<PAGE>
ANNUAL REPORT
December 31, 1999
SAFECO Mutual Funds
Stock Funds
No-Load Class
--------------
<TABLE>
<S> <C>
Growth Fund....................... 2
Equity Fund....................... 7
Income Fund....................... 12
Northwest Fund.................... 17
International Stock Fund.......... 22
Balanced Fund..................... 28
Small Company Stock Fund.......... 34
U.S. Value Fund................... 39
</TABLE>
[LOGO OF SAFECO(R)]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Growth Fund
December 31, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[PHOTO OF THOMAS M. MAGUIRE]
THOMAS M. MAGUIRE
While SAFECO Growth Fund's 1999 performance was disappointing, it ended on
an encouraging note. In the fourth quarter, the Fund outper-formed the S&P 500.
Keeping true to my style--trying to buy growth at a reasonable
price--caused us to underperform as hyper-growth and technology stocks
have driven the market. The Fund has never owned much tech (because valuations
appear excessive, competition is intense, and I'm not comfortable with it).
Until recently, we've been able to hold our own, or outperform, without it.
The second reason for our bad (and good) performance is that I take big
positions. In 1999, a number of them disappointed. Family Golf overex-tended
itself by trying to grow too fast and Prison Realty Trust prac-ticed
questionable disclosure. I've eliminated them both. Conseco--despite a number
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year 5 Year 10 Year
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAFECO Growth Fund 16.85 % 2.64 % 20.01 % 14.91 %
S & P 500 Index 14.88 % 21.04 % 28.54 % 18.19 %
Lipper. Inc. (Mid-Cap Core Funds) 30.20 % 38.27 % 21.93 % 16.28 %
</TABLE>
<TABLE>
<CAPTION>
Growth Fund S&P 500 Index
----------- -------------
<S> <C> <C> <C>
12/31/89 10,000 10,000
1/31/90 9,031 9,329
2/28/90 9,278 9,450
3/31/90 9,837 9,700
4/30/90 9,880 9,459
5/31/90 10,892 10,379
6/30/90 11,126 10,309
7/31/90 10,728 10,276
8/31/90 8,878 9,348
9/30/90 7,882 8,894
10/31/90 7,352 8,856
11/30/90 7,896 9,428
12/31/90 8,503 9,690
1/31/91 9,353 10,111
2/28/91 10,642 10,833
3/31/91 11,162 11,095
4/30/91 11,700 11,122
5/31/91 12,472 11,600
6/30/91 11,729 11,069
7/31/91 12,827 11,584
8/31/91 13,336 11,858
9/30/91 13,417 11,660
10/31/91 13,821 11,816
11/30/91 12,655 11,341
12/31/91 13,831 12,636
1/31/92 14,843 12,401
2/28/92 14,737 12,561
3/31/92 13,642 12,317
4/30/92 12,796 12,679
5/31/92 12,478 12,741
6/30/92 11,519 12,551
7/31/92 12,003 13,064
8/31/92 11,323 12,797
9/30/92 11,024 12,947
10/31/92 11,490 12,991
11/30/92 12,941 13,433
12/31/92 13,406 13,597
1/31/93 13,966 13,711
2/28/93 13,035 13,898
3/31/93 13,548 14,191
4/30/93 12,712 13,848
5/31/93 13,367 14,217
6/30/93 13,784 14,259
7/31/93 13,737 14,201
8/31/93 14,620 14,739
9/30/93 15,262 14,623
10/31/93 15,651 14,925
11/30/93 14,991 14,783
12/31/93 16,381 14,962
1/31/94 17,263 15,470
2/28/94 16,438 15,051
3/31/94 15,613 14,396
4/30/94 16,030 14,580
5/31/94 16,177 14,819
6/30/94 14,976 14,456
7/31/94 15,311 14,931
8/31/94 16,266 15,542
9/30/94 15,854 15,162
10/31/94 16,082 15,502
11/30/94 15,644 14,938
12/31/94 16,115 15,159
1/31/95 15,867 15,552
2/28/95 16,739 16,157
3/31/95 16,675 16,633
4/30/95 16,758 17,123
5/31/95 17,428 17,806
6/30/95 18,483 18,219
7/31/95 19,136 18,823
8/31/95 19,071 18,870
9/30/95 19,648 19,666
10/31/95 19,561 19,596
11/30/95 19,759 20,455
12/31/95 20,322 20,849
1/31/96 21,074 21,558
2/28/96 21,865 21,758
3/31/96 21,531 21,968
4/30/96 22,447 22,292
5/31/96 23,400 22,866
6/30/96 22,384 22,953
7/31/96 20,176 21,939
8/31/96 21,380 22,403
9/30/96 22,430 23,662
10/31/96 22,910 24,315
11/30/96 23,795 26,151
12/31/96 24,976 25,633
1/31/97 27,124 27,234
2/28/97 26,403 27,447
3/31/97 25,476 26,322
4/30/97 24,299 27,892
5/31/97 27,978 29,589
6/30/97 30,303 30,914
7/31/97 32,069 33,373
8/31/97 33,217 31,504
9/30/97 35,896 33,229
10/30/97 35,234 32,120
11/30/97 36,764 33,606
12/31/97 37,454 34,183
1/31/98 37,905 34,560
2/28/98 41,725 37,052
3/31/98 44,295 38,948
4/30/98 46,013 39,339
5/31/98 43,861 38,664
6/30/98 43,828 40,233
7/31/98 41,625 39,806
8/31/98 31,515 34,057
9/30/98 32,700 36,239
10/31/98 35,286 39,184
11/30/98 37,087 41,558
12/31/98 39,089 43,951
1/31/99 39,985 45,789
2/28/99 35,284 44,366
3/31/99 35,456 46,141
4/30/99 36,024 47,928
5/31/99 35,301 46,796
6/30/99 36,627 49,393
7/31/99 35,508 47,851
8/31/99 34,251 47,613
9/30/99 34,337 46,308
10/31/99 34,767 49,238
11/30/99 36,265 50,242
12/31/99 40,123 53,200
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 2 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of positive moves to enhance shareholder value, including more conservative
accounting and significant insider stock purchasing--has contin-ued to
decline. I still like it and will wait with a re-duced position, 4.1% of net
assets.
Nu Skin disappointed due to problems in their largest market, Japan. I
neither bought nor sold it, as the stock could work out in a few quar-ters.
Despite having good operating results and good outlooks, Rent-Way and Rent-A-
Center declined on a sell recommendation that proved unfounded. I used the
weakness to buy more. Both companies operate cash businesses in a growing
market. I cut back AMFM and Emmis Communications at high valuations and
invested the proceeds in lower valued names.
My hope for 2000 is that our performance will continue to
[PIE CHART]
Weightings As a Percent of Net Assets
- --------------------------------------------------------------------------------
Common Stocks:
1) Large ($4 Bil and above) - 9%
2) Medium ($1 Bil. - $4 Bil.) - 23%
3) Small (Less than $1 Bil.) - 68%
----
100%
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- --------------------------------------------------------------------------------
<S> <C>
MICROS Systems, Inc........................................................ 9.9%
(Computers-Hardware)
NCO Group, Inc............................................................. 5.4
(Services-Commercial & Consumer)
Rent-A-Center, Inc......................................................... 5.3
(Services-Commercial & Consumer)
United Stationers, Inc..................................................... 5.2
(Office Equipment & Supplies)
Conseco, Inc............................................................... 4.1
(Insurance-Life & Health)
Dura Pharmaceuticals, Inc.................................................. 3.7
(Health Care-Drugs-Generic & Other)
Rent-Way, Inc.............................................................. 3.7
(Services-Commercial & Consumer)
Emisphere Technologies, Inc................................................ 3.5
(Health Care-Diversified)
PolyMedica Industries, Inc................................................. 3.4
(Health Care-Medical Products & Supplies)
Mail-Well, Inc............................................................. 2.7
(Specialty Printing)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Rent-A-Center, Inc..................................................... $33,629
NCO Group, Inc......................................................... 31,495
Rent-Way, Inc.......................................................... 30,893
Mylan Laboratories, Inc................................................ 19,149
SFX Entertainment, Inc. (Class A)...................................... 18,500
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
AMFM, Inc............................................................. $213,927
Emmis Communications Corp. (Class A).................................. 79,866
Conseco, Inc.......................................................... 67,403
NCO Group, Inc........................................................ 43,552
Prison Realty Corp.................................................... 41,637
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Services (Commercial & Consumer)............................................ 21%
Computers (Hardware)........................................................ 10
Computers (Software & Services)............................................. 9
Office Equipment & Supplies................................................. 6
Health Care (Major Pharmaceuticals)......................................... 5
</TABLE>
- 3 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
trend above the market as investors come to appreciate the combination of grow-
ing earnings and good value. In the meantime, thank you for your patience. The
Fund's long-term record shows that hanging in there may be the best remedy for
the suffering.
Thomas M. Maguire
- --------------------------------------------------------------------------------
After completing his MBA at the University of Washington, Thomas M. Maguire
joined the company as an equity analyst in 1981 and today is a Vice President.
From 1984 to 1989, he co-managed the SAFECO Equity Fund.
- 4 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Growth Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 100.1%
Air Freight - 0.1%
611,000 *+Dynamex, Inc. (Illiquid++)............................... $ 916
Auto Parts & Equipment - 0.1%
592,400 *+Precision Auto Care, Inc. .................................... 666
Banks (Major Regional) - 0.4%
172,275 Provident Bankshares Corp. ................................... 2,983
Broadcasting (TV, Radio & Cable) - 0.9%
14,000 *AMFM, Inc. .................................................. 1,095
301,900 *Salem Communications Corp. (Class A)......................... 6,830
Chemicals (Specialty) - 0.1%
121,900 *TETRA Technologies, Inc. ...................................... 884
Communication Equipment - 1.3%
239,200 *Research In Motion, Ltd. ................................... 11,048
Computers (Hardware) - 9.9%
1,151,528 *+MICROS Systems, Inc. ...................................... 85,213
Computers (Peripherals) - 0.5%
298,500 *Quantum Corp. - DLT & Storage Systems........................ 4,515
Computers (Software & Services) - 8.8%
731,700 *Aspen Technology, Inc. ..................................... 19,344
450,641 Autodesk, Inc. .............................................. 15,209
573,700 *Cadence Design Systems, Inc. ............................... 13,769
805,800 *Ciber, Inc. ................................................ 22,159
831,700 *+Phoenix International Ltd., Inc. ........................... 3,223
314,200 *TRO Learning, Inc. .......................................... 1,689
Consumer (Jewelry, Novelties & Gifts) - 0.5%
370,500 *Action Performance Cos., Inc. ............................... 4,261
Consumer Finance - 1.7%
471,050 *Creditrust Corp. ............................................ 3,621
397,535 Doral Financial Corp. ........................................ 4,895
1,435,200 *+Towne Services, Inc. ....................................... 5,741
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Distributors (Food & Health) - 2.7%
2,348,400 *+Nu Skin Enterprises, Inc. (Class A)..................... $ 21,282
516,140 *+Weider Nutrition International, Inc. ...................... 1,903
Entertainment - 2.7%
640,000 * SFX Entertainment, Inc. (Class A)......................... 23,160
Financial (Diversified) - 0.4%
417,300 *+BNC Mortgage, Inc. ........................................ 2,712
439,700 *United Panam Financial Corp. ................................. 852
Health Care (Diversified) - 5.0%
758,700 *+Anesta Corp. ............................................. 13,040
984,435 *+Emisphere Technologies, Inc. ............................. 29,595
Health Care (Drugs - Generic & Other) - 3.9%
2,306,300 *+Dura Pharmaceuticals, Inc. ............................... 32,144
494,900 *+Nastech Pharmaceutical Co., Inc. .......................... 1,670
Health Care (Long-Term Care) - 1.1%
734,600 *Res-Care, Inc. ............................................. 9,366
Health Care (Major Pharmaceuticals) - 5.3%
526,400 Mylan Laboratories, Inc. ................................... 13,259
2,346,756 *+Serologicals Corp. ....................................... 14,081
252,300 Teva Pharmaceutical Industries, Ltd. (ADR).................. 18,087
Health Care (Managed Care) - 0.1%
173,500 *Matria Healthcare, Inc. ...................................... 716
Health Care (Medical Products & Supplies) - 4.3%
560,550 *+Lifeline Systems, Inc. .................................... 8,408
1,245,000 *+PolyMedica Industries, Inc. .............................. 28,791
Health Care (Specialized Services) - 1.6%
552,600 *+American Healthcorp, Inc. ................................. 2,521
1,226,300 *+Prime Medical Services, Inc. ............................. 11,190
Housewares - 0.5%
369,900 *+Home Products International, Inc. ......................... 3,838
Insurance (Life & Health) - 4.1%
1,952,329 Conseco, Inc. .............................................. 34,898
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Leisure Time (Products) - 0.1%
356,900 *+American Coin Merchandising, Inc. ....................... $ 981
Lodging (Hotels) - 0.9%
622,400 *ResortQuest International, Inc. ............................. 2,606
1,026,800 *+Suburban Lodges of America, Inc. ........................... 5,327
Machinery (Diversified) - 0.2%
438,350 Chart Industries, Inc. ....................................... 1,753
Manufacturing (Diversified) - 1.3%
402,400 *Nortek, Inc. ............................................... 11,267
Office Equipment & Supplies - 5.7%
710,000 *+TRM Copy Centers Corp. ..................................... 4,349
1,555,400 *United Stationers, Inc. .................................... 44,426
Personal Care - 0.7%
925,000 *+French Fragrances, Inc. .................................... 5,955
Restaurants - 0.2%
298,600 *Schlotzsky's, Inc. .......................................... 1,978
Retail (Department Stores) - 0.7%
262,300 *Rainbow Rentals, Inc. ....................................... 1,885
246,000 *Value City Department Stores, Inc. .......................... 3,721
Retail (Drug Stores) - 1.0%
217,000 CVS Corp. .................................................... 8,666
Retail (Food Chains) - 0.3%
307,500 *NPC International, Inc. ..................................... 2,422
Retail (Home Shopping) - 1.3%
714,900 *+Damark International, Inc. ................................ 11,260
Retail (Specialty) - 1.6%
623,600 *+Blue Rhino Corp. ........................................... 6,080
354,300 *+Funco, Inc. ................................................ 3,964
271,000 *+Travis Boats & Motors, Inc. ................................ 3,252
Retail (Specialty - Apparel) - 0.8%
479,500 *+Concepts Direct, Inc. ...................................... 5,215
542,213 *+Harold's Stores, Inc. ...................................... 2,033
Services (Commercial & Consumer) - 20.8%
787,700 *Bluegreen Corp. ............................................. 3,938
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
669,700 Central Parking Corp. .................................... $ 12,808
495,600 *FirstService Corp. ......................................... 6,784
494,700 *Iron Mountain, Inc. ....................................... 19,448
103,300 *Modis Professional Services, Inc. .......................... 1,472
1,528,335 *+NCO Group, Inc. .......................................... 46,041
220,200 *Pierce Leahy Corp. ......................................... 9,524
2,288,000 *+Rent-A-Center, Inc. ...................................... 45,331
1,706,100 *+Rent-Way, Inc. ........................................... 31,883
305,800 SunSource, Inc. ............................................. 1,300
Services (Computer Systems) - 1.2%
650,800 *Computer Horizons Corp. ................................... 10,535
Services (Employment) - 2.0%
805,100 *+Hall, Kinion & Associates, Inc. .......................... 17,310
Specialty Printing - 2.7%
1,720,900 *Mail-Well, Inc. ........................................... 23,232
Telecommunications (Cellular/Wireless) - 1.0%
822,685 *CellStar Corp. ............................................. 8,124
Telephone - 1.6%
1,013,400 *+Innotrac Corp. ........................................... 13,934
-------
TOTAL COMMON STOCKS................................................... 858,378
-------
CASH EQUIVALENTS - 0.0%
Investment Companies
4,899 J.P. Morgan Institutional Prime Money Market..................... 5
-------
TOTAL CASH EQUIVALENTS...................................................... 5
-------
TOTAL INVESTMENTS - 100.1%............................................ 858,383
Other Assets, less Liabilities......................................... (1,108)
-------
NET ASSETS........................................................... $857,275
-------
-------
</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).
++Securities are valued at fair value as determined by, and under the
supervision of, the Board of Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
- 6 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Equity Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF RICHARD MEAGLEY]
RICHARD MEAGLEY
The SAFECO Equity Fund ended the year and latest quarter below the
Lipper, Inc. average for large-cap value funds, and the S&P 500. The
Fund's returns fell short because it is underweighted in technology,
which was the market's best-performing sector, and overweighted in
financials.
As interest rates climbed, mortgage-related stocks such as Washington Mutu-
al, Fannie Mae and Freddie Mac fell beyond reason. Even as analysts raised
earning estimates for Fannie Mae, investors sent the stock down.
I started to broaden our technology holdings-- adding to telecommunication
equipment manufacturer Lucent Technologies and beginning a position in
CenturyTel which, I think, is growing by smart acquisitions. And I look forward
to adding to technology--at reasonable prices.
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAFECO Equity Fund 6.35 % 9.37 % 21.59 % 17.19 %
S & P 500 Index 14.88 % 21.04 % 28.54 % 18.19 %
Lipper, Inc, (Large-Cap Value Funds) 8.74 % 11.23 % 22.56 % 15.06 %
</TABLE>
<TABLE>
<CAPTION>
Equity Fund S&P 500 Index
----------- -------------
<S> <C> <C> <C>
12/31/89 10,000 10,000
1/31/90 9,170 9,329
2/28/90 9,256 9,450
3/31/90 9,599 9,700
4/30/90 9,321 9,459
5/31/90 10,222 10,379
6/30/90 10,206 10,309
7/31/90 10,023 10,276
8/31/90 8,965 9,348
9/30/90 8,528 8,894
10/31/90 8,346 8,856
11/30/90 8,801 9,428
12/31/90 9,143 9,690
1/31/91 9,612 10,111
2/28/91 10,183 10,833
3/31/91 10,470 11,095
4/30/91 10,685 11,122
5/31/91 11,115 11,600
6/30/91 10,401 11,069
7/31/91 11,098 11,584
8/31/91 11,273 11,858
9/30/91 11,120 11,660
10/31/91 11,302 11,816
11/30/91 10,595 11,341
12/31/91 11,695 12,636
1/31/92 12,391 12,401
2/28/92 12,601 12,561
3/31/92 12,034 12,317
4/30/92 12,134 12,679
5/31/92 12,023 12,741
6/30/92 11,155 12,551
7/31/92 11,611 13,064
8/31/92 11,133 12,797
9/30/92 11,165 12,947
10/31/92 11,704 12,991
11/30/92 12,477 13,433
12/31/92 12,778 13,597
1/31/93 13,202 13,711
2/28/93 13,213 13,898
3/31/93 13,923 14,191
4/30/93 13,605 13,848
5/31/93 14,725 14,217
6/30/93 14,785 14,259
7/31/93 14,584 14,201
8/31/93 15,401 14,739
9/30/93 15,829 14,623
10/31/93 16,246 14,925
11/30/93 16,334 14,783
12/31/93 16,728 14,962
1/31/94 17,731 15,470
2/28/94 17,286 15,051
3/31/94 16,623 14,396
4/30/94 17,158 14,580
5/31/94 17,654 14,819
6/30/94 17,019 14,456
7/31/94 17,454 14,931
8/31/94 18,516 15,542
9/30/94 18,443 15,162
10/31/94 18,788 15,502
11/30/94 18,416 14,938
12/31/94 18,390 15,159
1/31/95 18,524 15,552
2/28/95 19,008 16,157
3/31/95 19,163 16,633
4/30/95 19,677 17,123
5/31/95 20,177 17,806
6/30/95 20,678 18,219
7/31/95 21,004 18,823
8/31/95 21,589 18,870
9/30/95 22,424 19,666
10/31/95 22,146 19,596
11/30/95 22,864 20,455
12/31/95 23,035 20,849
1/31/96 23,651 21,558
2/28/96 23,861 21,758
3/31/96 24,106 21,968
4/30/96 24,619 22,292
5/31/96 25,192 22,866
6/30/96 25,659 22,953
7/31/96 24,674 21,939
8/31/96 24,932 22,403
9/30/96 26,469 23,662
10/31/96 27,321 24,315
11/30/96 29,375 26,151
12/31/96 28,795 25,633
1/31/97 30,461 27,234
2/28/97 30,582 27,447
3/31/97 29,356 26,322
4/30/97 30,208 27,892
5/31/97 32,209 29,589
6/30/97 33,525 30,914
7/31/97 35,794 33,373
8/31/97 33,944 31,504
9/30/97 35,167 33,229
10/30/97 34,047 32,120
11/30/97 35,150 33,606
12/31/97 35,766 34,183
1/31/98 36,315 34,560
2/28/98 39,189 37,052
3/31/98 40,503 38,948
4/30/98 40,576 39,339
5/31/98 39,824 38,664
6/30/98 40,842 40,233
7/31/98 40,364 39,806
8/31/98 35,141 34,057
9/30/98 37,639 36,239
10/31/98 40,977 39,184
11/30/98 43,577 41,558
12/31/98 44,683 43,951
1/31/99 45,394 45,789
2/28/99 44,491 44,366
3/31/99 45,909 46,141
4/30/99 48,780 47,928
5/31/99 47,778 46,796
6/30/99 49,252 49,393
7/31/99 48,248 47,851
8/31/99 47,766 47,613
9/30/99 45,952 46,308
10/31/99 49,277 49,238
11/30/99 48,446 50,242
12/31/99 48,871 53,200
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 7 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I remain very cautious about valua-tions, which explains our weightings in
both technology and finance. In the fourth quarter, I made additions to
Washington Mutual (WaMu) and Albertson's (another com-pany whose stock declined
beyond its bad news). I funded the WaMu additions (and held down our financial
weighting) by eliminating U.S. Bancorp.
I tend to populate the Fund with long-term core positions, which I will
continue to buy and hold when they are down as long as I believe they are good
companies with fixable, short-term problems. If not, I eliminate them, as was
the case with Lock-heed Martin and 3Com. Procter & Gamble, a long-term core
position, is a differ-ent story. I sold it down from our largest holding
Weightings
As a Percent of Net Assets
- --------------------------------------------------------------------------------
[PIE CHART]
Common Stocks:
1) Large ($4 Bil and above) - 99%
3) Cash and Other - 1%
----
100%
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Microsoft Corp............................................................ 4.4%
(Computers-Software & Services)
General Electric Co....................................................... 4.2
(Electrical Equipment)
Federal National Mortgage Association..................................... 3.3
(Financial-Diversified)
Johnson & Johnson......................................................... 3.3
(Health Care-Diversified)
Exxon Mobil Corp.......................................................... 3.3
(Oil-International Integrated)
Washington Mutual, Inc.................................................... 3.1
(Savings & Loans)
Gannett Co., Inc.......................................................... 3.1
(Publishing-Newspapers)
Albertson's, Inc.......................................................... 3.0
(Retail-Food Chains)
Intel Corp................................................................ 2.9
(Electronics-Semiconductors)
Procter & Gamble Co....................................................... 2.9
(Household Products-Non-Durables)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Gannett Co., Inc........................................................ $59,092
Emerson Electric Co..................................................... 57,969
Albertson's, Inc. ...................................................... 55,445
MCI WorldCom, Inc....................................................... 52,758
Procter & Gamble Co..................................................... 51,966
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Intel Corp............................................................. $43,679
Procter & Gamble Co.................................................... 43,514
Philip Morris Cos., Inc................................................ 41,637
Motorola, Inc. ........................................................ 37,800
Hewlett-Packard Co. ................................................... 34,112
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Health Care (Diversified)................................................... 9%
Telephone................................................................... 7
Electrical Equipment........................................................ 6
Household Products (Non-Durables)........................................... 6
Oil (International Integrated).............................................. 5
</TABLE>
- 8 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
when it was trading at 32 times 2000 estimated earnings in a broad market sell-
ing at 25 times.
I believe the Fund is made up of high-quality companies with predictable
earnings growth and positioned to do well in a moderating economy.
Richard Meagley
- --------------------------------------------------------------------------------
Rich Meagley joined SAFECO in 1983. After advancing from analyst to Northwest
Fund Manager, he left the company. He re-joined in January 1995 as Equity Fund
Manager. He holds an MBA from the University of Washington, and is a Chartered
Financial Analyst.
- 9 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Equity Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 98.7%
Banks (Major Regional) - 4.3%
682,000 Bank of America Corp..................................... $ 34,228
1,125,000 Citigroup, Inc............................................... 62,508
Banks (Money Center) - 2.1%
600,000 Chase Manhattan Corp. ........................................46,612
Beverages (Alcoholic) - 1.6%
500,000 Anheuser-Busch Co., Inc...................................... 35,437
Beverages (Non-Alcoholic) - 2.4%
1,500,000 PepsiCo, Inc. ................................................52,875
Chemicals - 3.7%
505,000 Du Pont (E.I.) de Nemours & Co............................... 33,267
1,000,000 Praxair, Inc................................................. 50,312
Computers (Hardware) - 4.0%
400,000 Hewlett-Packard Co........................................... 45,575
400,000 International Business Machines Corp......................... 43,200
Computers (Software & Services) - 4.4%
850,000 *Microsoft Corp.............................................. 99,238
Electrical Equipment - 6.0%
724,500 Emerson Electric Co.......................................... 41,568
600,000 General Electric Co.......................................... 92,850
Electronics (Semiconductors) - 2.9%
800,000 Intel Corp. ..................................................65,850
Entertainment - 3.3%
1,000,000 The Walt Disney Co. ..........................................29,250
625,000 Time Warner, Inc............................................. 45,273
Financial (Diversified) - 5.0%
800,000 Federal Home Loan Mortgage Corp.............................. 37,650
1,200,000 Federal National Mortgage Association........................ 74,925
Foods - 2.1%
900,000 Bestfoods.................................................... 47,306
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Health Care (Diversified) - 8.7%
1,500,000 Abbott Laboratories..................................... $ 54,469
600,000 American Home Products Corp................................. 23,663
650,000 Bristol-Myers Squibb Co. ....................................41,722
800,000 Johnson & Johnson........................................... 74,500
Health Care (Major Pharmaceuticals) - 2.2%
730,000 Merck & Co., Inc............................................ 48,956
Household Products (Non-Durables) - 5.6%
900,000 Kimberly-Clark Corp. ........................................58,725
600,000 Procter & Gamble Co......................................... 65,738
Insurance (Multi-Line) - 3.6%
500,000 American International Group, Inc........................... 54,063
550,000 Hartford Financial Services Group, Inc...................... 26,056
Manufacturing (Diversified) - 3.6%
750,000 Dover Corp.................................................. 34,031
700,000 Honeywell International, Inc. ...............................40,381
99,800 Illinois Tool Works, Inc..................................... 6,743
Office Equipment & Supplies - 1.1%
1,100,000 Xerox Corp. .................................................24,956
Oil (International Integrated) - 5.2%
903,080 Exxon Mobil Corp............................................ 72,754
725,000 Royal Dutch Petroleum Co. (ADR)............................. 43,817
Publishing (Newspapers) - 3.1%
850,000 Gannett Co., Inc. ...........................................69,328
Retail (Department Stores) - 1.7%
1,175,000 May Department Stores Co. ...................................37,894
Retail (Drug Stores) - 2.1%
1,150,000 CVS Corp. ...................................................45,928
Retail (Food Chains) - 3.0%
2,100,000 Albertson's, Inc............................................ 67,725
Retail (General Merchandise) - 1.5%
470,000 Wal-Mart Stores, Inc. .......................................32,489
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 10 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Savings & Loans - 3.1%
2,700,000 Washington Mutual, Inc.................................. $ 70,200
Services (Data Processing) - 1.5%
600,000 Automatic Data Processing, Inc.............................. 32,325
Telecommunications (Equipment) - 1.9%
550,000 Lucent Technologies, Inc.................................... 41,147
Telecommunications (Long Distance) - 2.5%
1,100,000 AT&T Corp................................................... 55,825
Telephone - 6.5%
900,000 Bell Atlantic Corp.......................................... 55,406
850,000 CenturyTel, Inc............................................. 40,269
945,000 *MCI WorldCom, Inc.......................................... 50,144
--------
TOTAL COMMON STOCKS.................................................. 2,207,178
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
CASH EQUIVALENTS - 1.6%
Investment Companies
36,948,080 J.P. Morgan Institutional Prime Money Market............ $ 36,948
--------
TOTAL CASH EQUIVALENTS................................................. 36,948
--------
TOTAL INVESTMENTS - 100.3%.......................................... 2,244,126
Other Assets, less Liabilities......................................... (6,942)
--------
NET ASSETS......................................................... $2,237,184
--------
--------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 11 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Income Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF THOMAS RATH]
THOMAS RATH
The SAFECO Income Fund had a great fourth quarter, yet it wasn't
enough to carry our annual return above the S&P 500. The year, itself,
was characterized by the market's focus on large-cap growth stocks,
primarily technology, where we were underweighted in the first half.
Midyear, I made the hardest decision an investor makes. I cut our losses in
the large positions we'd built in Prison Realty, Family Golf and Suburban
Lodges, and redirected assets into higher-quality companies and technology.
Thus, with increased exposure to technology, the Fund outperformed its equity-
income peers for the 4th quarter of 1999.
Reconfiguring the Fund, I sought growth at a reasonable price. In the case
of BEA Systems, the price didn't stay "reasonable" very long. This company,
which provides nuts and bolts software
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year 5 Year 10 Year
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAFECO Income Fund 11.43 % 1.17 % 17.06 % 11.61 %
S & P 500 Index 14.88 % 21.04 % 28.54 % 18.19 %
Lipper. Inc. (Equity/Income Funds) 3.80 % 3.34 % 17.36 % 12.40 %
</TABLE>
<TABLE>
<CAPTION>
Income Fund S&P 500 Index
<S> <C> <C> <C>
12/31/89 10,000 10,000
1/31/90 9,495 9,329
2/28/90 9,538 9,450
3/31/90 9,611 9,700
4/30/90 9,250 9,459
5/31/90 9,737 10,379
6/30/90 9,698 10,309
7/31/90 9,525 10,276
8/31/90 8,819 9,348
9/30/90 8,457 8,894
10/31/90 8,253 8,856
11/30/90 8,759 9,428
12/31/90 8,925 9,690
1/31/91 9,272 10,111
2/28/91 9,806 10,833
3/31/91 9,955 11,095
4/30/91 10,063 11,122
5/31/91 10,367 11,600
6/30/91 10,106 11,069
7/31/91 10,394 11,584
8/31/91 10,709 11,858
9/30/91 10,692 11,660
10/31/91 10,804 11,816
11/30/91 10,358 11,341
12/31/91 11,000 12,636
1/31/92 11,085 12,401
2/28/92 11,120 12,561
3/31/92 11,013 12,317
4/30/92 11,334 12,679
5/31/92 11,441 12,741
6/30/92 11,483 12,551
7/31/92 11,910 13,064
8/31/92 11,823 12,797
9/30/92 11,949 12,947
10/31/92 11,729 12,991
11/30/92 12,030 13,433
12/31/92 12,262 13,597
1/31/93 12,529 13,711
2/28/93 12,767 13,898
3/31/93 13,200 14,191
4/30/93 13,019 13,848
5/31/93 13,192 14,217
6/30/93 13,260 14,259
7/31/93 13,192 14,201
8/31/93 13,625 14,739
9/30/93 13,663 14,623
10/31/93 13,901 14,925
11/30/93 13,732 14,783
12/31/93 13,801 14,962
1/31/94 14,251 15,470
2/28/94 13,933 15,051
3/31/94 13,447 14,396
4/30/94 13,604 14,580
5/31/94 13,612 14,819
6/30/94 13,412 14,456
7/31/94 13,826 14,931
8/31/94 14,263 15,542
9/30/94 14,070 15,162
10/31/94 14,045 15,502
11/30/94 13,548 14,938
12/31/94 13,650 15,159
1/31/95 13,996 15,552
2/28/95 14,434 16,157
3/31/95 14,843 16,633
4/30/95 15,160 17,123
5/31/95 15,603 17,806
6/30/95 15,796 18,219
7/31/95 16,412 18,823
8/31/95 16,530 18,870
9/30/95 17,031 19,666
10/31/95 16,844 19,596
11/30/95 17,432 20,455
12/31/95 17,794 20,849
1/31/96 18,363 21,558
2/28/96 18,408 21,758
3/31/96 18,626 21,968
4/30/96 18,699 22,292
5/31/96 19,318 22,866
6/30/96 19,560 22,953
7/31/96 19,009 21,939
8/31/96 19,367 22,403
9/30/96 20,262 23,662
10/31/96 21,011 24,315
11/30/96 22,114 26,151
12/31/96 22,063 25,633
1/31/97 22,930 27,234
2/28/97 22,961 27,447
3/31/97 22,118 26,322
4/30/97 22,423 27,892
5/31/97 24,032 29,589
6/30/97 25,022 30,914
7/31/97 26,389 33,373
8/31/97 25,986 31,504
9/30/97 27,145 33,229
10/30/97 26,249 32,120
11/30/97 27,198 33,606
12/31/97 27,895 34,183
1/31/98 28,338 34,560
2/28/98 29,950 37,052
3/31/98 31,190 38,948
4/30/98 31,424 39,339
5/31/98 30,744 38,664
6/30/98 31,381 40,233
7/31/98 30,024 39,806
8/31/98 25,421 34,057
9/30/98 25,889 36,239
10/31/98 27,447 39,184
11/30/98 28,958 41,558
12/31/98 29,656 43,951
1/31/99 30,098 45,789
2/28/99 28,013 44,366
3/31/99 28,664 46,141
4/30/99 29,696 47,928
5/31/99 29,365 46,796
6/30/99 30,186 49,393
7/31/99 29,123 47,851
8/31/99 27,689 47,613
9/30/99 26,924 46,308
10/31/99 28,830 49,238
11/30/99 28,765 50,242
12/31/99 30,002 53,200
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
-12-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
for e-commerce, has quadrupled since I bought it. Other new positions bought on
price breaks that contributed nicely included telephone equipment manufacturer
Nortel Networks, Cadence Design Systems, Costco and Home Depot.
Of our long-term holdings, MICROS Systems climbed almost 83% during the
quarter on the pending launch of its new hotel software product and spin-off of
its Internet reservation system. AMFM and the Merrill Lynch Convertible
Preferred were also big contributors in the fourth quarter. While Finova Group
has yet to deliver, I'm retaining my position.
My hope for the new year is that the Fund's momentum will continue. I
expect money coming into market following Y2K to sustain valuations in the short
term. Further
Weightings
As a Percent of Net Assets
- --------------------------------------------------------------------------------
[PIE CHART]
Common Stocks:
1) Large ($4 Bil and above) - 63%
2) Medium ($1 Bil. / $4 Bil.) - 19%
3) Small (Less than $1 Bil.) - 5%
4) Preferred Stock: 12%
5) Cash and Other: 1%
----
100%
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Merrill Lynch & Co. 7.875% Convertible.................................... 7.1%
(Computers-Software & Services)
MICROS Systems, Inc. ..................................................... 5.4
(Computers-Hardware)
AMFM, Inc. 7.00% Convertible.............................................. 3.1
(Broadcasting-TV, Radio & Cable)
Kimberly-Clark Corp. ..................................................... 3.0
(Household Products-Non-Durables)
Hewlett-Packard Co. ...................................................... 2.6
(Computers-Hardware)
Minnesota Mining & Manufacturing Co. ..................................... 2.5
(Manufacturing-Diversified)
General Electric Co. ..................................................... 2.5
(Electrical Equipment)
Finova Group, Inc. ....................................................... 2.4
(Financial-Diversified)
PepsiCo, Inc. ............................................................ 2.4
(Beverages-Non-Alcoholic)
GTE Corp. ................................................................ 2.4
(Telephone)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Conseco, Inc. .......................................................... $8,399
Cadence Design Systems, Inc. ........................................... 8,358
Abbott Laboratories..................................................... 8,032
Bristol-Myers Squibb Co. ............................................... 7,641
Merrill Lynch & Co. 7.875% Convertible.................................. 6,902
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
AMFM, Inc. 7.00% Convertible........................................... $21,341
American Home Products Corp. .......................................... 13,448
Salomon, Inc. 6.25% Exchangeable Convertible to Cincinnati Bell, Inc. . 11,267
Mobil Corp. ........................................................... 9,734
Conseco, Inc. ......................................................... 8,770
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Computers (Software & Services)............................................. 11%
Computers (Hardware)........................................................ 8
Oil (International Integrated).............................................. 6
Health Care (Diversified)................................................... 6
Services (Commercial & Consumer)............................................ 6
</TABLE>
- 13 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
out is more worrisome. I feel certain the market will broaden, or correct, and
the focus will return to value. When that happens, those who are already there
will be the winners. For that reason, I'm interested in valuations that can be
defended and will continue to seek growth at a reasonable price.
Thomas Rath
- --------------------------------------------------------------------------------
In addition to being an equity and convertible securities portfolio manager at
SAFECO, Rath has been an analyst and portfolio manager at First Interstate Bank
and a principal at Meridian Capital Management. He holds an MBA from the Uni-
versity of Washington and is a Chartered Financial Analyst.
- 14 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Income Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 87.3%
Airlines - 0.9%
128,800 *Northwest Airlines Corp. .................................. $ 2,866
Banks (Major Regional) - 1.6%
99,111 Bank of America Corp. ......................................... 4,974
Banks (Money Center) - 2.3%
90,000 Chase Manhattan Corp. ......................................... 6,992
Beverages (Non-Alcoholic) - 2.4%
210,000 PepsiCo, Inc. ................................................. 7,403
Broadcasting (TV, Radio & Cable) - 1.0%
133,800 *Salem Communications Corp. (Class A).......................... 3,027
Chemicals - 1.5%
70,000 Du Pont (E.I.) de Nemours & Co. ............................... 4,611
Communication Equipment - 2.1%
44,100 Nortel Networks Corp. ......................................... 4,454
34,000 Scientific-Atlanta, Inc. ...................................... 1,891
Computers (Hardware) - 8.0%
70,900 Hewlett-Packard Co. ........................................... 8,078
224,000 *MICROS Systems, Inc. ........................................ 16,576
Computers (Peripherals) - 1.2%
240,000 *Quantum Corp. - DLT & Storage Systems........................ 3,630
Computers (Software & Services) - 3.9%
73,000 *BEA Systems, Inc. ............................................ 5,105
289,500 *Cadence Design Systems, Inc. ................................. 6,948
Distributors (Food & Health) - 0.6%
202,400 *Nu Skin Enterprises, Inc. (Class A)........................... 1,834
Electric Companies - 1.4%
250,000 NIPSCO Industries, Inc. ....................................... 4,469
Electrical Equipment - 2.5%
50,000 General Electric Co. .......................................... 7,738
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Electronics (Semiconductors) - 2.0%
75,000 Intel Corp. ................................................ $ 6,173
Financial (Diversified) - 4.1%
80,000 Federal National Mortgage Association.......................... 4,995
211,060 Finova Group, Inc. ............................................ 7,493
Foods - 0.8%
110,000 ConAgra, Inc. ................................................. 2,482
Health Care (Diversified) - 5.8%
195,800 Abbott Laboratories............................................ 7,110
115,900 American Home Products Corp. .................................. 4,571
97,000 Bristol-Myers Squibb Co. ...................................... 6,226
Health Care (Drugs - Generic & Other) - 1.0%
67,000 Pharmacia & Upjohn, Inc. ...................................... 3,015
Health Care (Major Pharmaceuticals) - 2.2%
100,000 Merck & Co., Inc. ............................................. 6,706
Household Products (Non-Durables) - 3.0%
140,000 Kimberly-Clark Corp. .......................................... 9,135
Insurance (Life & Health) - 1.9%
330,700 Conseco, Inc. ................................................. 5,911
Insurance (Multi-Line) - 1.2%
75,000 Hartford Financial Services Group, Inc. ....................... 3,553
Manufacturing (Diversified) - 2.5%
80,000 Minnesota Mining & Manufacturing Co. .......................... 7,830
Office Equipment & Supplies - 1.0%
112,100 *United Stationers, Inc. ...................................... 3,202
Oil (International Integrated) - 5.9%
59,409 Exxon Mobil Corp. ............................................. 4,786
100,000 Royal Dutch Petroleum Co. (ADR)................................ 6,044
135,000 Texaco, Inc. .................................................. 7,332
Railroads - 1.8%
168,600 GATX Corp. .................................................... 5,690
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 15 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Real Estate Investment Trust - 4.7%
100,000 Equity Residential Properties Trust......................... $ 4,269
205,000 First Industrial Realty Trust, Inc. ........................... 5,625
185,000 Liberty Property Trust......................................... 4,486
Retail (Building Supplies) - 1.3%
57,300 Home Depot, Inc. .............................................. 3,929
Retail (Drug Stores) - 1.6%
126,100 CVS Corp. ..................................................... 5,036
Retail (Food Chains) - 2.2%
206,700 Albertson's, Inc. ............................................. 6,666
Retail (General Merchandise) - 1.4%
46,700 *Costco Companies, Inc. ....................................... 4,261
Savings & Loans - 1.4%
171,000 Washington Mutual, Inc. ....................................... 4,446
Services (Commercial & Consumer) - 4.3%
37,300 Central Parking Corp. ........................................... 713
165,400 *Iron Mountain, Inc. .......................................... 6,502
38,200 *Modis Professional Services, Inc. .............................. 544
52,900 *Pierce Leahy Corp. ........................................... 2,288
45,800 United Parcel Service, Inc. (Class B).......................... 3,160
Services (Data Processing) - 1.1%
65,200 Automatic Data Processing, Inc. ............................... 3,513
Telecommunications (Equipment) - 1.3%
53,100 Lucent Technologies, Inc. ..................................... 3,973
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Telephone - 4.5%
104,500 GTE Corp. ................................................ $ 7,374
150,300 *Innotrac Corp. ............................................. 2,067
82,950 *MCI WorldCom, Inc. ......................................... 4,402
Waste Management - 0.9%
121,500 Landauer, Inc. .............................................. 2,658
-------
TOTAL COMMON STOCKS................................................... 268,762
-------
PREFERRED STOCKS - 11.5%
Broadcasting (TV, Radio & Cable) - 3.1%
45,000 AMFM, Inc. 7.00% Convertible................................. 9,681
Computers (Software & Services) - 7.1%
414,200 Merrill Lynch & Co. 7.875% Convertible...................... 21,797
Services (Commercial & Consumer) - 1.3%
311,200 Central Parking 5.25% Convertible............................ 4,123
-------
TOTAL PREFERRED STOCKS................................................. 35,601
-------
CASH EQUIVALENTS - 1.8%
Investment Companies
5,485,568 J.P. Morgan Institutional Prime Money Market................. 5,486
-------
TOTAL CASH EQUIVALENTS.................................................. 5,486
-------
TOTAL INVESTMENTS - 100.6%............................................ 309,849
Other Assets, less Liabilities......................................... (1,901)
-------
NET ASSETS........................................................... $307,948
-------
-------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 16 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Northwest Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF WILLIAM B WHITLOW]
WILLIAM B. WHITLOW
For the quarter and the year ended December 31, 1999, SAFECO North-
west Fund handily outperformed the Lipper, Inc. average for multi-cap
growth funds and the S&P 500. The Fund's outperformance is due to its
heavy concentration in technology, initial public offerings (IPOs), and
its investing universe.
Technology has surpassed aerospace as the driver of Washington's economy
and is the clear driver of the region's economy, and I've positioned the Fund
to take advantage of that. At December 31, 58% of net assets were in telecommu-
nications, medical technology and computer-related com-
panies. Gaining over 200% were F5 Networks, Western Wireless, NEXTLINK,
VoiceStream and SonoSite. They are respectively
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year 5 Year Since Inception*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAFECO Northwest Fund 34.90 % 54.25 % 23.68 % 16.27 %
S & P 500 Index 14.88 % 21.04 % 28.54 % 20.03 %
Lipper, Inc. (Multi-Cap Core Funds) 17.95 % 22.45 % 23.28 % N/A
WM Group NW 50 Index 17.57 % 27.80 % 28.51 % 18.43 %
</TABLE>
* Graph and average annual return comparison begins February 7, 1991, inception
date of the fund.
<TABLE>
<CAPTION>
WM Group
NW 50
Northwest Fund S&P 500 Index Index
-------------------- -------------------- ----------
<S> <C> <C> <C> <C>
2/7/91 10,000 10,000 10,000
2/28/91 10,130 10,336 10,288
3/31/91 10,357 10,586 10,692
4/30/91 10,660 10,611 10,940
5/31/91 11,024 11,067 11,579
6/30/91 10,379 10,561 10,791
7/31/91 10,998 11,052 11,298
8/31/91 11,454 11,314 11,739
9/30/91 11,173 11,124 11,500
10/31/91 11,061 11,273 11,477
11/30/91 10,380 10,820 11,006
12/31/91 11,643 12,056 12,308
1/31/92 12,144 11,831 12,934
2/28/92 12,533 11,985 13,112
3/31/92 12,258 11,752 12,677
4/30/92 11,828 12,096 12,083
5/31/92 11,950 12,155 11,958
6/30/92 11,573 11,975 11,524
7/31/92 11,840 12,464 11,627
8/31/92 11,522 12,209 11,292
9/30/92 12,002 12,352 11,722
10/31/92 12,403 12,395 12,171
11/30/92 12,927 12,816 12,701
12/31/92 13,282 12,973 12,709
1/31/93 13,334 13,081 12,790
2/28/93 12,680 13,260 12,374
3/31/93 13,176 13,539 12,869
4/30/93 12,638 13,212 12,563
5/31/93 12,912 13,564 12,857
6/30/93 12,791 13,604 12,564
7/31/93 12,685 13,549 12,096
8/31/93 13,044 14,062 12,576
9/30/93 13,035 13,951 12,276
10/31/93 13,204 14,240 12,699
11/30/93 13,257 14,105 12,955
12/31/93 13,418 14,275 13,110
1/31/94 13,655 14,760 13,491
2/28/94 14,000 14,360 13,677
3/31/94 13,407 13,735 13,178
4/30/94 13,375 13,911 13,122
5/31/94 13,580 14,139 13,303
6/30/94 13,233 13,792 12,881
7/31/94 13,427 14,245 12,963
8/31/94 14,031 14,828 13,692
9/30/94 13,711 14,466 13,150
10/31/94 13,580 14,790 13,053
11/30/94 13,243 14,252 12,801
12/31/94 13,210 14,463 12,853
1/31/95 13,373 14,838 12,797
2/28/95 13,711 15,415 13,254
3/31/95 14,169 15,870 13,673
4/30/95 14,354 16,337 14,069
5/31/95 14,573 16,988 14,052
6/30/95 15,291 17,382 14,890
7/31/95 16,088 17,959 15,437
8/31/95 16,230 18,004 15,715
9/30/95 16,317 18,763 16,273
10/31/95 16,125 18,696 15,877
11/30/95 16,091 19,516 16,092
12/31/95 15,875 19,892 16,267
1/31/96 16,026 20,568 16,163
2/28/96 16,514 20,759 16,517
3/31/96 17,513 20,959 17,046
4/30/96 17,990 21,268 18,052
5/31/96 18,292 21,815 18,325
6/30/96 17,911 21,899 18,227
7/31/96 17,062 20,932 17,314
8/31/96 17,609 21,374 18,152
9/30/96 17,885 22,576 18,602
10/31/96 17,431 23,198 18,453
11/30/96 18,197 24,950 19,769
12/31/96 18,262 24,456 20,211
1/31/97 19,585 25,983 21,093
2/28/97 19,598 26,187 21,465
3/31/97 18,768 25,113 20,851
4/30/97 19,443 26,611 21,761
5/31/97 20,741 28,230 23,523
6/30/97 21,935 29,494 24,612
7/31/97 23,817 31,840 26,835
8/31/97 23,194 30,058 25,944
9/30/97 24,349 31,703 27,737
10/30/97 23,207 30,645 25,880
11/30/97 24,219 32,063 27,428
12/31/97 23,945 32,613 26,784
1/31/98 23,724 32,973 26,658
2/28/98 26,158 35,350 29,359
3/31/98 26,490 37,159 30,733
4/30/98 27,140 37,533 30,966
5/31/98 25,162 36,888 29,097
6/30/98 25,730 38,386 30,896
7/31/98 24,153 37,978 28,980
8/31/98 19,352 32,493 24,333
9/30/98 20,473 34,574 25,456
10/31/98 21,759 37,384 28,274
11/30/98 23,613 39,649 31,483
12/31/98 24,782 41,932 35,244
1/31/99 26,264 43,686 37,006
2/28/99 25,243 42,329 36,454
3/31/99 25,523 44,022 39,007
4/30/99 26,096 45,727 40,556
5/31/99 27,270 44,647 40,607
6/30/99 29,311 47,125 42,487
7/31/99 28,654 45,654 39,228
8/31/99 28,668 45,426 39,107
9/30/99 28,332 44,181 38,312
10/31/99 31,281 46,977 40,303
11/30/99 33,853 47,935 40,959
12/31/99 38,226 50,757 45,043
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 17 -
<PAGE>
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- --------------------------------------------------------------------------------
an Internet software company, three telecoms and a medical technology company.
We've been very successful taking small positions in numerous start-ups. At
December 31, about 20% of net assets were invested in 11 IPO companies,
including F5 Networks, WebTrends, Internap Network Services, WatchGuard and
Primus Knowledge Solutions. In general, I give preference to companies that
enable, rather than use, the Internet.
I've been buying Visio (diagramming software) since its acquisition was
announced, as Visio's value will benefit upon conversion to Microsoft stock. TJ
International (manufactured wood products) climbed on news of its takeover by
Weyerhaeuser.
To balance our tech concentration, I'm holding substantial positions in
Kroger (Fred Meyer and
Weightings
As a Percent of Net Assets
- --------------------------------------------------------------------------------
[PIE CHART]
Common Stocks:
1) Large ($4 Bil and above) - 42%
2) Medium ($1 Bil. - $4 Bil.) - 17%
3) Small (Less than $1 Bil.) - 41%
----
100%
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Microsoft Corp............................................................. 5.9%
(Computers-Software & Services)
VoiceStream Wireless Corp.................................................. 5.1
(Telecommunications-Cellular/Wireless)
Visio Corp................................................................. 4.9
(Computers-Software & Services)
NEXTLINK Communications, Inc. (Class A).................................... 3.9
(Telephone)
Hewlett-Packard Co......................................................... 3.6
(Computers-Hardware)
Internap Network Services Corp............................................. 3.5
(Computers-Software & Services)
Expeditors International of Washington, Inc................................ 3.3
(Air Freight)
TJ International, Inc...................................................... 3.2
(Building Materials)
Costco Companies, Inc...................................................... 3.2
(Retail-General Merchandise)
Intel Corp................................................................. 3.1
(Electronics-Semiconductors)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Visio Corp.............................................................. $3,123
Mylan Laboratories, Inc................................................. 3,045
StanCorp Financial Group, Inc........................................... 2,173
Assisted Living Concepts, Inc........................................... 2,068
Northwest Airlines Corp................................................. 1,924
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Eagle Hardware & Garden, Inc............................................. $3,420
Weyerhaeuser Co.......................................................... 2,444
F5 Networks, Inc......................................................... 2,286
American Home Products Corp.............................................. 2,117
Starbucks Corp........................................................... 2,113
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Computers (Software & Services)............................................. 20%
Telecommunications (Cellular/Wireless)...................................... 7
Computers (Peripherals)..................................................... 6
Retail (Food Chains)........................................................ 6
Computers (Hardware)........................................................ 5
</TABLE>
- 18 -
<PAGE>
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- --------------------------------------------------------------------------------
QFC), Costco, Albertson's, Starbucks and Washington Mutual. I like their defen-
sive qualities and their prices. Even though I am managing in a growth style, I
remain sensitive to value and risk.
I believe the Northwest economy will outpace the nation's beyond 2000. Some
of America's fastest-growing companies are headquartered here, and I have tried
to position the SAFECO Northwest Fund to take advantage of them.
William B. Whitlow
- --------------------------------------------------------------------------------
William B. Whitlow began his career at SAFECO in 1976 and left in 1980. Before
rejoining 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.
- 19 -
<PAGE>
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Northwest Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 100.0%
Air Freight - 3.3%
81,000 Expeditors International of Washington, Inc. .............. $ 3,549
Airlines - 1.4%
67,000 *Northwest Airlines Corp. .................................... 1,491
Banks (Major Regional) - 2.4%
63,000 U.S. Bancorp ................................................. 1,500
74,800 West Coast Bancorp, Inc. ..................................... 1,010
Banks (Regional) - 1.2%
78,000 Heritage Financial Corp. ....................................... 673
79,000 Washington Banking Co. ......................................... 652
Biotechnology - 1.8%
115,700 *Corixa Corp. ................................................ 1,967
Building Materials - 3.2%
82,000 TJ International, Inc. ....................................... 3,444
Chemicals (Diversified) - 2.2%
137,000 Penford Corp. ................................................ 2,363
Communication Equipment - 1.5%
176,200 * GST Telecommunications, Inc. ................................. 1,597
Computers (Hardware) - 5.3%
57,600 *Apex, Inc. .................................................. 1,858
34,000 Hewlett-Packard Co. .......................................... 3,874
Computers (Peripherals) - 5.7%
63,000 *ImageX.com, Inc. ............................................ 2,638
37,100 *Primus Knowledge Solutions, Inc. .............................1,681
58,000 *WatchGuard Technologies, Inc. ................................1,754
Computers (Software & Services) - 20.3%
10,800 *Digimarc Corp. ................................................ 540
12,300 *F5 Networks, Inc. ........................................... 1,402
21,600 *Internap Network Services Corp. ..............................3,737
54,500 *Microsoft Corp. ............................................. 6,363
69,000 *ONYX Software Corp. ......................................... 2,553
110,000 *Visio Corp. ................................................. 5,225
24,000 *WebTrends Corp. ..............................................1,944
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
------------------------------------------------------------------------------
<S> <C>
Electronics (Semiconductors) - 3.1%
40,500 Intel Corp. ................................................. $ 3,334
Engineering & Construction - 1.1%
150,000 *Morrison Knudsen Corp. ........................................ 1,172
Hardware & Tools - 1.0%
141,000 *Jore Corporation............................................... 1,102
Health Care (Diversified) - 1.0%
27,000 American Home Products Corp. ................................... 1,065
Health Care (Drugs - Generic & Other) - 1.1%
56,500 *PathoGenesis Corp. ............................................ 1,211
Health Care (Long-Term Care) - 0.6%
280,000 *Assisted Living Concepts, Inc. .................................. 577
Health Care (Major Pharmaceuticals) - 4.8%
113,000 Mylan Laboratories, Inc. ....................................... 2,846
152,000 *Penwest Pharmaceuticals Co. ................................... 2,318
Health Care (Medical Products & Supplies) -
4.0%
229,000 *Protocol Systems, Inc. ........................................ 2,061
70,000 *SonoSite, Inc. ................................................ 2,214
Insurance (Life & Health) - 2.1%
90,000 StanCorp Financial Group, Inc. ................................. 2,267
Iron & Steel - 1.9%
109,000 Schnitzer Steel Industries, Inc. ............................... 2,071
Leisure Time (Products) - 1.0%
94,000 *Ambassadors International, Inc. ............................... 1,028
Restaurants - 2.8%
125,300 *Starbucks Corp. ............................................... 3,039
Retail (Food Chains) - 5.6%
97,120 Albertson's, Inc. .............................................. 3,132
150,000 * Kroger Co. ................................................... 2,831
Retail (General Merchandise) - 3.2%
37,000 *Costco Companies, Inc. ........................................ 3,376
Savings & Loans - 2.9%
64,000 Riverview Bancorp, Inc. .......................................... 620
97,000 Washington Mutual, Inc. ........................................ 2,522
Services (Commercial & Consumer) - 2.0%
89,500 *N2H2, Inc. .................................................... 2,103
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 20 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Northwest Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Services (Data Processing) - 2.7%
247,000 *ARIS Corp. ..................................................$ 2,902
Telecommunications (Cellular/Wireless) - 6.9%
38,500 *VoiceStream Wireless Corp. .....................................5,479
28,500 *Western Wireless Corp.
(Class A)........................................................1,902
Telephone - 3.9%
50,000 *NEXTLINK Communications, Inc. (Class A).........................4,153
-------
TOTAL COMMON STOCKS.................................................... 107,140
-------
CASH EQUIVALENTS - 0.6%
Investment Companies
623,728 J.P. Morgan InstitutionalPrime Money Market........................624
-------
TOTAL CASH EQUIVALENTS..................................................... 624
-------
TOTAL INVESTMENTS - 100.6%............................................. 107,764
Other Assets, less Liabilities........................................... (614)
-------
NET ASSETS............................................................ $107,150
-------
-------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 21 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO International Stock Fund
December 31, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Foreign markets outperformed the U.S. stock market for the first time since
1993, and the SAFECO International Stock Fund outperformed the EAFE Index for
the year and quarter just ended. (The Fund doesn't compare well to the Lipper
average for international funds, as Lipper includes an array of investment ob-
jectives, including emerging markets. The SAFECO Fund is a diversified portfo-
lio invested in established companies in developed markets.)
Stocks in the Growth in Telecommunications theme benefited by increasing mo-
bile phone and Internet usage across the globe and, in the fourth quarter, ac-
quisition activity. Vodafone Airtouch made a hostile bid for Mannesmann. We
took some profits in Mannesmann and Vodafone, but continue to hold both as our
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year Since Inception*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAFECO International Fund 19.79 % 29.00 % 15.53 %
EAFE Index 16.63 % 25.27 % 11.75 %
Lipper, Inc. (International Funds) 25.73 % 40.80 % N/A
</TABLE>
* Graph and average annual return comparison begins January 31, 1996, inception
date of the fund.
<TABLE>
<CAPTION>
International Fund EAFE Index
------------------- -----------------
<S> <C> <C> <C>
1/31/96 10,000 10,000
2/28/96 9,930 10,021
3/31/96 10,040 10,220
4/30/96 10,290 10,504
5/31/96 10,250 10,298
6/30/96 10,240 10,342
7/31/96 9,840 10,026
8/31/96 10,240 10,035
9/30/96 10,454 10,288
10/31/96 10,585 10,169
11/30/96 11,249 10,560
12/31/96 11,423 10,410
1/30/97 11,382 10,033
2/28/97 11,534 10,183
3/31/97 11,463 10,207
4/30/97 11,514 10,247
5/31/97 12,050 10,900
6/30/97 12,414 11,488
7/31/97 12,850 11,660
8/31/97 11,747 10,776
9/30/97 12,556 11,366
10/30/97 11,514 10,478
11/30/97 11,585 10,358
12/31/97 11,943 10,435
1/31/98 12,203 10,899
2/28/98 13,013 11,584
3/31/98 13,522 11,926
4/30/98 13,594 12,007
5/31/98 13,719 11,934
6/30/98 13,854 12,010
7/31/98 14,010 12,118
8/31/98 12,182 10,602
9/30/98 11,444 10,263
10/31/98 12,317 11,318
11/30/98 13,272 11,883
12/31/98 13,646 12,337
1/31/99 13,677 12,286
2/28/99 13,594 11,979
3/31/99 13,958 12,464
4/30/99 14,633 12,955
5/31/99 13,916 12,273
6/30/99 14,415 12,737
7/31/99 14,664 13,100
8/31/99 14,716 13,133
9/30/99 14,695 13,251
10/31/99 15,235 13,732
11/30/99 16,035 14,194
12/31/99 17,603 15,454
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
-22-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
outlook for telecommunications remains bright.
Japan posted one of 1999's strongest performances among global equity
markets, and Japanese stocks were strong contributors to our portfolio. At year-
end, Japan was our largest country of investment, with 23.4% of net assets.
Despite selling shares of Sony and Murata Manufacturing, the reduced
positions appreciated in size relative to net assets. Murata Manufacturing
climbed on increasing sales of digital components for electronic appliances such
as cell phones and DVDs. Sony gained on faster-than-anticipated revenue growth
and the news it would team with 3Com's Palm unit. We added to our positions in
Hitachi (electronics) and NTT Mobile Communications (telecom) as their
valuations were attractive, and they're in sectors we think will do well.
Virtually, all the European markets' positive performance came in the
year's final months. While the UK's fortunes improved steadily through 1999, it
still
<TABLE>
<CAPTION>
HIGHLIGHTS
- --------------------------------------------------------------------------------
TOP TEN Percent of
HOLDINGS Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Mannesmann AG........................................................ 4.3%
(Machinery - Diversified)
Sony Corp............................................................ 3.8
(Electrical Equipment)
NTT Mobile Communication Network, Inc................................ 3.4
(Telephone)
ING Groep NV......................................................... 3.1
(Banks - Foreign)
Murata Manufacturing Co., Ltd........................................ 3.0
(Electrical Equipment)
Vodafone Airtouch, plc............................................... 2.9
(Telephone)
Vivendi.............................................................. 2.5
(Services - Commercial & Consumer)
Canon, Inc........................................................... 2.3
(Office Equipment & Supplies)
Telecom Italia SpA................................................... 2.2
(Telephone)
Koninklijke KPN NV................................................... 2.2
(Telephone)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE Percent of
COUNTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Japan....................................................................... 23%
United Kingdom.............................................................. 23
Netherlands................................................................. 10
France...................................................................... 9
Switzerland................................................................. 9
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
ING Group NV............................................................... $603
Vodafone Airtouch, plc..................................................... 511
Prudential, plc............................................................ 446
Axa........................................................................ 436
Roche Holding AG........................................................... 409
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Sony Corp................................................................. $463
NTT Mobile Communication Network, Inc..................................... 445
Takeda Chemical Industries................................................ 387
Prudential, plc........................................................... 297
Kingfisher, plc........................................................... 261
</TABLE>
- 23 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
underperformed other European markets. In Asia, the rally continued unabated to
year-end, with Hong Kong, Singapore and Korea the stellar performers.
While the outlook is generally favorable, valuations are now quite demand-
ing. It will take strong earnings to maintain market momentum.
Bank of Ireland
Asset Management (U.S.) Limited
- --------------------------------------------------------------------------------
The Bank of Ireland Asset Management (U.S.) Limited (BIAM) investment committee
is comprised of senior analysts and economists and headed by the company's
chief financial officer. BIAM has managed international equities since 1966 and
began managing U.S. funds in 1989.
PORTFOLIO OF INVESTMENTS
SAFECO International Stock Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 96.6%
Australia - 3.5%
4,055 Brambles Industries, Ltd. ..................................... $ 112
Services (Commercial & Consumer)
25,450 National Australia Bank, Ltd. ..................................... 388
Banks (Foreign)
46,871 News Corp., Ltd. .................................................. 454
Publishing
53,068 Telstra Corp., Ltd. ............................................... 288
Telephone
26,977 Westpac Banking Corp., Ltd. ....................................... 186
Banks (Foreign)
Denmark - 0.6%
3,200 Tele Danmark AS-B.................................................. 238
Telephone
France - 9.2%
2,368 Alcatel............................................................ 544
Telephone
8,214 Aventis SA......................................................... 480
Chemicals
5,285 Axa................................................................ 737
Insurance (Multi-Line)
4,155 Compagnie Generale des Etablissements Michelin..................... 163
Auto Parts & Equipment
5,340 Total SA........................................................... 712
Oil (International Integrated)
11,054 Vivendi............................................................ 998
Services (Commercial & Consumer)
Germany - 7.4%
4,670 Bayerische HypoVereinsbank AG...................................... 319
Banks (Foreign)
13,932 Bayerische Motoren Werke AG........................................ 425
Automobiles
550 Celanese AG......................................................... 10
Chemicals
6,985 Mannesmann AG.................................................... 1,685
Machinery (Diversified)
6,925 VEBA AG............................................................ 336
Electric Companies
8,528 Viag AG............................................................ 156
Manufacturing (Diversified)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 24 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL STOCK FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Hong Kong - 1.8%
23,000 Cheung Kong Holdings, Ltd. ....................................$ 292
Real Estate Investment Trust
16,000 Hongkong Electric Holdings, Ltd. ...................................50
Electric Companies
13,200 HSBC Holdings, plc ............................................... 185
Banks (Foreign)
18,000 Sun Hung Kai Properties, Ltd. .................................... 188
Real Estate Investment Trust
Italy - 2.7%
37,747 Ente Nazionale Idrocarburi SpA.................................... 208
Oil (International Integrated)
61,680 Telecom Italia SpA................................................ 870
Telephone
Japan - 23.4%
1,900 Acom Co., Ltd. ................................................... 186
Consumer Finance
10,000 Bank of Tokyo - Mitsubishi, Ltd. ................................. 139
Banks (Foreign)
23,000 Canon, Inc. ...................................................... 913
Office Equipment & Supplies
8,000 Fuji Photo Film Co. .............................................. 292
Office Equipment & Supplies
28,000 Hitachi, Ltd. .................................................... 449
Electrical Equipment
6,000 Honda Motor Co., Ltd. ............................................ 223
Automobiles
2,000 Hoya Corp. ....................................................... 157
Health Care (Medical Products & Supplies)
14,000 Kao Corp. ........................................................ 399
Personal Care
600 Keyence Corp. .................................................... 243
Electrical Equipment
800 Mabuchi Motor Co., Ltd. .......................................... 139
Electrical Equipment
5,000 Murata Manufacturing Co., Ltd. ................................. 1,173
Electrical Equipment
18 Nippon Telegraph & Telephone Corp. ............................... 308
Telephone
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
35 NTT Mobile Communication Network, Inc. ........................ $ 1,345
Telephone
6,000 Pioneer Corp. ..................................................... 158
Electrical Equipment
1,300 Rohm Co., Ltd. .................................................... 534
Electrical Equipment
13,000 Shiseido Co., Ltd. ................................................ 189
Personal Care
5,100 Sony Corp. ...................................................... 1,511
Electrical Equipment
15,000 Takeda Chemical Industries......................................... 741
Health Care (Major Pharmaceuticals)
1,400 Takefuji Corp. .................................................... 175
Consumer Finance
Netherlands - 10.0%
15,748 ABN Amro Holdings NV............................................... 393
Banks (Foreign)
8,730 Elsevier NV........................................................ 104
Publishing
6,450 Fortis NV.......................................................... 232
Financial (Diversified)
20,162 ING Group NV..................................................... 1,217
Banks (Foreign)
13,345 Koninklijke Ahold NV............................................... 395
Retail (Food Chains)
8,720 Koninklijke KPN NV................................................. 851
Telephone
6,225 Royal Dutch Petroleum Co. ......................................... 381
Oil (International Integrated)
8,535 TNT Post Group NV.................................................. 245
Shipping
2,575 VNU NV............................................................. 135
Publishing
New Zealand - 0.2%
12,479 Telecom Corp of New Zealand, Ltd. .................................. 58
Telephone
Portugal - 0.3%
5,965 Electricidade de Portugal, SA...................................... 104
Electric Companies
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 25 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL STOCK FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Singapore - 2.3%
33,123 DBS Group Holdings Ltd. ...................................... $ 543
Banks (Foreign)
13,500 Oversea Chinese Banking Corp. Ltd. ............................... 124
Banks (Foreign)
10,000 Singapore Press Holdings, Ltd. ................................... 217
Publishing
South Korea - 0.9%
3,175 #Korea Telecom Corp. (ADR)........................................ 219
Telephone
3,825 #Pohang Iron & Steel Co., Ltd. (ADR).............................. 129
Iron & Steel
Spain - 2.5%
38,950 Banco Santander Central Hispano, SA............................... 441
Banks (Foreign)
21,968 Telefonica SA..................................................... 549
Telephone
Sweden - 0.5%
3,230 Telefonaktiebolaget LM Ericsson................................... 208
Telecommunications (Long Distance)
Switzerland - 8.6%
233 Alusuisse Lonza Group AG.......................................... 172
Manufacturing (Diversified)
233 Lonza AG.......................................................... 142
Chemicals
349 Nestle SA......................................................... 639
Foods
409 Novartis AG....................................................... 600
Health Care (Major Pharmaceuticals)
57 Roche Holding AG.................................................. 676
Health Care (Major Pharmaceuticals)
317 Schweizerische Rueckversicherungs - Gesellschaft.................. 651
Insurance (Multi-Line)
1,915 UBS AG............................................................ 517
Banks (Foreign)
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
United Kingdom - 22.7%
42,685 Allied Zurich, plc............................................ $ 506
Insurance (Multi-Line)
10,800 AstraZeneca Group, plc............................................ 448
Health Care (MedicalProducts & Supplies)
23,075 Barclays, plc..................................................... 666
Banks (Foreign)
1,629 British Aerospace, plc............................................. 11
Aerospace/Defense
35,546 British American Tobacco, plc..................................... 199
Tobacco
42,640 Cable & Wireless, plc............................................. 721
Telephone
49,110 Cadbury Schweppes, plc............................................ 297
Beverages (Non-Alcoholic)
44,660 Diageo, plc....................................................... 359
Beverages (Alcoholic)
13,386 EMI Group, plc.................................................... 130
Leisure Time (Products)
23,935 Glaxo Wellcome, plc............................................... 678
Health Care (Major Pharmaceuticals)
48,290 Granada Group, plc................................................ 487
Leisure Time (Products)
47,840 Hilton Group, plc................................................. 151
Lodging (Hotels)
63,130 Ivensys, plc...................................................... 342
Manufacturing (Diversified)
37,940 Lloyds TSB Group, plc............................................. 474
Banks (Foreign)
5,100 Marconi, plc....................................................... 90
Communication Equipment
6,921 National Power, plc................................................ 40
Power Producers (Independent)
11,940 National Westminster Bank, plc.................................... 257
Banks (Foreign)
28,650 Old Mutual, plc.................................................... 76
Insurance (Multi-Line)
10,250 Pearson, plc...................................................... 332
Publishing
38,030 Prudential, plc................................................... 746
Insurance (Multi-Line)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 26 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL STOCK FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
6,090 Railtrack Group, plc.......................................... $ 100
Railroads
82,231 Shell Transport & Trading Co.,
plc .............................................................. 683
Oil (International Integrated)
8,600 TI Group, plc...................................................... 64
Manufacturing (Diversified)
232,271 Vodafone Airtouch, plc.......................................... 1,145
Telephone
------
TOTAL COMMON STOCKS..................................................... 38,242
------
TOTAL INVESTMENTS - 96.6%............................................... 38,242
Domestic Cash............................................................ 1,109
Foreign Cash................................................................ 26
Other Assets, less Liabliities............................................. 197
------
1,332
------
NET ASSETS............................................................. $39,574
------
------
</TABLE>
- --------------------------------------------------------------------------------
# Security traded on NYSE and valued in USD.
<TABLE>
<CAPTION>
Industry Percent of
Diversification Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Telephone............................................................. 18.0%
Banks (Foreign)....................................................... 14.7
Electrical Equipment.................................................. 10.6
Insurance (Multi-line)................................................ 6.9
Health Care (Major Pharmaceuticals)................................... 6.8
Oil (International Integrated)........................................ 5.0
Machinery (Diversified)............................................... 4.3
Publishing............................................................ 3.1
Office Equipment & Supplies........................................... 3.0
Services (Commercial & Consumer)...................................... 2.8
Manufacturing (Diversified)........................................... 1.9
Automobiles........................................................... 1.7
Foods................................................................. 1.6
Chemicals............................................................. 1.6
Leisure Time (Products)............................................... 1.6
Health Care (Medical Products & Supplies)............................. 1.5
Personal Care......................................................... 1.5
Electric Companies.................................................... 1.2
Real Estate Investment Trust.......................................... 1.2
Retail (Food Chains).................................................. 1.0
Consumer Finance...................................................... 0.9
Beverages (Alcoholic)................................................. 0.9
Beverages (Non-Alcoholic)............................................. 0.8
Shipping.............................................................. 0.6
Financial (Diversified)............................................... 0.6
Telecommunications (Long Distance).................................... 0.5
Tobacco............................................................... 0.5
Auto Parts & Equipment................................................ 0.4
Lodging (Hotels)...................................................... 0.4
Iron & Steel.......................................................... 0.3
Railroads............................................................. 0.3
Communication Equipment............................................... 0.2
Power Producers (Independent)......................................... 0.1
Aerospace/Defense..................................................... 0.1
----
96.6%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 27 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO Balanced Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF REX BENTLEY]
REX BENTLEY
For the quarter and year ended December 31, 1999, the SAFECO Bal-anced Fund
underperformed its aggregate S&P 500/Lehman Gov't./Corp. benchmark and peer
group. The main cause of this was the equity portion of the portfolio, which is
invested using a value style. It suffered as growth stocks performed
considerably better than value stocks.
The fixed-income portion of the Fund beat its benchmark for the quarter,
but underperformed for the year, as it was positioned in the first half of
'99 to take advantage of an economic slowdown that failed to materialize. The
duration (sensitivity to interest rates) has since been shortened, and the
bond portfolio is positioned in a defensive manner. We intend to keep this
posture until we see evi-
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year Since Inception*
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SAFECO Balanced Fund 3.38 % 1.05 % 10.48 %
60% S&P 500/40% Lehman Brothers Gov't/Corp. Index 8.77 % 11.77 % 17.49 %
Lipper. Inc. (Balanced Funds) 7.56 % 8.69 % N/A
</TABLE>
* Graph and average annual return comparison begins January 31, 1996, inception
date of the fund.
<TABLE>
<CAPTION>
60% S&P 500/40%
Lehman Brothers
Government/
Balanced Fund Corporate Index
----------------- ---------------------
<S> <C> <C>
1/31/96 10,000 10,000
2/28/96 9,950 9,971
3/31/96 10,017 9,995
4/30/96 10,077 10,055
5/31/96 10,218 10,204
6/30/96 10,345 10,281
7/31/96 10,112 10,018
8/31/96 10,243 10,135
9/30/96 10,599 10,549
10/31/96 10,813 10,822
11/30/96 11,272 11,392
12/31/96 11,140 11,206
1/30/97 11,473 11,631
2/28/97 11,567 11,695
3/31/97 11,163 11,352
4/30/97 11,414 11,824
5/31/97 11,896 12,299
6/30/97 12,209 12,689
7/31/97 12,905 13,449
8/31/97 12,420 12,937
9/30/97 12,760 13,443
10/30/97 12,621 13,260
11/30/97 12,834 13,656
12/31/97 12,993 13,854
1/31/98 13,083 14,024
2/28/98 13,654 14,619
3/31/98 13,964 15,087
4/30/98 13,885 15,208
5/31/98 13,761 15,116
6/30/98 13,806 15,546
7/31/98 13,500 15,452
8/31/98 12,593 14,234
9/30/98 13,275 14,944
10/31/98 13,983 15,631
11/30/98 14,417 16,237
12/31/98 14,626 16,814
1/31/99 14,638 17,284
2/28/99 14,183 16,797
3/31/99 14,388 17,233
4/30/99 15,026 17,651
5/31/99 15,014 17,328
6/30/99 15,287 17,884
7/31/99 14,984 17,529
8/31/99 14,633 17,471
9/30/99 14,296 17,246
10/31/99 14,723 17,919
11/30/99 14,699 18,134
12/31/99 14,779 18,731
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 28 -
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[PHOTO OF MICHAEL HUGHES]
MICHAEL HUGHES
[PHOTO OF LYNETTE D. SAGVOLD]
LYNETTE D. SAGVOLD
dence of slowing economic growth.
On the stock side, our technology holdings, including Nortel Net-works,
Cadence Design Systems, and Apple Computer were the Fund's best performers.
Unfortunately, our value selection criteria resulted in the Fund having a lower
weighting in technology than the S&P 500. (We are over-weighted compared to the
Barra Value Index.) Some traditional value sectors in which the Fund is
overweighted--energy stocks, financials and consumer staples--were weak. During
the quarter we exited Bank One, Lockheed Martin, Boeing and New Century
Energies. We also reduced positions in KeyCorp, Conseco and Xerox, taking
losses, in order to reduce gains realized during the year. To increase the
weighting in telecommunications, we replaced Bell Atlantic with SBC
Communications and bought Sprint and Lucent Technologies.
HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN STOCK HOLDINGS Net Assets
- -------------------------------------------------------------------------------
<S> <C>
Kimberly-Clark Corp. ..................................................... 2.2%
(Household Products - Non-Durables)
Hewlett-Packard Co. ...................................................... 2.0
(Computers - Hardware)
ALLTEL Corp. ............................................................. 1.7
(Telephone)
Nortel Networks Corp. .................................................... 1.7
(Communication Equipment)
Interpublic Group Cos., Inc. ............................................. 1.6
(Services - Advertising/Marketing)
Exxon Mobil Corp. ........................................................ 1.6
(Oil - International Integrated)
Praxair, Inc. ............................................................ 1.5
(Chemicals)
Albertson's, Inc. ........................................................ 1.5
(Retail - Food Chains)
Abbott Laboratories....................................................... 1.5
(Health Care - Diversified)
CenturyTel, Inc. ......................................................... 1.5
(Telephone)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Common Stocks) Cost
For the Year Ended Dec. 31, 1999 (000's)
- -------------------------------------------------------------------------------
<S> <C>
Xerox Corp. .............................................................. $593
Abbott Laboratories....................................................... 438
ALLTEL Corp. ............................................................. 342
Mylan Laboratories, Inc................................................... 302
Bank of America Corp. .................................................... 295
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES (Common Stocks) Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- -------------------------------------------------------------------------------
<S> <C>
Corning, Inc. ............................................................ $460
Bell Atlantic Corp. ...................................................... 411
Merck & Co., Inc. ........................................................ 387
Motorola, Inc. ........................................................... 386
Wendy's International, Inc. .............................................. 347
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES Percent of
(Common Stock) Net Assets
- -------------------------------------------------------------------------------
<S> <C>
Telephone............................................................ 7%
Health Care (Diversified)............................................ 4
Manufacturing (Diversified).......................................... 3
Computers (Hardware)................................................. 3
Oil (International Integrated)....................................... 3
</TABLE>
- 29 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We think we're holding stocks with attractive growth prospects at discount
prices. At year-end, the equity portfolio's price-to-earnings ratio based on
2000 earnings estimates as 17.7 versus 26.4 for the S&P 500.
We believe the Balanced Fund is well positioned in the way the portfolio is
structured and in terms of the allocation split between stocks (61.8%), bonds
(38.1%) and cash (-.4%).
Rex Bentley
Michael Hughes
Lynette D. Sagvold
- --------------------------------------------------------------------------------
Rex Bentley, an MBA from Brigham Young University and Chartered Financial Ana-
lyst, has more than 20 years of investment experience.
Lynette D. Sagvold holds a BA in business administration from the University of
Washington and is a Chartered Financial Analyst. She began her investment ca-
reer in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO in 1995 as a portfolio manager and insurance
analyst.
Michael Hughes joined SAFECO as portfolio manager in January 1997. He began his
investment career in 1983. He graduated magna cum laude with a B.S. in finance
from the University of Colorado in Boulder and holds an MBA from the University
of Southern California in Los Angeles. He is a Chartered Financial Analyst.
<TABLE>
<CAPTION>
Weightings
As a Percent of Net Assets
- --------------------------------------------------------------------------------
[PIE CHART]
Common Stocks:
<S> <C> <C>
1) Large ($4 Bil. and above) - 55%
2) Medium ($1 Bil. - $4 Bil.) - 7%
3) Corporate Bonds: 10%
4) Asset Backed Securities: 3%
5) Mortgage Backed Securities: 7%
6) U.S. Government Securities: 18%
----
100%
</TABLE>
- 30 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Balanced Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 61.8%
Banks (Major Regional) - 1.5%
4,500 Bank of America Corp. ......................................... $ 226
5,300 KeyCorp............................................................ 117
Banks (Money Center) - 1.2%
3,600 Chase Manhattan Corp. ............................................. 280
Beverages (Non-Alcoholic) - 1.3%
8,600 PepsiCo, Inc. ..................................................... 303
Chemicals - 2.5%
3,400 Du Pont (E.I.) de Nemours & Co. ................................... 224
7,100 Praxair, Inc. ..................................................... 357
Communication Equipment - 1.7%
3,800 Nortel Networks Corp. ............................................. 384
Computers (Hardware) - 3.1%
2,500 *Apple Computer, Inc. ............................................. 257
4,000 Hewlett-Packard Co................................................. 456
Computers (Peripherals) - 0.9%
14,500 *Quantum Corp. - DLT & Storage Systems............................. 219
Computers (Software & Services) - 2.1%
10,800 *Cadence Design Systems, Inc. ..................................... 259
10,900 *PeopleSoft, Inc. ................................................. 232
Electric Companies - 0.9%
11,700 NIPSCO Industries, Inc. ........................................... 209
Electrical Equipment - 1.1%
4,500 Emerson Electric Co. .............................................. 258
Electronics (Semiconductors) - 1.4%
3,800 Intel Corp. ....................................................... 313
Entertainment - 1.2%
9,500 The Walt Disney Co. ............................................... 278
Financial (Diversified) - 2.0%
3,100 American General Corp. ............................................ 235
3,500 Federal National Mortgage Association.............................. 218
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Foods - 2.2%
11,600 ConAgra, Inc. ................................................ $ 262
6,400 Dean Foods Co. ................................................... 254
Health Care (Diversified) - 4.3%
9,800 Abbott Laboratories............................................... 356
4,700 American Home Products Corp. ..................................... 185
3,300 Bristol-Myers Squibb Co. ......................................... 212
2,600 Johnson & Johnson................................................. 242
Health Care (Major Pharmaceuticals) - 1.3%
11,800 Mylan Laboratories, Inc. ......................................... 297
Household Products (Non-Durables) - 2.2%
7,800 Kimberly-Clark Corp. ............................................. 509
Insurance (Life & Health) - 1.8%
8,600 Conseco, Inc. .................................................... 154
7,900 UnumProvident Corp. .............................................. 253
Insurance (Multi-Line) - 1.5%
7,100 Hartford Financial Services Group, Inc. .......................... 336
Manufacturing (Diversified) - 3.4%
13,400 Crane Co. ........................................................ 266
3,600 Honeywell International, Inc. .................................... 208
3,300 Minnesota Mining & Manufacturing Co. ............................. 323
Office Equipment & Supplies - 0.7%
6,600 Xerox Corp. ...................................................... 150
Oil (Domestic Integrated) - 0.7%
1,900 Atlantic Richfield Co. ........................................... 164
Oil (International Integrated) - 2.7%
4,488 Exxon Mobil Corp. ................................................ 362
4,900 Texaco, Inc. ..................................................... 266
Oil & Gas (Drilling & Equipment) - 0.8%
4,500 Halliburton Co. .................................................. 181
Paper & Forest Products - 1.2%
5,000 International Paper Co. .......................................... 282
Publishing (Newspapers) - 1.1%
5,300 New York Times Co. (Class A)...................................... 260
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 31 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Real Estate Investment Trust - 2.0%
3,200 Equity Residential Properties Trust........................... $ 137
6,800 First Industrial Realty Trust, Inc. .............................. 187
5,800 Liberty Property Trust............................................ 141
Retail (Department Stores) - 1.1%
7,950 May Department Stores Co. ........................................ 256
Retail (Drug Stores) - 1.1%
6,400 CVS Corp. ........................................................ 256
Retail (Food Chains) - 1.5%
11,049 Albertson's, Inc. ................................................ 356
Retail (General Merchandise) - 0.8%
2,100 *Costco Companies, Inc. .......................................... 192
Savings & Loans - 1.1%
9,600 Washington Mutual, Inc. .......................................... 250
Services (Advertising/Marketing) - 1.6%
6,400 Interpublic Group Cos., Inc. ..................................... 369
Services (Commercial & Consumer) - 0.0%
100 United Parcel Service, Inc. (Class B)............................... 7
Telecommunications (Equipment) - 0.9%
2,800 Lucent Technologies, Inc. ........................................ 209
Telecommunications (Long Distance) - 0.3%
900 Sprint Corp. ...................................................... 61
Telephone - 6.6%
4,700 ALLTEL Corp. ..................................................... 389
7,200 CenturyTel, Inc. ................................................. 341
4,700 GTE Corp. ........................................................ 332
4,200 *MCI WorldCom, Inc. .............................................. 223
4,800 SBC Communications, Inc. ......................................... 234
------
TOTAL COMMON STOCKS..................................................... 14,287
------
CORPORATE BONDS - 9.7%
Air Freight - 0.5%
$ 136 Federal Express Corp.
6.845%, due 1/15/19............................................... 126
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Banks (Major Regional) - 0.6%
$ 135 Bank of America Corp.
6.625%, due 6/15/04........................................... $ 132
Financial (Diversified) - 4.3%
200 CIT Group, Inc.
5.57%, due 12/08/03............................................... 188
150 First Union Corp.
6.625%, due 6/15/04............................................... 146
155 Ford Motor Credit Co.
7.375%, due 10/28/09.............................................. 153
150 General Motors Acceptance Corp.
5.95%, due 3/14/03................................................ 145
195 Hertz Corp.
7.00%, due 7/01/04................................................ 193
195 Sears Roebuck Acceptance Corp.
6.25%, due 5/01/09................................................ 172
Manufacturing (Diversified) - 0.9%
210 Tyco International Group SA
6.375%, due 6/15/05............................................... 197
Natural Gas - 0.9%
250 National Fuel Gas Co.
6.00%, due 3/01/09................................................ 220
Publishing (Newspapers) - 0.9%
210 Times-Mirror Co.
6.65%, due 10/15/01............................................... 209
Retail (General Merchandise) - 0.9%
205 Wal-Mart Stores, Inc.
6.15%, due 8/10/01................................................ 203
Telephone - 0.3%
30 AT&T Corp.
5.625%, due 3/15/04................................................ 28
40 AT&T Corp.
6.50%, due 3/15/29................................................. 34
U.S. Federal Agency Notes - 0.4%
95 Federal Home Loan Bank
6.00%, due 11/15/01................................................ 94
------
TOTAL CORPORATE BONDS.................................................... 2,240
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 32 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
ASSET BACKED SECURITIES - 3.5%
Electric Companies - 0.5%
$ 130 ComEd Transitional Funding Trust
5.63%, due 6/25/09............................................ $ 120
Financial (Diversified) - 2.5%
254 Citicorp Mortgage Securities, Inc.
6.50%, due 6/25/29................................................ 228
175 First USA Credit Card Master Trust
5.28%, due 9/18/06................................................ 165
180 Fleet Credit Card Master
6.90%, due 4/16/07................................................ 179
Trucking - 0.5%
115 Ryder Vehicle Lease
6.89%, due 4/15/05................................................ 114
------
TOTAL ASSET BACKED SECURITIES.............................................. 806
------
MORTGAGE BACKED SECURITIES - 6.8%
Federal Home Loan Mortgage Corp.
(FHLMC) - 0.8%
190 7.50%, due 10/01/29............................................... 188
Federal National Mortgage Association
(FNMA) - 4.2%
292 6.00%, due 1/01/29................................................ 268
204 7.00%, due 3/01/12................................................ 202
325 8.00%, due 12/01/29............................................... 328
183 8.00%, due 2/15/29................................................ 184
Government National Mortgage Association
(GNMA) - 1.8%
232 7.00%, due 4/15/28................................................ 225
59 7.00%, due 8/15/28................................................. 57
135 7.75%, due 10/15/29............................................... 135
------
TOTAL MORTGAGE BACKED SECURITIES......................................... 1,587
------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
U.S. GOVERNMENT OBLIGATIONS - 18.1%
U.S. Federal Agency Notes - 3.1%
$ 200 5.125%, due 2/13/04.......................................... $ 188
540 6.00%, due 8/15/02............................................... 532
U.S. Treasury Notes - 15.0%
700 5.375%, due 6/30/00.............................................. 699
335 5.875%, due 9/30/02.............................................. 331
100 6.375%, due 8/15/02.............................................. 100
250 6.50%, due 10/15/06.............................................. 249
245 6.50%, due 8/15/05............................................... 245
105 7.25%, due 8/15/04............................................... 108
1,620 7.50%, due 11/15/16............................................ 1,733
------
TOTAL U.S. GOVERNMENT OBLIGATIONS....................................... 4,185
------
CASH EQUIVALENTS - 0.4%
Investment Companies
100 J.P. Morgan Institutional Prime Money Market..................... 100
------
TOTAL CASH EQUIVALENTS.................................................... 100
------
TOTAL INVESTMENTS - 100.3%............................................. 23,205
Other Assets, less Liabilities............................................ (71)
------
NET ASSETS............................................................ $23,134
------
------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 33 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Small Company Stock Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF GREG EISEN]
GREG EISEN
For the year 1999, the SAFECO Small Company Fund widely outpaced the
Lipper, Inc. average for small-cap value funds, but not the Russell
2000, which contains both growth and value stocks.
Our value-oriented portfolio languished in the Internet's shadow
during the first half of '99. In the third and fourth quarters, we took advan-
tage of a very hot initial public offering (IPO) market. Several of our long-
held positions started to work and so did new ones I'd taken to increase the
Fund's price/ earnings ratio. As well, Vallen, a stock I held through the Fund's
reconfiguration, was bought out for significant gain.
We benefited as the stock market rewarded hot new tech issues with unrea-
sonably high first-day gains. Except for a few, we
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year Since Inception*
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
SAFECO Small Company Fund 27.05 % 14.07 % 8.56 %
Russell 2000 Index 18.60 % 21.39 % 14.37 %
Lipper. Inc. (Small-Cap Value Funds) 6.59 % 6.33 % N/A
</TABLE>
* Graph and average annual return comparison begins January 31, 1996, inception
date of the fund.
<TABLE>
<CAPTION>
Small Company Russell 2000
Fund Index
--------------- --------------
<S> <C> <C> <C>
1/31/96 10,000 10,000
2/28/96 10,150 10,316
3/31/96 10,490 10,521
4/30/96 11,550 11,086
5/31/96 12,350 11,531
6/30/96 12,030 11,061
7/31/96 11,220 10,096
8/31/96 11,910 10,682
9/30/96 12,183 11,099
10/31/96 12,162 10,927
11/30/96 12,024 11,375
12/31/96 12,501 11,667
1/30/97 12,606 11,898
2/28/97 12,342 11,610
3/31/97 11,918 11,066
4/30/97 11,675 11,093
5/31/97 12,786 12,330
6/30/97 13,464 12,854
7/31/97 14,385 13,454
8/31/97 14,670 13,757
9/30/97 16,121 14,762
10/30/97 15,538 14,105
11/30/97 15,443 14,009
12/31/97 15,423 14,261
1/31/98 15,325 14,044
2/28/98 16,886 15,097
3/31/98 18,458 15,731
4/30/98 19,119 15,817
5/31/98 18,078 14,969
6/30/98 17,677 15,012
7/31/98 15,640 13,786
8/31/98 11,120 11,113
9/30/98 11,673 11,973
10/31/98 11,413 12,464
11/30/98 11,586 13,123
12/31/98 12,096 13,942
1/31/99 12,453 14,126
2/28/99 11,684 12,987
3/31/99 11,044 13,187
4/30/99 10,936 14,368
5/31/99 10,979 14,580
6/30/99 11,229 15,235
7/31/99 11,424 14,815
8/31/99 10,817 14,269
9/30/99 10,860 14,270
10/31/99 10,903 14,333
11/30/99 12,432 15,203
12/31/99 13,797 16,924
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 34 -
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
quickly sold almost all the IPOs we participated in.
Long-time holdings MICROS Systems and Optimal Robotics turned from value
to growth stocks. MICROS was up 83% during the fourth quarter on anticipation
surrounding the spin-off of its internet reservation system. Optimal Robotics'
self-service checkout systems became profitable, and the stock climbed 166%
during the year.
Anything associated with the Internet did well. I let N2H2, an Internet
filtering service used by schools, run from ten to 28, and then cut our position
back to around 1.2%. I bought BEA Systems (e-commerce software) at a reasonable
price and by year-end it was a momentum stock. Emmis Communi-
Weightings
As a Percent of Net Assets
- -------------------------------------------------------------------------------
[PIE CHART]
Common Stocks:
1) Mid-Cap ($1 Billion - $4 Billion) - 26%
2) Small Cap (Under $1 Billion):
a) Large (Over $750 million) - 4%
b) Medium ($250 - $750 million) - 44%
c) Small (Under $250 million) - 22%
3) Cash and Other: 4%
----
100%
HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- -------------------------------------------------------------------------------
<S> <C>
MICROS Systems, Inc. ..................................................... 4.9%
(Computers - Hardware)
Optimal Robotics Corp. ................................................... 4.3
(Computers - Hardware)
International Aircraft Investors, Inc. ................................... 3.8
(Aerospace/Defense)
Imax Corp. ............................................................... 3.6
(Manufacturing - Specialized)
BEA Systems, Inc. ........................................................ 3.4
(Computers - Software & Services)
Emmis Communications Corp. (Class A)...................................... 3.3
(Broadcasting - TV, Radio & Cable)
U.S. Foodservice.......................................................... 2.9
(Distributors - Food & Health)
Timberline Software Corp. ................................................ 2.8
(Computers - Software & Services)
ACT Manufacturing, Inc. .................................................. 2.6
(Electronics - Component Distributors)
Regis Corp. .............................................................. 2.6
(Retail - Specialty)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- -------------------------------------------------------------------------------
<S> <C>
Rollins Truck Leasing Corp. ............................................ $1,363
Imax Corp. ............................................................. 1,148
HA-LO Industries, Inc. ................................................. 1,111
Central Parking Corp. .................................................. 1,097
Rent-Way, Inc. ......................................................... 946
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- -------------------------------------------------------------------------------
<S> <C>
Equitrac Corp. ......................................................... $2,756
Litchfield Financial Corp. ............................................. 2,514
Vallen Corp. ........................................................... 1,824
Hooper Holmes, Inc. .................................................... 1,599
Styling Technology Corp. ............................................... 1,586
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- -------------------------------------------------------------------------------
<S> <C>
Computers (Software & Services)............................................. 11%
Services (Commercial & Consumer)............................................ 10
Computers (Hardware)........................................................ 9
Trucking.................................................................... 6
Broadcasting (TV, Radio & Cable)............................................ 5
</TABLE>
- 35 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
cations, our best non-tech performer, gained on e-commerce advertising revenue.
The IPO market was unusually active and can't be counted on for future
gains. However, I will try to participate as long as it remains lucrative,
while remaining wary of valuations which, I believe, will eventually take pre-
cedence. At year-end, the Fund's P/E had climbed to 21.6 times 1999 earnings,
and its weighted market capitalization grew to $835 million. We remain in the
small-cap value camp.
Greg Eisen
- --------------------------------------------------------------------------------
Greg Eisen joined SAFECO in 1986. He holds a BA from Rutgers University and is
a Certified Public Accountant and a Chartered Financial Analyst.
- 36 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Small Company Stock Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 95.8%
Aerospace/Defense - 3.8%
186,950 *International Aircraft Investors, Inc. .................... $ 1,168
Air Freight - 1.7%
16,200 Air Express International Corp. ................................ 523
Airlines - 2.1%
23,400 SkyWest, Inc. .................................................. 655
Banks (Regional) - 1.9%
38,610 *Hanmi Bank (Los Angeles, CA)................................... 579
Broadcasting (TV, Radio & Cable) - 5.1%
8,000 *Emmis Communications Corp. (Class A)........................... 997
24,600 *Salem Communications Corp. (Class A)........................... 557
Computers (Hardware) - 9.4%
2,000 *Apex, Inc. ..................................................... 65
20,500 *MICROS Systems, Inc. ........................................ 1,517
35,100 *Optimal Robotics Corp. ...................................... 1,307
Computers (Peripherals) - 3.8%
9,475 *Circle.com..................................................... 117
1,100 *Egreetings Network, Inc. ....................................... 11
18,300 *GRIC Communications, Inc. ..................................... 464
11,000 *Integrated Measurement Systems, Inc. .......................... 155
9,000 *Primus Knowledge Solutions, Inc. .............................. 408
Computers (Software & Services) - 11.4%
15,000 *BEA Systems, Inc. ........................................... 1,049
2,000 *BSQUARE Corp. .................................................. 84
27,500 *Ciber, Inc. ................................................... 756
3,200 *Digimarc Corp. ................................................ 160
38,800 *ITT Educational Services, Inc. ................................ 599
62,800 Timberline Software Corp. ...................................... 844
Distributors (Food & Health) - 2.9%
52,700 *U.S. Foodservice............................................... 883
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Electronics (Component Distributors) - 2.6%
21,400 *ACT Manufacturing, Inc. ................................... $ 802
Engineering & Construction - 2.1%
34,200 *Astec Industries, Inc. ........................................ 643
Financial (Diversified) - 2.1%
51,000 *Hawthorne Financial Corp. ..................................... 638
Health Care
(Medical Products & Supplies) - 2.1%
20,700 *SonoSite, Inc. ................................................ 655
Insurance (Property-Casualty) - 2.0%
91,100 *American Safety Insurance Group, Ltd. ......................... 598
Manufacturing (Specialized) - 3.6%
40,700 *Imax Corp. .................................................. 1,114
Oil & Gas (Drilling & Equipment) - 4.5%
26,000 *Marine Drilling Co., Inc. ..................................... 583
15,900 *Rowan Companies, Inc. ......................................... 345
20,000 *UTI Energy Corp. .............................................. 461
Oil & Gas (Exploration & Production) - 0.5%
8,000 *Chieftain International, Inc. ................................. 138
Real Estate Investment Trust - 1.0%
9,700 Alexandria Real Estate Equities, Inc. .......................... 309
Restaurants - 2.3%
87,200 *Taco Cabana, Inc. (Class A).................................... 709
Retail (Department Stores) - 1.5%
53,500 *Musicland Stores Corp. ........................................ 451
Retail (Discounters) - 1.3%
72,500 *OfficeMax, Inc. ............................................... 399
Retail (Drug Stores) - 1.7%
119,000 *Drug Emporium, Inc. ........................................... 528
Retail (Food Chains) - 1.5%
42,000 Ingles Markets, Inc. ........................................... 467
Retail (Specialty) - 2.6%
42,300 Regis Corp. .................................................... 798
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 37 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO SMALL COMPANY STOCK FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Services (Advertising/Marketing) - 2.8%
37,900 *Snyder Communications, Inc. ............................... $ 730
12,633 *Ventiv Health, Inc. ........................................... 116
Services (Commercial & Consumer) - 10.4%
35,700 Central Parking Corp. .......................................... 683
28,800 *Dollar Thrifty Automotive Group, Inc. ......................... 689
15,800 *N2H2, Inc. .................................................... 371
33,350 *Rent-A-Center, Inc. ........................................... 661
42,200 *Rent-Way, Inc. ................................................ 789
Textiles (Apparel) - 1.5%
31,000 *Cutter & Buck, Inc. ........................................... 469
Trucking - 5.6%
13,800 *Landstar System, Inc. ......................................... 591
52,500 Rollins Truck Leasing Corp. .................................... 627
29,000 *Swift Transportation Co., Inc. ................................ 511
Waste Management - 2.0%
27,500 Landauer, Inc................................................... 602
------
TOTAL COMMON STOCKS..................................................... 29,375
------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- -------------------------------------------------------------------------------
<C> <S>
PREFERRED STOCKS - 1.7%
Electric Companies - 0.9%
3,700 Massachusetts Electric Co. ............................... $ 265
Entertainment - 0.8%
41,200 *Craig Corp. (Class A)........................................ 258
-----
TOTAL PREFERRED STOCKS................................................... 523
-----
CASH EQUIVALENTS - 7.1%
Investment Companies
626,489 AIM Short-Term Investments Co. Liquid Assets Money Market
Portfolio (Institutional Shares).............................. 626
1,537,772 J.P. Morgan Institutional Prime Money Market................ 1,538
-----
TOTAL CASH EQUIVALENTS................................................. 2,164
-----
TOTAL INVESTMENTS - 104.6%............................................ 32,062
Other Assets, less Liabilities........................................ (1,402)
-----
NET ASSETS........................................................... $30,660
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 38 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO U.S. Value Fund
December 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF REX BENTLEY]
REX BENTLEY
A favorite Wall Street saying wasn't true in 1999; the rising tide
did not lift all boats. The SAFECO U.S. Value Fund's return was similar
to that of the Russell 1000 Value Index's 6.9%, but much lower than the
S&P 500.
Our investment strategy, owning stocks that appear to be undervalued and
have good growth prospects based on our fundamental analysis, remains the same.
Unfortunately, it's been out of sync with the equity market for the past two
years. (For the two years ended December 31, 1999, the Russell 1000 Growth
Index's annualized return was 35.7% versus 11.2% for the Russell 1000 Value
Index.)
Not suprisingly, technology stocks Nortel Networks, Cadence Design Systems,
and Apple Computer were the fund's best per-
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1999 Quarter 1 Year Since Inception*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SAFECO U.S. Value Fund Fund 6.15 % 5.15 % 13.16 %
S & P 500 Index 14.88 % 21.04 % 27.35 %
Lipper. Inc. (Large-Cap Value Funds) 8.74 % 11.23 % N/A
</TABLE>
* Graph and average annual return comparison begins April 30, 1997, inception
date of the fund.
<TABLE>
<CAPTION>
U.S. Value Fund S&P 500 Index
------------------- ------------------
<S> <C> <C> <C>
4/30/97 10,000 10,000
5/31/97 10,670 10,608
6/30/97 11,053 11,083
7/31/97 11,915 11,965
8/31/97 11,283 11,295
9/30/97 11,669 11,914
10/30/97 11,307 11,516
11/30/97 11,599 12,049
12/31/97 11,750 12,256
1/31/98 11,760 12,391
2/28/98 12,621 13,284
3/31/98 13,095 13,964
4/30/98 12,905 14,104
5/31/98 12,632 13,862
6/30/98 12,615 14,425
7/31/98 12,150 14,272
8/31/98 10,662 12,210
9/30/98 11,380 12,993
10/31/98 12,375 14,048
11/30/98 12,999 14,900
12/31/98 13,231 15,758
1/31/99 13,242 16,417
2/28/99 12,799 15,907
3/31/99 13,042 16,543
4/30/99 13,996 17,184
5/31/99 14,118 16,778
6/30/99 14,593 17,709
7/31/99 14,182 17,156
8/31/99 13,681 17,071
9/30/99 13,105 16,603
10/31/99 13,708 17,653
11/30/99 13,674 18,013
12/31/99 13,912 19,074
</TABLE>
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- 39 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTO OF LYNETTE D. SAGVOLD]
LYNETTE D. SAGVOLD
formers, while our energy stocks, most financials, and most consumer
staple stocks (three sectors in which the Fund is over-weighted) were
weak.
We replaced Bell Atlantic with SBC Communications and bought Sprint to
increase the weighting in telecommunications. To offset a partial sale of Nortel
networks, which had nearly doubled, we took a small position in Lucent
Technologies. We also added Apple Computer. Still, because of our value
orientation, the Fund is underweighted in technology compared to the S&P 500.
We sold our holdings in Bank One, Lockheed Martin, Boeing and New Century
Energies, as the earnings outlook for these companies has weakened. We reduced
positions in KeyCorp, Conseco and Xerox, taking some losses to off-set gains
taken during the year.
At year-end, the Fund's price-to-earnings based on year 2000 earnings
estimates was 17.7 versus 26.4 for the S&P 500. The
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
- -------------------------------------------------------------------------------
<S> <C>
Kimberly-Clark Corp. .............................................. 3.3%
(Household Products - Non-Durables)
Hewlett-Packard Co. ............................................... 3.2
(Computers - Hardware)
Interpublic Group Cos., Inc. ...................................... 2.8
(Services - Advertising/Marketing)
ALLTEL Corp. ...................................................... 2.8
(Telephone)
GTE Corp. ......................................................... 2.7
(Telephone)
Exxon Mobil Corp. ................................................. 2.7
(Oil - International Integrated)
Nortel Networks Corp. ............................................. 2.7
(Communication Equipment)
Praxair, Inc. ..................................................... 2.7
(Chemicals)
CenturyTel, Inc. .................................................. 2.5
(Telephone)
Abbott Laboratories................................................ 2.5
(Health Care - Diversified)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Xerox Corp. ............................................................... $438
Abbott Laboratories........................................................ 314
ALLTEL Corp. .............................................................. 243
UnumProvident Corp. ....................................................... 220
Emerson Electric Co. ...................................................... 219
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Year Ended Dec. 31, 1999 (000's)
- --------------------------------------------------------------------------------
<S> <C>
Merck & Co., Inc. ........................................................ $361
Corning, Inc. ............................................................ 318
Bell Atlantic Corp. ...................................................... 305
Motorola, Inc. ........................................................... 284
Wendy's International, Inc. .............................................. 276
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Telephone................................................................... 11%
Health Care (Diversified)................................................... 7
Manufacturing (Diversified)................................................. 6
Computers (Hardware)........................................................ 5
Chemicals................................................................... 5
</TABLE>
- 40 -
<PAGE>
forecasted earnings growth for our stocks is 13% compared to 10% for the S&P
500. We think we're holding stocks with attractive growth at discount prices.
As well, we fully expect our style of investing to return to favor and offer
attractive returns as it has in the past.
Rex Bently
Lynette D. Sagvold
- --------------------------------------------------------------------------------
Rex Bently, an MBA from Brigham Young University and Chartered Financial Ana-
lyst, has more than 20 years of investment experience.
Lynette D. Sagvold holds a BA in business administration from the University of
Washington and is a Chartered Financial Analyst. She began her investment ca-
reer in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO in 1995 as a portfolio manager and insurance
analyst.
<TABLE>
<CAPTION>
[PIE CHART]
Weightings as a Percent of Net Assets
- -------------------------------------------------------------------
<S> <C>
Common Stocks:
1) Large ($4 Bil. and above) - 89%
2) Medium ($1 Bil. - $4 Bil.) - 11%
-------
100%
</TABLE>
- 41 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. Value Fund
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 99.6%
Banks (Major Regional) - 1.7%
3,000 Bank of America Corp........................................... $ 151
1,800 KeyCorp............................................................. 40
Banks (Money Center) - 2.1%
3,000 Chase Manhattan Corp............................................... 233
Beverages (Non-Alcoholic) - 2.2%
6,800 PepsiCo, Inc....................................................... 240
Chemicals - 4.5%
3,100 Du Pont (E.I.) de Nemours & Co..................................... 204
5,800 Praxair, Inc....................................................... 292
Communication Equipment - 2.7%
2,900 Nortel Networks Corp............................................... 293
Computers (Hardware) - 5.0%
1,900 *Apple Computer, Inc............................................... 195
3,100 Hewlett-Packard Co................................................. 353
Computers (Peripherals) - 1.1%
8,100 *Quantum Corp. - DLT & Storage Systems............................ 122
Computers (Software & Services) - 3.4%
8,100 *Cadence Design Systems, Inc....................................... 194
8,300 *PeopleSoft, Inc................................................... 177
Electric Companies - 1.5%
9,200 NIPSCO Industries, Inc............................................. 164
Electrical Equipment - 2.0%
3,800 Emerson Electric Co................................................ 218
Electronics (Semiconductors) - 2.0%
2,700 Intel Corp......................................................... 222
Entertainment - 1.9%
7,300 The Walt Disney Co................................................. 214
Financial (Diversified) - 2.6%
2,100 American General Corp.............................................. 159
2,000 Federal National Mortgage Association.............................. 125
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Foods - 3.9%
8,400 ConAgra, Inc................................................... $ 190
5,900 Dean Foods Co...................................................... 235
Health Care (Diversified) - 7.0%
7,500 Abbott Laboratories................................................ 272
3,700 American Home Products Corp........................................ 146
2,600 Bristol-Myers Squibb Co............................................ 167
2,000 Johnson & Johnson.................................................. 186
Health Care (Major Pharmaceuticals) - 1.7%
7,400 Mylan Laboratories, Inc............................................ 186
Household Products (Non-Durables) - 3.3%
5,500 Kimberly-Clark Corp................................................ 359
Insurance (Life & Health) - 2.5%
4,500 Conseco, Inc........................................................ 80
6,000 UnumProvident Corp................................................. 192
Insurance (Multi-Line) - 2.3%
5,400 Hartford Financial Services Group, Inc............................. 256
Manufacturing (Diversified) - 5.6%
10,150 Crane Co........................................................... 202
3,080 Honeywell International, Inc....................................... 178
2,400 Minnesota Mining & Manufacturing Co................................ 235
Office Equipment & Supplies - 1.0%
4,800 Xerox Corp......................................................... 109
Oil (Domestic Integrated) - 1.1%
1,400 Atlantic Richfield Co.............................................. 121
Oil (International Integrated) - 4.5%
3,654 Exxon Mobil Corp................................................... 294
3,700 Texaco, Inc........................................................ 201
Oil & Gas (Drilling & Equipment) - 1.5%
4,200 Halliburton Co..................................................... 169
Paper & Forest Products - 1.9%
3,700 International Paper Co............................................. 209
Publishing (Newspapers) - 2.1%
4,700 New York Times Co. (Class A)....................................... 231
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 42 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. VALUE FUND
As of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Real Estate Investment Trust - 3.2%
2,500 Equity Residential Properties Trust............................ $ 107
5,100 First Industrial Realty Trust, Inc................................. 140
4,300 Liberty Property Trust............................................. 104
Retail (Department Stores) - 1.8%
6,150 May Department Stores Co........................................... 198
Retail (Drug Stores) - 1.8%
5,000 CVS Corp........................................................... 200
Retail (Food Chains) - 2.5%
8,440 Albertson's, Inc................................................... 272
Retail (General Merchandise) - 1.3%
1,600 *Costco Companies, Inc............................................. 146
Savings & Loans - 1.8%
7,600 Washington Mutual, Inc............................................. 198
Services (Advertising/Marketing) - 2.8%
5,400 Interpublic Group Cos., Inc........................................ 312
Services (Commercial & Consumer) - 0.1%
100 United Parcel Service, Inc. (Class B)................................ 7
Telecommunications (Equipment) - 1.5%
2,200 Lucent Technologies, Inc........................................... 165
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE (000's)
- --------------------------------------------------------------------------------
<C> <S>
Telecommunications (Long Distance) - 0.6%
900 Sprint Corp.................................................. $ 61
Telephone - 11.1%
3,700 ALLTEL Corp...................................................... 306
5,800 CenturyTel, Inc.................................................. 275
4,200 GTE Corp......................................................... 296
3,000 *MCI WorldCom, Inc............................................... 159
3,700 SBC Communications, Inc.......................................... 180
------
TOTAL COMMON STOCKS.................................................... 10,940
------
CASH EQUIVALENTS - 2.9%
Investment Companies
314,935 J.P. Morgan Institutional Prime Money Market..................... 315
------
TOTAL CASH EQUIVALENTS.................................................... 315
------
TOTAL INVESTMENTS - 102.5%............................................. 11,255
Other Assets, less Liabilities........................................... (272)
------
NET ASSETS............................................................ $10,983
------
------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 43 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
As of December 31, 1999
SEE NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
(In Thousands, Except Growth Equity Income
Per Share Amounts) Fund Fund Fund
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at Cost $858,375 $1,546,368 $234,471
======== ========== ========
Investments, at Value
Unaffiliated Issuers $388,533 $2,244,126 $309,849
Affiliated Issuers 469,850 -- --
-------- ---------- --------
Total Investments at Value 858,383 2,244,126 309,849
Cash -- -- --
Receivables
Investment Securities Sold 3,600 -- 232
Trust Shares Sold 1,531 1,471 20
Dividends and Interest 464 2,274 727
From Advisor 169 10 1
Deferred Organization Expense -- -- --
-------- ---------- --------
Total Assets 864,147 2,247,881 310,829
Liabilities
Payables
Investment Securities Purchased 3,813 -- --
Trust Shares Redeemed 1,783 3,493 1,121
Notes Payable 350 -- --
Dividends -- 5,375 1,475
Investment Advisory Fees 523 1,275 209
Forward Currency Contracts Open, Net -- -- --
Other 403 554 76
-------- ---------- --------
Total Liabilities 6,872 10,697 2,881
-------- ---------- --------
Net Assets $857,275 $2,237,184 $307,948
======== ========== ========
No-Load Class:
Net Assets $815,041 $2,147,299 $303,537
Trust Shares Outstanding 34,982 89,379 13,555
-------- ---------- --------
Net Asset Value, Offering Price, and Redemption
Price Per Share $ 23.30 $ 24.02 $ 22.39
======== ========== ========
Class A:
Net Assets $ 27,597 $ 61,625 $ 2,046
Trust Shares Outstanding 1,189 2,561 91
-------- ---------- --------
Net Asset Value and Redemption Price Per Share $ 23.21 $ 24.06 $ 22.52
======== ========== ========
Maximum Offering Price Per Share (Net Asset
Value Plus Sales Charge of 5.75%) $ 24.63 $ 25.53 $ 23.89
======== ========== ========
Class B:
Net Assets $ 14,637 $ 28,260 $ 2,365
Trust Shares Outstanding 649 1,186 105
-------- ---------- --------
Net Asset Value and Offering
Price Per Share* $ 22.57 $ 23.83 $ 22.53
======== ========== ========
</TABLE>
- --------------------------------------------------------------------------------
* For Class B shares, the redemption price per share may be lower as a result
of applying contingent deferred sales charge.
- 44 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
<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>
$ 58,723 $25,673 $21,974 $28,117 $10,048
======== ======= ======= ======= =======
$107,764 $38,242 $23,205 $32,062 $11,255
-- -- -- -- --
-------- ------- ------- ------- -------
107,764 38,242 23,205 32,062 11,255
-- 1,135 -- -- --
-- -- -- -- --
844 305 55 118 1
31 51 130 24 18
-- -- 4 6 7
-- 4 4 4 9
-------- ------- ------- ------- -------
108,639 39,737 23,398 32,214 11,290
-- -- -- 1,406 --
130 14 61 113 16
-- -- -- -- --
1,253 -- 173 -- 266
71 36 17 22 8
-- 50 -- -- --
35 63 13 13 17
-------- ------- ------- ------- -------
1,489 163 264 1,554 307
-------- ------- ------- ------- -------
$107,150 $39,574 $23,134 $30,660 $10,983
======== ======= ======= ======= =======
$ 97,534 $36,967 $18,008 $28,319 $ 9,905
3,851 2,181 1,524 2,225 829
-------- ------- ------- ------- -------
$ 25.33 $ 16.95 $ 11.81 $ 12.73 $ 11.95
======== ======= ======= ======= =======
$ 4,774 $ 1,215 $ 2,573 $ 1,067 $ 331
191 72 217 85 28
-------- ------- ------- ------- -------
$ 25.01 $ 16.89 $ 11.87 $ 12.55 $ 11.94
======== ======= ======= ======= =======
$ 26.54 $ 17.92 $ 12.59 $ 13.32 $ 12.67
======== ======= ======= ======= =======
$ 4,842 $ 1,392 $ 2,553 $ 1,274 $ 747
198 84 216 104 63
-------- ------- ------- ------- -------
$ 24.46 $ 16.56 $ 11.83 $ 12.22 $ 11.88
======== ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
- 45 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<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 $61
in the International Fund) $ 4,423 $ 32,457 $ 9,667
Interest 239 2,991 1,229
-------- -------- --------
Total Investment Income 4,662 35,448 10,896
Expenses
Investment Advisory 6,137 12,814 2,300
Transfer Agent 3,113 4,329 716
Fund Accounting and Administration 219 408 139
Shareholder Service-Class A 71 148 6
-Class B 36 61 6
Distribution -Class B 108 182 17
Legal and Auditing 123 196 50
Custodian 79 125 25
Registration 50 69 22
Reports to Shareholders 701 699 94
Trustees 12 14 7
Loan Interest Expense 390 1 --
Other 232 317 55
-------- -------- --------
Total Expenses Before Reimbursement 11,271 19,363 3,437
Expense Reimbursement (576) (24) (8)
-------- -------- --------
Total Expenses After Reimbursement 10,695 19,339 3,429
-------- -------- --------
Net Investment Income (Loss) (6,033) 16,109 7,467
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 33,689 108,654 11,161
Investments in Affiliated Issuers (63,935) -- --
Foreign Currency Transactions -- -- --
-------- -------- --------
Total Net Realized Gain (Loss) (30,246) 108,654 11,161
Net Change in Unrealized Appreciation
(Depreciation) 8,592 72,979 (17,088)
-------- -------- --------
Net Gain (Loss) on Investments and Foreign
Currency (21,654) 181,633 (5,927)
-------- -------- --------
Net Change in Net Assets Resulting from
Operations $(27,687) $197,742 $ 1,540
======== ======== ========
- ------------------------------------------------------------------------------
</TABLE>
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>
$ 365 $ 453 $284 $ 112 $219
59 44 560 105 16
------- ------ ---- ------ ----
424 497 844 217 235
534 301 166 239 80
216 83 68 92 26
48 19 14 17 7
7 2 4 2 1
8 2 6 3 2
24 8 19 8 5
24 22 20 21 19
8 47 6 12 4
17 13 14 12 15
25 9 12 33 10
6 6 6 6 6
-- -- -- 1 --
12 9 7 13 6
------- ------ ---- ------ ----
929 521 342 459 181
(61) (73) (50) (79) (42)
------- ------ ---- ------ ----
868 448 292 380 139
------- ------ ---- ------ ----
(444) 49 552 (163) 96
8,020 576 438 (5,990) 451
-- -- -- -- --
-- (88) -- -- --
------- ------ ---- ------ ----
8,020 488 438 (5,990) 451
28,195 7,927 (709) 9,193 (51)
------- ------ ---- ------ ----
36,215 8,415 (271) 3,203 400
------- ------ ---- ------ ----
$35,771 $8,464 $281 $3,040 $496
======= ====== ==== ====== ====
- -----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 47 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SAFECO Growth Fund
------------------------
Year Ended December 31
------------------------
(In Thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net Investment Income (Loss) $ (6,033) $ (918)
Net Realized Gain (Loss) on Investments and Foreign
Currency Transactions (30,246) 44,781
Net Change in Unrealized Appreciation (Depreciation) 8,592 (92,841)
----------- -----------
Net Change in Net Assets Resulting from Operations (27,687) (48,978)
Dividends to Shareholders from
Net Investment Income
No Load Class -- --
Class A -- --
Class B -- --
Net Realized Gain on Investments
No-Load Class -- (43,556)
Class A -- (1,055)
Class B -- (497)
----------- -----------
Total -- (45,108)
Net Trust Share Transactions
No-Load Class (551,458) 846,267
Class A (6,151) 32,104
Class B (935) 15,181
----------- -----------
Total (558,544) 893,552
----------- -----------
Total Change in Net Assets (586,231) 799,466
Net Assets at Beginning of Period 1,443,506 644,040
----------- -----------
Net Assets at End of Period $ 857,275 $ 1,443,506
=========== ===========
- -------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 48 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO Northwest
SAFECO Equity Fund SAFECO Income Fund Fund
- -------------------------- ------------------------ -----------------------
Year Ended December Year Ended
Year Ended December 31 31 December 31
- -------------------------- ------------------------ -----------------------
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 16,109 $ 17,446 $ 7,467 $ 10,977 $ (444) $ (373)
108,654 79,369 11,161 20,424 8,020 1,091
72,979 295,679 (17,088) (10,865) 28,195 1,410
- ----------- ----------- -------- -------- -------- -------
197,742 392,494 1,540 20,536 35,771 2,128
(15,806) (17,149) (7,391) (10,921) -- --
(255) (343) (42) (33) -- --
-- -- (25) (22) -- --
(104,376) (76,799) (10,871) (20,354) (7,222) (658)
(2,993) (1,908) (73) (105) (358) (23)
(1,372) (656) (85) (110) (370) (28)
- ----------- ----------- -------- -------- -------- -------
(124,802) (96,855) (18,487) (31,545) (7,950) (709)
51,436 246,560 (79,020) 8,124 8,418 (2,513)
9,565 37,060 99 1,405 1,472 831
10,780 12,194 288 1,483 1,034 1,475
- ----------- ----------- -------- -------- -------- -------
71,781 295,814 (78,633) 11,012 10,924 (207)
- ----------- ----------- -------- -------- -------- -------
144,721 591,453 (95,580) 3 38,745 1,212
2,092,463 1,501,010 403,528 403,525 68,405 67,193
- ----------- ----------- -------- -------- -------- -------
$ 2,237,184 $ 2,092,463 $307,948 $403,528 $107,150 $68,405
=========== =========== ======== ======== ======== =======
- -----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 49 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SAFECO International Fund
-------------------------
Year Ended December 31
-------------------------
(In Thousands) 1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Operations
Net Investment Income (Loss) $ 49 $ 14
Net Realized Gain (Loss) on
Investments and Foreign Currency
Transactions 488 (910)
Net Change in Unrealized
Appreciation (Depreciation) 7,927 3,209
------------ ------------
Net Change in Net Assets Resulting
from Operations 8,464 2,313
Dividends to Shareholders from
Net Investment Income
No-Load Class -- --
Class A -- --
Class B -- --
Net Realized Gain on Investments
No Load Class -- --
Class A -- --
Class B -- --
------------ ------------
Total -- --
Net Trust Share Transactions
No-Load Class 6,926 5,155
Class A 338 273
Class B 329 396
------------ ------------
Total 7,593 5,824
------------ ------------
Total Change in Net Assets 16,057 8,137
Net Assets at Beginning of Period 23,517 15,380
------------ ------------
Net Assets at End of Period $ 39,574 $ 23,517
============ ============
- --------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 50 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO
SAFECO Balanced Fund SAFECO Small Company Fund U.S. Value Fund
- ------------------------- ----------------------------- -------------------
Year Ended
Year Ended December 31 Year Ended December 31 December 31
- ------------------------- ----------------------------- -------------------
1999 1998 1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 552 $ 505 $ (163) $ (220) $ 96 $ 102
438 890 (5,990) (4,172) 451 464
(709) 679 9,193 (9,513) (51) 598
- ----------- ----------- ------------ ------------ ------- -------
281 2,074 3,040 (13,905) 496 1,164
(481) (476) -- -- (93) (102)
(32) (12) -- -- (1) (1)
(37) (16) -- -- -- --
(344) (771) -- -- (408) (428)
(49) (36) -- -- (14) (9)
(49) (83) -- -- (30) (27)
- ----------- ----------- ------------ ------------ ------- -------
(992) (1,394) -- -- (546) (567)
(547) 4,868 (9,618) 25,617 (70) 377
1,732 660 (272) 1,449 125 69
574 1,675 94 930 126 392
- ----------- ----------- ------------ ------------ ------- -------
1,759 7,203 (9,796) 27,996 181 838
- ----------- ----------- ------------ ------------ ------- -------
1,048 7,883 (6,756) 14,091 131 1,435
22,086 14,203 37,416 23,325 10,852 9,417
- ----------- ----------- ------------ ------------ ------- -------
$ 23,134 $ 22,086 $ 30,660 $ 37,416 $10,983 $10,852
=========== =========== ============ ============ ======= =======
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 51 -
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Notes to Financial Statements
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 invest-
ment 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 U.S.
Value Fund (together "the Funds").
Effective September 30, 1996, the Trust began issuing two classes of
shares--Class A and Class B shares. Unlike the no-load class of shares (which
are sold directly to the shareholder with no associated sales or distribution
charges), these classes of shares are sold by financial advisors to sharehold-
ers 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 Class A and Class B shares, the Funds
adopted a Plan of Distribution (the "Plan"). Under the Plan, each Class pays a
service fee to the distributor, SAFECO Securities Inc., for selling its shares
at the annual rate of .25% of the average daily net assets of the Class A and
Class B shares. 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 com-
pensate persons selling Class A and Class B shares for providing ongoing serv-
ices and the maintenance of shareholder accounts. The distributor uses the
distribution fees primarily to offset the commissions it pays to financial ad-
visors 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 pol-
icies are in conformity with generally accepted accounting principles.
Security Valuation. Investments in securities are valued at the last re-
ported sales price, unless there are no transactions in which case they are
valued at the last reported bid price. When valuations are not readily avail-
able, securities are valued at fair value as determined in good faith by the
board of trustees. Temporary investments purchased at par are
- 52 -
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 fed-
eral 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 notifica-
tion in the case of certain foreign securities. Interest is accrued on short-
term investments and bonds daily. Income from market discount is recorded at
disposition.
Dividends and Distributions to Shareholders. For the Growth, Northwest,
International and Small Company Funds, net investment income (if any) is de-
clared 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.
Income dividends and capital gain distributions are determined in accor-
dance with income tax regulation which may differ from generally accepted ac-
counting principles. These differences are primarily due to differing treat-
ments for foreign exchange contracts and wash sale deferrals. Accumulated net
investment income and realized gain/loss may include temporary financial re-
porting and tax basis differences which will reverse in subsequent year.
Federal Income and Excise Taxes. Each Fund intends to comply with the re-
quirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all taxable income to their sharehold-
ers 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 ex-
pressed 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 re-
spective dates of such transactions.
- 53 -
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
The International Fund does not isolate that portion of the results of op-
erations 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, in-
terest, 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, result-
ing 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 for-
eign 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 ex-
change contract and are included in the Statements of Assets and Liabilities
and the Statement of Operations. Risks may arise upon entering into these con-
tracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Estimates. The preparation of financial statements in conformity with gen-
erally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the report-
ing period. Actual results could differ from those estimates.
- 54 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT TRANSACTIONS
Following is a summary of investment transactions (excluding short-term se-
curities) during the year ended December 31, 1999:
<TABLE>
<CAPTION>
(In Thousands) Purchases Sales
- -------------------------------------------------------------------
<S> <C> <C>
Growth Fund $399,709 $982,167
Equity Fund 781,123 739,806
Income Fund 141,183 219,682
Northwest Fund 39,376 36,553
International Fund 17,229 6,580
Balanced Fund 22,971 21,580
Small Company Fund 33,971 40,195
U.S. Value Fund 5,670 6,031
- -------------------------------------------------------------------
</TABLE>
Purchases in the Balanced Fund include $8,965 of U.S. Government securities.
Sales in the Balanced Fund include $8,409 of U.S. Government securities.
- 55 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. TRUST SHARE TRANSACTIONS
Following is a summary of transactions in shares and the related amounts
(in thousands):
<TABLE>
<CAPTION>
SAFECO Growth Fund
-------------------------------------------------------------
No-Load Class A Class B
------------------------ ----------------- ----------------
For the Year Ended December 31
-------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 26,975 89,342 536 1,454 211 681
Reinvestments -- 1,873 -- 45 -- 22
Redemptions (53,419) (58,229) (835) (193) (264) (65)
----------- ----------- -------- ------- ------- -------
Net Change (26,444) 32,986 (299) 1,306 (53) 638
=========== =========== ======== ======= ======= =======
Amounts:
Sales $ 571,275 $ 2,179,487 $ 11,412 $35,247 $ 4,371 $16,101
Reinvestments -- 42,509 -- 1,009 -- 486
Redemptions (1,122,733) (1,375,729) (17,563) (4,152) (5,306) (1,406)
----------- ----------- -------- ------- ------- -------
Net Change $ (551,458) $ 846,267 $(6,151) $32,104 $ (935) $15,181
=========== =========== ======== ======= ======= =======
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO Equity Fund
---------------------------------------------------------
No-Load Class A Class B
-------------------- ----------------- ----------------
For the Year Ended December 31
---------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 22,947 29,980 784 2,002 540 604
Reinvestments 4,755 3,861 132 97 57 28
Redemptions (25,424) (23,017) (518) (306) (156) (70)
--------- --------- -------- ------- ------- -------
Net Change 2,278 10,824 398 1,793 441 562
========= ========= ======== ======= ======= =======
Amounts:
Sales $ 559,406 $ 654,422 $ 19,136 $41,546 $13,214 $13,097
Reinvestments 114,357 88,790 3,189 2,241 1,359 650
Redemptions (622,327) (496,652) (12,760) (6,727) (3,793) (1,553)
--------- --------- -------- ------- ------- -------
Net Change $ 51,436 $ 246,560 $ 9,565 $37,060 $10,780 $12,194
========= ========= ======== ======= ======= =======
- -------------------------------------------------------------------------
</TABLE>
- 56 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAFECO Income Fund
------------------------------------------------------------
No-Load Class A Class B
----------------------- --------------- ----------------
For the Year Ended December 31
------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 1,419 4,553 41 66 35 62
Reinvestments 717 1,715 4 5 4 5
Redemptions (5,594) (5,541) (42) (14) (27) (8)
--------- --------- ---- ------ ----- ------
Net Change (3,458) 187 3 57 12 59
========= ========= ==== ====== ===== ======
Amounts:
Sales $ 32,738 $ 114,102 $951 $1,627 $ 808 $1,545
Reinvestments 16,035 27,902 92 119 98 123
Redemptions (127,793) (133,880) (944) (341) (618) (185)
--------- --------- ---- ------ ----- ------
Net Change $ (79,020) $ 8,124 $ 99 $1,405 $ 288 $1,483
========= ========= ==== ====== ===== ======
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO Northwest Fund
-------------------------------------------------------------
No-Load Class A Class B
--------------------- ----------------- -----------------
For the Year Ended December 31
-------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 1,370 987 78 77 49 106
Reinvestments 238 31 13 2 14 1
Redemptions (1,343) (1,165) (26) (31) (16) (28)
-------- -------- ------ ------ ------ ------
Net Change 265 (147) 65 48 47 79
======== ======== ====== ====== ====== ======
Amounts:
Sales $ 29,203 $ 17,313 $1,632 $1,349 $1,006 $1,882
Reinvestments 6,029 549 331 29 342 27
Redemptions (26,814) (20,375) (491) (547) (314) (434)
-------- -------- ------ ------ ------ ------
Net Change $ 8,418 $ (2,513) $1,472 $ 831 $1,034 $1,475
======== ======== ====== ====== ====== ======
- -----------------------------------------------------------------------------
</TABLE>
- 57 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. TRUST SHARE TRANSACTIONS (Continued)
<TABLE>
<CAPTION>
SAFECO International Fund
-------------------------------------------------------------------------
No-Load Class A Class B
------------------------- ------------------- -------------------
For the Year Ended December 31
-------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 3,678 2,000 47 28 35 40
Reinvestments -- -- -- -- -- --
Redemptions (3,179) (1,600) (23) (6) (11) (9)
------- ------- ---- ---- ---- ----
Net Change 499 400 24 22 24 31
======= ======= ==== ==== ==== ====
Amounts:
Sales $52,012 $25,289 $654 $343 $482 $511
Reinvestments -- -- -- -- -- --
Redemptions (45,086) (20,134) (316) (70) (153) (115)
------- ------- ---- ---- ---- ----
Net Change $ 6,926 $ 5,155 $338 $273 $329 $396
======= ======= ==== ==== ==== ====
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO Balanced Fund
-------------------------------------------------------------------------
No-Load Class A Class B
------------------------- ------------------- -------------------
For the Year Ended December 31
-------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 453 1,183 176 72 93 148
Reinvestments 44 66 7 3 7 7
Redemptions (539) (860) (39) (20) (52) (16)
------- ------- ------- ---- ------ ------
Net Change (42) 389 144 55 48 139
======= ======= ======= ==== ====== ======
Amounts:
Sales $ 5,531 $14,335 $2,126 $862 $1,129 $1,783
Reinvestments 527 798 75 41 81 91
Redemptions (6,605) (10,265) (469) (243) (636) (199)
------ ------- ------ ---- ------ ------
Net Change $ (547) $ 4,868 $1,732 $660 $ 574 $1,675
======= ======= ====== ==== ====== ======
- -------------------------------------------------------------------------------------------
</TABLE>
- 58 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAFECO Small Company Fund
--------------------------------------------------------------------
No-Load Class A Class B
----------------------- ------------------- ------------------
For the Year Ended December 31
--------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 3,426 9,098 33 108 40 87
Reinvestments -- -- -- -- -- --
Redemptions (4,351) (7,540) (59) (16) (31) (20)
------- -------- ----- ------ ---- ------
Net Change (925) 1,558 (26) 92 9 67
======= ======== ===== ====== ==== ======
Amounts:
Sales $36,187 $137,539 $ 347 $1,634 $405 $1,156
Reinvestments -- -- -- -- -- --
Redemptions (45,805) (111,922) (619) (185) (311) (226)
------- -------- ----- ------ ---- ------
Net Change $(9,618) $ 25,617 $(272) $1,449 $ 94 $ 930
======= ======== ===== ====== ==== ======
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO U.S. Value Fund
--------------------------------------------------------------------
No-Load Class A Class B
----------------------- ------------------- ------------------
For the Year Ended December 31
--------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 163 225 15 7 16 34
Reinvestments 17 17 1 -- 2 2
Redemptions (189) (215) (5) (1) (8) (3)
------ ------ ---- --- ---- ----
Net Change (9) 27 11 6 10 33
====== ====== ==== === ==== ====
Amounts:
Sales $2,043 $2,687 $179 $81 $196 $410
Reinvestments 202 203 9 4 25 21
Redemptions (2,315) (2,513) (63) (16) (95) (39)
------ ------ ---- --- ---- ----
Net Change $ (70) $ 377 $125 $69 $126 $392
====== ====== ==== === ==== ====
- -------------------------------------------------------------------------------------
</TABLE>
- 59 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
5. COMPONENTS OF NET ASSETS
At December 31, 1999, the components of net assets were as follows:
<TABLE>
<CAPTION>
Growth Equity Income Northwest
(In Thousands) Fund Fund Fund Fund
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross
Unrealized Appreciation
on Investments and
Forward Contracts in
Which There Is an
Excess of Value Over
Identified Cost
$196,433 $ 777,023 $ 97,121 $ 53,171
Aggregate Gross
Unrealized Depreciation
on Investments and
Forward Contracts in
Which There is an
Excess of Identified
Cost Over Value
(196,425) (79,265) (21,743) (4,130)
-------- ---------- -------- --------
Net Unrealized
Appreciation 8 697,758 75,378 49,041
Accumulated Net Realized
Gain (Loss) on
Investments:
Wash Sale Deferral* (351)* -- -- --
Other (31,148)** -- -- --
Paid in Capital (Par
Value $.001, Unlimited
Shares Authorized) 888,766 1,539,426 232,570 58,110
-------- ---------- -------- --------
Net Assets at December
31, 1999 $857,275 $2,237,184 $307,948 $107,150
======== ========== ======== ========
</TABLE>
- 60 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Small U.S.
International Balanced Company 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
$13,205 $ 2,539 $ 6,624 $ 1,921
Aggregate Gross
Unrealized Depreciation
on Investments and
Forward Contracts in
Which There is an
Excess of Identified
Cost Over Value
(687) (1,308) (2,679) (714)
------- ------- ------- -------
Net Unrealized
Appreciation 12,518 1,231 3,945 1,207
Accumulated Net Realized
Gain (Loss) on
Investments:
Wash Sale Deferral* (30)* (5)* -- --
Other (160)** -- (10,162)** --
Paid in Capital (Par
Value $.001, Unlimited
Shares Authorized) 27,246 21,908 36,877 9,776
------- ------- ------- -------
Net Assets at December
31, 1999 $39,574 $23,134 $30,660 $10,983
======= ======= ======= =======
- ------------------------------------------------------------------------
</TABLE>
* Represents accumulated realized losses not currently available to offset fu-
ture distributions.
** At December 31, 1999, these funds had the following amounts of accumulated
net realized losses on investment transactions that represented capital loss
carryforwards for Federal income tax purposes, which expire as follows:
<TABLE>
<CAPTION>
Amounts Expiration Dates
------- ----------------
<S> <C> <C>
Growth Fund $31,148 2006-2007
International Fund 160 2006-2007
Small Company Fund 10,162 2006-2007
</TABLE>
- 61 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
6. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fees. Effective May 1, 1999, shareholders approved an
amended and restated investment advisory contract with SAFECO Asset Management
Company. The fees paid by the Funds under the new contract are based on a per-
centage of each day's net assets, which, on an annual basis, are as follows:
<TABLE>
<S> <C>
Growth, Equity, Income,
Northwest, Balanced
and U.S. Value Funds:
First $250 million .70%
Next $500 million .65
Next $500 million .60
Over $1.25 billion .55
Small Company Fund:
First $250 million .75%
Next $500 million .70
Next $500 million .65
Over $1.25 billion .60
International Fund:
First $250 mil-
lion 1.00%
Next $500 million .90
Over $750 million .80
</TABLE>
SAFECO Asset Management Company pays sub-advisory fees to Bank of Ireland
Asset Management Company (U.S.) Limited for providing investment research and
advice to the International Fund.
Fund Accounting and Fund Administration Fees. Beginning May 1, 1999, SAFECO
Asset Management Company receives a fee for these services based on a percent-
age of each day's net assets, which, on an annual basis is as follows:
<TABLE>
<S> <C>
Fund Accounting:
First $200 million 0.04%
Over $200 million 0.01
</TABLE>
<TABLE>
<S> <C>
Fund Administration:
First $200 mil-
lion 0.05%
Over $200 million 0.01
</TABLE>
Transfer Agent, Shareholder Service, and Distribution Fees. SAFECO Services
Corporation receives transfer agent fees. SAFECO Securities, Inc. receives
shareholder service, and distribution fees.
- 62 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Notes Payable and Interest Expense. The Funds may borrow money for tempo-
rary purposes from SAFECO Corporation or its affiliates at rates equivalent to
commercial bank interest rates. At December 31, 1999, the Growth Fund had a
5.50% note payable to SAFECO Life Limited Maturity for $350,000. The note was
repaid on 1/10/00.
Line of Credit. The Trust, together with all other management investment
companies for which SAFECO Asset Management Company serves as investment advi-
sor, has line of credit arrangements with certain financial institutions. Under
these arrangements, $200 million is available to meet short-term financing
needs.
Affiliate Ownership. At December 31, 1999, SAFECO Insurance Company of
America, owned 450,000 shares (11% of outstanding shares) of the Northwest Fund
and SAFECO Asset Management Company owned 688,168 shares (30%) of the Interna-
tional Fund, 519,268 shares (27%) of the Balanced Fund, and 500,000 shares
(55%) of the U.S. Value Fund.
Expense Reimbursement. Beginning May 1, 1999, SAFECO Asset Management Com-
pany agreed to reimburse the Funds for operating expenses (i.e. all expenses
except investment advisory distribution, service fees and interest) which ex-
ceed on an annual basis 0.40% of the average daily net assets.
Dealer Concessions. SAFECO Securities, Inc. retained the following amounts
in dealer commissions from sales of Class A Shares during the year ended Decem-
ber 31, 1999:
<TABLE>
<CAPTION>
Commissions
Retained
- -------------------------------
<S> <C>
Growth Fund $10,556
Equity Fund 33,040
Income Fund 2,855
Northwest Fund 4,730
International Fund 1,276
Balanced Fund 3,046
Small Company Fund 1,273
U.S. Value Fund 678
- -------------------------------
</TABLE>
- 63 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
7. INVESTMENTS IN AFFILIATES
Each of the companies listed below is an affiliate of the Growth Fund be-
cause the Fund owned at least 5% of the company's voting securities during the
year ended December 31, 1999.
<TABLE>
<CAPTION>
Market
(In Thousands) Shares at Shares at Value
Beginning End December
Security of Period Additions Reductions of Period Dividends 31 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
*American Buildings Co. 360 -- (360) -- -- $ --
American Coin
Merchandising, Inc. 391 -- (34) 357 -- 981
American Healthcorp,
Inc. 282 335 (64) 553 -- 2,521
Anesta Corp. 347 516 (104) 759 -- 13,040
Blue Rhino Corp. -- 624 -- 624 -- 6,080
BNC Mortgage, Inc. 484 -- (67) 417 -- 2,712
Concepts Direct, Inc. 480 -- -- 480 -- 5,215
*Creditrust Corp. 489 549 (567) 471 -- --
Damark International,
Inc. 755 -- (40) 715 -- 11,260
*Discreet Logic, Inc. 1,618 -- (1,618)+ -- -- --
Dura Pharmaceuticals,
Inc. 2,546 -- (240) 2,306 -- 32,144
Dynamex, Inc. 642 -- (31) 611 -- 917
Emisphere Technologies,
Inc. -- 984 -- 984 -- 29,595
*Emmis Communications
Corp. (Class A) 1,242 49 (1,291) -- -- --
*Family Golf Centers,
Inc. 2,512 -- (2,512) -- -- --
*First Commonwealth,
Inc. 344 -- (344) -- -- --
French Fragrances, Inc. 895 30 -- 925 -- 5,955
Funco, Inc. 354 -- -- 354 -- 3,964
Hall, Kinion &
Associates, Inc. 899 -- (94) 805 -- 17,310
Harold's Stores, Inc. 542 -- -- 542 -- 2,033
Home Products
International, Inc. 293 77 -- 370 -- 3,838
Innotrac Corp. 676 337 -- 1,013 -- 13,934
*IntelliQuest
Information Group, Inc. 840 -- (840) -- -- --
Lifeline Systems, Inc. 514 54 (7) 561 -- 8,408
MICROS Systems, Inc. 1,202 24 (74) 1,152 -- 85,213
NCO Group, Inc. 1,456 1,215 (1,143) 1,528 -- 46,041
Nastech Pharmaceutical
Co., Inc. 609 -- (114) 495 -- 1,670
Nu Skin Enterprises,
Inc. (Class A) 1,505 843 -- 2,348 -- 21,282
*Open Plan Systems, Inc. 245 -- (245) -- -- --
Phoenix International
Ltd., Inc. 623 209 -- 832 -- 3,223
PolyMedica Industries,
Inc. 886 359 -- 1,245 -- 28,791
Precision Auto Care,
Inc. 607 -- (15) 592 -- 666
Prime Medical Services,
Inc. 1,121 105 -- 1,226 -- 11,190
*Recovery Engineering,
Inc. 342 -- (342) -- -- --
Rent-A-Center, Inc. 741 1,592 (45) 2,288 -- 45,331
Rent-Way, Inc. 108 1,609 (11) 1,706 -- 31,883
*Schlotzsky's, Inc. 493 -- (194) 299 -- --
Serologicals Corp. 543 1,903 (99) 2,347 -- 14,081
*Sirrom Capital Corp. 3,723 -- (3,723)++ -- -- --
*Stage Stores, Inc. 2,112 -- (2,112) -- -- --
Suburban Lodges of
America, Inc. 1,529 -- (502) 1,027 -- 5,327
TRM Copy Centers Corp. 698 12 -- 710 -- 4,349
*Teardrop Golf Co. 314 -- (314) -- -- --
*TETRA Technologies,
Inc. 710 -- (588) 122 -- --
Towne Services, Inc. 817 638 (20) 1,435 -- 5,741
Travis Boats & Motors,
Inc. 153 118 -- 271 -- 3,252
*Waterside Capital Corp. 118 6** (124) -- -- --
Weider Nutrition
International, Inc. 728 -- (212) 516 90 1,903
--------
$469,850
========
- ------------------------------------------------------------------------------------------
</TABLE>
*Company was not an affiliate at the end of the period.
**Represents a 5% Stock Dividend
+Acquired by Autodesk, Inc.
++Acquired by Finova Group, Inc.
- 64 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS.
At December 31, 1999, the International Fund had open forward foreign cur-
rency exchange contracts obligating it to receive or deliver the following for-
eign currencies:
<TABLE>
<CAPTION>
(In Thousands)
U.S. Dollar Unrealized
Currency In Exchange Settlement Value as of Appreciation
to be Delivered For Date Dec. 31, 1999 (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
59,303 Japanese Yen $ 560 01/18/00 $ 582 ($22)
31,308 Japanese Yen 302 02/09/00 308 (6)
41,366 Japanese Yen 399 02/18/00 408 (9)
35,384 Japanese Yen 339 02/24/00 349 (10)
24,834 Japanese Yen 242 02/29/00 245 (3)
------ ------ ----
$1,842 $1,892 ($50)
====== ====== ====
</TABLE>
9. NET INVESTMENT LOSS.
The Growth, Northwest, International and Small Company Funds had net in-
vestment losses for the year ended December 31, 1999. For the Northwest Fund
this amount was netted against short-term capital gains to reduce the short-
term capital gain distribution. For the Growth, International and Small Company
Funds these amounts were recorded as a reduction of paid in capital.
- 65 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Growth Fund
No-Load Class
<TABLE>
<CAPTION>
Three-Month For the
For the Year Ended Period Ended Year Ended
December 31 December 31 September 30
------------------------------------------------------------------
1999 1998 1997 1996 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 22.70 $ 22.45 $ 16.97 $ 15.45 $ 15.83 $ 17.37
Income From Investment
Operations
Net Investment Income
(Loss) (0.16) (0.01) (0.02) (0.02) (0.02) 0.07
Net Realized and
Unrealized Gain on
Investments 0.76 0.99 8.50 1.77 2.24 4.07
-------- ---------- -------- -------- -------- --------
Total from Investment
Operations 0.60 0.98 8.48 1.75 2.22 4.14
Less Distributions
Dividends from Net
Investment Income -- -- -- -- -- (0.07)
Distributions from
Realized Gains -- (0.73) (3.00) (0.23) (2.60) (5.61)
-------- ---------- -------- -------- -------- --------
Total Distributions -- (0.73) (3.00) (0.23) (2.60) (5.68)
-------- ---------- -------- -------- -------- --------
Net Asset Value at End
of Period $ 23.30 $ 22.70 $ 22.45 $ 16.97 $ 15.45 $ 15.83
======== ========== ======== ======== ======== ========
Total Return 2.64% 4.37% 49.96% 11.35%* 14.16% 23.93%
Net Assets at End of
Period (000's) $815,041 $1,394,225 $638,562 $195,760 $179,574 $176,483
Ratio of Gross Expenses
to Average Net Assets 1.07% 0.77% 0.85% 0.99%** 1.02% 0.98%
Ratio of Net Expenses to
Average Net Assets 1.02% 0.77% 0.85% 0.99%** 1.02% 0.98%
Ratio of Net Investment
Income (Loss) to
Average Net Assets (.57%) (0.06%) (.17%) (.51%)** (.14%) .34%
Portfolio Turnover Rate 38.32% 54.58% 82.57% 82.93%** 124.79% 110.44%
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 66 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Equity Fund
No-Load Class
<TABLE>
<CAPTION>
Three-Month For the
For the Year Ended Period Ended Year Ended
December 31 December 31 September 30
-----------------------------------------------------------------------
1999 1998 1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 23.25 $ 19.54 $ 16.60 $ 15.85 $ 15.31 $ 13.89
Income From Investment
Operations
Net Investment Income 0.18 0.21 0.23 0.06 0.28 0.34
Net Realized and
Unrealized Gain on
Investments 2.00 4.64 3.78 1.33 2.42 2.59
---------- ---------- ---------- -------- -------- --------
Total from Investment
Operations 2.18 4.85 4.01 1.39 2.70 2.93
Less Distributions
Dividends from Net
Investment Income (0.18) (0.21) (0.23) (0.06) (0.28) (0.34)
Distributions from
Realized Gains (1.23) (0.93) (0.84) (0.58) (1.88) (1.17)
---------- ---------- ---------- -------- -------- --------
Total Distributions (1.41) (1.14) (1.07) (0.64) (2.16) (1.51)
---------- ---------- ---------- -------- -------- --------
Net Asset Value at End
of Period $ 24.02 $ 23.25 $ 19.54 $ 16.60 $ 15.85 $ 15.31
========== ========== ========== ======== ======== ========
Total Return 9.37% 24.93% 24.21% 8.79%* 18.04% 21.59%
Net Assets at End of
Period (000's) $2,147,299 $2,024,877 $1,490,198 $849,831 $725,780 $598,582
Ratio of Expenses to
Average Net Assets 0.83% 0.74% 0.73% 0.78%** 0.79% 0.84%
Ratio of Net Investment
Income to Average Net
Assets 0.73% 0.99% 1.24% 1.48%** 1.74% 2.38%
Portfolio Turnover Rate 33.66% 32.94% 34.26% 59.34%** 74.07% 56.14%
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 67 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Income Fund
No-Load Class
<TABLE>
<CAPTION>
Three-Month For the
For the Year Ended Period Ended Year Ended
December 31 December 31 September 30
-------------------------------------------------------------
1999 1998 1997 1996 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 23.47 $ 23.89 $ 21.13 $ 20.03 $ 19.11 $ 17.25
Income From Investment
Operations
Net Investment Income 0.50 0.64 0.65 0.15 0.73 0.82
Net Realized and
Unrealized Gain (Loss)
on Investments (0.25) 0.86 4.87 1.63 2.84 2.71
-------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.25 1.50 5.52 1.78 3.57 3.53
Less Distributions
Dividends from Net
Investment Income (0.50) (0.64) (0.65) (0.15) (0.73) (0.82)
Distributions from
Realized Gains (0.83) (1.28) (2.11) (0.53) (1.92) (0.85)
-------- -------- -------- -------- -------- --------
Total Distributions (1.33) (1.92) (2.76) (0.68) (2.65) (1.67)
-------- -------- -------- -------- -------- --------
Net Asset Value at End
of Period $ 22.39 $ 23.47 $ 23.89 $ 21.13 $ 20.03 $ 19.11
======== ======== ======== ======== ======== ========
Total Return 1.17% 6.31% 26.43% 8.89%* 18.98% 21.04%
Net Assets at End of
Period (000's) $303,537 $399,279 $401,985 $289,968 $260,023 $217,870
Ratio of Expenses to
Average Net Assets 0.99% 0.82% 0.85% 0.89%** 0.86% 0.87%
Ratio of Net Investment
Income to Average Net
Assets 2.18% 2.54% 2.81% 2.89%** 3.56% 4.55%
Portfolio Turnover Rate 42.25% 46.14% 52.14% 37.84%** 50.11% 31.12%
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 68 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Northwest Fund
No-Load Class
<TABLE>
<CAPTION>
Three-Month For the
For the Year Ended Period Ended Year Ended
December 31 December 31 September 30
--------------------------------------------------------
1999 1998 1997 1996 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 17.73 $ 17.31 $ 14.07 $ 13.78 $ 14.41 $ 12.59
Income From Investment
Operations
Net Investment Income
(Loss) (0.10) (0.09) (0.03) (0.01) 0.02 0.04
Net Realized and
Unrealized Gain on
Investments 9.71 0.70 4.41 0.30 1.32 2.35
------- ------- ------- ------- ------- -------
Total from Investment
Operations 9.61 0.61 4.38 0.29 1.34 2.39
Less Distributions
Dividends from Net
Investment Income -- -- -- -- (0.02) (0.04)
Distributions from
Realized Gains (2.01) (0.19) (1.14) -- (1.95) (0.53)
------- ------- ------- ------- ------- -------
Total Distributions (2.01) (0.19) (1.14) -- (1.97) (0.57)
------- ------- ------- ------- ------- -------
Net Asset Value at End
of Period $ 25.33 $ 17.73 $ 17.31 $ 14.07 $ 13.78 $ 14.41
======= ======= ======= ======= ======= =======
Total Return 54.25% 3.50% 31.12% 2.10%* 9.61% 19.01%
Net Assets at End of
Period (000's) $97,534 $63,594 $64,635 $43,345 $43,128 $40,140
Ratio of Gross Expenses
to Average Net Assets 1.17% 1.12% 1.09% 1.25%** 1.07% 1.09%
Ratio of Net Expenses to
Average Net Assets 1.10% 1.12% 1.09% 1.25%** 1.07% 1.09%
Ratio of Net Investment
Income (Loss) to
Average Net Assets (.54%) (0.49%) (.19%) (.31%)** 0.11% 0.31%
Portfolio Turnover Rate 48.52% 50.40% 55.42% 67.32%** 35.69% 19.59%
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 69 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO International Fund
No-Load Class
<TABLE>
<CAPTION>
January 31,
1996
(Commencement
of
Three-Month Operations)
For the Year Ended Period Ended to September
December 31 December 31 30
----------------------------------------------------
1999 1998 1997 1996 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 13.14 $ 11.50 $ 11.29 $ 10.39 $10.00
Income From Investment
Operations
Net Investment Income 0.03 0.01 0.24 -- 0.06
Net Realized and
Unrealized Gain on
Investments and
Foreign Currency
Transactions 3.78 1.63 0.28 0.96 0.39
------- ------- ------- ------- ------
Total from Investment
Operations 3.81 1.64 0.52 0.96 0.45
Less Distributions
Dividends from Net
Investment Income -- -- (0.29) (0.06) (0.06)
Distributions from
Realized Gains -- -- (0.02) -- --
------- ------- ------- ------- ------
Total Distributions -- -- (0.31) (0.06) (0.06)
------- ------- ------- ------- ------
Net Asset Value at End
of Period $ 16.95 $ 13.14 $ 11.50 $ 11.29 $10.39
======= ======= ======= ======= ======
Total Return 29.00% 14.26% 4.55% 9.27%* 4.54%*
Net Assets at End of
Period (000's) $36,967 $22,111 $14,754 $11,157 $8,323
Ratio of Gross Expenses
to Average Net Assets 1.72% 1.79% 1.89% 1.68%** 2.36%**
Ratio of Net Expenses to
Average Net Assets 1.69% 1.62% 1.63% 1.37%** 2.36%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets .21% 0.14% 0.58% (.19%)** .93%**
Portfolio Turnover Rate 23.56% 25.62% 22.13% 18.51%** 15.73%**
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 70 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Balanced Fund
No-Load Class
<TABLE>
<CAPTION>
January 31,
1996
(Commencement
of
Three-Month Operations)
For the Year Ended Period Ended to September
December 31 December 31 30
-----------------------------------------------------
1999 1998 1997 1996 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 12.22 $ 11.61 $ 10.70 $10.38 $ 10.00
Income From Investment
Operations
Net Investment Income 0.31 0.32 0.32 0.08 0.21
Net Realized and
Unrealized Gain (Loss)
on Investments (0.18) 1.12 1.45 0.45 0.39
------- ------- ------- ------ -------
Total from Investment
Operations 0.13 1.44 1.77 0.53 0.60
Less Distributions
Dividends from Net
Investment Income (0.31) (0.32) (0.32) (0.08) (0.21)
Distributions from
Realized Gains (0.23) (0.51) (0.54) (0.13) (0.01)
------- ------- ------- ------ -------
Total Distributions (0.54) (0.83) (0.86) (0.21) (0.22)
------- ------- ------- ------ -------
Net Asset Value at End
of Period $ 11.81 $ 12.22 $ 11.61 $10.70 $ 10.38
======= ======= ======= ====== =======
Total Return 1.05% 12.56% 16.64% 5.11%* 5.99%*
Net Assets at End of
Period (000's) $18,008 $19,137 $13,667 $8,262 $ 7,632
Ratio of Gross Expenses
to Average Net Assets 1.33% 1.17% 1.23% 1.52%** 1.32%**
Ratio of Net Expenses to
Average Net Assets 1.14% 1.17% 1.23% 1.16%** 1.32%**
Ratio of Net Investment
Income to Average Net
Assets 2.51% 2.74% 2.85% 3.19%** 3.21%**
Portfolio Turnover Rate 94.73% 74.76% 101.22% 36.10%** 143.87%**
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 71 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Small Company Fund
No-Load Class
<TABLE>
<CAPTION>
January 31,
1996
(Commencement
of
Three-Month Operations)
For the Year Ended Period Ended to September
December 31 December 31 30
--------------------------------------------------------
1999 1998 1997 1996 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 11.16 $ 14.23 $ 11.81 $ 11.51 $ 10.00
Income From Investment
Operations
Net Investment Income
(Loss) (0.06) (0.06) (0.04) (0.01) (0.01)
Net Realized and
Unrealized Gain (Loss)
on Investments 1.63 (3.01) 2.80 0.31 2.19
------- ------- ------- ------- -------
Total from Investment
Operations 1.57 (3.07) 2.76 0.30 2.18
Less Distributions
Distributions from
Realized Gains -- -- (0.34) -- (0.67)
------- ------- ------- ------- -------
Net Asset Value at End
of Period $ 12.73 $ 11.16 $ 14.23 $ 11.81 $ 11.51
======= ======= ======= ======= =======
Total Return 14.07% (21.57%) 23.38% 2.61%* 21.83%*
Net Assets at End of
Period (000's) $28,319 $35,162 $22,658 $13,169 $12,552
Ratio of Gross Expenses
to Average Net Assets 1.44% 1.28% 1.33% 1.58%** 1.49%**
Ratio of Net Expenses to
Average Net Assets 1.20% 1.28% 1.33% 1.35%** 1.49%**
Ratio of Net Investment
(Loss) to Average Net
Assets (.49%) (.49%) (.41%) (.44%)** (.24%)**
Portfolio Turnover Rate 116.58% 90.23% 60.81% 73.47%** 91.03%**
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 72 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
10. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO U.S. Value Fund
No-Load Class
<TABLE>
<CAPTION>
April 30,
1997
(Commencement
of
Operations)
For the Year Ended to December
December 31 31
-------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value at
Beginning of Period $11.95 $ 11.19 $10.00
Income From Investment Operations
Net Investment Income 0.11 0.12 0.09
Net Realized and Unrealized Gain on
Investments 0.50 1.28 1.66
------ ------- ------
Total from Investment Operations 0.61 1.40 1.75
Less Distributions
Dividends from Net Investment Income (0.11) (0.12) (0.09)
Distributions from Realized Gains (0.50) (0.52) (0.47)
------ ------- ------
Total Distributions (0.61) (0.64) (0.56)
------ ------- ------
Net Asset Value at End of Period $11.95 $ 11.95 $11.19
====== ======= ======
Total Return 5.15% 12.61% 17.50%*
Net Assets at End of Period (000's) $9,905 $10,014 $9,063
Ratio of Gross Expenses to Average Net Assets 1.52% 1.19% 1.19%**
Ratio of Net Expenses to Average Net Assets 1.17% 1.19% 1.19%**
Ratio of Net Investment Income to Average Net
Assets 0.93% 1.06% 1.26%**
Portfolio Turnover Rate 52.15% 55.15% 36.37%**
</TABLE>
- --------------------------------------------------------------------------------
*Not annualized.
**Annualized.
- 73 -
<PAGE>
Report of ERNST & YOUNG LLP, Independent Auditors
To the Board of Trustees and Shareholders of the SAFECO Common Stock Trust
We have audited the accompanying statements of assets and liabilities, in-
cluding the portfolios of investments, of the SAFECO Common Stock Trust (com-
prising, respectively, the SAFECO Growth Fund, SAFECO Equity Fund, SAFECO In-
come Fund, SAFECO Northwest Fund, SAFECO International Stock Fund, SAFECO Bal-
anced Fund, SAFECO Small Company Stock Fund, and SAFECO U.S. Value Fund) as of
December 31, 1999, and the related statements of operations for the year then
ended, the statements of changes in net assets and the financial highlights
for each of the periods indicated therein. These financial statements and fi-
nancial highlights are the responsibility of the Trust's management. Our re-
sponsibility is to express an opinion on these financial statements and finan-
cial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An au-
dit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our proce-
dures included confirmation of securities owned as of December 31, 1999, by
correspondence with the custodians and brokers. An audit also includes assess-
ing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting the SAFECO Common Stock Trust at De-
cember 31, 1999, the results of their operations, the changes in their net as-
sets and financial highlights for each of the periods referred to above, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Seattle, Washington
February 4, 2000
- 74 -
<PAGE>
Year 2000 Readiness (Unaudited)
All Year 2000 readiness work was completed prior to December 31, 1999. The
Funds have experienced no disruption in their operations or service levels, and
do not expect to incur any future disruptions or expense in connection with the
Year 2000 issue.
Shareholder Meeting (Unaudited)
A joint special meeting of the Funds' shareholders was held on March 30,
1999, at which time the shareholders voted to approve changes to the Funds'
fundamental investment policies and approved an amended and restated investment
advisory contract, including a change in the fee structure. Shareholders also
elected the Board of Trustees and ratified the selection of Ernst & Young LLP
as independent auditors. The results of that meeting are presented below.
(In Thousands)
<TABLE>
<CAPTION>
Proposal Trust/Fund For Against Abstain
-------- ------------------------------- ------ ------- -------
<C> <S> <C> <C> <C>
Fundamental Investment Growth Fund....................
Policies 24,660 1,336 6,430
Equity Fund.................... 38,199 2,881 6,711
Income Fund.................... 8,319 551 805
Northwest Fund................. 2,010 175 247
International Fund............. 1,359 51 100
Balanced Fund.................. 1,145 8 74
Small Company Fund............. 1,624 76 368
U.S. Value Fund................ 524 38 117
Investment Advisory
Contract Growth Fund.................... 22,587 3,380 6,459
Equity Fund.................... 36,457 4,598 6,737
Income Fund.................... 7,942 908 824
Northwest Fund................. 1,963 220 244
International Fund............. 1,318 103 88
Balanced Fund.................. 1,098 54 76
Small Company Fund............. 1,563 146 360
U.S. Value Fund................ 531 41 108
Elect Boh A. Dickey Common Stock Trust............. 93,436 4,372
Elect Barbara J.
Dingfield Common Stock Trust............. 93,416 4,392
Elect David F. Hill Common Stock Trust............. 93,451 4,356
Elect Richard W.
Hubbard Common Stock Trust............. 93,430 4,377
Elect Richard E.
Lundgren Common Stock Trust............. 93,463 4,344
Elect Larry L. Pinnt Common Stock Trust............. 93,456 4,351
Elect John W.
Schneider Common Stock Trust............. 93,467 4,340
Selection of Ernst &
Young LLP Common Stock Trust............. 93,848 1,313 2,648
</TABLE>
- 75 -
<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
David H. Longhurst Assistant 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)
GMF 659 2/00
Printed on Recycled Paper.
This report must be preceded or accompanied by a current prospectus.
(R) A registered trademark of SAFECO Corporation.
CLIENT SERVICES*:
Monday-Friday,
5:30am-7:00pm Pacific Time
Nationwide: 1-800-624-5711
Deaf and Hard of Hearing TTY/TDD Service: 1-800-438-8718
* All telephone calls are tape-recorded for your protection.
FOR 24-HOUR AUTOMATED PERFORMANCE INFORMATION AND TRANSACTIONS:
Nationwide: 1-800-835-4391
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
INTERNET:
www.safecofunds.com
EMAIL: [email protected]
