SAFECO Mutual Funds

Semiannual Report

SAFECO Stock Funds

Growth Opportunities Fund	1
Equity Fund	6
Dividend Income Fund	11
Northwest Fund	16
International Stock Fund	21
Balanced Fund	27
Small Company Value Fund	34
U.S. Value Fund	39
Small Company Growth Fund	44
U.S. Growth Fund	49

Report From the Fund Manager

SAFECO Growth Opportunities Fund

As of June 30, 2002

    Thomas M. Maguire

How did the Fund perform?

During the six-month period ending June 30, 2002, the SAFECO Growth Opportunities Fund underperformed its benchmark index, the Russell 2000. The magnitude of the underperformance was significant, as the Fund had its share of companies miss earnings targets during the period. Year-to-date, the SAFECO Growth Opportunities Fund is down 17.14% versus the Russell 2000, which is down 4.70%.

As for longer-term performance, it is interesting to note that performance for the Fund over the five-year time period is higher than its benchmark index. This happened even with the underperformance the Fund had these first six months of 2002, and with my reluctance to play the Internet/technology bubble of 1999, and with the Fund owning too much technology in 2000.

What factors impacted performance?

The SAFECO Growth Opportunities Fund had disappointing news in a number of its sizeable holdings during the period.

For example, Matria Healthcare was down 76% after it was unable to secure several key contracts. RMH Teleservices dropped 64% after its largest customer, MCI Communications (a WorldCom subsidiary) became entangled in the nation’s ever-expanding accounting scandals. PLATO Learning lost 40% after budget-crunched school districts slowed spending and forced the company to lower its earnings guidance. TMP Worldwide slid 49% as the ongoing recession began to take its toll on the company’s largest subsidiary, the job-posting site Monster.com.

Still, there were a few names that appreciated significantly, including Rent-Way and Prime Medical Services—both of which were up 100% or more at June 30.

What changes did you make and why?

The SAFECO Growth Opportunities Fund did not make any wholesale changes during the period. Instead, I am continuing along the carefully crafted path that has served it well.

When bear markets are upon us, some stocks get hit worse than others while others hold up relatively well. I have selectively and cautiously decreased positions in stocks that have fared well, while adding to stocks that have been hit hard, but where the fundamentals remain intact. The logic behind this strategy is that when the market turns, companies that are operationally sound but have suffered immensely should bounce back and provide a better return than companies whose stocks did not get severely punished during the downturn.

What is your outlook for the future?

While there are signs that the economy is coming out of a recession, it seems to have no bearing on what continues to be a bear market. Still, it appears that we are now in the capitulation stage of the market cycle. This usually marks the final stage of a bear market, and is characterized by wholesale selling regardless of valuation or fundamentals. If this is the case, I believe investments made now will look

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1

Report From the Fund Manager

SAFECO Growth Opportunities Fund

As of June 30, 2002

positive 12 to 18 months from now. Although I cannot predict exactly when this will happen, I can tell you I feel that the bottom is close.

In a bear market, some stocks get hit so hard they sell at single-digit price earnings multiples or near the cash-per-share level the companies have on their balance sheets, often declining 50%, 60%, 70% and more. The silver lining behind all this bad news is that it is from these depressed stock levels that bull markets are born.

After managing the SAFECO Growth Opportunities Fund for almost 13 years, I have been through difficult markets. There is always another side to a bear market and that is what I’m preparing for. I am selectively purchasing stocks with the potential for great returns from depressed prices. What many forget in times like these is that there are opportunities out there.

Thomas M. Maguire, MBA

Vice President of SAFECO Asset Management; BA Business Administration, University of Washington (1976); MBA, University of Washington (1980)

Thomas M. Maguire started his investment career as an equity analyst at SAFECO in 1981. In 1984, he became a co-portfolio manager of the SAFECO Equity Fund, and in 1989 assumed sole responsibility for the SAFECO Growth Opportunities Fund.

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Performance Overview & Highlights

SAFECO Growth Opportunities Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*	1 Year	5 Year	10 Year
SAFECO Growth Opportunities Fund	(17.14)%	(19.84)%	5.11%	12.94%
Russell 2000 Index	(4.70)%	(8.60)%	4.44%	10.96%
Lipper, Inc. (Small-Cap Core Funds)	(3.42)%	(3.98)%	7.59%	12.50%
* Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Health Care Equipment	16	%
Diversified Commercial Services	15
Biotechnology	11
Health Care Supplies	7
Application Software	7
TOP TEN HOLDINGS	Percent of Net Assets
Rent-Way, Inc. (Diversified Financial Services)	5.4	%
NCO Group, Inc. (Diversified Commercial Services)	5.3
Conceptus, Inc. (Health Care Equipment)	4.8
PolyMedica Corp. (Health Care Supplies)	4.8
MICROS Systems, Inc. (Application Software)	4.6
TMP Worldwide, Inc. (Advertising)	4.4
Iron Mountain, Inc. (Diversified Commercial Services)	3.9
Serologicals Corp. (Biotechnology)	3.9
United Stationers, Inc. (Office Services & Supplies)	3.3
Corinthian Colleges, Inc. (Diversified Commercial Services)	2.4

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
TMP Worldwide, Inc.	$14,623
Med-Design Corp.	12,417
Stellent, Inc.	11,472
IMPCO Technologies, Inc.	11,124
La Jolla Pharmaceutical Co.	8,962
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
iShares Russell 2000 Index Fund	$40,422
iShares S&P SmallCap 600 Index Fund	16,667
Rent-A-Center, Inc.	13,937
Lumenis, Ltd.	13,803
Identix, Inc.	13,765

WEIGHTINGS AS A PERCENT

OF NET ASSETS

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Portfolio of Investments

SAFECO Growth Opportunities Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—98.5%
Advertising—4.4%
1,310,000	*	TMP Worldwide, Inc.	$	28,165
Application Software—7.0%
217,500	*	CryptoLogic, Inc.		1,907
1,061,928	*†	MICROS Systems, Inc.		29,426
1,239,766	*†	PLATO Learning, Inc.		12,236
235,898	*	Private Business, Inc.		873
Auto Parts & Equipment—2.9%
287,700		Autoliv, Inc.		7,250
859,500	*†	IMPCO Technologies, Inc.		11,259
Banks—1.3%
247,435		Doral Financial Corp.		8,262
Biotechnology—10.9%
499,700	*	Applied Molecular Evolution, Inc.		2,888
1,160,000	*	AtheroGenics, Inc.		8,317
664,800	*	Bio-Technology General Corp.		3,995
475,000	*	Cellegy Pharmaceuticals, Inc.		1,045
449,400	*	Ista Pharmaceuticals, Inc.		405
953,200	*†	North American Scientific, Inc.		9,742
587,500	*	Novavax, Inc.		2,503
410,300	*	Pain Therapeutics, Inc.		3,430
370,600	*	SangStat Medical Corp.		8,516
1,345,356	*†	Serologicals Corp.		24,607
571,600	*	SuperGen, Inc.		4,150
Casinos & Gaming—1.2%
424,300	*	Station Casinos, Inc.		7,574
Catalog Retail—0.1%
479,500	*†	Concepts Direct, Inc.		623
Computer Storage & Peripherals—0.0%
43,300	*	iManage, Inc.		145
Diversified Commercial Services—15.3%
459,900	*	Corinthian Colleges, Inc.		15,586
291,600	*	FirstService Corp.		7,369
805,980	*	Iron Mountain, Inc.		24,864
1,539,552	*†	NCO Group, Inc.		33,531
222,900	*	Rent-A-Center, Inc.		12,930
608,400	*	ResortQuest International, Inc.		3,468
Diversified Financial Services—5.4%
2,669,800	*†	Rent-Way, Inc.		34,574
Environmental Services—0.4%
312,900	*	Newpark Resources, Inc.		2,300
Footwear—1.0%
334,900	*	Steven Madden, Ltd.		6,641

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Health Care Distributors & Services—1.2%
606,200	*	MIM Corp.	$	7,329
Health Care Equipment—15.7%
300,150	*	ABIOMED, Inc.		2,545
329,000	*	Aksys, Ltd.		2,270
395,350	*	Align Technology, Inc.		1,598
455,000	*†	American Medical Alert Corp.		1,187
1,854,300	*†	Conceptus, Inc.		30,577
536,600	*	Cytyc Corp.		4,089
1,147,900	*	Endocare, Inc.		15,164
301,800	*	INAMED Corp.		8,064
175,550	*	Lifeline Systems, Inc.		4,624
1,300,000	*	LifePoint, Inc. (Illiquid) (acquired 3/27/02)**††		3,370
443,200	*	Lumenis, Ltd.		1,644
1,044,800	*†	Med-Design Corp.		13,520
1,800,000	*†	PhotoMedex, Inc. (Illiquid) (acquired 6/12/02)**††		2,592
490,300	*†	Physiometrix, Inc.		402
199,000	*	SonoSite, Inc.		2,872
861,000	*†	SpectRx, Inc.		3,366
586,200	*	STAAR Surgical Co.		2,415
Health Care Facilities—4.0%
842,175	*†	Matria Healthcare, Inc.		6,923
1,226,300	*†	Prime Medical Services, Inc.		14,250
636,800	*	Res-Care, Inc.		4,216
Health Care Supplies—7.2%
1,195,200	*†	PolyMedica Corp.		30,525
1,127,500	*	Thoratec Corp.		10,136
347,600	*	VIVUS, Inc.		2,353
134,000	*	Wright Medical Group, Inc.		2,701
Integrated Telecommunications Services—1.0%
968,672	*	RMH Teleservices, Inc.		6,655
Internet Software & Services—2.6%
2,365,188	*	InfoSpace, Inc.		1,064
1,341,003	*†	Stellent, Inc.		6,142
374,500	*	Websense, Inc.		9,576
IT Consulting & Services—1.1%
1,069,508	*	CIBER, Inc. (Illiquid) (acquired 4/25/02)**††		6,978
Managed Health Care—1.1%
300,700	*	AmeriPath, Inc.		7,217
Office Services & Supplies—3.3%
688,800	*	United Stationers, Inc.		20,940
Paper Packaging—1.2%
641,200		Intertape Polymer Group, Inc.		7,444

SEE NOTES TO FINANCIAL STATEMENTS

4

Portfolio of Investments

SAFECO Growth Opportunities Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Personal Products—2.8%
728,600	*	Elizabeth Arden, Inc.	$	12,751
347,200	*	Nu Skin Enterprises, Inc. (Class A)		5,052
Pharmaceuticals—5.2%
200,000	*	Axcan Pharma, Inc.		2,988
200,000	*	Connetics Corp.		2,584
1,149,425	*	Discovery Laboratories, Inc.		2,011
216,735	*	Emisphere Technologies, Inc.		891
404,300	*	Impax Laboratories, Inc.		3,028
1,216,000	*	La Jolla Pharmaceutical Co.		7,600
835,000	*†	Nastech Pharmaceutical Co., Inc.		13,719
Property & Casualty Insurance—0.3%
465,000		Vesta Insurance Group, Inc.		1,990
Semiconductors—0.1%
730,200	*	SONICblue, Inc.		752
Specialty Chemicals—0.9%
320,100	*	Eden Bioscience Corp.		637
530,000	*	Omnova Solutions, Inc.		4,452
33,300		PolyOne Corp.		375
Specialty Stores—0.3%
542,213	*†	Harold’s Stores, Inc.		1,437
710,000	*†	TRM Copy Centers Corp.		604
Systems Software—0.1%
831,700	*†	Sphinx International, Inc. (Illiquid)		507
Telecommunications Equipment—0.3%
465,000	*	Innotrac Corp.		2,246
Wireless Telecommunications Services—0.2%
353,000	*	Western Wireless Corp. (Class A)		1,144
TOTAL COMMON STOCKS (cost $661,504)				628,097
WARRANTS—0.9%
Health Care Equipment—0.3%
113,750	*	American Medical Alert Corp.††		114
92,625	*	Endocare, Inc.††		589
260,000	*	LifePoint, Inc. (Illiquid) (acquired 3/27/02)**††		335
450,000	*	PhotoMedex, Inc. (Illiquid) (acquired 6/12/02)**††		462
172,200	*	SpectRx, Inc.††		332
Integrated Telecommunications Services—0.2%
345,724	*	RMH Teleservices, Inc.††		1,439

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Pharmaceuticals—0.4%
229,885	*	Discovery Laboratories, Inc.††	$	117
217,500	*	Nastech Pharmaceutical Co., Inc.††		2,579
TOTAL WARRANTS (cost $43)				5,967
CASH EQUIVALENTS—0.7%
Investment Companies
4,296,048		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		4,296
TOTAL CASH EQUIVALENTS (cost $4,296)				4,296
TOTAL INVESTMENTS (cost $665,843)—100.1%				638,360
Other Assets, less Liabilities				(495	)
NET ASSETS			$	637,865

  * Non-income producing security.

** Securities are unregistered and restricted as to resale only to dealers, or through a dealer to a “qualified institutional buyer”. The total cost of such securities is $14,099,000 and the total value is $13,737,000 or 2.15% of net assets.

  † 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). Total cost of such securities is $272,376,000.

†† Securities are valued at fair value as determined by, and under supervision of, the Board of Trustees.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

5

Report From the Fund Manager

SAFECO Equity Fund

As of June 30, 2002

Richard Meagley

How did the Fund perform?

During the six-month period, the SAFECO Equity Fund performed poorly versus its benchmark, the S&P 500 index. The Fund and the S&P 500 were down 17.50% and 13.16%, respectively. Even in these trying times for both the market and the economy, shareholders should find comfort in the types of companies this Fund owns. These companies have delivered strong earnings over time, they continue to have solid fundamentals, and I believe these stocks will emerge from the current market slump in good condition.

What factors impacted performance?

Slightly over half of the year-to-date shortfall can be attributed to four stocks: Tyco International, AOL Time Warner, El Paso and Qwest Communications. Each company grew quickly in the last half of the 1990s. However, when the slowdown arrived, it became apparent that for these companies past growth was no indicator of future potential. All of these stocks dropped significantly in the first half of the year.

The healthcare sector also hurt performance. The severity and length of the earnings problems for companies with major patent expirations have been greater than I expected. Also, several companies without patent issues are experiencing earnings slowdowns.

Finally, holdings in what I would call “mega-cap” stocks hurt the Fund. Though this is a large-cap fund, I own more shares than the benchmark in big names like General Electric, Citigroup, Pfizer and Intel. On average, this group turned in a year-to-date performance that is worse than the benchmark.

What changes did you make and why?

I sold the Fund’s Tyco International and Qwest positions, because the long-term case for continuing with the investments was no longer intact. I kept AOL Time Warner and El Paso, because I believe the current prices are attractive even on materially reduced future expectations.

In healthcare, I sold the companies that find themselves in the midst of working through major patent expirations: Bristol-Myers Squibb, Schering-Plough and Merck. I took a new position in Pharmacia (on July 15, Pfizer announced plans to acquire Pharmacia), plus added to my positions in Abbott Laboratories and Wyeth. This last group of companies possesses less future risk relative to negative earnings revisions, yet sell at valuations close to the group of companies that I sold.

In the mega-cap arena, I reduced holdings in Wal-Mart, Microsoft and Intel, because near-term valuations no longer support maintaining the current position levels. However, in the case of General Electric, Pfizer and Citigroup, I chose to maintain the Fund’s current positions.

I increased the weightings in the technology and consumer discretionary sectors during the first half. Also, I have tried to focus, but not exclusively, on companies with more straightforward prospects. It is my belief that such companies will be the better investments in the positive, yet tepid market that I anticipate occurring through year-end.

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Report From the Fund Manager

SAFECO Equity Fund

As of June 30, 2002

What is your outlook for the future?

I feel that things are looking up for the second half of the year. The valuation on the S&P 500 has retreated to more reasonable levels, and at the same time the economy appears to be doing fairly well.

Corporate scandals and investors’ concerns about how much of the late 1990s earnings boom was “borrowed” from the current period will dampen near-term enthusiasm. However, I do believe the overall “mood” will be better by year-end than it is now, and I have endeavored to position the Fund to benefit from this outlook.

Richard Meagley, MBA, CFA

Vice President of SAFECO Asset Management; BA Economics, Wake Forest University (1977); MBA Finance, University of Washington (1982); Chartered Financial Analyst (CFA) (1986)

Richard Meagley joined SAFECO Asset Management Company as an equity analyst in 1983, and was a portfolio manager from 1988 to 1992. After gaining two additional years of portfolio management experience with a Seattle-area investment firm, Rich rejoined the organization in 1995.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

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Performance Overview & Highlights

SAFECO Equity Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		10 Year
SAFECO Equity Fund	(17.50	)%	(20.36	)%	(0.68	)%	11.25	%
S&P 500 Index	(13.16	)%	(17.99	)%	3.66	%	11.42	%
Lipper, Inc. (Large-Cap Core Funds)	(13.66	)%	(19.06	)%	2.23	%	9.77	%
* Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Pharmaceuticals	14	%
Diversified Financial Services	9
Integrated Oil & Gas	8
Banks	8
Systems Software	4
TOP TEN HOLDINGS	Percent of Net Assets
Washington Mutual, Inc. (Banks)	4.8	%
General Electric Co.	4.3
(Industrial Conglomerates)
Pfizer, Inc. (Pharmaceuticals)	4.2
Citigroup, Inc.	3.6
(Diversified Financial Services)
Microsoft Corp. (Systems Software)	3.5
American International Group, Inc.	3.2
(Multi-Line Insurance)
Exxon Mobil Corp. (Integrated Oil & Gas)	2.9
Abbot Laboratories	2.7
(Pharmaceuticals)
Wyeth (Pharmaceuticals)	2.6
ChevronTexaco Corp.	2.6
(Integrated Oil & Gas)

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
Pharmacia Corp.	$19,020
United Technologies Corp.	14,870
Target Corp.	12,366
Kimberly-Clark Corp.	11,501
Kroger Co.	11,353
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Washington Mutual, Inc.	$18,416
Merck & Co., Inc.	16,257
Wal-Mart Stores, Inc.	15,420
Schering-Plough Corp.	15,369
CVS Corp.	14,035

WEIGHTINGS AS A PERCENT

OF NET ASSETS

8

Portfolio of Investments

SAFECO Equity Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—96.1%
Advertising—1.0%
350,000		Interpublic Group Cos., Inc.	$	8,666
Aerospace & Defense—1.7%
210,000		United Technologies Corp.		14,259
Application Software—0.4%
230,000	*	Siebel Systems, Inc.		3,271
Automobile Manufacturers—1.0%
150,000		General Motors Corp.		8,017
Banks—8.0%
250,000		Bank of America Corp.		17,590
400,000		U.S. Bancorp		9,340
1,100,000		Washington Mutual, Inc.		40,821
Brewers—2.0%
330,000		Anheuser-Busch Companies, Inc.		16,500
Computer Hardware—3.1%
400,000	*	Dell Computer Corp.		10,456
175,000		International Business Machines Corp.		12,600
650,000	*	Sun Microsystems, Inc.		3,256
Computer Storage & Peripherals—0.4%
490,000	*	EMC Corp.		3,700
Data Processing Services—1.6%
300,000		Automatic Data Processing, Inc.		13,065
Department Stores—1.3%
325,000		May Department Stores Co.		10,702
Diversified Commercial Services—0.8%
350,000		IMS Health, Inc.		6,282
Diversified Financial Services—8.9%
300,000		American Express Co.		10,896
775,000		Citigroup, Inc.		30,031
255,000		Federal National Mortgage Association		18,806
440,000		J.P. Morgan Chase & Co.		14,925
Electric Utilities—1.9%
500,000		Duke Energy Corp.		15,550
Food Retail—2.4%
500,000	*	Kroger Co.		9,950
350,000	*	Safeway, Inc.		10,216

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Gas Utilities—1.0%
400,000		El Paso Corp.	$	8,244
General Merchandise Stores—3.7%
275,000		Target Corp.		10,477
380,000		Wal-Mart Stores, Inc.		20,904
Home Improvement Retail—1.5%
350,000		Home Depot, Inc.		12,855
Household Products—3.7%
175,000		Kimberly-Clark Corp.		10,850
225,000		Procter & Gamble Co.		20,092
Industrial Conglomerates—4.3%
1,250,000		General Electric Co.		36,313
Industrial Gases—1.4%
200,000		Praxair, Inc.		11,394
Integrated Oil & Gas—8.4%
245,000		ChevronTexaco Corp.		21,683
350,000		Conoco, Inc.		9,730
600,000		Exxon Mobil Corp.		24,552
270,000		Royal Dutch Petroleum Co. (ADR)		14,923
Integrated Telecommunications Services—4.1%
555,000		SBC Communications, Inc.		16,928
450,000		Verizon Communications		18,068
IT Consulting & Services—0.5%
120,000		Electronic Data Systems Corp.		4,458
Movies & Entertainment—2.9%
1,000,000	*	AOL Time Warner, Inc.		14,710
500,000		Walt Disney Co.		9,450
Multi-Line Insurance—3.2%
400,000		American International Group, Inc.		27,292
Networking Equipment—1.4%
850,000	*	Cisco Systems, Inc.		11,858
Pharmaceuticals—13.8%
600,000		Abbott Laboratories		22,590
375,000		Johnson & Johnson		19,598
1,000,000		Pfizer, Inc.		35,000
450,000		Pharmacia Corp.		16,853
435,000		Wyeth		22,272

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

9

Portfolio of Investments

SAFECO Equity Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Publishing & Printing—1.8%
200,000		Gannett Co., Inc.	$	15,180
Semiconductor Equipment—2.1%
260,000	*	Applied Materials, Inc.		4,945
700,000		Intel Corp.		12,789
Semiconductors—0.8%
270,000		Texas Instruments, Inc.		6,399
Soft Drinks—2.0%
345,000		PepsiCo, Inc.		16,629
Systems Software—4.4%
540,000	*	Microsoft Corp.		29,538
815,000	*	Oracle Corp.		7,718
Telecommunications Equipment—0.6%
200,000		Nokia Oyj (ADR)		2,896
125,000	*	QUALCOMM, Inc.		3,436
TOTAL COMMON STOCKS (cost $675,084)				809,523

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
CASH EQUIVALENTS—4.1%
Investment Companies
34,740,019	AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)	$	34,740
TOTAL CASH EQUIVALENTS (cost $34,740)			34,740
TOTAL INVESTMENTS (cost $709,824)—100.2%			844,263
Other Assets, less Liabilities			(1,626	)
NET ASSETS		$	842,637

* Non-income producing security.

SEE NOTES TO FINANCIAL STATEMENTS

10

Report From the Fund Managers

SAFECO Dividend Income Fund

As of June 30, 2002

How did the Fund perform?

The SAFECO Dividend Income Fund declined 7.89% for the six-month period. The Fund’s performance was below that of the Russell 1000 Value, which declined 4.78%. The Fund benefited from the market’s bias toward value stocks, but was hurt by the outperformance of small capitalization stocks.

What factors impacted performance?

Our portfolio is tilted towards large-cap companies with good records for increasing earnings and dividends. We try to buy when companies are selling at attractive price/earnings ratios, and sell or cut back when the valuations are above the usual range for that stock. Our average market capitalization is $60 billion, compared to $63 billion for the Russell 1000 Value. Our stocks yielded 2.50% compared to the Russell 1000 Value’s 2.25%.

While general portfolio characteristics were the largest predictors of returns this year, individual stocks and sector weightings had their impact. We were helped by our banks (e.g., Washington Mutual, US Bancorp and Bank of America), real estate investment trusts (e.g., Liberty Property Trust), defense (e.g., Northrop Grumman), and consumer cyclicals (e.g., Fortune Brands).

Our worst performers were primarily technology stocks, including Nokia, IBM, Agilent, Electronic Data Systems and Intel. The technology sector weighting was relatively small; however, El Paso continued to decline in the wake of the Enron scandal.

Tyco International deserves mention as our single worst performer. As we look back and try to understand what happened, we believe it was not a case of misunderstanding the income statement, the balance sheet or the individual business units, but instead a misjudgment of Tyco’s management. When it became clear that this company had stepped over the line, we sold the stock.

What changes did you make and why?

Portfolio turnover has declined this year. In addition to selling Tyco International, we sold Emerson and replaced it with Hubbell, a company where we think both the near-term earnings outlook and the valuation are better. We sold Weyerhaeuser and Boeing when they reached our price targets, CVS to reduce our weighting in consumer staples, and Computer Associates due to concerns about management credibility and accounting practices. We replaced Reliant Energy with FirstEnergy, as Reliant was planning to cut its dividend. Texas Instruments and IMS Health, the leading source of drug utilization data, are new holdings.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

11

Report From the Fund Managers

SAFECO Dividend Income Fund

As of June 30, 2002

What is your outlook for the future?

We continue to believe that the economy has begun what will prove to be a lackluster, but real recovery. For the first time in years, the stock market is valued at attractive levels. In addition, the scandals are likely to lead us to better corporate governance and stronger accounting standards. These factors should favor companies with reliable earnings and dividends.

SAFECO Asset Management Company

SAFECO Asset Management Company’s dividend income investment team, which is comprised of senior equity managers and analysts, assumed management of SAFECO Dividend Income Fund in April 2001. Team management allows broader coverage of this highly complex market and increased input into the investment process.

12

Performance Overview & Highlights

SAFECO Dividend Income Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		10 Year
SAFECO Dividend Income Fund	(7.89	)%	(9.72	)%	(0.79	)%	7.67	%
Russell 1000 Value Index	(4.78	)%	(8.95	)%	6.53	%	13.01	%
Lipper, Inc. (Equity-Income Funds)	(7.00	)%	(10.34	)%	4.21	%	10.29	%
* Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Integrated Oil & Gas	11	%
Real Estate Investment Trust	9
Diversified Financial Services	8
Banks	8
Integrated Telecommunications Services	8
TOP TEN HOLDINGS	Percent of Net Assets
ChevronTexaco Corp. (Integrated Oil & Gas)	3.9	%
Liberty Property Trust (Real Estate Investment Trust)	3.2
Washington Mutual, Inc. (Banks)	3.2
Exxon Mobil Corp. (Integrated Oil & Gas)	3.1
First Industrial Realty Trust, Inc. (Real Estate Investment Trust)	2.9
Federal National Mortgage Association (Diversified Financial Services)	2.6
Hartford Financial Services Group, Inc. (Multi-line Insurance)	2.5
Equity Residential (Real Estate Investment Trust)	2.5
SBC Communications (Integrated Telecommunications Services)	2.4
Wyeth (Pharmaceuticals)	2.4

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
FirstEnergy Corp.	$2,694
IMS Health, Inc.	1,636
SBC Communications, Inc.	1,455
Hubbell, Inc. (Class B)	1,262
Fortune Brands, Inc.	997
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Weyerhaeuser Co.	$1,904
Emerson Electric Co.	1,772
Boeing Co.	1,730
Reliant Energy, Inc.	1,711
Hewlett-Packard Co.	1,677

WEIGHTINGS AS A PERCENT

OF NET ASSETS

13

Portfolio of Investments

SAFECO Dividend Income Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—96.1%
Advertising—1.1%
70,400		Interpublic Group Cos., Inc.	$	1,743
Aerospace & Defense—3.5%
22,000		Northrop Grumman Corp.		2,750
40,000		United Technologies Corp.		2,716
Air Freight & Couriers—2.2%
55,000		United Parcel Service, Inc. (Class B)		3,396
Banks—7.7%
47,000		Bank of America Corp.		3,307
160,000		U.S. Bancorp		3,736
135,000		Washington Mutual, Inc.		5,010
Brewers—2.1%
65,000		Anheuser-Busch Companies, Inc.		3,250
Computer Hardware—1.7%
25,000	*	Dell Computer Corp.		653
19,200		International Business Machines Corp.		1,382
125,000	*	Sun Microsystems, Inc.		626
Data Processing Services—1.0%
35,000		Automatic Data Processing, Inc.		1,524
Department Stores—2.1%
100,500		May Department Stores Co.		3,309
Diversified Chemicals—1.8%
64,000		Du Pont (E.I.) de Nemours & Co.		2,842
Diversified Commercial Services—0.9%
80,000		IMS Health, Inc.		1,436
Diversified Financial Services—8.2%
70,000		American Express Co.		2,542
75,000		Citigroup, Inc.		2,906
55,000		Federal National Mortgage Association		4,056
100,000		J.P. Morgan Chase & Co.		3,392
Electric Utilities—2.9%
68,000		Duke Energy Corp.		2,115
75,000		FirstEnergy Corp.		2,503
Electronic Equipment & Instruments—2.3%
55,000	*	Agilent Technologies, Inc.		1,301
30,000		Diebold, Inc.		1,117
35,000		Hubbell, Inc. (Class B)		1,195
Gas Utilities—0.7%
55,000		El Paso Corp.		1,134

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
Household Products—2.4%
60,000	Kimberly-Clark Corp.	$	3,720
Housewares & Specialities—1.8%
50,500	Fortune Brands, Inc.		2,828
Industrial Conglomerates—2.1%
115,000	General Electric Co.		3,341
Industrial Gases—2.2%
70,000	Air Products and Chemicals, Inc.		3,533
Industrial Machinery—2.1%
73,300	Ingersoll-Rand Co.		3,347
Integrated Oil & Gas—11.3%
70,000	ChevronTexaco Corp.		6,195
115,000	Conoco, Inc.		3,197
118,812	Exxon Mobil Corp.		4,862
65,000	Royal Dutch Petroleum Co. (ADR)		3,593
Integrated Telecommunications Services—7.6%
45,000	ALLTEL Corp.		2,115
30,000	BellSouth Corp.		945
50,000	CenturyTel, Inc.		1,475
125,000	SBC Communications, Inc.		3,813
91,740	Verizon Communications		3,683
IT Consulting & Services—1.1%
45,000	Electronic Data Systems Corp.		1,672
Movies & Entertainment—1.3%
105,000	Walt Disney Co.		1,985
Multi-Line Insurance—4.0%
35,000	American International Group, Inc.		2,388
65,700	Hartford Financial Services Group, Inc.		3,907
Multi-Utilities—1.0%
75,000	NiSource, Inc.		1,637
Pharmaceuticals—6.5%
65,000	Abbott Laboratories		2,447
50,000	Johnson & Johnson		2,613
60,000	Schering-Plough Corp.		1,476
73,000	Wyeth		3,738
Publishing & Printing—1.9%
40,000	Gannett Co., Inc.		3,036
Real Estate Investment Trust—8.5%
134,000	Equity Residential		3,853
137,000	First Industrial Realty Trust, Inc.		4,500
145,000	Liberty Property Trust		5,075
Semiconductor Equipment—0.7%
62,800	Intel Corp.		1,147

SEE NOTES TO FINANCIAL STATEMENTS

14

Portfolio of Investments

SAFECO Dividend Income Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Semiconductors—0.4%
25,000		Texas Instruments, Inc.	$	593
Systems Software—1.0%
30,000	*	Microsoft Corp.		1,641
Telecommunications Equipment—1.0%
110,000		Nokia Oyj (ADR)		1,593
Tobacco—1.0%
35,000		Philip Morris Cos., Inc.		1,529
TOTAL COMMON STOCKS (cost $129,066)				151,418
CASH EQUIVALENTS—4.0%
Investment Companies
6,274,321		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		6,274
TOTAL CASH EQUIVALENTS (cost $6,274)				6,274
TOTAL INVESTMENTS (cost $135,340)—100.1%				157,692
Other Assets, less Liabilities				(218	)
NET ASSETS			$	157,474

* Non-income producing security.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

15

Report From the Fund Manager

SAFECO Northwest Fund

As of June 30, 2002

Bill Whitlow

How did the Fund perform?

The SAFECO Northwest Fund performed modestly better than its S&P 500 benchmark for the six-month period. The portfolio declined 11.77% versus a 13.16% decline for the index. While disappointing, I was satisfied with this relative performance given the difficult market conditions and the Fund’s pro-cyclical, pro-growth bias.

What factors impacted performance?

Broad diversification and risk control helped the SAFECO Northwest Fund weather the market storm. Over the past two years, I have decreased the sector allocations, as well as the size of the largest holdings. I have also made an effort to closely monitor each security’s risk, decreasing the weighting in the riskier, more volatile stocks. These efforts have cushioned the punches from the “blow ups” that did occur. I have also been improving the quality of the holdings, which has helped dampen the impact of “Enronitis” on the Fund.

The winners during the period come from a diversified list of financial, consumer and industrial companies. Top performers were Schnitzer Steel, Ambassadors International, Penford, Starbucks, Pacific Northwest Bank, Washington Banking, StanCorp Financial Group, Expeditors International of Washington and West Coast Bancorp. The losers were concentrated in telecommunications, technology and biotech.

What changes did you make and why?

I made few changes to the SAFECO Northwest Fund in the first six months of 2002. I added F-5 Networks and ICOS and sold Onyx Software, Agilent and InfoSpace. Ambassadors International split into two companies during the first quarter, so the portfolio has remained at 52 holdings throughout the period.

My strategy during these difficult times for coping with both the ailing economy and the tough bear market has been to remain diversified in terms of stocks, sectors, capitalization and style. At June 30, about half of the names held within the Fund were large-cap, and the other half were mid-cap or small-cap. Additionally, approximately one-third had value characteristics, while the remainder had a growth focus.

What is your outlook for the future?

I believe we are in the early stages of a modest, worldwide economic recovery. Historically, such an economic recovery would have been led by a market recovery. Thus far, that has not been the case during this cycle. The crisis of investor confidence resulting from corporate mismanagement and accounting scandals, as well as concerns regarding terrorism, seems to be causing a disconnect between the economy and the market cycles. The net result is an increase in risk, both for the market in general and for individual stocks.

16

Report From the Fund Manager

SAFECO Northwest Fund

As of June 30, 2002

My strategy for dealing with this increased volatility is more diversification, a greater focus on risk control, and a general improvement in the quality of our holdings. I believe this ongoing approach allowed the SAFECO Northwest Fund to weather this difficult period, while retaining the potential to outperform when the inevitable market recovery occurs.

Bill Whitlow, MBA, CFA

Vice President of SAFECO Asset Management; BA Chemistry, University of Colorado (1967); MBA Finance, U.C. Berkeley (1974); Chartered Financial Analyst (CFA) (1980)

Bill Whitlow, a nationally quoted authority on Northwest stocks, began his investment career at SAFECO in 1976, staying four years and then returning April 1997. He has over 25 years of investment experience. Before his return to SAFECO, Whitlow was a principal with Pacific Crest Securities in Portland, OR. He is currently on the Governor’s Council of Economic Advisors for the state of Washington.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

17

Performance Overview & Highlights

SAFECO Northwest Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		10 Year
SAFECO Northwest Fund	(11.77	)%	(19.38	)%	2.74	%	8.42	%
S&P 500 Index	(13.16	)%	(17.99	)%	3.66	%	11.42	%
WM Group NW 50 Index	(9.03	)%	(11.61	)%	9.00	%	12.63	%
Lipper, Inc. (Multi-Cap Core Funds)	(11.70	)%	(17.25	)%	4.03	%	11.33	%
* Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Banks	17	%
Pharmaceuticals	9
Food Retail	5
Restaurants	4
Air Freight & Couriers	4
TOP TEN HOLDINGS	Percent of Net Assets
Starbucks Corp. (Restaurants)	4.0	%
Washington Mutual, Inc. (Banks)	3.9
Expeditors International of Washington, Inc. (Air Freight & Couriers)	3.9
StanCorp Financial Group, Inc. (Life & Health Insurance)	3.7
Costco Wholesale Corp. (General Merchandise Stores)	3.5
Wyeth (Pharmaceuticals)	3.4
U.S. Bancorp (Banks)	3.3
Bank of America Corp. (Banks)	3.3
Microsoft Corp. (Systems Software)	3.2
Pfizer, Inc. (Pharmaceuticals)	3.2

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
SPDR Trust Series 1	$1,584
Icos Corp.	1,463
F5 Networks, Inc.	1,117
Anadarko Petroleum Corp.	550
IMS Health, Inc.	453
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Starbucks Corp.	$1,673
SPDR Trust Series 1	1,586
Boeing Co.	1,208
StanCorp Financial Group, Inc.	1,056
Expeditors International of Washington, Inc.	1,000

WEIGHTINGS AS A PERCENT

OF NET ASSETS

18

Portfolio of Investments

SAFECO Northwest Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—97.8%
Aerospace & Defense—1.6%
28,500		Boeing Co.	$	1,282
Air Freight & Couriers—3.9%
93,000		Expeditors International of Washington, Inc.		3,084
Airlines—2.1%
63,000	*	Alaska Air Group, Inc.		1,644
Application Software—2.7%
362,200	*	Captaris, Inc.		1,068
33,260	*	NetIQ Corp.		753
470,000	*	Primus Knowledge Solutions, Inc.		376
Banks—17.4%
37,000		Bank of America Corp.		2,603
64,500		Pacific Northwest Bancorp		2,020
114,000		U.S. Bancorp		2,662
86,000		Washington Banking Co.		1,421
84,500		Washington Mutual, Inc.		3,136
124,000		West Coast Bancorp, Inc.		2,127
Biotechnology—3.1%
95,000	*	Corixa Corp.		651
101,000	*	Dendreon Corp.		213
44,000	*	Icos Corp.		746
39,000	*	Immunex Corp.		871
Catalog Retail—2.7%
87,000	*	Coldwater Creek, Inc.		2,123
Diversified Chemicals—3.0%
132,000		Penford Corp.		2,389
Diversified Commercial Services—3.6%
80,000	*	Ambassadors Group, Inc.		1,149
98,500		IMS Health, Inc.		1,768
Electric Utilities—2.1%
81,000		Avista Corp.		1,118
81,000	*	Calpine Corp.		569
Electronic Equipment & Instruments—2.6%
112,000	*	Tektronix, Inc.		2,096
Food Retail—5.3%
115,000	*	Kroger Co.		2,289
67,500	*	Safeway, Inc.		1,970
General Merchandise Stores—3.5%
71,500	*	Costco Wholesale Corp.		2,761
Health Care Equipment—1.7%
93,000	*	SonoSite, Inc.		1,342

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Health Care Supplies—0.4%
101,000	*	AVI BioPharma, Inc.	$	297
Integrated Oil & Gas—2.5%
39,500		BP, plc (ADR)		1,994
Integrated Telecommunications Services—0.3%
95,000		Qwest Communications International, Inc.		266
Internet Software & Services—0.8%
67,000	*	F5 Networks, Inc.		655
Leisure Products—1.0%
80,000	*	Ambassadors International, Inc.		805
Life & Health Insurance—3.7%
53,000		StanCorp Financial Group, Inc.		2,942
Movies & Entertainment—0.7%
130,000	*	RealNetworks, Inc.		541
Networking Equipment—1.4%
72,050	*	Avocent Corp.		1,147
Oil & Gas Drilling—2.1%
53,000		Transocean Sedco Forex, Inc.		1,651
Oil & Gas Exploration & Production—2.4%
39,000		Anadarko Petroleum Corp.		1,923
Personal Products—1.7%
45,500	*	Nautilus Group, Inc.		1,392
Pharmaceuticals—8.9%
96,500	*	Penwest Pharmaceuticals Co.		1,882
72,000		Pfizer, Inc.		2,520
53,200		Wyeth		2,724
Restaurants—4.0%
128,000	*	Starbucks Corp.		3,181
Semiconductor Equipment—1.5%
68,000		Intel Corp.		1,242
Semiconductors—2.5%
42,000	*	Micron Technology, Inc.		849
54,000	*	PMC-Sierra, Inc.		501
96,000	*	TriQuint Semiconductor, Inc.		615
Specialty Chemicals—0.3%
118,000	*	Eden Bioscience Corp.		235
Steel—3.0%
108,000		Schnitzer Steel Industries, Inc.		2,411

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

19

Portfolio of Investments

SAFECO Northwest Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Systems Software—3.2%
47,500	*	Microsoft Corp.	$	2,598
Telecommunications Equipment—0.8%
229,000	*	Touch America Holdings, Inc.		630
Wireless Telecommunications Services—1.3%
141,000	*	AT&T Wireless Services, Inc.		825
70,800	*	Western Wireless Corp. (Class A)		229
TOTAL COMMON STOCKS (cost $74,926)				78,286
CASH EQUIVALENTS—1.9%
Investment Companies
1,534,784		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		1,535
TOTAL CASH EQUIVALENTS (cost $1,535)				1,535
TOTAL INVESTMENTS (cost $76,461)—99.7%				79,821
Other Assets, less Liabilities				262
NET ASSETS			$	80,083

* Non-income producing security.

SEE NOTES TO FINANCIAL STATEMENTS

20

Report From the Fund Managers

SAFECO International Stock Fund

As of June 30, 2002

During the first half of 2002, the SAFECO International Stock Fund underperformed its benchmark, the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.

Fragile investor confidence prompted a slump in almost all developed equity markets during the first half of 2002. A series of announcements of manipulated financial statements and bankruptcies, mainly in the United States, undermined investor trust and battered stock prices across the globe. While most of the incidents occurred domestically, debt loads, accounting inconsistencies and corporate governance at companies in France, Britain and other markets came under renewed scrutiny as a result.

The decline in equity markets was mainly led by telecom, media and technology (TMT) companies, although financial stocks also weakened amid fears regarding their exposure to bankrupt and debt-laden companies in the TMT sectors. While investor disdain for the financial practices of some companies has depressed stocks, a volatile geopolitical landscape has also weighed on markets. Heightened fears of further terrorism aimed at the United States, the continuing instability in the Middle East, and the recent nuclear-tinged standoff between India and Pakistan have all added to investors’ worries.

Telecom stocks contributed the most to the decline in the portfolio as these companies were knocked by a global loss of investor confidence following the bankruptcy of Global Crossing and the $4 billion accounting shock at WorldCom—neither of which were held in your portfolio. In addition, high-debt levels and a lack of demand have led to market downgrades for telecommunications operators and equipment manufacturers.

Two of the largest fallers in the portfolio were Telefonica and Vodafone. The Spanish company’s tough markets have been exacerbated by difficulties in South America, with the economic crisis in Argentina and the potential escalation of the Brazilian economy’s woes. Support for Telefonica is likely to come from the fact that it has relatively lower debt levels and has enjoyed better cashflow growth than most other European operators. Vodafone has been hurt by worries about the ability of mobile phone companies to generate sufficient revenue from next-generation services, such as 3G, to justify the investments of the last few years. The world’s largest mobile phone services company recently reported stronger-than-expected free cashflow and a reduction in its debt.

Meanwhile, shares in Finland’s Nokia dropped as the company lowered its estimate for growth in the mobile-phone handset market, partly because of a weaker-than-expected replacement market. The world’s largest maker of mobile phones has warned its second-quarter sales would be lower than in the previous year, but it has maintained its earnings target.

Among the portfolio’s positive performers were consumer-related and oil companies, as investors generally favored the steadier and more predictable earnings-growth capabilities of these sectors. Unilever, one of the world’s leading consumer goods companies, rose as the company achieved its stated growth targets for the first quarter. Sales of its leading brands rose 4.6% over the last 12 months while operating margins increased. Operating profits increased 18% while earnings per share gained 37% as the company benefited from a fall in its interest costs. Shares in Eni, an Italian oil company, increased as it reported second-quarter oil and gas output rose 8%. The company has benefited from its purchase of Lasmo in the UK and the development of new fields in Italy and Kazakhstan. Eni has set itself a production growth target of almost double the rates planned by certain other large rivals like Exxon Mobil Corp.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

21

Report From the Fund Managers

SAFECO International Stock Fund

As of June 30, 2002

Historically, an improvement in corporate earnings has been a natural response to positive movement in underlying economic fundamentals. Since the beginning of the year, this synchronicity has not materialized, as many sectors have reported no notable improvement despite better economic fundamentals. Indeed, some companies have indicated that demand is still contracting. This is most notable within the beleaguered TMT sectors.

The ability of the global economy to maintain its positive momentum will be of great importance during this time. Based on recent reports both business and consumer confidence levels have faltered despite the improving economic data. The major European economies are likely to show at least modest increases this year; the extent of any additional advance remains dependent on the performance of the U.S., the world’s largest economy. Recent concerns regarding the American economy should be put in context; it is likely to be one of the top performers in 2002 and may, as it has in the past, help drive global exports and growth. Nevertheless, the weakening of the U.S. dollar has thrown up new challenges, not least of which is the effect that this might have on tentative export-led recoveries in Asia. Fundamental problems still exist in the Japanese economy and the strengthening of the yen threatens to strangle an export-driven upturn there.

We do not expect much movement from the major central banks on interest rates. The stronger euro should help to ease inflation concerns and consequently delay any rate rise by the European Central Bank. The Bank of England may increase interest rates in the nearer term as the economy appears in reasonable shape and such action should provide stability for sterling, which has weakened so far this year.

Going forward, it is likely that equity returns will be lower than in recent periods of growth. The financial scandals of the last nine months are likely to keep investor enthusiasm muted in the short-term, until it can be shown that these problems are being addressed. The investigations that are taking place should provide some solace in this regard.

As markets shake off the valuation excesses that built up during the latter part of the 1990s, we believe that attractive opportunities will emerge as the benefits of the improved economic conditions feed through to corporate earnings. Our preference in the current environment continues to be for quality stocks with strong balance sheets where we can identify real value.

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, economists and headed by the company’s chief financial officer. BIAM has managed international equities since 1996 and began managing U.S. funds in 1989.

22

Performance Overview & Highlights

SAFECO International Stock Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		Since Inception**
SAFECO International Stock Fund	(3.51	)%	(11.35	)%	(1.59	)%	2.14	%
EAFE Index	(2.77	)%	(10.98	)%	(3.01	)%	(0.22	)%
Lipper, Inc. (International Funds)	(1.65	)%	(10.15	)%	(0.41	)%	N/A
* Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP TEN HOLDINGS	Percent of Net Assets
Total Fina Elf SA (Integrated Oil & Gas)	3.5	%
ING Groep NV (Banks)	3.5
Nestle SA (Food Retail)	3.5
Aventis SA (Pharmaceuticals)	2.9
Barclays, plc (Banks)	2.9
GlaxoSmithKline, plc (Pharmaceuticals)	2.9
Canon, Inc. (Office Services & Supplies)	2.8
Swiss Re (Multi-Line Insurance)	2.8
Shell Transport & Trading Co., plc (Integrated Oil & Gas)	2.6
Lloyds TSB Group, plc (Banks)	2.5

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
BP, plc	$352
Allianz AG	247
British American Tobacco, plc	187
Tesco, plc	184
Samsung Electronics Co., Ltd.	169
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Royal Dutch Petroleum Co.	$232
NEC Corp.	173
Cable & Wireless, plc	164
Murata Manufacturing Co., Ltd.	161
Bayerische Hypo-und Vereinsbank AG	152

TOP FIVE COUNTRIES	Percent of Net Assets
United Kingdom	29	%
Japan	13
Netherlands	12
Switzerland	12
France	10

23

Portfolio of Investments

SAFECO International Stock Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
COMMON STOCKS—97.2%
Australia—3.5%
26,758	Brambles Industries, Ltd. Industrial Machinery	$	142
48,984	Foster’s Group, Ltd. Brewers		130
11,550	National Australia Bank, Ltd. Banks		230
22,027	News Corp., Ltd. Publishing & Printing		120
24,911	Westpac Banking Corp., Ltd. Banks		227
Finland—0.6%
10,957	Nokia Oyj Wireless Telecommunications Services		160
France—9.6%
11,334	Alcatel Telecommunications Equipment		79
10,056	Aventis SA Pharmaceuticals		712
18,312	Axa Multi-Line Insurance		335
2,500	Lafarge SA Construction Materials		249
5,269	Total Fina Elf SA Integrated Oil & Gas		855
4,622	Vivendi Universal SA Movies & Entertainment		100
Germany—6.4%
1,086	Allianz AG Multi-Line Insurance		217
10,375	Bayer AG Diversified Chemicals		329
9,757	Bayerische Motoren Werke AG Automobile Manufacturers		402
10,235	E.On AG Electric Utilities		596
Hong Kong—2.4%
28,000	Cheung Kong Holdings, Ltd. Real Estate Investment Trust		233
871,000	PetroChina Co., Ltd. Oil & Gas Exploration & Production		185
21,000	Sun Hung Kai Properties, Ltd. Real Estate Investment Trust		159

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Italy—3.5%
32,027		ENI SpA Integrated Oil & Gas	$	509
42,296		Telecom Italia SpA Integrated Telecommunications Services		331
Japan—13.3%
2,100		Acom Co., Ltd. Consumer Finance		143
18,000		Canon, Inc. Office Services & Supplies		680
8,000		Fuji Photo Film Co. Office Services & Supplies		258
40,000		Hitachi, Ltd. Electrical Components & Equipment		259
7,200		Honda Motor Co., Ltd. Automobile Manufacturers		292
3,100		Hoya Corp. Health Care Supplies		226
1,900		Nintendo Co., Ltd. Consumer Electronics		280
84	#	NTT DoCoMo, Inc. Integrated Telecommunications Services		207
1,000		Rohm Co., Ltd. Electrical Components & Equipment		149
1,500		SMC Corp. Industrial Machinery		177
3,000		Sony Corp. Electrical Components & Equipment		158
9,000		Takeda Chemical Industries Pharmaceuticals		395
Netherlands—12.3%
22,938		ABN AMRO Holding NV Banks		416
17,929		Elsevier NV Publishing & Printing		244
5,147		Fortis Diversified Financial Services		110
3,756		Heineken NV Brewers		165
32,944		ING Groep NV Banks		846
18,582		Koninklijke (Royal) Philips Electronics NV Semiconductors		519
19,435		Koninklijke Ahold NV Food Retail		409
6,860		TPG NV Distributors		155
3,855		VNU NV Publishing & Printing		107

SEE NOTES TO FINANCIAL STATEMENTS

24

Portfolio of Investments

SAFECO International Stock Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Portugal—0.2%
34,583		Electricidade de Portugal SA Electric Utilities	$	67
South Korea—1.8%
3,200	*	Kookmin Bank (ADR) Banks		157
3,800	*	Pohang Iron & Steel Co., Ltd. (ADR) Steel		104
1,272		Samsung Electronics Co., Ltd. Electronic Equipment & Instruments		174
Spain—3.0%
51,345		Banco Santander Central Hispano SA Banks		407
36,745		Telefonica SA Integrated Telecommunications Services		308
Switzerland—12.1%
3,580		Nestle SA Food Retail		835
11,025		Novartis AG Pharmaceuticals		485
4,968		Roche Holding AG Pharmaceuticals		376
6,817		Swiss Re Multi-Line Insurance		667
11,386		UBS AG Banks		573
United Kingdom—28.5%
9,870		3i Group, plc Diversified Financial Services		102
5,150		AstraZeneca Group, plc Health Care Supplies		212
84,306		Barclays, plc Banks		708
9,697		Boots Co., plc Drug Retail		96
42,825		BP, plc Integrated Oil & Gas		359
18,181		British American Tobacco, plc Tobacco		194
33,137		Cadbury Schweppes, plc Soft Drinks		248
38,234		Compass Group, plc Food Retail		231
46,290		Diageo, plc Brewers		600
32,244		GlaxoSmithKline, plc Pharmaceuticals		696
37,700		Hilton Group, plc Hotels		131

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
United Kingdom—(continued)
28,240	HSBC Holdings, plc Banks	$	324
62,002	Lloyds TSB Group, plc Banks		616
34,150	Prudential, plc Multi-Line Insurance		312
10,360	Railtrack Group, plc Railroads		35
10,388	Reuters Group, plc Broadcasting & Cable TV		55
6,300	RMC Group, plc Construction Materials		63
81,990	Shell Transport & Trading Co., plc Integrated Oil & Gas		618
6,836	Smiths Group, plc Industrial Conglomerates		89
52,230	Tesco, plc Food Retail		190
19,100	TI Automotives, LTD. (Illiquid)† Industrial Conglomerates		0
48,530	Unilever, plc Household Products		444
263,625	Vodafone Group, plc Integrated Telecommunications Services		361
6,710	Wolseley, plc Distributors		68
16,320	WPP Group, plc Advertising		138
TOTAL COMMON STOCKS (cost $19,971)			23,538
TOTAL INVESTMENTS (total cost $19,971)—97.2%			23,538
Domestic Cash			364
Foreign Cash			284
Other Assets, less Liabilities			24
			672
NET ASSETS		$	24,210

* Security traded on NYSE and valued in USD.

† Securities are valued at fair value as determined by, and under supervision of, the Board of Trustees.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

25

Portfolio of Investments

SAFECO International Stock Fund

As of June 30, 2002

(Unaudited)

Industry Diversification	Percent of Net Assets
Banks	18.6	%
Pharmaceuticals	11.0
Integrated Oil & Gas	9.7
Food Retail	6.9
Multi-Line Insurance	6.3
Integrated Telecommunications Services	5.0
Office Services & Supplies	3.9
Brewers	3.7
Automobile Manufacturers	2.9
Electric Utilities	2.7
Electrical Components & Equipment	2.3
Semiconductors	2.1
Publishing & Printing	2.0
Household Products	1.8
Health Care Supplies	1.8
Real Estate Investment Trust	1.6
Diversified Chemicals	1.4
Industrial Machinery	1.3
Construction Materials	1.3
Consumer Electronics	1.2
Soft Drinks	1.0
Other	8.7
	97.2	%

SEE NOTES TO FINANCIAL STATEMENTS

26

Report From the Fund Managers

SAFECO Balanced Fund

As of June 30, 2002

Rex Bentley Michael Hughes Lynette D. Sagvold

How did the Fund perform?

Year-to-date, the SAFECO Balanced Fund was down 4.14% versus the Balanced Index return, which was down 1.35%.

What factors impacted performance?

Our underperformance relative to the 60% Russell 1000 Value Index and 40% Lehman Aggregate Bond Index is attributable to the Fund’s equity and bond holdings, both of which underperformed their respective index benchmarks for the period.

Three stocks were primarily responsible for the Fund’s underperformance: Tyco International, AOL Time Warner and El Paso. In each case, slower earnings growth and questionable accounting practices caused these stocks to decline significantly. The health care sector also hurt performance as concerns about patent expirations, lack of new drugs in the research pipeline, as well as problems with FDA compliance, drove pharmaceutical issues lower.

The main reason for underperformance from bonds came from exposure to scandal-plagued WorldCom, whose accounting woes also cast a shadow over other telecom holdings including Qwest and Sprint. The Fund’s best-performing bonds were Treasuries and Mortgage-Backed Securities.

What changes did you make and why?

Changes to the equity portion of the Balanced Fund were made for two primary reasons: to make a change in sector exposure and take advantage of valuations. Looking forward to an improving U.S. economy, we added stocks such as Dow Chemical, General Motors, Home Depot and United Technologies, while selling stocks such as Merck, CVS and Gillette. These changes increased our weightings in the basic materials, producer durable and consumer discretionary sectors while reducing our exposure to consumer staples.

We also sold stocks that reached our price target, such as Northrop Grumman. In the fixed-income area, we added to our position in U.S. Treasury obligations and reduced our overweight in corporate debt to add a measure of safety due to increased uncertainty in the market.

What is your outlook for the future?

While the economy appears to be experiencing a modest recovery, the stock market continues to languish. Investors remain uneasy about near-term corporate earnings, the barrage of accounting scandals, and the potential for devastating geopolitical events.

On the plus side, the stock market valuation has improved and currently looks moderately inexpensive. We find the equity market encouraging at its current levels, and anticipate that inflation and interest rates will remain in check as the economy continues to improve. We see gross domestic product (GDP) growing in the 3% range, and look for the stock market to appreciate as the growth in GDP begins to flow down to corporate earnings. Finally, we are optimistic that the current scandals are likely to lead to better corporate governance and stronger accounting standards in the future.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

27

Report From the Fund Managers

SAFECO Balanced Fund

As of June 30, 2002

While the geopolitical concerns remain, we believe we have positioned the SAFECO Balanced Fund to benefit from what we believe will be a stronger economy. We also believe that the consumer will continue to be the driver of our economic strength.

Looking toward the future, we will continue to target a 60% equity, 40% bond asset allocation in the Fund. While the Fund’s bonds should continue to add income and price stability, we believe that equities will likely outperform bonds over the next 12 months as interest rates remain stable or inch up modestly.

Rex Bentley, MBA, CFA

Vice President of SAFECO Asset Management; BA and MBA, Brigham Young University (1975); Chartered Financial Analyst (CFA)(1981)

Rex joined SAFECO Asset Management in 1995 and has amassed more than 20 years investment experience.

Michael Hughes, MBA, CFA

Assistant Vice President of SAFECO Asset Management; Magna Cum Laude BS Finance, University of Colorado; MBA, University of Southern California (1992); Chartered Financial Analyst (CFA)(1995)

Michael began his investment career in 1983 and joined SAFECO as a portfolio manager in January 1997.

Lynette D. Sagvold, CFA

Assistant Vice President of SAFECO Asset Management; BA Business Administration, University of Washington (1982); Chartered Financial Analyst (CFA)(1988)

Lynette began her investment career in 1981 at Kidder Peabody and was a portfolio manager for Key Trust and First Interstate before joining SAFECO in 1995 as a portfolio manager and insurance analyst.

28

Performance Overview & Highlights

SAFECO Balanced Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		Since Inception**
SAFECO Balanced Fund	(4.14	)%	(3.23	)%	3.99	%	6.35	%
60% Russell 1000 Value/40% Lehman Brothers Gov’t/Corp. Index	1.56	%	(7.49	)%	5.19	%	7.91	%
60% Russell 1000 Value/40% Lehman Brothers Aggregate Bond Index	1.35	%	(2.07	)%	6.91	%	8.98	%
S&P 500 Index	(13.16	)%	(17.99	)%	3.66	%	8.79	%
Lipper, Inc. (Balanced Funds)	(6.79	)%	(8.61	)%	4.22	%	N/A
* Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES (Common Stocks)	Percent of Net Assets
Banks	8	%
Integrated Oil & Gas	6
Diversified Financial Services	5
Integrated Telecommunications Services	4
Multi-Line Insurance	3
TOP TEN STOCK HOLDINGS	Percent of Net Assets
ChevronTexaco Corp. (Integrated Oil & Gas)	2.2	%
Exxon Mobil Corp. (Integrated Oil & Gas)	1.9
American International Group, Inc. (Multi-Line Insurance)	1.9
Wells Fargo & Co. (Banks)	1.8
U.S. Bancorp (Banks)	1.7
Citigroup, Inc. (Diversified Financial Services)	1.6
United Parcel Service, Inc. (Class B) (Air Freight & Couriers)	1.6
Praxair, Inc. (Industrial Gases)	1.6
Washington Mutual, Inc. (Banks)	1.5
Hartford Financial Services Group, Inc. (Multi-Line Insurance)	1.5

TOP FIVE PURCHASES (Common Stocks) For the Period Ended June 30, 2002	Cost (000’s)
FirstEnergy Corp.	$269
Kimberly-Clark Corp.	166
Target Corp.	146
Bank of New York Co., Inc.	139
ChevronTexaco Corp.	130
TOP FIVE SALES (Common Stocks) For the Period Ended June 30, 2002	Proceeds (000’s)
Gillette Co.	$265
CVS Corp.	201
Procter & Gamble Co.	156
Northrop Grumman Corp.	145
Johnson & Johnson	132

WEIGHTINGS AS A PERCENT

OF NET ASSETS

29

Portfolio of Investments

SAFECO Balanced Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—58.2%
Aerospace & Defense—0.3%
800		United Technologies Corp.	$	54
Air Freight & Couriers—1.6%
4,500		United Parcel Service, Inc. (Class B)		278
Aluminum—0.3%
1,700		Alcoa, Inc.		56
Automobile Manufacturers—0.3%
1,000		General Motors Corp.		54
Banks—8.2%
2,200		Bank of America Corp.		155
3,800		Bank of New York Co., Inc.		128
6,400		KeyCorp		175
2,400		State Street Corp.		107
12,820		U.S. Bancorp		299
7,250		Washington Mutual, Inc.		269
6,200		Wells Fargo & Co.		310
Brewers—0.6%
2,300		Anheuser-Busch Companies, Inc.		115
Computer Hardware—0.4%
1,100		International Business Machines Corp.		79
Computer Storage & Peripherals—0.2%
4,600	*	EMC Corp.		35
Data Processing Services—0.6%
2,300		Automatic Data Processing, Inc.		100
Department Stores—1.3%
7,150		May Department Stores Co.		236
Diversified Chemicals—1.5%
2,300		Dow Chemical Co.		79
4,100		Du Pont (E.I.) de Nemours & Co.		182
Diversified Financial Services—4.6%
3,200		American Express Co.		116
7,300		Citigroup, Inc.		283
2,600		Federal National Mortgage Association		192
6,500		J.P. Morgan Chase & Co.		221
Electric Utilities—2.6%
6,900		Duke Energy Corp.		215
7,300		FirstEnergy Corp.		244
Electronic Equipment & Instruments—0.6%
3,100		Hubbell, Inc. (Class B)		106
Food Distributors—0.6%
4,000		SYSCO Corp.		109

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Food Retail—0.9%
7,800	*	Kroger Co.	$	155
Gas Utilities—0.3%
2,800		El Paso Corp.		58
General Merchandise Stores—1.5%
3,500	*	Costco Wholesale Corp.		135
3,500		Target Corp.		133
Home Improvement Retail—0.6%
2,800		Home Depot, Inc.		103
Household Products—1.6%
2,700		Kimberly-Clark Corp.		167
1,300		Procter & Gamble Co.		116
Industrial Conglomerates—1.0%
6,100		General Electric Co.		177
Industrial Gases—1.6%
4,800		Praxair, Inc.		273
Industrial Machinery—0.6%
2,300		Ingersoll-Rand Co.		105
Integrated Oil & Gas—6.0%
4,300		ChevronTexaco Corp.		381
7,700		Conoco, Inc.		214
8,376		Exxon Mobil Corp.		343
2,200		Royal Dutch Petroleum Co. (ADR)		122
Integrated Telecommunications Services—4.3%
3,600		ALLTEL Corp.		169
4,100		CenturyTel, Inc.		121
7,600		SBC Communications, Inc.		232
6,014		Verizon Communications		241
IT Consulting & Services—0.6%
2,900		Electronic Data Systems Corp.		108
Movies & Entertainment—1.4%
5,400	*	AOL Time Warner, Inc.		79
8,400		Walt Disney Co.		159
Multi-Line Insurance—3.4%
4,800		American International Group, Inc.		328
4,500		Hartford Financial Services Group, Inc.		268
Multi-Utilities—1.4%
11,100		NiSource, Inc.		242
Networking Equipment—0.3%
4,000	*	Cisco Systems, Inc.		56
Oil & Gas Equipment & Services—0.4%
1,500		Schlumberger, Ltd.		70

SEE NOTES TO FINANCIAL STATEMENTS

30

Portfolio of Investments

SAFECO Balanced Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Pharmaceuticals—3.1%
3,800		Abbott Laboratories	$	143
2,000		Bristol-Myers Squibb Co.		51
2,300		Pfizer, Inc.		81
2,100		Pharmacia Corp.		79
3,100		Schering-Plough Corp.		76
2,300		Wyeth		118
Publishing & Printing—1.0%
2,400		Gannett Co., Inc.		182
Real Estate Investment Trust—2.1%
4,000		Equity Residential		115
3,300		First Industrial Realty Trust, Inc.		108
4,200		Liberty Property Trust		147
Restaurants—0.9%
5,600		McDonald’s Corp.		159
Semiconductor Equipment—0.4%
3,400		Intel Corp.		62
Semiconductors—0.4%
3,000		Texas Instruments, Inc.		71
Systems Software—0.5%
1,700	*	Microsoft Corp.		93
Telecommunications Equipment—0.2%
2,500		Nokia Oyj (ADR)		36
TOTAL COMMON STOCKS (cost $10,344)				10,273
CORPORATE BONDS—13.7%
Air Freight & Couriers—0.4%
$60,000		Federal Express Corp. 6.625%, due 2/12/04		63
Airlines—1.1%
65,000		Delta Air Lines, Inc. 7.11%, due 9/18/11		69
25,000		Northwest Airlines, Inc. 7.041% due 4/01/22		25
113,272		United Air Lines 7.783%, due 1/01/14		109
Alternative Carriers—0.3%
65,000		Sprint Capital Corp. 6.00%, due 1/15/07		51
Computer Hardware—0.4%
70,000		Hewlett-Packard Co. 5.75%, due 12/15/06		71

SHARES OR PRINCIPAL AMOUNT				Value (000’s)
Consumer Finance—0.4%
	65,000		Household Finance Corp. 7.875%, due 3/01/07	$	69
Diversified Chemicals—0.5%
	80,000		Dow Chemical Co. 5.75%, due 12/15/08		81
Diversified Financial Services—2.7%
	125,000	#	Erac USA Finance Co. (144A) 8.00%, due 1/15/11 (acquired 1/09/01)		136
	70,000		Ford Motor Credit Co. 7.25%, due 10/25/11		70
	80,000		General Electric Capital Corp. 6.75%, due 3/15/32		79
	135,000		General Motors Acceptance Corp. 6.125%, due 9/15/06		137
	55,000		Morgan Stanley Dean Witter Co. 6.60%, due 4/01/12		56
Electric Utilities—1.6%
	75,000		Avista Corp. 7.75%, due 1/01/07		77
	65,000		National Rural Utilities Cooperative Finance Corp. 7.25%, due 3/01/12		69
	70,000	#	PSEG Power (144A) 6.95%, due 6/01/12 (acquired 6/04/02)		70
	65,000		Puget Sound Energy, Inc. 6.25%, due 1/16/04		67
Food Retail—0.9%
	140,000		Safeway, Inc. 7.50%, due 9/15/09		155
Forest Products—0.2%
	40,000	#	Weyerhaeuser Co. (144A) 5.50%, due 3/15/05 (acquired 3/06/02)		41
Gas Utilities—0.4%
	65,000		El Paso Corp. 7.00%, due 5/15/11		62
General Merchandise Stores—0.4%
$	60,000		Sears Roebuck & Co. 6.25%, due 1/15/04		62
Home Furnishings—0.4%
	70,000	#	Mohawk Industries, Inc. (144A) 6.50%, due 4/15/07 (acquired 3/25/02)		73
Integrated Oil & Gas—0.7%
	65,000		Pemex Project Funding Master Trust 9.125%, due 10/13/10		68

SAFECO    MUTUAL    FUNDS 1-800-624-5711

SEE NOTES TO FINANCIAL STATEMENTS

31

Portfolio of Investments

SAFECO Balanced Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Integrated Oil & Gas—(continued)
55,000		USX Corp. 6.85%, due 3/01/08	$	58
Integrated Telecommunications Services—0.8%
110,000		Qwest Communications International, Inc. 7.25%, due 2/15/11		62
85,000	#	Verizon Wireless, Inc. (144A) 5.375%, due 12/15/06 (acquired 12/12/01)		79
40,000		Worldcom, Inc. 8.00%, due 5/15/06		6
Life & Health Insurance—0.4%
70,000		Lincoln National Corp. 5.25%, due 6/15/07		71
Movies & Entertainment—0.4%
80,000		AOL Time Warner, Inc. 6.875%, due 5/01/12		74
Oil & Gas Equipment & Services—0.3%
50,000		Kinder Morgan Energy Partners 6.75%, due 3/15/11		51
Trucking—0.8%
145,000		Hertz Corp. 7.00%, due 7/01/04		149
Wireless Telecommunications Services—0.6%
105,000		TCI Communications, Inc. 8.65%, due 9/15/04		108
TOTAL CORPORATE BONDS (cost $2,480)				2,418
ASSET BACKED SECURITIES—3.2%
Consumer Finance—0.8%
135,000		World Omni Auto Receivables Trust 4.49%, due 8/20/08		138
Diversified Financial Services—2.3%
125,000		CNH Equipment Trust 7.34%, due 2/15/07		131
265,000		General Motors Acceptance Corp. 6.42%, due 5/15/35		282
Motorcycle Manufacturers—0.1%
21,828		Harley Davidson Eaglemark Motorcycle Trust 7.07%, due 11/15/04		22
TOTAL ASSET BACKED SECURITIES (cost $559)				573

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
MORTGAGE BACKED SECURITIES—16.3%
Collateral Mortgage Obligation (CMO)—0.8%
129,460	6.50%, due 2/14/41	$	133
Diversified Financial Services—1.0%
170,000	First Union Commercial Mortgage Trust 6.07%, due 10/15/35		178
Federal National Mortgage Association (FNMA)—12.6%
219,228	6.00%, due 1/01/29		220
103,509	6.00%, due 9/01/29		104
104,717	6.50%, due 1/01/15		109
218,016	6.50%, due 2/01/31		223
34,471	6.50%, due 5/01/31		35
94,308	6.50%, due 6/01/31		96
254,906	6.50%, due 7/01/29		261
100,551	7.00%, due 3/01/12		106
83,032	7.00%, due 9/01/31		86
168,905	7.00%, due 9/01/31		175
47,013	8.00%, due 1/01/31		50
73,445	8.00%, due 10/01/30		78
82,835	8.00%, due 2/01/29		89
52,729	8.00%, due 2/01/30		56
366,471	8.00%, due 3/01/31		389
58,251	8.00%, due 4/01/20		62
26,864	8.00%, due 4/01/30		29
27,340	8.00%, due 5/01/31		29
27,992	8.00%, due 7/01/30		30
Government National Mortgage Association (GNMA)—1.9%
15,489	6.00%, due 4/15/14		16
87,824	6.00%, due 8/15/13		91
133,333	7.00%, due 4/15/28		139
32,547	7.00%, due 8/15/28		34
51,906	7.75%, due 11/15/29		55
TOTAL MORTGAGE BACKED SECURITIES (cost $2,782)			2,873
U.S. GOVERNMENT OBLIGATIONS—7.1%
Federal National Mortgage Association (FNMA)—2.1%
345,000	6.625%, due 11/15/30		364
U.S. Federal Agency Notes—1.8%
310,000	5.75%, due 2/15/08		327
U.S. Treasury Notes—3.2%
80,000	4.875%, due 2/15/12		80
145,000	6.00%, due 8/15/09		158
160,000	6.50%, due 11/15/26		177

SEE NOTES TO FINANCIAL STATEMENTS

32

Portfolio of Investments

SAFECO Balanced Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
U.S. Treasury Notes—(continued)
110,000	9.25%, due 2/15/16	$	151
TOTAL U.S. GOVERNMENT OBLIGATIONS (cost $1,243)			1,257
CASH EQUIVALENTS—2.3%
Investment Companies
399,879	AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		400
TOTAL CASH EQUIVALENTS (cost $400)			400
TOTAL INVESTMENTS (cost $17,808)—100.8%			17,794
Other Assets, less Liabilities			(133	)
NET ASSETS		$	17,661

* Non-income producing security.

# Securities are exempt from registration and restricted as to resale only to dealers, or through a dealer to a “qualified institutional buyer”. The total cost of such securities is $390,000 and the total value is $399,000 or 2.26% of net assets.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

SEE NOTES TO FINANCIAL STATEMENTS

33

Report From the Fund Manager

SAFECO Small Company Value Fund

As of June 30, 2002

Greg Eisen

How did the Fund perform?

The SAFECO Small Company Value Fund earned a modest positive year-to-date return in a period where the overall stock market was down sharply. There were well over 30 stocks in the Fund that showed price changes of greater than 10% over the first 6 months of 2002. The stocks with price gains had a significantly greater impact on the overall portfolio performance than did the stocks with price drops.

For example, our largest position, Rent-Way, was the Fund’s best-performing stock—up 116% for the six-month period. Many of the biggest winners were bank stocks, our largest industry exposure. Still, the Fund has performed slightly below the Russell 2000 Value index.

What factors impacted performance?

From a top-down perspective, the key to the SAFECO Small Company Value Fund’s continued success has been to maintain a portfolio structure closely aligned to the value index in terms of sector weights and valuation. This is a strategy I have been using successfully for the last six quarters.

I continue to maintain a low exposure to technology stocks. I have minimum exposure to telecommunications, which was among the worst-performing sectors in the small-cap universe. The financial sector was the best performer within the Russell 2000 Value Index, and I maintain exposure close to the index weight. While the Fund’s portfolio holdings did react negatively to the WorldCom fiasco, I believe small-cap stocks in general are being viewed as “different” from the former large-cap stars of the bubble market.

What changes did you make and why?

During the period, among the names that met my sell criteria were Forward Air, which was the highest valuation name we held. It was sold to reduce weight in the transportation sector. Colonial Bancorp had not only reached its price target, but was also at a point where it was valued at greater than $1.5 billion in market cap. As a result, I sold it to make room for stocks with greater opportunities and that fall within the small-cap definition.

Quovadx was a software name I sold after it became apparent they would have to perform heroics to meet their annual performance objectives. I realized a sizable gain on this stock, which was all the more gratifying when it recently collapsed after my fears became evident to the whole market.

I sold Paradigm Genetics due to its failure to deliver on stated objectives, as well as its internal management turmoil. Some of the names we added during the six-month period include Central Pacific Bank, Southwest Securities, URS Corp., Building Materials Holding Co. and Roper Industries.

34

Report From the Fund Manager

SAFECO Small Company Value Fund

As of June 30, 2002

What is your outlook for the future?

The SAFECO Small Company Value Fund investment style continues to center on buying companies with valuation metrics lower than their peer group, yet with sound business models. This is combined with a smattering of turnaround ideas (e.g., Rent-Way) and “basket” approaches (e.g., trades in a large number of utility-preferred stocks).

Greg Eisen, CFA

Assistant Vice President of SAFECO Asset Management; BA Business Administration, Rutgers University (1978); Chartered Financial Analyst (CFA)(1995)

In 1986, Greg Eisen joined SAFECO as a financial analyst. In 1992, he became a securities analyst. He was named portfolio manager in 1996 and is currently manager of the SAFECO Small Company Value Fund, which he has managed since its inception.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

35

Performance Overview & Highlights

SAFECO Small Company Value Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year		Since Inception**
SAFECO Small Company Value Fund	6.10	%	8.21	%	3.51	%	7.60	%
Russell 2000 Value Index	7.26	%	8.49	%	9.70	%	13.08	%
Lipper, Inc. (Small-Cap Value Funds)	4.31	%	5.69	%	9.15	%	N/A
* Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Banks	15	%
Diversified Financial Services	6
Trucking	5
Steel	5
Diversified Commercial Services	5
TOP TEN HOLDINGS	Percent of Net Assets
Rent-Way, Inc. (Diversified Financial Services)	3.7	%
BankUnited Financial Corp. (Class A) (Banks)	2.9
Shaw Group, Inc. (Steel)	2.9
Regis Corp. (Specialty Stores)	2.8
Precision Castparts Corp. (Diversified Metals & Mining)	2.5
Hooper Holmes, Inc. (Health Care Distributors & Services)	2.5
Insight Enterprises, Inc. (Catalog Retail)	2.5
Schnitzer Steel Industries, Inc. (Steel)	2.2
Macatawa Bank Corp. (Banks)	2.1
Landstar System, Inc. (Trucking)	2.1

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
Optimal Robotics Corp. (Class A)	$1,003
Shaw Group, Inc.	931
SWS Group, Inc.	815
Alliance Gaming Corp.	764
P.A.M. Transportation Services, Inc.	661
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Elcor Corp.	$  914
Federal Signal Corp.	780
FBR Asset Investment Corp.	773
Forward Air Corp.	722
Colonial BancGroup, Inc.	719

WEIGHTINGS AS A PERCENT

OF NET ASSETS

36

Portfolio of Investments

SAFECO Small Company Value Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—89.1%
Aerospace & Defense—1.4%
25,500	*	United Defense Industries, Inc.	$	586
Banks—14.9%
11,400		Alabama National BanCorp		493
62,400	*	BankUnited Financial Corp. (Class A)		1,195
16,900		BostonFed Bancorp, Inc.		542
41,885		Camco Financial Corp.		591
14,300		CPB, Inc.		657
41,029	*	Hanmi Financial Corp.		703
40,132		Macatawa Bank Corp.		867
18,700		Pacific Crest Capital, Inc.		524
20,600		Riggs National Corp.		307
5,830		Southern Financial Bancorp, Inc.		186
Biotechnology—0.1%
26,600	*	Paradigm Genetics, Inc.		37
Building Products—0.9%
14,500		Elcor Corp.		397
Casinos & Gaming—3.2%
56,300	*	Alliance Gaming Corp.		688
142,100	*	Mikohn Gaming Corp.		602
Catalog Retail—2.5%
40,000	*	Insight Enterprises, Inc.		1,008
Construction & Engineering—1.6%
22,800		URS Corp.		638
Construction Materials—2.8%
14,150		Florida Rock Industries, Inc.		507
16,900		Martin Marietta Materials, Inc.		659
Consumer Finance—2.0%
90,000		Cash America International, Inc.		828
Distributors—1.5%
43,000	*	Building Materials Holding Corp.		618
Diversified Commercial Services—4.5%
25,300	*	DeVry, Inc.		578
186,950	*†	International Aircraft Investors, Inc.		200
22,200	*	ITT Educational Services, Inc.		484
14,900		Landauer, Inc.		579
Diversified Financial Services—5.7%
117,200	*	Rent-Way, Inc.		1,518
40,200		SWS Group, Inc.		789
Diversified Metals & Mining—2.5%
31,100		Precision Castparts Corp.		1,026

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Electronic Equipment & Instruments—1.0%
57,000	*	Optimal Robotics Corp. (Class A)	$	416
Gas Utilities—1.7%
25,600		NUI Corp.		704
Health Care Distributors & Services—2.5%
126,200		Hooper Holmes, Inc.		1,010
Health Care Equipment—2.8%
22,100	*	INAMED Corp.		591
37,400	*	SonoSite, Inc.		540
Health Care Facilities—1.3%
24,800	*	Province Healthcare Co.		555
Health Care Supplies–—1.5%
67,000	*	Thoratec Corp.		602
Housewares & Specialities—1.6%
18,400		Lancaster Colony Corp.		656
Industrial Machinery—1.0%
10,800		Roper Industries, Inc.		403
Integrated Oil & Gas—1.6%
26,600		World Fuel Services Corp.		649
Internet Software & Services—1.6%
25,500	*	Websense, Inc.		652
Life & Health Insurance—2.0%
14,800		StanCorp Financial Group, Inc.		821
Marine—1.6%
48,700		Nordic American Tanker Shipping, Ltd.		665
Metal & Glass Containers—1.1%
32,100	*	Owens-Illinois, Inc.		441
Networking Equipment—1.8%
31,000	*	Anixter International, Inc.		729
Oil & Gas Drilling—0.7%
9,700	*	Patterson-UTI Energy, Inc.		274
Property & Casualty Insurance—1.5%
26,700		First American Corp.		614
Real Estate Investment Trust—3.9%
11,500		Alexandria Real Estate Equities, Inc.		567
12,700		Camden Property Trust		470
16,500		First Industrial Realty Trust, Inc.		542
Restaurants—0.0%
14,000	*	BRIAZZ, Inc.		14

SAFECO    MUTUAL    FUNDS www.safecofunds.com

SEE NOTES TO FINANCIAL STATEMENTS

37

Portfolio of Investments

SAFECO Small Company Value Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Specialty Stores—2.8%
41,800		Regis Corp.	$	1,129
Steel—5.0%
39,300		Schnitzer Steel Industries, Inc.		877
38,300	*	Shaw Group, Inc.		1,176
Telecommunications Equipment—1.8%
38,100	*	Plantronics, Inc.		724
Tobacco—1.5%
16,500		Universal Corp.		606
Trucking—5.2%
26,500	*	Arkansas Best Corp.		675
8,000	*	Landstar System, Inc.		855
24,200	*	P.A.M. Transportation Services, Inc.		581
TOTAL COMMON STOCKS (cost $32,273)				36,345
PREFERRED STOCKS—2.1%
Electric Utilities—2.1%
2,400		Great Plains Energy, Inc. Callable 8/05/02 @ $101.00		150
3,300		Jersey Central Power & Light Co. Callable 8/05/02 @ $106.50		193
4,000		Massachusetts Electric Co. Callable 8/05/02 @ $103.73		279
4,800		PSI Energy, Inc. Callable 8/05/02 @ $25.00		84
2,000		Virginia Electric & Power Co. Callable 8/05/02 @ $101.00		132
TOTAL PREFERRED STOCKS (cost $875)				838

SHARES OR PRINCIPAL AMOUNT		Value (000’s)
CASH EQUIVALENTS—8.9%
Investment Companies
2,020,706	AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)	$	2,021
1,584,410	Nations Money Market Reserves		1,584
TOTAL CASH EQUIVALENTS (cost $3,605)			3,605
TOTAL INVESTMENTS (cost $36,753)—100.0%			40,788
Other Assets, less Liabilities			(19)
NET ASSETS		$	40,769

* Non-income producing security.

† Affiliated issuer as defined by the Investment Company Act of 1940 (the Fund controls 5% or more of the outstanding voting shares of the company).

SEE NOTES TO FINANCIAL STATEMENTS

38

Report From the Fund Managers

SAFECO U.S. Value Fund

As of June 30, 2002

Rex Bentley Lynette D. Sagvold

How did the Fund perform?

In a period marked by corporate transgressions, accounting concerns and earnings weakness, the SAFECO U.S. Value Fund declined 8.01% while the Russell 1000 Value Index was down just 4.78% during the first half of 2002.

What factors impacted performance?

Approximately two-thirds of the year-to-date shortfall in performance is attributable to three stocks: Tyco International, AOL Time Warner and El Paso. In each case, slower earnings growth and questions regarding accounting practices caused these stocks to decline significantly over the past six months. The healthcare sector also hurt performance as concerns about patent expirations, lack of new drugs in the research pipeline, and problems with FDA compliance drove pharmaceutical issues lower.

What changes did you make and why?

Changes to the Fund this period fell into two categories: the purchase or sale of stocks based on valuation, and a change in sector weights. Looking forward to an improving gross domestic product (GDP), we added stocks that are more sensitive to the economy like Dow Chemical, General Motors and Home Depot, and United Technologies, while selling stocks like CVS, Gillette and Merck. These changes increased our weightings in the basic material, producer durable, and consumer and discretionary sectors, and decreased our exposure to consumer staples. We also sold stocks that had reached our price target, such as Northrup Grumman.

What is your outlook for the future?

Although the economy appears to be experiencing a modest recovery, the stock market continues to languish. Investors remain uneasy about near-term corporate earnings, the barrage of corporate accounting scandals, and the potential for disruptive geopolitical events.

Still, the stock market valuation has improved and currently looks moderately inexpensive. We are encouraged about the market at current levels and anticipate that inflation and interest rates will remain in check as the economy continues to improve. We see GDP growing in the 3% range, and look for the stock market to appreciate as the growth in GDP begins to flow down to corporate earnings. We believe the current scandals are likely to lead us to better corporate governance and stronger accounting standards in the future.

While the geopolitical concerns remain, we believe we have positioned the SAFECO U.S. Value Fund to benefit from what we believe will be a stronger economy. We also believe that the consumer will continue to be the driver of our economic strength.

The Fund is modestly overweight in the consumer discretionary, technology, and integrated oil sectors where valuations are attractive and prospects are likely to improve. The SAFECO U.S. Value Fund’s

SAFECO    MUTUAL    FUNDS 1-800-624-5711

39

Report From the Fund Managers

SAFECO U.S. Value Fund

As of June 30, 2002

forward price/equity (P/E) ratio of 15.3 compares favorably to the Russell 1000 Value P/E of 16.1, and the Fund’s gross dividend yield of 2.24% is line with the Russell 1000 Value yield of 2.25%.

Rex Bentley, MBA, CFA

Vice President of SAFECO Asset Management; BA and MBA, Brigham Young University (1975); Chartered Financial Analyst (CFA)(1981)

Rex joined SAFECO Asset Management in 1995 and has amassed more than 20 years investment experience.

Lynette D. Sagvold, CFA

Assistant Vice President of SAFECO Asset Management; BA Business Administration, University of Washington (1982); Chartered Financial Analyst (CFA) (1988)

Lynette began her investment career in 1981 at Kidder Peabody and was a portfolio manager for Key Trust and First Interstate before joining SAFECO in 1995 as a portfolio manager and insurance analyst.

40

Performance Overview & Highlights

SAFECO U.S. Value Fund

INVESTOR CLASS

Average Annual Total Return for the periods ended June 30, 2002	Six Month*		1 Year		5 Year	Since Inception**
SAFECO U.S. Value Fund	(8.01	)%	(8.68	)%	2.21	4.14	%
Russell 1000 Value Index	(4.78	)%	(8.95	)%	6.53	8.31	%
Lipper, Inc. (Large-Cap Value Funds)	(9.21	)%	(13.43	)%	3.45	N/A
* Not annualized. ** Graph and average annual return comparison begins April 30, 1997, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Banks	14	%
Integrated Oil & Gas	10
Diversified Financial Services	8
Integrated Telecommunication Services	7
Multi-Line Insurance	6
TOP TEN HOLDINGS	Percent of Net Assets
Exxon Mobil Corp. (Integrated Oil & Gas)	3.6	%
ChevronTexaco Corp. (Integrated Oil & Gas)	3.5
American International Group, Inc. (Multi-Line Insurance)	3.0
Wells Fargo & Co. (Banks)	2.9
United Parcel Service, Inc. (Class B) (Air Freight & Couriers)	2.8
Citigroup, Inc. (Diversified Financial Services)	2.8
U.S. Bancorp. (Banks)	2.7
Washington Mutual, Inc. (Banks)	2.6
Hartford Financial Services Group, Inc. (Multi-Line Insurance)	2.5
Verizon Communications (Integrated Telecommunications Services)	2.3

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
FirstEnergy Corp.	$217
Kimberly-Clark Corp.	135
Bank of New York Co., Inc.	117
Target Corp.	117
Hubbell, Inc. (Class B)	94
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Gillette Corp.	$207
CVS Corp.	157
Procter & Gamble Co.	114
Northrop Grumman Corp.	109
Johnson & Johnson	100

WEIGHTINGS AS A PERCENT

OF NET ASSETS

41

Portfolio of Investments

SAFECO U.S. Value Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCK—97.0%
Aerospace & Defense—0.8%
1,000		United Technologies Corp.	$	68
Air Freight & Couriers—2.8%
3,900		United Parcel Service, Inc. (Class B)		241
Aluminum—0.7%
1,900		Alcoa, Inc.		63
Automobile Manufacturers—0.5%
800		General Motors Corp.		43
Banks—13.5%
1,800		Bank of America Corp.		127
3,200		Bank of New York Co., Inc.		108
5,000		KeyCorp		136
2,000		State Street Corp.		89
10,090		U.S. Bancorp		236
5,950		Washington Mutual, Inc.		221
5,000		Wells Fargo & Co.		250
Brewers—1.1%
1,900		Anheuser-Busch Companies, Inc.		95
Computer Hardware—0.8%
1,000		International Business Machines Corp.		72
Computer Storage & Peripherals—0.4%
4,300	*	EMC Corp.		32
Data Processing Services—1.1%
2,100		Automatic Data Processing, Inc.		91
Department Stores—2.1%
5,550		May Department Stores Co.		183
Diversified Chemicals—2.4%
1,800		Dow Chemical Co.		62
3,300		Du Pont (E.I.) de Nemours & Co.		147
Diversified Financial Services—7.6%
2,400		American Express Co.		87
6,200		Citigroup, Inc.		240
2,100		Federal National Mortgage Association		155
5,300		J.P. Morgan Chase & Co.		180
Electric Utilities—4.3%
5,700		Duke Energy Corp.		177
5,900		FirstEnergy Corp.		197
Electronic Equipment & Instruments—1.0%
2,600		Hubbell, Inc. (Class B)		89
Food Distributors—1.0%
3,300		SYSCO Corp.		90

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Food Retail—1.5%
6,300	*	Kroger Co.	$	125
Gas Utilities—0.5%
2,200		El Paso Corp.		45
General Merchandise Stores—2.5%
2,900	*	Costco Wholesale Corp.		112
2,800		Target Corp.		107
Home Improvement Retail—1.0%
2,300		Home Depot, Inc.		84
Household Products—2.7%
2,200		Kimberly-Clark Corp.		136
1,100		Procter & Gamble Co.		98
Industrial Conglomerates—1.7%
5,100		General Electric Co.		148
Industrial Gases—2.2%
3,400		Praxair, Inc.		194
Industrial Machinery—1.0%
1,800		Ingersoll-Rand Co.		82
Integrated Oil & Gas—10.0%
3,400		ChevronTexaco Corp.		301
5,700		Conoco, Inc.		158
7,528		Exxon Mobil Corp.		308
1,800		Royal Dutch Petroleum Co. (ADR)		99
Integrated Telecommunications Services—7.1%
3,000		ALLTEL Corp.		141
3,300		CenturyTel, Inc.		97
6,000		SBC Communications, Inc.		183
4,948		Verizon Communications		199
IT Consulting & Services—0.9%
2,200		Electronic Data Systems Corp.		82
Movies & Entertainment—2.3%
5,100	*	AOL Time Warner, Inc.		75
6,600		Walt Disney Co.		125
Multi-Line Insurance—5.5%
3,863		American International Group, Inc.		264
3,600		Hartford Financial Services Group, Inc.		214
Multi-Utilities—2.2%
8,700		NiSource, Inc.		190
Networking Equipment—0.7%
4,300	*	Cisco Systems, Inc.		60
Oil & Gas Equipment & Services—0.6%
1,200		Schlumberger, Ltd.		56

SEE NOTES TO FINANCIAL STATEMENTS

42

Portfolio of Investments

SAFECO U.S. Value Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Pharmaceuticals—5.0%
3,000		Abbott Laboratories	$	113
1,500		Bristol-Myers Squibb Co.		39
1,900		Pfizer, Inc.		67
1,700		Pharmacia Corp.		64
2,400		Schering-Plough Corp.		59
1,900		Wyeth		97
Publishing & Printing—1.8%
2,000		Gannett Co., Inc.		152
Real Estate Investment Trust—3.5%
3,200		Equity Residential		92
2,700		First Industrial Realty Trust, Inc.		89
3,400		Liberty Property Trust		119
Restaurants—1.5%
4,500		McDonald’s Corp.		128
Semiconductor Equipment—0.6%
2,800		Intel Corp.		51
Semiconductors—0.7%
2,500		Texas Instruments, Inc.		59
Systems Software—1.0%
1,600	*	Microsoft Corp.		88
Telecommunications Equipment—0.4%
2,300		Nokia Oyj (ADR)		33
TOTAL COMMON STOCKS (cost $8,410)				8,412
CASH EQUIVALENTS—4.2%
Investment Companies
366,302		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		366
TOTAL CASH EQUIVALENTS (cost $366)				366
TOTAL INVESTMENTS (cost $8,777)—101.3%				8,778
Other Assets, less Liabilities				(111)
NET ASSETS			$	8,667

* Non-income producing security.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

SEE NOTES TO FINANCIAL STATEMENTS

43

Report From the Fund Manager

SAFECO Small Company Growth Fund

As of June 30, 2002

Thomas J. Ross

For the six-month period ending June 30, the SAFECO Small Company Growth Fund was ahead of its benchmark, the Russell 2000 Growth, by 5.19%.

As the first half of 2002 came to a close, WorldCom, the second largest long distance telecommunications company in the United States, disclosed that it had overstated its results by nearly $4 billion, in what may be one of America’s largest cases of fraudulent accounting practices. This announcement was characteristic of business headlines in recent months, shaking investors’ faith by adding to the list of large, high-profile companies attempting to prop up their share prices by misleading the public. Standard & Poor’s also introduced their new definitions of “core earnings” in an effort to apply updated standards to the definition.

Also impacting sentiment, international news reminded investors of ongoing tensions in the Middle East, including unfinished business with Iraq, a possible confrontation between India and Pakistan, as well as heightened terror alerts at home. In response, virtually every U.S. equity style and size segment fell during the first half of 2002. Small-cap stocks were more resilient, however, and fell to a lesser extent than large caps. Value beat growth across the market-cap spectrum. We appear to be well into one of the longer cycles of value leadership in the small-cap stock universe.

The data unfolding in the real economy has nevertheless been reasonably upbeat, with slower but steady growth on an annualized basis. On an annualized basis, first quarter real gross domestic product (GDP) growth was 6.1%, and second quarter growth is expected to come in around 2%. On the heels of a recession, a 4% annualized growth rate for the first half of 2002 is certainly respectable. Despite strong growth in productivity, little inflationary pressure, and signs of improvement in manufacturing, negative investor sentiment was the key driver of equity markets over the quarter.

Performance of the SAFECO Small Company Growth Fund was helped most by strong performance in retail stocks, favorable stock selection in healthcare providers, and by underweighting software stocks. The major detractors from returns came from semiconductor holdings and the underweight position in banks.

Technology and biotechnology were the most punished areas in the Russell 2000 Growth Index—we are underweight in both groups. Few areas of the small-cap growth market posted positive returns, although industries within consumer staples and financials were among the most resilient.

We reduced commitments to technology, notably in semiconductors and communications equipment, given what we perceive to be a weak outlook and a continuation of overly optimistic earnings growth assumptions. Despite the potential for counter-trend rallies in technology, we do not believe fundamentals in most areas of this sector are improving to the extent necessary to support their valuations. Earnings estimates for the second half and 2003 remain too hopeful, and these will eventually have to be revised downward. Software, in particular, is an industry where we have difficulty with company forecasts.

44

Report From the Fund Manager

SAFECO Small Company Growth Fund

As of June 30, 2002

In addition to reducing allocations to technology, we exited telecommunications, added to consumer discretionary, commercial goods and services, and added exposure to financials with new bank and insurance holdings. We also added a real estate investment trust (Redwood Trust Inc.), a component of the benchmark. While our position size here is small, this was one of the best performing industry segments for the fund.

Healthcare stocks came under selling pressure, and we reduced biotechnology holdings. Our healthcare holdings are concentrated in healthcare providers and services.

The largest economic sector overweight in portfolios at the end of the first half of 2002 was consumer discretionary. This sector continues to generate strong earnings, and has enjoyed the highest degree of positive earnings revisions. The largest underweight allocation was to technology.

Equity markets typically rally in anticipation of an economic recovery, with smaller-cap stocks taking the lead. While small caps have been outperforming the large caps, the overall market’s recent performance has been sub-par for this stage of a recovery, compared to past economic cycles. Shares in many sectors have dipped to below their September 2001 lows. It may be a rational investor response to wait until better earnings materialize, given that the integrity of published earnings is so widely being called into question.

Ultimately, however, smaller-cap stocks may benefit vis-à-vis larger caps, since most of the high profile accounting misdeeds, discovered so far, have occurred at very large, multinational corporations. The importance of restoring faith in corporate America is clear and policy makers appear highly motivated to pursue aggressive reforms. If deemed effective, reforms coinciding with stronger earnings could substantially improve the investment outlook.

Terror-related shocks remain a great uncertainty, and would hurt small caps’ relative performance in the short term. We expect monetary policy will remain accommodative near term, and believe that the current slow growth economic environment still favors smaller cap investing. Smaller companies can often grow faster than large cap firms can, in part by pursuing niche opportunities. Faster earnings growth and frustration with mega-caps are two themes that make smaller cap investing appealing, and could attract further flows into the sector as signs of an equity market recovery accelerate.

Thomas J. Ross

Dresdner RCM Global Investors LLC (the “sub-advisor”) acts as the investment sub-advisor to the SAFECO Small Company Growth Fund. Thomas J. Ross is a Director of the sub-advisor, with which he has been associated since 2001. Prior to 2001, he was a senior analyst and portfolio manager for Dresdner Bank’s Dresdner Investment Trust subsidiary for ten years. He is primarily responsible for the day-to-day management of the Fund. Mr. Ross manages or co-manages other accounts of the sub-advisor or its clients.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

45

Performance Overview & Highlights

SAFECO Small Company Growth Fund

INVESTOR CLASS

Total Return for the period ended June 30, 2002	Six Month*	Since Inception*†
SAFECO Small Company Growth Fund	(12.16)%	(0.66)%
Russell 2000 Growth Index	(17.35)%	(4.90)%
* Not annualized. † Total return comparison begins October 31, 2001, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Specialty Stores	6	%
Health Care Facilities	6
Semiconductor Equipment	5
Banks	5
Application Software	4
TOP TEN HOLDINGS	Percent of Net Assets
Monro Muffler Brake, Inc. (Diversified Commercial Services)	3.2	%
Patterson-UTI Energy, Inc. (Oil & Gas Drilling)	2.2
Duane Reade, Inc. (Drug Retail)	2.1
Linens ’n’ Things, Inc. (Specialty Stores)	2.0
Hibbet Sporting Goods, Inc. (Specialty Stores)	2.0
Renal Care Group (Health Care Facilities)	1.9
National-Oilwell, Inc. (Oil & Gas Equipment & Services)	1.8
Scottish Annuity & Life Holdings, Ltd. (Life & Health Insurance)	1.8
Alliance Data Systems Corp. (Data Processing Systems)	1.8
VCA Antech, Inc. (Health Care Facilities)	1.7

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
Microsemi Corp.	$153
Monro Muffler Brake, Inc.	119
Concurrent Computer Corp.	112
Hibbett Sporting Goods, Inc.	111
SeaChange International, Inc.	102
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Triad Hospitals, Inc.	$154
SeaChange International, Inc.	125
Legato Systems, Inc.	117
ORATEC Interventions, Inc.	111
Humana, Inc.	102

WEIGHTINGS AS A PERCENT

OF NET ASSETS

46

Portfolio of Investments

SAFECO Small Company Growth Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—89.7%
Aerospace & Defense—1.4%
3,500	*	Veridian Corp.	$	79
Apparel & Accessories—0.6%
2,000	*	Gymboree Corp.		32
Apparel Retail—1.4%
1,000	*	J. Jill Group, Inc.		38
2,000	*	Pacific Sunwear of California, Inc.		44
Application Software—4.4%
2,500	*	J.D. Edwards & Co.		30
3,000	*	NetIQ Corp.		68
2,250	*	Take-Two Interactive Software, Inc.		46
2,400	*	THQ, Inc.		72
8,000	*	Vastera, Inc.		35
Auto Parts & Equipment—2.1%
3,000	*	Dura Automotive Systems, Inc.		62
4,000	*	Tower Automotive, Inc.		56
Automobile Manufacturers—0.5%
1,000	*	Navistar International Corp.		32
Banks—4.5%
3,500		First State Bancorporation		91
1,750		FirstMerit Corp.		48
1,600		Mid-State Bancshares		31
1,866		Pacific Capital Bancorp		45
1,800		Trustmark Corp.		46
Biotechnology—1.3%
1,400	*	Neurocrine Biosciences, Inc.		40
1,000	*	Transkaryotic Therapies, Inc.		36
Broadcasting & Cable TV—2.9%
3,000	*	Cumulus Media, Inc. (Class A)		41
1,350	*	Entercom Communications Corp.		62
2,400	*	Lin TV Corp. (Class A)		65
Catalog Retail—0.6%
1,500	*	Insight Enterprises, Inc.		38
Computer Storage & Peripherals—1.0%
12,500	*	Concurrent Computer Corp.		58
Construction & Farm Machinery—0.8%
2,250	*	AGCO Corp.		44
Consumer Electronics—0.7%
3,400	*	InterTAN, Inc.		38
Data Processing Services—3.0%
4,000	*	Alliance Data Systems Corp.		102
1,600	*	ChoicePoint, Inc.		73

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Distributors—0.5%
1,600		Advanced Marketing Services, Inc.	$	29
Diversified Chemicals—1.3%
3,500		Olin Corp.		78
Diversified Commercial Services—4.0%
2,000	*	Coinstar, Inc.		49
8,000	*	Monro Muffler Brake, Inc.		182
Diversified Financial Services—0.8%
1,800	*	Federal Agricultural Mortgage Corp.		48
Drug Retail—2.1%
3,500		Duane Reade, Inc.		119
Electrical Components & Equipment—0.9%
2,200	*	Advanced Energy Industries, Inc.		49
Electronic Equipment & Instruments—2.2%
3,300		EDO Corp.		94
1,400	*	InVision Technologies, Inc.		34
Food Distributors—1.5%
2,500		Performance Food Group Co.		85
Health Care Distributors & Services—0.6%
10,600	*	Curon Medical, Inc.		37
Health Care Equipment—3.1%
2,500	*	Conceptus, Inc.		41
2,500	*	Med-Design Corp.		32
1,400	*	Therasense, Inc.		26
2,000	*	Varian Medical Systems, Inc.		81
Health Care Facilities—5.6%
1,250	*	LifePoint Hospitals, Inc.		45
3,500	*	Renal Care Group, Inc.		109
1,750	*	Triad Hospitals, Inc.		74
6,000	*	VCA Antech, Inc.		95
Health Care Supplies—0.5%
1,900	*	Kyphon, Inc.		28
Hotels—2.7%
3,000	*	Choice Hotels International, Inc.		60
2,500		Fairmont Hotels & Resorts, Inc.		65
700		Four Seasons Hotels, Inc.		33
Industrial Machinery—0.7%
1,400	*	Flowserve Corp.		42
Insurance Brokers—0.7%
2,500		Hub International, Ltd.		38
Internet Retail—0.5%
1,250	*	Overture Services, Inc.		31

SAFECO    MUTUAL    FUNDS www.safecofunds.com

SEE NOTES TO FINANCIAL STATEMENTS

47

Portfolio of Investments

SAFECO Small Company Growth Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Internet Software & Services—2.1%
6,000	*	Exult, Inc.	$	39
3,500	*	Fidelity National Information Solutions, Inc.		84
IT Consulting & Services—2.4%
4,700	*	KPMG Consulting, Inc.		70
5,000	*	Perot Systems Corp.		54
500	*	SRA International, Inc. (Class A)		13
Leisure Products—0.6%
2,500	*	West Marine, Inc.		32
Life & Health Insurance—1.8%
5,500		Scottish Annuity & Life Holdings, Ltd.		105
Metal & Glass Containers—1.8%
1,200		Ball Corp.		50
1,400	*	Silgan Holdings, Inc.		57
Multi-Line Insurance—0.2%
400	*	The Navigators Group, Inc.		11
Oil & Gas Drilling—2.2%
4,500	*	Patterson-UTI Energy, Inc.		127
Oil & Gas Equipment & Services—4.3%
2,500	*	Cal Dive International, Inc.		55
5,000	*	National-Oilwell, Inc.		105
4,900	*	Varco International, Inc.		86
Oil & Gas Exploration & Production—1.4%
3,500	*	Ultra Petroleum Corp.		27
3,000	*	Unit Corp.		52
Pharmaceuticals—2.3%
4,000	*	Amylin Pharmaceuticals, Inc.		44
1,000	*	CV Therapeutics, Inc.		19
2,500	*	Pharmaceutical Resources, Inc.		69
Railroads—0.9%
5,000	*	RailAmerica, Inc.		54
Real Estate Investment Trust—0.7%
1,250		Redwood Trust, Inc.		39
Restaurants—0.8%
1,750	*	O’Charley’s, Inc.		44
Semiconductor Equipment—4.9%
8,800	*	Artisan Components, Inc.		79
4,000		Lattice Semiconductor Corp.		35
17,500	*	Manufacturers’ Services, Ltd.		85
5,000	*	Microsemi Corp.		33
2,000	*	Semtech Corporation		53

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Specialty Chemicals—0.6%
4,000	*	Omnova Solutions, Inc.	$	34
Specialty Stores—6.3%
1,500		Aaron Rents, Inc.		36
4,500	*	Hibbett Sporting Goods, Inc.		114
3,500	*	Linens ’n Things, Inc.		115
2,000	*	O’Reilly Automotive, Inc.		55
1,600	*	Sonic Automotive, Inc.		41
Systems Software—0.8%
5,000	*	Per-Se Technologies, Inc.		46
Telecommunications Equipment—1.6%
4,600	*	UTStarcom, Inc.		93
Textiles—0.4%
6,000	*	DHB Industries, Inc.		24
Trucking—0.7%
1,800	*	Swift Transportation Co., Inc.		42
TOTAL COMMON STOCKS (cost $5,185)				5,177
CASH EQUIVALENTS—10.2%
Investment Companies
295,222		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		295
295,222		Nations Money Market Reserves		295
TOTAL CASH EQUIVALENTS (cost $590)				590
TOTAL INVESTMENTS (cost $5,775)—99.9%				5,767
Other Assets, less Liabilities				3
NET ASSETS			$	5,770

* Non-income producing security.

SEE NOTES TO FINANCIAL STATEMENTS

48

Report From the Fund Managers

SAFECO U.S. Growth Fund

As of June 30, 2002

Seth A. Reicher Mary Bersot

Year-to-date, the SAFECO U.S. Growth Fund performed in line with its benchmark, the Russell 1000 Growth Index. Once again, value stocks outperformed growth stocks and small cap stocks outperformed large-cap stocks.

The economy showed signs of improvement, but stock prices continued to decline. Typically at this stage of an economic recovery, stock prices tend to increase, however, the latest economic and market cycles have been anything but typical.

Normally during a recession, many of the excesses built up in the previous expansion are unwound. This recession, mild by historical comparison, did not fully correct the excesses. Namely, debt levels for both consumers and corporations remain high and there appears to be an excess of technology and telecommunications capital equipment that will take time to work through. As a result, it will be more difficult for the economy to make the transition from inventory cycle led growth to more sustainable growth.

Although still positive, economic news released during the second quarter pointed to a slower pace from the first quarter. In addition, new data suggested that the consumer might finally be retrenching. While housing remained solid, several other indicators were noticeably weaker. In addition, comments from a number of companies, especially in more cyclical industries including technology, suggested business activity remained weak and the outlook continued to be quite uncertain. Expectations for a pick-up of demand and profit recovery in the second half of the year faded.

Market sentiment switched from positive to negative as investors were bombarded by daily examples of questionable accounting, suggesting a lack of corporate integrity. With valuations still comparatively high in many sectors of the market, share prices had little support. U.S. mutual fund and foreign investors moved money out of stocks. Foreign investors, also had to deal with a rapid decline in the U.S dollar, which likely exacerbated the flow of funds from the United States.

The SAFECO U.S. Growth Fund is built bottom-up. The defensive nature of our selections was most characterized by our underweight to technology stocks and overweight to traditionally stable growth sectors, including consumer staples companies and pharmaceuticals.

Consumer staples stocks performed well, viewed as a safe haven in this difficult market. On the other hand, pharmaceutical stocks did not perform as expected. Technology and telecommunications stocks have been weak throughout the year (especially during the second quarter) as the fundamentals for these businesses continued to be challenged.

As fallout from the accounting and liquidity issues surrounding the telecommunications sector and WorldCom continue, investors punished the stocks of media companies. Our underweight to this group was positive for performance, as well.

SAFECO    MUTUAL    FUNDS 1-800-624-5711

49

Report From the Fund Managers

SAFECO U.S. Growth Fund

As of June 30, 2002

We continue to maintain our cautious short-term outlook for the market and the economy as a whole. While it is clear that the economy has turned the corner, growth and corporate profits in the second half of 2002 will likely be less robust than implied by current share prices. The current levels of consumer and business sector debt will act as a headwind to sustainable economic growth. In the near-term, the consumer may once again be reinvigorated by the current low mortgage rates with the acceleration of refinancing activity. However, any strength in consumer spending will likely be difficult to maintain.

We were somewhat skeptical of the market’s extraordinary rebound in last year’s fourth quarter and chose to maintain our defensive portfolio positioning. However, due to subsequent changes in individual stock positions, we have slightly reduced our overall defensiveness by modestly reducing our technology underweight and decreasing our healthcare overweight.

Given the difference in relative performance of large-cap growth to both small-cap and value stocks, and the expected growth of earnings between the sectors, we believe that growth stocks are poised for strong relative performance over the next 12 to 18 months. Regarding the broader market, stocks are likely to be caught in a trading range over the near-term and could continue to experience sharp swings in prices. Any positive news on the economy or earnings could easily be offset by negative news. In addition, concerns about the quality of earnings and relatively expensive valuations will likely combine to keep a lid on stock price appreciation. We anticipate that after a challenging summer, we may have an opportunity to further reduce your portfolio’s defensive posture. We hope to see more realistic earnings expectations for cyclical sectors and more attractive valuations.

As always, we remain committed to our philosophy of investing in quality companies with achievable superior growth characteristics and reasonable valuations. In an uncertain environment such as this, investors will likely pay a premium price for companies that are able to produce outstanding earnings growth. While the recent market declines have been disappointing, one result has been an increasing number of stocks that offer attractive entry-points for the intermediate-term investment horizon.

Seth A. Reicher Mary Bersot

Dresdner RCM Global Investors LLC (the “sub-advisor”) acts as an investment sub-advisor to the SAFECO U.S. Growth Fund. Seth A. Reicher, CFA and Mary Bersot, CFA, are primarily responsible for the day-to-day management of the Fund. Mr. Reicher is a Managing Director of the sub-advisor, which he has been associated with since 1993. Ms. Bersot is a Managing Director of the sub-advisor, which she has been associated with since 1999. From 1990 to 1999, she worked for McMorgan & Co. as a Senior Vice President managing the Taft Hartley Funds as well as a balanced mutual fund. Mr. Reicher and Ms. Bersot manage or co-manage other accounts of the sub-advisor or its clients.

50

Performance Overview & Highlights

SAFECO U.S. Growth Fund

INVESTOR CLASS

Total Return for the period ended June 30, 2002	Six Month*	Since Inception*†
SAFECO U.S. Growth Fund	(20.80)%	(15.73)%
Russell 1000 Growth Index	(20.78)%	(13.30)%
* Not annualized. † Total return comparison begins October 31, 2001, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

TOP FIVE INDUSTRIES	Percent of Net Assets
Pharmaceuticals	20	%
Systems Software	8
Industrial Conglomerates	6
Diversified Financial Services	5
General Merchandise Stores	5
TOP TEN HOLDINGS	Percent of Net Assets
Pfizer, Inc. (Pharmaceuticals)	7.7	%
Microsoft Corp. (Systems Software)	6.5
General Electric Co. (Industrial Conglomerates)	5.9
Wal-Mart Stores, Inc. (General Merchandise Stores)	3.6
Anheuser-Busch Companies, Inc. (Brewers)	3.4
American International Group, Inc. (Multi-Line Insurance)	3.2
Johnson & Johnson (Pharmaceuticals)	3.0
Pharmacia Corp. (Pharmaceuticals)	2.9
Wyeth (Pharmaceuticals)	2.8
Intel Corp. (Semiconductor Equipment)	2.7

TOP FIVE PURCHASES For the Period Ended June 30, 2002	Cost (000’s)
Dell Computer Corp.	$  79
Cardinal Health, Inc.	68
Medtronic, Inc.	67
Colgate-Palmolive Co.	48
Automatic Data Processing, Inc.	42
TOP FIVE SALES For the Period Ended June 30, 2002	Proceeds (000’s)
Tyco International, Ltd.	$123
Merck & Co., Inc.	106
AOL Time Warner, Inc.	72
GlaxoSmithKline, plc (ADR)	69
Bristol-Myers Squibb Co.	38

WEIGHTINGS AS A PERCENT

OF NET ASSETS

51

Portfolio of Investments

SAFECO U.S. Growth Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
COMMON STOCKS—94.6%
Aerospace & Defense—2.3%
400		General Dynamics Corp.	$	43
900		United Technologies Corp.		61
Air Freight & Couriers—1.2%
900		United Parcel Service, Inc. (Class B)		56
Application Software—1.0%
400	*	Check Point Software Technologies, Ltd.		6
400	*	Electronic Arts, Inc.		27
800	*	Siebel Systems, Inc.		11
Biotechnology—3.1%
2,200		Amgen, Inc.		92
900	*	Genentech, Inc.		30
700	*	MedImmune, Inc.		19
Brewers—3.4%
3,100		Anheuser-Busch Companies, Inc.		155
Broadcasting & Cable TV—1.4%
1,000	*	Comcast Corp. (Special Class A)		24
950	*	Viacom, Inc. (Class B)		42
Computer Hardware—2.9%
3,000	*	Dell Computer Corp.		79
750		International Business Machines Corp.		54
Data Processing Services—1.3%
1,300		Automatic Data Processing, Inc.		57
Diversified Financial Services—4.9%
1,500		Citigroup, Inc.		58
1,175		Federal National Mortgage Association		87
600		Franklin Resources, Inc.		26
300		Marsh & McLennan Cos., Inc.		29
600		Merrill Lynch & Co., Inc.		24
Drug Retail—1.7%
2,000		Walgreen Co.		77
Food Distributors—1.1%
1,800		SYSCO Corp.		49
Footwear—1.3%
1,100		NIKE, Inc. (Class B)		59
General Merchandise Stores—4.9%
700	*	Costco Wholesale Corp.		27
800		Target Corp.		31
3,000		Wal-Mart Stores, Inc.		165
Health Care Distributors & Services—1.4%
1,025		Cardinal Health, Inc.		63

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Health Care Equipment—2.8%
1,450		Baxter International, Inc.	$	64
1,500		Medtronic, Inc.		64
Home Improvement Retail—1.8%
2,200		Home Depot, Inc.		81
Household Products—0.3%
200		Kimberly-Clark Corp.		12
Industrial Conglomerates—5.9%
9,200		General Electric Co.		267
Integrated Oil & Gas—0.5%
475		BP, plc (ADR)		24
Integrated Telecommunications Services—0.4%
600		SBC Communications, Inc.		18
IT Consulting & Services—1.4%
1,600	*	Accenture, Ltd. (Class A)		30
900		Electronic Data Systems Corp.		33
Multi-Line Insurance—3.2%
2,100		American International Group, Inc.		143
Networking Equipment—1.8%
5,800	*	Cisco Systems, Inc.		81
Oil & Gas Equipment & Services—1.2%
600		Baker Hughes, Inc.		20
500		Schlumberger, Ltd.		23
300	*	Weatherford International, Inc.		13
Oil & Gas Exploration & Production—0.5%
500		Anadarko Petroleum Corp.		25
Packaged Foods—1.4%
1,600		Kraft Foods, Inc. (Class A)		66
Personal Products—2.8%
1,950		Colgate-Palmolive Co.		98
900		Gillette Co.		30
Pharmaceuticals—20.4%
1,600		Eli Lilly & Co.		90
550	*	IDEC Pharmaceuticals Corp.		19
2,600		Johnson & Johnson		136
10,000		Pfizer, Inc.		350
3,500		Pharmacia Corp.		131
2,900		Schering-Plough Corp.		71
2,500		Wyeth		128
Restaurants—0.8%
1,500	*	Starbucks Corp.		37

SEE NOTES TO FINANCIAL STATEMENTS

52

Portfolio of Investments

SAFECO U.S. Growth Fund

As of June 30, 2002

(Unaudited)

SHARES OR PRINCIPAL AMOUNT			Value (000’s)
Semiconductor Equipment—2.9%
6,600		Intel Corp.	$	121
600	*	NVIDIA Corp.		10
Semiconductors—0.8%
1,000	*	Maxim Integrated Products, Inc.		38
Soft Drinks—4.4%
1,400		Coca-Cola Co.		78
2,500		PepsiCo, Inc.		121
Systems Software—7.7%
5,400	*	Microsoft Corp.		295
3,500	*	Oracle Corp.		33
1,100	*	VERITAS Software Corp.		22
Telecommunications Equipment—0.9%
1,350		Nokia Oyj (ADR)		20
800	*	QUALCOMM, Inc.		22
Wireless Telecommunications Services—0.8%
2,650		Vodafone Group, plc (ADR)		36
TOTAL COMMON STOCKS (cost $4,874)				4,301
CASH EQUIVALENTS—5.3%
Investment Companies
232,937		AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares)		233
9,459		Nations Money Market Reserves		9
TOTAL CASH EQUIVALENTS (cost $242)				242
TOTAL INVESTMENTS (cost $5,116)—99.9%				4,543
Other Assets, less Liabilities				3
NET ASSETS			$	4,546

* Non-income producing security.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

SEE NOTES TO FINANCIAL STATEMENTS

53

Statements of Assets and Liabilities

As of June 30, 2002

(Unaudited)

–(In Thousands, Except Per-Share Amounts)–	SAFECO Growth Opportunities Fund			SAFECO Equity Fund		SAFECO Dividend Income Fund
Assets
Investments, at Cost	$	665,843		$	709,824	$	135,340
Investments, at Value:
Unaffiliated Issuers	$	356,611		$	844,263	$	157,692
Affiliated Issuers		281,749			–		–
Total Investments at Value		638,360			844,263		157,692
Cash		–			–		–
Collateral for Securities Loaned, at Fair Value		150,163			2,640		1,650
Receivables:
Investment Securities Sold		2,063			–		487
Trust Shares Sold		26			22		–
Dividends and Interest		5			585		420
From Advisor		4			17		–
Other		–			–		–
Deferred Offering Costs		–			–		–
Total Assets		790,621			847,527		160,249
Liabilities
Payables:
Investment Securities Purchased		1,938			–		374
Trust Shares Redeemed		79			99		–
Payable Upon Return of Securities Loaned		150,163			2,640		1,650
Forward Currency Contracts Open, Net		–			–		–
Dividends		–			1,384		596
Investment Advisory Fees		331			441		87
Accrued Expenses		245			326		68
Total Liabilities		152,756			4,890		2,775
Net Assets	$	637,865		$	842,637	$	157,474
Investor Class:
Net Assets	$	601,672		$	813,212	$	155,564
Trust Shares Outstanding		26,647			53,324		9,036
Net Asset Value, Offering Price, and Redemption Price Per Share	$	22.58		$	15.25	$	17.22
Class A:
Net Assets	$	24,227		$	16,539	$	856
Trust Shares Outstanding		1,086			1,083		49
Net Asset Value and Redemption Price Per Share	$	22.30		$	15.27	$	17.30
Maximum Offering Price Per Share (Net Asset Value Plus Sales Charge of 5.75%)	$	23.66		$	16.20	$	18.36
Class B:
Net Assets	$	11,776		$	12,756	$	958
Trust Shares Outstanding		552			854		55
Net Asset Value and Offering Price Per Share	$	21.32		$	14.93	$	17.34
Class C:
Net Assets	$	190		$	130	$	96
Trust Shares Outstanding		9			9		6
Net Asset Value and Offering Price Per Share	$	21.31		$	14.95	$	17.37
Analysis of Net Assets:
Paid in Capital (Par Value $.001, Unlimited Shares Authorized)	$	698,312		$	740,927	$	139,481
Distributable Earnings		(60,447	)		101,710		17,993
Net Assets	$	637,865		$	842,637	$	157,474

SEE NOTES TO FINANCIAL STATEMENTS

54

–(In Thousands, Except Per-Share Amounts)–	SAFECO Northwest Fund			SAFECO International Stock Fund			SAFECO Balanced Fund			SAFECO Small Company Value Fund			SAFECO U.S. Value Fund			SAFECO Small Company Growth Fund			SAFECO U.S. Growth Fund
Assets
Investments, at Cost	$	76,461		$	19,971		$	17,808		$	36,753		$	8,777		$	5,775		$	5,116
Investments, at Value:
Unaffiliated Issuers	$	79,821		$	23,538		$	17,794		$	40,588		$	8,778		$	5,767		$	4,543
Affiliated Issuers		–			–			–			200			–			–			–
Total Investments at Value		79,821			23,538			17,794			40,788			8,778			5,767			4,543
Cash		–			664			–			–			–			98			–
Collateral for Securities Loaned, at Fair Value		6,650			–			1,685			7,285			1,610			–			–
Receivables:
Investment Securities Sold		319			7			55			–			40			6			29
Trust Shares Sold		–			24			–			35			–			–			–
Dividends and Interest		34			79			106			45			14			2			4
From Advisor		12			20			5			7			5			9			7
Other		–			–			–			–			–			–			–
Deferred Offering Costs		–			–			–			–			–			19			19
Total Assets		86,836			24,332			19,645			48,160			10,447			5,901			4,602
Liabilities
Payables:
Investment Securities Purchased		–			15			152			37			124			93			20
Trust Shares Redeemed		5			–			–			16			–			–			–
Payable Upon Return of Securities Loaned		6,650			–			1,685			7,285			1,610			–			–
Forward Currency Contracts Open, Net		–			50			–			–			–			–			–
Dividends		–			–			117			–			26			–			–
Investment Advisory Fees		44			18			9			23			5			5			3
Accrued Expenses		54			39			21			30			15			33			33
Total Liabilities		6,753			122			1,984			7,391			1,780			131			56
Net Assets	$	80,083		$	24,210		$	17,661		$	40,769		$	8,667		$	5,770		$	4,546
Investor Class:
Net Assets	$	70,785		$	22,324		$	14,176		$	38,027		$	7,788		$	2,684		$	1,990
Trust Shares Outstanding		4,255			2,195			1,281			2,601			757			271			237
Net Asset Value, Offering Price, and Redemption Price Per Share	$	16.64		$	10.17		$	11.06		$	14.62		$	10.29		$	9.92		$	8.42
Class A:
Net Assets	$	4,504		$	913		$	1,730		$	1,271		$	343		$	1,018		$	875
Trust Shares Outstanding		276			91			156			89			33			103			104
Net Asset Value and Redemption Price Per Share	$	16.33		$	10.07		$	11.10		$	14.37		$	10.29		$	9.90		$	8.40
Maximum Offering Price Per Share (Net Asset Value Plus Sales Charge of 5.75%)	$	17.33		$	10.68		$	11.78		$	15.25		$	10.92		$	10.50		$	8.91
Class B:
Net Assets	$	4,706		$	895		$	1,755		$	1,471		$	536		$	991		$	845
Trust Shares Outstanding		300			91			159			106			52			100			101
Net Asset Value and Offering Price Per Share	$	15.68		$	9.84		$	11.08		$	13.83		$	10.24		$	9.85		$	8.36
Class C:
Net Assets	$	88		$	77			–			–			–		$	1,077		$	836
Trust Shares Outstanding		6			8												109			100
Net Asset Value and Offering Price Per Share	$	15.68		$	9.84											$	9.85		$	8.36
Analysis of Net Assets:
Paid in Capital (Par Value $.001, Unlimited Shares Authorized)	$	81,552		$	26,786		$	17,800		$	42,945		$	8,912		$	5,920		$	5,427
Distributable Earnings		(1,469	)		(2,576	)		(139	)		(2,176	)		(245	)		(150	)		(881	)
Net Assets	$	80,083		$	24,210		$	17,661		$	40,769		$	8,667		$	5,770		$	4,546

SEE NOTES TO FINANCIAL STATEMENTS

55

Statements of Operations

For the Six-Month Period Ended June 30, 2002

(Unaudited)

–(In Thousands)–	SAFECO Growth Opportunities Fund			SAFECO Equity Fund			SAFECO Dividend Income Fund
Investment Income
Dividends (Net of Foreign Taxes Withheld of $32 Thousand in the International Stock Fund)	$	202		$	7,367		$	1,992
Interest		51			285			53
Income from Securities Loaned, net		407			21			8
Total Investment Income		660			7,673			2,053
Expenses
Investment Advisory		2,431			3,240			597
Fund Accounting and Administration		142			169			77
Transfer Agent—Investor Class		897			1,158			189
—Class A		44			30			1
—Class B		20			24			2
Shareholder Service—Class A		35			24			1
—Class B		16			19			1
—Class C		–			–			–
Distribution               —Class B		49			56			4
—Class C		1			1			–
Legal and Auditing		21			26			12
Custodian		33			43			10
Registration		21			19			18
Reports to Shareholders		113			167			22
Trustees		4			5			3
Loan Interest		25			–			–
Amortization of Offering Costs		–			–			–
Other		40			64			7
Total Expenses Before Expense Reimbursement		3,892			5,045			944
Expense Reimbursement From Advisor—Investor Class		–			–			–
—Class A		(11	)		(45	)		(1	)
—Class B		(5	)		(5	)		(1	)
—Class C		–			–			–
Total Expenses After Expense Reimbursement		3,876			4,995			942
Investment Income (Loss)		(3,216	)		2,678			1,111
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers		(7,725	)		(2,666	)		(3,598	)
Investments in Affiliated Issuers		(6,411	)		–			–
Foreign Currency Transactions		–			–			–
Total Net Realized Gain (Loss)		(14,136	)		(2,666	)		(3,598	)
Net Change in Unrealized Appreciation (Depreciation)		(127,269	)		(185,207	)		(11,134	)
Net Gain (Loss) on Investments and Foreign Currency		(141,405	)		(187,873	)		(14,732	)
Net Change in Net Assets Resulting from Operations	$	(144,621	)	$	(185,195	)	$	(13,621	)

SEE NOTES TO FINANCIAL STATEMENTS

56

–(In Thousands)–	SAFECO Northwest Fund			SAFECO International Stock Fund			SAFECO Balanced Fund			SAFECO Small Company Value Fund			SAFECO U.S. Value Fund			SAFECO Small Company Growth Fund			SAFECO U.S. Growth Fund
Investment Income
Dividends (Net of Foreign Taxes Withheld of $32 Thousand in the International Stock Fund)	$	342		$	308		$	121		$	217		$	96		$	5		$	23
Interest		18			1			210			24			4			4			2
Income from Securities Loaned, net		27			–			4			14			3			–			–
Total Investment Income		387			309			335			255			103			9			25
Expenses
Investment Advisory		312			120			63			130			32			30			20
Fund Accounting and Administration		40			11			8			16			4			3			2
Transfer Agent —Investor Class		117			33			20			44			8			1			1
—Class A		7			2			3			1			–			–			–
—Class B		8			2			3			2			1			–			–
Shareholder Service —Class A		6			1			2			1			–			1			1
—Class B		7			1			2			2			1			1			1
—Class C		–			–			–			–			–			2			1
Distribution —Class B		19			4			7			5			2			4			4
—Class C		–			–			–			–			–			4			4
Legal and Auditing		11			10			10			10			10			9			9
Custodian		7			35			3			7			3			5			3
Registration		23			22			17			17			15			15			15
Reports to Shareholders		18			8			4			9			1			1			–
Trustees		3			3			3			3			3			3			3
Loan Interest		–			–			–			–			–			–			–
Amortization of Offering Costs		–			–			–			–			1			28			28
Other		4			13			–			4			1			–			–
Total Expenses Before Expense Reimbursement		582			265			145			251			82			107			92
Expense Reimbursement From Advisor —Investor Class		(49	)		(82	)		(26	)		(38	)		(25	)		(21	)		(20	)
—Class A		(5	)		(4	)		(4	)		(2	)		(1	)		(9	)		(9	)
—Class B		(6	)		(4	)		(4	)		(3	)		(2	)		(8	)		(9	)
—Class C		–			–			–			–			–			(9	)		(8	)
Total Expenses After Expense Reimbursement		522			175			111			208			54			60			46
Investment Income (Loss)		(135	)		134			224			47			49			(51	)		(21	)
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers		(3	)		(401	)		(31	)		1,376			(30	)		(85	)		(287	)
Investments in Affiliated Issuers		–			–			–			–			–			–			–
Foreign Currency Transactions		–			4			–			–			–			–			–
Total Net Realized Gain (Loss)		(3	)		(397	)		(31	)		1,376			(30	)		(85	)		(287	)
Net Change in Unrealized Appreciation (Depreciation)		(10,916	)		(607	)		(971	)		291			(783	)		(666	)		(882	)
Net Gain (Loss) on Investments and Foreign Currency		(10,919	)		(1,004	)		(1,002	)		1,667			(813	)		(751	)		(1,169	)
Net Change in Net Assets Resulting from Operations	$	(11,054	)	$	(870	)	$	(778	)	$	1,714		$	(764	)	$	(802	)	$	(1,190	)

SEE NOTES TO FINANCIAL STATEMENTS

57

Statements of Changes in Net Assets

(Unaudited)

	SAFECO Growth Opportunities Fund						SAFECO Equity Fund						SAFECO Dividend Income Fund						SAFECO Northwest Fund
–(In Thousands)–	2002*			2001**			2002*			2001**			2002*			2001**			2002*			2001**
Operations
Net Investment Income (Loss)	$	(3,216	)	$	(5,308	)	$	2,678		$	6,294		$	1,111		$	3,016		$	(135	)	$	(236	)
Net Realized Gain (Loss) on Investments and Foreign Currency		(14,136	)		(15,562	)		(2,666	)		(30,021	)		(3,598	)		(298	)		(3	)		(4,512	)
Net Change in Unrealized Appreciation (Depreciation)		(127,269	)		151,466			(185,207	)		(112,939	)		(11,134	)		(17,959	)		(10,916	)		(9,041	)
Net Change in Net Assets Resulting from Operations		(144,621	)		130,596			(185,195	)		(136,666	)		(13,621	)		(15,241	)		(11,054	)		(13,789	)
Distributions to Shareholders From:
Net Investment Income
—Investor Class		–			–			(2,657	)		(6,251	)		(1,104	)		(2,987	)		–			–
—Class A		–			–			(21	)		(58	)		(5	)		(12	)		–			–
—Class B		–			–			–			–			(2	)		(7	)		–			–
—Class C		–			–			–			–			–			(1	)		–			–
Net Realized Gain on Investments
—Investor Class		–			–			–			–			–			–			–			–
—Class A		–			–			–			–			–			–			–			–
—Class B		–			–			–			–			–			–			–			–
—Class C		–			–			–			–			–			–			–			–
Total		–			–			(2,678	)		(6,309	)		(1,111	)		(3,007	)		–			–
Net Trust Share Transactions		(94,983	)		70,785			(90,622	)		(229,360	)		(7,853	)		(21,469	)		(5,147	)		(11,213	)
Redemption Fees		–			–			–			–			–			–			–			–
Total Change in Net Assets		(239,604	)		201,381			(278,495	)		(372,335	)		(22,585	)		(39,717	)		(16,201	)		(25,002	)
Net Assets at Beginning of Period		877,469			676,088			1,121,132			1,493,467			180,059			219,776			96,284			121,286
Net Assets at End of Period	$	637,865		$	877,469		$	842,637		$	1,121,132		$	157,474		$	180,059		$	80,083		$	96,284
Tax Character of Distributions Paid:
Ordinary Income	$	–		$	–		$	2,678		$	6,309		$	1,111		$	3,007		$	–		$	–
Long-term Capital Gains		–			–			–			–			–			–			–			–
Total	$	–		$	–		$	2,678		$	6,309		$	1,111		$	3,007		$	–		$	–

 * For the six-month period ended June 30, 2002.

 ** For the year ended December 31, 2001.

*** For the period from October 31, 2001 (commencement of operations) to December 31, 2001.

SEE NOTES TO FINANCIAL STATEMENTS

58

					SAFECO International Stock Fund		SAFECO Balanced Fund						SAFECO Small Company Value Fund					SAFECO U.S. Value Fund						SAFECO Small Company Growth Fund						SAFECO U.S. Growth Fund
–(In Thousands)–		2002*		2001**			2002*			2001**			2002*		2001**			2002*			2001**			2002*			2001***			2002*			2001***
Operations
Net Investment Income (Loss)	$	134		$	129		$	224		$	497		$	47	$	289		$	49		$	104		$	(51	)	$	(15	)	$	(21	)	$	(7	)
Net Realized Gain (Loss) on Investments and Foreign Currency		(397	)		(5,502	)		(31	)		312			1,376		(1,065	)		(30	)		39			(85	)		18			(287	)		11
Net Change in Unrealized Appreciation (Depreciation)		(607	)		(2,351	)		(971	)		(867	)		291		5,404			(783	)		(609	)		(666	)		658			(882	)		309
Net Change in Net Assets Resulting from Operations		(870	)		(7,724	)		(778	)		(58	)		1,714		4,628			(764	)		(466	)		(802	)		661			(1,190	)		313
Distributions to Shareholders From:
Net Investment Income
—Investor Class		–			(541	)		(191	)		(414	)		–		(282	)		(47	)		(99	)		–			–			–			–
—Class A		–			(21	)		(20	)		(47	)		–		(7	)		(1	)		(3	)		–			–			–			–
—Class B		–			(11	)		(15	)		(36	)		–		(1	)		(1	)		(1	)		–			–			–			–
—Class C		–			(1	)		–			–			–		–			–			–			–			–			–			–
Net Realized Gain on Investments
—Investor Class		–			–			–			–			–		–			–			–			(4	)		–			(2	)		–
—Class A		–			–			–			–			–		–			–			–			(2	)		–			(1	)		–
—Class B		–			–			–			–			–		–			–			–			(1	)		–			(1	)		–
—Class C		–			–			–			–			–		–			–			–			(2	)		–			–			–
Total		–			(574	)		(226	)		(497	)		–		(290	)		(49	)		(103	)		(9	)		–			(4	)		–
Net Trust Share Transactions		(416	)		(2,610	)		217			494			7,069		3,180			210			432			818			5,102			170			5,257
Redemption Fees		22			351
Total Change in Net Assets		(1,264	)		(10,557	)		(787	)		(61	)		8,783		7,518			(603	)		(137	)		7			5,763			(1,024	)		5,570
Net Assets at Beginning of Period		25,474			36,031			18,448			18,509			31,986		24,468			9,270			9,407			5,763			—			5,570			–
Net Assets at End of Period	$	24,210		$	25,474		$	17,661		$	18,448		$	40,769	$	31,986		$	8,667		$	9,270		$	5,770		$	5,763		$	4,546		$	5,570
Tax Character of Distributions Paid:
Ordinary Income	$	–		$	574		$	226		$	497		$	–	$	290		$	49		$	103		$	9		$	–		$	4		$	–
Long-term Capital Gains		–			–			–			–			–		–			–			–			–			–			–			–
Total	$	–		$	574		$	226		$	497		$	–	$	290		$	49		$	103		$	9		$	–		$	4		$	–

SEE NOTES TO FINANCIAL STATEMENTS

59

Financial Highlights

(For a Share Outstanding Throughout the Period)

(Unaudited)

SAFECO Growth Opportunities Fund	Six-Month Period Ended June 30			For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	27.25		$	22.33		$	23.30		$	22.70		$	22.45		$	16.97
Income (Loss) From Investment Operations
Net Investment Loss		(0.11	)		(0.16	)		(0.19	)		(0.16	)		(0.01	)		(0.02	)
Net Realized and Unrealized Gain (Loss) on Investments		(4.56	)		5.08			(0.78	)		0.76			0.99			8.50
Total from Investment Operations		(4.67	)		4.92			(0.97	)		0.60			0.98			8.48
Less Distributions
Distributions from Realized Gains		–			–			–			–			(0.73	)		(3.00	)
Net Asset Value at End of Period	$	22.58		$	27.25		$	22.33		$	23.30		$	22.70		$	22.45
Total Return		(17.14%	)*		22.03%			(4.16%	)		2.64%			4.37%			49.96%
Net Assets at End of Period (000’s)	$	601,672		$	829,052		$	637,557		$	815,041		$	1,394,225		$	638,562
Ratios to Average Net Assets:
Gross Expenses		1.04%	**		1.03%			1.05%			1.07%			0.77%			0.85%
Net Expenses		1.04%	**		1.03%			1.05%			1.02%			0.77%			0.85%
Net Investment Loss		(0.85%	)**		(0.71%	)		(0.74%	)		(0.57%	)		(0.06%	)		(0.17%	)
Portfolio Turnover Rate		40%	**		65%			63%			38%			55%			83%
SAFECO Equity Fund		Six-Month Period Ended June 30		For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	18.54		$	20.65		$	24.02		$	23.25		$	19.54		$	16.60
Income (Loss) From Investment Operations
Net Investment Income		0.05			0.10			0.13			0.18			0.21			0.23
Net Realized and Unrealized Gain (Loss) on Investments		(3.29	)		(2.11	)		(2.76	)		2.00			4.64			3.78
Total from Investment Operations		(3.24	)		(2.01	)		(2.63	)		2.18			4.85			4.01
Less Distributions
Dividends from Net Investment Income		(0.05	)		(0.10	)		(0.13	)		(0.18	)		(0.21	)		(0.23	)
Distributions from Realized Gains		–			–			(0.61	)		(1.23	)		(0.93	)		(0.84	)
Total Distributions		(0.05	)		(0.10	)		(0.74	)		(1.41	)		(1.14	)		(1.07	)
Net Asset Value at End of Period	$	15.25		$	18.54		$	20.65		$	24.02		$	23.25		$	19.54
Total Return		(17.50%	)*		(9.72%	)		(10.97%	)		9.37%			24.93%			24.21%
Net Assets at End of Period (000’s)	$	813,212		$	1,083,035		$	1,419,589		$	2,147,299		$	2,024,877		$	1,490,198
Ratios to Average Net Assets:
Expenses		0.98%	**		0.94%			0.89%			0.83%			0.74%			0.73%
Net Investment Income		0.56%	**		0.53%			0.57%			0.73%			0.99%			1.24%
Portfolio Turnover Rate		33%	**		31%			35%			34%			33%			34%

 * Not annualized.

** Annualized.

60

Financial Highlights

(For a Share Outstanding Throughout the Period)

(Unaudited)

SAFECO Dividend Income Fund	Six-Month Period Ended June 30			For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	18.82		$	20.58		$	22.39		$	23.47		$	23.89		$	21.13
Income (Loss) From Investment Operations
Net Investment Income		0.12			0.30			0.38			0.50			0.64			0.65
Net Realized and Unrealized Gain (Loss) on Investments		(1.60	)		(1.76	)		(1.81	)		(0.25	)		0.86			4.87
Total from Investment Operations		(1.48	)		(1.46	)		(1.43	)		0.25			1.50			5.52
Less Distributions
Dividends from Net Investment Income		(0.12	)		(0.30	)		(0.38	)		(0.50	)		(0.64	)		(0.65	)
Distributions from Realized Gains		–			–			–			(0.83	)		(1.28	)		(2.11	)
Total Distributions		(0.12	)		(0.30	)		(0.38	)		(1.33	)		(1.92	)		(2.76	)
Net Asset Value at End of Period	$	17.22		$	18.82		$	20.58		$	22.39		$	23.47		$	23.89
Total Return		(7.89%	)*		(7.06%	)		(6.36%	)		1.17%			6.31%			26.43%
Net Assets at End of Period (000’s)	$	155,564		$	177,920		$	217,053		$	303,537		$	399,279		$	401,985
Ratios to Average Net Assets:
Expenses		1.10%	**		1.08%			1.07%			0.99%			0.82%			0.85%
Net Investment Income		1.32%	**		1.57%			1.80%			2.18%			2.54%			2.81%
Portfolio Turnover Rate		16%	**		58%			45%			42%			46%			52%
SAFECO Northwest Fund	Six-Month Period Ended June 30			For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	18.86		$	21.25		$	25.33		$	17.73		$	17.31		$	14.07
Income (Loss) From Investment Operations
Net Investment Loss		(0.02	)		(0.03	)		(0.11	)		(0.10	)		(0.09	)		(0.03	)
Net Realized and Unrealized Gain (Loss) on Investments		(2.20	)		(2.36	)		(3.97	)		9.71			0.70			4.41
Total from Investment Operations		(2.22	)		(2.39	)		(4.08	)		9.61			0.61			4.38
Less Distributions
Distributions from Realized Gains		–			–			–			(2.01	)		(0.19	)		(1.14	)
Total Distributions		–			–			–			(2.01	)		(0.19	)		(1.14	)
Net Asset Value at End of Period	$	16.64		$	18.86		$	21.25		$	25.33		$	17.73		$	17.31
Total Return		(11.77	)*		(11.25%	)		(16.11%	)		54.25%			3.50%			31.12%
Net Assets at End of Period (000’s)	$	70,785		$	85,290		$	108,113		$	97,534		$	63,594		$	64,635
Ratios to Average Net Assets:
Gross Expenses		1.22%	**		1.21%			1.11%			1.17%			1.12%			1.09%
Net Expenses		1.10%	**		1.10%			1.10%			1.10%			1.12%			1.09%
Net Investment Loss		(0.23%	)**		(0.15%	)		(0.45%	)		(0.54%	)		(0.49%	)		(0.19%	)
Portfolio Turnover Rate		16%	**		50%			36%			49%			50%			55%

 * Not annualized.

** Annualized.

61

Financial Highlights

(For a Share Outstanding Throughout the Period)

(Unaudited)

SAFECO International Stock Fund	Six-Month Period Ended June 30			For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	10.54		$	14.24		$	16.95		$	13.14		$	11.50		$	11.29
Income (Loss) From Investment Operations
Net Investment Income		0.06			0.06			0.08			0.03			0.01			0.24
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency		(0.44	)		(3.65	)		(1.94	)		3.78			1.63			0.28
Total from Investment Operations		(0.38	)		(3.59	)		(1.86	)		3.81			1.64			0.52
Redemption Fees		0.01			0.14			–			–			–			–
Less Distributions
Dividends from Net Investment Income		–			(0.25	)		(0.08	)		–			–			(0.29	)
Distributions from Realized Gains		–			–			(0.77	)		–			–			(0.02	)
Total Distributions		–			(0.25	)		(0.85	)		–			–			(0.31	)
Net Asset Value at End of Period	$	10.17		$	10.54		$	14.24		$	16.95		$	13.14		$	11.50
Total Return		(3.51%	)*		(24.30%	)		(10.95%	)		29.00%			14.26%			4.55%
Net Assets at End of Period (000’s)	$	22,324		$	23,398		$	33,019		$	36,967		$	22,111		$	14,754
Ratios to Average Net Assets:
Gross Expenses		2.14%	**		2.08%			1.79%			1.72%			1.79%			1.89%
Net Expenses		1.40%	**		1.46%			1.40%			1.69%			1.62%			1.63%
Net Investment Income		0.55%	**		0.46%			0.23%			0.21%			0.14%			0.58%
Portfolio Turnover Rate		20%	**		163%			33%			24%			26%			22%
SAFECO Balanced Fund		Six-Month Period Ended June 30		For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	11.69		$	12.06		$	11.81		$	12.22		$	11.61		$	10.70
Income (Loss) From Investment Operations
Net Investment Income		0.15			0.33			0.34			0.31			0.32			0.32
Net Realized and Unrealized Gain (Loss) on Investments		(0.63	)		(0.37	)		0.25			(0.18	)		1.12			1.45
Total from Investment Operations		(0.48	)		(0.04	)		0.59			0.13			1.44			1.77
Less Distributions
Dividends from Net Investment Income		(0.15	)		(0.33	)		(0.34	)		(0.31	)		(0.32	)		(0.32	)
Distributions from Realized Gains		–			–			–			(0.23	)		(0.51	)		(0.54	)
Total Distributions		(0.15	)		(0.33	)		(0.34	)		(0.54	)		(0.83	)		(0.86	)
Net Asset Value at End of Period	$	11.06		$	11.69		$	12.06		$	11.81		$	12.22		$	11.61
Total Return		(4.14%	)*		(0.29%	)		5.09%			1.05%			12.56%			16.64%
Net Assets at End of Period (000’s)	$	14,176		$	14,736		$	14,816		$	18,008		$	19,137		$	13,667
Ratios to Average Net Assets:
Gross Expenses		1.46%	**		1.49%			1.43%			1.33%			1.17%			1.23%
Net Expenses		1.10%	**		1.10%			1.10%			1.14%			1.17%			1.23%
Net Investment Income		2.65%	**		2.82%			2.83%			2.51%			2.74%			2.85%
Portfolio Turnover Rate		65%	**		75%			63%			95%			75%			101%

 * Not annualized.

** Annualized.

62

Financial Highlights

(For a Share Outstanding Throughout the Period)

(Unaudited)

SAFECO Small Company Value Fund	Six-Month Period Ended June 30			For the Year Ended December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	13.78		$	11.77		$	12.73		$	11.16		$	14.23		$	11.81
Income (Loss) From Investment Operations
Net Investment Income (Loss)		0.02			0.13			(0.02	)		(0.06	)		(0.06	)		(0.04	)
Net Realized and Unrealized Gain (Loss) on Investments		0.82			2.01			(0.94	)		1.63			(3.01	)		2.80
Total from Investment Operations		0.84			2.14			(0.96	)		1.57			(3.07	)		2.76
Less Distributions
Dividends from Net Investment Income		–			(0.13	)		–			–			–			–
Distributions from Realized Gains		–			–			–			–			–			(0.34	)
Total Distributions		–			(0.13	)		–			–			–			(0.34	)
Net Asset Value at End of Period	$	14.62		$	13.78		$	11.77		$	12.73		$	11.16		$	14.23
Total Return		6.10%	*		18.20%			(7.54%	)		14.07%			(21.57%	)		23.38%
Net Assets at End of Period (000’s)	$	38,027		$	29,643		$	22,477		$	28,319		$	35,162		$	22,658
Ratios to Average Net Assets:
Gross Expenses		1.39%	**		1.48%			1.41%			1.44%			1.28%			1.33%
Net Expenses		1.15%	**		1.19%			1.15%			1.20%			1.28%			1.33%
Net Investment Income (Loss)		0.32%	**		1.01%			(0.13%	)		(0.49%	)		(0.49%	)		(0.41%	)
Portfolio Turnover Rate		71%	**		141%			107%			117%			90%			61%
SAFECO U.S. Value Fund	Six-Month Period Ended June 30			For the Year Ended December 31												April 30, 1997 (Commencement of Operations) to December 31
Investor Class	2002			2001			2000			1999			1998			1997
Net Asset Value at Beginning of Period	$	11.25		$	11.96		$	11.95		$	11.95		$	11.19		$	10.00
Income (Loss) From Investment Operations
Net Investment Income		0.06			0.14			0.13			0.11			0.12			0.09
Net Realized and Unrealized Gain (Loss) on Investments		(0.96	)		(0.71	)		0.01			0.50			1.28			1.66
Total from Investment Operations		(0.90	)		(0.57	)		0.14			0.61			1.40			1.75
Less Distributions
Dividends from Net Investment Income		(0.06	)		(0.14	)		(0.13	)		(0.11	)		(0.12	)		(0.09	)
Distributions from Realized Gains		–			–			–			(0.50	)		(0.52	)		(0.47	)
Total Distributions		(0.06	)		(0.14	)		(0.13	)		(0.61	)		(0.64	)		(0.56	)
Net Asset Value at End of Period	$	10.29		$	11.25		$	11.96		$	11.95		$	11.95		$	11.19
Total Return		(8.01%	)*		(4.78%	)		1.18%			5.15%			12.61%			17.50%	*
Net Assets at End of Period (000’s)	$	7,788		$	8,383		$	8,541		$	9,905		$	10,014		$	9,063
Ratios to Average Net Assets:
Gross Expenses		1.70%	**		1.79%			1.64%			1.52%			1.19%			1.19%	**
Net Expenses		1.10%	**		1.10%			1.10%			1.17%			1.19%			1.19%	**
Net Investment Income		1.14%	**		1.21%			1.08%			0.93%			1.06%			1.26%	**
Portfolio Turnover Rate		42%	**		39%			45%			52%			55%			36%	**

 * Not annualized.

** Annualized.

63

Financial Highlights

(For a Share Outstanding Throughout the Period)

(Unaudited)

SAFECO Small Company Growth Fund	Six-Month Period Ended June 30			October 31, 2001 (Commencement of Operations) to December 31
Investor Class	2002			2001
Net Asset Value at Beginning of Period	$	11.31		$	10.00
Income (Loss) From Investment Operations
Net Investment Loss		(0.06	)		(0.02	)
Net Realized and Unrealized Gain (Loss) on Investments		(1.31	)		1.33
Total from Investment Operations		(1.37	)		1.31
Less Distributions
Distributions from Realized Gains		(0.02	)		–
Net Asset Value at End of Period	$	9.92		$	11.31
Total Return*		(12.16%	)		13.10%
Net Assets at End of Period (000’s)	$	2,684		$	2,367
Ratios to Average Net Assets:
Gross Expenses**		3.20%			4.54%
Net Expenses**		1.60%			1.60%
Net Investment Loss**		(1.31%	)		(1.23%	)
Portfolio Turnover Rate**		142%			43%
SAFECO U.S. Growth Fund	Six-Month Period Ended June 30			October 31, 2001 (Commencement of Operations) to December 31
Investor Class	2002			2001
Net Asset Value at Beginning of Period	$	10.64		$	10.00
Income (Loss) From Investment Operations
Net Investment Loss		(0.02	)		–
Net Realized and Unrealized Gain (Loss) on Investments		(2.19	)		0.64
Total from Investment Operations		(2.21	)		0.64
Less Distributions
Distributions from Realized Gains		(0.01	)		–
Net Asset Value at End of Period	$	8.42		$	10.64
Total Return*		(20.80%	)		6.40%
Net Assets at End of Period (000’s)	$	1,990		$	2,372
Ratios to Average Net Assets:
Gross Expenses**		3.26%			4.29%
Net Expenses**		1.40%			1.40%
Net Investment Loss**		(0.43%	)		(0.28%	)
Portfolio Turnover Rate**		34%			2%

 * Not annualized.

** Annualized.

64

Notes to Financial Statements

(Unaudited)

1.    GENERAL

The SAFECO Common Stock Trust (“Trust”) is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Trust consists of the SAFECO Growth Opportunities Fund, SAFECO Equity Fund, SAFECO Dividend Income Fund, SAFECO Northwest Fund, SAFECO International Stock Fund, SAFECO Balanced Fund, SAFECO Small Company Value Fund, SAFECO U.S. Value Fund, SAFECO Small Company Growth Fund and the SAFECO U.S. Growth Fund (together “the Funds”).

The Funds offer up to four classes of shares:

* Investor shares—sold directly to shareholders with no associated sales charges.

* Class A, Class B, and Class C shares—sold by financial advisors to shareholders with associated sales and distribution charges.

Each class of shares has equal rights as to earnings and assets except that each class bears different distribution, shareholder service, and transfer agent expenses. Each class of shares has exclusive voting rights with respect to matters that affect just that class. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets. Class B shares automatically covert to Class A shares at the end of the month following the sixth anniversary of issuance.

In connection with issuing Class A, B and C shares, the Funds have adopted a Plan of Distribution (the “Plan”). Under the Plan, these classes pay 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 each class. Class B and Class C shares also pay the distributor a distribution fee at the annual rate of .75% of the average daily net assets of each class. Under the plan, the distributor uses the service fees primarily to compensate persons for selling shares in each class and for providing ongoing services to shareholders. The distributor uses the distribution fees primarily to offset commissions it pays to financial advisors for selling these shares.

2.    SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The policies are in conformity with accounting principals generally accepted in the United States.

Security Valuation.    Investments in securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price, except for short positions and call options written, for which the last quoted asked price is used. Short-term notes are stated at amortized cost, which approximates fair value. When valuations are not readily available, securities are valued at fair value as determined in good faith by the Board of Trustees.

Security Transactions.    Security transactions are recorded on the trade date. Realized gains and losses from security transactions are determined using the identified cost basis.

Securities Lending.    The Funds (excluding the International Stock, Small Company Growth and U.S. Growth Funds) may lend portfolio securities to broker-dealers and to qualified banks. The loans are secured by cash collateral in an amount equal to at least the market value, as of the prior business day, of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan,

SAFECO    MUTUAL    FUNDS 1-800-624-5711

65

Notes to Financial Statements

(Unaudited)

the Funds will continue to receive the interest and dividends on the loaned securities, while earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower is required to return to the Fund securities identical to the loaned securities. The Funds may pay reasonable administrative fees in connection with the loans of their securities and share the interest earned on the cash collateral with the borrower. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan will be for the account of the Fund.

Income Recognition.    Dividend income less foreign taxes withheld (if any) is recorded on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest is accrued on short-term investments and bonds daily.

Redemption Fees.    Effective October 1, 2001, shares held in the International Stock Fund less than 90 days are subject to an early redemption fee equal to 2% of the proceeds of the redeemed shares. These fees, which are retained by the Fund, are accounted for as an addition to paid in capital for book purposes and ordinary income for tax purposes.

Dividends and Distributions to Shareholders.    For the Growth Opportunities, Northwest, International Stock, Small Company Value, Small Company Growth, and U.S. Growth Funds net investment income (if any) is distributed to shareholders on 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 in December and March. Distribution to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.

Federal Income and Excise Taxes.    Each Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies by distributing substantially all taxable income to their shareholders in a a manner which results in no taxes to the Funds. Therefore, no federal income or excise tax provision is required.

Foreign Currency Translation.    The accounting records of the International Stock Fund are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, and dividend and interest income, are translated at the rates of exchange prevailing on the respective dates of such  transactions. The International Stock Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized gains or losses from foreign currency transactions arise from gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the International Stock Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate.

Foreign Exchange Contracts.    The International Stock Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The International Stock 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

66

Notes to Financial Statements

(Unaudited)

hedge or cross-hedge against either specific transactions or portfolio positions. The objective of the International Stock Fund’s foreign currency hedging transactions is to reduce the risk that the U.S. Dollar value of the International Stock Fund’s foreign currency denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are “marked-to-market” daily at the applicable translation rates resulting in unrealized gains or losses. Realized and unrealized gains or losses on foreign currency contracts are recorded on settlement date of the foreign currency exchange contract and are included in the Statements of Assets and Liabilities and the Statement of Operations. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. Dollar.

Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States, 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 reporting period. Actual results could differ from those estimates.

3.    INVESTMENT TRANSACTIONS

Following is a summary of investment transactions (excluding short-term securities) during the six-month period ended June 30, 2002:

(In Thousands)	Purchases		Sales
Growth Opportunities Fund	$	145,668	$	250,125
Equity Fund		157,716		238,477
Dividend Income Fund		13,367		21,298
Northwest Fund		6,904		13,290
International Stock Fund		2,359		3,168
Balanced Fund		6,082		5,802
Small Company Value Fund		15,531		11,584
U.S. Value Fund		2,045		1,813
Small Company Growth Fund		4,352		3,874
U.S. Growth Fund		878		817

Purchases in the Balanced Fund include $1,406 of U.S. Government securities.

Sales in the Balanced Fund include $978 of U.S. Government securities.

4.    PORTFOLIO SECURITIES LOANED

At June 30, 2002, the value of securities on loan and related collateral received for portfolio securities loaned were as follows:

(In Thousands)	Value of Securities on Loan		Collateral Received
Growth Opportunities Fund	$	144,885	$	150,163
Equity Fund		2,346		2,640
Dividend Income Fund		1,637		1,650
Northwest Fund		6,245		6,650
Balanced Fund		1,637		1,685
Small Company Value Fund		6,974		7,285
U.S. Value Fund		1,572		1,610

SAFECO    MUTUAL    FUNDS www.safecofunds.com

67

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5. COMMITMENTS

At June 30, 2002, the International Stock Fund had open forward foreign currency exchange contracts obligating it to receive or deliver the following foreign currencies:

(In Thousands)
Currency to be Delivered	In Exchange For		Settlement Date	U.S. Dollar Value as of June 30, 2002		Unrealized Depreciation
25,513 Japanese Yen	$	195	7/15/02	$	213	$	(18	)
29,929 Japanese Yen		233	7/22/02		250		(17	)
27,037 Japanese Yen		211	8/13/02		226		(15	)
10,145 Japanese Yen		85	8/28/02		85		—
	$	724		$	774	$	(50	)

6. COMPONENTS OF ACCUMULATED UNDISTRIBUTED INCOME (LOSS) AND DISTRIBUTABLE EARNINGS

At June 30, 2002, accumulated undistributed income (loss) was as follows:

(In Thousands)	Growth Opportunities Fund			Equity Fund			Dividend Income Fund			Northwest Fund			International Stock Fund
Gross Unrealized Appreciation on Investments	$	173,657		$	247,994		$	37,742		$	25,411		$	4,936
Gross Unrealized Depreciation on Investments		(201,140	)		(113,555	)		(15,390	)		(22,051	)		(1,369	)
Net Unrealized Appreciation (Depreciation) on Investments		(27,483	)		134,439			22,352			3,360			3,567
Accumulated Net Investment Income (Loss)		(3,216	)		–			–			(135	)		134
Accumulated Realized Loss		(29,748	)		(32,729	)		(4,359	)		(4,694	)		(6,277	)
Accumulated Undistributed Income (Loss)	$	(60,447	)	$	101,710		$	17,993		$	(1,469	)	$	(2,576	)
(In Thousands)	Balanced Fund			Small Company Value Fund			U.S. Value Fund			Small Company Growth Fund			U.S. Growth Fund
Gross Unrealized Appreciation on Investments	$	1,327		$	7,888		$	969		$	565		$	133
Gross Unrealized Depreciation on Investments		(1,341	)		(3,853	)		(968	)		(573	)		(706	)
Net Unrealized Appreciation (Depreciation) on Investments		(14	)		4,035			1			(8	)		(573	)
Accumulated Net Investment Income (Loss)		(2	)*		47			–			(51	)		(21	)
Accumulated Realized Loss		(123	)		(6,258	)		(246	)		(91	)		(287	)
Accumulated Undistributed Loss	$	(139	)	$	(2,176	)	$	(245	)	$	(150	)	$	(881	)

* Accumulated undistributed net investment loss on a book basis is due to premium and discount amortization required on debt securities.

68

Notes to Financial Statements

(Unaudited)

At June 30, 2002, the estimated components of distributable earnings on a tax basis were as follows:

(In Thousands)	Growth Opportunities Fund			Equity Fund			Dividend Income Fund			Northwest Fund			International Stock Fund
Undistributed Long-term Capital Gain (Loss)	$	(6,678	)	$	15,620		$	(2,301	)	$	(125	)	$	(27	)
Undistributed Ordinary Loss		(10,674	)		(18,289	)		(1,297	)		(13	)		(286	)
Capital Loss Carryforward**		(15,014	)		(30,060	)		(761	)		(4,680	)		(3,296	)
Net Unrealized Appreciation (Depreciation) on Investments		(28,081	)		134,439			22,352			3,349			1,033
Distributable Earnings	$	(60,447	)	$	101,710		$	17,993		$	(1,469	)	$	(2,576	)
(In Thousands)	Balanced Fund			Small Company Value Fund			U.S. Value Fund			Small Company Growth Fund			U.S. Growth Fund
Undistributed Long-term Capital Gain	$	93		$	465		$	67		$	–		$	–
Undistributed Ordinary Income (Loss)		(123	)		957			(96	)		(136	)		(308	)
Capital Loss Carryforward**		(93	)		(7,479	)		(217	)		–			–
Net Unrealized Appreciation (Depreciation) on Investments		(16	)		3,881			1			(14	)		(573	)
Distributable Earnings	$	(139	)	$	(2,176	)	$	(245	)	$	(150	)	$	(881	)

        Differences between book basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales, realization for tax purposes of unrealized gains on certain forward foreign currency contracts and premium and discount amortization required for book purposes but not for tax purposes.

** At December 31, 2001, the following funds had accumulated net realized losses on investment transactions that represent capital loss carryforwards for Federal Income tax purposes, which expire as follows:

(In Thousands)	Amounts (000’s)		Expiration Dates
Growth Opportunities Fund	$	15,014	2008-2009
Equity Fund		30,060	2009
Dividend Income Fund		761	2008-2009
Northwest Fund		4,680	2008-2009
International Stock Fund		3,296	2009
Balanced Fund		93	2008-2009
Small Company Value Fund		7,479	2006-2009
U.S. Value Fund		217	2008-2009

SAFECO    MUTUAL    FUNDS 1-800-624-5711

69

Notes to Financial Statements

(Unaudited)

7.    TRUST SHARE TRANSACTIONS

Following is a summary of transactions in Trust shares and the related amounts (in thousands):

	Investor Class						Class A						Class B						Class C
	2002*			2001**			2002*			2001**			2002*			2001*			2002*			2001**
	SAFECO Growth Opportunities Fund
Shares:
Sales		11,712			24,208			323			676			35			62			2			2
Reinvestments		–			–			–			–			–			–			–			–
Redemptions		(15,486	)		(22,338	)		(494	)		(593	)		(37	)		(86	)		–			–
Net Change		(3,774	)		1,870			(171	)		83			(2	)		(24	)		2			2
Amounts:
Sales	$	298,894		$	604,350		$	7,999		$	16,516		$	822		$	1,433		$	34		$	49
Reinvestments		–			–			–			–			–			–			–			–
Redemptions		(389,491	)		(535,850	)		(12,375	)		(13,734	)		(864	)		(1,977	)		(2	)		(2	)
Net Change	$	(90,597	)	$	68,500		$	(4,376	)	$	2,782		$	(42	)	$	(544	)	$	32		$	47
	SAFECO Equity Fund
Shares:
Sales		1,672			4,175			90			516			32			82			2			3
Reinvestments		66			321			1			3			–			–			–			–
Redemptions		(6,819	)		(14,836	)		(167	)		(1,942	)		(80	)		(178	)		(2	)		(1	)
Net Change		(5,081	)		(10,340	)		(76	)		(1,423	)		(48	)		(96	)		–			2
Amounts:
Sales	$	29,429		$	79,730		$	1,579		$	9,977		$	552		$	1,543		$	30		$	76
Reinvestments		1,208			5,869			7			57			–			–			–			–
Redemptions		(119,112	)		(284,521	)		(2,924	)		(38,726	)		(1,364	)		(3,344	)		(27	)		(21	)
Net Change	$	(88,475	)	$	(198,922	)	$	(1,338	)	$	(28,692	)	$	(812	)	$	(1,801	)	$	3		$	55
	SAFECO Dividend Income Fund
Shares:
Sales		292			412			6			6			2			4			–			1
Reinvestments		23			137			–			1			–			1			–			–
Redemptions		(733	)		(1,644	)		(3	)		(13	)		(8	)		(18	)		–			(1	)
Net Change		(418	)		(1,095	)		3			(6	)		(6	)		(13	)		–			–
Amounts:
Sales	$	5,399		$	7,994		$	114		$	119		$	34		$	85		$	7		$	17
Reinvestments		440			2,562			2			10			1			6			–			–
Redemptions		(13,642	)		(31,676	)		(62	)		(249	)		(146	)		(328	)		–			(9	)
Net Change	$	(7,803	)	$	(21,120	)	$	54		$	(120	)	$	(111	)	$	(237	)	$	7		$	8

 * For the six-month period ended June 30, 2002.

** For the year ended December 31, 2001.

70

Notes to Financial Statements

(Unaudited)

	Investor Class						Class A						Class B						Class C
	2002*			2001**			2002*			2001**			2002*			2001**			2002*			2001**
	SAFECO Northwest Fund
Shares:
Sales		862			1,399			34			71			13			49			–			1
Reinvestments		–			–			–			–			–			–			–			–
Redemptions		(1,129	)		(1,964	)		(35	)		(110	)		(35	)		(44	)		–			–
Net Change		(267	)		(565	)		(1	)		(39	)		(22	)		5			–			1
Amounts:
Sales	$	15,765		$	25,295		$	598		$	1,340		$	230		$	908		$	3		$	14
Reinvestments		–			–			–			–			–			–			–			–
Redemptions		(20,515	)		(35,931	)		(610	)		(2,051	)		(615	)		(783	)		(3	)		(5	)
Net Change	$	(4,750	)	$	(10,636	)	$	(12	)	$	(711	)	$	(385	)	$	125		$	–		$	9
	SAFECO International Stock Fund
Shares:
Sales		532			13,235			181			459			5			163			–			1
Reinvestments		–			35			–			2			–			1			–			–
Redemptions		(556	)		(13,368	)		(183	)		(469	)		(14	)		(172	)		–			–
Net Change		(24	)		(98	)		(2	)		(8	)		(9	)		(8	)		–			1
Amounts:
Sales	$	5,348		$	158,423		$	1,790		$	5,294		$	46		$	1,954		$	–		$	12
Reinvestments		–			366			–			19			–			10			–			–
Redemptions		(5,635	)		(161,176	)		(1,828	)		(5,450	)		(137	)		(2,059	)		–			(3	)
Net Change	$	(287	)	$	(2,387	)	$	(38	)	$	(137	)	$	(91	)	$	(95	)	$	–		$	9
	SAFECO Balanced Fund
Shares:
Sales		160			228			17			28			7			25
Reinvestments		5			20			1			4			1			3
Redemptions		(143	)		(217	)		(10	)		(32	)		(18	)		(17	)
Net Change		22			31			8			–			(10	)		11
Amounts:
Sales	$	1,863		$	2,669		$	197		$	334		$	79		$	296
Reinvestments		54			235			9			43			7			33
Redemptions		(1,672	)		(2,545	)		(112	)		(377	)		(208	)		(194	)
Net Change	$	245		$	359		$	94		$	–		$	(122	)	$	135

* For the six-month period ended June 30, 2002.

** For the year ended December 31, 2001.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

71

Notes to Financial Statements

(Unaudited)

	Investor Class						Class A						Class B
	2002*			2001**			2002*			2001**			2002*			2001**
	SAFECO Small Company Value Fund
Shares:
Sales		1,733			5,045			26			66			14			9
Reinvestments		–			20			–			–			–			–
Redemptions		(1,283	)		(4,824	)		(12	)		(65	)		(9	)		(9	)
Net Change		450			241			14			1			5			–
Amounts:
Sales	$	24,908		$	64,825		$	380		$	835		$	184		$	100
Reinvestments		–			273			–			6			–			–
Redemptions		(18,110	)		(61,938	)		(169	)		(815	)		(124	)		(106	)
Net Change	$	6,798		$	3,160		$	211		$	26		$	60		$	(6	)
	SAFECO U.S. Value Fund
Shares:
Sales		49			67			6			9			6			9
Reinvestments		1			3			–			–			–			–
Redemptions		(38	)		(39	)		(2	)		(4	)		(3	)		(8	)
Net Change		12			31			4			5			3			1
Amounts:
Sales	$	539		$	756		$	64		$	97		$	65		$	97
Reinvestments		8			34			–			2			–			1
Redemptions		(408	)		(428	)		(27	)		(46	)		(31	)		(81	)
Net Change	$	139		$	362		$	37		$	53		$	34		$	17

* For the six-month period ended June 30, 2002.

** For the year ended December 31, 2001.

72

Notes to Financial Statements

(Unaudited)

	Investor Class						Class A					Class B				Class C
	2002*			2001**			2002*		2001**			2002*		2001**		2002*		2001**
	SAFECO Small Company Growth Fund
Shares:
Sales		74			209			2		103			1		100		9		100
Reinvestments		–			–			–		–			–		–		–		–
Redemptions		(13	)		–			–		(2	)		–		–		–		–
Net Change		61			209			2		101			1		100		9		100
Amounts:
Sales	$	827		$	2,096		$	25	$	1,030		$	6	$	1,000	$	100	$	1,000
Reinvestments		1			–			–		–			–		–		–		–
Redemptions		(141	)		–			–		(24	)		–		–		—		–
Net Change	$	687		$	2,096		$	25	$	1,006		$	6	$	1,000	$	100	$	1,000
	SAFECO U.S. Growth Fund
Shares:
Sales		34			226			3		101			1		100		–		100
Reinvestments		–			–			–		–			–		–		–		–
Redemptions		(21	)		(3	)		–		–			–		–		–		–
Net Change		13			223			3		101			1		100		–		100
Amounts:
Sales	$	336		$	2,277		$	28	$	1,011		$	11	$	1,000	$	–	$	1,000
Reinvestments		–			–			–		–			–		–		–		–
Redemptions		(205	)		(31	)		–		–			–		–		–		–
Net Change	$	131		$	2,246		$	28	$	1,011		$	11	$	1,000	$	–	$	1,000

 * For the six-month period ended June 30, 2002.

** For the period from October 31, 2001 (commencement of operations) through December 31, 2001.

8.    INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Advisory Fees.    The Funds receive investment management and advising services pursuant to an agreement with SAFECO Asset Management Company. The fees paid by the Funds under the contract are based on a percentage of each day’s net assets, which, on an annual basis, are as follows:

Growth Opportunities, Equity, Dividend Income, Northwest, Balanced and U.S. Value Funds:		Small Company Value Fund:		International Stock Fund:
First $250 million	.70%	First $250 million	.75%	First $250 million	1.00%
Next $500 million	.65	Next $500 million	.70	Next $500 million	.90
Next $500 million	.60	Next $500 million	.65	Over $750 million	.80
Over $1.25 billion	.55	Over $1.25 billion	.60
U.S. Growth Fund:		Small Company Growth Fund:
First $250 million	.80%	First $250 million	1.00%
Next $500 million	.75	Over $250 million	.80
Next $500 million	.70
Over $1.25 billion	.65

SAFECO    MUTUAL    FUNDS 1-800-624-5711

73

Notes to Financial Statements

(Unaudited)

SAFECO Asset Management Company pays sub-advisory fees for investment research and advice to the Bank of Ireland Asset Management Company (U.S.) Limited for the International Stock Fund and to Dresdner RCM Global Investors LLC for the Small Company Growth and U.S. Growth Funds.

Fund Accounting and Fund Administration Fees.    SAFECO Asset Management Company receives a fee for these services on a percentage of each day’s net assets, which, on an annual basis is as follows:

Fund Accounting:			Fund Administration:
First $200 million	0.04	%	First $200 million	0.05	%
Over $200 million	0.01		Over $200 million	0.01

Transfer Agent, Shareholder Service, and Distribution Fees.    SAFECO Services Corporation receives transfer agent fees. SAFECO Securities, Inc. receives shareholder service and distribution fees.

Notes Payable and Interest Expense.    The Funds may borrow money for temporary purposes from SAFECO Corporation or its affiliates at rates equivalent to commercial bank interest rates. At June 30, 2002, no such borrowings were outstanding.

Line of Credit.    The Trust, together with all other management investment companies for which SAFECO Asset Management Company serves as investment advisor, has line of credit arrangements with certain financial institutions. Under these arrangements, $125 million is currently available to meet short-term financing needs. At June 30, 2002 no such borrowings were outstanding.

Affiliate Ownership.    At June 30, 2002, SAFECO Insurance Company of America owned 450,000 shares (9% of outstanding shares) of the Northwest Fund, SAFECO Asset Management Company owned 694,490 shares (or 29%) of the International Stock Fund, 519,268 shares (or 33%) of the Balanced Fund, 500,000 shares (or 60%) of the U.S. Value Fund, 500,000 shares (or 86%) of the Small Company Growth Fund and 500,000 shares (or 92%) of the U.S. Growth Fund.

Deferred Offering Costs.    Costs related to the initial offering of the Small Company Growth and U.S. Growth Funds have been deferred and are being amortized to operations on a straight-line basis over a period of twelve months. These costs were advanced by an affiliate and are being reimbursed by the Funds over a twelve-month period.

Expense Reimbursement.    Beginning May 1, 1999 through April 30, 2009, SAFECO Asset Management Company agreed to reimburse the Funds (excluding the Small Company Growth and the U.S. Growth Funds) for operating expenses (i.e., all expenses except investment advisory, distribution fees, service fees, and interest expense) that exceed on an annual basis 0.40% of the Funds average daily net assets. Beginning October 31, 2001 (commencement of operations) through December 31, 2002, SAFECO Asset Management Company voluntarily agreed to reimburse the Small Company Growth and the U.S. Growth Funds for operating expenses that exceed on an annual basis 0.60% of the Funds average daily net assets.

Dealer Concessions.    SAFECO Securities, Inc. retained the following amounts in dealer commissions from sales of Class A shares during the six-month period ended June 30, 2002:

(In Thousands)	Commissions Retained
Growth Opportunities Fund	$  2
Equity Fund	2
Northwest Fund	1

74

Notes to Financial Statements

(Unaudited)

9.    INVESTMENTS IN AFFILIATES

Each of the companies listed below is an affiliate of the Fund because the Fund owned at least 5% of the company’s voting securities during the six-month period ended June 30, 2002.

(In Thousands)	Shares at Beginning of Period	Additions	Reductions		Shares at End of Period	Dividends	Market Value of Affiliates at June 30, 2002
SAFECO Growth Opportunities Fund
American Medical Alert Corp.	–	455	–		455	–	$	1,187
Concepts Direct, Inc.	480	–	–		480	–		623
Conceptus, Inc.	1,418	436	–		1,854	–		30,577
Endocare, Inc.*	1,072	76	–		1,148	–		–
Harold’s Stores, Inc.	542	–	–		542	–		1,437
IMPCO Technologies, Inc.	–	860	–		860	–		11,259
Matria Healthcare, Inc.	657	185	–		842	–		6,923
Med-Design Corp.	–	1,045	–		1,045	–		13,520
MICROS Systems, Inc.	1,050	12	–		1,062	–		29,426
Nastech Pharmaceutical Co., Inc.	835	–	–		835	–		13,719
NCO Group, Inc.	2,104	–	(564	)	1,540	–		33,531
North American Scientific, Inc.	953	–	–		953	–		9,742
PhotoMedex, Inc.	–	1,800	–		1,800	–		2,592
Physiometrix, Inc.	490	–	–		490	–		402
PLATO Learning, Inc.	1,094	146	–		1,240	–		12,236
PolyMedica Corp.	1,198	–	(3	)	1,195	–		30,525
Prime Medical Services, Inc.	1,226	–	–		1,226	–		14,250
Provell, Inc.*	662	–	(662	)	–	–		–
Rent-Way, Inc.	2,696	–	(26	)	2,670	–		34,574
RMH Teleservices, Inc.*	1,037	184	(252	)	969	–		–
Serologicals Corp.	1,173	272	(100	)	1,345	–		24,607
SpectRx, Inc.	861	–	–		861	–		3,366
Sphinx International, Inc.	832	–	–		832	–		507
Stellant, Inc.	591	945	(195	)	1,341	–		6,142
TRM Copy Centers Corp.	710	–	–		710	–		604
							$	281,749
SAFECO Small Company Value Fund
International Aircraft Investors, Inc.	187	–	–		187	–	$	200

* Company was not an affiliate at the end of the period.

SAFECO    MUTUAL    FUNDS www.safecofunds.com

75

Trustee and Officer Information

Name, Address, and Age	Position(s) Held with Trusts	Term of Office and Length of Time Served	Principal Occupation(s) During the Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee
INDEPENDENT TRUSTEES
Barbara J. Dingfield 4854 154th Place NE Redmond, WA 98052 (56)	Trustee	Term: Age 72 Time Served: 11 years	Consultant. From 1994 to 1999 she was the Director of Community Affairs for Microsoft Corporation, Redmond, Washington.	25 SAFECO Mutual Funds	First SAFECO Life Insurance Co.
Richard E. Lundgren 4854 154th Place NE Redmond, WA 98052 (64)	Trustee	Term: Age 72 Time Served: 18 years	Retired in 2000 from position as Director of Marketing and Customer Relations, Building Materials Distribution, Weyerhaeuser Company, Tacoma, Washington.	25 SAFECO Mutual Funds	First SAFECO Life Insurance Co.
Larry L. Pinnt 4854 154th Place NE Redmond, WA 98052 (67)	Trustee	Term: Age 72 Time Served: 16 years	Retired Vice president and Chief Financial Officer of U.S. WEST Communications, Seattle, Washington.	25 SAFECO Mutual Funds	First SAFECO Life Insurance Co., Director of Cascade Natural Gas Corporation, Seattle, Washington.
John W. Schneider 4854 154th Place NE Redmond, WA 98052 (60)	Trustee	Term: Age 72 Time Served: 18 years	President and sole owner of Wallingford Group, Inc., Seattle, Washington, a company consulting on the acquisition/disposition and development of real estate.	25 SAFECO Mutual Funds	First SAFECO Life Insurance Co.
INTERESTED TRUSTEE
Randall H. Talbot 5069 154th Place NE Redmond, WA 98052 (48)	Chairman and Trustee	Term: Age 72 Time Served: 1 year	President of SAFECO Life Insurance Company since 1998. From 1975 to 1998 he was President and CEO of Talbot Financial Corporation.	25 SAFECO Mutual Funds	First SAFECO Life Insurance Co., Director of Netstock Corporation, Bellevue, Washington
OFFICERS
Roger F. Harbin 5069 154th Place NE Redmond, WA 98052 (51)	President	Time Served: Six Months	Senior Vice President of SAFECO Life Insurance Company from 1992 to 1998. Since 1998, Executive Vice President and Actuary of SAFECO Life Insurance Company. In November 2001, named Director and President of SAFECO Services Corporation, Director of SAFECO Asset Management Company, Director and President of SAFECO Securities, Inc.
Ronald L. Spaulding Two Union Square 601 Union Street 25th Floor Seattle, WA 98101 (57)	Vice President Treasurer	Time Served: 7 years	Chairman of SAFECO Asset Management Company; Treasurer and Chief Investment Officer of SAFECO Corporation; Vice President of SAFECO Insurance Companies; Director, Vice President and Treasurer of First SAFECO Life Insurance Company of New York; former Senior Portfolio Manager of SAFECO Insurance Companies and Portfolio Manager for SAFECO Mutual Funds.
David H. Longhurst 4854 154th Place NE Redmond, WA 98052 (45)	Vice President, Secretary, Controller	Time Served: 2 years	Vice President, Treasurer, Controller and Secretary of SAFECO Asset Management Company; Vice President, Treasurer, Controller and Secretary of SAFECO Services Corporation; and Vice President, Treasurer, Controller and Secretary and Financial Principal of SAFECO Securities, Inc. since July 2000. Treasurer, Controller, Secretary and Financial Principal of SAFECO Investment Services, Inc. since March 2000; Assistant Controller of SAFECO Securities, Inc., SAFECO Services Corporation and SAFECO Asset Management Company from 1996 to June 2000.
Scott D. Murphy 4854 154th Place NE Redmond, WA 98052 (40)	Assistant Controller	Time Served: 2 years	Assistant Controller, SAFECO Asset Management Company and SAFECO Services Corporation since June 2000. Assistant Controller of SAFECO Securities, Inc. since May 2001. Former Senior Vice President and Chief Financial Officer with Nichols Brothers Boat Builders, Inc., a commercial ship building and repair company, from April 1991 to April 2000.
Susan Tracey SAFECO Plaza 4333 Brooklyn Ave. NE Seattle, WA 98185 (51)	Assistant Secretary	Time Served: 1 year	Tax Manager for SAFECO Corporation. Assistant Secretary of SAFECO Asset Management Company, SAFECO Securities, Inc. and SAFECO Services Corporation. She has been employed by SAFECO Corporation since 1987.
Stephen Collier SAFECO Plaza 4333 Brooklyn Ave. NE Seattle, WA 98185 (49)	Assistant Secretary	Time Served: 1 year	Director of Taxation and Assistant Vice President of SAFECO Corporation; Assistant Secretary of SAFECO Asset Management Company, SAFECO Securities, Inc. and SAFECO Services Corporation. He has been an executive officer of SAFECO Corporation and subsidiaries since 1991.

The Statement of Additional Information (“SAI”) includes additional information about Fund trustees and is available upon request without charge by contacting the Fund at SAFECO Securities, Inc. 4854 154th Place NE, Redmond, WA 98052. Telephone 1-800-624-5711 Deaf and Hard of Hearing TTY/TDD Service 1-800-438-8718.

SAFECO COMMON STOCK FUNDS

INVESTMENT ADVISOR

SAFECO Asset Management

    Company

DISTRIBUTOR

SAFECO Securities, Inc.

TRANSFER AGENT

SAFECO Services Corporation

CUSTODIAN

State Street Bank

Chase Manhattan Bank

(International Stock Fund)

FOR CLIENT SERVICES

1-800-624-5711

TTY/TDD

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, Washington 98124-1890

Internet

www.safecofunds.com

Email

mfunds@safeco.com

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^®A registered trademark of SAFECO Corporation

GMF-1054 08/02