<PAGE>
June 30, 1997
[SAFECO LOGO]
SEMIANNUAL
REPORT
STOCK FUNDS
NO-LOAD CLASS
---------
<TABLE>
<S> <C>
SAFECO Growth Fund ....................................................... 2
SAFECO Equity Fund ....................................................... 8
SAFECO Income Fund ...................................................... 13
SAFECO Northwest Fund ................................................... 19
SAFECO International Stock Fund ......................................... 24
SAFECO Balanced Fund .................................................... 30
SAFECO Small Company Fund ............................................... 36
SAFECO U.S. Value Fund .................................................. 41
</TABLE>
[SAFECO MUTUAL FUNDS LOGO]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO GROWTH FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO Growth Fund returned 35.38%, to beat the S&P 500 (34.68%)
and the Lipper average for growth funds (23.96%) for the year ended June
30, 1997. We outperformed both the broad market and our peer group on pure stock
picking. I've populated the Growth Fund with companies I can comfortably own for
a year--or five years. [PHOTO OF THOMAS M. MAGUIRE]
Even though our stocks are generally unfollowed by Wall Street, my research
has convinced me they are good companies purchased at decent prices. I'm
willing to wait for them and I'm comfortable with any ensuing volatility.
So far in 1997, your Fund's volatility has been upward overall. For example,
our radio stocks really did well. I bought stock in SFX Broadcasting, American
Radio and Chancellor anticipating deregulation would allow radio companies to
own more stations in each market, and with greater market share become
formidable contenders for advertising dollars.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 35.38%
5 Year 21.34%
10 Year 14.39%
Investment Value As of June 30, 1997
SAFECO Growth Fund: $38,348
S&P 500 Index: $39,251
SAFECO Growth Fund S&P 500 Index
06/30/87 $10,000 $10,000
07/31/87 10,000 10,507
08/31/87 10,473 10,899
09/30/87 10,841 10,660
10/31/87 8,338 8,364
11/30/87 8,338 7,675
12/31/87 8,695 8,259
01/31/88 8,695 8,607
02/28/88 8,832 9,008
03/31/88 9,599 8,729
04/30/88 9,684 8,826
05/31/88 9,554 8,903
06/30/88 10,141 9,312
07/31/88 10,115 9,276
08/31/88 9,944 8,961
09/30/88 10,434 9,343
10/31/88 10,434 9,602
11/30/88 10,448 9,465
12/31/88 10,617 9,631
01/31/89 10,617 10,336
02/28/89 10,914 10,078
03/31/89 11,189 10,313
04/30/89 11,189 10,848
05/31/89 11,644 11,288
06/30/89 11,902 11,223
07/31/89 11,902 12,237
08/31/89 12,432 12,477
09/30/89 13,067 12,425
10/31/89 12,574 12,137
11/30/89 12,536 12,385
12/31/89 12,654 12,682
01/31/90 11,428 11,831
02/28/90 11,740 11,984
03/31/90 12,449 12,301
04/30/90 12,502 11,994
05/31/90 13,783 13,163
06/30/90 13,317 13,074
07/31/90 13,576 13,032
08/31/90 11,235 11,854
09/30/90 9,975 11,276
10/31/90 9,303 11,228
11/30/90 9,993 11,953
12/31/90 10,761 12,287
01/31/91 11,836 12,822
02/28/91 13,467 13,739
03/31/91 14,125 14,072
04/30/91 14,807 14,106
05/31/91 15,784 14,715
06/30/91 14,843 14,041
07/31/91 16,232 14,695
08/31/91 16,877 15,044
09/30/91 16,979 14,792
10/31/91 17,490 14,991
11/30/91 16,014 14,386
12/31/91 17,502 16,032
01/31/92 18,783 15,734
02/28/92 18,649 15,939
03/31/92 17,263 15,628
04/30/92 16,193 16,087
05/31/92 15,791 16,166
06/30/92 14,577 15,925
07/31/92 15,189 16,577
08/31/92 14,329 16,237
09/30/92 13,951 16,428
10/31/92 14,540 16,485
11/30/92 16,376 17,044
12/31/92 16,965 17,254
01/31/93 17,674 17,398
02/28/93 16,496 17,635
03/31/93 17,145 18,007
04/30/93 16,087 17,571
05/31/93 16,915 18,040
06/30/93 17,444 18,093
07/31/93 17,384 18,020
08/31/93 18,502 18,702
09/30/93 19,313 18,559
10/31/93 19,806 18,943
11/30/93 18,971 18,763
12/31/93 20,729 18,990
01/31/94 21,846 19,635
02/28/94 20,802 19,103
03/31/94 19,758 18,272
04/30/94 20,285 18,506
05/31/94 20,471 18,808
06/30/94 18,952 18,347
07/31/94 19,376 18,949
08/31/94 20,585 19,724
09/30/94 20,063 19,243
10/31/94 20,352 19,674
11/30/94 19,797 18,957
12/31/94 20,393 19,238
01/31/95 20,080 19,736
02/28/95 21,183 20,504
03/31/95 21,102 21,109
04/30/95 21,207 21,729
05/31/95 22,055 22,612
06/30/95 23,390 23,136
07/31/95 24,216 23,902
08/31/95 24,134 23,962
09/30/95 24,864 24,973
10/31/95 24,754 24,883
11/30/95 25,005 25,973
12/31/95 25,717 26,474
01/31/96 26,669 27,374
02/28/96 27,669 27,629
03/31/96 27,247 27,894
04/30/96 28,406 28,305
05/31/96 29,613 29,034
06/30/96 28,327 29,145
07/31/96 25,532 27,858
08/31/96 27,056 28,446
09/30/96 28,385 30,045
10/31/96 28,992 30,874
11/30/96 30,112 33,205
12/31/96 31,606 32,548
01/31/97 34,325 34,578
02/28/97 33,413 34,852
03/31/97 32,239 33,423
04/30/97 30,749 35,415
05/31/97 35,406 37,568
06/30/97 38,348 39,251
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 2 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Chancellor's gain was further enhanced when it agreed to merge with Evergreen
Media and to purchase Viacom's radio properties. Consummation of these deals
will make Chancellor America's premier radio company.
Our health care holdings are also able growers. No matter how you cut it
health care is a growth industry, and as such we have 19.2% of net assets
invested in drugs and hospital supplies.
Penederm is doing well with its toenail fungus drug. Nastech Pharmaceutical
is developing nasal drug delivery, a technique that is so far proving highly
efficient. And Datascope is a good company that seemed to be selling too
cheaply, I'm waiting for the day the market figures out it's priced wrong.
Waiting for MICROS Systems, the electronic ordering and inventory control
company, has been highly worthwhile. This specialty software company serving the
hospitality industry is doing extremely well. MICROS has launched new products
and logged new business, including Marriott International. In short, MICROS is
revolutionizing the cash register business.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
MICROS Systems, Inc. .............................................. 6.3%
(Specialty Software Company)
Chancellor Broadcasting Corp. (Class A) ............................. 6.3
(Radio Stations)
Weider Nutrition International, Inc. ............................... 4.9
(Nutritional Products Manufacturer)
American Buildings Co. ............................................. 4.3
(Construction Products Company)
Lifeline Systems, Inc. ............................................. 3.9
(Medical Instruments)
NPC International, Inc. ............................................ 3.7
(Restaurants)
Penederm, Inc. ..................................................... 3.7
(Drug Delivery System)
RJR Nabisco Holdings Corp. ......................................... 3.3
(Food & Tobacco Company)
Damark International, Inc. ......................................... 3.1
(Retail Marketer)
First Financial Caribbean Corp. (ADR) ............................... 3.1
(Mortgage Bank)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Mobil Corp. ....................................................... $11,793
Chancellor Broadcasting Corp. (Class A) ............................. 11,602
Weider Nutrition International, Inc. ................................ 9,486
Ultrak, Inc. ........................................................ 9,123
RJR Nabisco Holdings Corp. .......................................... 8,274
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Seagate Technology, Inc. ......................................... $18,358
Philip Morris Cos., Inc. ........................................... 17,139
*Mobil Corp. ....................................................... 11,518
*INBRAND Corp. ..................................................... 10,954
*Alternative Resources Corp. ........................................ 8,457
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Broadcasting ........................................................ 10%
Health Care (Medical Products & Supplies) ............................ 10
Health Care (Drugs--Major Pharmaceuticals) ............................ 9
Restaurants ........................................................... 7
Computers (Hardware) .................................................. 6
- -------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 3 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE GROWTH FUND MANAGER (Continued)
Weider Nutrition, a leader in the nutritional supplement market
and the manufacturer of Tigermilk, is among our new positions.
Benefiting by the wellness movement's migration to main street USA,
Weider's share price has moved from $11 to $16 since we purchased
it.
Other purchases include NPC, the holding company for Tony Romas and Pizza Hut
franchises, and Damark, a catalog company. Looking at our portfolio it seems
that if people order pizza, take vitamins, turn on the radio and look at
catalogs, we should do well.
In all seriousness, I feel cautiously confident. We've attained good
performance holding small stocks, which as a group haven't performed well and
hence have plenty of room to move up.
I take relatively big positions in stocks I believe in. When one
of our big positions works, performance gets a boost, when one
doesn't work, performance may suffer. So, though the short-term
results can be volatile, over the years the Growth Fund's returns
have proven quite competitive.
Yes, Growth Fund spurts, rather than putts along. But stay with it, because I
have your best interests at heart--that is, your interest in long-term capital
appreciation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above.) 5%
Medium: ($1 Bil. - $4 Bil.) 1%
Small: (Less than $1 Bil.) 93%
Cash and Other: 1%
</TABLE>
/s/ Thomas M. Maguire
Thomas M. Maguire,
Growth Fund Manager
- -------------------------------
After completing his M.B.A. at the University of Washington, Thomas M. Maguire
joined the company as an equity analyst in 1981 and today is a Vice President.
From 1984 to 1989, he co-managed the SAFECO Equity Fund.
- 4 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 99.4%
BIOTECHNOLOGY - 0.1%
55,000 *Quidel Corp. ....................................... $ 179
BROADCASTING (TELEVISION, RADIO & CABLE) - 10.5%
71,300 American Radio Systems Corp. ......................... 2,843
413,100 *Chancellor Broadcasting Corp. (Class A) ............ 16,524
191,100 *SFX Broadcasting, Inc. (Class A) .................... 8,062
BUILDING MATERIALS - 0.2%
18,200 *ABT Building Products Corp. ........................... 478
CHEMICALS - 1.3%
239,700 *Melamine Chemicals, Inc. ............................ 3,356
CHEMICALS (SPECIALTY) - 0.5%
110,300 Spartech Corp. ....................................... 1,434
COMPUTERS (HARDWARE) - 6.3%
393,914 *MICROS Systems, Inc. ............................... 16,544
COMPUTERS (NETWORKING) - 0.9%
167,000 *Vanstar Corp. ....................................... 2,359
COMPUTERS (SOFTWARE & SERVICES) - 2.0%
43,900 Computer Data Systems, Inc. .......................... 1,284
128,000 *Optimal Robotics Corp. ................................ 512
146,300 *Phoenix International Ltd., Inc. .................... 3,365
CONSUMER FINANCE - 0.9%
157,200 AmeriTrade Holding Corp. ............................. 2,476
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
DISTRIBUTORS (FOOD & HEALTH) - 4.9%
808,400 +Weider Nutrition International, Inc. .............. $12,833
ENGINEERING & CONSTRUCTION - 4.3%
415,500 *+American Buildings Co. ............................ 11,218
FINANCIAL (DIVERSIFIED) - 4.4%
274,475 *Credit Acceptance Corp. ............................. 3,534
247,600 First Financial Caribbean Corp. (ADR) ................ 8,078
GAMING, LOTTERY, & PARIMUTUEL COMPANIES - 2.1%
500,000 *+American Coin Merchandising, Inc. .................. 5,437
HEALTH CARE (DIVERSIFIED) - 3.4%
178,900 *Anesta Corp. ........................................ 3,399
139,000 *Res-Care, Inc. ...................................... 2,658
186,150 *Sano Corp. .......................................... 2,839
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 9.4%
160,800 *Andrx Corp. ......................................... 6,151
255,000 *Ethical Holdings, plc (ADR) ......................... 1,132
188,200 *Faulding, Inc. ...................................... 2,305
226,900 *Gensia, Inc. ........................................ 1,007
60,000 Mylan Laboratories, Inc. ............................... 885
327,900 *+Nastech Pharmaceutical Co., Inc. ................... 3,443
727,700 *+Penederm, Inc. ..................................... 9,824
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.7%
130,000 *American Healthcorp, Inc. ........................... 1,430
98,000 *Laboratory Specialists of America, Inc. ............... 276
HEALTH CARE (MANAGED CARE) - 0.3%
47,000 *United Dental Care, Inc. .............................. 705
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 9.8%
359,600 *Datascope Corp. ................................... $ 7,057
34,500 Dentsply International, Inc. ......................... 1,690
202,000 *Haemonetics Corp. ................................... 3,863
524,850 *+Lifeline Systems, Inc. ............................ 10,103
28,700 *PolyMedica Industries, Inc. ........................... 251
92,400 *Prime Medical Services, Inc. .......................... 999
42,300 *ResMed, Inc. ........................................ 1,026
122,000 *UroQuest Medical Corp. ................................ 793
HOMEBUILDING - 0.3%
38,125 *American Homestar Corp. ............................... 815
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.7%
221,000 *Celebrity, Inc. ....................................... 691
122,800 *Diamond Home Services, Inc. ......................... 1,182
200,000 *Home Products International, Inc. ................... 1,975
150,000 *Media Arts Group, Inc. ................................ 619
HOUSEWARES - 1.2%
357,720 *Lifetime Hoan Corp. ................................. 3,130
INSURANCE (LIFE/HEALTH) - 0.9%
115,600 *Compdent Corp. ...................................... 2,435
LEISURE TIME (PRODUCTS) - 0.6%
68,350 *Family Golf Centers, Inc. ........................... 1,572
80,000 *Laser Storm, Inc. ...................................... 35
MANUFACTURING (DIVERSIFIED) - 0.4%
22,500 Furon Co. .............................................. 706
75,600 *ITC Learning Corp. .................................... 387
MANUFACTURING (SPECIALIZED) - 0.6%
137,660 *Intermagnetics General Corp. ........................ 1,471
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OFFICE EQUIPMENT & SUPPLIES - 1.1%
138,000 Asia Pacific Wire & Cable Corp. Ltd. ................ $1,501
244,500 *+Open Plan Systems, Inc. .............................. 978
41,700 *TRM Copy Centers Corp. ................................ 443
RESTAURANTS - 6.5%
170,300 Apple South, Inc. .................................... 2,597
845,779 *NPC International, Inc. ............................. 9,832
92,400 *New York Bagel Enterprises ............................ 393
344,000 *Rare Hospitality International, Inc. ................ 4,257
RETAIL (HOME SHOPPING) - 3.1%
523,800 *+Damark International, Inc. ......................... 8,119
RETAIL (SPECIALTY) - 4.9%
71,200 *Alrenco, Inc. ......................................... 943
268,800 *Funco, Inc. ......................................... 4,973
358,000 *+Rent-Way, Inc. ..................................... 5,280
316,400 *West Coast Entertainment Corp. ...................... 1,661
RETAIL (SPECIALTY--APPAREL) - 5.0%
505,094 *+Harold's Stores, Inc. .............................. 4,483
269,835 *Stage Stores, Inc. .................................. 7,049
76,600 *The Dress Barn, Inc. ................................ 1,494
SERVICES (ADVERTISING/MARKETING) - 2.6%
183,400 *ACI Telecentrics, Inc. .............................. 1,055
184,000 *APAC Teleservices, Inc. ............................. 3,576
40,700 *IntelliQuest Information Group, Inc. .................. 916
96,950 LCS Industries, Inc. ................................. 1,400
SERVICES (COMMERCIAL & CONSUMER) - 2.8%
148,800 *Renter's Choice, Inc. ............................... 2,957
460,400 *Ultrak, Inc. ........................................ 4,086
18,600 *Youth Services International, Inc. .................... 226
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 6 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
SERVICES (DATA PROCESSING) - 0.2%
21,000 *NCO Group, Inc. ................................... $ 617
TOBACCO - 5.0%
98,000 Philip Morris Cos., Inc. ............................. 4,349
266,300 RJR Nabisco Holdings Corp. ........................... 8,788
WASTE MANAGEMENT - 0.5%
56,800 *Tetra Technologies, Inc. ............................ 1,406
------
TOTAL COMMON STOCKS ................................................. 260,749
------
WARRANTS - 0.0%
LEISURE TIME (PRODUCTS) - 0.0%
80,000 *Laser Storm, Inc. (Warrant) ............................ 20
------
TOTAL WARRANTS ........................................................... 20
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 0.0%
INVESTMENT COMPANIES:
$1,800 SSgA Money Market Portfolio ......................... $ 2
------
TOTAL TEMPORARY INVESTMENTS ............................................... 2
------
TOTAL INVESTMENTS - 99.4% ........................................... 260,771
Other Assets, less Liabilities ........................................ 1,629
------
NET ASSETS ......................................................... $262,400
------
------
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
+ Affiliated issuer as defined by the Investment Company Act of 1940 (the Fund
controls 5% or more of the outstanding voting shares of the company).
SEE NOTES TO FINANCIAL STATEMENTS
- 7 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO EQUITY FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SAFECO Equity Fund returned 30.66% for the 12 months ended June 30,
1997; beating the Lipper Analytical Services peer group; which returned
28.07%; but lagging the S&P 500's 34.68%.
Three stocks held us below the broad market indicator: Viacom, Advanta and
PacifiCare. However, far more of our stocks added to rather than detracted from
our performance. And for that reason, Equity Fund beat the growth and income
peer group average which was 28.07% for the 12-month period according to Lipper.
[PHOTO OF RICH MEAGLEY]
Within the Viacom organization, Blockbuster has been a bust.
Competition for leisure time attention has come from multiple fronts and,
consequently, Viacom will close some stores. Meanwhile, the MTV division
is doing fine. We're holding our position.
PacifiCare discovered the HMO it acquired, FHP, was in worse financial shape
than anticipated. That news sent the stock reeling. Nonetheless the company's
long-term fundamentals remain unchanged and the merged company controls 25% of
the
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 30.66%
5 Year 24.62%
10 Year 15.79%
Investment Value As of June 30, 1997
SAFECO Equity Fund: $43,338
S&P 500 Index: $39,251
SAFECO Equity Fund S&P 500 Index
06/30/87 $10,000 $10,000
07/31/87 10,428 10,507
08/31/87 10,428 10,899
09/30/87 10,734 10,660
10/31/87 7,638 8,364
11/30/87 7,638 7,675
12/31/87 7,598 8,259
01/31/88 7,598 8,607
02/28/88 8,241 9,008
03/31/88 8,867 8,729
04/30/88 8,867 8,826
05/31/88 8,737 8,903
06/30/88 9,133 9,312
07/31/88 9,078 9,276
08/31/88 8,927 8,961
09/30/88 9,347 9,343
10/31/88 9,347 9,602
11/30/88 9,512 9,465
12/31/88 9,520 9,631
01/31/89 9,520 10,336
02/28/89 10,165 10,078
03/31/89 10,178 10,313
04/30/89 10,178 10,848
05/31/89 10,803 11,288
06/30/89 11,201 11,223
07/31/89 11,201 12,237
08/31/89 12,199 12,477
09/30/89 12,350 12,425
10/31/89 12,374 12,137
11/30/89 12,460 12,385
12/31/89 12,927 12,682
01/31/90 11,854 11,831
02/28/90 11,965 11,984
03/31/90 12,409 12,301
04/30/90 12,050 11,994
05/31/90 13,214 13,163
06/30/90 13,193 13,074
07/31/90 12,957 13,032
08/31/90 11,589 11,854
09/30/90 11,024 11,276
10/31/90 10,789 11,228
11/30/90 11,377 11,953
12/31/90 11,819 12,287
01/31/91 12,426 12,822
02/28/91 13,163 13,739
03/31/91 13,535 14,072
04/30/91 13,813 14,106
05/31/91 14,368 14,715
06/30/91 13,445 14,041
07/31/91 14,347 14,695
08/31/91 14,572 15,044
09/30/91 14,375 14,792
10/31/91 14,610 14,991
11/30/91 13,696 14,386
12/31/91 15,118 16,032
01/31/92 16,018 15,734
02/28/92 16,289 15,939
03/31/92 15,557 15,628
04/30/92 15,685 16,087
05/31/92 15,542 16,166
06/30/92 14,420 15,925
07/31/92 15,009 16,577
08/31/92 14,391 16,237
09/30/92 14,433 16,428
10/31/92 15,130 16,485
11/30/92 16,129 17,044
12/31/92 16,519 17,254
01/31/93 17,066 17,398
02/28/93 17,081 17,635
03/31/93 17,999 18,007
04/30/93 17,587 17,571
05/31/93 19,035 18,040
06/30/93 19,113 18,093
07/31/93 18,853 18,020
08/31/93 19,909 18,702
09/30/93 20,462 18,559
10/31/93 21,001 18,943
11/30/93 21,115 18,763
12/31/93 21,624 18,990
01/31/94 22,920 19,635
02/28/94 22,346 19,103
03/31/94 21,488 18,272
04/30/94 22,180 18,506
05/31/94 22,822 18,808
06/30/94 22,000 18,347
07/31/94 22,563 18,949
08/31/94 23,936 19,724
09/30/94 23,841 19,243
10/31/94 24,288 19,674
11/30/94 23,807 18,957
12/31/94 23,773 19,238
01/31/95 23,946 19,736
02/28/95 24,572 20,504
03/31/95 24,772 21,109
04/30/95 25,436 21,729
05/31/95 26,083 22,612
06/30/95 26,730 23,136
07/31/95 27,152 23,902
08/31/95 27,908 23,962
09/30/95 28,988 24,973
10/31/95 28,628 24,883
11/30/95 29,556 25,973
12/31/95 29,777 26,474
01/31/96 30,574 27,374
02/28/96 30,846 27,629
03/31/96 31,162 27,894
04/30/96 31,825 28,305
05/31/96 32,566 29,034
06/30/96 33,169 29,145
07/31/96 31,896 27,858
08/31/96 32,229 28,446
09/30/96 34,216 30,045
10/31/96 35,317 30,874
11/30/96 37,973 33,205
12/31/96 37,224 32,548
01/31/97 39,376 34,578
02/28/97 39,533 34,852
03/31/97 37,948 33,423
04/30/97 39,050 35,415
05/31/97 41,637 37,568
06/30/97 43,338 39,251
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 8 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Medicare market. I bought more PacifiCare on what I perceive to be a temporary
setback.
Advanta was overly aggressive in its strategy to pursue market share with low
introductory rates. It now has $10 billion in credit card receivables issued to
what turned out to be higher risk users. We still own Advanta, but it's the
smallest position in our portfolio.
Other than the preceding stories, the past six months, have been
characterized by quality companies, low turnover and more stocks that pleased
than disappointed.
Technology helped us outperform the peer group. Microsoft was one of our best
performing stocks. So was Seagate which we sold before the stock fell in the
face of stiff competition, and questions about overcapacity. Wal-Mart was
another stock that did well for us. We bought it late in 1995 when it was
trading at a price that underestimated its growth rate.
As always, I'm trying to slowly work the cliche buy low and sell high. I
added Hewlett Packard and 3Com because their price dipped and I like their
fundamentals. And I sold Browning Ferris, Seagate, ConAgra, Colgate when they
hit our price objective.
I've shifted our stake in the healthcare arena so that four of our six
healthcare holdings are in drugs and drugstore-type
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Chase Manhattan Corp. ............................................. 4.7%
(Bank)
Kimberly-Clark Corp. ............................................... 3.1
(Manufacturing & Marketing Personal Care Products)
American Stores Co. ................................................ 3.0
(Retail Store)
Hartford Financial Services Group, Inc. ............................ 3.0
(Insurance Company)
Burlington Northern Santa Fe ........................................ 2.8
(Railroad)
SmithKline Beecham, plc (ADR) ....................................... 2.5
(Pharmaceuticals)
Intel Corp. ........................................................ 2.5
(Microcomputer Components Manufacturer)
Lockheed Martin Corp. .............................................. 2.4
(Aerospace/Defense)
Mobil Corp. ........................................................ 2.4
(Oil/Gas Exploration & Production)
Bell Atlantic Corp. ................................................ 2.3
(Telephone Company)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
3Com Corp. ........................................................ $30,189
Lockheed Martin Corp. .............................................. 27,078
Columbia/HCA Healthcare Corp. ...................................... 26,538
Kimberly-Clark Corp. ............................................... 22,984
First Data Corp. ................................................... 22,951
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*ConAgra, Inc. .................................................... $20,181
*Colgate-Palmolive Co. ............................................. 19,340
*Seagate Technology, Inc. .......................................... 18,580
*Motorola, Inc. .................................................... 18,421
*Browning-Ferris Industries, Inc. .................................. 18,019
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 7%
Health Care (Diversified) ................................................ 6
Computers (Software & Services) .......................................... 5
Retail (Food Chains) ..................................................... 5
Financial (Diversified) .................................................. 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 9 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE EQUITY FUND MANAGER (Continued)
products. Changes in medical practices, the aging of America, and
the aid the FDA is giving to drug development have created a
favorable environment for drug stocks. For example, we bought Smith
Kline Beecham because it had a good pipeline (drugs enroute for FDA approval)
and a valuation that was below its peers. Indeed, SmithKline secured FDA
approval for wider application of its hepatitis drugs and moved up 65% over the
last 12 months.
Chase Manhattan is still Equity Fund's largest holding and the reason for
holding it remains the same: cost cutting.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 88%
Medium: ($1 Bil. - $4 Bil.) 6%
Small: (Less than $1 Bil.) 1%
Cash and Other: 5%
</TABLE>
Hartford Financial Services, Kimberly Clark, American Stores, Burlington
Northern are names that are new to the top ten--but not to the Fund. Again the
main theme is cost cutting: The savings and earnings growth Kimberly and
Burlington Northern can reap through their respective mergers are pretty easy to
visualize. As well, we see Hartford, recently released from ITT, becoming leaner
and meaner.
American Stores has clearly laid plans to consolidate buying and distribution
and bring its grocery and drugstore profit margins up to industry
levels. We bought the stock believing it could raise its margins
and, subsequently its stock price.
I've made Lockheed Martin a top-ten holding purely because it's a
major participant in the aerospace consolidation. And where there is
consolidation there can be cost cutting.
In summary, I think the market is expensive, and that perception has made me
a very cost-conscious manager. I also believe, in spite of the high prices,
there are values to be found and that you have hired me to find them. And so I
will continue forward, knowing you have hired me to invest your money in stocks
and making every effort not to pay too much for a stock in a market that seems
overpriced.
/s/ Rich Meagley
Rich Meagley,
Equity Fund Manager
- -------------------------------
Rich Meagley joined SAFECO in 1983. After advancing from analyst to Northwest
Fund Manager, he left the company. He re-joined in January 1995 as Equity Fund
Manager. He holds an M.B.A. from the University of Washington, and is a
Chartered Financial Analyst.
- 10 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 95.4%
AEROSPACE/DEFENSE - 2.4%
300,000 Lockheed Martin Corp. .............................. $31,069
AUTO PARTS & EQUIPMENT - 2.0%
740,000 Echlin, Inc. ........................................ 26,640
BANKS (MAJOR REGIONAL) - 2.1%
420,000 NationsBank Corp. ................................... 27,090
BANKS (MONEY CENTER) - 4.7%
635,000 Chase Manhattan Corp. ............................... 61,635
BEVERAGES (NON-ALCOHOLIC) - 1.4%
500,000 PepsiCo, Inc. ....................................... 18,781
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.1%
900,000 *Viacom, Inc. (Class B) ............................. 27,000
CHEMICALS - 1.6%
330,000 Du Pont (E.I.)
de Nemours & Co. .................................... 20,749
COMPUTERS (HARDWARE) - 2.2%
500,000 Hewlett-Packard Co. ................................. 28,000
COMPUTERS (NETWORKING) - 1.6%
475,000 *3Com Corp. ......................................... 21,375
COMPUTERS (SOFTWARE & SERVICES) - 5.5%
700,000 Electronic Data Systems Corp. ....................... 28,700
165,000 Microsoft Corp. ..................................... 20,852
400,000 Oracle Corp. ........................................ 20,150
ELECTRIC COMPANIES - 1.9%
1,150,000 Houston Industries, Inc. ............................ 24,653
ELECTRICAL EQUIPMENT - 3.6%
600,000 AMP, Inc. ........................................... 25,050
340,000 General Electric Co. ................................ 22,227
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRONICS (SEMICONDUCTORS) - 2.5%
225,000 Intel Corp. ........................................ $31,908
ENTERTAINMENT - 1.6%
260,000 Walt Disney Co. ..................................... 20,865
FINANCIAL (DIVERSIFIED) - 4.9%
460,000 Advanta Corp. (Class B) ............................. 16,416
550,000 Federal Home Loan Mortgage Corp. .................... 18,906
650,000 Federal National Mortgage Association ............... 28,356
HEALTH CARE (DIVERSIFIED) - 5.7%
375,000 American Home Products Corp. ........................ 28,687
300,000 Bristol-Myers Squibb Co. ............................ 24,300
325,000 Johnson & Johnson ................................... 20,922
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 2.5%
350,000 SmithKline Beecham, plc (ADR) ....................... 32,069
HEALTH CARE (HOSPITAL MANAGEMENT) - 4.3%
760,000 Columbia/HCA Healthcare Corp. ....................... 29,878
400,000 *PacifiCare Health Systems, Inc. (Class B) .......... 25,550
HOUSEHOLD PRODUCTS (NON-DURABLES) - 3.1%
810,000 Kimberly-Clark Corp. ................................ 40,298
INSURANCE (MULTI-LINE) - 4.5%
130,000 American International Group, Inc. .................. 19,419
475,000 Hartford Financial Services Group, Inc. ............. 39,306
MANUFACTURING (DIVERSIFIED) - 3.9%
275,000 AlliedSignal, Inc. .................................. 23,100
450,000 Dover Corp. ......................................... 27,675
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 11 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO EQUITY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL (DOMESTIC INTEGRATED) - 6.7%
460,000 Exxon Corp. ........................................ $28,290
440,000 Mobil Corp. ......................................... 30,745
260,000 Texaco, Inc. ........................................ 28,275
OIL (INTERNATIONAL INTEGRATED) - 1.7%
400,000 Royal Dutch Petroleum Co. (ADR) ..................... 21,750
PAPER & FOREST PRODUCTS - 1.6%
300,000 Willamette Industries, Inc. ......................... 21,000
RAILROADS - 2.7%
400,000 Burlington Northern Santa Fe ........................ 35,950
RETAIL (DEPARTMENT STORES) - 1.9%
535,000 May Department Stores Co. ........................... 25,279
RETAIL (FOOD CHAINS) - 5.0%
700,000 Albertson's, Inc. ................................... 25,550
800,000 American Stores Co. ................................. 39,500
RETAIL (GENERAL MERCHANDISE) - 2.0%
785,000 Wal-Mart Stores, Inc. ............................... 26,543
SERVICES (DATA PROCESSING) - 2.1%
635,000 First Data Corp. .................................... 27,900
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TELECOMMUNICATIONS (LONG DISTANCE) - 1.6%
575,000 AT&T Corp. ....................................... $ 20,161
TELEPHONE - 4.1%
400,000 Bell Atlantic Corp. ................................. 30,350
525,000 GTE Corp. ........................................... 23,034
TOBACCO - 1.9%
550,000 Philip Morris Cos., Inc. ............................ 24,406
-------
TOTAL COMMON STOCKS ............................................... 1,240,359
-------
TEMPORARY INVESTMENTS - 4.7%
FINANCIAL (DIVERSIFIED)
$61,445,000 Merrill Lynch & Co.
6.20%, due 7/01/97 .................................. 61,445
-------
TOTAL TEMPORARY INVESTMENTS .......................................... 61,445
-------
TOTAL INVESTMENTS - 100.1% ........................................ 1,301,804
Liabilities, less Other Assets ...................................... (1,276)
-------
NET ASSETS ....................................................... $1,300,528
-------
-------
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 12 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO INCOME FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30, the Fund returned 27.92%, versus 26.73%,
the average for equity-income funds calculated by Lipper Analytical
Services.
During the most recent six months, SAFECO Income Fund returned 13.41%. While
beating the peer group, the fund underperformed the S&P 500 as the first quarter
was marked by a few companies which disappointed investor expectations for
revenues and earnings. Most notably, 3Com lost value on fears of competition and
Advanta's share price sank as the company tried to grow its credit card
business too fast. [PHOTO OF THOMAS RATH]
Of late, investors appear to be casting about from sector to sector in
search of strong relative earnings and, at the same time, driving a
select group of large, high-quality, consistent-growth companies to
valuation extremes. It was a period in which market leadership narrowed
and larger company stocks outperformed smaller company stocks.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 27.92%
5 Year 16.86%
10 Year 11.41%
Investment Value As of June 30, 1997
SAFECO Income Fund: $29,449
S&P 500 Index: $39,251
SAFECO Income Fund S&P 500 Index
06/30/87 $10,000 $10,000
07/31/87 10,280 10,507
08/31/87 10,280 10,899
09/30/87 10,591 10,660
10/31/87 8,339 8,364
11/30/87 8,339 7,675
12/31/87 8,297 8,259
01/31/88 8,297 8,607
02/28/88 8,809 9,008
03/31/88 9,127 8,729
04/30/88 9,127 8,826
05/31/88 9,227 8,903
06/30/88 9,667 9,312
07/31/88 9,688 9,276
08/31/88 9,526 8,961
09/30/88 9,800 9,343
10/31/88 9,800 9,602
11/30/88 9,950 9,465
12/31/88 9,872 9,631
01/31/89 9,872 10,336
02/28/89 10,316 10,078
03/31/89 10,361 10,313
04/30/89 10,361 10,848
05/31/89 10,754 11,288
06/30/89 11,090 11,223
07/31/89 11,090 12,237
08/31/89 11,760 12,477
09/30/89 11,858 12,425
10/31/89 11,411 12,137
11/30/89 11,541 12,385
12/31/89 11,769 12,682
01/31/90 11,175 11,831
02/28/90 11,226 11,984
03/31/90 11,311 12,301
04/30/90 10,887 11,994
05/31/90 11,460 13,163
06/30/90 11,414 13,074
07/31/90 11,210 13,032
08/31/90 10,380 11,854
09/30/90 9,953 11,276
10/31/90 9,714 11,228
11/30/90 10,308 11,953
12/31/90 10,504 12,287
01/31/91 10,912 12,822
02/28/91 11,541 13,739
03/31/91 11,716 14,072
04/30/91 11,843 14,106
05/31/91 12,201 14,715
06/30/91 11,894 14,041
07/31/91 12,232 14,695
08/31/91 12,603 15,044
09/30/91 12,584 14,792
10/31/91 12,715 14,991
11/30/91 12,190 14,386
12/31/91 12,946 16,032
01/31/92 13,046 15,734
02/28/92 13,087 15,939
03/31/92 12,961 15,628
04/30/92 13,340 16,087
05/31/92 13,466 16,166
06/30/92 13,515 15,925
07/31/92 14,017 16,577
08/31/92 13,915 16,237
09/30/92 14,063 16,428
10/31/92 13,804 16,485
11/30/92 14,158 17,044
12/31/92 14,431 17,254
01/31/93 14,746 17,398
02/28/93 15,026 17,635
03/31/93 15,535 18,007
04/30/93 15,323 17,571
05/31/93 15,526 18,040
06/30/93 15,607 18,093
07/31/93 15,526 18,020
08/31/93 16,036 18,702
09/30/93 16,081 18,559
10/31/93 16,361 18,943
11/30/93 16,162 18,763
12/31/93 16,242 18,990
01/31/94 16,773 19,635
02/28/94 16,398 19,103
03/31/94 15,826 18,272
04/30/94 16,011 18,506
05/31/94 16,020 18,808
06/30/94 15,785 18,347
07/31/94 16,272 18,949
08/31/94 16,787 19,724
09/30/94 16,559 19,243
10/31/94 16,530 19,674
11/30/94 15,945 18,957
12/31/94 16,065 19,238
01/31/95 16,473 19,736
02/28/95 16,987 20,504
03/31/95 17,469 21,109
04/30/95 17,843 21,729
05/31/95 18,363 22,612
06/30/95 18,590 23,136
07/31/95 19,316 23,902
08/31/95 19,455 23,962
09/30/95 20,044 24,973
10/31/95 19,824 24,883
11/30/95 20,516 25,973
12/31/95 20,942 26,474
01/31/96 21,611 27,374
02/28/96 21,665 27,629
03/31/96 21,922 27,894
04/30/96 22,008 28,305
05/31/96 22,736 29,034
06/30/96 23,021 29,145
07/31/96 22,372 27,858
08/31/96 22,794 28,446
09/30/96 23,847 30,045
10/31/96 24,728 30,874
11/30/96 26,026 33,205
12/31/96 25,967 32,548
01/31/97 26,987 34,578
02/28/97 27,024 34,852
03/31/97 26,032 33,423
04/30/97 26,391 35,415
05/31/97 28,284 37,568
06/30/97 29,449 39,251
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 13 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE INCOME FUND MANAGER (Continued)
As valuations have climbed to extreme levels relative to interest rates and
the earnings outlook, I have become increasingly cautious about the outlook for
the stock market. The strong rally we enjoyed in the second quarter was driven
in a large part by a fairly dramatic decline in long-term interest rates. I am
concerned that stock prices will suffer should interest rates reverse and move
higher.
In this environment, I have become more conservative in selecting companies
and securities for investment. There has been greater emphasis in the Fund on
current dividend yield and less emphasis on technology sector investments.
However, companies that provide computer-based services for others have
underperformed the market and look attractive at current prices. Hence, I'm
looking for good things from our holdings in First Data Corporation, EDS and
Automatic Data Processing.
I continue to seek high-quality companies with dominant market positions,
strong balance sheets and cash flow, attractive earnings growth prospects, and
reasonable stock prices. I recently found these traits--and purchased
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Chancellor Broadcasting Co. 7.00% Convertible ...................... 3.4%
(Radio Stations)
First Financial Management
5.00%, due 12/15/99 ............................................... 3.2
(Information Processor)
American Home Products Corp. ....................................... 3.0
(Pharmaceuticals)
Philip Morris Cos., Inc. ........................................... 2.9
(Food, Beverage & Tobacco Company)
MICROS Systems, Inc. ............................................... 2.8
(Electronic Cash Register Manufacturer)
Mobil Corp. ........................................................ 2.8
(Oil/Gas Exploration & Production)
J.C. Penney Co., Inc. .............................................. 2.5
(Department Store)
Texaco, Inc. ....................................................... 2.5
(Oil Company)
Hartford Financial Services Group, Inc. ............................ 2.3
(Insurance Company)
Washington Mutual Savings Bank ...................................... 2.3
(Savings & Loan)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Chancellor Broadcasting Co. 7.00% Convertible ....................... $8,770
Lockheed Martin Corp. ............................................... 6,569
Mobil Corp. ......................................................... 6,522
Unisource Worldwide, Inc. ........................................... 6,123
MICROS Systems, Inc. ................................................ 5,490
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Seagate Technology, Inc. ......................................... $12,948
Philip Morris Cos., Inc. ............................................ 8,801
*Colgate-Palmolive Co. .............................................. 7,168
*Xilinx, Inc. 5.25% 11/1/02 (144A) ................................... 5,740
*American List Corp. ................................................ 4,870
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 8%
Financial (Diversified) .................................................. 8
Tobacco .................................................................. 5
Health Care (Diversified) ................................................ 4
Telephone ................................................................ 4
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 14 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
them for the Fund-- in First Industrial Realty Trust, which
specializes in industrial properties; Bristol-Myers Squibb, which
was cheap relative to other drug stocks and benefiting from new
financial leadership; Weyerhaeuser, because paper prices have been
depressed and are ready to recover; and Stage Stores, a small
company that is finding success operating department stores in smaller markets.
It seems the higher up the capitalization chain you go, the harder it is to
find value. In fact, I am finding small companies far more attractive than large
companies these days, and consequently about 21% of net assets are currently
invested in smaller companies. Our top ten holdings contain two small caps that
contributed significantly to returns: Chancellor Broadcasting, an owner of radio
stations, and MICROS Systems, a software company that serves the hospitality
industry.
SAFECO Income Fund invests in convertible securities for their rich
dividends. During the period, I initiated new convertible positions
in Adaptec, HMT Technologies, Chancellor Broadcasting, Checkpoint
systems and IKON Office Solutions. However, it has been hard to find
other high-yielding securities in which to invest. At June 30, our
cash had climbed to 6.7% of net assets. The remaining net assets
were 69.3% invested in common stocks, and 24.4% in convertible securities.
The Income Fund continues to be well diversified, representing all economic
sectors and companies with market capitalizations ranging from very large to
very small. Going forward, I will continue to position the Fund somewhat
defensively with high-quality, consistently growing companies.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Common Stocks
Large: ($4 Bil. and above) 52%
Medium: ($1 Bil. - $4 Bil.) 5%
Small: (Less than $1 Bil.) 12%
Preferred Stocks: 14%
Corporate Bonds: 10%
Cash and Other: 7%
</TABLE>
/s/ Thomas E. Rath
Thomas E. Rath,
Income Fund Manager
- -------------------------------
In addition to being an equity and convertible securities portfolio manager at
SAFECO, Rath has been an analyst and portfolio manager at First Interstate Bank
and a principal at Meridian Capital Management. He holds an MBA from the
University of Washington and is a Chartered Financial Analyst.
- 15 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 69.3%
AEROSPACE/DEFENSE - 2.2%
75,000 Lockheed Martin Corp. .............................. $ 7,767
BANKS (MAJOR REGIONAL) - 3.5%
45,674 NationsBank Corp. .................................... 2,946
46,100 Norwest Corp. ........................................ 2,593
105,000 US Bancorp ........................................... 6,733
BANKS (MONEY CENTER) - 1.9%
70,000 Chase Manhattan Corp. ................................ 6,794
COMPUTERS (HARDWARE) - 2.8%
234,100 *MICROS Systems, Inc. ................................ 9,832
COMPUTERS (SOFTWARE & SERVICES) - 0.8%
70,000 Electronic Data Systems Corp. ........................ 2,870
ELECTRIC COMPANIES - 2.8%
220,000 Houston Industries, Inc. ............................. 4,716
125,000 NIPSCO Industries, Inc. .............................. 5,164
ELECTRICAL EQUIPMENT - 3.0%
155,000 AMP, Inc. ............................................ 6,471
60,000 General Electric Co. ................................. 3,923
FINANCIAL (DIVERSIFIED) - 3.5%
140,000 Federal National Mortgage Association ................ 6,108
327,500 Medallion Financial Corp. ............................ 6,264
FOODS - 1.9%
12,400 CPC International, Inc. .............................. 1,145
85,000 ConAgra, Inc. ........................................ 5,451
HEALTH CARE (DIVERSIFIED) - 4.2%
140,000 American Home Products Corp. ........................ 10,710
50,000 Bristrol-Myers Squibb Co. ............................ 4,050
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 0.9%
30,000 Merck and Co., Inc. ................................. $3,105
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.9%
135,000 Kimberly-Clark Corp. ................................. 6,716
INSURANCE (MULTI-LINE) - 2.4%
100,000 Hartford Financial Services Group, Inc. .............. 8,275
MANUFACTURING (DIVERSIFIED) - 1.9%
65,000 Minnesota Mining & Manufacturing Co. ................. 6,630
NATURAL GAS - 1.0%
135,000 Northwest Natural Gas Co. ............................ 3,535
OFFICE EQUIPMENT & SUPPLIES - 1.8%
400,000 Unisource Worldwide, Inc. ............................ 6,400
OIL (DOMESTIC INTEGRATED) - 7.0%
100,000 Exxon Corp. .......................................... 6,150
140,000 Mobil Corp. .......................................... 9,783
80,000 Texaco, Inc. ......................................... 8,700
OIL (INTERNATIONAL INTEGRATED) - 1.5%
100,000 Royal Dutch Petroleum Co. (ADR) ...................... 5,438
OIL & GAS (EXPLORATION & PRODUCTION) - 0.3%
22,000 *Nuevo Energy Co. ...................................... 902
PAPER & FOREST PRODUCTS - 1.0%
70,000 Weyerhaeuser Co. ..................................... 3,640
PERSONAL CARE - 1.1%
74,600 International Flavors & Fragrances, Inc. ............. 3,767
RAILROADS - 2.1%
126,434 GATX Corp. ........................................... 7,302
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 16 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
REAL ESTATE--NON-AFFILIATED - 2.3%
105,000 First Industrial Realty Trust, Inc. ................ $ 3,071
148,600 Omega Healthcare Investors, Inc. ..................... 4,857
RETAIL (DEPARTMENT STORES) - 2.5%
170,000 J.C. Penney Co., Inc. ................................ 8,872
RETAIL (FOOD CHAINS) - 1.0%
70,000 American Stores Co. .................................. 3,456
RETAIL (SPECIALTY--APPAREL) - 1.4%
191,400 Stage Stores, Inc. ................................... 5,000
SAVINGS & LOAN COMPANIES - 2.3%
136,642 Washington Mutual Savings Bank ....................... 8,164
SERVICES (COMMERCIAL & CONSUMER) - 0.7%
274,600 *Ultrak, Inc. ........................................ 2,437
TELECOMMUNICATIONS (LONG DISTANCE) - 0.9%
90,000 AT&T Corp. ........................................... 3,156
TELEPHONE - 2.0%
160,000 GTE Corp. ............................................ 7,020
TOBACCO - 4.9%
229,000 Philip Morris Cos., Inc. ............................ 10,162
215,000 RJR Nabisco Holdings Corp. ........................... 7,095
WASTE MANAGEMENT - 1.8%
275,900 Landauer, Inc. ....................................... 6,397
------
TOTAL COMMON STOCKS ................................................. 243,567
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PREFERRED STOCKS - 14.1%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.4%
170,000 Chancellor Broadcasting Co. 7.00% Convertible ...... $11,815
COMPUTERS (NETWORKING) - 1.1%
100,000 #Vanstar Financing Trust 6.75% Convertible (144A) .... 3,950
CONTAINERS (METAL & GLASS) - 1.8%
125,000 Crown Cork & Seal 4.50% Convertible .................. 6,313
FINANCIAL (DIVERSIFIED) - 1.5%
150,000 Advanta Corp. Class B Series 95 SAILS ................ 5,137
INSURANCE (LIFE/HEALTH) - 1.1%
52,000 American Banks Insurance Series B Convertible ........ 3,744
OFFICE EQUIPMENT & SUPPLIES - 1.1%
60,000 IKON Office Solutions, Inc. 5.04% Convertible ........ 3,862
OIL & GAS (EXPLORATION & PRODUCTION) - 0.6%
44,800 Nuevo Energy Co. $2.875 Convertible .................. 2,140
TELEPHONE - 2.0%
115,400 Salomon, Inc. 6.25% Exchangeable Convertible to Cincinnati
Bell, Inc. ........................................... 7,371
WASTE MANAGEMENT - 1.5%
160,000 Browning Ferris Industries, Inc. 7.25% "ACES" ........ 5,320
------
TOTAL PREFERRED STOCKS ............................................... 49,652
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 17 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
CORPORATE BONDS - 10.3%
CONVERTIBLE SUBORDINATED DEBENTURES:
AIRLINES - 0.4%
$1,605,000 Alaska Air Group, Inc. 6.875%, due 6/15/14 ......... $ 1,585
BIOTECHNOLOGY - 0.8%
2,400,000 Bindley Western Industries, Inc. 6.50%, due
10/01/02 ............................................. 2,751
COMPUTERS (HARDWARE) - 1.1%
1,000,000 HMT Technology 5.75%, due 1/15/04 ...................... 825
3,500,000 #HMT Technology (144A) 5.75%, due 1/15/04 ............ 2,887
ELECTRONICS (SEMICONDUCTORS) - 0.8%
3,000,000 #Adaptec, Inc. (144A) 4.75%, due 2/01/04 ............. 2,966
FINANCIAL (DIVERSIFIED) - 3.2%
5,500,000 First Financial Management Convertible to First Data Corp.
5.00%, due 12/15/99 ................................. 11,172
OIL (DOMESTIC INTEGRATED) - 1.2%
2,500,000 Pennzoil Co. 6.50%, due 1/15/03 ...................... 4,375
PUBLISHING - 0.9%
3,000,000 #Thomas Nelson, Inc. (144A) 5.75%, due 11/30/99 ...... 3,075
RETAIL (BUILDING SUPPLIES) - 1.0%
3,000,000 Home Depot, Inc. 3.25%, due 10/01/01 ................. 3,390
SERVICES (COMMERCIAL & CONSUMER) - 0.9%
3,000,000 #Checkpoint Systems (144A) 5.25%, due 11/01/05 ....... 3,184
------
TOTAL CORPORATE BONDS ................................................ 36,210
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 6.7%
INVESTMENT COMPANIES:
$17,666,842 SSgA Money Market Portfolio ....................... $ 17,667
6,067,107 SSgA U.S. Treasury Money Market Portfolio ............ 6,067
------
TOTAL TEMPORARY INVESTMENTS .......................................... 23,734
------
TOTAL INVESTMENTS - 100.4% .......................................... 353,163
Liabilities, less Other Assets ...................................... (1,513)
------
NET ASSETS ......................................................... $351,650
------
------
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer". At June 30, 1997, such securities are HMT Technology
(144A) at 5.75%, acquired 1/14/97, due 1/15/04, Adaptec, Inc. (144A) at 4.75%,
acquired 6/11/97, due 2/01/04, Checkpoint Systems (144A) at 5.25%, acquired
3/12/97, due 11/01/05 and Thomas Nelson, Inc. (144A) at 5.75%, acquired
9/19/96, due 11/30/99. The cost of such securities is $12,755,625 and total
value is 3.6% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 18 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO NORTHWEST FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Returning 22.47%, the SAFECO Northwest Fund lagged the growth fund
peer group at 23.96% for the year ended June 30. By migrating to larger
companies, we've closed the performance gap: For the quarter just ended
the fund returned 16.87% while the growth peer group delivered 15.82% according
to Lipper Analytical Services.
[PHOTO OF WILLIAM B. WHITLOW]
Clearly the quarter and year have belonged to large cap stocks. Since
becoming Fund Manager in April, I've jettisoned the small companies that held us
under the broad market and re-invested in larger capitalization
companies.
Within the Northwest Universe, only 11 stocks are over $4 billion in
market capitalization and we now own seven of them. These large
companies--especially Microsoft and Washington Mutual--helped us outperform in
the last three months.
Washington Mutual, aided by its acquisition of Great Western Savings,
significantly outperformed the S&P. Our overweighting in financials gave
performance a further boost as banks and savings and loans in
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C>
1 Year 22.47%
5 Year 13.64%
Since Inception 13.10%
Investment Value As of June 30, 1997
SAFECO Northwest Fund: $21,804*
S&P 500 Index: $28,568
Northwest 50TM Index: $26,156
Northwest 50TM
SAFECO Northwest Fund S&P 500 Index Index
02/28/91 $10,000 $10,000 $10,000
03/31/91 10,295 10,242 10,409
04/30/91 10,597 10,267 10,666
05/31/91 10,958 10,710 11,305
06/30/91 10,317 10,220 10,552
07/31/91 10,932 10,696 11,063
08/31/91 11,385 10,949 11,510
09/30/91 11,106 10,766 11,292
10/31/91 10,995 10,911 11,285
11/30/91 10,318 10,471 10,836
12/31/91 11,573 11,669 12,133
01/31/92 12,072 11,452 12,767
02/28/92 12,459 11,601 12,958
03/31/92 12,185 11,375 12,545
04/30/92 11,757 11,709 11,973
05/31/92 11,879 11,766 11,865
06/30/92 11,504 11,591 11,450
07/31/92 11,769 12,065 11,567
08/31/92 11,453 11,818 11,250
09/30/92 11,931 11,957 11,693
10/31/92 12,329 11,998 12,156
11/30/92 12,850 12,406 12,701
12/31/92 13,202 12,558 12,725
01/31/93 13,255 12,663 12,821
02/28/93 12,605 12,835 12,420
03/31/93 13,097 13,106 12,932
04/30/93 12,563 12,789 12,641
05/31/93 12,835 13,130 12,953
06/30/93 12,715 13,169 12,675
07/31/93 12,610 13,116 12,220
08/31/93 12,966 13,612 12,721
09/30/93 12,957 13,508 12,434
10/31/93 13,125 13,787 12,881
11/30/93 13,178 13,656 13,158
12/31/93 13,338 13,821 13,334
01/31/94 13,574 14,291 13,737
02/28/94 13,917 13,904 13,941
03/31/94 13,327 13,299 13,449
04/30/94 13,295 13,470 13,409
05/31/94 13,499 13,689 13,611
06/30/94 13,154 13,354 13,198
07/31/94 13,347 13,792 13,300
08/31/94 13,948 14,356 14,068
09/30/94 13,629 14,005 13,530
10/31/94 13,499 14,319 13,449
11/30/94 13,164 13,798 13,209
12/31/94 13,131 14,002 13,281
01/31/95 13,294 14,365 13,224
02/28/95 13,629 14,924 13,668
03/31/95 14,085 15,364 14,102
04/30/95 14,269 15,816 14,526
05/31/95 14,486 16,458 14,528
06/30/95 15,200 16,840 15,409
07/31/95 15,992 17,397 15,993
08/31/95 16,133 17,440 16,299
09/30/95 16,220 18,176 16,897
10/31/95 16,029 18,111 16,507
11/30/95 15,995 18,904 16,753
12/31/95 15,780 19,269 16,957
01/31/96 15,930 19,924 17,518
02/28/96 16,415 20,110 17,921
03/31/96 17,409 20,303 17,826
04/30/96 17,882 20,602 18,898
05/31/96 18,183 21,132 19,204
06/30/96 17,804 21,213 19,123
07/31/96 16,960 20,276 18,188
08/31/96 17,503 20,704 19,088
09/30/96 17,778 21,868 19,583
10/31/96 17,327 22,471 19,446
11/30/96 18,088 24,168 20,852
12/31/96 18,153 23,689 21,348
01/31/97 19,469 25,168 22,302
02/28/97 19,481 25,366 22,719
03/31/97 18,656 24,326 22,097
04/30/97 19,327 25,776 23,084
05/31/97 20,617 27,343 24,975
06/30/97 21,804 28,568 26,156
* The Funds inception was February 7, 1991.
Graph and average annual return comparison
begins February 28, 1991.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 19 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE NORTHWEST FUND MANAGER (Continued)
general continued to benefit by low interest rates, consolidation and a strong
Northwest economy during the period.
Managing the Northwest Fund, I won't be timing the market or making big
sector bets. I'll just work to pick good stocks. I'll do that using intuition
I've built on 21 years of experience, and the SAFECO research team.
Only one of my stock picking rules is hard and fast: I only buy companies
that I, or one of our researchers, has visited and know well. Other than that, I
favor companies with valuations that are low compared to their industry group or
their own historical range, and that have good earnings outlooks.
I plan to hold 30 to 40 stocks of mid-to-large companies, giving the heaviest
weightings to industries that drive the Northwest economy. That'd be
export-related companies, technology and health-care. Indeed, the most
substantial additions I've made were to technology and healthcare.
From computer hardware and software to biotech and telecommunications, there
is no doubt that developing technology is this region's strong suit. For that
reason, our largest position is Microsoft. I don't think there's a more powerful
company in the
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Microsoft Corp. ................................................... 6.3%
(Personal Computer Software)
Washington Mutual Savings Bank ...................................... 5.0
(Savings & Loan)
Schnitzer Steel Industries, Inc. ................................... 4.4
(Steel Manufacturing)
Boeing Co. ......................................................... 4.4
(Aerospace)
Costco Companies, Inc. ............................................. 4.0
(Wholesale Membership Warehouse)
Starbucks Corp. .................................................... 3.7
(Beverage Retailer)
Sterling Financial Corp. ........................................... 3.7
(Savings & Loan Holding Co.)
Albertson's, Inc. .................................................. 3.5
(Retail Grocer)
Alaska Air Group, Inc. ............................................. 3.2
(Airlines)
Emeritus Corp. ..................................................... 3.1
(Health Care)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Alaska Air Group, Inc. ............................................. $1,652
Oregon Metallurgical Corp. .......................................... 1,617
PacifiCare Health Systems, Inc. (Class B) ............................ 1,573
Hewlett-Packard Co. ................................................. 1,553
Physio-Control International Corp. .................................. 1,490
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
US Bancorp .......................................................... $1,750
*Monaco Coach Corp. ................................................. 1,208
Microsoft Corp. ..................................................... 1,177
*Flir Systems, Inc. ................................................. 1,095
*Airborne Freight Corp. ............................................... 828
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Savings & Loan Companies ............................................... 12%
Banks (Major Regional) ................................................... 9
Iron & Steel ............................................................. 8
Computer (Software & Services) ........................................... 7
Aerospace/Defense ........................................................ 7
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 20 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Northwest. However, I bought more Hewlett Packard to further expose
the Fund to this growing sector.
And, after visiting, I added Physio-Control to our portfolio.
Physio's defibrillators are well-positioned in the marketplace and
its stock price was right. I also added Pacificare a health maintenance
organization that controls 25% of the Medicare market. Pacificare's stock price
slipped on disappointing earnings, and it was simply a matter of "When bad
things happen to good companies, we buy them".
I also started a position in Alaska Airlines, a company I have followed for
two decades. Alaska is American's top rated airline and people on the West Coast
have money to fly it.
I added to our position in Expeditors International to capitalize on the
geographic advantage it has in international trade. Schnitzer Steel, even though
it lagged the broad market, is also an export play. Schnitzer will gain with
growth of scrap steel exports to the Pacific Rim.
Finally the requisite Boeing discussion: Boeing is not only at a positive
point in its business cycle, the company is reinventing itself. Acquiring
McDonnell Douglas and Rockwell and increasing its airplane
maintenance business, Boeing will achieve a better business mix. The
company stands to become less cyclical and even more formidable.
In addition to investing in areas where we expect growth, I'm
investing only in companies that we know. Such intimacy helps me know when to
buy and when to sell a stock. In general, I will sell when a stock has reached
our price target, the fundamentals have deteriorated, or to raise cash to invest
in a better opportunity.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 42%
Medium: ($1 Bil. - $4 Bil.) 14%
Small: (Less than $1 Bil.) 43%
Cash and Other: 1%
</TABLE>
Right now, I see the Northwest itself as a better opportunity. As far as the
economists' eyes can see, our regional economy is set to outperform the national
economy, which should benfit the Northwest Fund.
/s/ Bill Whitlow
Bill Whitlow,
Northwest Fund Manager
- -------------------------------
Bill Whitlow began his career at SAFECO in 1976 and left in 1980. Before
re-joining SAFECO in April 1997 as Northwest Fund Manager, he was Director of
Research at Pacific Crest Securities. He holds a BA in chemistry from the U. of
Colorado and an MBA from the U. of Calif. at Berkeley. He is a CFA and a member
of the Washington State Governor's Council of Economic Advisors.
- 21 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 98.6%
AEROSPACE/DEFENSE - 6.7%
44,200 Boeing Co. .......................................... $2,345
21,000 Precision Castparts Corp. ............................ 1,252
AIR FREIGHT - 2.0%
37,200 Expeditors International of Washington, Inc. ......... 1,055
AIRLINES - 3.2%
67,000 *Alaska Air Group, Inc. .............................. 1,717
BANKS (MAJOR REGIONAL) - 8.6%
22,620 *Cascade Bancorp ....................................... 905
65,915 Northrim Bank .......................................... 725
25,000 US Bancorp ........................................... 1,603
43,975 West Coast Bancorp, Inc. ............................. 1,374
BEVERAGES (ALCOHOLIC) - 0.8%
58,200 *Redhook Ale Brewery, Inc. ............................. 407
BUILDING MATERIALS - 1.7%
40,000 TJ International, Inc. ................................. 940
CHEMICALS (DIVERSIFIED) - 1.0%
225,200 *Consep, Inc. .......................................... 563
COMPUTERS (HARDWARE) - 4.7%
30,000 Hewlett-Packard Co. .................................. 1,680
40,000 Sequent Computer Systems, Inc. ......................... 843
COMPUTERS (SOFTWARE & SERVICES) - 6.7%
27,500 *Mentor Graphics Corp. ................................. 254
26,600 *Microsoft Corp. ..................................... 3,362
ELECTRIC COMPANIES - 3.4%
62,600 Houston Industries, Inc. ............................. 1,342
12,000 Public Service Co. of Colorado ......................... 498
ELECTRICAL EQUIPMENT - 2.3%
29,000 AMP, Inc. ............................................ 1,211
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRONICS (SEMICONDUCTORS) - 5.4%
11,200 *Intel Corp. ........................................ $1,588
23,000 *Lattice Semiconductor Corp. ......................... 1,300
FOOTWEAR - 2.2%
20,000 NIKE, Inc. ........................................... 1,167
HEALTH CARE (LONG TERM CARE) - 4.6%
29,200 *Assisted Living Concepts, Inc. ........................ 807
114,600 *Emeritus Corp. ...................................... 1,690
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.7%
23,000 *PacifiCare Health Systems, Inc. (Class B) ........... 1,469
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 3.0%
107,000 *Physio-Control International Corp. .................. 1,605
IRON & STEEL - 7.9%
50,000 *Oregon Metallurgical Corp. .......................... 1,406
23,100 Oregon Steel Mills, Inc. ............................... 461
80,000 Schnitzer Steel Industries, Inc. ..................... 2,380
NATURAL GAS - 0.9%
30,400 Cascade Natural Gas Corp. .............................. 498
RAILROADS - 3.0%
18,000 Burlington Northern Santa Fe ......................... 1,618
RESTAURANTS - 3.7%
51,000 Starbucks Corp. ...................................... 1,986
RETAIL (DEPARTMENT STORES) - 1.4%
15,600 Nordstrom, Inc. ........................................ 765
RETAIL (FOOD CHAINS) - 3.7%
51,500 Albertson's, Inc. .................................... 1,880
2,284 *Quality Food Centers, Inc. ............................. 87
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 22 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
RETAIL (GENERAL MERCHANDISE) - 4.0%
65,600 Costco Companies, Inc. ............................. $ 2,157
RETAIL (SPECIALTY) - 3.1%
73,000 *Hollywood Entertainment Corp. ....................... 1,670
SAVINGS & LOAN COMPANIES - 11.9%
33,000 Interwest Savings Bank ............................... 1,304
106,000 *Sterling Financial Corp. ............................ 1,974
45,200 Washington Mutual Savings Bank ....................... 2,701
19,829 WesterFed Financial Corp. .............................. 406
-----
TOTAL COMMON STOCKS .................................................. 52,995
-----
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 1.5%
INVESTMENT COMPANIES:
$834,138 SSgA Money Market Portfolio ......................... $ 834
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 834
-----
TOTAL INVESTMENTS - 100.1% ........................................... 53,829
Liabilaties, less Other Assets ......................................... (72)
-----
NET ASSETS .......................................................... $53,757
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 23 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO INTERNATIONAL FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SAFECO International Fund beat its peer funds and benchmark Index for the
year ended June 30, 1997. The Fund delivered 21.24%, while the Lipper Analytical
Services average return for international funds was 16.54% and the MSCI EAFE
(Morgan Stanley Capital International Europe, Australasia, Far East) index
posted 11.07%. For the six months just ended the Fund returned 8.67%.
During the early part of the year, no individual theme made a significant
contribution--either positive or negative--to overall performance, although
there were a number of good individual stock performances which helped the
portfolio, particularly in the Healthcare Needs and Positive Banking Environment
themes.
Themes directed at the developing markets in the Far East have disappointed
throughout 1997. Increased Consumer Spending in the Pacific Basin and
Infrastructural Development have had a negative impact on the Fund.
With the notable exception of the developing markets in the Pacific Basin,
equity markets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 21.24%
Since Inception 16.49%
Investment Value As of June 30, 1997
SAFECO International Fund: $12,414*
EAFE: $11,686
SAFECO International Fund EAFE
01/30/96 $10,000 $10,000
02/28/96 9,940 10,036
03/31/96 10,040 10,252
04/30/96 10,290 10,553
05/31/96 10,250 10,361
06/30/96 10,240 10,422
07/31/96 9,840 10,120
08/31/96 10,240 10,145
09/30/96 10,454 10,417
10/31/96 10,585 10,313
11/30/96 11,249 10,725
12/31/96 11,423 10,590
01/30/97 11,382 10,206
02/28/97 11,534 10,359
03/31/97 11,463 10,383
04/30/97 11,514 10,424
05/31/97 12,050 11,088
06/30/97 12,414 11,686
* Graph and average annual return data is measured
from January 31, 1996, inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 24 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
worldwide have thus far done well during 1997.
In the UK, strong corporate earnings, particularly from financial-services
sector, and the expectation of even more corporate restructuring by major
companies have been underpinning valuations. The initial actions of the
country's new Labour government have been a source of encouragement to the
market.
The weaknesses of the Deutschemark stimulated a recovery in Germany's
export-oriented manufacturing sector in the early part of the year and, during
the second quarter, foreign orders have increased at a steady pace. The domestic
economy remains in the doldrums, however.
Far Eastern markets performed poorly during the first three months due to
fears about the upward direction of U.S. interest rates and continued net
outflows by foreign investors. During the second quarter in Malaysia, concern
about strong consumer spending a rising level of imports, high labor costs and a
possible oversupply of property all contributed to drive the market downwards.
The ongoing financial crisis in Thailand resulted in 25%
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Novartis AG ........................................................ 5.0%
(Pharmaceuticals)
National Australia Bank, Ltd. ...................................... 3.2
(Banking & Finance)
Canon, Inc. ........................................................ 2.7
(Office Equipment)
Lloyds Bank, plc .................................................... 2.6
(Banking & Finance)
B.A.T. Industries, plc .............................................. 2.6
(Tobacco)
Barclays, plc ....................................................... 2.6
(Banking & Finance)
Schweizerische Rueckversicherungs- Gesellschaft ..................... 2.5
(Insurance)
Internationale Nederlanden Groep NV ................................. 2.5
(Banking & Finance)
ABN Amro Holdings NV ................................................ 2.2
(Banking & Finance)
Development Bank of Singapore, Ltd. ................................ 2.1
(Banking & Finance)
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE COUNTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
United Kingdom ......................................................... 32%
Switzerland ............................................................. 13
Netherlands ............................................................. 10
Australia ................................................................ 7
Singapore ................................................................ 7
<CAPTION>
TOP FIVE PURCHASES COST
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Nestle SA ............................................................. $230
VEBA AG ................................................................ 154
Barclays, plc .......................................................... 118
General Electric Co., plc .............................................. 113
HSBC Holdings, plc ..................................................... 100
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
HSBC Holdings, plc .................................................... $102
*Iberdrola SA ........................................................... 95
*Thai Farmers Bank Public Co., Ltd. .................................... 73
Hoechst AG .............................................................. 59
*Guinness, plc .......................................................... 47
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 25 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE INTERNATIONAL FUND MANAGER (Continued)
decline in the market over the most recent three months.
Though we didn't much participate, the Japanese market gained 22% during the
second quarter. Despite continued speculation that interest rates are set to
rise, and mixed prospects for economic growth, foreigners continue to increase
their investments in Japan. Little attention is being paid to the current paltry
state of the financial sector where banks are continuing to struggle under the
burden of their bad debts.
Our outlook for the remainder of the year remains the same. The low-growth,
low-inflationary environment will continue to provide a favorable backdrop for
equity investments. Nevertheless, the upward movement of most markets has driven
up valuations relative to earnings growth and this fact remains uppermost in our
minds.
The July budget in the UK will be a key determining factor on how that market
fares for the remainder of the year. The ongoing uncertainty regarding European
Monetary Union will affect the performance of European markets over the coming
months.
We will continue to have a very selective approach to investments in the Far
East, although we feel that the bear market in the region, which commenced in
1993, is closer to the end than the beginning. We remain convinced that the
Japanese market is overvalued, although we continue to monitor companies there
in search of worthwhile investment opportunities.
We do not believe any significant change has taken place in the underlying
fundamentals of the portfolio and accordingly our strategy remains unaltered.
Bank of Ireland
Asset Management (U.S.) Limited.
- -------------------------------
The Bank of Ireland Asset Management (BIAM) investment committee is comprised of
senior analysts and economists and headed by the company's chief financial
officer. BIAM has managed international equities since 1966 and began managing
U.S. funds in 1989.
- 26 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 95.2%
AUSTRALIA - 7.2%
16,000 Broken Hill Proprietary Co., Ltd. ..................... $234
(Metals & Mining)
32,000 National Australia Bank, Ltd. .......................... 455
(Banking & Finance)
43,600 News Corp., Ltd. ....................................... 208
(Television & Publishing)
22,100 WMC, Ltd. .............................................. 138
(Metals & Mining)
FINLAND - 0.6%
3,750 Kymmene Oy Corp. ........................................ 87
(Paper & Forest Products)
FRANCE - 2.0%
670 Elf Aquitaine ........................................... 72
(Oil & Gas)
2,400 Michelin "B" ........................................... 144
(Tire & Rubber)
710 Total SA ................................................ 72
(Oil & Gas)
GERMANY - 6.2%
5,055 Hoechst AG ............................................. 215
(Chemicals)
670 Mannesmann AG .......................................... 299
(Machinery & Engineering)
2,370 Siemens AG ............................................. 141
(Electrical Equipment & Electronics)
4,165 VEBA AG ................................................ 234
(Utilities - Electric)
HONG KONG - 1.5%
7,400 HSBC Holdings, plc ..................................... 223
(Banking & Finance)
INDONESIA - 3.1%
37,000 PT Gudang Garam ........................................ 155
(Tobacco)
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
38,000 PT Hanjaya Mandala Sampoerna .......................... $145
(Tobacco)
33,000 PT Indocement Tunggal Perkasa ........................... 51
(Building Materials)
56,500 PT Telekomunikasi Indonesia ............................. 92
(Telecommunications)
IRELAND - 1.5%
11,080 Allied Irish Bank, plc .................................. 85
(Banking & Finance)
42,900 Smurfit (Jefferson) Group .............................. 124
(Paper Products)
ITALY - 1.3%
32,460 Stet-Societa Finanz Telefon ............................ 189
(Telecommunications)
JAPAN - 2.6%
14,000 Canon, Inc. ............................................ 381
(Office Equipment)
MALAYSIA - 3.2%
16,000 Hume Industries Berhad .................................. 74
(Building Materials)
30,000 RHB Capital Berhad ...................................... 95
(Banking & Finance)
45,000 Sime Darby Berhad ...................................... 150
(Conglomerates)
19,000 United Engineers, Ltd. ................................. 137
(Construction)
MEXICO - 0.8%
42,000 Grupo Financiero Series B .............................. 110
(Banking & Finance)
NETHERLANDS - 10.3%
16,548 ABN Amro Holdings NV ................................... 309
(Banking & Finance)
840 DSM NV .................................................. 84
(Chemicals)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 27 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
14,150 Elsevier NV ........................................... $237
(Publishing)
7,682 Internationale Nederlanden Groep NV .................... 354
(Banking & Finance)
1,010 Nutricia Vereenigde Bedrijven NV ....................... 160
(Food-Processing)
2,880 Royal Dutch Petroleum Co. .............................. 150
(Oil & Gas)
4,560 Royal PTT Nederland NV ................................. 179
(Commercial Services)
PHILIPPINES - 0.6%
35,300 San Miguel Corp. (Class B) .............................. 93
(Wine & Spirits, Food)
SINGAPORE - 6.8%
27,000 City Developments, Ltd. ................................ 264
(Real Estate)
24,000 Development Bank of Singapore, Ltd. .................... 302
(Banking & Finance)
17,800 Fraser & Neave, Ltd. ................................... 127
(Beverages)
13,950 Singapore Press Holdings, Ltd. ......................... 281
(Publishing)
SPAIN - 1.2%
5,455 Banco Santander SA ..................................... 168
(Banking & Finance)
SWEDEN - 0.5%
2,000 Pharmacia & Upjohn, Inc. ................................ 68
(Pharmaceuticals)
SWITZERLAND - 12.7%
278 Alusuisse-Lonza Holding AG ............................. 288
(Holding Co. - Diversified)
188 Nestle SA .............................................. 248
(Food)
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
444 Novartis AG ........................................... $711
(Pharmaceuticals)
24 Roche Holding AG ....................................... 217
(Pharmaceuticals)
253 Schweizerische Rueckversicherungs-Gesellschaft ......... 358
(Insurance)
THAILAND - 0.7%
15,000 Bangkok Bank Public Co., Ltd. .......................... 107
(Banking & Finance)
UNITED KINGDOM - 32.4%
41,230 B.A.T. Industries, plc ................................. 369
(Tobacco)
53,800 BTR, plc ............................................... 184
(Holding Co. - Diversified)
18,550 Barclays, plc .......................................... 368
(Banking & Finance)
15,850 Cable & Wireless, plc .................................. 146
(Telecommunications)
21,530 Cadbury Schweppes, plc ................................. 192
(Beverages)
9,195 EMI Group, plc ......................................... 165
(Leisure)
35,500 General Electric Co., plc .............................. 212
(Electronics)
12,500 Glaxo Wellcome, plc .................................... 258
(Pharmaceuticals)
17,900 Granada Group, plc ..................................... 235
(Leisure)
24,000 Grand Metropolitan, plc ................................ 232
(Wine & Spirits, Food)
5,900 Kingfisher, plc ......................................... 67
(Retail - Drug Store)
24,740 Ladbroke Group, plc ..................................... 97
(Hotels & Property Management)
36,240 Lloyds Bank, plc ....................................... 371
(Banking & Finance)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 28 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
12,250 Premier Farnell, plc .................................... 95
(Electronics)
24,020 Prudential Corp., plc ............................... $ 232
(Insurance)
26,410 Safeway, plc ........................................... 153
(Retail - Grocery)
20,290 Scottish Power, plc .................................... 132
(Utilities - Electric)
40,800 Shell Transport & Trading Co., plc ..................... 278
(Oil & Gas)
13,850 Siebe, plc ............................................. 234
(Industrial & Electronic Equipment)
20,700 TI Group, plc .......................................... 180
(Manufacturing)
34,260 Vodafone Group, plc .................................... 167
(Telecommunications)
4,600 Williams, plc ........................................... 25
(Diversified Operations)
7,995 Zeneca Group, plc ...................................... 264
-----
(Pharmaceuticals)
TOTAL COMMON STOCKS .................................................. 13,671
-----
PREFERRED STOCKS - 0.2%
AUSTRALIA - 0.2%
6,000 News Corp., Ltd. ........................................ 24
-----
(Television & Publishing)
TOTAL PREFERRED STOCKS ................................................... 24
-----
TOTAL INVESTMENTS - 95.4% ............................................ 13,695
-----
Domestic Cash .......................................... 780
Foreign Cash ............................................ 92
Liabilities, less Other
Assets ............................................... (212)
660
-----
NET ASSETS .......................................................... $14,355
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
PERCENT OF
NET ASSETS
- -----------------------------------------------------------------------------
<S> <C>
Banking & Finance 20.5%
Pharmaceuticals 10.6
Telecommunications 5.4
Holding Company - Diversified 5.3
Publishing 5.2
Food 5.1
Tobacco 4.7
Insurance 4.1
Oil & Gas 4.0
Leisure Time 3.5
Electrical Equipment & Electronics 3.1
Metals 2.6
Office Equipment & Supplies 2.6
Electric Utility 2.5
Building Materials 2.5
Beverages 2.2
Chemicals 2.1
Machinery - Diversified 2.1
Real Estate 1.8
Paper & Forest Products 1.5
Manufacturing 1.4
Retail - Grocers 1.1
Tire & Rubber 1.0
Retail - Drug Store 0.5
----
95.4%
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 29 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO BALANCED FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO Balanced Fund returned 18.02% for the year ending June 30,
1997 slightly underperforming the 19.41% Lipper Analytical Service
average for balanced funds. For the six months the Fund returned 9.60%
while the peer group posted a 10.21% total return.
There are three main reasons the Balanced Fund lagged. The first is
asset allocation For most of the past year, our allocation to equities
was a conservative 55%. In a 12-month period in which the S&P 500
returned 34.68% and the Lehman Brothers Government Corporate Bond Index
returned 7.75%, a higher commitment to stocks clearly would have been
better. [PHOTO OF MICHAEL C. KNEBEL]
[PHOTO OF REX BENTLEY]
The second reason is that during the last quarter, growth stocks
performed much better than the value-oriented stocks we own. As measured
by the Russell 1000 Growth Index, stocks with high price to earnings
ratios and strong earnings growth returned 18.91%. Meanwhile the Russell
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 18.02%
Since 1/30/96* 15.13%
Investment Value As of June 30, 1997
SAFECO Balanced Fund: $12,209*
60% S&P/40% Lehman Brothers Government/Corporate Index: $12,691
60% S&P/40% Lehman Brothers
Government/Corporate Index SAFECO Balanced Fund
01/30/96 $10,000 $10,000
02/28/96 9,971 9,950
03/31/96 9,995 10,017
04/30/96 10,056 10,077
05/31/96 10,204 10,218
06/30/96 10,282 10,345
07/31/96 10,019 10,112
08/31/96 10,136 10,243
09/30/96 10,550 10,599
10/31/96 10,823 10,813
11/30/96 11,393 11,272
12/31/96 11,207 11,140
01/30/97 11,632 11,473
02/28/97 11,697 11,567
03/31/97 11,354 11,163
04/30/97 11,826 11,414
05/31/97 12,302 11,896
06/30/97 12,691 12,209
* Graph and average annual return data
is measured from January 31, 1996,
inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 30 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
1000 Value Index returned 14.74%. It is well documented that the Growth
and Value styles alternate being in and out of favor. We remain confident
that our turn will come and that value investing will continue to offer
excellent returns at lower levels of risk over long periods of time.
The final reason that Balanced Fund trailed over the past 12 months is that
the bond portion of the portfolio did poorly late last year. Rest assured, we
have made some adjustments to our fixed income strategy and our bond results
improved relative to the bond indices. At June 30, about two thirds of
the Balanced Fund's fixed income portfolio are Treasuries and its
duration (sensitivity to interest rates) is about the same as the broad
treasury market. [PHOTO OF LYNETTE SAGVOLD]
We increased the level of stocks in the portfolio to 60.7% of net assets at
June 30. (Bonds were 37.4% and cash 2.2%.) Stocks added during the quarter
included: American Stores, First Industrial Realty, and Baxter International.
American Stores is benefiting from its Delta (re-engineering) program
designed to improve its efficiencies in procurement, warehousing, and
merchandising.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN STOCK HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ...................................... 1.8%
(Pharmaceuticals)
AMP, Inc. .......................................................... 1.7
(Electrical Equipment Manufacturer)
Chase Manhattan Corp. .............................................. 1.7
(Bank)
Hartford Financial Services Group, Inc. ............................. 1.7
(Insurance Company)
Bell Atlantic Corp. ................................................ 1.6
(Telephone Company)
NationsBank Corp. .................................................. 1.6
(Bank)
American Home Products Corp. ....................................... 1.5
(Pharmaceuticals)
May Department Stores Co. .......................................... 1.5
(Department Store)
Amoco Corp. ........................................................ 1.5
(Oil/Gas Exploration & Production)
J.C. Penney Co., Inc. .............................................. 1.5
(Department Store)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(COMMON STOCK)
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Unisource Worldwide, Inc. ............................................ $191
3Com Corp. ............................................................ 142
Baxter International, Inc. ............................................ 135
Burlington Northern Santa Fe ........................................... 125
B. F. Goodrich Co. .................................................... 124
<CAPTION>
TOP FIVE SALES
(COMMON STOCK) PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Colgate-Palmolive Co. ............................................... $116
*Household Finance Co. 9.00%, due 9/28/01 . 107
*Browning-Ferris Industries, Inc. ..................................... 104
*Associates Corp. of North America 7.02%, due 5/15/01 .................. 100
*Walt Disney Co. 6.375%, due 3/30/01 .................................... 99
<CAPTION>
TOP FIVE INDUSTRIES PERCENT OF
(COMMON STOCK) NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 4%
Manufacturing (Diversified) .............................................. 4
Electrical Equipment ..................................................... 3
Retail (Department Stores) ............................................... 3
Telephone ................................................................ 3
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 31 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE BALANCED FUND MANAGERS (Continued)
First Industrial Realty is a REIT that specializes in bulk
warehouse and light industrial buildings primarily in major Midwest
markets. Recently First Industrial had its debt rating upgraded to
investment grade, but still sells at a discount to its peers. We
believe that the current valuation does not fully reflect its
increased financial and operational flexibility.
Baxter is a leading medical technology manufacturer focusing on
cardiovascular, kidney dialysis, biotech, and intravenous systems. Baxter has
very attractive long-term earnings prospects and a strong research and
development pipeline.
We eliminated our positions in Colgate and Abbott as they reached our price
targets. We sold AT&T because of increased competition, the uncertain regulatory
environment and questions about its future growth. At this time, we remain
overweighted in capital goods, consumer cyclicals, and consumer staples.
Most economic indicators appear to be leading down a path of slower growth
except one--industrial sector activity is still advancing solidly, aided by a
better-than-expected trade performance. We expect GDP to grow around 2.5% and
inflation to increase a moderate 2-2.5% for the year. Businesses continue to
increase efficiency and productivity in order to expand their
markets. Competing in bigger markets affords them additional room
for growth.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C> <C>
Common Stocks
Large: ($4 Bil. and above) 48%
Medium: ($1 Bil. - $4 Bil.) 11%
Small: (Less than $1 Bil.) 2%
Corporate Bonds: 14%
U.S. Government Securities: 23%
Cash and Other: 2%
</TABLE>
Our outlook of moderate economic growth, low inflation, and
reasonable profit growth should provide a good environment for
financial assets. And our portfolio is tuned to take full advantage
of it.
/s/ Mike Knebel
Michael C. Knebel, Bonds
/s/ Rex Bentley
Rex Bentley, Stocks
/s/ Lynette Sagvold
Lynette D. Sagvold, Stocks
- -------------------------------
Michael Knebel oversees SAFECO Corporation's entire taxable bond operation. He
has 13 years investment experience, an MBA from the University of Minnesota and
is a Chartered Financial Analyst.
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
Lynette Sagvold holds a BA in business administration from the University of
Washington and is a chartered financial analyst. She began her investment career
in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO as a portfolio manager and insurance analyst.
- 32 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 60.7%
AEROSPACE/DEFENSE - 2.2%
3,000 B. F. Goodrich Co. .................................... $130
2,400 Raytheon Co. ........................................... 122
AUTO PARTS & EQUIPMENT - 1.4%
4,600 Echlin, Inc. ........................................... 166
BANKS (MAJOR REGIONAL) - 1.6%
2,800 NationsBank Corp. ...................................... 181
BANKS (MONEY CENTER) - 1.7%
2,000 Chase Manhattan Corp. .................................. 194
BEVERAGES (ALCOHOLIC) - 1.1%
3,000 Anheuser-Busch Companies, Inc. ......................... 126
BEVERAGES (NON-ALCOHOLIC) - 1.1%
3,400 PepsiCo, Inc. .......................................... 128
BUILDING MATERIALS - 1.5%
2,300 Armstrong World Industries, Inc. ....................... 169
CHEMICALS - 1.1%
3,400 Nalco Chemical Co. ..................................... 131
COMPUTERS (HARDWARE) - 1.2%
2,400 Hewlett-Packard Co. .................................... 134
COMPUTERS (NETWORKING) - 1.5%
3,700 *3Com Corp. ............................................ 166
COMPUTERS (PERIPHERALS) - 0.8%
2,500 Seagate Technology, Inc. ................................ 88
COMPUTERS (SOFTWARE & SERVICES) - 1.3%
3,500 *Electronic Data Systems Corp. ......................... 143
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRIC COMPANIES - 2.4%
6,100 Houston Industries, Inc. .............................. $131
3,600 NIPSCO Industries, Inc. ................................ 149
ELECTRICAL EQUIPMENT - 3.2%
4,700 AMP, Inc. .............................................. 196
2,600 General Electric Co. ................................... 170
FINANCIAL (DIVERSIFIED) - 2.3%
4,100 Advanta Corp. (Class B) ................................ 146
2,800 Federal National Mortgage Association .................. 122
FOODS - 2.5%
1,800 CPC International, Inc. ................................ 166
1,800 ConAgra, Inc. .......................................... 115
HEALTH CARE (DIVERSIFIED) - 2.4%
2,300 American Home Products Corp. ........................... 176
1,400 Bristol-Myers Squibb Co. ............................... 113
HEALTH CARE (DRUGS--MAJOR PHARMUCEUTICALS) - 1.8%
2,200 SmithKline Beecham, plc (ADR) .......................... 202
HEALTH CARE (HOSPITAL MANAGEMENT) - 1.3%
3,000 Schering-Plough Corp. .................................. 144
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.1%
2,500 Baxter International, Inc. ............................. 131
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.3%
2,900 Kimberly-Clark Corp. ................................... 144
INSURANCE (MULTI-LINE) - 1.6%
2,300 Hartford Financial Services Group, Inc. ................ 190
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 33 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
MANUFACTURING (DIVERSIFIED) - 4.4%
1,800 Briggs & Stratton Corp. ............................... $ 90
2,700 Corning, Inc. .......................................... 150
3,100 Crane Co. .............................................. 130
3,400 Harsco Corp. ........................................... 138
OFFICE EQUIPMENT & SUPPLIES - 1.4%
10,000 Unisource Worldwide, Inc. .............................. 160
OIL (DOMESTIC INTEGRATED) - 4.4%
2,000 Amoco Corp. ............................................ 174
2,400 Atlantic Richfield Co. ................................. 169
2,400 Mobil Corp. ............................................ 168
PERSONAL CARE - 2.2%
1,800 Avon Products, Inc. .................................... 127
2,600 International Flavors & Fragrances, Inc. ............... 131
RAILROADS - 1.2%
1,500 Burlington Northern
Santa Fe ............................................... 135
REAL ESTATE--NON-AFFILIATED - 0.5%
2,000 First Industrial Realty Trust, Inc. ..................... 59
RETAIL (DEPARTMENT STORES) - 2.9%
3,300 J.C. Penney Co., Inc. .................................. 172
3,700 May Department Stores Co. .............................. 175
RETAIL (FOOD CHAINS) - 2.4%
4,600 Albertson's, Inc. ...................................... 168
2,200 American Stores Co. .................................... 109
RETAIL (SPECIALTY) - 1.0%
3,200 Toys "R" Us, Inc. ...................................... 112
TELEPHONE - 3.0%
2,400 Bell Atlantic Corp. .................................... 182
3,700 GTE Corp. .............................................. 162
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TOBACCO - 0.9%
2,200 Philip Morris Cos., Inc. ............................. $ 98
-----
TOTAL COMMON STOCKS ................................................... 6,982
-----
CORPORATE BONDS - 14.6%
AUTOMOBILES - 0.9%
$100,000 General Motors Acceptance Corp.
6.625%, due 10/01/02 .................................... 99
BANKS (MONEY CENTER) - 1.9%
100,000 BankAmerica Corp.
9.50%, due 4/01/01 ..................................... 109
100,000 Citicorp
7.625%, due 5/01/05 .................................... 103
BANKS (MAJOR REGIONAL) - 1.8%
65,000 ABN Amro Bank
7.125%, due 6/18/07 ..................................... 65
50,000 Banc One Corp.
7.60%, due 5/01/07 ...................................... 51
100,000 Norwest Corp. (MTN)
6.25%, due 3/15/01 ...................................... 99
BANKS--FOREIGN - 0.4%
50,000 Deutsche Bank Financial
7.50%, due 4/25/09 ...................................... 51
BUILDING MATERIALS - 0.5%
65,000 Hanson Overseas
6.75%, due 9/15/05 ...................................... 63
ENGINEERING & CONSTRUCTION - 0.7%
75,000 Halliburton Co.
6.75%, due 2/1/27 ....................................... 74
FINANCE--DIVERSIFIED - 0.7%
75,000 Student Loan Marketing Association
6.375%, due 2/11/00 ..................................... 74
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 34 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FINANCE--MISC. - 4.9%
$ 95,000 Associates Corp. of North America
8.55%, due 7/15/09 ................................... $ 106
100,000 Associates Corp. of North America
6.625%, due 5/15/01 .................................... 100
65,000 Lehman Brothers, Inc.
7.375%, due 5/15/04 ..................................... 66
100,000 Ford Motor Credit Co.
7.20%, due 6/15/07 ..................................... 100
95,000 McDonnel Douglas Finance Corp.
6.83%, due 5/21/01 ...................................... 95
100,000 Commercial Credit Co.
5.875%, due 1/15/03 ..................................... 96
PETROLEUM & PETROLEUM SERVICES - 0.8%
100,000 Texaco Capital, Inc.
6.19%, due 7/09/03 ...................................... 96
RETAIL (DEPARTMENT STORES) - 0.5%
60,000 J.C. Penny Co., Inc.
7.60%, due 4/01/07 ...................................... 62
RETAIL (GENERAL MERCHANDISE) - 0.9%
100,000 Sears Roebuck Acceptance Corp.
6.90%, due 8/1/03 ...................................... 100
UTILITIES - 0.6%
75,000 Allegheny Generating Co.
6.90%, due 8/1/03 ....................................... 71
-----
TOTAL CORPORATE BONDS ................................................. 1,680
-----
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
U.S. GOVERNMENT SECURITIES - 22.8%
U.S TREASURY NOTES - 22.8%
$655,000 7.50%, due 11/15/16 ................................. $ 700
135,000 7.25%, due 8/15/04 ..................................... 141
275,000 6.875%, due 3/31/00 .................................... 279
265,000 6.50%, due 10/15/06 .................................... 264
455,000 6.375%, due 9/30/01 .................................... 455
790,000 5.75%, due 12/31/98 .................................... 788
-----
TOTAL U.S GOVERNMENT SECURITIES ....................................... 2,627
-----
TEMPORARY INVESTMENTS - 2.2%
INVESTMENT COMPANIES:
248,862 SSgA Money Market Portfolio ............................ 249
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 249
-----
TOTAL INVESTMENTS - 100.3% ........................................... 11,538
Liabilities, less Other Assets ......................................... (28)
-----
NET ASSETS .......................................................... $11,510
-----
-----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 35 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO SMALL COMPANY FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30, the SAFECO Small Company Fund returned
11.92%, while the peer group of small capitalization funds averaged
13.71% according to Lipper Analytical Services. For the six months ended
[PHOTO OF GREG EISEN]
June 30, 1997, the SAFECO Small Company Stock Fund returned 7.71%, versus the
small company peer group average which was 8.98%
The first quarter of 1997 was marked by a 10% correction in the Russell 2000
Index of small company stocks, and second quarter by a recovery. At the end of
both quarters, The Russell 2000 was up 10.20%. While the Fund avoided
losing as much as the average fund in the downturn, we did not keep up
with the average fund in the recovery. The particular mix of stocks we had,
which has a smaller market cap than our peer group average, kept us from keeping
pace.
In review, it appears to me that the stocks in our portfolio are still
cheaply valued versus the
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C>
1 Year 11.92%
Since Inception 23.36%
Investment Value As of June 30, 1997
SAFECO Small Company Fund: $13,464*
Russell 2000: $12,852
SAFECO Small Company Fund Russell 2000
01/30/96 $10,000 $10,000
02/28/96 10,150 10,312
03/31/96 10,490 10,522
04/30/96 11,550 11,084
05/31/96 12,350 11,521
06/30/96 12,030 11,048
07/31/96 11,220 10,083
08/31/96 11,910 10,668
09/30/96 12,183 11,085
10/31/96 12,162 10,914
11/30/96 12,024 11,364
12/31/96 12,501 11,662
01/30/97 12,606 11,895
02/28/97 12,342 11,606
03/31/97 11,918 11,058
04/30/97 11,675 11,089
05/31/97 12,786 12,324
06/30/97 13,464 12,852
* Graph and average annual return data is measured
from January 31, 1996, inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment into a relevant market index. The index is unmanaged.
Past performance is not predictive of future performance. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- 36 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
overall small cap market, so I am optimistic that our turn to deliver
above-average performance is yet to come.
Regional banks are still the largest sector in the Fund. They continued to
perform well and so we bought two more: Southwest Bancorp is a small bank
providing Houston businesses a level of service the large banks in that market
are unwilling to provide. Independent Bankshares is also a Texas bank, serving
Abilene, Odessa, and Lubbock. These two stocks provide geographical
diversification to the Fund's bank holdings. We now own banks in Florida, Texas,
California, Illinois and Washington State.
Other stocks purchased during the quarter include: Hooper Holmes, Patina Oil
and Gas, Craig Corp preference shares, American Oilfield Divers and Ovid
Technologies.
Hooper Holmes, through its subsidiary Portamedic, provides information and
specimen collection to the life insurance industry. If you ever applied for life
insurance, chances are Hooper's nurse came to your house to interview you. The
company is growing fast,
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Cole National Corp. (Class A) ...................................... 4.2%
(Specialty Retailer)
Lancer Corp. ....................................................... 3.9
(Beverage Equipment Manufacturer)
Stage Stores, Inc. ................................................. 3.9
(Retail Store)
Hooper Holmes, Inc. ................................................ 3.8
(Health Care Services)
Penederm, Inc. ..................................................... 3.7
(Drug Delivery System)
Tracor, Inc. ....................................................... 3.2
(Aerospace Electronics)
GATX Corp. ......................................................... 3.0
(Railway & Terminal Operator)
Hanmi Bank (Los Angeles, CA) ........................................ 2.9
(Bank)
Vallen Corp. ....................................................... 2.7
(Safety Products)
Patina Oil & Gas Corp. ............................................. 2.7
(Oil Company)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Patina Oil & Gas Corp. ............................................... $556
Hooper Holmes, Inc. ................................................... 442
Mesa Air Group, Inc. .................................................. 439
Craig Corp. (Class A) .................................................. 425
American Oilfield Divers, Inc. ........................................ 320
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*American List Corp. ................................................. $477
*First Enterprise Financial Group, Inc. ............................... 384
*Fibreboard Corp. ..................................................... 372
*Tasty Baking Co. ..................................................... 274
*Imperial Bancorp ...................................................... 253
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Banks (Major Regional) ................................................. 11%
Financial (Diversified) .................................................. 6
Services (Commercial & Consumer) ......................................... 5
Computers (Hardware) ..................................................... 5
Oil & Gas (Drilling & Equipment) ......................................... 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 37 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE SMALL COMPANY FUND MANAGER (Continued)
with new avenues of distribution opening up to them.
Patina Oil and Gas is a majority owned subsidiary of Snyder Oil.
Snyder and Patina have committed to removing the Patina stock from
Snyder's ownership, and the spin-off should attract attention to the
cheaply valued Patina shares.
Craig Corp is another value stock. Craig's assets are primarily cash and
movie theaters in the US, Puerto Rico and Australia, some of which are operating
and some are under construction.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
1 Mid-Cap: ($1 billion - $4
billion) 5%
2 Small-Cap: 89% (under $1 billion)
a Large: (over $750 million) 3%
b Medium: ($250 - $750 million) 28%
c Small: (under $250 million) 58%
3 Cash and Other: 6%
</TABLE>
American Oilfield Divers provides underwater construction services to the
offshore oil drilling industry, which is in a major upturn.
Ovid Technologies provides online access to research databases and full text
versions of articles to the biomedical research community. Their product is sold
directly to hospitals, research facilities, medical schools, and pharmaceutical
companies and delivered over the internet.
In summary, the small capitalization stock sector has recovered
but continues to lag larger capitalization stocks. Because of that,
small company stocks look like a bargain. Even if we are still in
the midst of a market that benefits the largest capitalization
stocks, I believe staying the course with small caps that are good businesses at
cheap prices will be rewarding over the long haul.
The Fund will remain essentially fully invested across the broad range of
market sectors, in stocks that present the opportunity to provide better than
average returns.
/s/ Greg Eisen
Greg Eisen,
Small Company Fund Manager
- -------------------------------
Greg Eisen joined SAFECO in 1986. He holds a BA from Rutgers University and is a
certified public accountant and a Chartered Financial Analyst.
- 38 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO SMALL COMPANY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 91.5%
AIRLINES - 3.8%
7,000 Air Express International Corp. ....................... $278
65,000 *Mesa Air Group, Inc. .................................. 349
AUTO PARTS & EQUIPMENT - 1.3%
25,000 *Deflecta-Shield Corp. ................................. 219
BANKS (MAJOR REGIONAL) - 11.1%
25,000 1st United Bancorp ..................................... 438
16,800 Columbia Banking System, Inc. .......................... 338
27,475 *Hanmi Bank (Los Angeles, CA) .......................... 481
11,250 Independent Bankshares, Inc. ........................... 149
5,500 *Southwest Bancorp of Texas, Inc. ...................... 152
20,000 UnionBancorp, Inc. ..................................... 255
BUILDING MATERIALS - 2.3%
13,000 Zurn Industries, Inc. .................................. 374
COMPUTERS (HARDWARE) - 4.9%
10,500 *MICROS Systems, Inc. .................................. 441
45,500 *PC Service Source, Inc. ............................... 358
COMPUTERS (SOFTWARE & SERVICES) - 4.2%
35,000 *Optimal Robotics Corp. ................................ 140
4,000 *RadiSys Corp. ......................................... 159
13,500 *SPSS, Inc. ............................................ 392
CONSUMER FINANCE - 2.1%
6,950 *AmeriTrade Holding Corp. .............................. 109
7,000 *Ocwen Financial Corp. ................................. 228
ELECTRONICS (DEFENSE) - 3.2%
21,100 *Tracor, Inc. .......................................... 530
ENGINEERING & CONSTRUCTION - 2.0%
12,000 *American Buildings Co. ................................ 324
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FINANCIAL (DIVERSIFIED) - 5.8%
8,600 First Financial Caribbean Corp. (ADR) ................. $281
24,675 Litchfield Financial Corp. ............................. 404
30,000 *Long Beach Financial Corp. ............................ 263
FOODS - 2.0%
11,600 *JP Foodservice, Inc. .................................. 333
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 1.3%
15,000 Sodak Gaming, Inc. ..................................... 221
HEALTH CARE (DIVERSIFIED) - 3.8%
27,000 Hooper Holmes, Inc. .................................... 619
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 3.7%
45,000 *Penederm, Inc. ........................................ 607
HEALTH CARE (SPECIALIZED SERVICES) - 1.9%
30,000 *Ovid Technologies, Inc. ............................... 319
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.4%
24,500 *Guest Supply, Inc. .................................... 233
HOUSEWARES - 2.2%
40,810 *Lifetime Hoan Corp. ................................... 357
MANUFACTURING (DIVERSIFIED) - 3.9%
26,000 *Lancer Corp. .......................................... 643
OFFICE EQUIPMENT & SUPPLIES - 2.6%
9,000 *Asia Pacific Wire & Cable Corp. Ltd. ................... 98
20,000 Unisource Worldwide, Inc. .............................. 320
OIL (DOMESTIC INTEGRATED) - 2.7%
55,000 *Patina Oil & Gas Corp. ................................ 447
OIL & GAS (DRILLING & EQUIPMENT) - 4.7%
28,000 *American Oilfield Divers, Inc. ........................ 336
8,000 *Seitel, Inc. .......................................... 304
5,000 *Stolt Comex Seaway, S.A. .............................. 127
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 39 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO SMALL COMPANY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL & GAS (EXPLORATION & PRODUCTION) - 2.0%
14,000 *Swift Energy Co. ................................... $ 334
RAILROADS - 3.0%
8,600 GATX Corp. ............................................. 497
REAL ESTATE--NON-AFFILIATED - 2.2%
7,700 Alexandria Real Estate Equities, Inc. .................. 169
9,300 Ocwen Asset Investment Corp. ........................... 188
RETAIL (SPECIALTY) - 4.2%
15,500 *Cole National Corp.
(Class A) .............................................. 682
RETAIL (SPECIALTY--APPAREL) - 3.9%
24,200 *Stage Stores, Inc. .................................... 632
SERVICES (COMMERCIAL & CONSUMER) - 5.3%
24,500 *Vallen Corp. .......................................... 447
22,000 York Group, Inc. ....................................... 413
-----
TOTAL COMMON STOCKS .................................................. 14,988
-----
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PREFERRED STOCK - 2.6%
CONSUMER FINANCE - 2.6%
27,000 *Craig Corp. (Class A) .............................. $ 425
-----
TOTAL PREFERRED STOCK ................................................... 425
-----
TEMPORARY INVESTMENTS - 5.9%
INVESTMENT COMPANIES:
$817,613 SSgA Money Market Portfolio ............................ 818
143,337 SSgA U.S. Treasury Money Market Portfolio .............. 143
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 961
-----
TOTAL INVESTMENTS - 100.0% ........................................... 16,374
Other Assets, less Liabilities ............................................ 1
-----
NET ASSETS .......................................................... $16,375
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 40 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO U.S. VALUE FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO U.S. Value Fund was launched April 30 1997. It was a
fortuitous time to begin investing because the stock market has advanced
significantly since that time. (In fact the second quarter 1997 proved to
be the market's second best in a decade, as measured by the S&P.)
On June 30, 97.5% of the portfolio was invested in common stocks, with
the remaining 2.5% in cash equivalents. The Fund is invested in a well-
diversified group of stocks, and is managed using a value approach.
[PHOTO OF LYNETTE SAGVOLD]
[PHOTO OF REX BENTLEY]
Some of the characteristics that define our Value style of management include
a low price-earnings ratio and a high yield, relative to the S&P 500. At mid
year, the price earnings (PE) ratio on the stocks in our portfolio was 15.2
times 1998 estimated earnings, and the dividend yield was 2.4%. Comparable
numbers for the stocks comprising the S&P 500 were 18.9 times 1998 expected
earnings and a yield of 1.6%.
In other words, stocks in the U.S. Value Fund sell at a discount to
the market, and have a 50% higher current yield. Furthermore, we're
biased toward growth. We select our companies to generate better earnings
growth than the market.
Our top ten holdings are all large capitalization companies chosen for
the qualities described above:
SmithKline has one of the best new drug pipelines in the
pharmaceutical industry and is benefiting from a corporate restructuring.
AMP, the world's number one supplier of electronic connectors, is undertaking
steps to improve its asset utilization and improve overall efficiency.
We have a large position in Mobil because it has strong production
opportunities and is attractively priced relative to the other international
integrated oil companies.
Armstrong, known for its floor covering and building products, should perform
well in a low-interest rate environment which fosters home improvement and home
building.
Chase Manhattan and Nationsbank are both dominant
- 41 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE U.S. VALUE FUND MANAGERS (Continued)
players in the consolidating banking industry. Spun off from ITT,
Hartford is doing a good job expanding distribution of its insurance
products.
CPC International (whose brands include Skippy, Mazola and Knorr)
has good international exposure, good distribution, and is implementing a
restructuring designed to increase earnings predictability.
We think the retail group, having been out of favor for several
years is undervalued. To capture that value, we've invested in JC
Penney and May Department Stores.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 77%
Medium: ($1 Bil. - $4 Bil.) 18%
Small: (Less than $1 Bil.) 2%
Cash and Other: 3%
</TABLE>
In short, our goal is to find and buy companies with better than average
prospects that are selling at discounted prices. We intend to
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ...................................... 3.4%
(Pharmaceuticals)
AMP, Inc. .......................................................... 3.1
(Electrical Equipment Manufacturer)
Mobil Corp. ........................................................ 3.0
(Oil/Gas Exploration & Production)
Armstrong World Industries, Inc. ................................... 2.9
(Construction Products Company)
Chase Manhattan Corp. .............................................. 2.8
(Bank)
Hartford Financial Services Group, Inc. ............................ 2.7
(Insurance Company)
CPC International, Inc. ............................................ 2.7
(Food Company)
NationsBank Corp. .................................................. 2.6
(Bank)
J.C. Penney Co., Inc. .............................................. 2.6
(Department Store)
May Department Stores Co. .......................................... 2.5
(Department Store)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ......................................... $247
Mobil Corp. ........................................................... 225
AMP, Inc. ............................................................. 221
Chase Manhattan Corp. ................................................. 215
GTE Corp. ............................................................. 208
<CAPTION>
SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Colgate-Palmolive Co. ................................................ $81
*Abbott Laboratories .................................................... 78
Philip Morris Cos., Inc. ............................................... 44
Raytheon Co. ........................................................... 19
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 8%
Manufacturing (Diversified) .............................................. 6
Electrical Equipment ..................................................... 5
Retail (Department Stores) ............................................... 5
Telephone ................................................................ 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 42 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
stay fully invested in companies that will pay you, the shareholder, in
dividends while we wait. We are confident that this approach will result in
superior investment performance over time, factoring in both risk and return.
/s/ Lynette D. Sagvold
Lynette Sagvold
/s/ Rex Bentley
Rex Bentley
- -------------------------------
Lynette Sagvold holds a BA in business administration from the University of
Washington and is a chartered financial analyst. She began her investment career
in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO as a portfolio manager and insurance analyst.
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
- 43 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. VALUE FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 97.5%
AEROSPACE/DEFENSE - 3.8%
3,300 BF Goodrich Co. ....................................... $143
3,100 Raytheon Co. ........................................... 158
AUTO PARTS & EQUIPMENT - 2.3%
5,200 Echlin, Inc. ........................................... 187
BANKS (MAJOR REGIONAL) - 2.6%
3,200 NationsBank Corp. ...................................... 206
BANKS (MONEY CENTER) - 2.8%
2,300 Chase Manhattan Corp. .................................. 223
BEVERAGES (ALCOHOLIC) - 2.0%
3,800 Anheuser-Busch Companies, Inc. ......................... 159
BEVERAGES (NON-ALCOHOLIC) - 1.6%
3,500 PepsiCo, Inc. .......................................... 132
BUILDING MATERIALS - 2.9%
3,100 Armstrong World Industries, Inc. ....................... 228
CHEMICALS - 2.0%
4,100 Nalco Chemical Co. ..................................... 158
COMPUTERS (HARDWARE) - 2.1%
3,000 Hewlett-Packard Co. .................................... 168
COMPUTERS (NETWORKING) - 2.2%
3,900 *3Com Corp. ............................................ 176
COMPUTERS (PERIPHERALS) - 0.9%
2,100 Seagate Technology, Inc. ................................ 74
COMPUTERS (SOFTWARE & SERVICES) - 1.9%
3,800 *Electronic Data Systems Corp. ......................... 156
ELECTRIC COMPANIES - 3.7%
5,600 Houston Industries, Inc. ............................... 120
4,200 NIPSCO Industries, Inc. ................................ 174
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRICAL EQUIPMENT - 5.4%
5,900 AMP, Inc. ............................................. $246
2,800 General Electric Co. ................................... 183
FINANCIAL (DIVERSIFIED) - 3.5%
3,200 Advanta Corp. (Class B) ................................ 114
3,800 Federal National Mortgage Association .................. 166
FOODS - 4.0%
2,300 CPC International, Inc. ................................ 212
1,700 ConAgra, Inc. .......................................... 109
HEALTH CARE (DIVERSIFIED) - 3.5%
2,500 American Home Products Corp. ........................... 191
1,100 Bristol-Myers Squibb Co. ................................ 89
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 3.4%
3,000 SmithKline Beecham, plc (ADR) .......................... 275
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.0%
3,100 Baxter International, Inc. ............................. 162
HOUSEHOLD PRODUCTS (NON-DURABLES) - 2.3%
3,700 Kimberly-Clark Corp. ................................... 184
INSURANCE (MULTI-LINE) - 2.7%
2,600 Hartford Financial Services Group, Inc. ................ 215
MANUFACTURING (DIVERSIFIED) - 6.3%
3,100 Corning, Inc. .......................................... 173
3,900 Crane Co. .............................................. 163
4,100 Harsco Corp. ........................................... 166
OFFICE EQUIPMENT & SUPPLIES - 2.4%
12,100 Unisource Worldwide, Inc. .............................. 194
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 44 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. VALUE FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL (DOMESTIC INTEGRATED) - 7.9%
2,300 Amoco Corp. ........................................... $200
2,700 Atlantic Richfield Co. ................................. 190
3,400 Mobil Corp. ............................................ 238
PERSONAL CARE - 3.8%
2,300 Avon Products, Inc. .................................... 162
2,800 International Flavors & Fragrances, Inc. ............... 141
RAILROADS - 2.3%
2,000 Burlington Northern
Santa Fe ............................................... 180
REAL ESTATE--NON-AFFILIATED - 1.1%
2,900 First Industrial Realty Trust, Inc. ..................... 85
RETAIL (DEPARTMENT STORES) - 5.1%
3,900 J.C. Penney Co., Inc. .................................. 204
4,300 May Department Stores Co. .............................. 203
RETAIL (FOOD CHAINS)--GROCERS - 4.1%
5,400 Albertson's, Inc. ...................................... 197
2,600 American Stores Co. .................................... 128
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
RETAIL (SPECIALTY) - 1.3%
3,000 Toys R Us, Inc. ...................................... $ 105
TELEPHONE - 4.6%
2,200 Bell Atlantic Corp. .................................... 167
4,600 GTE Corp. .............................................. 202
TOBACCO - 1.0%
1,800 Philip Morris Cos., Inc. ................................ 80
----
TOTAL COMMON STOCKS ................................................... 7,786
----
TEMPORARY INVESTMENTS - 3.0%
INVESTMENT COMPANIES:
$238,177 SSgA Money Market Portfolio ............................ 238
----
TOTAL TEMPORARY INVESTMENTS ............................................. 238
----
TOTAL INVESTMENTS - 100.5% ............................................ 8,024
Liabilities, less Other Assets ......................................... (40)
----
NET ASSETS ........................................................... $7,984
----
----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 45 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME
(In Thousands, Except Per-Share Amounts) FUND FUND FUND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost $ 219,162 $ 1,033,906 $ 271,116
----------- ----------- -----------
----------- ----------- -----------
Investments, at Value
Unaffiliated Issuers 189,050 1,301,804 353,163
Affiliated Issuers 71,721 -- --
----------- ----------- -----------
Total Investments at Value 260,771 1,301,804 353,163
Cash -- -- --
Receivables
Investment Securities Sold 3,154 -- --
Trust Shares Sold 517 1,936 289
Dividends and Interest 194 1,429 1,185
Forward Currency Contracts Open, Net -- -- --
Deferred Organization Expense -- -- --
----------- ----------- -----------
Total Assets 264,636 1,305,169 354,637
LIABILITIES
Payables
Investment Securities Purchased 759 -- --
Dividends -- 3,786 2,708
Investment Advisory Fees 147 559 192
Notes Payable 1,260 -- --
Organization Expense -- -- --
Other 70 296 87
----------- ----------- -----------
Total Liabilities 2,236 4,641 2,987
----------- ----------- -----------
NET ASSETS $ 262,400 $ 1,300,528 $ 351,650
----------- ----------- -----------
----------- ----------- -----------
NO-LOAD CLASS:
Net Assets $ 261,662 $ 1,295,127 $ 351,034
Trust Shares Outstanding 12,709 67,430 14,859
----------- ----------- -----------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 20.59 $ 19.21 $ 23.62
----------- ----------- -----------
----------- ----------- -----------
CLASS A:
Net Assets $ 471 $ 4,044 $ 417
Trust Shares Outstanding 23 210 18
----------- ----------- -----------
Net Asset Value and Redemption
Price Per Share $ 20.55 $ 19.21 $ 23.72
----------- ----------- -----------
----------- ----------- -----------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 21.52 $ 20.12 $ 24.84
----------- ----------- -----------
----------- ----------- -----------
CLASS B:
Net Assets $ 267 $ 1,357 $ 199
Trust Shares Outstanding 13 71 8
----------- ----------- -----------
Net Asset Value and Offering Price
Per Share* $ 20.45 $ 19.22 $ 23.65
----------- ----------- -----------
----------- ----------- -----------
- ---------------------------------------------------------------------------------
</TABLE>
* Redemption price per share is the net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS
- 46 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at Cost $ 35,860 $ 11,691 $ 10,353 $ 13,712 $ 7,447
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
Investments, at Value
Unaffiliated Issuers 53,829 13,697 11,538 16,374 8,023
Affiliated Issuers -- -- -- -- --
----------- --------------- ----------- --------------- -----------
Total Investments at Value 53,829 13,697 11,538 16,374 8,023
Cash -- 872 -- -- --
Receivables
Investment Securities Sold -- -- -- 14 --
Trust Shares Sold 11 3 -- 20 2
Dividends and Interest 48 51 67 5 11
Forward Currency Contracts Open, Net -- 18 -- -- --
Deferred Organization Expense -- 14 14 14 19
----------- --------------- ----------- --------------- -----------
Total Assets 53,888 14,655 11,619 16,427 8,055
LIABILITIES
Payables
Investment Securities Purchased 71 245 -- 12 26
Dividends -- -- 77 -- 16
Investment Advisory Fees 33 13 8 11 5
Notes Payable -- -- -- -- --
Organization Expense -- 14 14 14 19
Other 27 28 10 15 5
----------- --------------- ----------- --------------- -----------
Total Liabilities 131 300 109 52 71
----------- --------------- ----------- --------------- -----------
NET ASSETS $ 53,757 $ 14,355 $ 11,510 $ 16,375 $ 7,984
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
NO-LOAD CLASS:
Net Assets $ 52,835 $ 13,884 $ 11,181 $ 15,990 $ 7,737
Trust Shares Outstanding 3,127 1,132 966 1,258 701
----------- --------------- ----------- --------------- -----------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 16.90 $ 12.27 $ 11.57 $ 12.72 $ 11.03
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
CLASS A:
Net Assets $ 581 $ 232 $ 147 $ 203 $ 118
Trust Shares Outstanding 35 19 13 16 11
----------- --------------- ----------- --------------- -----------
Net Asset Value and Redemption
Price Per Share $ 16.86 $ 12.25 $ 11.55 $ 12.71 $ 11.03
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 17.65 $ 12.83 $ 12.09 $ 13.31 $ 11.55
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
CLASS B:
Net Assets $ 341 $ 239 $ 182 $ 182 $ 129
Trust Shares Outstanding 20 19 16 14 12
----------- --------------- ----------- --------------- -----------
Net Asset Value and Offering Price
Per Share* $ 16.77 $ 12.20 $ 11.55 $ 12.63 $ 11.03
----------- --------------- ----------- --------------- -----------
----------- --------------- ----------- --------------- -----------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 47 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended June 30, 1997*
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME
(In Thousands) FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of Foreign Taxes
Withheld of $22 in the
International Fund) $ 559 $ 9,794 $ 4,849
Interest 93 1,025 1,319
---------- ---------- ----------
Total Investment Income 652 10,819 6,168
EXPENSES
Investment Advisory Fees 798 2,790 1,042
Transfer Agent Fees 216 944 269
Shareholder Service Fees - Class A 1 5 1
- Class B -- 1 --
Distribution Fees - Class B 1 3 1
Legal and Auditing Fees 8 14 9
Custodian Fees 13 12 7
Reports to Shareholders 21 92 26
Trustees' Fees 2 5 3
Loan Interest 20 -- --
Amortization of Organization Expenses -- -- --
---------- ---------- ----------
Total Expenses Before Reimbursement 1,080 3,866 1,358
Expense Reimbursement -- -- --
---------- ---------- ----------
Total Expenses After Reimbursement 1,080 3,866 1,358
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) (428) 6,953 4,810
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 40,453 41,407 17,845
Investments in Affiliated Issuers 756 -- --
Foreign Currency Transactions -- -- --
---------- ---------- ----------
Total Net Realized Gain (Loss) 41,209 41,407 17,845
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments 2,449 115,321 17,886
Foreign Currency Related
Transactions -- -- --
---------- ---------- ----------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 43,658 156,728 35,731
---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 43,230 $ 163,681 $ 40,541
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
* U.S. Value Fund--April 30, 1997 (Commencement of Operations) to June 30, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
- 48 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of Foreign Taxes
Withheld of $22 in the
International Fund) $ 274 $ 164 $ 70 $ 40 $ 24
Interest 29 18 135 19 7
---------- -------------- ---------- -------------- ----------
Total Investment Income 303 182 205 59 31
EXPENSES
Investment Advisory Fees 175 69 37 60 8
Transfer Agent Fees 65 14 8 20 --
Shareholder Service Fees - Class A 1 1 -- -- --
- Class B 1 -- -- -- --
Distribution Fees - Class B 1 1 1 1 --
Legal and Auditing Fees 7 7 7 7 2
Custodian Fees 5 19 5 5 2
Reports to Shareholders 7 1 -- 2 --
Trustees' Fees 2 2 2 2 1
Loan Interest 1 -- -- -- --
Amortization of Organization Expenses -- 2 2 2 1
---------- -------------- ---------- -------------- ----------
Total Expenses Before Reimbursement 265 116 62 99 14
Expense Reimbursement -- (18) -- -- --
---------- -------------- ---------- -------------- ----------
Total Expenses After Reimbursement 265 98 62 99 14
---------- -------------- ---------- -------------- ----------
NET INVESTMENT INCOME (LOSS) 38 84 143 (40) 17
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 2,919 9 116 96 14
Investments in Affiliated Issuers -- -- -- -- --
Foreign Currency Transactions -- 171 -- -- --
---------- -------------- ---------- -------------- ----------
Total Net Realized Gain (Loss) 2,919 180 116 96 14
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments 5,860 876 684 1,139 576
Foreign Currency Related
Transactions -- (18) -- -- --
---------- -------------- ---------- -------------- ----------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 8,779 1,038 800 1,235 590
---------- -------------- ---------- -------------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 8,817 $ 1,122 $ 943 $ 1,195 $ 607
---------- -------------- ---------- -------------- ----------
---------- -------------- ---------- -------------- ----------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 49 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO GROWTH FUND
------------------------------------
SIX-MONTH THREE-MONTH
PERIOD PERIOD
ENDED JUNE ENDED DEC. YEAR ENDED
30 31 SEPT. 30
(In Thousands) 1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ (428) $ (236) $ (252)
Net Realized Gain from
Investments and Foreign
Currency Transactions 41,209 2,890 26,762
Net Change in Unrealized
Appreciation (Depreciation) 2,449 17,540 (1,973)
---------- ---------- ----------
Net Change in Net Assets
Resulting from Operations 43,230 20,194 24,537
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- (45)
- Class A -- -- --
- Class B -- -- --
Net Realized Gain on Investments
- No-Load Class -- (2,644) (26,481)
- Class A -- (3) --
- Class B -- (2) --
---------- ---------- ----------
Total -- (2,649) (26,526)
NET TRUST SHARE TRANSACTIONS
No-Load Class 22,785 (1,336) 5,080
Class A 209 74 100
Class B 113 6 100
---------- ---------- ----------
Total 23,107 (1,256) 5,280
---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 66,337 16,289 3,291
NET ASSETS AT BEGINNING OF PERIOD 196,063 179,774 176,483
---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 262,400 $ 196,063 $ 179,774
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 7,792 1,572 22,451
Reinvestments -- 148 1,627
Redemptions (6,599) (1,807) (23,589)
---------- ---------- ----------
NET CHANGE 1,193 (87) 489
---------- ---------- ----------
---------- ---------- ----------
AMOUNTS:
Sales $ 142,715 $ 25,444 $ 372,215
Reinvestments -- 2,522 25,225
Redemptions (119,608) (29,222) (392,160)
---------- ---------- ----------
NET CHANGE $ 23,107 $ (1,256) $ 5,280
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 50 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO EQUITY FUND SAFECO INCOME FUND
------------------------------------------- -------------------------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
JUNE 30 DEC. 31 SEPT. 30 JUNE 30 DEC. 31 SEPT. 30
1997 1996 1996 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ 6,953 $ 3,012 $ 11,183 $ 4,810 $ 2,032 $ 8,365
Net Realized Gain from
Investments and Foreign
Currency Transactions 41,407 28,862 77,448 17,845 7,031 22,848
Net Change in Unrealized
Appreciation (Depreciation) 115,321 33,741 18,119 17,886 14,121 9,944
------------- ------------- ----------- ------------- ------------- -----------
Net Change in Net Assets
Resulting from Operations 163,681 65,615 106,750 40,541 23,184 41,157
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (6,948) (3,006) (11,189) (4,796) (2,028) (8,374)
- Class A (16) (7) -- (4) (1) --
- Class B (1) -- -- (2) (1) --
Net Realized Gain on Investments
- No-Load Class -- (28,684) (77,500) -- (7,033) (22,837)
- Class A -- (98) -- -- (5) --
- Class B -- (12) -- -- (3) --
------------- ------------- ----------- ------------- ------------- -----------
Total (6,965) (31,807) (88,689) (4,802) (9,071) (31,211)
NET TRUST SHARE TRANSACTIONS
No-Load Class 289,338 90,300 109,137 25,379 15,846 32,207
Class A 506 2,742 100 191 85 100
Class B 888 250 100 68 6 100
------------- ------------- ----------- ------------- ------------- -----------
Total 290,732 93,292 109,337 25,638 15,937 32,407
------------- ------------- ----------- ------------- ------------- -----------
TOTAL CHANGE IN NET ASSETS 447,448 127,100 127,398 61,377 30,050 42,353
NET ASSETS AT BEGINNING OF PERIOD 853,080 725,980 598,582 290,273 260,223 217,870
------------- ------------- ----------- ------------- ------------- -----------
NET ASSETS AT END OF PERIOD $ 1,300,528 $ 853,080 $ 725,980 $ 351,650 $ 290,273 $ 260,223
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 23,076 6,132 17,984 2,013 869 2,864
Reinvestments 176 1,800 5,249 87 385 1,374
Redemptions (6,920) (2,347) (16,536) (955) (503) (2,649)
------------- ------------- ----------- ------------- ------------- -----------
NET CHANGE 16,332 5,585 6,697 1,145 751 1,589
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
AMOUNTS:
Sales $ 402,877 $ 102,959 $ 289,961 $ 52,319 $ 18,394 $ 58,320
Reinvestments 2,959 29,886 82,876 1,823 8,140 27,638
Redemptions (115,104) (39,553) (263,500) (28,504) (10,597) (53,551)
------------- ------------- ----------- ------------- ------------- -----------
NET CHANGE $ 290,732 $ 93,292 $ 109,337 $ 25,638 $ 15,937 $ 32,407
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 51 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO NORTHWEST FUND
------------------------------------
SIX-MONTH THREE-MONTH
PERIOD PERIOD
ENDED JUNE ENDED DEC. YEAR ENDED
30 31 SEPT. 30
(In Thousands) 1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ 38 $ (34) $ 47
Net Realized Gain from
Investments and Foreign
Currency Transactions 2,919 (2,374) 5,695
Net Change in Unrealized
Appreciation (Depreciation) 5,860 3,280 (1,961)
---------- ---------- ----------
Net Change in Net Assets
Resulting from Operations 8,817 872 3,781
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- (48)
- Class A -- -- --
- Class B -- -- --
Net Realized Gain on Investments
- No-Load Class -- -- (5,695)
- Class A -- -- --
- Class B -- -- --
---------- ---------- ----------
Total -- -- (5,743)
NET TRUST SHARE TRANSACTIONS
No-Load Class 806 (632) 4,950
Class A 129 254 100
Class B 59 124 100
---------- ---------- ----------
Total 994 (254) 5,150
---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 9,811 618 3,188
NET ASSETS AT BEGINNING OF PERIOD 43,946 43,328 40,140
---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 53,757 $ 43,946 $ 43,328
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 563 196 1,209
Reinvestments -- -- 323
Redemptions (505) (215) (1,175)
---------- ---------- ----------
NET CHANGE 58 (19) 357
---------- ---------- ----------
---------- ---------- ----------
AMOUNTS:
Sales $ 7,818 $ 2,692 $ 17,755
Reinvestments -- -- 4,438
Redemptions (6,824) (2,946) (17,043)
---------- ---------- ----------
NET CHANGE $ 994 $ (254) $ 5,150
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 52 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO INTERNATIONAL FUND SAFECO BALANCED FUND
------------------------------------------- -------------------------------------------
JAN. 31, 1996 JAN. 31, 1996
(COMMENCEMENT (COMMENCEMENT
SIX-MONTH THREE-MONTH OF SIX-MONTH THREE-MONTH OF
PERIOD ENDED PERIOD ENDED OPERATIONS) PERIOD ENDED PERIOD ENDED OPERATIONS)
JUNE 30 DEC. 31 TO SEPT. 30 JUNE 30 DEC. 31 TO SEPT. 30
1997 1996 1996 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ 84 $ (5) $ 45 $ 143 $ 66 $ 146
Net Realized Gain from
Investments and Foreign
Currency Transactions 180 87 (11) 116 99 5
Net Change in Unrealized
Appreciation (Depreciation) 858 853 314 684 243 258
------------ ------------ ------------- ------------ ------------ -------------
Net Change in Net Assets
Resulting from Operations 1,122 935 348 943 408 409
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- (62) (51) (139) (64) (146)
- Class A -- (1) -- (2) (1) --
- Class B -- -- -- (1) (1) --
Net Realized Gain on Investments
- No-Load Class -- -- -- -- (97) (5)
- Class A -- -- -- -- (1) --
- Class B -- -- -- -- (1) --
------------ ------------ ------------- ------------ ------------ -------------
Total -- (63) (51) (142) (165) (151)
NET TRUST SHARE TRANSACTIONS
No-Load Class 1,635 1,981 8,026 2,140 393 7,374
Class A 63 43 100 27 7 100
Class B 112 4 100 55 12 100
------------ ------------ ------------- ------------ ------------ -------------
Total 1,810 2,028 8,226 2,222 412 7,574
------------ ------------ ------------- ------------ ------------ -------------
TOTAL CHANGE IN NET ASSETS 2,932 2,900 8,523 3,023 655 7,832
NET ASSETS AT BEGINNING OF PERIOD 11,423 8,523 -- 8,487 7,832 --
------------ ------------ ------------- ------------ ------------ -------------
NET ASSETS AT END OF PERIOD $ 14,355 $ 11,423 $ 8,523 $ 11,510 $ 8,487 $ 7,832
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 286 219 1,042 285 43 785
Reinvestments -- 3 2 2 5 3
Redemptions (128) (30) (224) (85) (9) (34)
------------ ------------ ------------- ------------ ------------ -------------
NET CHANGE 158 192 820 202 39 754
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
AMOUNTS:
Sales $ 3,291 $ 2,323 $ 10,466 $ 3,139 $ 459 $ 7,893
Reinvestments -- 29 18 25 50 31
Redemptions (1,481) (324) (2,258) (942) (97) (350)
------------ ------------ ------------- ------------ ------------ -------------
NET CHANGE $ 1,810 $ 2,028 $ 8,226 $ 2,222 $ 412 $ 7,574
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 53 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
U.S. VALUE
SAFECO SMALL COMPANY FUND FUND
------------------------------------- ----------
JAN. 31, APRIL 30,
THREE- 1996 1997
SIX- MONTH MONTH (COMMENCE- (COMMENCE-
PERIOD PERIOD MENT OF MENT OF
ENDED JUNE ENDED DEC. OPERATIONS) OPERATIONS)
30 31 TO SEPT. 30 TO JUNE 30
(In Thousands) 1997 1996 1996 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ (40) $ (14) $ (15) $ 17
Net Realized Gain from
Investments and Foreign
Currency Transactions 96 (278) 723 14
Net Change in Unrealized
Appreciation (Depreciation) 1,139 643 880 576
---------- ---------- ----------- ----------
Net Change in Net Assets
Resulting from Operations 1,195 351 1,588 607
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- -- (16)
- Class A -- -- -- (1)
- Class B -- -- -- --
Net Realized Gain on Investments
- No-Load Class -- -- (708) --
- Class A -- -- -- --
- Class B -- -- -- --
---------- ---------- ----------- ----------
Total -- -- (708) (17)
NET TRUST SHARE TRANSACTIONS
No-Load Class 1,650 272 11,672 7,167
Class A 57 31 100 108
Class B 66 1 100 119
---------- ---------- ----------- ----------
Total 1,773 304 11,872 7,394
---------- ---------- ----------- ----------
TOTAL CHANGE IN NET ASSETS 2,968 655 12,752 7,984
NET ASSETS AT BEGINNING OF PERIOD 13,407 12,752 -- --
---------- ---------- ----------- ----------
NET ASSETS AT END OF PERIOD $ 16,375 $ 13,407 $ 12,752 $ 7,984
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
- --------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 402 254 1,625 737
Reinvestments -- (1) 32 --
Redemptions (249) (226) (549) (13)
---------- ---------- ----------- ----------
NET CHANGE 153 27 1,108 724
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
AMOUNTS:
Sales $ 4,713 $ 2,918 $ 17,916 $ 7,534
Reinvestments -- (7) 373 --
Redemptions (2,940) (2,607) (6,417) (140)
---------- ---------- ----------- ----------
NET CHANGE $ 1,773 $ 304 $ 11,872 $ 7,394
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 54 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
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, SAFECO Small Company Stock Fund, and SAFECO US Value
Fund (together "the Funds").
Effective September 30, 1996, the Funds (U.S. Value Fund-- April 30, 1997)
began issuing two new classes of shares--Class A and Class B shares
(collectively, "Advisor Classes"). Unlike the no-load class of shares (which are
sold directly to the shareholder with no associated sales or distribution
charges), these new classes of shares are sold by financial advisors to
shareholders and have associated sales and distribution charges. Each class of
shares represents an interest in the net assets of the fund.
In connection with issuing the new Advisor Classes, the Funds adopted a Plan
of Distribution (the "Plan"). Under the Plan, each Advisor Class pays the
distributor, SAFECO Securities Corp., for selling its shares at the annual rate
of .25% of the average daily net assets of the Advisor Class. Class B shares
also pay the distributor a distribution fee at the annual rate of .75% of the
average daily net assets of the Class B shares.
Under the Plans, the distributor uses the service fees primarily to
compensate persons selling Advisor Class shares for providing ongoing services
and the maintenance of shareholder accounts.The distributor uses the
distribution fees primarily to offset the commissions it pays to financial
advisors for selling Class B shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the 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.
(Continued on next page.)
- 55 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
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
Temporary investments are valued at amortized cost.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
The cost of the portfolios is the same for financial statement and federal
income tax purposes. Realized gains and losses from security transactions are
determined using the identified cost basis.
INCOME RECOGNITION. Dividend income less foreign taxes withheld (if any) is
recorded on the ex-dividend date or upon receipt of ex-dividend notification in
the case of certain foreign securities. Interest is accrued on short-term
investments and bonds daily.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. For the Growth, Northwest,
International and Small Company Funds, net investment income is declared as a
dividend to shareholders as of the last business day (ex-dividend date) of
December. For 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
December.
FEDERAL INCOME AND EXCISE TAXES. Each Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all taxable income to their shareholders
in a manner which results in no tax to the Funds. Therefore, no federal income
or excise tax provision is required.
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.
- 56 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The International Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized gains or losses from foreign currency transactions
arise from gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the International Fund's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in the exchange rate.
FOREIGN EXCHANGE CONTRACTS. The International Fund may enter into foreign
currency exchange contracts as a way of managing foreign exchange rate risk. The
International Fund may enter into these contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
cross-hedge against either specific transactions or portfolio positions. The
objective of the International Fund's foreign currency hedging transactions is
to reduce the risk that the U.S. dollar value of the International Fund's
foreign currency denominated securities will decline in value due to changes in
foreign currency exchange rates. All foreign currency exchange contracts are
"marked-to-market" daily at the applicable translation rates resulting in
unrealized gains or losses. Realized and unrealized gains or losses on foreign
currency contracts are recorded on settlement date of the foreign currency
exchange contract and are included in the Statements of Assets and Liabilities
and the Statement of Operations. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
- 57 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
(In Thousands) FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES* FOR THE SIX-MONTH
PERIOD ENDED JUNE 30, 1997 $ 181,839 $ 429,963 $ 98,173 $ 13,848
------------- ---------- -------------- -----------
------------- ---------- -------------- -----------
SALES* FOR THE SIX-MONTH
PERIOD ENDED JUNE 30, 1997 $ 157,967 $ 166,376 $ 85,124 $ 11,854
------------- ---------- -------------- -----------
------------- ---------- -------------- -----------
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
(In Thousands) FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES* FOR THE SIX-MONTH
PERIOD ENDED JUNE 30, 1997** $ 2,780 $ 8,441 $ 5,428 $ 7,417
------------- ---------- -------------- -----------
------------- ---------- -------------- -----------
SALES* FOR THE SIX-MONTH
PERIOD ENDED JUNE 30, 1997** $ 741 $ 6,176 $ 4,032 $ 222
------------- ---------- -------------- -----------
------------- ---------- -------------- -----------
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Excludes short-term securities. Purchases and Sales for the Balanced Fund
include $5,169 and $4,365 of U.S. Government Securities, respectively.
** U.S. Value Fund--April 30, 1997 (Commencement of Operations) to June 30,
1997.
- 58 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. COMPONENTS OF NET ASSETS
At June 30, 1997, the components of net assets were as follows:
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
(In Thousands) FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There Is an Excess of Value
Over Identified Cost $ 61,803 $ 292,651 $ 87,996 $ 19,483
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There is an Excess of
Identified Cost Over Value (20,194) (24,753) (5,949) (1,514)
------------ ----------- -------------- -------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 41,609 267,898 82,047 17,969
ACCUMULATED NET INVESTMENT INCOME (LOSS) (428) -- -- 38
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS 41,210 41,453 17,848 545
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 180,009 991,177 251,755 35,205
------------ ----------- -------------- -------
NET ASSETS AT JUNE 30, 1997 $ 262,400 $ 1,300,528 $ 351,650 $ 53,757
------------ ----------- -------------- -------
------------ ----------- -------------- -------
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
(In Thousands) FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There is an Excess of Value
Over Identified Cost $ 2,536 $ 1,292 $ 3,442 $ 629
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There is an Excess of
Identified Cost Over Value (512) (107) (780) (53)
------------ ----------- -------------- -------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 2,024 1,185 2,662 576
ACCUMULATED NET INVESTMENT INCOME (LOSS) 84 -- (40) --
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS 183 117 (181)* 14
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 12,064 10,208 13,934 7,394
------------ ----------- -------------- -------
NET ASSETS AT JUNE 30, 1997 $ 14,355 $ 11,510 $ 16,375 $ 7,984
------------ ----------- -------------- -------
------------ ----------- -------------- -------
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The above accumulated net realized loss on investment transactions represents
a capital loss carryforward for Federal income tax purposes, which expires as
follows:
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATE
----------- ------------
<S> <C> <C>
Small Company Fund $ (181) 2005
</TABLE>
- 59 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
SAFECO Asset Management Company receives investment advisory fees from the
Funds. These fees are based on a percentage of each day's net assets, which, on
an annual basis, are as follows:
<TABLE>
<S> <C>
GROWTH, EQUITY AND INCOME FUNDS: NORTHWEST FUND:
First $100 million .75 % First $250 million .75 %
Next $150 million .65 Next $250 million .65
Next $250 million .55 Next $250 million .55
Over $500 million .45 Over $750 million .45
BALANCED AND U.S. VALUE FUNDS: INTERNATIONAL FUND:
First $250 million .75 % First $250 million 1.10 %
Next $250 million .65 Next $250 million 1.00
Over $500 million .55 Over $500 million .90
SMALL COMPANY FUND:
First $250 million .85 %
Next $250 million .75
Over $500 million .65
</TABLE>
SAFECO Asset Management Company pays sub-advisory fees to Bank of Ireland
Asset Management Company for providing investment research and advice to the
International Fund.
TRANSFER AGENT FEES. SAFECO Services Corporation receives transfer agent
fees.
NOTES PAYABLE AND INTEREST EXPENSE. The Funds may borrow money for temporary
purposes from SAFECO Corporation or its affiliates. Interest rates equivalent to
commercial bank interest rates are charged on loans over $100,000. No interest
is charged on loans under $100,000. At June 30, 1997, the Growth Fund had a
5.66% note payable of $1,260,000 to SAFECO Life Insurance Company of America.
The note was repaid July 2, 1997.
AFFILIATE OWNERSHIP. At June 30, 1997, SAFECO Insurance Company of America,
owned 500,000 shares (16% of outstanding shares) of
- 60 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
the Northwest Fund; SAFECO Asset Management Company owned 500,000 shares (44%)
of the International Fund, 500,000 shares (52%) of the Balanced Fund, and
500,000 shares (69%) of the U.S. Value Fund; and SAFECO Corporation owned
500,000 shares (39%) of the Small Company Fund.
DEFERRED ORGANIZATION EXPENSE. Costs related to the organization of the
International, Balanced, Small Company and US Value Funds have been deferred and
are being amortized to operations over a period of sixty months. These costs
were advanced by SAFECO Asset Management Company and are being reimbursed by the
Funds over a sixty-month period.
EXPENSE REIMBURSEMENT. During the six-month period ended June 30, 1997,
SAFECO Asset Management Company voluntarily reimbursed certain expenses of the
International Fund.
6. INVESTMENTS IN AFFILIATES
Each of the companies listed below is an affiliate of the Growth Fund because
the Fund owned at least 5% of the company's voting securities during the
six-month period ended June 30, 1997.
<TABLE>
<CAPTION>
(In Thousands) SHARES AT SHARES AT MARKET VALUE
BEGINNING END OF JUNE 30,
SECURITY OF PERIOD ADDITIONS REDUCTIONS PERIOD DIVIDENDS 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American Building Co. 429 -- (13) 416 -- $ 11,219
American Coin
Merchandising, Inc. 500 -- -- 500 -- 5,438
Damark International, Inc. 659 22 (157) 524 -- 8,119
Harold's Stores, Inc. 379 126 -- 505 -- 4,483
Lifeline Systems, Inc. 504 21 -- 525 -- 10,103
Nastech Pharmaceutical
Co., Inc. -- 328 -- 328 -- 3,443
Open Plan Systems, Inc. 244 -- -- 244 -- 978
Penederm, Inc. 724 4 -- 728 -- 9,824
Rent-Way, Inc. 362 11 (15) 358 -- 5,281
Weider Nutrition
International, Inc. -- 808 -- 808 30 12,833
------
$ 71,721
------
------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- 61 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. COMMITMENTS
At June 30, 1997, the International Fund had open forward foreign currency
exchange contracts obligating it to receive or deliver the following foreign
currencies (in thousands):
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
CURRENCY IN EXCHANGE SETTLEMENT VALUE AS OF APPRECIATION
TO BE DELIVERED FOR DATE JUNE 30, 1997 (DEPRECIATION)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
400 British Pound $ 651 9/23/97 $ 664 $ ) (13
314 Dutch Guilder 165 8/20/97 161 4
470 Dutch Guilder 244 7/16/97 240 4
537 Dutch Guilder 278 9/05/97 275 3
509 German Marks 303 9/12/97 294 9
416 Swiss Francs 290 7/23/97 286 4
435 Swiss Francs 307 8/13/97 300 7
---
$ 18
---
---
- ---------------------------------------------------------------------------------------
</TABLE>
- 62 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 16.97 $ 15.45 $ 15.83 $ 17.37 $ 19.20 $ 13.98
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.02) (0.02) 0.07 (0.02) (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments 3.65 1.77 2.24 4.07 0.78 5.39
------- ------- --------- --------- --------- ---------
Total from Investment Operations 3.62 1.75 2.22 4.14 0.76 5.37
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- -- (0.07) -- --
Distributions from Realized Gains -- (0.23) (2.60) (5.61) (2.59) (0.15)
------- ------- --------- --------- --------- ---------
Total Distributions -- (0.23) (2.60) (5.68) (2.59) (0.15)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 20.59 $ 16.97 $ 15.45 $ 15.83 $ 17.37 $ 19.20
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 21.33%* 11.35%* 14.16% 23.93% 3.88% 38.43%
NET ASSETS AT END OF PERIOD (000'S) $ 261,662 $ 195,760 $ 179,574 $ 176,483 $ 156,108 $ 158,723
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.93%** 0.99%** 1.02% 0.98% 0.95% 0.91%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS -0.37%** -0.51%** -0.14% 0.34% -0.12% -0.10%
PORTFOLIO TURNOVER RATE 138.82%** 82.93%** 124.79% 110.44% 71.18% 57.19%
AVERAGE COMMISSION RATE PAID $ 0.0500 $ 0.0477 $ 0.0548 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 63 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.97 $ 15.45 $ 16.94 $ 15.45
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.04) (0.02) (0.10) (0.05)
Net Realized and Unrealized Gain on
Investments 3.62 1.77 3.61 1.77
------------- ------------- ------------- -------------
Total from Investment Operations 3.58 1.75 3.51 1.72
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- --
Distributions from Realized Gains -- (0.23) -- (0.23)
------------- ------------- ------------- -------------
Total Distributions -- (0.23) -- (0.23)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 20.55 $ 16.97 $ 20.45 $ 16.94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 21.10%* 11.35%* 20.72%* 11.15%*
NET ASSETS AT END OF PERIOD (000'S) $ 471 $ 187 $ 267 $ 116
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.26% 1.12% 1.93% 1.87%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** -0.70% -0.58% -1.38% -1.38%
PORTFOLIO TURNOVER RATE** 138.82% 82.93% 138.82% 82.93%
AVERAGE COMMISSION RATE PAID $ 0.0500 $ 0.0477 $ 0.0500 $ 0.0477
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 64 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 16.60 $ 15.85 $ 15.31 $ 13.89 $ 12.54 $ 9.53
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.11 0.06 0.28 0.34 0.23 0.17
Net Realized and Unrealized Gain on
Investments 2.61 1.33 2.42 2.59 1.83 3.79
------- ------- --------- --------- --------- ---------
Total from Investment Operations 2.72 1.39 2.70 2.93 2.06 3.96
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.11) (0.06) (0.28) (0.34) (0.23) (0.17)
Distributions from Realized Gains -- (0.58) (1.88) (1.17) (0.48) (0.78)
------- ------- --------- --------- --------- ---------
Total Distributions (0.11) (0.64) (2.16) (1.51) (0.71) (0.95)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 19.21 $ 16.60 $ 15.85 $ 15.31 $ 13.89 $ 12.54
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 16.42%* 8.79%* 18.04% 21.59% 16.51% 41.77%
NET ASSETS AT END OF PERIOD (000'S) $1,295,127 $ 849,831 $ 725,780 $ 598,582 $ 412,805 $ 148,894
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.73%** 0.78%** 0.79% 0.84% 0.85% 0.94%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 1.32%** 1.48%** 1.74% 2.38% 1.72% 1.50%
PORTFOLIO TURNOVER RATE 32.84%** 59.34%** 74.07% 56.14% 33.33% 37.74%
AVERAGE COMMISSION RATE PAID $ 0.0579 $ 0.0571 $ 0.0587 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 65 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.62 $ 15.85 $ 16.60 $ 15.85
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.08 0.04 0.01 0.02
Net Realized and Unrealized Gain on
Investments 2.59 1.35 2.62 1.33
------------- ------------- ------------- -------------
Total from Investment Operations 2.67 1.39 2.63 1.35
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.08) (0.04) (0.01) (0.02)
Distributions from Realized Gains -- (0.58) -- (0.58)
------------- ------------- ------------- -------------
Total Distributions (0.08) (0.62) (0.01) (0.60)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 19.21 $ 16.62 $ 19.22 $ 16.60
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 16.11%* 8.78%* 15.85%* 8.50%*
NET ASSETS AT END OF PERIOD (000'S) $ 4,044 $ 2,894 $ 1,357 $ 355
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.19% 0.97% 1.84% 1.75%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 0.87% 1.38% 0.18% 0.51%
PORTFOLIO TURNOVER RATE** 32.84% 59.34% 32.84% 59.34%
AVERAGE COMMISSION RATE PAID $ 0.0579 $ 0.0571 $ 0.0579 $ 0.0571
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 66 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 21.13 $ 20.03 $ 19.11 $ 17.25 $ 17.79 $ 16.27
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.33 0.15 0.73 0.82 0.81 0.78
Net Realized and Unrealized Gain on
Investments 2.49 1.63 2.84 2.71 (0.30) 1.52
------- ------- --------- --------- --------- ---------
Total from Investment Operations 2.82 1.78 3.57 3.53 0.51 2.30
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.33) (0.15) (0.73) (0.82) (0.81) (0.78)
Distributions from Realized Gains -- (0.53) (1.92) (0.85) (0.24) --
------- ------- --------- --------- --------- ---------
Total Distributions (0.33) (0.68) (2.65) (1.67) (1.05) (0.78)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 23.62 $ 21.13 $ 20.03 $ 19.11 $ 17.25 $ 17.79
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 13.41%* 8.89%* 18.98% 21.04% 2.98% 14.35%
NET ASSETS AT END OF PERIOD (000'S) $ 351,034 $ 289,968 $ 260,023 $ 217,870 $ 190,610 $ 203,019
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.86%** 0.89%** 0.86% 0.87% 0.86% 0.90%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 3.04%** 2.89%** 3.56% 4.55% 4.59% 4.55%
PORTFOLIO TURNOVER RATE 57.54%** 37.84%** 50.11% 31.12% 19.30% 20.74%
AVERAGE COMMISSION RATE PAID $ 0.0581 $ 0.0573 $ 0.0591 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 67 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 21.15 $ 20.03 $ 21.12 $ 20.03
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.25 0.12 0.21 0.10
Net Realized and Unrealized Gain on
Investments 2.57 1.65 2.53 1.62
------------- ------------- ------------- -------------
Total from Investment Operations 2.82 1.77 2.74 1.72
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.25) (0.12) (0.21) (0.10)
Distributions from Realized Gains -- (0.53) -- (0.53)
------------- ------------- ------------- -------------
Total Distributions (0.25) (0.65) (0.21) (0.63)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 23.72 $ 21.15 $ 23.65 $ 21.12
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 13.39%* 8.85%* 13.02%* 8.60%*
NET ASSETS AT END OF PERIOD (000'S) $ 417 $ 193 $ 199 $ 112
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.11% 1.03% 1.87% 1.79%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 2.87% 2.66% 2.09% 1.99%
PORTFOLIO TURNOVER RATE** 57.54% 37.84% 57.54% 37.84%
AVERAGE COMMISSION RATE PAID $ 0.0581 $ 0.0573 $ 0.0581 $ 0.0573
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 68 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED FOR THE YEAR ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 SEPTEMBER 30 SEPTEMBER 30
--------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.07 $ 13.78 $ 14.41 $ 12.59 $ 12.34 $ 12.59
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01 (0.01) 0.02 0.04 0.04 0.02
Net Realized and Unrealized Gain
(Loss) on Investments 2.82 0.30 1.32 2.35 0.59 (0.25)
------- ------- --------- --------- --------- -------
Total from Investment Operations 2.83 0.29 1.34 2.39 0.63 (0.23)
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- (0.02) (0.04) (0.04) (0.02)
Distributions from Realized Gains -- -- (1.95) (0.53) (0.34) --
------- ------- --------- --------- --------- -------
Total Distributions -- -- (1.97) (0.57) (0.38) (0.02)
------- ------- --------- --------- --------- -------
NET ASSET VALUE AT END OF PERIOD $ 16.90 $ 14.07 $ 13.78 $ 14.41 $ 12.59 $ 12.34
------- ------- --------- --------- --------- -------
------- ------- --------- --------- --------- -------
TOTAL RETURN* 20.11%* 2.10%* 9.61% 19.01% 5.19% -1.86%*
NET ASSETS AT END OF PERIOD (000'S) $ 52,835 $ 43,345 $ 43,128 $ 40,140 $ 36,383 $ 39,631
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.12%** 1.25%** 1.07% 1.09% 1.06% 1.11%**
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** 0.17%** -0.31%** 0.11% 0.31% 0.33% 0.18%**
PORTFOLIO TURNOVER RATE** 51.37%** 67.32%** 35.69% 19.59% 18.46% 14.05%**
AVERAGE COMMISSION RATE PAID $ 0.0576 $ 0.0482 $ 0.0591 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 69 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
<CAPTION>
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.06 $ 13.78 $ 14.03 $ 13.78
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) (0.01) (0.06) (0.03)
Net Realized and Unrealized Gain on
Investments 2.81 0.29 2.80 0.28
------------- ------------- ------------- -------------
Total from Investment Operations 2.80 0.28 2.74 0.25
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- --
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- -- -- --
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 16.86 $ 14.06 $ 16.77 $ 14.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 19.91%* 2.03%* 19.53%* 1.81%*
NET ASSETS AT END OF PERIOD (000'S) $ 581 $ 369 $ 341 $ 232
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.49% 1.40% 2.18% 2.18%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** -0.20% -0.39% -0.89% -1.19%
PORTFOLIO TURNOVER RATE** 51.37% 67.32% 51.37% 67.32%
AVERAGE COMMISSION RATE PAID $ 0.0576 $ 0.0482 $ 0.0576 $ 0.0482
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 70 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERNATIONAL FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 11.29 $ 10.39 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 -- 0.06
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 0.76 0.96 0.39
------- ------- -------
Total from Investment Operations 0.98 0.96 0.45
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- (0.06) (0.06)
Distributions from Realized Gains -- -- --
------- ------- -------
Total Distributions -- (0.06) (0.06)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 12.27 $ 11.29 $ 10.39
------- ------- -------
------- ------- -------
TOTAL RETURN* 8.68% 9.27% 4.54%
NET ASSETS AT END OF PERIOD (000'S) $ 13,884 $ 11,157 $ 8,323
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.53%+ 1.37%+ 2.36%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** 1.35% -0.19% 0.93%
PORTFOLIO TURNOVER RATE** 12.55% 18.51% 15.73%
AVERAGE COMMISSION RATE PAID $ 0.0206 $ 0.0223 $ 0.0225
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would have been 1.81% and 1.68% for the
periods ended June 30, 1997 and December 31, 1996, respectively.
- 71 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERNATIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.29 $ 10.39 $ 11.28 $ 10.39
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.18 -- 0.14 --
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 0.78 0.95 0.78 0.93
------------- ------------- ------------- -------------
Total from Investment Operations 0.96 0.95 0.92 0.93
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- (0.05) -- (0.04)
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- (0.05) -- (0.04)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 12.25 $ 11.29 $ 12.20 $ 11.28
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 8.50%++ 9.19%++ 8.16%++ 8.96%++
NET ASSETS AT END OF PERIOD (000'S) $ 232 $ 154 $ 239 $ 112
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.71%+ 1.41%+ 2.52%+ 2.17%+
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** 1.20% -0.23% 0.52% -1.15%
PORTFOLIO TURNOVER RATE** 12.55% 18.51% 12.55% 18.51%
AVERAGE COMMISSION RATE PAID $ 0.0206 $ 0.0223 $ 0.0206 $ 0.0223
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would have been 1.99% and 1.72% for the
periods ended June 30, 1997 and December 31, 1996, respectively, for Class A,
and 2.80% and 2.47% for Class B.
++ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 72 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO BALANCED FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.70 $ 10.38 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.15 0.08 0.21
Net Realized and Unrealized Gain on
Investments 0.87 0.45 0.39
------- ------- -------
Total from Investment Operations 1.02 0.53 0.60
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.15) (0.08) (0.21)
Distributions from Realized Gains -- (0.13) (0.01)
------- ------- -------
Total Distributions (0.15) (0.21) (0.22)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 11.57 $ 10.70 $ 10.38
------- ------- -------
------- ------- -------
TOTAL RETURN* 9.60% 5.11% 5.99%
NET ASSETS AT END OF PERIOD (000'S) $ 11,181 $ 8,262 $ 7,632
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.23% 1.16%+ 1.32%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 2.90% 3.19% 3.21%
PORTFOLIO TURNOVER RATE** 129.82% 36.10% 143.87%
AVERAGE COMMISSION RATE PAID $ 0.0499 $ 0.0548 $ 0.0560
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.68%.
- 73 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO BALANCED FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.69 $ 10.38 $ 10.70 $ 10.38
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.14 0.09 0.09 0.06
Net Realized and Unrealized Gain on
Investments 0.86 0.44 0.85 0.45
------------- ------------- ------------- -------------
Total from Investment Operations 1.00 0.53 0.94 0.51
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.14) (0.09) (0.09) (0.06)
Distributions from Realized Gains -- (0.13) -- (0.13)
------------- ------------- ------------- -------------
Total Distributions (0.14) (0.22) (0.09) (0.19)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 11.55 $ 10.69 $ 11.55 $ 10.70
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 9.42%++ 5.07%++ 8.85%++ 4.85%++
NET ASSETS AT END OF PERIOD (000'S) $ 147 $ 110 $ 182 $ 115
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.48% 1.35%+ 2.28% 2.11%+
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 2.66% 3.01% 1.85% 2.23%
PORTFOLIO TURNOVER RATE** 129.82% 36.10% 129.82% 36.10%
AVERAGE COMMISSION RATE PAID $ 0.0499 $ 0.0548 $ 0.0499 $ 0.0548
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.70% and 2.46% for Class A and Class
B, respectively.
++ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 74 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO SMALL COMPANY FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.81 $ 11.51 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.01) (0.01)
Net Realized and Unrealized Gain on
Investments 0.94 0.31 2.19
------- ------- -------
Total from Investment Operations 0.91 0.30 2.18
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- --
Distributions from Realized Gains -- -- (0.67)
------- ------- -------
Total Distributions -- -- (0.67)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 12.72 $ 11.81 $ 11.51
------- ------- -------
------- ------- -------
TOTAL RETURN* 7.71% 2.61% 21.83%
NET ASSETS AT END OF PERIOD (000'S) $ 15,990 $ 13,169 $ 12,552
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.38% 1.35%+ 1.49%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** -0.55% -0.44% -0.24%
PORTFOLIO TURNOVER RATE** 59.39% 73.47% 91.03%
AVERAGE COMMISSION RATE PAID $ 0.0526 $ 0.0496 $ 0.0510
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.68%.
- 75 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO SMALL COMPANY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.81 $ 11.51 $ 11.79 $ 11.51
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.01) (0.07) (0.04)
Net Realized and Unrealized Gain on
Investments 0.93 0.31 0.91 0.32
------------- ------------- ------------- -------------
Total from Investment Operations 0.90 0.30 0.84 0.28
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- --
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- -- -- --
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 12.71 $ 11.81 $ 12.63 $ 11.79
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 7.62%++ 2.61%++ 7.12%++ 2.43%++
NET ASSETS AT END OF PERIOD (000'S) $ 203 $ 135 $ 182 $ 103
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.48% 1.42%+ 2.33% 2.18%+
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS** -0.66% -0.50% -1.50% -1.28%
PORTFOLIO TURNOVER RATE** 59.39% 73.47% 59.39% 73.47%
AVERAGE COMMISSION RATE PAID $ 0.0526 $ 0.0496 $ 0.0526 $ 0.0496
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.62% and 2.41% for Class A and Class
B, respectively.
++ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 76 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO U.S. VALUE FUND
<TABLE>
<CAPTION>
NO-LOAD CLASS A CLASS B
---------------- ---------------- ----------------
APRIL 30, 1997 APRIL 30, 1997 APRIL 30, 1997
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
TO TO TO
JUNE 30 JUNE 30 JUNE 30
------------------------------------------------------
1997 1997 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.03 0.01
Net Realized and Unrealized Gain on
Investments 1.03 1.03 1.03
------- ------- -------
Total from Investment Operations 1.05 1.06 1.04
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.02) (0.03) (0.01)
Distributions from Realized Gains -- -- --
------- ------- -------
Total Distributions (0.02) (0.03) (0.01)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 11.03 $ 11.03 $ 11.03
------- ------- -------
------- ------- -------
TOTAL RETURN* 10.53% 10.55%+ 10.41%+
NET ASSETS AT END OF PERIOD (000'S) $ 7,737 $ 118 $ 129
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.25% 1.50% 2.25%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 1.54% 1.46% 0.71%
PORTFOLIO TURNOVER RATE** 10.12% 10.12% 10.12%
AVERAGE COMMISSION RATE PAID $ 0.0239 $ 0.0239 $ 0.0239
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 77 -
<PAGE>
SAFECO COMMON STOCK FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
David F. Hill
Richard W. Hubbard
Richard E. Lundgren
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer
Neal A. Fuller
Vice President and Controller
INVESTMENT ADVISOR:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
State Street Bank
Chase Manhattan Bank
(International Fund)
AUDITOR:
Ernst & Young, LLP
FOR SHAREHOLDER SERVICE*:
Monday-Friday,
5:30am-7:00pm Pacific Time
Nationwide: 1-800-624-5711
Seattle: (206) 545-7319
Deaf and Hard of Hearing
TTY/TDD Service: 1-800-438-8718
*All telephone calls are tape-recorded
for your protection.
FOR 24-HOUR AUTOMATED
PERFORMANCE INFORMATION
AND TRANSACTIONS:
Nationwide: 1-800-835-4391
Seattle: (206) 545-5113
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
INTERNET:
http://www.safecofunds.com
E-mail: [email protected]
GMF 659 6/97
RECYCLE LOGO Printed on Recycled Paper.
This report must be preceded or
accompanied by a current prospectus.
- -Registered Trademark-Registered trademark of SAFECO Corporation.
