<PAGE> 1
March 31, 1996
[GRAPHIC]
ANNUAL
REPORT
[GRAPHIC]
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
[SAFECO LOGO] SAFECO
MUTUAL FUNDS
<PAGE> 2
PERFORMANCE INFORMATION
SAFECO MONEY MARKET FUND
AVERAGE WEEKLY YIELD FOR SIX-MONTH PERIOD ENDED MARCH 25, 1996
- --------------------------------------------------------------
Graph appears here comparing
the average weekly yield of
the Fund to the IBCI Donahue
average yield for the six-
month period ended March 25,
1996.
Money Market Mutual Fund
<TABLE>
<CAPTION>
MMKT Donoghue
---------------------------------------
<S> <C> <C>
10/02 5.04 5.21
10/09 4.93 5.16
10/16 5.05 5.17
10/23 5.03 5.16
10/30 5.18 5.18
11/06 5.07 5.16
11/13 5.01 5.17
11/20 5.09 5.17
11/27 5.05 5.18
12/04 4.95 5.16
12/11 4.84 5.16
12/18 5.14 5.16
12/25 5.11 5.14
01/01 5.00 5.12
01/08 4.99 5.09
01/29 4.84 4.97
02/05 4.67 4.88
02/12 4.51 4.82
02/19 4.55 4.78
02/26 4.52 4.74
03/04 4.52 4.74
03/11 4.49 4.67
03/18 4.53 4.70
03/25 4.54 4.68
</TABLE>
SAFECO TAX-FREE MONEY MARKET FUND
AVERAGE WEEKLY YIELD FOR SIX-MONTH PERIOD ENDED MARCH 25, 1996
- --------------------------------------------------------------
Graph appears here comparing
the average weekly yield of
the Fund to the IBCI Donahue
average yield for the six-
month period ended March 25,
1996.
Tax-Free Money Market
<TABLE>
<CAPTION>
IBC
TFMM Donoghue
- ------------------------------------
<S> <C> <C>
10/02 3.62 3.51
10/09 3.30 3.16
10/16 3.35 3.11
10/23 3.41 3.20
10/30 3.51 3.28
11/06 3.45 3.20
11/13 3.47 3.25
11/20 3.50 3.28
11/27 3.47 3.25
12/04 3.41 3.17
12/11 3.36 3.05
12/18 3.67 3.41
12/25 3.93 3.67
01/01 4.10 3.88
01/08 3.32 3.10
01/29 3.15 2.86
02/05 3.02 2.81
02/12 2.98 2.79
02/19 2.96 2.81
02/26 2.99 2.83
03/04 2.94 2.79
03/11 2.73 2.65
03/18 2.82 2.70
03/25 2.91 2.78
</TABLE>
YIELDS ARE HISTORICAL AND NOT PREDICTIVE
OF FUTURE PERFORMANCE.
<PAGE> 3
===============================================================================
LETTER FROM THE PRESIDENT
May 1, 1996
[PHOTO OF DAVID F. HILL]
DAVID F. HILL
DEAR
SHAREHOLDERS:
Strong corporate earnings, low interest rates and low inflation helped the
U.S. financial markets continue to post robust returns. As measured by the S&P
500, the stock market advanced 32.07% in the 12 months ended March 31, and 5.37%
in the most recent quarter.
While the domestic stock market kept on advancing at a clip well above its
historical average, the bond market did slow its pace. As measured by the Lehman
Brothers Government/Corporate Index, the bond market finished the 12 months
ended March 31 up 10.93%, and the three months just ended down, -2.34%. The bond
market's decline, which began midway through the first quarter, can be
attributed to unexpected, albeit slight, strength in economic indicators and the
failure to reach a federal budget accord.
In truth, the economic indicators are thoroughly mixed, and that is
keeping the Fed cautious and slow moving.
TABLE OF CONTENTS
<TABLE>
<S> <C>
SAFECO Money Market Fund ................................................... 3
SAFECO Tax-Free Money Market Fund........................................... 7
Financial Statements........................................................ 15
Notes to Financial Statements............................................... 18
</TABLE>
A careful Fed is fine in our view, because inflation is not currently an
issue and interest rates are providing good support for stock prices.
Despite positive employment reports, renewed inflation fears and higher
interest rates, we think the fundamentals are in place to return the bond market
to year-end 1995 levels and to sustain the stock market. We see enough strength
in the economy -- and, in turn, corporate earnings -- to support stock market
growth, but not at the rate we have seen these past 15 months.
(Continued on next page.)
-1-
<PAGE> 4
===============================================================================
LETTER FROM THE PRESIDENT (Continued)
All in all, our outlook is positive; it's just unlikely that 1996 will
match 1995's bounty. It would be highly unrealistic to expect gains like those
we experienced last year.
The strength of the markets last year surprised prognosticators who'd
predicted a slowdown (if not a correction) and it highlighted the difficulty in
attempting to "time" the markets. Investors who took the conservative route and
moved their money out of stocks and long-term bonds missed significant gains.
Undeniably, the year-to-year behavior of the markets is unpredictable, and
can go either way. That is why investors with short-term time frames should use
short-term instruments such as money funds.
The money you have invested in stocks should be for long-term goals. And,
as you get closer to needing the funds you have invested toward a goal,
gradually reduce the percentage that is invested in stocks. Stocks are for money
that can be left invested for a long while.
Our commitment to our shareholders is as deeply ingrained as our long-term
attitude. At SAFECO Mutual Funds, we remain committed to providing you the
service, information and investment vehicles you need to achieve financial
security. To that end, we introduced three new stock funds in January: The
SAFECO International, Balanced, and Small Company Funds. And in June, to better
serve you, we'll bring a new automated information system on-line. We are
constantly striving for top-rated fund performance, top-notch services and truly
useful financial planning materials. Please call us if we can be of further
service at 1-800-426-6730. In the meantime, thank you for investing with SAFECO
Mutual Funds.
/s/ David F. Hill
David F. Hill
-2-
<PAGE> 5
===============================================================================
REPORT FROM THE FUND MANAGER
SAFECO Money Market Fund
May 1, 1996
The SAFECO Money Market Fund's seven-day current yield decreased from 5.05%
to 4.60% in the six months ending March 31, 1996. For comparison, the average
money fund yield was 4.68% on March 25 according to IBC/Donoghue. The Consumer
Price Index, a broad inflation measure, rose 2.80% for the 12 months ending
March 31, 1996.
Interest rates fell through the fourth quarter of 1995 as the market
anticipated another drop in the Federal Funds rate. On January 31, 1996, the Fed
lowered both the Federal Funds rate and the discount rate by 25 basis points, or
one-quarter percent. Thereafter the economy showed signs of strength, causing
rates to start moving upward in March.
Through it all, the short end of the yield curve has remained inverted.
This means overnight investments are paying more than securities out to one
year. (Apparently, some investors still believe the economy is ailing and that
the Fed will ease rates further later in the year.) We continued to maintain a
shorter average maturity of 37 days to capture the higher yields at the shorter
end of the curve.
[PHOTO OF NAOMI URATA]
NAOMI URATA
Looking ahead, the yield on the Fund should remain stable as maturing
investments are rolled into assets with similar or slightly changed yields.
Currently, there's no clear consensus on whether rates will go up or down.
Until I have a better feel for expectations about the economy's future, I will
buy the best yields offered within the 30- to 120-day maturity range. If it
appears interest rates will trend down, I will lock in longer maturities. If
market sentiment indicates that rates will go up, I will maintain shorter
maturities.
Regarding the credit of commercial paper issuers, I removed some issuers
from our approved list during the year when their programs were eliminated or
their top-tier ratings were at risk. Among those names
(Continued on next page.)
-3-
<PAGE> 6
===============================================================================
HIGHLIGHTS
SAFECO MONEY
MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
SAFECO MONEY
MARKET FUND
TOP 5 CATEGORIES
- -------------------------------------------------------------------------------
<S> <C>
Asset Backed: 14.1% Graph here shows the percentage
of total assets invested in each
U.S. Gov't & Agency Securities: 11.3% of the five largest types of
investments held by the Fund.
Financial Services-Brokerage: 9.6%
Finance-Auto: 9.6%
Banks-Foreign: 9.6%
</TABLE>
<TABLE>
<S> <C>
WEIGHTED AVERAGE MATURITY............................................ 37 DAYS
TOTAL RETURN (1 YEAR)................................................ 5.15%
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CREDIT QUALITY PERCENT
- ------------------------------------------------------------------------------
<S> <C>
Highest Rated(1)..................................................... 100.0%
Split Rated(2)....................................................... 0.0
Not Rated (3)........................................................ 0.0
-----
100.0%
=====
</TABLE>
(1) Rated highest quality by at least two nationally recognized rating
organizations or, when rated by only one organization, received its
highest rating.
(2) Rated highest by one organization and second highest by another.
(3) Although unrated, comparable in credit quality to securities in the
highest or split-rated categories, in the opinion of SAFECO Asset
Management Company, the Fund's investment advisor.
REPORT FROM THE FUND MANAGER
SAFECO MONEY MARKET FUND
(CONTINUED)
were the issuers with letters of credit from Japanese and French banks. The
level of bad loans at the banks is of concern as the economies in Japan and
France continued to suffer from recession.
I added some new names to the approved list, including top-rated
Transamerica Finance Corporation, Wachovia Bank and New Center Asset Trust, an
automobile loan receivables program of General Motors.
The SAFECO Money Market Fund will continue its objective to seek as high a
level of current income as is compatible with maintaining a net asset value of
$1.00 per share. In addition, I will manage the fund to provide liquidity for
your future cash needs.
/s/ Naomi Urata
Naomi Urata
-4-
<PAGE> 7
===============================================================================
PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER - 80.9%
ASSET BACKED - 14.1%
$4,000 Apreco, Inc.
5.22%, due 5/09/96....................................... $3,977
Ciesco L.P.
4,000 5.19%, due 4/01/96....................................... 3,999
4,000 5.18%, due 4/23/96....................................... 3,986
3,300 Corporate Asset Funding Co.
5.42%, due 5/20/96....................................... 3,275
- Receivables Capital Corp. 4(2)
4,000 5.25%, due 4/17/96....................................... 3,989
4,000 5.23%, due 4/29/96....................................... 3,983
BANKS-DOMESTIC - 7.3%
4,000 First Union Bank of North Carolina
5.00%, due 8/05/96....................................... 4,000
4,000 Norwest Corporation
5.11%, due 4/11/96....................................... 3,993
4,000 Seattle-First National Bank
5.33%, due 7/09/96....................................... 4,000
BANKS-FOREIGN - 9.6%
Halifax Building Society
4,000 5.22%, due 4/15/96....................................... 3,991
4,000 5.03%, due 7/23/96....................................... 3,936
Westpac Capital Corp.
4,000 5.22%, due 4/30/96....................................... 3,982
4,000 5.05%, due 5/22/96....................................... 3,970
CONGLOMERATES - 2.4%
$4,000 B.A.T. Capital Corp.
5.15%, due 4/12/96....................................... $3,993
FINANCE-AUTO - 9.6%
Ford Motor Credit Co.
4,000 5.33%, due 4/08/96....................................... 3,995
4,000 5.07%, due 4/25/96....................................... 3,985
General Motors Acceptance Corp.
4,000 5.46%, due 4/26/96....................................... 3,984
4,000 5.20%, due 5/23/96....................................... 3,969
FINANCE-CONSUMER - 2.4%
4,000 Commercial Credit Co.
5.22%, due 4/19/96....................................... 3,988
FINANCE-DIVERSIFIED & BUSINESS - 7.2%
4,000 General Electric Capital Corp.
4.98%, due 6/26/96....................................... 3,951
Heller Financial, Inc.
4,000 5.35%, due 6/20/96....................................... 3,951
4,000 5.18%, due 5/10/96....................................... 3,976
FINANCE-EQUIPMENT LEASING - 2.4%
4,000 International Lease Finance Corp.
5.20%, due 5/03/96....................................... 3,980
</TABLE>
- --------------------------------------------------------------------------------
- - Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer". At March 31, 1996, such securities are Receivables Capital
Corp. 4(2) at 5.25%, acquired 3/4/96, due 4/17/96 and Receivables Capital Corp.
4(2) at 5.23%, acquired 1/29/96, due 4/29/96. The total market value of such
securities is $7,972,000 or 4.8% of net assets.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
-5-
<PAGE> 8
===============================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
SAFECO MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -------------------------------------------------------------------------------
<S> <C>
FINANCIAL SERVICES-BROKERAGE - 9.6%
$4,000 CS First Boston Group, Inc.
5.16%, due 5/02/96...................................... $ 3,981
4,000 Dean Witter Discover
5.03%, due 5/17/96...................................... 3,973
Merrill Lynch & Co., Inc.
4,000 5.22%, due 5/21/96...................................... 3,970
4,000 5.15%, due 5/16/96...................................... 3,973
INSURANCE NON-AFFILIATED MULTI-LINE - 4.8%
Prudential Funding Corp.
4,000 5.22%, due 4/10/96...................................... 3,994
4,000 5.14%, due 5/14/96...................................... 3,974
METALS - 2.4%
4,000 BHP Finance (USA), Inc.
5.13%, due 5/07/96...................................... 3,978
MISCELLANEOUS - 2.4%
4,000 Tasmanian Public Finance Corp.
5.25%, due 9/23/96...................................... 3,897
OIL & GAS - 2.4%
4,000 Bridge Oil International Finance
5.39%, due 4/24/96...................................... 3,985
PAPER & FOREST PRODUCTS - 4.3%
Southeast Paper Manufacturing
$4,000 5.32%, due 5/24/96...................................... $ 3,967
3,090 5.08%, due 5/08/96...................................... 3,073
--------
TOTAL COMMERCIAL PAPER............................................ 133,618
--------
U.S. GOVERNMENT AND
AGENCY SECURITIES - 11.3%
FEDERAL HOME LOAN MORTGAGE CORP. - 11.3%
18,610 5.30%, due 4/01/96...................................... 18,605
--------
TOTAL U.S. GOVERNMENT
AND AGENCY SECURITIES............................................. 18,605
--------
FLOATING RATE MEDIUM-TERM NOTES* - 7.9%
8,000 Household Finance Corp.
5.39%, due 8/28/96...................................... 8,000
5,000 Wachovia Bank of NC
5.25%, due 5/31/96...................................... 5,000
--------
TOTAL FLOATING RATE
MEDIUM-TERM NOTES................................................. 13,000
--------
TOTAL INVESTMENTS - 100.1%........................................ 165,223
Liabilities, less Other Assets.................................... (101)
--------
NET ASSETS ....................................................... $165,122
========
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* Securities have variable rates which change periodically based on specified
market rates or indices. Rates shown are those in effect on March 31, 1996.
- -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
-6-
<PAGE> 9
===============================================================================
REPORT FROM THE FUND MANAGER
SAFECO TAX-FREE MONEY MARKET FUND
MAY 1, 1996
The SAFECO Tax-Free Money Market's seven-day average yield declined from
3.58% at the beginning of the six-month reporting period to 2.92% at the end.
For comparison, the IBC/Donoghue average of tax-free money fund yields was 2.78%
on March 25.
The path of declining yields was not smooth. The downward movement of
returns caused by the declining interest rate environment was interrupted by an
abrupt spike up in rates at year-end. This was due to temporary fluctuations in
supply and demand that are peculiar to the tax-exempt money market.
The SAFECO Tax-Free Money Market Fund has performed well in this
environment. As the graph on the inside cover shows, the Fund has consistently
exceeded the IBC/Donoghue Tax-Free Money Fund Average. When evaluated by Lipper
Analytical Services, the Fund was 15 of 128 funds with one-year returns and 14
of 86 funds with five-year returns ending March 31.
[PHOTO OF MARY V. METASTASIO]
MARY V. METASTASIO
To accomplish this, we maintain a consistent style and portfolio structure.
The Fund is weighted heavily in variable rate securities, which we can tender at
par value in one to seven days. The tender options allow us to take advantage of
the interest rate fluctuations so characteristic of this market. To prevent us
from being at the mercy of fluctuating rates, we add stability to the portfolio
by maintaining a portion of it in securities with longer maturities, locking in
attractive yields for those time periods.
(Continued on next page.)
-7-
<PAGE> 10
===============================================================================
REPORT FROM THE FUND MANAGER
SAFECO TAX-FREE MONEY MARKET FUND (CONTINUED)
The tax-exempt money market was fairly quiet during the last six months.
Issuance remained low, keeping supply at adequate, yet moderate, levels. Assets,
both for the SAFECO Tax-Free Money Market Fund and the market in general, grew
slowly. As we seek to provide an investment that provides safety and liquidity,
we welcome this relative lack of activity. When it comes to money markets, quiet
is not a bad thing.
In the next six months we expect to see more issuance in the tax-exempt
money market, as states and municipalities issue notes to take care of their
cash flow needs. However, overall issuance of short-term municipal paper has
decreased in recent years, and we do not anticipate the huge supply that we have
sometimes seen in the past. Whatever the supply/demand situation, and wherever
interest rates take us, we expect to do what we have always done with this fund
- -- to provide a high-quality, liquid investment with a very competitive yield
that is exempt from federal income tax.
/s/ Mary V. Metastasio
Mary V. Metastasio
-8-
<PAGE> 11
===============================================================================
HIGHLIGHTS
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
SAFECO TAX-FREE
MONEY MARKET FUND
COMPARISON OF THE FUND'S
TAX-EQUIVALENT YIELDS TO THE AVERAGE
TAXABLE MONEY MARKET FUND YIELD
- -------------------------------------------------------------------------------
SAFECO TAX-FREE MONEY MARKET FUND **
<TABLE>
<S> <C>
Yield 2.92
Tax-Equivalent Yield 3.44
Tax-Equivalent Yield [Graph] 4.86
Tax-Equivalent Yield 4.23
Tax-Equivalent Yield 4.56
Tax-Equivalent Yield 4.83
<CAPTION>
IBC/DONOGHUE*
<S> <C>
Taxable Yield 4.68
</TABLE>
* Represents IBC/Donoghue Taxable Money Fund on March 25, 1996.
** Represents the SAFECO Tax-Free Money Market Fund actual yield on March 31,
1996, and related tax-equivalent yields assuming various shareholder tax
brackets. Tax-equivalent yield comparisons vary with market conditions.
<TABLE>
<CAPTION>
PORTFOLIO CREDIT QUALITY PERCENT
- ---------------------------------------------------------------------------------
<S> <C>
Highest Rated(1) ......................................... 100.0%
Split Rated(2) ........................................... 0.0
Not Rated(3) ............................................. 0.0
-----
100.0%
=====
</TABLE>
SAFECO TAX-FREE
MONEY MARKET FUND
TOP 5 CATEGORIES
- --------------------------------------------------------------------------------
Housing/Uninsured: 17.6%
IDR/PCR* Utilities-Electric: 11.9
IDR/PCR* Miscellaneous: 6.3 [Graph]
IDR/PCR* Air Transportation: 5.9
Miscellaneous Tax: 5.5
*Industrial Develoment Revenue/Pollution Control Revenue
<TABLE>
<S> <C>
WEIGHTED AVERAGE MATURITY................................. 57 DAYS
TOTAL RETURN (1 YEAR)..................................... 3.44%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE STATES PERCENT OF NET ASSETS
- ---------------------------------------------------------------------------------
<S> <C>
Texas ................................................... 15.4%
Washington .............................................. 13.9
Georgia ................................................. 7.4
Arizona ................................................. 6.8
California .............................................. 6.8
</TABLE>
(1) Rated highest quality by at least two nationally recognized rating
organizations or, when rated by only one organization, received its highest
rating.
(2) Rated highest by one organization and second highest by another.
(3) Although unrated, comparable in credit quality to securities in the highest
or split-rated categories, in the opinion of SAFECO Asset Management
Company, the Fund's investment advisor.
-9-
<PAGE> 12
===============================================================================
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS - 99.6%
ALASKA - 2.9%
Alaska Industrial Development
and Export Authority Revenue
$1,295b 3.45%, due 7/01/98
put date 4/07/96..................................... $ 1,295
1,015 3.45%, due 7/01/01,
put date 4/07/96..................................... 1,015
ARIZONA - 6.8%
3,600 Apache County Industrial
Development Authority Pollution
Control Revenue
(Tucson Electric Power Co. Project)
3.45%, due 6/15/20,
put date 4/07/96..................................... 3,600
1,000 Apache County Industrial
Development Authority
Revenue
(Tucson Electric Power Co.
Springerville Project)
3.45%, due 12/15/18,
put date 4/07/96..................................... 1,000
800 Pima County Industrial
Development Authority Revenue
(Tucson Electric Power Co.
Projects)
3.45%, due 12/01/22,
put date 4/07/96..................................... .800
CALIFORNIA - 6.8%
1,000 California Student Education
Loan Marketing Corp.
(Student Loan Revenue
Ref. Bonds)
3.90%, due 11/01/02,
put date 11/01/96.................................... 1,000
$2,400 Orange County (Irvine Coast
Assessment District #88-1)
4.00%, due 9/02/18,
put date 4/01/96..................................... $ 2,400
1,000 Orange County Local
Transportation
Authority Sales Tax Revenue
3.50%, due 4/04/96................................... 1,000
1,000 South Coast Local
Education Agencies
Pooled Tax and Revenue
Anticipation Notes
5.00%, due 8/14/96................................... 1,002
DISTRICT OF COLUMBIA - 1.2%..
1,000 District of Columbia Supplemental
Student Loan Revenue
4.10%, due 7/01/04,
put date 7/01/96..................................... 1,000
FLORIDA - 3.0%
650 Dade County Equipment
Special Obligation Revenue
3.55%, due 10/01/99,
put date 4/07/96..................................... 650
1,750 Florida Housing Finance Agency
Multifamily Revenue
4.50%, due 12/01/09,
put date 12/01/96.................................... 1,750
GEORGIA - 7.4%
1,800 Burke County Development
Authority PCR
(Georgia Power Co.) 5th Series 1994
3.70%, due 7/01/24,
put date 4/01/96..................................... 1,800
</TABLE>
- -------------------------------------------------------------------------------
- - If a put date is indicated, the Fund has a right to sell a specified
underlying security or securities at an exercise price equal to the amortized
cost of the underlying security or securities plus accrued interest, if any, as
of that date.
- -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
-10-
<PAGE> 13
===============================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
GEORGIA (CONTINUED)
$2,000 Marietta Housing Authority
Multifamily Housing Revenue
(Falls at Bells Ferry)
3.55%, due 1/15/09,
put date 1/15/97..................................... $ 2,000
2,100 Municipal Electric Authority
of Georgia General Resolution
Projects Subordinated Bonds,
Series C
3.30%, due 3/01/20,
put date 5/02/96..................................... 2,100
ILLINOIS - 2.9%
2,320 Chicago -- O'Hare
International Airport
Revenue 1984
3.30%, due 1/01/15,
put date 4/07/96..................................... 2,320
IOWA - 2.5%
1,000 Iowa Municipalities Workers'
Compensation
Association Revenue
4.10%, due 7/01/97,
put date 7/01/96..................................... 1,000
1,000 Iowa School Corporations
Warrant Certificates
4.375%, due 6/28/96.................................. 1,002
KANSAS - 1.3%
1,000 Wichita Revenue
(CSJ Health System)
3.70%, due 10/01/11,
put date 4/07/96..................................... 1,000
LOUISIANA - 3.0%
$1,000 Louisiana Public Facilities
Authority Special Insurance
Assessment Revenue
3.65%, due 12/01/13,
put date 4/07/96..................................... $ 1,000
Louisiana Recovery District
Sales Tax Bonds Series 1988
400 3.80%, due 7/01/97,
put date 4/01/96..................................... 400
1,000 3.80%, due 7/01/98,
put date 4/01/96..................................... 1,000
MARYLAND - 3.1%
2,075 Howard County Multifamily
Housing Revenue
(Sherwood Crossing Ltd.
Partnership)
4.25%, due 6/01/08,
put date 6/01/96..................................... 2,075
400 Montgomery County Industrial
Development Revenue
(Information Systems &
Networks)
3.55%, due 4/01/14,
put date 4/01/96..................................... 400
MISSOURI - 6.6%
2,100 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(Coach House II Project)
3.65%, due 12/01/15,
put date 4/01/96..................................... 2,100
600 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(J.C. Nichols Co.)
3.65%, due 5/01/15,
put date 4/01/96..................................... 600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-11-
<PAGE> 14
===============================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
MISSOURI (CONTINUED)
$1,000 Missouri Health and
Educational Facilities
Authority Educational Facilities
Revenue Bonds
(The Washington University)
Series 1996 C
3.65%, due 9/01/30,
put date 4/01/96..................................... $ 1,000
1,600 St. Louis Planned Industrial
Expansion Authority
Industrial Development Revenue
(Italgrani U.S.A., Inc.)
3.65%, due 6/01/03,
put date 4/01/96..................................... 1,600
MONTANA - 2.8%
2,215 Havre Industrial Development
Revenue (Safeway, Inc., Projects)
3.75%, due 6/01/06,
put date 6/01/96..................................... 2,215
NEW YORK - 1.2%
1,000 New York State Energy R & D
Authority PCR
(Long Island Lighting Co.
Project) 1985
Series B
3.30%, due 3/15/15,
put date 3/15/97..................................... 1,000
OHIO - 2.9%
300 Akron Sanitary Sewer
System Revenue
3.50%, due 12/01/14,
put date 4/07/96..................................... 300
$2,000 Cleveland-Cuyahoga County
Port Authority Revenue
(Rock and Roll Hall of Fame and
Museum Project)
3.50%, due 12/01/15,
put date 4/07/96.................................... $2,000
OKLAHOMA - 1.3%
1,000 Oklahoma Water Resources
Board
State Loan Program Revenue
3.25%, due 9/01/23,
put date 9/01/96..................................... 1,000
OREGON - 2.3%
1,800 Port of Portland Pollution
Control Revenue
(Reynolds Metals ) Series 1985
3.80%, due 12/01/09,
put date 4/01/96..................................... 1,800
PENNSYLVANIA - 0.2%
170 Commonwealth Tax Exempt
Mortgage Trust
4.50%, due 11/01/05,
put date 5/01/96..................................... 170
SOUTH CAROLINA - 1.6%
1,250 York County Pollution Control
Revenue (North Carolina Electric
Membership Corp. Project)
Series N-6
3.25%, due 9/15/14,
put date 9/15/96..................................... 1,250
TENNESSEE - 4.9%
3,400 Hamilton County Industrial
Development Revenue
(Komatsu American
Manufacturing Corp.)
3.70%, due 11/01/05,
put date 4/07/96..................................... 3,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-12-
<PAGE> 15
===============================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
TENNESSEE (CONTINUED)
$ 500 Knox County Industrial
Development Board
Industrial Development Revenue
(Service Merchandise)
3.45%, due 12/15/08,
put date 4/15/96..................................... $ 500
TEXAS - 15.4%
2,700 Cedar Hill Industrial Development
Corp. Revenue
(Minyard Properties Project)
4.00%, due 5/01/02,
put date 4/01/96..................................... 2,700
500 Grapevine Industrial Development
Corp. (American Airlines) 1984
Series A-3
3.80%, due 12/01/24,
put date 4/01/96..................................... 500
2,600 Grapevine Industrial Development
Corp (American Airlines) 1984
Series B-3
3.80%, due 12/01/24,
put date 4/01/96..................................... 2,600
1,000 Harris County Housing Finance
Corp.
Multifamily Housing Revenue
(Arbor II, Ltd. Project)
3.95%, due 10/01/05,
put date 10/01/96.................................... 1,000
600 Lone Star Airport Improvement
Authority (American Airlines) 1984
Series B-1
3.80%, due 12/01/14,
put date 4/01/96..................................... 600
TEXAS (CONTINUED)
$1,000 Lone Star Airport Improvement
Authority (American Airlines) 1984
Series B-5
3.80%, due 12/01/14,
put date 4/01/96..................................... $ 1,000
1,400 North Central Texas Health
Facilities Development Corp.
Series 1985 D
3.80%, due 12/01/15,
put date 4/01/96..................................... 1,400
1,500 State of Texas Tax and Revenue
Anticipation
Notes Series 1995 A
4.75%, due 8/30/96................................... 1,504
1,000 Tarrant County Housing Finance
Corp.
Multifamily Housing Revenue
(Lincoln Meadows Project)
Series 1988
4.30%, due 12/01/14,
put date 12/01/96.................................... 1,000
VIRGINIA - 4.3%
2,500 Harrisonburg Development and
Housing Authority
Multifamily Housing Revenue
(Rolling Brook Village Apts.
Project)
3.50%, due 2/01/09,
put date 2/01/97..................................... 2,500
1,000 Peninsula Ports Authority of
Virginia Port Facility Revenue
(CSX Transportation, Inc., Project)
3.20%, due 12/15/12,
put date 4/10/96..................................... 1,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-13-
<PAGE> 16
===============================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
SAFECO TAX-FREE MONEY MARKET FUND
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- --------------------------------------------------------------------------------
<S> <C>
WASHINGTON - 13.9%
$2,000 Chelan County Public Utility
District #1 Revenue
3.25%, due 6/01/15,
put date 4/07/96..................................... $ 2,000
285 Federal Way School District #210
King County General Obligation
Bonds 1996
4.00%, due 12/01/96.................................. 286
1,000 Seattle Municipal Power and
Light Revenue
3.20%, due 11/01/15,
put date 5/07/96..................................... 1,000
1,000 Washington Public Power
Supply System
Project #2 Revenue
3.50%, due 7/01/00,
put date 4/07/96..................................... 1,000
2,000 Washington State General
Obligation
Series VR-96 A
3.30%, due 6/01/20,
put date 4/07/96..................................... 2,000
2,130 Washington State Housing
Finance Commission Revenue
(Pioneer Human Services)
3.50%, due 7/01/11,
put date 4/07/96..................................... 2,130
1,480 Washington State Housing
Finance Commission
Revenue (YMCA of Greater
Seattle Program)
3.90%, due 7/01/11,
put date 4/01/96..................................... 1,480
$1,150 Washington State Housing
Finance Commission
Revenue (YMCA of Snohomish
County Program)
3.45%, due 8/01/19,
put date 4/01/96..................................... $ 1,150
WYOMING - 1.3%
1,000 Uinta County Pollution
Control Revenue
(Chevron USA, Inc., Project)
4.30%, due 6/15/97,
put date 6/15/96..................................... 1,000
---------
TOTAL MUNICIPAL BONDS.......................................... 79,394
---------
OTHER INVESTMENTS - 0.0%
INVESTMENT COMPANIES:
13 Aim Tax-Exempt
Money Market Fund, Inc............................... 13
---------
TOTAL OTHER INVESTMENTS........................................ 13
---------
TOTAL INVESTMENTS - 99.6%...................................... 79,407
Other Assets, less Liabilities................................. 295
---------
NET ASSETS..................................................... $ 79,702
=========
- -------------------------------------------------------------------------------
</TABLE>
Securities with a maturity of more than thirteen months have variable rates
and/or demand features which qualify them as short-term securities. Rates shown
are those in effect on March 31, 1996. These rates change periodically based on
specified market rates or indices.
SEE NOTES TO FINANCIAL STATEMENTS
-14-
<PAGE> 17
================================================================================
STATEMENT OF ASSETS AND LIABLITIES
As of March 31, 1996
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
(In Thousands, Except Per-Share Amounts) MARKET FUND MONEY MARKET FUND
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Value (Amortized Cost
$165,223 and $79,407, respectively) $165,223 $79,407
Cash 3 --
Receivables
Capital Stock Sold 1,819 248
Interest 94 452
-------- -------
Total Assets 167,139 80,107
-------- -------
LIABILITIES
Payables
Capital Stock Redeemed 1,863 337
Investment Advisory Fees 71 32
Dividends 24 15
Other 59 21
-------- -------
Total Liabilities 2,017 405
-------- -------
Net Assets $165,122 $79,702
======== =======
Shares Outstanding 165,122 79,702
======== =======
Net Asset Value Per Share $ 1.00 $ 1.00
======== =======
(Net Assets Divided by Shares Outstanding)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-15-
<PAGE> 18
================================================================================
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
March 31, 1996
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
(In Thousands) MARKET FUND MONEY MARKET FUND
- --------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $10,097 $3,083
EXPENSES
Investment Advisory Fees (Note 2) 865 380
Shareholder Servicing Fees (Note 2) 424 72
Custodian Fees 27 16
Legal and Auditing Fees 18 15
Reports to Shareholders 20 3
Trustees' Fees 6 7
Loan Interest Expense 2 4
------- ------
Total Expenses 1,362 497
------- ------
NET INVESTMENT INCOME AND NET CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS $ 8,735 $2,586
======= ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-16-
<PAGE> 19
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
MARKET FUND MONEY MARKET FUND
-------------------------------------------------------------
For the Year Ended March 31 For the Year Ended March 31
(In Thousands) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 8,735 $ 6,996 $ 2,586 $ 2,636
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (8,735) (6,996) (2,586) (2,363)
TRUST SHARE TRANSACTIONS (6,836) (14,354) 2,382 (17,269)
----------- ----------- --------- ---------
TOTAL CHANGE IN NET ASSETS (6,836) (14,354) 2,382 (17,269)
NET ASSETS AT BEGINNING OF PERIOD 171,958 186,312 77,320 94,589
----------- ----------- --------- ---------
NET ASSETS AT END OF PERIOD $ 165,122 $ 171,958 $ 79,702 $ 77,320
=========== =========== ========= =========
OTHER INFORMATION
INCREASE (DECREASE) IN
TRUST SHARES AND AMOUNTS
SHARES SOLD 1,017,443 1,216,336 134,041 176,342
SHARES REINVESTED 7,446 5,911 2,265 2,024
SHARES REDEEMED (1,031,725) (1,236,601) (133,924) (195,635)
----------- ----------- --------- ---------
NET CHANGE (6,836) (14,354) 2,382 (17,269)
=========== =========== ========= =========
</TABLE>
Because share value is equal to $1.00, dollar amounts and share amounts are
identical.
<TABLE>
<CAPTION>
As of March 31, 1996:
Shares Authorized Unlimited Unlimited
<S> <C> <C>
Par Value Per Share $ .001 $ .001
Paid in Capital $165,122 $79,702
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-17-
<PAGE> 20
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT
ACCOUNTING POLICIES
The SAFECO Money Market 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 Money Market
Fund ("Money Fund") and SAFECO Tax-Free Money Market Fund ("Tax-Free Money
Fund") (together the "Funds").
The following is a summary of significant accounting policies
consistently followed by each Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles which permit management to make certain estimates and assumptions at
the date of the financial statements.
SECURITY VALUATION. Investments consist of short-term securities
maturing within thirteen months from the date of purchase. Securities in the
Tax-Free Money Fund with maturities of more than thirteen months have floating
rates and/or demand features which qualify them as short-term securities.
Securities purchased at par are valued at cost. All other securities are valued
at amortized cost, which approximates market value.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade
date. The cost of each portfolio is the same for financial statement and federal
income tax purposes.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. In the Tax-Free Money
Fund, securities purchased on a when-issued or delayed basis may be settled a
month or more after the trade date. The securities purchased are carried in the
portfolio at market and are subject to market fluctuation during this period.
These securities begin earning interest on the settlement date. As commitments
to purchase when-issued securities become fixed, the Tax-Free Money Fund
segregates liquid assets in an amount equal to the total obligation.
-18-
<PAGE> 21
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INCOME RECOGNITION. Interest is accrued on portfolio investments daily.
Bond premiums, original issue discounts and market discounts are amortized to
either call or maturity dates.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment income is
declared as a dividend to shareholders of record as of the close of each
business day and payment is made as of the last business day of each month.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to continue to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies by distributing substantially all income to shareholders in
a manner which results in no tax to the Fund. Therefore no federal income or
excise tax provision is required. The Tax-Free Money Fund intends to satisfy
conditions which will enable it to designate its dividends from net investment
income as tax-exempt dividend distributions.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
SAFECO Asset Management Company receives investment advisory fees from
the Funds. For the Money Fund, the fee is based on average daily net assets at
the annual rate of 50/100 of one percent on the first $250 million declining in
three levels to 25/100 of one percent on net assets over $750 million. For the
Tax-Free Money Fund, the fee is based on average daily net assets at the annual
rate of 50/100 of one percent on the first $100 million declining in three
levels to 20/100 of one percent on net assets over $500 million. SAFECO Services
Corporation receives shareholder servicing fees.
The Funds may borrow money for temporary purposes from SAFECO
Corporation or its affiliates at interest rates equivalent to commercial bank
interest rates.
-19-
<PAGE> 22
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period.)
SAFECO MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.04 0.02 0.03 0.05
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.05) (0.04) (0.02) (0.03) (0.05)
-------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
TOTAL RETURN 5.15% 4.20% 2.48% 2.98% 5.04%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $165,122 $171,958 $186,312 $144,536 $184,823
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.78% 0.78% 0.79% 0.77% 0.73%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 5.04% 4.21% 2.47% 3.02% 5.05%
</TABLE>
- --------------------------------------------------------------------------------
-20-
<PAGE> 23
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FINANCIAL HIGHLIGHTS (Continued)
(For a share outstanding throughout the period.)
SAFECO TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.03 0.02 0.03 0.04
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.03) (0.03) (0.02) (0.03) (0.04)
-------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
TOTAL RETURN 3.44% 2.84% 1.98% 2.53% 3.94%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $ 79,702 $ 77,320 $ 94,589 $ 82,098 $ 79,849
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.65% 0.64% 0.64% 0.61% 0.62%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 3.40% 2.79% 1.96% 2.48% 3.83%
</TABLE>
- --------------------------------------------------------------------------------
-21-
<PAGE> 24
================================================================================
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF THE SAFECO MONEY MARKET TRUST
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the SAFECO Money Market Trust
(comprising, respectively, the SAFECO Money Market Fund and SAFECO Tax-Free
Money Market Fund) as of March 31, 1996, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective funds constituting the SAFECO Money Market
Trust at March 31, 1996, and the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Seattle, Washington
April 26, 1996
-22-
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<PAGE> 27
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-25-
<PAGE> 28
SAFECO MONEY MARKET FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
Richard W. Hubbard
Richard E. Lundgren
L.D. McClean
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer
Neal A. Fuller
Vice President and Controller
INVESTMENT ADVISER:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
U.S. Bank of Washington, N.A.
FOR SHAREHOLDER SERVICE:
Monday-Friday,
5:30am-7:00pm Pacific Time
NATIONWIDE: 1-800-624-5711
SEATTLE: 545-7319
TTY/TDD: 1-800-438-8718
FOR YIELDS, PRICES AND
PERFORMANCE INFORMATION:
24 hours a day, 7 days a week
NATIONWIDE: 1-800-835-4391
SEATTLE: 545-5113
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
GMF 663 5/96
[RECYCLE LOGO] Printed on Recycled Paper.
This report must be preceded or accompanied by a current prospectus.
(R) Registered trademark of SAFECO Corporation.
