<PAGE> 1
March 31, 1996
[PICTURE]
SEMIANNUAL
REPORT
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Income Fund
SAFECO Northwest Fund
SAFECO International Stock Fund
SAFECO Balanced Fund
SAFECO Small Company Stock Fund
[SAFECO LOGO]
<PAGE> 2
LETTER FROM THE PRESIDENT
May 1, 1996
[PHOTO OF DAVID F. HILL]
DEAR SHAREHOLDER:
Strong corporate earnings, low interest rates and low inflation helped the
U.S. financial markets continue to post robust returns. As measured by the S&P
500, the stock market advanced 32.07% in the 12 months ended March 31, and 5.37%
in the most recent quarter.
While the domestic stock market kept on advancing at a clip well above its
historical average, the bond market did slow its pace. As measured by the Lehman
Brothers Government/Corporate Index, the bond market finished the 12 months
ended March 31 up 10.93%, and the three months just ended down, -2.34%. The bond
market's decline, which began midway through the first quarter, can be
attributed to unexpected, albeit slight, strength in economic indicators and the
failure to reach a federal budget accord.
In truth, the economic indicators are thoroughly mixed, and that is keeping
the Fed cautious and slow moving.
A careful Fed is fine in our view, because inflation is not currently an
issue and interest rates are providing good support for stock prices.
Despite positive employment reports, renewed inflation fears and higher
interest rates, we think the fundamentals are in place to return the bond market
to year-end 1995 levels and to sustain the stock market. We see enough strength
in the economy -- and, in turn, corporate earnings -- to support stock market
growth, but not at the rate we have seen these past 15 months.
All in all, our outlook is positive; it's just unlikely that 1996 will
match 1995's bounty. It would be highly unrealistic to expect gains like those
we experienced last year.
The strength of the markets last year surprised prognosticators who'd
predicted a slowdown (if not a correction), and it highlighted
<PAGE> 3
the difficulty in attempting to "time" the markets. Investors who took the
conservative route and moved their money out of stocks and long-term bonds
missed significant gains.
Undeniably, the year-to-year behavior of the markets is unpredictable, and
can go either way. That is why investors with short-term time frames should use
short-term instruments such as money funds.
The money you have invested in stocks should be for long-term goals. And,
as you get closer to needing the funds you have invested toward a goal,
gradually reduce the percentage that is invested in stocks. Stocks are for money
that can be left invested for a long while.
Our commitment to our shareholders is as deeply ingrained as our long-term
attitude. At SAFECO Mutual Funds, we remain committed to providing you the
service, information and investment vehicles you need to achieve financial
security. To that end, we introduced three new stock funds in January: The
SAFECO International, Balanced and Small Company Funds. And in June, to better
serve you, we'll bring a new automated information system on-line. We are
constantly striving for top-rated fund performance, top-notch services and truly
useful financial planning materials. Please call us if we can be of further
service at 1-800-426-6730. In the meantime, thank you for investing with SAFECO
Mutual Funds.
/s/ David F. Hill
- ----------------------------
David F. Hill, President
TABLE OF CONTENTS
SAFECO Growth Fund.................4
SAFECO Equity Fund................10
SAFECO Income Fund................15
SAFECO Northwest Fund.............21
SAFECO International Stock Fund...26
SAFECO Balanced Fund..............34
SAFECO Small Company Stock Fund...40
Financial Statements..............44
Notes to Financial Statements.....50
-1-
<PAGE> 4
PERFORMANCE INFORMATION
March 31, 1996
SAFECO GROWTH FUND - SAFECO EQUITY FUND - SAFECO INCOME FUND
ILLUSTRATION OF A $10,000 INVESTMENT
GRAPH DATAPOINTS
<TABLE>
<CAPTION>
S&P Equity Growth Income
--------------------------------------------------------------
<S> <C> <C> <C> <C>
03/31/86 10,000 10,000 10,000 10,000
04/30/86 9,887 10,000 10,025 10,000
05/31/86 10,413 10,082 10,025 9,945
06/30/86 10,589 10,566 10,302 10,261
07/31/86 9,997 9,917 10,243 10,064
08/31/86 10,739 9,917 9,504 10,064
09/30/86 9,851 10,524 9,912 10,639
10/31/86 10,419 10,099 9,465 10,527
11/30/86 10,672 10,099 9,465 10,527
12/31/86 10,400 10,141 9,432 10,721
01/31/87 11,801 11,151 9,267 11,464
02/28/87 12,267 11,151 10,379 11,464
03/31/87 12,621 11,912 11,186 11,842
04/30/87 12,509 11,704 11,011 11,618
05/31/87 12,618 11,704 11,011 11,618
06/30/87 13,255 11,987 11,044 11,632
07/31/87 13,927 12,938 11,404 12,329
08/31/87 14,446 12,938 11,944 12,329
09/30/87 14,130 13,317 12,363 12,702
10/31/87 11,086 9,476 9,508 10,002
11/30/87 10,173 9,476 9,508 10,002
12/31/87 10,947 9,426 9,916 9,951
01/31/88 11,408 9,426 9,916 9,951
02/28/88 11,940 10,224 10,072 10,565
03/31/88 11,571 11,022 10,947 10,946
04/30/88 11,699 11,000 11,044 10,946
05/31/88 11,801 10,840 10,895 11,066
06/30/88 12,342 11,330 11,565 11,595
07/31/88 12,296 11,263 11,535 11,619
08/31/88 11,878 11,075 11,340 11,425
09/30/88 12,384 11,597 11,899 11,753
10/31/88 12,728 11,597 11,899 11,753
11/30/88 12,546 11,801 11,915 11,934
12/31/88 12,765 11,810 12,108 11,840
01/31/89 13,700 11,810 12,108 11,840
02/28/89 13,359 12,612 12,446 12,373
03/31/89 13,670 12,627 12,760 12,426
04/30/89 14,379 12,627 12,760 12,426
05/31/89 14,962 13,403 13,279 12,898
06/30/89 14,876 13,897 13,573 13,301
07/31/89 16,220 13,897 13,573 13,301
08/31/89 16,538 15,134 14,178 14,104
09/30/89 16,470 15,322 14,902 14,222
10/31/89 16,088 15,352 14,339 13,685
11/30/89 16,416 15,458 14,296 13,841
12/31/89 16,810 16,038 14,431 14,115
01/31/90 15,682 14,706 13,032 13,402
02/28/90 15,884 14,844 13,389 13,464
03/31/90 16,305 15,395 14,197 13,566
04/30/90 15,898 14,950 14,257 13,057
05/31/90 17,448 16,394 15,718 13,744
06/30/90 17,329 16,368 15,187 13,689
07/31/90 17,274 16,075 15,483 13,445
08/31/90 15,712 14,378 12,812 12,449
09/30/90 14,947 13,677 11,375 11,937
10/31/90 14,883 13,385 10,609 11,650
11/30/90 15,844 14,115 11,396 12,363
12/31/90 16,286 14,664 12,272 12,598
01/31/91 16,996 15,416 13,498 13,087
02/28/91 18,211 16,331 15,358 13,841
03/31/91 18,652 16,792 16,109 14,051
04/30/91 18,697 17,136 16,886 14,204
05/31/91 19,504 17,825 18,000 14,633
06/30/91 18,611 16,681 16,926 14,265
07/31/91 19,478 17,799 18,511 14,671
08/31/91 19,940 18,079 19,247 15,116
09/30/91 19,607 17,834 19,363 15,092
10/31/91 19,870 18,126 19,946 15,250
11/30/91 19,069 16,992 18,263 14,620
12/31/91 21,251 18,756 19,960 15,527
01/31/92 20,855 19,872 21,420 15,646
02/28/92 21,126 20,209 21,268 15,696
03/31/92 20,714 19,300 19,687 15,545
04/30/92 21,323 19,460 18,466 15,999
05/31/92 21,428 19,282 18,008 16,150
06/30/92 21,109 17,890 16,624 16,209
07/31/92 21,972 18,621 17,322 16,811
08/31/92 21,522 17,855 16,341 16,689
09/30/92 21,776 17,906 15,910 16,866
10/31/92 21,850 18,771 16,581 16,555
11/30/92 22,592 20,011 18,675 16,980
12/31/92 22,869 20,494 19,347 17,308
01/31/93 23,060 21,172 20,155 17,686
02/28/93 23,375 21,191 18,812 18,021
03/31/93 23,867 22,330 19,552 18,632
04/30/93 23,291 21,820 18,345 18,377
05/31/93 23,912 23,616 19,290 18,621
06/30/93 23,982 23,712 19,893 18,718
07/31/93 23,885 23,389 19,825 18,621
08/31/93 24,789 24,699 21,099 19,233
09/30/93 24,599 25,387 22,025 19,286
10/31/93 25,109 26,055 22,587 19,622
11/30/93 24,870 26,196 21,635 19,384
12/31/93 25,171 26,828 23,640 19,480
01/31/94 26,027 28,436 24,913 20,116
02/28/94 25,321 27,724 23,722 19,667
03/31/94 24,220 26,659 22,532 18,980
04/30/94 24,530 27,517 23,133 19,202
05/31/94 24,930 28,314 23,345 19,213
06/30/94 24,319 27,294 21,613 18,932
07/31/94 25,116 27,992 22,096 19,515
08/31/94 26,144 29,696 23,475 20,133
09/30/94 25,506 29,579 22,880 19,860
10/31/94 26,077 30,132 23,209 19,826
11/30/94 25,128 29,536 22,577 19,123
12/31/94 25,500 29,493 23,256 19,267
01/31/95 26,160 29,709 22,899 19,756
02/28/95 27,178 30,485 24,158 20,374
03/31/95 27,980 30,733 24,065 20,952
04/30/95 28,802 31,557 24,184 21,399
05/31/95 29,971 32,360 25,151 22,024
06/30/95 30,667 33,162 26,674 22,296
07/31/95 31,682 33,686 27,616 23,166
08/31/95 31,761 34,624 27,523 23,333
09/30/95 33,101 35,964 28,355 24,040
10/31/95 32,982 35,517 28,229 23,775
11/30/95 34,427 36,668 28,516 24,606
12/31/95 35,091 36,943 29,327 25,116
01/31/96 36,263 37,931 30,413 25,920
02/28/96 36,600 38,269 31,554 25,983
03/31/96 36,952 38,661 31,072 26,292
</TABLE>
INVESTMENT VALUE AS OF MARCH 31, 1996
SAFECO Growth Fund: $31,072
SAFECO Equity Fund: $38,661
SAFECO Income Fund: $26,292
S&P 500 Index: $36,952 (w/Dividends)
The performance of the Funds assumes the reinvestment of all dividends and
capital gains. The Standard & Poor's 500 Index is an unmanaged index of 500
stocks weighted by market capitalization; the index has been adjusted to reflect
reinvestment of dividends on securities in the index. The Northwest 50(TM) Index
is an index of 50 Northwest companies weighted by their regional impact.
Operating expenses have been applied to the Funds, but not to the indices. If
Fund operating expenses had been applied to the indices, their values would have
been lower. Investment returns are historical and not predictive of future
performance.
(1) A graph appears here which illustrates the growth of a $10,0000 investment
each fund in comparison to the S&P Index
-2-
<PAGE> 5
SAFECO NORTHWEST FUND
ILLUSTRATION OF A $10,000 INVESTMENT
[GRAPH](1)
INVESTMENT VALUE AS OF MARCH 31, 1996
SAFECO Northwest Fund: $17,289
NORTHWEST50(TM) Index: $17,826 (w/Dividends)
S&P 500 Index: $20,164 (w/Dividends)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
10 YEAR OR
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
SAFECO Growth Fund 29.12% 14.04% 12.01%
SAFECO Equity Fund 25.80% 18.15% 14.48%
SAFECO Income Fund 25.49% 13.35% 10.15%
S&P 500 Index 32.07% 14.62% 13.94%
- ------------------------------------------------------------------------------
SAFECO Northwest Fund 23.60% 11.08% 11.37%*
Northwest 50(TM) Index 26.40% 11.48% 12.05%*
S&P 500 Index 32.07% 14.62% 14.77%*
- ------------------------------------------------------------------------------
</TABLE>
* Inception date of the Northwest Fund was February 7, 1991.
Index graph comparison begins on February 28, 1991.
(1) A graph appears here which compares performance of the Northwest Fund,
Northwest Index, and S&P. Below are the datapoints for the graph.
NORTHWEST FUND -- GRAPH DATAPOINTS
<TABLE>
<CAPTION>
NW 50
NW S&P Index
------------------------------------------------
<S> <C> <C> <C>
02/28/91 10,000 10,000 10,000
03/31/91 10,224 10,242 10,409
04/30/91 10,523 10,267 10,666
05/31/91 10,882 10,710 11,305
06/30/91 10,246 10,220 10,552
07/31/91 10,856 10,696 11,063
08/31/91 11,307 10,949 11,510
09/30/91 11,029 10,766 11,292
10/31/91 10,919 10,911 11,285
11/30/91 10,247 10,471 10,836
12/31/91 11,493 11,669 12,133
01/31/92 11,988 11,452 12,767
02/28/92 12,373 11,601 12,958
03/31/92 12,101 11,375 12,545
04/30/92 11,676 11,709 11,973
05/31/92 11,797 11,766 11,865
06/30/92 11,425 11,591 11,450
07/31/92 11,688 12,065 11,567
08/31/92 11,374 11,818 11,250
09/30/92 11,848 11,957 11,693
10/31/92 12,244 11,998 12,156
11/30/92 12,761 12,406 12,701
12/31/92 13,111 12,558 12,725
01/31/93 13,163 12,663 12,821
02/28/93 12,518 12,835 12,420
03/31/93 13,007 13,106 12,932
04/30/93 12,476 12,789 12,641
05/31/93 12,747 13,130 12,953
06/30/93 12,627 13,169 12,675
07/31/93 12,523 13,116 12,220
08/31/93 12,877 13,612 12,721
09/30/93 12,868 13,508 12,434
10/31/93 13,034 13,787 12,881
11/30/93 13,086 13,656 13,158
12/31/93 13,246 13,821 13,334
01/31/94 13,480 14,291 13,737
02/28/94 13,821 13,904 13,941
03/31/94 13,235 13,299 13,449
04/30/94 13,203 13,470 13,409
05/31/94 13,406 13,689 13,611
06/30/94 13,063 13,354 13,198
07/31/94 13,255 13,792 13,300
08/31/94 13,851 14,356 14,068
09/30/94 13,535 14,005 13,530
10/31/94 13,406 14,319 13,449
11/30/94 13,073 13,798 13,209
12/31/94 13,040 14,002 13,281
01/31/95 13,202 14,365 13,224
02/28/95 13,535 14,924 13,668
03/31/95 13,987 15,364 14,102
04/30/95 14,170 15,816 14,526
05/31/95 14,386 16,458 14,528
06/30/95 15,095 16,828 15,409
07/31/95 15,882 17,385 15,993
08/31/95 16,022 17,429 16,299
09/30/95 16,108 18,113 16,897
10/31/95 15,918 18,048 16,507
11/30/95 15,884 18,839 16,753
12/31/95 15,671 19,202 16,957
01/31/96 15,820 19,844 17,518
02/28/96 16,302 20,020 17,921
03/31/96 17,289 20,165 17,826
</TABLE>
-3-
<PAGE> 6
REPORT FROM THE FUND MANAGER
SAFECO GROWTH FUND
May 1, 1996
For the quarter, six months, year, and three years ended March 31, SAFECO
Growth Fund is ahead of its peer group's total return.
For the year ended March 31, SAFECO Growth returned 29.12% outpacing
28.31%, the average growth fund return for the 645 funds measured by Lipper.
Over the three months just ended, the Fund rose 5.95% while both the average
growth fund and the S&P were up 5.37%.
I think the fact the Fund outperformed over the past three and six months,
despite having its two largest positions fall 40% and 50%, speaks to the high
quality of this portfolio. We're holding strong, good companies that more than
compensated for significant price drops in both MICROS Systems and Canandaigua.
Canandaigua Wine has recovered enough to reclaim its status as the Fund's
largest position. In the fourth quarter of 1995, the company cut prices to
increase market share. That temporarily depressed earnings and its share price.
Now, with a larger share of the varietal wine market, Canandaigua is bringing
prices -- including its share price -- back up.
MICROS Systems, the leading point-of-sale company serving the hospitality
industry, slipped in the March quarter when it announced it would miss its
quarterly earnings estimates. Costs came in higher and margins lower than
expected. Believing that MICROS will tighten its belt and take its stock higher,
I took advantage of the price cut to buy more shares.
Though technology came under fire in the fourth quarter, it didn't much
hurt us. I cut our position in silicon chip maker INTEL by about two thirds. In
the long run, I perceive Intel as a core holding. When the sector settles and
the price seems right, we'll build that position again.
Meanwhile, I held our position in SEAGATE, a producer of high-end disk
drives, because its balance sheet and cash flow made it seem
-4-
<PAGE> 7
[PHOTO OF THOMAS M. MAGUIRE]
less treacherous than its peers. Seagate climbed 30% over the last six months to
become our second largest position.
In managing the Fund, I look at all sorts of stocks and I select them for
appreciation potential. Consequently, in the SAFECO Growth Fund portfolio,
companies range from small and emerging to those that are large and well
established.
I found three promising companies in drugs and medical technology.
Consequently, that category now comprises 11.1% of net assets.
Datascope is the leading manufacturer of cardiac assist systems used during
open-heart surgery. The company recently introduced a collagen plug used to seal
the femoral artery after angioplasty. Datascope has a strong balance sheet, low
valuation, and a bright outlook.
Penederm is an emerging pharmaceutical company with products in late-stage
development and collaborations with major companies. One of its most promising
products is a retinoic acid acne treatment. The third company, Medex, provides
medical supplies, such as infusion pumps and tubes and surgical procedure trays.
I also bought HEALTH SYSTEMS INTERNATIONAL, an HMO with strong enrollment
trends, geographic diversity and a price that seemed undervalued. Indeed, that
price has moved up since I bought it. I think the upward trend in HMO
enrollments should continue no matter what the economy does.
CENTRAL PARKING, our third largest position, is a newly offered stock. This
company owns, leases and manages parking facilities with greater sophistication
than its peers, and it has almost doubled since we bought it.
We also hold and have purchased a number of better known
(Continued on next page.)
-5-
<PAGE> 8
REPORT FROM THE
GROWTH FUND MANAGER
(Continued)
giants. Among them are PHILIP MORRIS, MOBIL, CHEVRON and tissue-maker
KIMBERLY-CLARK. These stocks are held for their earnings growth as well as the
stability their blue-chip status brings to the fund.
While I don't know what the market or the economy will do, I expect good
things from our portfolio. I think we have a diverse mix of stocks with good
earnings growth potential and share prices that are generally cheaper than their
competitors.
/s/ Thomas M. Maguire,
- ----------------------
Tom M. Maguire,
Growth Fund Manager
- -----------------
Completing his M.B.A. at the University of Washington, Tom 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.
HIGHLIGHTS
SAFECO
GROWTH FUND
As of March 31, 1996 (Unaudited)
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[PIE CHART]
(1) Large: 29.4% ($4 Bil. and above.)
(2) Medium: 1.7% ($1 Bil. - $4 Bil.)
(3) Small: 62.4% (Less than $1 Bil.)
(4) Cash and Other: 6.5%
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[BAR GRAPH]
Drugs & Hospital Supplies: 11.1%
Computer Systems: 10.9%
Petroleum & Petroleum Services: 10.0%
Beverages - Alcoholic: 7.1%
Food & Tobacco: 6.7%
-6-
<PAGE> 9
PORTFOLIO OF INVESTMENTS
SAFECO
GROWTH FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000'S)
- --------------------------------------------------
<S> <C>
COMMON STOCKS - 93.5%
AUTOS & AUTO PARTS - 2.3%
64,000 *Andros, Inc..................$ 1,152
96,500 *Miller Industries, Inc.........3,281
BEVERAGES - ALCOHOLIC - 7.1%
355,300 *Canandaigua Wine Co...........13,768
BUILDING MATERIALS - 3.0%
102,400 *ABT Building Products Corp.....1,894
162,100 *Fibreboard Corp................3,830
CHEMICALS - 1.0%
129,500 *Melamine Chemicals, Inc........1,004
50,400 *Synalloy Corp....................958
COMMERCIAL SERVICES - 1.8%
32,300 Aaron Rents, Inc..................670
10,600 *Intelliquest Information
Group, Inc........................292
99,000 *Youth Services
International, Inc..............2,524
COMPUTER SOFTWARE - 4.1%
91,200 *Ciber, Inc.....................2,987
10,800 Computer Data Systems, Inc........168
82,300 *Cotelligent Group, Inc...........967
50,000 *Oracle Corp....................2,356
76,300 *SPSS, Inc......................1,364
COMPUTER SYSTEMS - 10.9%
329,600 *MICROS Systems, Inc............8,240
233,984 *Seagate Technology, Inc.......12,811
CONSTRUCTION & ENGINEERING - 1.6%
139,800 *American Buildings, Inc........3,093
</TABLE>
- ---------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
HIGHLIGHTS (Continued)
SAFECO GROWTH FUND
As of March 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- ---------------------------------------
<S> <C>
Canandaigua Wine Co.............7.1%
(Wine Manufacturer/Distributor)
Seagate Technology, Inc.........6.6%
(Magnetic Disk Manufacturer)
Central Parking Corp............5.9%
(Commercial Services, Parking)
Philip Morris Cos., Inc.........5.9%
(Food, Beverage & Tobacco Company)
Chevron Corp....................5.2%
(Oil/Gas Exploration & Production)
Mobil Corp......................4.8%
(Oil/Gas Exploration & Production)
Kimberly-Clark Corp.............4.5%
(Manufacturing & Marketing
Personal Care Products)
MICROS Systems, Inc.............4.3%
(Electronic Cash Register
Manufacturer)
Datascope Corp..................3.9%
(Hospital Supplies)
Health Systems International,
Inc. ........................3.4%
(Health Care)
<CAPTION>
TOP FIVE PURCHASES
(Sept. through March) COST
- ---------------------------------------
<S> <C>
Mobil Corp..............$10,056,296
Chevron Corp..............9,369,860
Central Parking Corp......8,384,661
*Foundation Health Corp...7,621,049
Datascope Corp............7,515,464
<CAPTION>
TOP FIVE SALES
(Sept. through March) PROCEEDS
- ---------------------------------------
<S> <C>
*U.S. Healthcare, Inc......$10,195,623
*Intel Corp..................9,456,994
*Mid Atlantic Medical
Services, Inc..............8,438,236
*RJR Nabisco Holdings Corp...7,006,901
*Foundation Health Corp......6,923,745
</TABLE>
- ---------------
*Security sold, no longer in portfolio.
-7-
<PAGE> 10
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO GROWTH FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000'S)
- --------------------------------------------------
<S> <C>
CONSUMER PRODUCTS & SUPPLIERS - 0.5%
202,000 - Celebrity, Inc.................$ 934
DRUGS - 0.2%
34,900 - Zonagen, Inc......................332
DRUGS & HOSPITAL SUPPLIES - 11.1%
70,000 - Anesta Corp.......................997
317,500 - Datascope Corp..................7,461
255,000 - Ethical Holdings,
plc (ADR).....................2,391
56,150 - Lifeline Systems, Inc ............688
367,600 Medex, Inc......................4,365
45,000 - Ostex International, Inc. ........720
345,167 - Penederm, Inc.................. 4,487
28,000 - ResMed, Inc.......................371
ELECTRICAL EQUIPMENT & ELECTRONICS - 1.1%
36,500 Intel Corp......................2,076
ELECTRONICS - 0.9%
103,000 - Intermagnetics General Corp.....1,751
FINANCIAL - 1.7%
170,100 First Financial
Caribbean Corp. (ADR)...........3,359
FINANCIAL SERVICES - 1.7%
17,057 - Alleghany Corp..................3,369
FOOD & TOBACCO - 6.7%
130,000 Philip Morris Cos., Inc........11,407
127,275 - Thorn Apple Valley, Inc........ 1,527
HEALTH CARE - 4.4%
122,500 - Amrion, Inc.....................1,853
179,700 - Health Systems
International, Inc..............6,559
HOMEBUILDING - 0.4%
42,500 - American Homestar Corp............845
HOUSEHOLD PRODUCTS - 4.7%
116,376 Kimberly-Clark Corp.............8,670
150,000 - Media Arts Group, Inc.............413
LEISURE TIME - 0.7%
46,050 Polaris Industries, Inc.........1,416
MACHINERY DIVERSIFIED - 1.6%
172,000 - Computational
Systems, Inc....................3,053
MANUFACTURING - 0.3%
75,600 - Industrial Training Corp..........567
OIL & GAS - 0.1%
7,500 - Belco Oil & Gas Corp..............171
PAPER PRODUCTS & SUPPLIES - 0.4%
53,200 - Crown Vantage, Inc................771
PETROLEUM & PETROLEUM SERVICES - 10.0%
180,000 Chevron Corp...................10,102
80,000 Mobil Corp......................9,270
POLLUTION CONTROL - 3.0%
150,900 Landauer, Inc...................3,112
156,000 - Tetra Technologies, Inc.........2,691
REAL ESTATE DEVELOPMENT - 5.9%
434,000 Central Parking Corp...........11,447
RESTAURANTS - 1.6%
345,300 - NPC International, Inc..........3,108
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-8-
<PAGE> 11
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO GROWTH FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000'S)
- --------------------------------------------------
<S> <C>
RETAIL - 3.2%
206,000 - Damark
International, Inc...........$ 1,957
255,603 - Harold's Stores, Inc............4,154
RETAIL - SPECIALTY - 1.5%
196,000 - American Coin
Merchandising, Inc................980
15,000 - Party City Corp...................217
166,300 - Rent-Way, Inc...................1,684
--------
TOTAL COMMON STOCKS.......................180,634
--------
TEMPORARY INVESTMENTS - 6.8%
INVESTMENT COMPANIES:
$9,702,745 Short-Term Investments Co.
(Prime Portfolio).............. 9,703
3,502,429 Short-Term Investments Co.
(Treasury Portfolio)............3,502
--------
TOTAL TEMPORARY INVESTMENTS................13,205
--------
TOTAL INVESTMENTS - 100.3%................193,839
Liabilities, less Other Assets ..............(672)
--------
NET ASSETS...............................$193,167
========
- --------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-9-
<PAGE> 12
REPORT FROM THE FUND MANAGER
SAFECO EQUITY FUND
May 1, 1996
[PHOTO]RICH MEAGLEY
For the 12 months ended March 31, 1996, the SAFECO Equity Fund returned
25.80%. The growth and income peer group of 529 funds measured by Lipper
returned 27.73% for the same period.
Moving along the course we plotted last year, Equity Fund hit two snags
that hurt our six-month performance. However, other than stumbles in Motorola
and Advanced Micro Devices (3.2% and 1.5% of net assets on 9/30/95), lots of
good gains were logged in the period just ended.
In the fourth quarter of 1995, Motorola's stock dropped 25% on lowered
earnings estimates, and Advanced Micro Devices fell 43% on a product delay. I
sold all the Advanced Micro Devices and kept the Motorola. Motorola appears
simply to have hit a lull, triggered by lower demand for cellular handsets.
My experience is that larger, established companies -- such as Motorola --
post the most enduring growth records. Following that logic, I continue to buy
high-quality companies as well as companies with both international and domestic
growth potential.
In the last six months, I added Chase Manhattan, Citicorp, Exxon and Royal
Dutch Petroleum, Du Pont, Wal-Mart, General Electric, Walt Disney and Viacom to
our holdings.
I sold all the Real Estate Investment Trusts and moved most of that money
into oils. In addition to benefiting from intelligent cost-cutting and increased
sales, the oil stocks have attractive dividends. I believe their ability to pay
those dividends is more secure than that of the Real Estate Investment Trusts'.
Our net assets in petroleum and petroleum services grew from 5.1% to 9.3%.
Our oil group now includes Mobil, Texaco, Exxon and Royal Dutch. These stocks
are up handsomely over the six months.
Big winners over the last six months, banking and finance stocks, are our
highest industry concentration. I consolidated the group from five names to
three: I sold PNC Bank when it reached our target and First Interstate after it
exceeded our target price, and I invested the gains in Chase Manhattan and
Citicorp.
Chase's merger with Chemical Banking is creating huge cost-cutting
potential. The stock was up over 20% in the last three months. Citicorp, via its
credit cards, has
-10-
<PAGE> 13
global exposure to help it produce solid earnings growth. NationsBank remains in
the fund as a quality company with an attractive price and yield.
Fannie Mae, the mortgage-pooling company, continued to grow earnings, and I
took some profits there. I also sold about half our position in Philip Morris.
While I still like both companies, they had grown to take up a greater share of
net assets than I felt comfortable committing to them.
I sold the US West after it ran up. While I continue to like GTE and
Century, it's increasingly unclear who will win in the telephone game. The rules
are changing and the costs of entry, in terms of capital investment, are high.
Nonetheless, I can't see AT&T being a loser with its superior long-distance
infrastructure and its expansion into cellular. I maintained our position there.
I sold the Georgia-Pacific in order to decrease our paper and forest
product exposure. Demand has been week and GP seemed the least promising of our
holdings in that group.
Our holdings in computer software shrunk from 5.8% of net assets spread
among four names to 2.8% of net assets mostly invested in Microsoft. I sold the
Advanced Micro
(Continued on next page.)
HIGHLIGHTS
SAFECO
EQUITY FUND
As of March 31, 1996
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[PIE CHART]
1 Large: 80.4% ($4 Bil. and above.)
2 Medium: 13.4% ($1 Bil. -$4 Bil.)
3 Small: 5.2% (less than $1 Bil.)
4 Cash and Other: 1.0%
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[BAR GRAPH]
Banking &
Finance: 9.7%
Petroleum &
Petroleum
Services: 9.3%
Insurance: 7.6%
Food &
Tobacco: 7.2%
Retail: 7.0%
-11-
<PAGE> 14
HIGHLIGHTS (Continued)
SAFECO Equity Fund
As of March 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Chase Manhattan Corp. ................................................ 3.6%
(Bank)
NationsBank Corp. .................................................... 3.6%
(Bank)
Federal National Mortgage Association ................................ 3.1%
(Mortgage Broker)
Salomon, Inc. ........................................................ 3.0%
(Brokerage)
AT&T Corp. ........................................................... 2.9%
(Telephone Company)
GTE Corp. ............................................................ 2.8%
(Telephone Company)
Mobil Corp. .......................................................... 2.7%
(Oil/Gas Exploration & Production)
Viacom, Inc. ......................................................... 2.7%
(Entertainment & Communication)
Browning Ferris Industries, Inc. ..................................... 2.6%
(Pollution Control)
Citicorp ............................................................. 2.5%
(Global Bank Holding Co.)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Sept. through March) COST
- --------------------------------------------------------------------------------
<S> <C>
Chase Manhattan Corp. .................................... $18,342,096
Viacom, Inc. ............................................. 17,875,045
Browning Ferris Industries ............................... 15,664,751
Echlin, Inc. ............................................. 15,419,009
Kimberly-Clark Corp. ..................................... 13,694,658
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES
(Sept. through March) PROCEEDS
- --------------------------------------------------------------------------------
<S> <C>
*Knight-Ridder, Inc. .................................... $19,097,571
*PNC Bank Corp. ......................................... 17,065,210
Philip Morris Cos ...................................... 14,585,043
*US West, Inc. .......................................... 14,481,244
*First Interstate Bank .................................. 13,849,488
- --------------------------------------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio
REPORT FROM THE
EQUITY FUND MANAGER
(Continued)
Devices at a loss, as previously mentioned. I sold the MENTOR GRAPHICS when it
climbed to our target price, and I gave up waiting for INFORMATION RESOURCES.
Investing in Viacom and Walt Disney, we entered a new sector, broadcast
media. I think Viacom's Blockbuster stores and MTV holdings provide great
potential for international growth. Disney is simply the premier entertainment
company, and the price was right.
Also new to our top ten is a less glamorous company, landfill operator
BROWNING FERRIS. It's a strong company with a reasonable dividend whose earnings
growth looks poised for acceleration.
The stocks in our portfolio belong to larger, more established companies
that I know well and have conviction in. They are stocks that I am happy to have
and to hold -- unless their growth stalls or they become too pricey.
I'm neutral on the economy. And while I like the prospects for banking and
finance, the only real "bet" this portfolio has made is on quality.
/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, is a Chartered
Financial Analyst and is an avid golfer.
-12-
<PAGE> 15
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
COMMON STOCKS - 99.0%
AUTO & AUTO PARTS - 2.5%
<S> <C>
435,000 Echlin, Inc. ....................................... $15,769
BANKING & FINANCE - 9.7%
310,000 Chase Manhattan Corp. .............................. 22,785
200,000 Citicorp ........................................... 16,000
284,000 NationsBank Corp. .................................. 22,756
BROADCAST MEDIA - 4.7%
405,000 * Viacom, Inc. (Class B) ........................... 17,061
200,000 Walt Disney Co. .................................... 12,775
CHEMICALS - 2.3%
175,000 Du Pont (E.I.)
De Nemours & Co. ................................... 14,525
COMPUTER HARDWARE - 2.3%
160,000 Hewlett-Packard Co. ................................ 15,040
COMPUTER SOFTWARE - 2.8%
230,500 MacNeal-Schwendler Corp. ........................... 3,285
140,000 *Microsoft Corp. ................................... 14,437
DRUGS & HOSPITAL SUPPLIES - 6.3%
126,000 American Home
Products Corp. ..................................... 13,655
226,000 Schering-Plough Corp. .............................. 13,136
129,500 Warner-Lambert Co. ................................. 13,371
ELECTRICAL EQUIPMENT & ELECTRONICS - 6.6%
200,000 General Electric Co. ............................... 15,575
230,000 Intel Corp. ........................................ 13,081
250,000 Motorola, Inc. ..................................... 13,250
FINANCIAL SERVICES - 6.1%
620,000 Federal National Mortgage
Association ........................................ 19,763
510,000 Salomon, Inc. ...................................... 19,125
FOOD & TOBACCO - 7.2%
311,900 American Brands, Inc. .............................. 13,217
384,162 ConAgra, Inc. ...................................... 15,607
170,000 Philip Morris Cos., Inc. ........................... 14,917
221,050 Tasty Baking Co. ................................... 2,459
HOUSEHOLD PRODUCTS - 4.8%
175,000 Colgate-Palmolive Co. .............................. 13,628
178,000 Kimberly-Clark Corp. ............................... 13,261
169,900 *Paragon Trade Brands, Inc. ........................ 3,525
INSURANCE - 7.6%
375,000 American General Corp. ............................. 12,938
87,000 American International
Group, Inc. ........................................ 8,145
396,000 Equitable Cos., Inc. ............................... 9,603
117,300 Hartford Steam Boiler
Inspection & Insurance Co. ......................... 5,938
250,000 ITT Hartford Group, Inc. ........................... 12,250
LEISURE TIME - 1.5%
307,900 Polaris Industries, Inc. ........................... 9,468
</TABLE>
*Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
-13-
<PAGE> 16
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO EQUITY FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 3.3%
<S> <C>
154,000 Weyerhaeuser Co. ....................................... $ 7,104
230,000 Willamette Industries, Inc. ............................ 13,858
PETROLEUM & PETROLEUM SERVICES - 9.3%
160,000 Exxon Corp. ............................................ 13,060
150,000 Mobil Corp. ............................................ 17,381
96,000 Royal Dutch
Petroleum Co.(ADR). .................................... 13,560
180,000 Texaco, Inc. ........................................... 15,480
POLLUTION CONTROL - 2.6%
520,000 Browning Ferris
Industries, Inc. ....................................... 16,380
RETAIL - 7.0%
400,000 Albertson's Inc. ....................................... 14,850
301,000 May Department Stores Co. .............................. 14,523
287,700 - NeoStar Retail Group, Inc. ............................. 1,367
600,000 Wal-Mart Stores, Inc. .................................. 13,875
TELECOMMUNICATIONS - 2.9%
300,000 AT&T Corp. ............................................. 18,375
TRANSPORTATION - 1.9%
175,000 Union Pacific Corp. .................................... 12,009
UTILITIES - ELECTRIC DISTRIBUTION - 2.3%
687,400 Houston Industries, Inc. ............................... 14,865
UTILITIES - TELEPHONE - 5.3%
500,800 Century Telephone
Enterprise Co. ......................................... 15,900
403,400 GTE Corp. .............................................. 17,699
--------
TOTAL COMMON STOCKS. ................................................. 630,631
--------
TEMPORARY INVESTMENTS - 1.8%
U.S. AGENCY NOTES:
$11,385,000 Federal Home
Loan Mortgage Corp.
5.30%, due 4/01/96. .................................... 11,382
--------
TOTAL TEMPORARY INVESTMENTS. ......................................... 11,382
--------
TOTAL INVESTMENTS - 100.8%. .......................................... 642,013
Liabilities, less Other Assets. ...................................... (5,128)
--------
NET ASSETS. .......................................................... $636,885
========
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-14-
<PAGE> 17
REPORT FROM THE FUND MANAGER
SAFECO INCOME FUND
May 1, 1996
[PHOTO]Arley Hudson
So far, 1996 has been a great year for the markets and for the SAFECO
Income Fund. For the 12 months ended March 31, the Fund returned 25.49% compared
to 26.41%, the average return for the 152 equity income funds reported by
Lipper.
Our large stake in convertible securities held us slightly under the peer
group's total return. Convertible securities, which pay higher yields than
common stocks, tend to appreciate less than common stocks when the market is
climbing.
Still, the gains were handsome, and our oil stocks contributed
substantially. Oil prices, long suppressed, benefited by higher heating oil
usage and an improving economy. I'm fairly optimistic about the oil group, which
accounts for 10.7% of net assets. Their earnings cycle is somewhat different
from other businesses, and their above-average yields lower the volatility of
their share prices.
Banks have done very well for the last two years and seem poised to
continue to do so. We have 11.1% of net assets invested in this group. Their
earnings multiples (the relationship of earnings to share price) are lower than
other industries, making their prices attractive. Additionally, the industry is
consolidating and, I presume, will continue to consolidate until we have
nationwide banks, as is the case in other industrialized nations.
The railroads have moved through a similar consolidation.
When I started my career, there were 30 or 40 major railroads. Now there
are two in the West and three in the East. And Union Pacific, the railroad I
consider the most efficient, is trying to make it one less by acquiring Southern
Pacific.
Also in the transportation category is General American Transportation
(GATX) convertible. We've held this security for nearly seven years, and it
still has good value, good growth potential and a great income stream.
I've reduced our telephone holdings from 9.4% of net assets to 5.7%
(including AT&T) as they are less predictable, now that they are
(Continued on next page.)
-15-
<PAGE> 18
HIGHLIGHTS
SAFECO
INCOME FUND
As of March 31, 1996
NET ASSET CAPITALIZATION WEIGHTINGS
(of Common & Preferred Stocks)
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
- -------------------------------------
[PIE CHART]
(1) Large: 48.6% ($4 Bil. and above.)
(2) Medium: 4.1% ($1 Bil. -- $4 Bil.)
(3) Small: 29.8% (Less than $1 Bil.)
(4) Bonds: 14.3%
(5) Cash and Other: 3.2%
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
- -------------------------------------
[BAR GRAPH]
Banking & Finance: 11.0%
Petroleum & Petroleum Services: 10.7%
Transportation: 9.3%
Retail: 6.2%
Household Products: 5.2%
REPORT FROM THE
INCOME FUND MANAGER
(Continued)
no longer true utilities. In what was once a monopoly business, everybody is now
getting into everybody else's territory.
GTE and Bell Atlantic are the only local phone companies we're currently
holding. Though I think these two are no longer a bargain, they also don't have
a lot of risk, especially GTE with its rural holdings.
All the positions in the portfolio have a few things in common: each is
issued by an established company with solid earnings and each was purchased at
an attractive price.
When buying stocks I look for value and relatively high yield for two
reasons: total return and stability. A low relative price (value) gives our
stocks ample appreciation potential. A healthy dividend income gives them some
constancy.
The last six months in the stock market have been far better than most of
us imagined. Increases in corporate earnings, subdued price inflation, lower
interest rates, modest economic growth and strong demand
-16-
<PAGE> 19
created an idyllic environment for stocks. Going forward, I think there's a real
chance the stock market might not perform as well.
The demand for stocks generated by aging baby boomers cannot drive the
market forever. Over the long term, earnings and interest rates will prevail as
the critical forces. Fortunately, the outlook for those is benign.
/s/Arley Hudson
- ---------------
Arley Hudson,
Income Fund Manager
- --------------------------------------------------------------------------------
After 36 years in the asset management business, 18 of them at the helm of
SAFECO Income Fund, Arley Hudson retired on March 31. The Fund's new manager is
Tom Rath, a 13-year veteran of securities analysis and portfolio management.
Hudson hired Rath in 1983, and it was under his tutelage that Rath developed his
investment style. 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.
HIGHLIGHTS (Continued)
SAFECO INCOME FUND
As of March 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
GTE Corp. ................................................................. 3.7%
(Telephone Company)
American Home Products Corp. .............................................. 3.2%
(Pharmaceuticals)
Texaco, Inc. .............................................................. 2.9%
(Oil Company)
Weyerhaeuser Co. .......................................................... 2.7%
(Forest Products)
GATX Corp. $3.875 Cumulative
Convertible ............................................................. 2.7%
(Railway & Terminal Operator)
Royal Dutch Petroleum Co. ................................................. 2.4%
(Oil Company)
BankAmerica Corp. ......................................................... 2.3%
(Bank)
Union Pacific Corp. ....................................................... 2.3%
(Transportation)
Colgate-Palmolive Co. ..................................................... 2.3%
(Manufacturer of Household Products)
Browning Ferris Industries, Inc.
7.25% "ACES" ............................................................ 2.3%
(Pollution Control)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Sept. through March) COST
- --------------------------------------------------------------------------------
<S> <C>
Browning Ferris Industries, Inc.
7.25% "ACES" .............................................. $5,404,092
Jefferson-Pilot Corp., 7.25% "ACES" ......................... 2,919,000
May Department Stores Co. ................................... 2,856,700
Mobil Corp. ................................................. 2,161,200
Crown Cork & Seal, 4.5%, due
6/21/01 Convertible ....................................... 2,101,824
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES
(Sept. through March) PROCEEDS
- --------------------------------------------------------------------------------
<S> <C>
*Time Warner, Inc. ...................................... $4,329,146
*US West, Inc. .......................................... 3,541,462
*BellSouth Corp. ........................................ 2,328,822
*Grace (WR) & Co. ....................................... 2,075,031
*Travelers Corp. ........................................ 1,842,189
- --------------------------------------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio
-17-
<PAGE> 20
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
COMMON STOCKS - 65.0%
BANKING & FINANCE - 7.6%
<S> <C>
71,271 BankAmerica Corp. ......................................... $5,524
70,000 Boatmen's Bancshares, Inc. ................................ 2,748
60,250 Keycorp ................................................... 2,327
100,000 Norwest Corp. ............................................. 3,675
105,000 US Bancorp ................................................ 3,570
CONGLOMERATES - 2.2%
80,000 Minnesota Mining &
Manufacturing Co. ......................................... 5,190
DRUGS & HOSPITAL SUPPLIES - 4.0%
70,000 American Home
Products Corp. ............................................ 7,586
30,000 Merck and Co., Inc. ....................................... 1,868
ELECTRICAL EQUIPMENT & ELECTRONICS - 2.0%
60,000 General Electric Co. ...................................... 4,672
FOOD & TOBACCO - 2.5%
50,000 American Brands, Inc. ..................................... 2,119
90,000 ConAgra, Inc. ............................................. 3,656
HOUSEHOLD PRODUCTS - 5.2%
70,000 Colgate-Palmolive Co. ..................................... 5,451
60,000 Kimberly-Clark Corp. ...................................... 4,470
50,000 WD-40 Co. ................................................. 2,413
INSURANCE - 2.0%
95,000 Hartford Steam Boiler
Inspection & Insurance Co. ................................ 4,809
LEISURE TIME - 3.4%
134,850 Polaris Industries, Inc. .................................. 4,147
100,000 Sturm Ruger & Co., Inc. ................................... 3,850
MANUFACTURING - 0.7%
73,068 Mark IV Industries, Inc. .................................. 1,607
PAPER & FOREST PRODUCTS - 2.7%
140,000 Weyerhaeuser Co. .......................................... 6,457
PETROLEUM & PETROLEUM SERVICES - 9.3%
24,000 Atlantic Richfield Co. .................................... 2,856
50,000 Exxon Corp. ............................................... 4,081
20,000 Mobil Corp. ............................................... 2,318
40,000 Royal Dutch
Petroleum Co. (ADR) ....................................... 5,650
80,000 Texaco, Inc. .............................................. 6,880
POLLUTION CONTROL - 1.1%
125,000 Landauer, Inc. ............................................ 2,578
REAL ESTATE INVESTMENT TRUSTS - 4.7%
150,000 Crown American
Realty Corp. .............................................. 1,144
150,400 HGI Realty, Inc. .......................................... 3,177
8,300 Kranzco Realty Trust ...................................... 126
200,000 Mark Centers Trust Co. .................................... 2,175
148,600 Omega Health Care
Investors ................................................. 4,254
RETAIL - 4.1%
30,000 Blair Corp. ............................................... 758
50,000 J.C. Penney Co., Inc. ..................................... 2,487
70,000 May Department Stores Co. ................................. 3,378
62,039 Sears, Roebuck & Co. ...................................... 3,024
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-18-
<PAGE> 21
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INCOME FUND
As of March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
TRANSPORTATION - 4.7%
36,595 Burlington Northern
Santa Fe ................................................. $ 3,005
30,000 Norfolk & Southern Corp. ................................. 2,550
80,000 Union Pacific Corp. ...................................... 5,490
UTILITIES - ELECTRIC DISTRIBUTION - 1.9%
60,199 Eastern Utilities Associates ............................. 1,294
150,000 Houston Industries, Inc. ................................. 3,244
UTILITIES - GAS DISTRIBUTION - 1.2%
90,000 Northwest Natural Gas Co. ................................ 2,858
UTILITIES - TELEPHONE - 5.7%
40,000 AT&T Corp. ............................................... 2,450
35,000 Bell Atlantic Corp. ...................................... 2,160
200,000 GTE Corp. ................................................ 8,775
--------
TOTAL COMMON STOCKS .................................................. 152,851
--------
PREFERRED STOCKS - 17.6%
AUTOS & AUTO PARTS - 0.7%
15,000 Ford Motor Co. 8.40%
Cumulative Convertible ................................... 1,680
BANKING & FINANCE - 3.4%
40,000 Jefferson-Pilot Corp.
7.25% "ACES" ............................................. 3,360
40,000 Washington Mutual
Savings Bank
Series C 6.00% Convertible ............................... 4,760
CONTAINERS - 0.9%
45,400 Crown Cork & Seal
4.50%, due
6/21/01 Convertible. ..................................... 2,179
FINANCIAL - MISC. - 2.0%
100,000 Advanta Corp. Class B
Series 95 "SAILS" ........................................ 4,650
FOOD & TOBACCO - 1.0%
400,000 RJR Nabisco Holdings Corp.
$0.835 Convertible ....................................... 2,450
INSURANCE - 1.9%
85,000 American General Corp.
$3.00 Convertible ........................................ 4,388
PAPER & FOREST PRODUCTS - 1.4%
70,400 James River Corp. of Virginia
$3.375 Cumulative Convertible
Exchangeable ............................................. 3,282
POLLUTION CONTROL - 2.3%
160,000 Browning Ferris Industries, Inc.
7.25% "ACES".............................................. 5,360
TRANSPORTATION - 4.0%
110,000 GATX Corp.$3.875
Cumulative Convertible ................................... 6,202
37,000 Interpool, Inc. 5.75%
Convertible .............................................. 3,117
--------
TOTAL PREFERRED STOCKS................................................ 41,428
--------
</TABLE>
SEE NOTES FINANCIAL STATEMENTS
-19-
<PAGE> 22
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INCOME FUND
As of March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS - 14.3%
CONVERTIBLE SUBORDINATED DEBENTURES:
COMPUTER SYSTEMS - 2.0%
$2,200,000 Seagate Technology, Inc.
5.00%, due 11/01/03 .................................... $ 4,653
CONGLOMERATES - 2.2%
4,932,000 Cooper Industries, Inc.
7.05%, due 1/01/15 ..................................... 5,074
DRUGS - 1.0%
2,400,000 Bindley Western Industries, Inc.
6.50%, due 10/01/02 .................................... 2,457
ELECTRICAL EQUIPMENT & ELECTRONICS - 2.0%
2,000,000 General Signal Corp.
5.75%, due 6/02/02 ..................................... 2,080
2,800,000 MagneTek, Inc.
8.00%, due 9/15/01 ..................................... 2,552
MACHINERY - 2.1%
1,250,000 AGCO Corp.
6.50%, due 6/01/08 ..................................... 4,844
PAPER & FOREST PRODUCTS - 0.9%
2,115,000 Repap Enterprises, Inc.
8.50%, due 8/01/97 (ADR) ............................... 2,086
PETROLEUM & PETROLEUM SERVICES - 1.4%
$2,500,000 Pennzoil Co.
6.50%, due 1/15/03 ..................................... 3,347
RETAIL - 2.1%
3,000,000 Eagle Hardware & Garden, Inc.
6.25%, due 3/15/01 ..................................... 2,474
2,500,000 Price/Costco, Inc.
6.75%, due 3/01/01 ..................................... 2,534
TRANSPORTATION - 0.6%
1,605,000 Alaska Air Group, Inc.
6.875%, due 6/15/14 .................................... 1,525
--------
TOTAL CORPORATE BONDS .............................................. 33,626
--------
TEMPORARY INVESTMENTS - 3.2%
INVESTMENT COMPANIES:
7,607,128 Short-Term Investments Co.
(Prime Portfolio) ...................................... 7,607
--------
TOTAL TEMPORARY INVESTMENTS ........................................ 7,607
--------
TOTAL INVESTMENTS - 100.1% ......................................... 235,512
Liabilities, less Other Assets ..................................... (117)
--------
NET ASSETS ......................................................... $235,395
========
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-20-
<PAGE> 23
REPORT FROM THE FUND MANAGER
SAFECO NORTHWEST FUND
May 1, 1996
[PHOTO OF CHARLES R. DRIGGS]
The SAFECO Northwest Fund's total return was 23.60% for the 12 months
ended March 31, 1996. The Northwest 50 Index returned 26.40% for the same
period. For the six months then ended, the Fund's total return was 7.33%
compared to 5.48% for the index.
In the first quarter of 1996, most of the technology stocks and other
individual issues that caused the Fund's twelve-month return to lag behind the
Northwest 50 turned around and came back strongly--casting us well in front of
the index for the latest six months.
Our aging population makes assisted living a growth industry, and we
established two positions here, ASSISTED LIVING CONCEPTS out of Salem, Oregon
(.9% of net assets), and EMERITUS of Seattle (4.6% of net assets). Coming from
Hillhaven, Emeritus' management is well-qualified for success. Additionally, the
elder care industry is expected to grow 25% to 35% per year through 2010.
The Fund was able to establish a nearly 3% position in the newly issued
stock of HART BREWING. Hart makes Pyramid Ales and Thomas Kemper Lagers. Both
brews seem destined for national distribution, and it appears craft brewers are
here to stay. Our stock in REDHOOK ALE logged a good gain over the last six
months.
Our largest purchase during the quarter was in SCHNITZER STEEL INDUSTRIES,
a scrap steel recycler and mini-mill operator in McMinnville, Oregon.
Schnitzer's environmentally correct operations make it a sought-after partner
for troubled scrap producers or recyclers. We took a 3.2% position in Schnitzer
in anticipation of merger/takeover activity, and because the company has good
fundamentals. We also added to our holdings in tire recycler R-B RUBBER during
the period.
We took a small position in biotechnology firm EPITOPE (.3% of net assets)
and brought our other biotech holding, CONSEP, to 1.0% of net assets. We also
initiated a small position in ANALOGY, a company that tests mixed technology
systems.
NIKE continued to "just do it" and I took some profits here, selling it
out of our top ten holdings, to 1.9% of net assets.
(Continued on next page.)
-21-
<PAGE> 24
HIGHLIGHTS
SAFECO
NORTHWEST FUND
As of March 31, 1996
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
- -------------------------------------
[PIE CHART]
(1) Large: 18.7% ($4 Bil. and above.)
(2) Medium: 12.8% ($1 Bil. -- $4 Bil.)
(3) Small: 62.3% (Less than $1 Bil.)
(4) Cash and Other: 6.2%
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
- -------------------------------------
[BAR GRAPH]
Banking &
Finance: 12.1%
Savings &
Loan/Savings
Banks: 8.8%
Retail-Other: 8.2%
Electrical
Equipment &
Electronics: 6.9%
Health Care: 5.5%
REPORT FROM THE
NORTHWEST FUND MANAGER
(Continued)
I liquidated our positions in MACHEEZMO MOUSE RESTAURANTS when it became
clear it couldn't sustain its healthy-fare niche and in SPACE LABS, which no
longer fits my criteria for technology companies.
I sold the SMC out of the portfolio as its sales just kept slipping. As
motor coach manufacturers go, MONACO COACH simply is the better company. I added
to Monaco, bringing it into our top ten holdings.
I also added to our position in NORTHRIM BANK, bringing banks and savings
& loans to 20.9% of net assets on March 31. I expect this group to outperform
the market in 1996 as it did in 1995. The banks and S&L's prices based on
earnings (PE) remain below historical values.
MICROSOFT remains a core holding for us. This is a huge, but still
growing, company that has done a great job capitalizing on computing trends.
PRICE/COSTCO has long languished under a cloud of merger and expansion
costs. However, the latest comparable sales figures are the strongest they've
been since Costco merged with Price, and a sound plan to further increase sales
is in place.
LONGVIEW FIBRE'S stock price, flat through 1995, is staged to
-22-
<PAGE> 25
come back as Japanese timber orders are expected to increase.
Airplane orders, production and consequently workforce levels are
increasing at the area's biggest employer. Boeing stock was up over 10% in the
first quarter alone. I took some profits and sold the position down to 5.4% of
net assets.
I believe a Boeing rebound and continued strong growth in the "Silicon
Forest" of the Pacific Northwest will benefit the service providers that
populate our portfolio. As such, SAFECO Northwest Fund is currently geared
toward capitalizing on a strong local economy.
/s/Charles R. Driggs,
- ---------------------
Charles R. Driggs,
Northwest Fund Manager
Charles Driggs has 27 years in securities analysis in the Northwest. He joined
SAFECO in 1984 as a utility and financial services expert and took the helm of
SAFECO Northwest Fund in November 1992. Driggs holds a Bachelor of Science in
Investments from Portland State University in Oregon.
HIGHLIGHTS(Continued)
SAFECO NORTHWEST FUND
March 31, 1996
<TABLE>
<CAPTION>
PERCENT
TOP TEN HOLDINGS NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
US Bancorp ................................................................ 5.9%
(Bank)
Boeing Co. ................................................................ 5.4%
(Aerospace)
Emeritus Corp. ............................................................ 4.6%
(Health Care)
Washington Mutual Savings Bank ............................................ 4.5%
(Savings & Loan)
Microsoft Corp. ........................................................... 4.4%
(Personal Computer Software)
Price/Costco, Inc. ........................................................ 3.6%
(Wholesale Membership Warehouse)
Longview Fibre Co. ........................................................ 3.5%
(Forestry)
Monaco Coach Corp. ........................................................ 3.4%
(Designs, Develops &
Manufactures Motor Coaches)
Schnitzer Steel Industries, Inc. .......................................... 3.2%
(Steel Manufacturing)
Sterling Financial Corp. .................................................. 3.2%
(Savings & Loan Holding Co.)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Sept. through March) Cost
- --------------------------------------------------------------------------------
<S> <C>
Schnitzer Steel Industries, Inc. ........................... $1,511,750
Emeritus Corp. ............................................. 1,482,000
Hart Brewing, Inc. ......................................... 1,328,511
Redhook Ale Brewery, Inc. .................................. 552,478
Wholesome & Hearty Foods, Inc. ............................. 503,150
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES
(Sept. through March) Proceeds
- --------------------------------------------------------------------------------
<S> <C>
*Vencor, Inc. ........................................... $2,643,676
NIKE, Inc. ............................................. 2,387,230
*Keycorp ................................................ 1,282,633
Boeing Co. ............................................. 1,114,683
Albertson's, Inc. ...................................... 870,971
- --------------------------------------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio.
-23-
<PAGE> 26
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 93.7%
AEROSPACE - 5.4%
26,900 Boeing Co. ................................................ $ 2,330
APPAREL MANUFACTURING - 1.9%.
10,000 NIKE, Inc. ................................................ 813
AUTOS - 3.4%
104,000* Monaco Coach Corp. ........................................ 1,482
BANKING & FINANCE - 12.1%
24,200* Cascade Bancorp ........................................... 463
33,000 Interwest Savings Bank .................................... 722
67,500 Northrim Bank ............................................. 675
75,000 US Bancorp ................................................ 2,550
41,580 West Coast Bancorp, Inc. .................................. 811
BEVERAGES - 4.5%
87,300* Hart Brewing, Inc. ........................................ 1,266
27,100* Redhook Ale Brewery, Inc. ................................. 681
BUILDING MATERIALS - 2.6%
31,000* BMC West Corp. ............................................ 504
40,000 TJ International, Inc. .................................... 630
CHEMICALS - 1.0%
114,000* Consep, Inc. .............................................. 413
COMMERCIAL SERVICES - 1.6%
39,000* Barrett Business
Services, Inc. ............................................ 683
COMPUTER SOFTWARE - 5.5%
5,400* Analogy, Inc. ............................................. 43
27,500* Mentor Graphics Corp. ..................................... 392
18,300* Microsoft Corp. ........................................... 1,887
10,000* ThrustMaster, Inc. ........................................ 41
DRUGS & HOSPITAL SUPPLY - 0.3%
7,500* Epitope, Inc. ............................................. 128
ELECTRICAL EQUIPMENT & ELECTRONICS - 6.9%
91,000* Flir Systems, Inc. ........................................ 1,115
43,000* Lattice
Semiconductor Corp. ....................................... 1,220
12,000* Merix Corp. ............................................... 444
15,000* Semitool, Inc. ............................................ 225
FOOD - 2.7%
140,100* Wholesome &
Hearty Foods, Inc. ........................................ 1,173
HEALTH CARE - 5.5%
21,600* Assisted Living
Concepts, Inc. ............................................ 397
98,000* Emeritus Corp ............................................. 1,997
HOUSEHOLD PRODUCTS - 2.8%
58,000* Paragon Trade Brands, Inc. ................................ 1,204
INDUSTRIAL PRODUCTS & SUPPLIERS - 2.0%
78,000 Univar Corp. .............................................. 878
MACHINERY - 1.5%
74,000* Flow International Corp. .................................. 648
METALS - 3.2%
52,800 Schnitzer Steel
Industries, Inc. .......................................... 1,379
PAPER & FOREST PRODUCTS - 3.5%
88,500 Longview Fibre Co. ........................................ 1,493
POLLUTION CONTROL - 0.5%
77,400* R-B Rubber Products, Inc. ................................. 213
</TABLE>
* Non-Income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
-24-
<PAGE> 27
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO NORTHWEST FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
RETAIL-GROCERS - 4.9%
35,000 Albertson's, Inc. ....................................... $ 1,299
66,000* Carr-Gottstein Foods Co. ................................ 338
19,284* Quality Food Centers, Inc. .............................. 472
RETAIL-OTHER - 8.2%
60,000* Hollywood
Entertainment Corp ...................................... 795
24,600 Nordstrom, Inc. ......................................... 1,192
83,500* Price/Costco, Inc. ...................................... 1,566
RETAIL-SPECIALTY - 2.2%
89,000* Egghead, Inc. ........................................... 951
SAVINGS & LOAN / SAVINGS BANKS - 8.8%
24,000 Security Bancorp ........................................ 486
106,000* Sterling Financial Corp. ................................ 1,378
65,200 Washington Mutual
Savings Bank ............................................ 1,940
TRANSPORTATION - 2.7%
15,500* Airborne Freight Corp. .................................. 391
164,000* Arrow Transportation Co. ................................ 133
18,600 Expeditors International
of Washington, Inc. ..................................... 488
14,000 Greenbrier Companies, Inc ............................... 180
-------
TOTAL COMMON STOCKS ................................................. 40,509
-------
TEMPORARY INVESTMENTS - 6.6%
INVESTMENT COMPANIES:
$2,134,040 Short-Term Investments Co.
(Prime Portfolio) ....................................... 2,134
706,346 Short-Term Investments Co.
(Treasury Portfolio) .................................... 706
-------
TOTAL TEMPORARY INVESTMENTS ......................................... 2,840
-------
TOTAL INVESTMENTS - 100.3% .......................................... 43,349
Liabilities, less Other Assets ...................................... (121)
-------
NET ASSETS .......................................................... $43,228
=======
- --------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE> 28
REPORT FROM THE FUND MANAGER
SAFECO INTERNATIONAL STOCK FUND
May 1, 1996
The SAFECO International Stock Fund had a total return of 0.40% from its
inception January 31 to March 31, 1996. The Morgan Stanley Europe Australia and
Far East (EAFE) Index had a total return of 2.52% for the same period. Part of
the under- performance of the Fund compared to the index is due to the initial
investment costs, the most significant of which were the commission expenses
incurred in building the portfolio.
By the end of March, the Fund held 76 stocks spread across 16 themes. The
stocks are primarily medium-to-large capitalized issues.
Stocks, not countries, are the building blocks of the SAFECO International
Fund. We take a fundamental, value-driven approach in our stock selection
process which is carried out within a thematic framework. We buy stocks of
well-established companies which are trading at a discount to their future
earnings growth.
Because holdings are priced in foreign currencies, fluctuations in
exchange rates can inflate or deflate U.S. dollar returns. When the dollar rises
against a foreign currency, the dollar value of assets quoted in that currency
fall. Conversely, when the dollar falls against a foreign currency, the dollar
value of assets quoted in that currency rises. The returns discussed in this
report are in U.S. dollar terms.
During the reporting period, most international equity markets continued
the upward trend they set in 1995. The better performing markets were some of
the smaller Far Eastern markets that had not participated in the broad rally in
1995 as well as a number of the major European ones. However, part of the gains
achieved in local currency terms were diluted on translation to U.S. dollar
terms due to the strengthening of the dollar over the period.
The UK market, in which 30.4% of net assets were invested on March 31, was
the notable exception to this general strength. It was flat during the period.
While corporate results were encouraging and merger activity showed
-26-
<PAGE> 29
little evidence of slowing, the market was overshadowed by uncertainty
surrounding the government and the reduced likelihood of further interest rate
reductions.
In Continental Europe, most of the strength came from the four major
markets. France and Germany returned 9% and 5% respectively. In the Netherlands,
positive corporate results contributed to a robust performance of 8%; and in
Switzerland, continued takeover activity was the primary stimulus behind the 7%
return.
The Japanese market returned just 0.4% for the quarter. Although the
economy has stopped deteriorating, the bad debt crisis faced by the banking
sector and the property slump continue. Other Far Eastern markets were strong,
buoyed principally by cash inflows. Indonesia and Malaysia were the leaders
here, with returns in double-digits.
The Australian market returned 6%, primarily on the continued strength of
the Australian dollar.
(continued on next page)
HIGHLIGHTS
SAFECO International Stock Fund
As of March 31, 1996
TOP FIVE INDUSTRIES AS A PERCENT OF NET ASSETS AS OF MARCH 31, 1996
[BAR GRAPH]
Banking & Finance: 16.6%
Publishing: 8.3%
Tobacco: 7.0%
Pharmaceuticals: 6.3%
Diversified Holding Co.: 5.4%
TOP FIVE COUNTRIES
AS A PERCENT OF NET ASSETS AS OF MARCH 31, 1996
[BAR GRAPH]
United Kingdom: 30.4%
Australia: 10.1%
Netherlands: 9.9%
Singapore: 8.5%
Switzerland: 8.5%
-27-
<PAGE> 30
HIGHLIGHTS (Continued)
SAFECO INTERNATIONAL
STOCK FUND
May 1, 1996
<TABLE>
<CAPTION>
PERCENT
TOP TEN HOLDINGS PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
News Corp., Ltd. .......................................................... 3.6%
(Telephone Company)
B.A.T. Industries, plc .................................................... 3.5%
(Tobacco & Financial Services)
Ciba-Geigy AG ............................................................. 3.0%
(Pharmaceuticals)
Thorn EMI, plc ............................................................ 2.9%
(Entertainment)
National Australia Bank, Ltd. ............................................. 2.6%
(Banking & Finance)
Broken Hill Proprietary Co., Ltd. ......................................... 2.5%
(Metals & Mining)
Singapore Press Holdings, Ltd. ............................................ 2.5%
(Publishing)
Hanjaya Mandala Sampoerna ................................................. 2.4%
(Tobacco)
Elsevier NV ............................................................... 2.3%
(Publishing)
Roche Holding AG .......................................................... 2.2%
(Pharmaceuticals)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Feb. through March) Cost
- --------------------------------------------------------------------------------
<S> <C>
B.A.T. Industries, plc ...................................... $267,248
News Corp., Ltd. ............................................ 214,324
Hanjaya Mandala Sampoerna ................................... 184,467
Thorn EMI, plc .............................................. 183,849
National Australia Bank, Ltd. ............................... 177,665
<CAPTION>
SALES
(Feb. through March) Proceeds
- --------------------------------------------------------------------------------
<S> <C>
Hanson, plc ............................................. $23,243
Repola Oy ............................................... 16,048
</TABLE>
REPORT FROM THE
INTERNATIONAL
STOCK FUND MANAGER
(Continued)
The portfolio's holdings are spread across themes determined by our
investment team. Themes are derived from social, demographic, economic,
technological and other trends that provide above-average growth opportunities.
Health care needs, growth in telecommunications and global cyclical recovery
are among the current themes.
Themes directed at the growth in the Far East, namely, expanding financial
services, rapid economic growth, and increased consumer spending, contributed
positively to performance. These themes were supported by the above-average
economic growth in the region together with the strong inflows of investment
capital.
Takeover activity helped a number of the stocks in the telecommunication,
health care, multimedia and undervalued asset themes. While a number of
companies in the paper/print industry theme did stage a recovery, other cyclical
stocks in the
-28-
<PAGE> 31
global recovery theme continued to disappoint.
With lower interest rates and following a particularly strong performance
in 1995, we saw some profit taking in the financial stocks. This negatively
affected our holdings in the interest rate and global insurance themes.
With moderate growth rates and subdued inflation levels globally, the
economic background remains generally positive for world financial markets.
Further modest reductions in interest rates are possible, particularly in
Continental Europe.
Despite the recent strong equity market performances, we remain
comfortable with valuation levels in most markets, except Japan.
We continue to believe the potential for earnings growth is significantly
less than the expectations reflected in Japanese stock prices.
Given our positive view on international markets, we will maintain a
fully-invested position within the portfolio.
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.
-29-
<PAGE> 32
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL STOCK FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 97.2%
AUSTRALIA - 10.1%
11,300 Broken Hill
Proprietary Co., Ltd. ................................... $ 161
(Metals & Mining)
18,500 National Australia Bank, Ltd. ........................... 165
(Banking & Finance)
39,400 News Corp., Ltd. ........................................ 230
(Television & Publishing)
14,800 WMC, Ltd. ............................................... 98
(Metals & Mining)
FINLAND - 1.1%
3,750 Repola Oy ............................................... 74
(Forest Products & Paper)
FRANCE - 0.5%
500 Elf Aquitaine ........................................... 34
(Oil & Gas)
GERMANY - 4.8%
295 Hoechst AG .............................................. 105
(Chemicals)
264 Mannesmann AG ........................................... 96
(Machinery & Engineering)
117 Siemens AG .............................................. 64
(Electrical Equipment &
Electronics)
975 Veba AG ................................................. 47
(Energy)
INDONESIA - 5.4%
6,000 Gudang Garam ............................................ 74
(Tobacco)
15,000 Hanjaya Mandala Sampoerna ............................... 157
(Tobacco)
4,000 Hero Supermarket ........................................ 9
(Retail - Grocery)
9,500 Indocement Tunggal Perkasa .............................. 37
(Cement, Food & Properties)
6,500 Kalbe Farma ............................................. 20
(Pharmaceuticals)
31,000 Mayora Indah ............................................ 23
(Food Processing)
16,500 Telekomunikasi Indonesia ................................ 26
(Telecommunications)
IRELAND - 2.3%
8,720 Allied Irish Bank, plc. ................................. 44
(Banking & Finance)
42,900 Smurfit (Jefferson) Group ............................... 103
(Paper Products & Supplies)
ITALY - 1.2%
25,960 Stet-Societa Finanz Telefon ............................. 72
(Telecommunications)
JAPAN - 1.8%
6,000 Canon, Inc. ............................................. 115
(Office Equipment)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-30-
<PAGE> 33
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INTERNATIONAL STOCK FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARE OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
MALAYSIA - 4.5%
17,000 DCB Holdings Berhad ..................................... $ 58
(Banking & Finance)
14,000 Hume Industries ......................................... 71
(Building Materials)
37,000 Sime Darby Berhad ....................................... 102
(Conglomerates)
9,000 United Engineers, Ltd. .................................. 62
(Construction)
MEXICO - 0.5%
15,000 Grupo Financiero
Banamex Accival ......................................... 32
(Banking & Finance)
NETHERLANDS - 9.9%
2,275 ABN Amro Holdings NV .................................... 113
(Banking & Finance)
260 DSM NV .................................................. 25
(Publishing)
9,700 Elsevier NV ............................................. 149
(Publishing)
1,620 Internationale Nederlanden
Groep NV ................................................ 118
(Banking & Finance)
1,000 Koninklijke PTT Nederland NV ............................ 39
(Commercial Services)
730 Nutricia Verenigde
Bedrijven NV ............................................ 73
(Food Processing)
2,950 Philips Electronics NV .................................. 107
(Electronics)
110 Royal Dutch Petroleum ................................... 16
(Petroleum & Petroleum Services)
SINGAPORE - 8.5%
15,000 City Developments, Ltd. ................................. 133
(Real Estate)
11,000 Development Bank
of Singapore, Ltd. ...................................... 135
(Banking & Finance)
10,800 Fraser & Neave, Ltd. .................................... 122
(Beverages)
8,000 Singapore Press Holdings, Ltd. .......................... 160
(Publishing)
SPAIN - 2.4%
525 Banco Santander SA ...................................... 25
(Banking & Finance)
7,530 Iberdrola SA ............................................ 69
(Utilities - Electronic)
1,540 Repsol SA ............................................... 58
(Petroleum & Petroleum Services)
SWEDEN - 2.4%
1,400 AssiDoman AB ............................................ 31
(Forest Products & Paper)
1,150 Stora Kopparbergs
Bergslags Akliebolag .................................... 15
(Forest Products & Paper)
5,050 Telefonaktiebolaget LM
Ericsson ................................................ 111
(Telecommunications Equipment)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-31-
<PAGE> 34
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INTERNATIONAL STOCK FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
SWITZERLAND - 8.5%
113 Alusuisse-Lonza
Holding AG .............................................. $ 95
(Materials, Energy, Chemicals)
157 Ciba-Geigy AG ........................................... 197
(Pharmaceuticals)
17 Roche Holding AG ........................................ 141
(Pharmaceuticals)
20 Sandoz AG-R ............................................. 23
(Pharmaceuticals)
91 Schweizerische
Rueckversicherungs-
Gesellschaft ............................................ 92
(Insurance)
THAILAND - 2.9%
8,000 Bangkok Bank Public Co., Ltd. ........................... 108
(Banking & Finance)
7,000 Thai Farmers Bank
Public Co., Ltd. ........................................ 82
(Banking & Finance)
UNITED KINGDOM - 30.4%
14,440 Argyll Group, plc. ...................................... 68
(Retail - Grocery)
30,230 B.A.T. Industries, plc. ................................. 223
(Tobacco & Financial Services)
22,150 BTR, plc. ............................................... 107
(Building Products, Equipment,
Consumer Goods)
11,450 Barclays, plc. .......................................... 127
(Banking & Finance)
UNITED KINGDOM (CONTINUED)
9,050 British Airways, plc. ................................... $ 74
(Air Transportation)
2,000 Cable & Wireless, plc. .................................. 16
(Air Transportation)
11,230 Cadbury Schweppes, plc. ................................. 86
(Beverages)
7,500 Chubb Security, plc. .................................... 42
(Electronic Security Systems)
13,310 Coats Viyella, plc. ..................................... 42
(Textiles)
6,640 General Accident, plc. .................................. 62
(Insurance)
10,500 General Electric Co., plc ............................... 59
(Electronics)
6,450 Granada Group, plc. ..................................... 74
(Television Systems, Travel)
8,000 Grand Metropolitan, plc ................................. 52
(Wine & Spirits, Food)
15,540 Hanson, plc. ............................................ 46
(Chemicals, Building Materials,
Consumer Products)
14,570 Ladbroke Group, plc. .................................... 43
(Hotels & Property Management)
13,050 Lloyds Bank, plc. ....................................... 62
(Banking & Finance)
7,260 Medeva, plc ............................................. 27
(Pharmaceuticals)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-32-
<PAGE> 35
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INTERNATIONAL STOCK FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
UNITED KINGDOM (CONTINUED)
12,020 Prudential Corp., plc. .................................. $ 78
(Insurance)
16,020 Scottish Power, plc ..................................... 84
(Utilities - Electric)
3,200 Shell Transportation &
Trading Co., plc ........................................ 42
(Utilities - Electric)
9,800 Siebe, plc .............................................. 131
(Industrial & Electronic
Equipment)
9,400 TI Group, plc ........................................... 70
(Manufacturing)
7,270 Thorn EMI, plc .......................................... 187
(Entertainment)
UNITED KINGDOM (CONTINUED)
11,600 Vodafone Group, plc ..................................... 43
(Telecommunications)
5,650 Zeneca Group, plc ....................................... 117
(Pharmaceuticals) ---------
TOTAL COMMON STOCKS ................................................. 6,278
---------
TOTAL INVESTMENTS - 97.2% ........................................... 6,278
Foreign Cash ............................................ 41
Domestic Cash ........................................... 171
Other Assets, less Liabilities .......................... (29)
---------
.................................................................... 183
---------
NET ASSETS .......................................................... $ 6,461
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-33-
<PAGE> 36
REPORT FROM THE FUND MANAGERS
SAFECO BALANCED FUND
May 1, 1996
[PHOTO OF REX BENTLEY]
[PHOTO OF MICHAEL C. KNEBEL]
This letter covers the two-month period from the SAFECO Balanced Fund's
inception on January 31, 1996, to March 31, 1996. During that time, the fund
returned 0.17% compared to the -0.27% return of the relevant indices (the S&P
500 Index weighted at 60% and the Lehman Brothers Government/Corporate Index
weighted at 40%).
Fortunate stock choices helped us beat our benchmark.
Pursuing current income and long-term capital growth, the SAFECO Balanced
Fund invests in both stocks and bonds. The bond portion of the portfolio is
managed to generate the majority of the income, while the stocks are selected to
provide appreciation and dividend growth.
On March 31, 54% of net assets were invested in high-quality stocks with
above-average yields, and the remainder was in high-grade corporate and
government bonds and overnight investments.
We will generally buy stocks of large, seasoned companies with a
price-to-earnings ratio (PE) lower, and a current yield higher, than the overall
market. Additionally, we look for faster than average earnings growth. In short,
we're looking for better-than-average growth at below-average prices.
On March 31st, the price earnings ratio for the portfolio was 14.4,
compared to 16.0 for the S&P 500. The current yield on the stocks in the
portfolio was 2.9%, compared to 2.2% for the S&P.
The ten largest equity positions accounted for 30.2% of the equity
portfolio. Among our largest holdings are two oil companies, ARCO and Mobil.
Both give us exposure to the important oil industry and good yields.
-34-
<PAGE> 37
NATIONSBANK yields 3.2% and has a price earnings multiple of 9, compared
to 16 for the S&P. It's also been a canny acquirer in a rapidly consolidating
industry.
GE is simply a well-run, well-diversified business that could grow faster
than the market over the long term. Du Pont pays a solid dividend and is
involved in a cost-cutting program that should enable it to grow earnings.
Additionally, Du Pont gives us cyclical exposure, as the chemical industry tends
to rise with the economy.
MAY DEPARTMENT STORES and BROWNING FERRIS, a landfill operator, represent
stocks that we purchased when they were out of favor.
SCHERING-PLOUGH, SMITH KLINE BEECHAM and ABBOTT LABS comprise our position
in the health care sector. With these and the other holdings, our stock
portfolio is well-diversified across industries and economic sectors.
Managing the bond side, we use a trend-following technique known as active
duration management, as opposed to the more
(Continued on next page)
HIGHLIGHTS
SAFECO
BALANCED FUND
As of March 31, 1996 (Unaudited)
NET ASSET CAPITALIZATION WEIGHTINGS
(OF COMMON STOCK)
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[PIE CHART]
(1) Large: 46.5% ($4 Bil. and above.)
(2) Medium: 6.6% ($1 Bil. - $4 Bil.)
(3) Small: 1.9% (Less than $1 Bil.)
(4) Bonds: 12.8%
(5) U.S. Government Securities: 29.6%
(6) Cash and Other: 2.6%
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[BAR GRAPH]
U.S. Government
Securities: 29.5%
Banking &
Finance: 5.7%
Finance-Misc.: 4.9%
Electronic Equipment
& Electronics: 4.3%
Petroleum &
Petroleum
Services: 3.3%
-35-
<PAGE> 38
HIGHLIGHTS (Continued)
SAFECO BALANCED FUND
As of March 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------------
<S> <C>
U.S. Treasury Notes ........................................... 29.1%
NationsBank Corp. ............................................. 1.8%
(Bank)
BankAmerica Corp. ............................................. 1.8%
9.50%, due 4/01/01
Household Financial Corp. ..................................... 1.7%
9.00%, due 9/28/01
Atlantic Richfield Co. ........................................ 1.7%
(Oil Company)
Mobil Corp. ................................................... 1.6%
(Oil Company)
Associates Corp. of North America ............................. 1.6%
7.02%, due 5/15/01
General Electric Co. .......................................... 1.6%
(Electrical Equipment)
Walt Disney Company ........................................... 1.6%
6.50%, due 10/01/02
Du Pont (EI) De Nemours ....................................... 1.6%
(Chemical Company)
<CAPTION>
TOP FIVE PURCHASES
(Feb. through March) Cost
- -------------------------------------------------------------------------------
<S> <C>
U.S. Government Securities .................................... $ 4,291,255
BankAmerica Corp.
9.50%, due 4/01/01 .......................................... 112,800
Household Financial Corp.
9.00%, due 9/28/01 .......................................... 111,556
Philip Morris Cos., Inc. ...................................... 103,752
Associates Corp. of North America
7.02%, due 5/15/01 .......................................... 102,452
<CAPTION>
SALES
(Feb. through March) PROCEEDS
- -------------------------------------------------------------------------------
<S> <C>
U.S. Government Securities .................................... $ 2,310,392
*Honeywell, Inc. .............................................. 38,282
</TABLE>
*Security sold, no longer in portfolio.
REPORT FROM THE
BALANCED FUND
MANAGERS (Continued)
risky interest-rate anticipation style. We manage the sensitivity to changes in
interest rates (or duration) to protect the value of your principal when
interest rates rise and to participate in the capital gains created when rates
fall.
Whenever rates are rising, you should expect to see us shorten the
average maturity of the Balanced Fund's bond holdings. As rates decline, you
will see the bond portfolio's average maturity lengthen. In this way, we work to
minimize risk and boost returns.
In mid-February, concerns over rising employment and a strengthening
economy caused bond yields to reverse direction and move up sharply. As a
result, we reduced the bond portfolio's average maturity from six to about
two-and-one-half years. At its current level, the Fund's average
-36-
<PAGE> 39
maturity is much shorter than the Lehman Brothers Government/Corporate Index's
9.4 years.
We included a number of corporate bonds in the mix because they yield
more than comparable length treasuries. As of March 31, high-grade corporate
bonds comprised about 30% and U.S. Treasuries about 70% of the bond portion of
the Fund. The combination of a higher-yielding, shorter-maturity portfolio
should help insulate the Fund if rates continue to rise.
Our plan is to keep the Balanced Fund fully invested, varying the
allocations between stocks and bonds based on market valuations and the outlook
for inflation, interest rates and the economy. Managing SAFECO Balanced Fund, we
will select securities, allocate assets and adjust maturities through changing
market conditions to give you a diversified portfolio without your constantly
monitoring the markets or your own allocations.
/s/ REX L. BENTLEY
Rex Bentley, Stocks
/s/ MICHAEL C. KNEBEL
Michael Knebel, Bonds
Rex Bentley, an MBA from Brigham Young University and chartered financial
analyst, has more than 20 years of investment experience.
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.
-37-
<PAGE> 40
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT* VALUE (000'S)
- ---------------------------------------------
<S> <C>
COMMON STOCKS - 54.4%
AUTOS & AUTO PARTS - 1.2%
2,100 Echlin, Inc................$ 76
BANKING & FINANCE - 3.9%
1,200 Chemical Banking Corp. .....85
600 J.P. Morgan & Co. ...........50
1,400 NationsBank Corp............112
BEVERAGES - ALCOHOL - 0.9%
800 Anheuser-Busch
Companies, Inc...............54
CHEMICALS - 1.6%
1,200 Du Pont (EI) De Nemours.....100
COMPUTER SOFTWARE - 0.7%
900 Oracle Corp..................42
CONGLOMERATES - 1.3%
1,300 Minnesota Mining &
Manufacturing Co.............84
COSMETICS - 0.9%
700 Avon Products, Inc...........60
DRUGS & HOSPITAL SUPPLIES - 2.8%
800 American Home Products Corp..87
1,500 Schering-Plough Corp.........87
ELECTRICAL EQUIPMENT & ELECTRONICS - 4.3%
1,800 AMP, Inc.....................75
1,300 General Electric Co. ......101
800 Intel Corp. .................46
1,000 Motorola, Inc. ..............53
FINANCIAL SERVICES - 2.8%
1,700 Federal National
Mortgage Association.........54
1,500 H & R Block ................54
2,400 MBNA Corp. .................71
FOOD - 1.2%
1,100 CPC International, Inc.....$ 76
32 Earthgrains Co................1
FOOD & TOBACCO - 2.5%
1,600 ConAgra, Inc. ...............65
1,100 Philip Morris Cos., Inc......97
HOUSEHOLD PRODUCTS - 2.9%
1,200 Colgate-Palmolive Co. .......93
1,200 Kimberly-Clark Corp..........89
INDUSTRIAL PRODUCT & SUPPLIES - 1.2%
2,200 Corning, Inc.................77
INSURANCE - 1.0%
1,800 American General Corp........62
INSURANCE - MULTILINE - 1.1%
1,400 ITT Hartford Group, Inc. ....69
MACHINERY DIVERSIFIED - 1.2%
1,800 Briggs & Stratton Corp. .....78
MANUFACTURING - 0.7%
800 Allied Signal, Inc. .........47
METALS - 0.7%
700 Aluminum Co. of America......44
OIL & GAS - 3.3%
3,200 Occidental Petroleum Corp....86
1,600 Sonat, Inc. .................58
1,100 Tenneco, Inc.................61
PETROLEUM & PETROLEUM SERVICES - 3.3%
900 Atlantic Richfield Co. .....107
900 Mobil Corp..................104
PHARMACEUTICALS - 2.3%
1,900 Abbott Laboratories..........77
1,400 Smith Kline Beecham (ADR)....72
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-38-
<PAGE> 41
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO BALANCED FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT* VALUE (000'S)
- ---------------------------------------------
<S> <C>
POLLUTION CONTROL - 1.4%
2,800 Browning Ferris
Industries, Inc..........$ 88
PUBLISHING - 0.6%
600 Dun & Bradstreet Corp........36
RETAIL - 2.3%
1,200 J.C. Penny Co., Inc. .......60
1,900 May Department Stores Co. ...92
RETAIL - GROCERS - 0.9%
1,800 American Stores Co...........59
TELECOMMUNICATIONS - 1.3%
1,300 AT & T Corp. ................80
TEXTILES - 0.9%
1,300 Springs Industries, Inc......60
TRANSPORTATION - 1.2%
1,700 CSX Corp.....................78
UTILITIES - ELECTRIC - 1.1%
1,900 NIPSCO Industries, Inc.......71
UTILITIES - ELECTRIC DISTRIBUTION - 1.4%
3,900 Houston Industries, Inc. ....84
UTILITIES - TELEPHONE - 1.5%
2,100 GTE Corp.....................92
------
TOTAL COMMON STOCKS.....................3,454
------
CORPORATE BONDS - 12.9%
AUTOMOBILES - 1.6%
$100 General Motors Acceptance Corp.
6.625%, due 10/01/02.........99
BANKING & FINANCE - 1.8%
100 BankAmerica Corp.
9.50%, due 4/01/01..........112
ENTERTAINMENT - 1.6%
100 Walt Disney Co.
6.50%, due 10/01/02.........100
FINANCE - AUTO - 1.5%
$100 Ford Motor Credit
6.25%, due 8/11/00........$ 97
FINANCE - MISC - 4.9%
100 Associates Corp. of
North America
7.02%, due 5/15/01..........102
100 Household Financial Corp.
9.00%, due 9/28/01..........110
100 International Lease Finance Corp.
6.20%, due 5/01/00...........99
UTILITIES - ELECTRIC - 1.5%
100 Southern California Edison Co.
5.875%, due 1/15/01..........97
------
TOTAL CORPORATE BONDS.....................816
------
U.S. GOVERNMENT SECURITIES - 29.5%
U.S. TREASURY NOTES - 29.1%
110 7.50%, due 2/15/05..........118
25 6.25%, due 2/15/03...........25
1,405 6.00%, due 6/30/96........1,407
300 6.00%, due 10/15/99.........300
U.S. TREASURY STRIPS - 0.4%
50 0.00%, due 8/15/05...........27
------
TOTAL U.S. GOVERNMENT SECURITIES........1,877
------
TEMPORARY INVESTMENTS - 2.8%
INVESTMENT COMPANIES:
179 Short-Term Investments Co.
(Prime Portfolio)...........179
------
TOTAL TEMPORARY INVESTMENTS...............179
------
TOTAL INVESTMENTS - 99.6%...............6,326
Other Assets, less Liabilities ............27
------
NET ASSETS $6,353
======
</TABLE>
* Principal amount is in thousands.
SEE NOTES TO FINANCIAL STATEMENTS
-39-
<PAGE> 42
REPORT FROM THE FUND MANAGER
SAFECO SMALL COMPANY STOCK FUND
May 1, 1996
[PHOTO GREG EISEN]
The SAFECO Small Company Stock Fund commenced operations on January 31st,
1996. For the two months through March 31st, the Fund achieved a total return of
4.90%. During this same period, the Russell 2000 Index earned a total return of
5.89%.
The variance between the Fund and the index is primarily attributable to the
Fund not being fully invested, specifically in February when small company
stocks were rallying. Small cap stocks (as represented by the Russell Index)
started to climb in late January, and the Russell Index outperformed the S&P 500
by almost 3% in February and March.
During the quarter, I invested the Fund across a diversified group of stocks.
I have tried to get a wide range of exposure to the sectors in the market, with
some notable overweightings, as explained below. At the time of purchase, I am
committing about 3% of net assets to each new stock position.
One area I overweighted is consumer cyclical stocks. Among them, CARIBINER
INTERNATIONAL grew from around 3% to 4% of the portfolio. Caribiner produces
meetings and special events for corporate clients. Other commercial services
stocks, such as FRANKLIN QUEST (personal calendar systems), AMRE (home
improvement remodeling) and MUNRO MUFFLER BRAKE, also outperformed during the
period as consumer cyclicals regained popularity.
The Fund had a significant overweighting at March 31st in the transportation
sector, 6.9% of net assets. There were a few names I found here to be both
quality companies and attractively priced.
AIR EXPRESS INTERNATIONAL is a freight forwarder with offices around the
world. It's truly a global small cap company and, at purchase, was significantly
cheaper in valuation than its competitors.
COMAIR HOLDINGS is a regional commuter airline based in Cincinnati that feeds
traffic to Delta in Cincinnati and Orlando. It's been a great stock so far this
decade, but fell out of favor in late 1995. It's performed well since.
GATX is a transportation equipment leasing conglomerate
-40-
<PAGE> 43
whose stock price fell during the quarter for what appears to be temporary
trouble in its storage business.
ABC RAIL, a manufacturer of railroad brakes, wheels, and specialty track work
grew to 3.7% of net assets.
Technology stocks totaled about 17% of net assets, about the same weighting
as is found in the Russell 2000. TRACOR, a producer of electronic components for
weapons systems, grew to 3.9% of net assets. It's an acquiring company in a
consolidating industry. Software company COTELLIGENT has grown to 3.7% of net
assets. I bought it primarily because it was a good company that seemed
significantly undervalued.
Financial services companies, at 9.2% of net assets on March 31, were
significantly under the index's weight. I expect to increase exposure in this
area during the second quarter. One financial company that has done well for us
is ROCKFORD INDUSTRIES. Rockford finances medical equipment and then securitizes
the loans in an exclusive relationship with Sun Life Insurance.
HIGHLIGHTS
SAFECO
SMALL COMPANY
STOCK FUND
As of March 31, 1996
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[PIE CHART]
- ----------------------------------------------------
<S> <C>
Large: 9.1% ($750 Mil. and above)
Medium: 38.2% ($250 Mil. -$750 Mil.)
Small: 42.8% (Less than $250 Mil.)
Cash and Other: 9.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES
AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1996
[BAR GRAPH]
- ----------------------------------------
<S> <C>
Commercial Services: 13.8%
Financial Services: 9.2%
Transportation: 6.9%
Computer Software: 6.5%
Electrical Equipment
& Electronics: 6.4%
</TABLE>
(Continued on next page.)
-41-
<PAGE> 44
HIGHLIGHTS (Continued)
SAFECO SMALL
COMPANY STOCK FUND
As of March 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- --------------------------------------------------------
<S> <C>
Caribiner International, Inc................ 4.0%
(Business Services)
Tracor, Inc................................. 3.9%
(Aerospace Electronics)
ABC Rail Products Corp...................... 3.7%
(Capital Goods Manufacturer)
Cotelligent Group, Inc...................... 3.7%
(Computer Consulting and
Contract Programming)
Rockford Ind., Inc.......................... 3.6%
(Specialty Finance)
Franklin Quest Co........................... 3.6%
(Business Services)
Datascope Corp.............................. 3.5%
(Hospital Supplies)
Seitel, Inc................................. 3.4%
(Oil Services)
AMRE, Inc................................... 3.1%
(Commercial Services)
Paragon Trade Brands, Inc................... 3.1%
(Manufacturer of Household Products)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES COST
(Feb. through March)
- -------------------------------------------------------
<S> <C>
Datascope Corp.............................. $222,918
Paragon Trade Brands, Inc................... 220,339
Tracor, Inc................................. 217,500
AMRE, Inc................................... 210,398
Seitel, Inc................................. 202,585
</TABLE>
<TABLE>
<CAPTION>
SALES PROCEEDS
(Feb. through March)
- --------------------------------------------------------
<S> <C>
*Physician Support Systems, Inc............. $104,738
*Renal Care Group, Inc...................... 9,600
*Indus Group, Inc........................... 830
- --------------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio.
REPORT FROM THE
SMALL COMPANY STOCK FUND
MANAGER (Continued)
At the end of the quarter, the Fund had 9.5% of net assets in cash. My goal
is to be fully invested in small capitalization stocks. I will be investing all
available cash as we identify opportunities to buy superior companies at
attractive valuations. To that end, we're searching different sectors across a
wide range of U.S. industries for small companies that make sense. While the
reasons they make sense will vary -- a superior product, a turnaround, a
transition, a new stock offering -- two elements will remain constant: the
companies in the SAFECO Small Company Stock Fund will have prospects that appear
above average, and prices that seem to underestimate their potential.
/s/ Greg Eisen
Greg Eisen
- --------------------------------------------------------------------------------
Greg Eisen joined SAFECO in 1986. He holds a BA from Rutgers University and is a
certified public accountant and a chartered financial analyst.
-42-
<PAGE> 45
PORTFOLIO OF INVESTMENTS
SAFECO SMALL COMPANY STOCK FUND
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE (000's)
- -------------------------------------------------------
<S> <C>
COMMON STOCKS - 90.1%
BEVERAGES - 4.0%
4,500 Canandaigua Wine Co............. $ 174
3,200* Redhook Ale Brewery, Inc........ 80
BUILDING MATERIALS - 3.0%
8,300 Fibreboard Corp................. 196
COMMERCIAL SERVICES - 13.8%
10,800* AMRE, Inc....................... 201
10,000* Caribiner International, Inc. 258
8,500* Franklin Quest Co............... 230
400* IntelliQuest
Information Group, Inc.......... 11
11,500* Monro Muffler Brake, Inc........ 184
COMPUTER SOFTWARE - 6.5%
20,000* Cotelligent Group, Inc........... 235
10,000* SPSS, Inc....................... 179
COMPUTER SYSTEMS - 1.4%
3,500* MICROS System, Inc.............. 88
DRUGS & HOSPITAL SUPPLIES - 4.1%
9,500* Datascope Corp.................. 223
4,000* Zonagen, Inc.................... 38
ELECTRICAL EQUIPMENT & ELECTRONICS - 6.4%
9,000* Tencor Instruments.............. 162
14,100* Tracor, Inc..................... 246
FINANCIAL SERVICES - 9.2%
8,600 First Financial
Caribbean Corp. (ADR)........... 170
15,000* Jayhawk Acceptance Corp......... 184
14,500* Rockford Industries, Inc........ 234
FOOD - 2.8%
9,600* JP Foodservice, Inc............. 180
HOMEBUILDING - 2.0%
8,000* Castle & Cooke, Inc. ........... 131
HOUSEHOLD PRODUCTS - 4.9%
9,500* Guest Supply, Inc............... 116
9,600* Paragon Trade Brands, Inc....... 199
MACHINERY - 2.0%
3,000 Briggs & Stratton Corp.......... 129
MANUFACTURING - 6.2%
9,600* ABC Rail Products Corp.......... 235
10,000* Lancer Corp..................... 163
PETROLEUM & PETROLEUM SERVICES - 3.5%
300* Belco Oil & Gas Corp............ 7
8,000* Seitel, Inc..................... 217
PUBLISHING - 2.6%
5,800* Devon Group, Inc................ 165
RESTAURANTS - 2.7%
6,900* Sbarro, Inc..................... 174
RETAIL - SPECIALTY - 2.2%
800* Party City Corp................. 12
12,500* Rent-Way, Inc................... 128
TELECOMMUNICATIONS - 2.9%
12,000* Mobile Telecommunication
Technologies Corp............... 187
TRANSPORTATION - 6.9%
7,000 Air Express International Corp. 180
2,500 Comair Holdings, Inc........... 87
3,900 GATX Corp...................... 179
UTILITIES - GAS - 3.0%
6,000 Northwest Natural Gas Co....... 190
------
TOTAL COMMON STOCKS........................ 5,772
------
TEMPORARY INVESTMENTS - 9.5%
INVESTMENT COMPANIES:
$607,862 Short-Term Investments Co.
(Prime Portfolio) ............. 608
------
TOTAL TEMPORARY INVESTMENTS................ 608
------
TOTAL INVESTMENTS - 99.6%.................. 6,380
Other Assets, less Liabilities ............ 26
------
NET ASSETS................................. $6,406
======
- -----------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
-43-
<PAGE> 46
STATEMENTS OF ASSETS AND LIABILITIES
As of March 31, 1996 (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 Value
Common Stocks (Identified Cost $142,591,
$530,376, $108,519, $31,526, $6,215,
$3,381, and $5,534, respectively) $180,634 $630,631 $152,851
Preferred Stocks (Identified Cost $38,921) -- -- 41,428
Corporate Bonds (Identified Cost $28,841,
and $822, respectively) -- -- 33,626
U.S. Government and Agency Obligations
(Identified Cost $1,897) -- -- --
Temporary Investments 13,205 11,382 7,607
-------- -------- --------
Total Investments 193,839 642,013 235,512
Cash -- -- --
Receivables
Trust Shares Sold 1,702 493 107
Dividends and Interest 234 1,028 848
Investment Securities Sold 630 2,995 --
Deferred Organization Expense (Note 4) -- -- --
-------- -------- --------
Total Assets 196,405 646,529 236,467
-------- -------- --------
LIABILITIES
Payables
Investment Securities Purchased 2,283 7,809 --
Dividends 3 197 258
Investment Advisory Fees 103 298 126
Trust Shares Redeemed 798 1,236 654
Organization Expense -- -- --
Forward Currency Contracts Open (Note 5) -- -- --
Other 51 104 34
-------- -------- --------
Total Liabilities 3,238 9,644 1,072
-------- -------- --------
NET ASSETS $193,167 $636,885 $235,395
======== ======== ========
TRUST SHARES OUTSTANDING 11,259 39,861 11,497
======== ======== ========
NET ASSET VALUE PER SHARE
(Net Assets Divided by Trust
Shares Outstanding) $ 17.16 $ 15.98 $ 20.47
======== ======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-44-
<PAGE> 47
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
As of March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
NORTHWEST INTERNATIONAL BALANCED SMALL COMPANY
(In Thousands, Except Per-Share Amounts) FUND STOCK FUND FUND STOCK FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at Value
Common Stocks (Identified Cost $142,591,
$530,376, $108,519, $31,526, $6,215,
$3,381, and $5,534, respectively) $40,509 $6,278 $3,454 $5,772
Preferred Stocks (Identified Cost $38,921) -- -- -- --
Corporate Bonds (Identified Cost $28,841,
and $822, respectively) -- -- 816 --
U.S. Government and Agency Obligations
(Identified Cost $1,897) -- -- 1,877 --
Temporary Investments 2,840 -- 179 608
------- ------ ------ ------
Total Investments 43,349 6,278 6,326 6,380
Cash -- 212 -- --
Receivables
Trust Shares Sold 92 9 21 47
Dividends and Interest 46 32 57 2
Investment Securities Sold -- -- -- --
Deferred Organization Expense (Note 4) -- 19 19 19
------- ------ ------ ------
Total Assets 43,487 6,550 6,423 6,448
------- ------ ------ ------
LIABILITIES
Payables
Investment Securities Purchased 210 42 15 --
Dividends -- -- 26 --
Investment Advisory Fees 24 6 3 4
Trust Shares Redeemed 9 2 -- 12
Organization Expense -- 20 20 20
Forward Currency Contracts Open (Note 5) -- 6 -- --
Other 16 13 6 6
------- ------ ------ ------
Total Liabilities 259 89 70 42
------- ------ ------ ------
NET ASSETS $43,228 $6,461 $6,353 $6,406
======= ====== ====== ======
TRUST SHARES OUTSTANDING 2,869 643 637 611
======= ====== ====== ======
NET ASSET VALUE PER SHARE
(Net Assets Divided by Trust
Shares Outstanding) $ 15.07 $10.04 $ 9.97 $10.49
======= ====== ====== ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-45-
<PAGE> 48
STATEMENTS OF OPERATIONS
For the Period Ended March 31, 1996* (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 $4 in the International Fund) $ 868 $ 7,077 $ 3,771
Interest 115 1,024 1,265
-------- -------- --------
Total Investment Income 983 8,101 5,035
-------- -------- --------
EXPENSES
Investment Advisory Fees (Note 4) 619 1,808 766
Shareholder Servicing Costs (Note 4) 187 554 155
Loan Interest 95 -- --
Custodian Fees 10 14 7
Reports to Shareholders 17 56 20
Legal and Auditing Fees 9 14 9
Trustees' Fees 3 5 4
Amortization of Organization Expenses -- -- --
-------- -------- --------
Total Expenses 940 2,451 961
-------- -------- --------
NET INVESTMENT INCOME 43 5,650 4,075
-------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 1)
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 6,448 39,879 4,822
Investments in Affiliates (Note 3) (2,890) -- --
Foreign Currency Transactions -- -- --
-------- -------- --------
Total Net Realized Gain (Loss) 3,558 39,879 4,822
Net Change in Unrealized Appreciation
(Depreciation) on Investments 14,449 (462) 11,528
Translation of Assets and Liabilities
in Foreign Currencies -- -- --
-------- -------- --------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY 18,007 39,417 16,350
-------- -------- --------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,050 $ 45,067 $ 20,425
======== ======== ========
</TABLE>
* For the Growth, Equity, Income, and Northwest Funds, represents the six-month
period ended March 31, 1996. For the International, Balanced, and Small
Company Funds, represents the period from January 31, 1996 (commencement of
operations) to March 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS
-46-
<PAGE> 49
STATEMENTS OF OPERATIONS (Continued)
For the Period Ended March 31, 1996* (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
Northwest International Balanced Small Company
(In Thousands) Fund Stock Fund Fund Stock Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of Foreign Taxes Withheld
of $4 in the International Fund) $ 216 $ 34 $ 18 $ 3
Interest 33 9 28 22
------- ------- ------- -------
Total Investment Income 249 43 46 25
------- ------- ------- -------
EXPENSES
Investment Advisory Fees (Note 4) 144 10 7 7
Shareholder Servicing Costs (Note 4) 56 1 -- 1
Loan Interest -- -- -- --
Custodian Fees 6 7 3 3
Reports to Shareholders 5 -- -- --
Legal and Auditing Fees 7 6 5 5
Trustees' Fees 3 -- -- --
Amortization of Organization Expenses 1 1 1 1
------- ------- ------- -------
Total Expenses 222 25 16 17
------- ------- ------- -------
NET INVESTMENT INCOME 27 18 30 8
------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 1)
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 4,677 (1) (82) 35
Investments in Affiliates (Note 3) -- -- -- --
Foreign Currency Transactions -- (36) -- --
------- ------- ------- -------
Total Net Realized Gain (Loss) 4,677 (37) (82) 35
Net Change in Unrealized Appreciation
(Depreciation) on Investments (1,806) 58 48 238
Translation of Assets and Liabilities
in Foreign Currencies -- (1) -- --
------- ------- ------- -------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY 2,871 20 (34) 273
------- ------- ------- -------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,898 $ 38 $ (4) $ 281
======= ======= ======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-47-
<PAGE> 50
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO Growth Fund SAFECO Equity Fund
------------------ ------------------
For the Six For the For the Six For The
Months Ended Year Ended Months Ended Year Ended
March 31 September 30 March 31 September 30
(In Thousands) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 43 $ 552 $ 5,650 $ 12,311
Net Realized Gain from
Investments and Foreign
Currency Transactions 3,558 46,016 39,879 42,516
Net Change in Unrealized
Appreciation (Depreciation) 14,449 (10,634) (462) 52,564
--------- --------- --------- ---------
Net Change in Net Assets
Resulting from Operations 18,050 35,934 45,067 107,391
NET EQUALIZATION CREDITS (DEBITS) -- 2 -- 73
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (45) (557) (5,662) (12,378)
Net Realized Gain on
Investments (1,939) (46,001) (12,508) (42,473)
NET TRUST SHARE TRANSACTIONS 618 30,997 11,406 133,164
--------- --------- --------- ---------
TOTAL CHANGE IN NET ASSETS 16,684 20,375 38,303 185,777
NET ASSETS AT BEGINNING OF PERIOD 176,483 156,108 598,582 412,805
--------- --------- --------- ---------
NET ASSETS AT END OF PERIOD $ 193,167 $ 176,483 $ 636,885 $ 598,582
========= ========= ========= =========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND AMOUNTS
SHARES:
Sales 17,739 26,526 9,045 29,460
Reinvestments 113 2,736 1,100 3,370
--------- --------- --------- ---------
17,852 29,262 10,145 32,830
Redemptions (17,743) (27,099) (9,381) (23,460)
--------- --------- --------- ---------
NET CHANGE 109 2,163 764 9,370
========= ========= ========= =========
AMOUNTS:
Sales $ 288,677 $ 490,890 $ 140,908 $ 419,705
Reinvestments 1,837 43,424 16,956 50,729
Redemptions (289,896) (503,317) (146,458) (337,270)
--------- --------- --------- ---------
NET CHANGE $ 618 $ 30,997 $ 11,406 $ 133,164
========= ========= ========= =========
As of March 31, 1996
Trust Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $ .001
Paid in Capital $ 153,497 $ 509,222
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-48-
<PAGE> 51
STATEMENTS OF CHANGES OF NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
Income Fund Northwest Fund
---------------------------- -----------------------------
For the Six For the For the Six For the
Months Ended Year Ended Months Ended Year Ended
March 31 September 30 March 31 September 30
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 4,075 $ 8,954 $ 27 $ 112
Net Realized Gain from
Investments and Foreign
Currency Transactions 4,822 9,277 4,677 1,432
Net Change in Unrealized
Appreciation (Depreciation) 11,528 20,170 (1,806) 4,956
--------- --------- --------- ---------
Net Change in Net Assets
Resulting from Operations 20,425 38,401 2,898 6,500
NET EQUALIZATION CREDITS (DEBITS) -- (39) -- (1)
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (4,078) (8,912) (37) (110)
Net Realized Gain on
Investments (725) (9,283) (979) (1,432)
NET TRUST SHARE TRANSACTIONS 1,903 7,093 1,206 (1,200)
--------- --------- --------- ---------
TOTAL CHANGE IN NET ASSETS 17,525 27,260 3,088 3,757
NET ASSETS AT BEGINNING OF PERIOD 217,870 190,610 40,140 36,383
--------- --------- --------- ---------
NET ASSETS AT END OF PERIOD $ 235,395 $ 217,870 $ 43,228 $ 40,140
========= ========= ========= =========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND AMOUNTS
SHARES:
Sales 1,620 1,662 663 832
Reinvestments 204 833 59 84
--------- --------- --------- ---------
1,824 2,495 722 916
Redemptions (1,726) (2,145) (639) (1,019)
--------- --------- --------- ---------
NET CHANGE 98 350 83 103
========= ========= ========= =========
AMOUNTS:
Sales $ 32,110 $ 30,024 $ 9,468 $ 11,348
Reinvestments 4,069 15,463 801 1,202
Redemptions (34,276) (38,394) (9,063) (13,750)
--------- --------- --------- ---------
NET CHANGE $ 1,903 $ 7,093 $ 1,206 $ (1,200)
========= ========= ========= =========
As of March 31, 1996
Trust Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $ .001
Paid in Capital 179,676 $ 30,557
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
International Balanced Small Company
Stock Fund Fund Stock Fund
------------- --------- ------------
For the Period from January 31, 1996
(Commencement of Operations)
to March 31, 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Investment Income $ 18 $ 30 $ 8
Net Realized Gain from
Investments and Foreign
Currency Transactions (37) (82) 35
Net Change in Unrealized
Appreciation (Depreciation) 57 48 238
--------- --------- ---------
Net Change in Net Assets
Resulting from Operations 38 (4) 281
NET EQUALIZATION CREDITS (DEBITS) -- -- --
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income -- (30) --
Net Realized Gain on
Investments -- -- --
NET TRUST SHARE TRANSACTIONS 6,423 6,387 6,125
--------- --------- ---------
TOTAL CHANGE IN NET ASSETS 6,461 6,353 6,406
NET ASSETS AT BEGINNING OF PERIOD -- -- --
--------- --------- ---------
NET ASSETS AT END OF PERIOD $ 6,461 $ 6,353 $ 6,406
========= ========= =========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND AMOUNTS
SHARES:
Sales 688 638 618
Reinvestments -- -- --
--------- --------- ---------
688 638 618
Redemptions (45) (1) (7)
--------- --------- ---------
NET CHANGE 643 637 611
========= ========= =========
AMOUNTS:
Sales $ 6,868 $ 6,390 $ 6,194
Reinvestments -- 4 --
Redemptions (445) (7) (69)
--------- --------- ---------
NET CHANGE $ 6,423 $ 6,387 $ 6,125
========= ========= =========
As of March 31, 1996
Trust Shares Authorized Unlimited Unlimited Unlimited
Par Value Per Share $ .001 $ .001 $ .001
Paid in Capital $ 6,423 $ 6,387 $ 6,125
- -----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-49-
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The SAFECO Common Stock Trust ("Trust") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trust consists of the SAFECO Growth Fund,
SAFECO Equity Fund, SAFECO Income Fund, SAFECO Northwest Fund, SAFECO
International Stock Fund, SAFECO Balanced Fund, and SAFECO Small Company Stock
Fund (together "the Funds"). The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of its
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 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. When valuations are not readily
available, securities are valued at fair value as determined in good faith by
the board of trustees. Temporary investments purchased at par are valued at
cost. All other short-term investments are valued at amortized cost.
Security Transactions. Security transactions are recorded on the trade
date or upon receipt of ex-dividend notification in the case of certain foreign
securities. 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.
Income Recognition. Dividend income less foreign taxes withheld (if
any) is recorded on the ex-dividend date. Interest is accrued on short-term
investments and bonds daily.
Dividends and Distributions to Shareholders. For the 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 September and
December. For all other Funds net investment income is distributed as of the
last business day of March, June, September and December. Net realized gains on
investments, if any, are normally distributed to shareholders at the end of
September and December.
-50-
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
EQUALIZATION. During prior periods, the Funds followed the accounting
practice known as equalization by which a portion of the proceeds from sales and
cost of redemptions of Trust shares equivalent, on a per-share basis, to the
amount of distributable net investment income on the date of the transaction was
credited or charged to undistributed income. As a result, undistributed net
investment income per share was unaffected by sales or redemptions of a Fund's
shares.
Beginning October 1, 1995, the Funds discontinued the practice of
equalization accounting. Therefore, distributions of net investment income after
then are unaffected by trust share transactions. The change does not affect net
assets, net asset value, or net investment income of the Funds.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all taxable income to their shareholders
in a manner which results in no tax to the Funds. Therefore, no federal income
or excise tax provision is required.
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
(Continued on next page.)
-51-
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 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 counter-parties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
-52-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
(In Thousands) Growth Fund Equity Fund Income Fund Northwest Fund
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES FOR THE SIX MONTHS
ENDED MARCH 31, 1996 $ 124,284 $ 274,228 $ 30,436 $ 8,851
========= ========= ========= =========
SALES FOR THE SIX MONTHS
ENDED MARCH 31, 1996 $ 129,086 $ 254,454 $ 27,314 $ 11,181
========= ========= ========= =========
UNREALIZED APPRECIATION
(DEPRECIATION) AT MARCH 31, 1996
Aggregate Gross Unrealized Appreciation
for Investment Securities in Which There
Is an Excess of Value over Identified Cost $ 44,518 $ 107,497 $ 56,228 $ 11,602
Aggregate Gross Unrealized Depreciation
for Investment Securities in Which There
Is an Excess of Identified Cost Over Value (6,475) (7,243) (4,604) (2,619)
--------- --------- --------- ---------
NET UNREALIZED APPRECIATION $ 38,043 $ 100,254 $ 51,624 $ 8,983
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
International SAFECO Small Company
(In Thousands) Stock Fund Balanced Fund Stock Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES FOR THE SIX MONTHS
ENDED MARCH 31, 1996 (INCLUDING $4,291 OF
U.S. GOVERNMENT OBLIGATIONS FOR BALANCED FUND) $ 6,256 $ 7,121 $ 5,614
======= ======= =======
SALES FOR THE SIX MONTHS
ENDED MARCH 31, 1996 (INCLUDING $2,310 OF
U.S. GOVERNMENT OBLIGATIONS FOR BALANCED FUND) $ 40 $ 2,349 $ 115
======= ======= =======
UNREALIZED APPRECIATION
(DEPRECIATION) AT MARCH 31, 1996
Aggregate Gross Unrealized Appreciation
for Investment Securities in Which There
Is an Excess of Value Over Identified Cost $ 274 $ 48 $ 498
Aggregate Gross Unrealized Depreciation
for Investment Securities in Which There
Is an Excess of Identified Cost Over Value (216) 0 (260)
------- ------- -------
NET UNREALIZED APPRECIATION $ 58 $ 48 $ 238
======= ======= =======
- ----------------------------------------------------------------------------------------------------
</TABLE>
-53-
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. INVESTMENTS IN AFFILIATES
Each of the companies is listed below because the Growth Fund owned at
least 5% of its voting securities during the six months ended March 31, 1996.
<TABLE>
<CAPTION>
SHARES AT SHARES AT MARKET VALUE
BEGINNING END MARCH 31,
(In Thousands) OF PERIOD ADDITIONS REDUCTIONS OF PERIOD DIVIDENDS 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECURITY
* Speizman
Industries, Inc. 165 -- (165) 0 -- --
* Thorn Apple
Valley, Inc. 313 -- (186) 127 -- $1,527
- ---------------------------------------------------------------------------------------------
</TABLE>
* Company was not an affiliate at end of period.
4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS
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, is as follows:
<TABLE>
<S> <C>
GROWTH, EQUITY & INCOME FUNDS:
First $100 million .75%
Next $150 million .65
Next $250 million .55
Over $500 million .45
NORTHWEST FUND:
First $250 million .75%
Next $250 million .65
Next $250 million .55
Over $750 million .45
INTERNATIONAL STOCK FUND:
First $250 million 1.10%
Next $250 million 1.00
Next $500 million .90
BALANCED FUND:
First $250 million .75%
Next $250 million .65
Next $500 million .55
SMALL COMPANY STOCK FUND:
First $250 million .85%
Next $250 million .75
Next $500 million .65
</TABLE>
-54-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
SAFECO Asset Management Company pays sub-advisory fees to Bank of
Ireland Asset Management (U.S.) Limited for providing investment research and
advice to the International Fund.
TRANSFER AGENT FEES. SAFECO Services Corporation receives shareholder
servicing 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.
AFFILIATE OWNERSHIP. At March 31, 1996, SAFECO Insurance Company of
America owned 500,000 shares of the Northwest Fund. SAFECO Asset Management
Company owned 500,000 shares of the International and Balanced Funds, and SAFECO
Corporation owned 500,000 shares of the Small Company Fund.
DEFERRED ORGANIZATION EXPENSE. Costs related to the organization of the
International, Balanced, and Small Company 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 the same
time period.
-55-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. COMMITMENTS
At March 31, 1996, the International Fund had open forward foreign
currency exchange contracts obligating it to receive or deliver the following
foreign currencies (in thousands):
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
CURRENCY IN EXCHANGE SETTLEMENT VALUE AS OF APPRECIATION
TO BE DELIVERED FOR DATE 3/31/96 (DEPRECIATION)
--------------- --- ---- ------- --------------
<S> <C> <C> <C> <C>
374
Swiss Franc $ 312 4/16/96 $ 315 ($3)
407
German Mark 277 5/31/96 277 0
925
Dutch Guilder 559 6/27/96 562 (3)
------ ------- ---
$1,148 $ 1,154 ($6)
</TABLE>
-56-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
-------- ------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 15.83 $ 17.37 $ 19.20 $ 13.98 $ 17.95 $ 11.14
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) -- 0.07 (0.02) (0.02) (0.01) 0.05
Net Realized and Unrealized
Gain (Loss) on Investments 1.50 4.07 0.78 5.39 (3.15) 7.77
-------- -------- -------- -------- -------- --------
Total from
Investment Operations 1.50 4.14 0.76 5.37 (3.16) 7.82
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- (0.07) -- -- -- (0.05)
Distributions from
Realized Gains (0.17) (5.61) (2.59) (0.15) (0.81) (0.96)
-------- -------- -------- -------- -------- --------
Total Distributions (0.17) (5.68) (2.59) (0.15) (0.81) (1.01)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 17.16 $ 15.83 $ 17.37 $ 19.20 $ 13.98 $ 17.95
======== ======== ======== ======== ======== ========
TOTAL RETURN 9.58%+ 23.93% 3.88% 38.43% -17.83% 70.22%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $193,167 $176,483 $156,108 $158,723 $127,897 $155,429
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.99%* 0.98% 0.95% 0.91% 0.91% 0.90%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 0.05%* 0.34% -0.12% -0.10% -0.10% 0.36%
PORTFOLIO TURNOVER RATE 137.98%* 110.44% 71.18% 57.19% 85.38% 49.86%
AVERAGE COMMISSION RATE PAID $ 0.0572 -- -- -- -- --
</TABLE>
+ Not annualized.
* Annualized.
-57-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
<TABLE>
<CAPTION>
For the Six
Months Ended
March 31 For the Year Ended September 30
-------- -----------------------------------------------------------
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 15.31 $ 13.89 $ 12.54 $ 9.53 $ 10.38 $ 8.43
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.14 0.34 0.23 0.17 0.15 0.17
Net Realized and Unrealized
Gain (Loss) on Investments 0.99 2.59 1.83 3.79 (0.09) 2.37
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.13 2.93 2.06 3.96 0.06 2.54
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.14) (0.34) (0.23) (0.17) (0.15) (0.17)
Distributions from
Realized Gains (0.32) (1.17) (0.48) (0.78) (0.76) (0.42)
-------- -------- -------- -------- -------- --------
Total Distributions (0.46) (1.51) (0.71) (0.95) (0.91) (0.59)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 15.98 $ 15.31 $ 13.89 $ 12.54 $ 9.53 $ 10.38
======== ======== ======== ======== ======== ========
TOTAL RETURN 14.66%+ 21.59% 16.51% 41.77% 0.41% 30.39%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $636,885 $598,582 $412,805 $148,894 $ 74,383 $ 71,586
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.79%* 0.84% 0.85% 0.94% 0.96% 0.98%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 1.82%* 2.38% 1.72% 1.50% 1.34% 1.70%
PORTFOLIO TURNOVER RATE 86.93%* 56.14% 33.33% 37.74% 39.88% 45.21%
AVERAGE COMMISSION RATE PAID $ 0.0600 -- -- -- -- --
</TABLE>
+ Not annualized.
* Annualized.
-58-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ -----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 19.11 $ 17.25 $ 17.79 $ 16.27 $ 15.35 $ 12.89
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.36 0.82 0.81 0.78 0.80 0.81
Net Realized and Unrealized
Gain (Loss) on Investments 1.42 2.71 (0.30) 1.52 0.96 2.53
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.78 3.53 0.51 2.30 1.76 3.34
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.36) (0.82) (0.81) (0.78) (0.80) (0.83)
Distributions from
Realized Gains (0.06) (0.85) (0.24) -- (0.04) (0.05)
-------- -------- -------- -------- -------- --------
Total Distributions (0.42) (1.67) (1.05) (0.78) (0.84) (0.88)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 20.47 $ 19.11 $ 17.25 $ 17.79 $ 16.27 $ 15.35
======== ======== ======== ======== ======== ========
TOTAL RETURN 9.37%+ 21.04% 2.98% 14.35% 11.75% 26.43%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $235,395 $217,870 $190,610 $203,019 $181,582 $181,265
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.85%* 0.87% 0.86% 0.90% 0.90% 0.93%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 3.59%* 4.55% 4.59% 4.55% 5.06% 5.58%
PORTFOLIO TURNOVER RATE 24.82%* 31.12% 19.30% 20.74% 20.35% 22.25%
AVERAGE COMMISSION RATE PAID $ 0.0600 -- -- -- -- --
</TABLE>
+ Not annualized.
* Annualized.
-59-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ -------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 14.41 $ 12.59 $ 12.34
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.01 0.04 0.04
Net Realized and Unrealized
Gain (Loss) on Investments 1.01 2.35 0.59
---------- ---------- ---------
Total from Investment Operations 1.02 2.39 0.63
---------- ---------- ---------
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.01) (0.04) (0.04)
Distributions from
Realized Gains (0.35) (0.53) (0.34)
---------- ---------- ---------
Total Distributions (0.36) (0.57) (0.38)
---------- ---------- ---------
NET ASSET VALUE AT END OF PERIOD $ 15.07 $ 14.41 $ 12.59
========== ========== =========
TOTAL RETURN 7.33%** 19.01% 5.19%**
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $ 43,228 $ 40,140 $ 36,383
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 1.11%* 1.09% 1.06%*
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 0.14%* 0.31% 0.33%*
PORTFOLIO TURNOVER RATE 45.32%* 19.59% 18.46%*
AVERAGE COMMISSION RATE PAID $ 0.0583 -- --
</TABLE>
+ Includes $.06 per share of net investment income earned on the initial seed
money investment prior to February 7, 1991. The shares were first offered to
the public on February 7, 1991, at $10.06 per share.
** Not annualized.
* Annualized.
-60-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
<TABLE>
<CAPTION>
For the Nine Months For the Year
Ended September 30 Ended September 30
------------------ ------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 12.59 $ 11.37 $ 10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.02 0.06 0.19
Net Realized and Unrealized
Gain (Loss) on Investments (0.25) 1.53 1.44
---------- ---------- ----------
Total from Investment Operations (0.23) 1.59 1.63
---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.06) (0.19)
Distributions from
Realized Gains -- (0.31) (0.07)
---------- ---------- ----------
Total Distributions (0.02) (0.37) (0.26)
---------- ---------- ----------
NET ASSET VALUE AT END OF PERIOD $ 12.34 $ 12.59 $ 11.37
========== ========== ==========
TOTAL RETURN -1.86% 14.08% 14.93%**
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $ 39,631 $ 40,402 $ 26,434
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 1.11% 1.11% 1.24%*
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 0.18% 0.55% 1.26%*
PORTFOLIO TURNOVER RATE 14.05% 33.34% 27.71%*
AVERAGE COMMISSION RATE PAID -- -- --
</TABLE>
+ Includes $.06 per share of net investment income earned on the initial seed
money investment prior to February 7, 1991. The shares were first offered to
the public on February 7, 1991, at $10.06 per share.
** Not annualized.
* Annualized.
-61-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 31, 1996
(COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1996
----------------------------------------------
SAFECO SAFECO
INTERNATIONAL SAFECO SMALL COMPANY
STOCK FUND BALANCED FUND STOCK FUND
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.05 0.01
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions 0.01 (0.03) 0.48
----------- ----------- -----------
Total from Investment Operations 0.04 0.02 0.49
----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- (0.05) --
Distributions from Realized Gains -- -- --
----------- ----------- -----------
Total Distributions -- (0.05) --
----------- ----------- -----------
NET ASSET VALUE AT END OF PERIOD $ 10.04 $ 9.97 $ 10.49
=========== =========== ===========
TOTAL RETURN 0.40%+ 0.17%+ 4.90%+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 6,461 $ 6,353 $ 6,406
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.53%* 1.69%* 1.82%*
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 1.87%* 3.10%* 0.89%*
PORTFOLIO TURNOVER RATE 3.97%* 351.35%* 22.28%*
AVERAGE COMMISSION RATE PAID $ .0250 $ 0.0552 $ 0.0538
</TABLE>
+ Not annualized.
* Annualized.
-62-
<PAGE> 65
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-63-
<PAGE> 66
This page left blank intentionally.
-64-
<PAGE> 67
SAFECO FAMILY OF FUNDS
STABILITY OF PRINCIPAL
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
TAXABLE BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
TAX-FREE BOND INCOME
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
HIGH CURRENT INCOME
WITH LONG-TERM GROWTH
SAFECO Income Fund
SAFECO Balanced Fund
LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
SAFECO International Stock Fund
SAFECO Small Company Stock Fund
For more complete information on any SAFECO Mutual Fund, including management
fees and expenses, call or write for a free Prospectus. Please read it carefully
before you invest or send money.
-65-
<PAGE> 68
SAFECO COMMON STOCK FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
Richard W. Hubbard
Richard E. Lundgren
L.D. McClean
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer
Neal A. Fuller
Vice President and Controller
INVESTMENT ADVISER:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
U.S. Bank of Washington, N.A.
Chase Manhattan Bank
(International Stock Fund only)
FOR SHAREHOLDER SERVICE:
Monday-Friday,
5:30am-7:00pm Pacific Time
NATIONWIDE: 1-800-624-5711
SEATTLE: 545-7319
TTY/TDD: 1-800-438-8718
FOR YIELDS, PRICES AND
PERFORMANCE INFORMATION:
24 hours a day, 7 days a week
NATIONWIDE: 1-800-835-4391
Seattle: 545-5113
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
GMF 659 5/96
[Recycle Logo] Printed on Recycled Paper.
This report must be preceded or accompanied by a current prospectus.
(R) Registered trademark of SAFECO Corporation.
