<PAGE> 1
Registration Nos. 2-25272/811-3347
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 19 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
Amendment No. 19 /X/
(Check appropriate box or boxes.)
SAFECO MONEY MARKET TRUST
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza, Seattle, Washington 98185
(Address of Principal Executive Offices) ZIP Code
Registrant's Telephone Number, including
Area Code (206) 545-5000
Name and Address of Agent for Service
DAVID F. HILL
SAFECO Plaza
Seattle, Washington 98185
(206) 545-5269
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
X immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on __________________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
o This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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====
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 by declaration made pursuant to Section 24(f) of the
Investment Company Act of 1940 ("Act"). Pursuant to Rule 24f-2 under the Act,
Registrant's Rule 24f-2 Notice was filed on or about May 30, 1996.
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====
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
Title of Amount of Proposed Proposed Amount
Securities Shares Maximum Maximum of
Being Being Offering Price Aggregate Registration
Registered Registered Per Unit Offering Price Fee
- ----------------------------------------------------------------------------
Shares of 4,743,890 Varying prices calculated as $100.00*
Common Stock, set forth in prospectus
</TABLE>
Par Value .001
Cent, of the
SAFECO Money
Market Trust
==========================================================================
The fee for the above shares to be registered by this filing has been computed
on the basis of the price in effect on June 30, 1996.
__________________________________________________________________________
* Calculation of the proposed maximum aggregate offering price has been made
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During its
fiscal year ended March 31, 1996, Registrant redeemed or repurchased
1,165,648,988 shares of common stock. During its current fiscal year,
Registrant used 1,161,195,098 of the shares it redeemed or repurchased for a
reduction pursuant to paragraph (c) of Rule 24f-2 under the Investment Company
Act of 1940. Registrant is filing this post-effective amendment to register
the remaining 4,453,890 shares redeemed or repurchased during its fiscal year
ended March 31, 1996 plus an additional 290,000 shares. During its current
fiscal year Registrant has filed no other post-effective amendments for the
purpose of the reduction pursuant to paragraph (a) of Rule 24e-2.
<PAGE> 3
SAFECO MONEY MARKET TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
<TABLE>
Part A
------
<S> <C> <C>
Location
Item No. in Prospectus
- -------- -------------
Item 1. Cover Page Cover page
Item 2. Synopsis Introduction to the
Trust and the Funds; Fund
Expenses
Item 3. Condensed Financial Information Financial Highlights;
Performance Information
Item 4. General Description of Registrant The Trust and Each Fund's
Investment Policies;
Information about Share
Ownership and Companies that
Provide Services to the Trust
Item 5. Management of the Trust Information about Share
Ownership and Companies
that Provide Services to
the Trust; Fund Expenses
Item 6. Capital Stock and Other Securities Cover Page; Fund
Distributions and How They
are Taxed; Information About
Share Ownership and Companies
that Provide Services to
the Trust
Item 7. Purchase of Securities Being Offered How to Purchase Shares;
How to Exchange Shares
From One Fund to Another;
Share Price Calculation; How
to Systematically Purchase or
Redeem Shares; Tax-Deferred
Retirement Plans; Account
Statements; Telephone Transactions;
Transactions Through Registered Investment
Advisers
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Item 8. Redemption or Repurchase How to Redeem Shares; How to
Exchange Shares From One Fund
to Another; How to
Systematically Purchase or
Redeem Shares; Account
Changes and Signature
Requirements; Account
Statements; Telephone
Transactions; Transactions
Through Registered Investment
Advisers
Item 9. Pending Legal Proceedings Not applicable
</TABLE>
Part B
------
<TABLE>
<S> <C> <C>
Location in Statement
Item No. of Additional Information
- -------- -------------------------
Item 10. Cover page Cover page
Item 11. Table of Contents Cover page
Item 12. General Information and History Not applicable
Item 13. Investment Objectives and Policies Overview of Investment
Policies; Additional
Investment Information;
Investment Policies of the
Money Fund; Investment
Policies of the Tax-Free
Money Fund; Description of
Ratings
Item 14. Management of the Trust Trustees and Officers
Item 15. Control Persons and Principal Not Applicable
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Brokerage Practices
Practices
Item 18. Capital Stock and Other Securities Additional Information on
Dividends
Item 19. Purchase, Redemption and Pricing Additional Information
of Securities Being Offered On Calculation
of Net Asset
Value Per
Share; Redemption
in Kind
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Item 20. Tax Status Additional Tax Information
Regarding the Tax-Free Money
Fund
Item 21. Underwriters Investment Advisory and Other
Services
Item 22. Calculation of Performance Data Additional Performance
Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 6
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SAFECO MONEY MARKET FUND
SAFECO TAX-FREE MONEY MARKET FUND
July 19, 1996
Each Fund described in this Prospectus is a series of the SAFECO Money Market
Trust ("Trust"), an open-end, management investment company consisting of two
separate series.
There are market risks in all securities transactions. This Prospectus sets
forth the information a prospective investor should know before investing.
PLEASE READ AND RETAIN THE PROSPECTUS FOR FUTURE REFERENCE. A Statement of
Additional Information, dated July 19, 1996, and incorporated herein by
reference, has been filed with the Securities and Exchange Commission and is
available at no charge upon request by calling one of the numbers listed on this
page. The Statement of Additional Information contains more information about
most of the topics in this Prospectus as well as information about the Trustees
and officers of the Trust.
For additional assistance, please call or write:
<TABLE>
<S> <C>
NATIONWIDE: 1-800-624-5711 SAFECO MUTUAL FUNDS
SEATTLE 206-545-7319 P.O. BOX 34890
TTY/TDD SERVICE: 1-800-438-8718 SEATTLE, WA 98124-1890
</TABLE>
All telephone calls are tape-recorded for your protection.
- -------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR SAFECO SECURITIES, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY THE
TRUST, ANY SERIES OF THE TRUST, OR SAFECO SECURITIES IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION MAY NOT BE LAWFULLY MADE.
- -------------------------------------------------------------------------
-- 1 --
<PAGE> 7
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SAFECO MONEY MARKET FUND has as its investment objective to seek as high a level
of current income as is consistent with the preservation of capital and
liquidity through investment in high-quality money market instruments maturing
in thirteen months or less.
SAFECO TAX-FREE MONEY MARKET FUND has as its investment objective to provide as
high a level of current income exempt from federal income tax as is consistent
with a portfolio of high-quality, short-term municipal obligations selected on
the basis of liquidity and preservation of capital.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT A FUND WILL MAINTAIN A STABLE
$1.00 SHARE PRICE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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<PAGE> 8
- -------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction to the Trust and the Funds 4
Fund Expenses 6
Financial Highlights 7
The Trust and Each Fund's Investment Policies 9
Information about Share Ownership and Companies
that Provide Services to the Trust 17
Performance Information 19
Fund Distributions and How They Are Taxed 20
Tax-Deferred Retirement Plans 22
Account Statements 23
Account Changes and Signature Requirements 23
Share Price Calculation 24
How to Purchase Shares 25
How to Redeem Shares 27
How to Systematically Purchase or Redeem Shares 30
How to Exchange Shares from One Fund to Another 30
Telephone Transactions 32
Transactions Through Registered Investment Advisers 33
</TABLE>
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<PAGE> 9
- -------------------------------------------------------------------------
INTRODUCTION TO THE TRUST
AND THE FUNDS
The Trust is a series investment company that currently issues shares
representing two mutual funds: SAFECO Money Market Fund ("Money Fund") and
SAFECO Tax-Free Money Market Fund ("Tax-Free Money Fund") (together, the
"Funds"). Each Fund is a diversified series of the Trust, an open-end,
management investment company that continuously offers to sell and redeem (buy
back) its shares at the current net asset value per share without any sales or
redemption charges or 12b-1 fees. Each Fund intends to maintain a net asset
value per share of $1.00.
The MONEY FUND has as its investment objective to seek as high a level of
current income as is consistent with the preservation of capital and liquidity
through investment in high-quality money market instruments maturing in thirteen
months or less.
The TAX-FREE MONEY FUND has as its investment objective to provide as high a
level of current income exempt from federal income tax as is consistent with a
portfolio of high-quality, short-term municipal obligations selected on the
basis of liquidity and preservation of capital.
There is, of course, no assurance that a Fund will achieve its investment
objective. See "The Trust and Each Fund's Investment Policies" for more
information.
The principal risk associated with an investment in a mutual fund like either of
the Funds is that they may experience a delay or failure in principal or
interest payments at maturity of one or more of the portfolio securities. Each
Fund's yield will fluctuate with general money market interest rates. See "The
Trust and Each Fund's Investment Policies" for further information.
Each Fund is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington, and managed over $2 billion in mutual fund
assets as of June 30, 1996. SAM has been an adviser to mutual funds and other
investment portfolios since 1973 and its predecessors have been such advisers
since 1932. See "Information About Share
-- 4 --
<PAGE> 10
- -------------------------------------------------------------------------
INTRODUCTION TO THE TRUST
AND THE FUNDS (Continued)
Ownership and Companies that Provide Services to the Trust" for more
information.
EACH FUND:
- -Seeks to maintain a $1.00 per share net asset value.
- -Is 100% no-load; there are no sales or redemption charges or 12b-1 fees.
- -Offers free exchanges as well as easy access to your money through telephone
redemptions and wire transfers.
- -Pays dividends monthly.
- -Has a minimum initial investment of $1,000 for regular accounts and $250 for
IRAs. No minimum initial investment is required to establish the Automatic
Investment Method ("AIM") or Payroll Deduction Plan.
-- 5 --
<PAGE> 11
- --------------------------------------------------------------------------------
FUND EXPENSES
A. SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND
<TABLE>
<CAPTION>
SALES
LOAD IMPOSED
SALES ON DEFERRED
LOAD IMPOSED REINVESTED SALES REDEMPTION EXCHANGE
FUND ON PURCHASES DIVIDENDS LOAD FEES FEES
- ------------------------ ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Money Fund None None None None None
Tax-Free
Money Fund
None None None None None
</TABLE>
SAFECO Services Corporation, the transfer agent for the Funds, charges a $10 fee
to wire redemption proceeds.
B. ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FUND 12B-1 FEE + FEE + EXPENSES = EXPENSES
- ------------------------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Fund None .50% .28% .78%
Tax-Free
Money Fund None .50% .15% .65%
</TABLE>
The amounts shown are actual expenses paid by shareholders of the Money and Tax-
Free Money Funds for the fiscal year ended March 31, 1996. See "Information
about Share Ownership and Companies that Provide Services to the Trust" on page
17 for more information.
C. EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment assuming 5% annual
return and redemption at the end of each time period. The example assumes that
all dividends and other distributions are reinvested and that the percentage
amounts listed in "Annual Operating Expenses" above remain the same in the years
shown.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------ --------- --------- ---------
<S> <C> <C> <C> <C>
Money Fund $8 $25 $43 $97
Tax-Free
Money Fund $7 $21 $36 $81
</TABLE>
The purpose of the tables is to assist you in understanding the various costs
and expenses that an investor in each Fund would bear, directly or indirectly.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. A FUND'S ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS REQUIRED BY SECURITIES AND EXCHANGE
COMMISSION REGULATIONS APPLICABLE TO ALL MUTUAL FUNDS AND IT IS NOT A PREDICTION
OF, NOR DOES IT REPRESENT, PAST OR FUTURE EXPENSES OR THE PERFORMANCE OF ANY
FUND.
-- 6 --
<PAGE> 12
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
The following supplemental financial information and performance data has been
derived from the financial statements of the SAFECO Money Market Fund which has
been audited by Ernst & Young LLP, independent auditors. The information should
be read in conjunction with the financial statements, related notes and other
financial information incorporated by reference herein.
<TABLE>
<CAPTION>
Year Ended March 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
NET INVESTMENT
INCOME .05 .04 .02 .03 .05 .07 .08 .08 .06 .06
LESS
DISTRIBUTIONS:
DIVIDENDS FROM NET
INVESTMENT INCOME (.05) (.04) (.02) (.03) (.05) (.07) (.08) (.08) (.06) (.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE AT
END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 5.15% 4.20% 2.48% 2.98% 5.04% 7.60% 8.77% 7.86% 6.56% 5.90%*
NET ASSETS AT END OF
PERIOD (000'S
OMITTED) $165,122 $171,958 $186,312 $144,536 $184,823 $224,065 $225,974 $177,813 $119,709 $57,998
RATIO OF EXPENSES TO
AVERAGE
NET ASSETS .78% .78% .79% .77% .73% .70% .71% .74% .79% .82%
RATIO OF NET
INVESTMENT
INCOME TO AVERAGE
NET ASSETS 5.04% 4.21% 2.47% 3.02% 5.05% 7.34% 8.45% 7.66% 6.49% 5.71%
</TABLE>
* UNAUDITED.
-- 7 --
<PAGE> 13
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO TAX-FREE MONEY MARKET FUND
The following supplemental financial information and performance data has been
derived from the financial statements of the SAFECO Tax-Free Money Market Fund
which has been audited by Ernst & Young LLP, independent auditors. The
information should be read in conjunction with the financial statements, related
notes and other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .03 .03 .02 .03 .04 .05 .06 .05 .04 .03
LESS
DISTRIBUTIONS:
Dividends from
net investment
income (.03) (.03) (.02) (.03) (.04) (.05) (.06) (.05) (.04) (.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return 3.44% 2.84% 1.98% 2.53% 3.94% 5.39% 5.92% 5.27% 4.33% 3.79%*
Net assets at end
of period
(000'S omitted) $79,702 $77,320 $94,589 $82,098 $79,849 $60,478 $52,092 $44,623 $37,492 $19,039
Ratio of expenses
to average
net assets .65% .64% .64% .61% .62% .62% .63% .63% .64% .66%
Ratio of net
investment
income to
average
net assets 3.40% 2.79% 1.96% 2.48% 3.83% 5.24% 5.75% 5.15% 4.35% 3.68%
</TABLE>
* Unaudited
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<PAGE> 14
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES
The Trust is a Delaware business trust established by the Trust Instrument dated
May 13, 1993. The Trust currently consists of two mutual funds: Money Market
Fund and Tax-Free Money Market Fund, each of which is a diversified series of
the Trust.
The investment objective and investment policies for each Fund are described
below. The Trust's Board of Trustees may change the Money Market Fund's
objective without shareholder vote, but no such change will be made without 60
days' prior written notice to shareholders of that Fund. In the event a Fund
changes its investment objective, the new objective may not meet the investment
needs of every shareholder and may be different from the objective a shareholder
considered appropriate at the time of initial investment. It is the policy of
both the Money Fund and Tax-Free Money Fund to seek to maintain a net asset
value per share of $1.00. Current holdings and recent investment strategies are
described in the Funds' financial reports which are sent to shareholders twice a
year.
Each Fund has adopted a number of investment restrictions. If a Fund follows a
percentage limitation at the time of investment, a later increase or decrease in
values, net assets or other circumstances will not be considered in determining
whether a Fund complies with the applicable policy. Unless otherwise stated, all
investment policies and limitations described below are non-fundamental and may
be changed by the Trust's Board of Trustees without shareholder vote.
MONEY FUND
The investment objective of the Money Fund is to seek as high a level of current
income as is consistent with the preservation of capital and liquidity through
investment in high-quality money market instruments maturing in thirteen months
or less.
To pursue its objective, the Money Fund:
1. WILL PURCHASE ONLY HIGH-QUALITY SECURITIES THAT, IN THE OPINION OF SAM
OPERATING UNDER GUIDELINES ESTABLISHED BY THE BOARD OF TRUSTEES, PRESENT
MINIMAL CREDIT RISKS AFTER AN EVALUATION OF THE CREDIT QUALITY OF THE ISSUER
OR OF ANY ENTITY
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<PAGE> 15
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
PROVIDING A CREDIT ENHANCEMENT FOR THE SECURITY. The Fund complies with
industry-standard guidelines on the quality and maturity of its investments,
which are designed to help maintain a stable $1.00 share price. The Fund
invests in instruments with remaining maturities of 397 days or less and
maintains a dollar-weighted average portfolio maturity of not more than 90
days.
2. MAY INVEST IN COMMERCIAL PAPER OBLIGATIONS. Commercial paper is a short-term
instrument issued by corporations, financial institutions, governmental
entities and other entities. The principal risk associated with commercial
paper is the potential insolvency of the issuer. In addition to commercial
paper obligations of domestic corporations, the Fund may also purchase
dollar-denominated commercial paper issued in the U.S. by foreign entities.
While investments in foreign securities are intended to reduce risk by
providing further diversification, such investments involve sovereign and
other risks, in addition to the credit and market risks normally associated
with domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability)
and the potentially adverse effects of unavailability of public information
regarding issuers, reduced governmental supervision regarding financial
markets, reduced liquidity of certain markets, and the lack of uniform
accounting, auditing, and financial standards or the application of standards
that are different or less stringent than those applied in the U.S. The Fund
will purchase such securities, only if, in the opinion of SAM, the security
is of an investment quality comparable to other obligations that may be
purchased by the Fund.
3.MAY INVEST IN NEGOTIABLE AND NON-NEGOTIABLE DEPOSITS, BANKERS' ACCEPTANCES AND
OTHER SHORT-TERM OBLIGATIONS OF U.S. BANKS. Companies in the financial
services industry are subject to various risks related to that industry, such
as government regulation, changes in interest rates, and
-- 10 --
<PAGE> 16
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
exposure on loans, including loans to foreign borrowers. The Fund may also
invest in dollar-denominated securities issued by foreign banks (including
foreign branches of U.S. banks) provided that, in the opinion of SAM, the
security is of an investment quality comparable to other obligations which may
be purchased by the Fund. Foreign banks may not be subject to accounting
standards or governmental supervision comparable to U.S. banks, and there may
be less public information available about their operations. In addition,
foreign securities may be subject to risks relating to the political and
economic conditions of the foreign country involved, which could affect the
payment of principal and interest.
4.MAY INVEST IN U.S. GOVERNMENT SECURITIES. U.S. Government securities include
(a) securities supported by the full faith and credit of the U.S. Government
but that are not direct obligations of the U.S. Treasury, (b) securities that
are not supported by the full faith and credit of the U.S. Government but are
supported by the issuer's ability to borrow from the U.S. Treasury such as
securities issued by the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Association ("FHLMC"), and (c) securities
supported solely by the creditworthiness of the issuer, such as securities
issued by the Tennessee Valley Authority ("TVA"). While U.S. Government
securities are considered to be of the highest credit quality available, they
are subject to the same market risks as comparable debt securities.
5.MAY INVEST IN EURODOLLAR AND YANKEE OBLIGATIONS. Eurodollar bank obligations
are dollar-denominated certificates of deposit and time deposits issued
outside the U.S. capital markets by foreign branches of U.S. banks and by
foreign banks. Yankee bank obligations are dollar-denominated obligations
issued in the U.S. capital markets by foreign banks.
Eurodollar and Yankee obligations are subject to the same risks that pertain
to domestic issues, notably credit risk,
-- 11 --
<PAGE> 17
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
market risk and liquidity risk. Additionally, Eurodollar (and to a limited
extent, Yankee) obligations are subject to certain sovereign risks. One such
risk is the possibility that a foreign government might prevent
dollar-denominated funds from flowing across its borders. Other risks
include: adverse political and economic developments in a foreign country;
the extent and quality of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes; and expropriation
or nationalization of foreign issuers. Eurodollar and Yankee obligations will
undergo the same credit analysis as domestic issues in which the Fund
invests, and foreign issuers will be required to meet the same tests of
financial strength as the domestic issuers approved for the Fund.
TAX-FREE MONEY FUND
The investment objective of the Tax-Free Money Fund is to provide as high a
level of current income exempt from federal income tax as is consistent with a
portfolio of high-quality, short-term municipal obligations selected on the
basis of liquidity and preservation of capital. The Tax-Free Money Fund's
investment objective is a fundamental policy that may not be changed without
shareholder approval. The term "municipal obligations" as used in this
Prospectus means those obligations issued by or on behalf of states, territories
or possessions of the U.S. and the District of Columbia and their political
subdivisions, agencies and instrumentalities, the interest on which in the
opinion of counsel for the issuer is exempt from federal income tax.
To pursue its investment objective, the Tax-Free Money Fund:
1.WILL PURCHASE ONLY HIGH-QUALITY SECURITIES THAT, IN THE OPINION OF SAM
OPERATING UNDER GUIDELINES ESTABLISHED BY THE BOARD OF TRUSTEES, PRESENT
MINIMAL CREDIT RISKS AFTER AN EVALUATION OF THE CREDIT QUALITY OF THE ISSUER
OR OF ANY ENTITY PROVIDING A CREDIT ENHANCEMENT FOR THE SECURITY. The Fund
complies with industry-standard guidelines on the quality
-- 12 --
<PAGE> 18
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
and maturity of its investments, which are designed to help maintain a stable
$1.00 share price. The Fund invests in instruments with remaining maturities
of 397 days or less (determined in accordance with Rule 2a-7 under the 1940
Act) and maintains a dollar-weighted average portfolio maturity of not more
than 90 days.
2.WILL INVEST, DURING NORMAL MARKET CONDITIONS AND AS A MATTER OF FUNDAMENTAL
POLICY, AT LEAST 80% OF ITS NET ASSETS IN SECURITIES THE INTEREST ON WHICH IS
EXEMPT FROM FEDERAL INCOME TAX.
3.WILL INVEST IN MUNICIPAL NOTES. Municipal notes include bond anticipation
notes, tax anticipation notes and revenue anticipation notes, municipal bonds,
and municipal commercial paper. These instruments are generally issued to
provide for short-term capital needs of the issuer. The principal risk
associated with municipal notes is that the issuer may fail to make timely
payments of principal and interest to the Fund.
4.MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN SHARES OF NO-LOAD, OPEN-END
INVESTMENT COMPANIES THAT INVEST IN TAX-EXEMPT SECURITIES WITH REMAINING
MATURITIES OF THIRTEEN MONTHS OR LESS. Such shares will be purchased only if
SAM determines that they provide a better combination of yield and liquidity
than a direct investment in short-term, tax-exempt securities. SAM will waive
its advisory fees for assets invested in other investment companies. The Fund
will not invest more than 5% of its total assets in a single investment
company.
5.MAY INVEST (AS A TEMPORARY ACCOMMODATION OR IN AN EMERGENCY SITUATION) UP TO
20% OF ITS NET ASSETS IN SHORT-TERM TAXABLE INVESTMENTS SUCH AS DIRECT
OBLIGATIONS OF THE U.S. GOVERNMENT, CERTIFICATES OF DEPOSIT AND COMMERCIAL
PAPER MEETING THE NECESSARY QUALITY REQUIREMENTS.
-- 13 --
<PAGE> 19
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
COMMON INVESTMENT PRACTICES
Each Fund:
1. MAY INVEST IN REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys
securities at one price and simultaneously agrees to sell them back at a
higher price. Delays or losses could result if the counterparty to the
agreement defaults or becomes insolvent. Each Fund will invest no more than
10% of total assets in repurchase agreements and will not purchase repurchase
agreements that mature in more than seven days.
2. MAY INVEST IN VARIABLE AND FLOATING RATE INSTRUMENTS. The interest rates on
variable rate instruments reset periodically on specified dates so as to
cause the instruments' market value to approximate their par value. The
interest rates on floating rate instruments change whenever there is a change
in a designated benchmark rate. Variable and floating rate instruments may
have put features. These instruments may have optional put features. Puts may
also be mandatory, in which case the Fund would be required to act to keep
the instrument.
3. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES ELIGIBLE FOR
RESALE UNDER RULE 144A UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") ("RULE
144A SECURITIES") AND COMMERCIAL PAPER SOLD PURSUANT TO SECTION 4(2) OF THE
1933 ACT ("SECTION 4(2) PAPER"), PROVIDED THAT SAM HAS DETERMINED THAT SUCH
SECURITIES ARE LIQUID UNDER GUIDELINES ADOPTED BY THE BOARD OF TRUSTEES.
Restricted securities may be sold only in offerings registered under the 1933
Act or in transactions exempt from the registration requirements under the
1933 Act. Rule 144A under the 1933 Act provides an exemption for the resale
of certain restricted securities to qualified institutional buyers. Investing
in such Rule 144A Securities could have the effect of increasing a Fund's
illiquidity to the extent that qualified institutional buyers or other buyers
are unwilling to purchase the securities. Section 4(2) of the 1933 Act
exempts securities sold by the
-- 14 --
<PAGE> 20
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
issuer in private transactions from the 1933 Act's registration requirements.
Because Section 4(2) paper is a restricted security, investing in Section
4(2) paper could have the effect of increasing a Fund's illiquidity to the
extent that buyers are unwilling to purchase the securities.
The following restrictions are fundamental policies and cannot be changed
without shareholder vote.
Each Fund:
1. MAY INVEST UP TO 5% OF ITS ASSETS IN THE SECURITIES OF ANY ONE ISSUER OTHER
THAN U.S. GOVERNMENT SECURITIES (EXCEPT, WITH RESPECT TO THE TAX-FREE MONEY
FUND ONLY, THAT UP TO 25% OF THAT FUND'S ASSETS MAY BE INVESTED WITHOUT
REGARD TO THE 5% LIMITATION, WHICH 25% DOES NOT INCLUDE SECURITIES ISSUED BY
OTHER INVESTMENT COMPANIES).
2. MAY INVEST UP TO 25% OF ITS TOTAL ASSETS IN ANY ONE INDUSTRY (INCLUDING
SECURITIES ISSUED BY FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS),
PROVIDED, HOWEVER, THAT THIS LIMITATION DOES NOT APPLY TO U.S. GOVERNMENT
SECURITIES, OR TO CERTIFICATES OF DEPOSIT OR BANKERS' ACCEPTANCES ISSUED BY
DOMESTIC BANKS. The Tax-Free Money Fund will not invest more than 25% of its
total assets to be invested in any one industry, or in municipal obligations
and other permitted investments, the interest on which is payable from
revenues on similar types of projects.
3. MAY BORROW MONEY FOR TEMPORARY OR EMERGENCY PURPOSES (BUT NOT FOR INVESTMENT
PURPOSES) FROM A BANK OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST RATE
NOT GREATER THAN THAT AVAILABLE FROM COMMERCIAL BANKS. A Fund will not borrow
amounts in excess of 20% of total assets and will not purchase securities if
borrowings equal to or greater than 5% of total assets are outstanding. Each
Fund intends to primarily exercise its borrowing authority to meet
shareholder redemptions under circumstances where redemptions exceed
available cash.
-- 15 --
<PAGE> 21
- -------------------------------------------------------------------------
THE TRUST AND EACH FUND'S
INVESTMENT POLICIES (Continued)
In addition to the fundamental policy set forth in number 1, above, the Tax-Free
Money Fund is subject to a more restrictive non-fundamental policy pursuant to
which it may not invest more than 5% of its total assets in the securities of
any one issuer other than U.S. Government securities. Notwithstanding this
policy, the Tax-Free Money Fund may invest up to 25% of its total assets in the
first tier securities of a single issuer for up to three business days after
purchase. First tier securities are securities (1) rated in the highest
short-term category by two nationally recognized statistical rating
organizations ("NRSROs"); (2) rated in the highest short-term rating category by
a single NRSRO if only that NRSRO has assigned the securities a short-term
rating; or (3) unrated, but determined by SAM to be of comparable quality.
For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Trust's Statement of Additional Information.
RISK FACTORS
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that either Fund will maintain a
stable $1.00 share price. The principal risk associated with an investment in a
mutual fund like either of the Funds is that they may experience a delay or
failure in principal or interest payments at maturity of one or more of the
portfolio securities. It is possible that a major change in interest rates or a
default on one or more of the Funds' investments could cause their share prices
(and the value of your investment) to fall. Both Funds' yield will fluctuate
with general interest rates, and the value of the Funds' portfolios will
fluctuate inversely with changes in interest rates. With respect to the Tax-Free
Money Fund, the ability of issuers of municipal obligations to make principal
and interest payments is dependent on the receipt of revenue and subject to
bankruptcy and insolvency laws.
-- 16 --
<PAGE> 22
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INFORMATION ABOUT SHARE OWNERSHIP
AND COMPANIES THAT PROVIDE SERVICES
TO THE TRUST
Each Fund is a series of SAFECO Money Market Trust, a Delaware business trust
that issues an unlimited number of shares of beneficial interest. The Board of
Trustees may establish additional series of shares of the Trust without approval
of shareholders.
Shares of each Fund represent equal proportionate interests in the assets of
that Fund only and have identical voting, dividend, redemption, liquidation and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any additional
shares.
The Trust does not intend to hold annual meetings of shareholders of the Funds.
The Trustees will call a special meeting of shareholders of a Fund only if
required under the Investment Company Act of 1940 or in their discretion or upon
the written request of holders of 10% or more of the outstanding shares of the
Fund entitled to vote.
Under Delaware law, the shareholders of the Funds will not be personally liable
for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations. To
guard against the risk that Delaware law might not be applied in other states,
the Trust Instrument requires that every written obligation of the Trust or Fund
contain a statement that such obligation may be enforced only against the assets
of the Trust or Fund.
SAM is the investment adviser for each Fund under an agreement with the Trust.
Under the agreement, SAM is responsible for the management of the Trust's and
each Fund's business affairs. Each Fund pays SAM an annual management fee based
on a percentage of that Fund's net assets ascertained each business day and paid
monthly in accordance with the schedules below. A reduction in the fees paid by
a Fund occurs only when that Fund's net assets reach the dollar amounts of
-- 17 --
<PAGE> 23
- -------------------------------------------------------------------------
INFORMATION ABOUT SHARE OWNERSHIP
AND COMPANIES THAT PROVIDE SERVICES
TO THE TRUST (Continued)
the break points and applies only to the assets that fall within the specified
range:
MONEY FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .5 of 1%
$250,000,001 -- $500,000,000 .4 of 1%
$500,000,001 -- $750,000,000 .3 of 1%
Over $750,000,000 .25 of 1%
</TABLE>
TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $100,000,000 .5 of 1%
$100,000,001 -- $250,000,000 .4 of 1%
$250,000,001 -- $500,000,000 .3 of 1%
Over $500,000,000 .2 of 1%
</TABLE>
For the year ended March 31, 1996, the ratios of expenses to average net assets
for the Money and Tax-Free Money Funds were .78% and .65%, respectively, and the
ratios of the net compensation paid to SAM to the average net assets of the
Money and Tax-Free Money Funds were .50% and .50%, respectively.
The distributor of each Fund's shares under an agreement with the Trust is
SAFECO Securities, Inc. ("SAFECO Securities"), a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. SAFECO Securities receives no compensation from the
Trust or the Funds for its services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for each Fund under an agreement with the Trust is SAFECO Services
Corporation ("SAFECO Services"). SAFECO Services receives a fee from each Fund
for every shareholder account held in the Fund. SAFECO Services may enter into
subcontracts with registered broker-dealers, third party administrators and
other qualified service providers
-- 18 --
<PAGE> 24
- -------------------------------------------------------------------------
INFORMATION ABOUT SHARE OWNERSHIP
AND COMPANIES THAT PROVIDE SERVICES
TO THE TRUST (Continued)
that generally perform shareholder, administrative, and/or accounting services
which would otherwise be provided by SAFECO Services. Fees incurred by a Fund
for these services will not exceed the transfer agency fee payable to SAFECO
Services. Any distribution expenses associated with these arrangements will be
borne by SAM.
SAM, SAFECO Securities and SAFECO Services are wholly-owned subsidiaries of
SAFECO Corporation (a holding company whose primary subsidiaries are engaged in
the insurance and related financial services businesses) and are each located at
SAFECO Plaza, Seattle, Washington 98185.
PERFORMANCE INFORMATION
Each Fund's yield, effective yield and tax-equivalent yield may be quoted in
advertisements.
Yield is the annualization on a 365-day basis of either Fund's net income over a
7-day period. Effective yield is the annualization, on a 365-day basis, of
either Fund's net income over a 7-day period with dividends reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. Tax-equivalent yield is, given
an investor's tax bracket, the taxable yield necessary to equal the Tax-Free
Money Fund's yield on an after-tax basis over the same period of time.
From time to time, the Funds may advertise rankings. Rankings are calculated by
independent companies that monitor mutual fund performance (e.g., CDA Investment
Technologies, Lipper Analytical Services, Inc., and Morningstar, Inc.) and are
reported periodically in national financial publications such as Barron's,
Business Week, Forbes, Investor's Business Daily, Money Magazine, and The Wall
Street Journal. In addition, non-standardized performance figures may accompany
the standardized figures described above. Non-standardized figures may
-- 19 --
<PAGE> 25
- -------------------------------------------------------------------------
PERFORMANCE INFORMATION (Continued)
be calculated in a variety of ways, including, but not necessarily limited to,
different time periods and different initial investment amounts. Each Fund may
also compare its performance to the performances of relevant indices.
Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results. Each
Fund's yield will fluctuate.
FUND DISTRIBUTIONS AND HOW
THEY ARE TAXED
DIVIDEND AND OTHER DISTRIBUTIONS
Each Fund declares an income dividend each business day based on net investment
income; i.e., all of its interest income earned on the securities in its
portfolio less all of its expenses. Income dividends are payable on the last
business day of each month. Your shares become entitled to declared dividends on
the next business day after shares are purchased in your account. If you request
redemption of all your shares at any time during the month, you will receive all
declared income dividends through the date of redemption together with the
proceeds of the redemption.
A shareholder's dividends and other distributions are reinvested in additional
shares of the distributing Fund at net asset value per share generally
determined as of the close of business on the ex-distribution date, unless the
shareholder elects in writing to receive dividends or other distributions in
cash and that election is provided to SAFECO Services at the address on the
Prospectus cover. An election to receive cash will remain in effect until
revoked by written notice by the shareholder in the same manner as the
distribution election. For retirement accounts, all dividends and other
distributions declared by the Money Fund must be reinvested in additional shares
of the Money Fund.
-- 20 --
<PAGE> 26
- -------------------------------------------------------------------------
FUND DISTRIBUTIONS AND HOW
THEY ARE TAXED (Continued)
TAXES
Each Fund intends to continue to qualify for favorable tax treatment as a
regulated investment company under the Internal Revenue Code. By so qualifying,
each Fund will not be subject to federal income taxes to the extent it
distributes its net investment income and realized capital gains to its
shareholders.
TAX STATUS OF DIVIDENDS
Each Fund will inform you as to the amount and nature of dividends and other
distributions to your account. Dividends and other distributions declared in
December, but received by shareholders in January, are taxable to shareholders
in the year in which declared.
Distributions you receive from the Money Fund will be taxable as dividend income
whether received in cash or in additional Money Fund shares. Distributions you
receive from the Tax-Free Money Fund will normally be exempt from federal income
tax. However, from time to time, a portion of the Tax-Free Money Fund's assets
may be temporarily invested in fixed-income obligations, the interest on which
when distributed to the Fund's shareholders will be subject to federal income
taxes. Substantially all dividends of the Tax-Free Money Fund are expected to be
exempt from federal income tax, but may be subject to state or local taxes.
TAX WITHHOLDING INFORMATION
You will be asked to certify on your account application or on a separate form
that the taxpayer identification number you provide is correct and that you are
not subject to, or are exempt from, backup withholding for previous
underreporting to the Internal Revenue Service.
Retirement plan distributions may be subject to federal income tax withholding.
However, you may elect to not have any distributions withheld by checking the
appropriate box on the Redemption Request form or by instructing SAFECO Services
in writing at the address on the Prospectus cover.
-- 21 --
<PAGE> 27
- -------------------------------------------------------------------------
FUND DISTRIBUTIONS AND HOW
THEY ARE TAXED (Continued)
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders; see the
Trust's Statement of Additional Information for a further discussion. There may
be other federal, state or local tax considerations applicable to a particular
investor. You therefore are urged to consult your tax adviser.
TAX-DEFERRED RETIREMENT PLANS
SAFECO Services offers a variety of tax-deferred retirement plans for
individuals, businesses and non-profit organizations. An account may be
established under one of the following plans which allow you to defer investment
income from federal income tax while you save for retirement. Many of the SAFECO
Funds may be used as an investment vehicle for these plans.
INDIVIDUAL RETIREMENT ACCOUNT (IRAS). IRAs are tax-deferred retirement accounts
for anyone under age 70 1/2 with earned income. The maximum annual contribution
is $2,000 per person ($2,250 for you and a non-working spouse). An annual
custodial fee will be charged for any part of a calendar year in which you have
an IRA investment in a Fund.
SIMPLIFIED EMPLOYEE PENSION IRA (SEP-IRAS). SEP-IRAs are easily administered
retirement plans for small businesses and self-employed individuals. Currently,
annual contributions of up to $22,500 may be made to SEP-IRA accounts. SEP-IRAs
have the same investment minimums and custodial fees as regular IRAs.
403(B) PLANS. 403(b) plans are retirement plans for tax-exempt organizations and
school systems to which employers and employees both may contribute. Minimum
investment amounts are negotiable.
401(K) PLANS. 401(k) plans allow employers and employees to make tax-deductible
contributions to a retirement account. SAFECO Services offers a low-cost
administration package that
-- 22 --
<PAGE> 28
- -------------------------------------------------------------------------
TAX-DEFERRED RETIREMENT PLANS (Continued)
includes a prototype plan, record keeping, testing and employee communications.
Minimum investment amounts are negotiable.
PROFIT-SHARING AND MONEY PURCHASE PENSION PLANS. These plans allow corporations,
partnerships and self-employed persons to make annual, tax-deductible
contributions to a retirement account for each person covered by a plan. A plan
may be adopted individually or paired with another plan to maximize
contributions. SAFECO Services offers an administration package for these plans.
Minimum investment amounts are negotiable.
THE ASSETS OF THESE PLANS MAY NOT BE INVESTED IN THE TAX-FREE MONEY FUND.
For information about these tax-deferred retirement plans, please call
1-800-278-1985.
ACCOUNT STATEMENTS
Periodically, you will receive an account statement showing your current fund
holdings and transactions affecting your account. Confirmation statements will
be sent to you confirming each transaction that affects your account including
investments, redemptions and exchanges. Dividend distributions are confirmed at
the end of each quarter. Please review the information on each confirmation
statement for accuracy immediately upon receipt. If you do not notify us within
30 days of any processing error, SAFECO Services will consider the transactions
listed on the confirmation statement to be correct.
ACCOUNT CHANGES AND SIGNATURE REQUIREMENTS
Changes to your account registration or the services you have selected must be
in writing and signed by the persons specified on your account application as
having authority to make changes. Send written changes to SAFECO Services at the
address on the Prospectus cover. Certain changes to the
-- 23 --
<PAGE> 29
- -------------------------------------------------------------------------
ACCOUNT CHANGES AND SIGNATURE REQUIREMENTS (Continued)
Automatic Investment Method and Systematic Withdrawal Plan can be made by
telephone if you have previously selected single signature authorization for
your account.
You must specify on your account application the number of signatures required
to authorize redemptions and exchanges and to change account registration or the
services selected. Authorizing fewer than all account owners to take such
actions has important implications. For example, one owner of a joint tenant
account could redeem money or change the account registration to single
ownership without the co-owner's signature. If you do not indicate otherwise on
the application, the signatures of all account owners will be required to effect
a transaction. Your selection of fewer than all account owner signatures may be
revoked by any account owner who writes to SAFECO Services at the address on the
Prospectus cover.
SAFECO Services may require a signature guarantee for a signature that cannot be
verified by comparison to the signature(s) on your account application. A
signature guarantee may be obtained from most financial institutions, including
banks, savings and loans and broker-dealers.
SHARE PRICE CALCULATION
The net asset value per share ("NAV") of each Fund is computed as of the close
of regular trading on the New York Stock Exchange (normally 1:00 p.m. Pacific
time) each day that Exchange is open for trading. The NAV is calculated by
subtracting a Fund's liabilities from its assets and dividing the result by the
number of outstanding shares. Each Fund intends to maintain a NAV of $1.00.
Like most money market funds, each Fund values the securities it owns on the
basis of amortized cost. Each Fund may use amortized cost valuation as long as
the Board of Trustees determines that it fairly reflects market value. Amortized
cost valuation involves valuing a security at its cost and adding or
-- 24 --
<PAGE> 30
- -------------------------------------------------------------------------
SHARE PRICE CALCULATION
(Continued)
subtracting, ratably to maturity, any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the security. This
method minimizes the effect of changes in a security's market value and helps
each Fund maintain a stable $1.00 share price.
HOW TO PURCHASE SHARES
A completed and signed application must accompany payment for an initial
purchase by mail and in all cases is necessary before a redemption can be made.
Specific applications for retirement accounts must be completed and signed
before any retirement account can be set up (Money Fund only). The Funds only
accept funds drawn in U.S. dollars and payable through a U.S. bank. The Funds do
not accept currency. The Funds issue shares in uncertificated form. Certificates
for whole shares will be issued without charge only upon written request. You
will be required to post a bond to replace missing certificates.
THE FUNDS HAVE THE RIGHT TO REFUSE ANY INVESTMENT.
INITIAL PURCHASES
MINIMUM INITIAL INVESTMENT $1,000.
IRA $250 (MONEY FUND ONLY)
Minimum initial investments are negotiable for retirement accounts other than
IRAs (Money Fund Only).
No minimum initial investment is required to establish the Automatic Investment
Method or Payroll Deduction Plan.
BY WRITTEN REQUEST
Send a check or money order made payable to the applicable Fund and a completed
and signed application to the address on the Prospectus cover.
BY WIRE
Call toll-free 1-800-624-5711 or, in Seattle, 206-545-7319 for instructions.
-- 25 --
<PAGE> 31
- -------------------------------------------------------------------------
HOW TO PURCHASE SHARES
(Continued)
Not available for retirement accounts.
ADDITIONAL PURCHASES
MINIMUM ADDITIONAL INVESTMENTS $100 (EXCEPT DIVIDEND
REINVESTMENTS).
Minimum additional investments are negotiable for retirement plans other than
IRAs (Money Fund Only).
BY WRITTEN REQUEST
Send a check or money order payable to the applicable Fund to the address on the
Prospectus cover. Please specify your account number.
BY WIRE
Instruct your bank to send wires to U.S. Bank of Washington, N.A., Seattle,
Washington, ABA #1250-0010-5, Account #0017-086083.
To ensure timely credit to your account, ask your bank to include the following
information in its wire to U.S. Bank of Washington, N.A.:
- - SAFECO Fund Name
- - SAFECO account number
- - Name of the registered owner(s) of the SAFECO account
Delays of purchases caused by inadequate wire instructions are not the
responsibility of the Funds or SAFECO Services.
Your bank may charge a fee for wire services.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 206-545-7319. You must have previously
selected this service on your account application or by written request. Not
available to open a new account or for retirement accounts.
Maximum purchase $100,000 per day, minimum purchase $100 per day.
-- 26 --
<PAGE> 32
- -------------------------------------------------------------------------
HOW TO PURCHASE SHARES
(Continued)
Monies will be transferred from your predesignated bank account to your existing
Fund account. Your bank may charge a fee if monies are wired to your Fund
account. Please allow 15 business days after selecting this service for it to be
available for use. Telephone purchases may be unavailable from some bank
accounts and non-bank financial institutions. Please read "Telephone
Transactions" on page 32 for important information.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 33 for
important information.
SHARE PURCHASE PRICE
You will buy full and fractional shares at the NAV next computed after your
check, money order or wire is received. For telephone purchase orders, you will
receive the price per share calculated on the day monies are received from your
bank account. Each Fund intends to maintain a NAV of $1.00. See "Share Price
Calculation" on page 24 for more information.
HOW TO REDEEM SHARES
BY WRITTEN REQUEST
Shares may be redeemed by sending a letter that specifies your account number,
the Fund's name and the number of shares or dollar amount you wish to redeem.
The request should be sent to the address on the Prospectus cover. The request
must be signed by the appropriate number of owners, and in some cases a
signature guarantee may be required. In all cases, SAFECO Services must have a
signed and completed application on file before a redemption can be made. See
"Account Changes and Signature Requirements" on page 23 for more information.
Retirement account shareholders of the Money Fund must specify whether or not
they elect 10% federal income tax withholding from a distribution.
-- 27 --
<PAGE> 33
- -------------------------------------------------------------------------
HOW TO REDEEM SHARES
(Continued)
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 206-545-7319. You must have previously
selected this service on your account application or by written request.
Telephone redemptions are not available for retirement accounts or shares issued
in certificate form. You may request that redemption proceeds be sent directly
to your predesignated bank or mailed to your account address of record.
Please read "Telephone Transactions" on page 32 for important information.
BY REDEMPTION CHECK
SAFECO Services will send to you, free of charge, redemption checks (drafts)
payable through U.S. Bank of Washington, N.A. Redemption checks are not
available to IRA shareholders or for shares issued in certificate form.
Redemption checks may be made payable to any person or entity and must contain
the proper number of signatures. Redemption checks must be for $500 or more.
Neither the Funds nor SAFECO Services will be liable for payment of postdated
redemption checks. See "Account Changes and Signature Requirements" on page 23
for further information.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 33 for
important information.
PLEASE NOTE THE FOLLOWING:
- - If your shares were purchased by wire, redemption proceeds will be available
immediately. If shares were purchased by means other than wire, each Fund
reserves the right to hold the proceeds of your redemption for up to 15
business days after investment or until such time as the Fund has received
assurance that your investment will be honored by the bank on which it was
drawn, whichever occurs first.
-- 28 --
<PAGE> 34
- -------------------------------------------------------------------------
HOW TO REDEEM SHARES
(Continued)
- - SAFECO Services charges a $10 fee to wire redemption proceeds. In addition,
some banks may charge a fee to receive wires.
- - If shares are issued in certificate form, the certificates must accompany a
redemption request and be duly endorsed.
- - Under some circumstances (e.g., a change in corporate officer or death of an
owner), SAFECO Services may require certified copies of supporting documents
before a redemption will be made.
SHARE REDEMPTION PRICE AND PROCESSING
Your shares will be redeemed at the NAV next calculated after receipt of your
request that meets the redemption requirements of the Funds. Redemption proceeds
will normally be sent on the business day following receipt of your redemption
request. If your redemption request is received after the close of trading on
the New York Stock Exchange (normally 1:00 p.m. Pacific time), proceeds will
normally be sent on the second business day following receipt. Each Fund,
however, reserves the right to postpone payment of redemption proceeds for up to
seven days if making immediate payment could adversely affect its portfolio. In
addition, redemptions may be suspended or payment dates postponed if the New
York Stock Exchange is closed, its trading is restricted or the Securities and
Exchange Commission declares an emergency.
Due to the high cost of maintaining small accounts, your account may be closed
upon 60 days' written notice if at the time of any redemption or exchange the
total value falls below $100. Your shares will be redeemed at the share price
calculated on the day your account is closed.
-- 29 --
<PAGE> 35
- -------------------------------------------------------------------------
HOW TO SYSTEMATICALLY PURCHASE OR REDEEM SHARES
Call 1-800-426-6730 or, in Seattle, 206-545-5530 for more information.
AUTOMATIC INVESTMENT METHOD (AIM)
AIM enables you to make regular monthly investments by authorizing SAFECO
Services to withdraw a specific amount (minimum of $100 per withdrawal per Fund)
from your bank account and invest the amount in either Fund.
PAYROLL DEDUCTION PLAN
An employer or other entity using group billing may establish a
self-administered payroll deduction plan in either Fund. Payroll deduction
amounts are negotiable.
SYSTEMATIC WITHDRAWAL PLAN
This plan enables you to receive a portion of your investment on a monthly
basis. A Fund automatically redeems shares in your account and sends you a
withdrawal check (minimum amount $50 per Fund) on or about the fifth business
day of every month.
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER
An exchange is the redemption of shares of one SAFECO Fund and the purchase of
shares of another SAFECO Fund in accounts that are identically registered; i.e.,
have the same registered owners and account number. For income tax purposes,
depending on the cost or other basis of the shares you exchange, you may realize
a capital gain or loss when you make an exchange. You may purchase shares of a
SAFECO Fund by exchange only if it is registered for sale in the state where you
reside. Before exchanging into a SAFECO Fund, please read its current
Prospectus.
BY WRITTEN REQUEST
Shares may be exchanged by writing SAFECO Services at the address on the
Prospectus cover. Please designate the SAFECO
-- 30 --
<PAGE> 36
- -------------------------------------------------------------------------
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER (Continued)
Funds you wish to exchange out of and into as well as your account number. The
request must be signed by the number of owners designated on your account
application, and in some cases a signature guarantee may be required. See
"Account Changes and Signature Requirements" on page 23 for more information.
If the shares you want to exchange are evidenced by certificates, the
certificates must accompany the request and be duly endorsed.
Under some circumstances (e.g., a change in corporate officer or death of an
owner), SAFECO Services may require certified copies of supporting documents
before an exchange can be made.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 206-545-7319.
Exchanges by telephone must be in amounts of $1,000 or more. Telephone exchanges
are not available for shares issued in certificate form. Please read "Telephone
Transactions" on page 32 for important information.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 33 for
important information.
LIMITATIONS
Each Fund reserves the right to refuse exchange purchases by any person or group
if, in SAM's judgment, the Fund would be unable to invest the money effectively
in accordance with that Fund's investment objective and policies or would
otherwise potentially be adversely affected.
The exchange privilege is not intended to provide a means for frequent trading
in response to short-term fluctuations in the market. Excessive exchange
transactions can be disadvantageous to other shareholders and the Funds. Your
exchanges may be restricted or refused if a Fund receives or anticipates
-- 31 --
<PAGE> 37
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HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER (Continued)
simultaneous orders affecting significant portions of that Fund's assets, for
example, a pattern of exchanges that coincides with a "market-timing" strategy.
Although a Fund will attempt to give you prior notice whenever it is reasonably
able to do so, it may impose the above restrictions at any time.
SHARE EXCHANGE PRICE AND PROCESSING
The shares of the SAFECO Fund you are exchanging from will be redeemed at the
price next computed after your exchange request is received. Normally the
purchase of the SAFECO Fund you are exchanging into is executed on the same day.
However, each Fund reserves the right to delay the payment of proceeds and,
hence, the purchase in an exchange for up to seven days if making immediate
payment could adversely affect the portfolio of the Fund whose shares are being
redeemed. The exchange privilege may be modified or terminated with respect to a
Fund at any time, upon at least 60 days' notice to shareholders.
TELEPHONE TRANSACTIONS
To purchase, redeem or exchange shares by telephone, call 1-800-624-5711 or, in
Seattle, 206-545-7319 between 5:30 a.m. and 7:00 p.m. Pacific time, Monday
through Friday, except certain holidays. All telephone calls are tape-recorded
for your protection. During times of drastic or unusual market volatility, it
may be difficult for you to exercise the telephone transaction privileges.
To use the telephone purchase, redemption and exchange privileges, you must have
previously selected these services either on your account application or by
having submitted a request in writing to SAFECO Services at the address on the
Prospectus cover. Purchasing, redeeming or exchanging shares by telephone allows
the Funds and SAFECO Services to accept telephone instructions from an account
owner or a person preauthorized in writing by an account owner.
Each Fund and SAFECO Services reserve the right to refuse any telephone
transaction when a Fund or SAFECO Services, in its
-- 32 --
<PAGE> 38
- -------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
(Continued)
sole discretion, is unable to confirm to its satisfaction that a caller is the
account owner or a person preauthorized by the account owner.
The Funds and SAFECO Services will not be liable for the authenticity of
instructions received by telephone that a Fund or SAFECO Services, in its
discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Fund or SAFECO Services follows reasonable procedures
to identify the caller. The shareholder will bear the risk of any resulting
loss. The Funds and SAFECO Services will follow certain procedures designed to
make sure that telephone instructions are genuine. These procedures may include
requiring the account owner to select the telephone privilege in writing prior
to first use and to designate persons authorized to deliver telephone
instructions. SAFECO Services tape-records telephone transactions and may
request certain identifying information from the caller.
The telephone transaction privilege may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or SAFECO Services.
TRANSACTIONS THROUGH REGISTERED INVESTMENT ADVISERS
SAFECO Services may accept instructions for share transactions and account
information changes from investment advisers who are acting on behalf of
shareholders, provided that the adviser is registered under the Investment
Advisers Act of 1940, has a signed agreement with SAFECO Services and has an
executed power of attorney from the shareholder, in an acceptable form, on file
with SAFECO Services. Advisers may charge a fee to shareholders for their
services. The Trust, the Funds and SAFECO Services have no control over, or
involvement with, the fees charged by advisers for such services. Advisers are
responsible for the prompt forwarding of instructions on shareholders' accounts
to SAFECO Services and are bound by the terms of this Prospectus. The Trust, the
Funds, SAFECO
-- 33 --
<PAGE> 39
- -------------------------------------------------------------------------
TRANSACTIONS THROUGH REGISTERED INVESTMENT ADVISERS (Continued)
Services and their affiliated companies will not be responsible to any
shareholder for any losses, liabilities, costs or expenses associated with any
investment advice or recommendation provided by the adviser to the shareholder
or for accepting and following any instructions from such adviser on the
shareholder's account(s).
-- 34 --
<PAGE> 40
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
SAFECO FAMILY OF FUNDS
STABILITY OF PRINCIPAL
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
TAXABLE BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
TAX-FREE BOND INCOME
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
HIGH CURRENT INCOME WITH LONG-TERM GROWTH
SAFECO Income Fund
LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
SAFECO International Stock Fund
SAFECO Balanced Fund
SAFECO Small Company Stock Fund
FOR MORE COMPLETE INFORMATION ON ANY SAFECO MUTUAL FUND, INCLUDING MANAGEMENT
FEES AND EXPENSES, CALL OR WRITE FOR A FREE PROSPECTUS. PLEASE READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
-- 35 --
<PAGE> 41
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(This page left blank intentionally.)
-- 36 --
<PAGE> 42
- -------------------------------------------------------------------------
To request a Prospectus:
Nationwide: 1-800-426-6730
Seattle: 206-545-5530
For 24-hour performance figures:
Nationwide: 1-800-835-4391
Seattle: 206-545-5113
For account information or telephone transactions:
Nationwide: 1-800-624-5711
Seattle: 206-545-7319
TTY/TDD Service: 1-800-438-8718
ALL TELEPHONE CALLS ARE TAPE-RECORDED FOR YOUR PROTECTION.
Mailing Address:
SAFECO MUTUAL FUNDS
P.O. Box 34890
Seattle, Washington 98124-1890
EXPRESS/OVERNIGHT MAIL:
SAFECO Mutual Funds
4333 Brooklyn Avenue NE
Seattle, Washington 98105
Internet Address:
http:\\networth.galt.com\safeco
SAFECO Securities, Inc.
Distributor
PROSPECTUS
July 19, 1996
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
No-Load Funds
-- 38 --
<PAGE> 43
SAFECO MONEY MARKET TRUST:
SAFECO MONEY MARKET FUND
SAFECO TAX-FREE MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the SAFECO Money Market Fund and SAFECO
Tax-Free Money Market Fund. A copy of the Prospectus may be obtained by
writing SAFECO Mutual Funds, P.O. Box 34890, Seattle, Washington 98124-1890, or
by calling TOLL FREE:
Nationwide
1-800-426-6730
Seattle
206-545-5530
The date of the most current Prospectus of the Funds to which this Statement of
Additional Information relates is July 19, 1996.
The date of this Statement of Additional Information is July 19, 1996.
______________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Overview of Investment Policies 2
Investment Policies 2
Additional Investment Information 8 Additional Information 13
Additional Tax Information 11 on Dividends
Regarding the Tax-Free Trustees and Officers 13
Money Fund Investment Advisory and
Additional Information On 11 Other Services 16
Calculation of Net Asset Brokerage Practices 19
Value Per Share Redemption in Kind 19
Additional Performance 12 Financial Statements 20
Information Description of Ratings 20
</TABLE>
1
<PAGE> 44
OVERVIEW OF INVESTMENT POLICIES
SAFECO Money Market Fund ("Money Fund") and SAFECO Tax-Free Money Market Fund
("Tax-Free Money Fund") (together the "Funds") are each a series of the SAFECO
Money Market Trust ("Trust"). The investment policies of each Fund are
described in the Prospectus and this Statement of Additional Information.
These policies state the investment practices that the Funds will follow, in
some cases limiting investments to a certain percentage of assets. The types
of securities a Fund may purchase are also disclosed in the Prospectus. If a
policy's percentage limitation is adhered to immediately after and as a result
of the investment, a later increase or decrease in percentage beyond the
specified limit resulting from a change in values, net assets or other
circumstances will not be considered in determining whether a Fund complies
with the applicable limitation. With respect to the Tax-Free Money Fund's
investment restrictions, the entity that has the ultimate responsibility for
the payment of interest and principal on a particular security is deemed the
issuer for purposes of the investment policies.
Each Fund's fundamental policies may not be changed without the approval of a
majority of its outstanding voting securities. For purposes of such approval,
the vote of a majority of the outstanding voting securities of a Fund means the
vote, at a meeting of the shareholders of such Fund duly called, (i) of 67% or
more of the voting securities present at such meeting if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy, or (ii) of more than 50% of the outstanding voting securities, whichever
is less.
Non-fundamental investment policies may be changed by the Trust's Board of
Trustees without shareholder approval.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES OF THE MONEY FUND
The Money Fund has adopted the following fundamental policies. The Money Fund
will NOT:
1. Purchase securities of any issuer, other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities, if, as a
result, more than five percent (5%) of the value of the Money Fund's assets
would be invested in securities of such issuer;
2. Purchase more than ten percent (10%) of any class of securities of any
issuer. All issues of debt securities of any issuer are considered as one
class;
3. Concentrate more than twenty-five percent (25%) of the value of its total
assets in any one industry including securities issued by foreign banks and
foreign branches of U.S. banks; provided, however, that this limitation
does not apply to obligations issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities, or to certificates of deposit or
bankers' acceptances issued by domestic banks;
4. Invest more than five percent (5%) of the Money Fund's total assets in
securities of issuers that with their predecessors have a record
2
<PAGE> 45
of less than three years' continuous operation;
5. Invest more than five percent (5%) of the Money Fund's total assets in
securities restricted as to disposition under the federal securities laws;
6. Invest more than ten percent (10%) of the Money Fund's total assets in time
deposits, repurchase agreements maturing in more than seven days and other
non-negotiable instruments;
7. Enter into repurchase agreements if, as a result thereof, more than ten
percent (10%) of the Fund's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing in more than
seven days;
8. Make loans to others, except through the purchase of publicly distributed
debt obligations or repurchase agreements;
9. Borrow money, except from a bank or affiliates of SAFECO Corporation at an
interest rate not greater than that available to the Money Fund from
commercial banks, for temporary or emergency purposes and not for
investment purposes, and then only in an amount not exceeding twenty
percent (20%) of its total assets (including borrowings) less liabilities
(other than borrowings) immediately after such borrowing. The Money Fund
will not purchase securities if borrowings equal to or greater than five
percent (5%) of the Fund's total assets are outstanding;
10. Make short sales of securities or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions,
or purchase or sell any put or call options or combinations thereof;
11. Pledge, mortgage or hypothecate, or in any other manner transfer as
security for indebtedness any security owned by the Money Fund, except as
may be necessary in connection with permissible borrowings mentioned in
paragraph 9 above, and then such pledging, mortgaging or hypothecating may
not exceed fifteen percent (15%) of the Money Fund's total assets, taken at
cost; provided, however, that as a matter of operating policy the Money
Fund will limit any such pledging, mortgaging or hypothecating to ten
percent (10%) of its net assets, taken at market, in order to comply with
certain state investment restrictions;
12. Purchase or retain securities of any issuer if any of the officers or
directors of the Money Fund or its investment adviser owns beneficially
more than one-half of one percent (.5%) of the securities of such issuer
and together own more than five percent (5%) of the securities of such
issuer;
13. Invest in commodities or commodity futures contracts or in real estate,
although the Money Fund may invest in securities which are secured by real
estate and securities of issuers that invest or deal in real estate;
14. Invest in interests in oil, gas or other mineral exploration or
3
<PAGE> 46
development programs, although it may invest in securities of issuers that
invest in or sponsor such programs;
15. Purchase securities of other investment companies;
16. Underwrite securities issued by others except to the extent the Money Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities; or
17. Issue or sell any senior security, except that this restriction shall not
be construed to prohibit the Money Fund from borrowing funds (i) on a
temporary basis as permitted by Section 18(g) of the Investment Company Act
of 1940, or (ii) from any bank provided, that immediately after such
borrowing, there is an asset coverage of at least three hundred percent
(300%) for all such borrowings and provided, further, that in the event
that such asset coverage shall at any time fall below three hundred percent
(300%), the Money Fund shall, within three (3) days thereafter (not
including Sundays and holidays), or such longer period as the Securities
and Exchange Commission may prescribe by rules and regulations, reduce the
amount of its borrowings to an extent that the asset coverage of such
borrowings shall be at least three hundred percent (300%) (for purposes of
this restriction, the terms "senior security" and "asset coverage" shall be
understood to have the meaning assigned to those terms in Section 18 of the
Investment Company Act of 1940).
NON-FUNDAMENTAL INVESTMENT POLICIES OF THE MONEY FUND
The Money Fund has adopted the following non-fundamental policies with respect
to its investment activities:
1. The Money Fund will not invest in securities with unlimited liability;
e.g., securities the holder of which may be assessed for amounts in
addition to the subscription or other price paid for the security.
2. The Money Fund will not buy or sell foreign currency, except as may be
necessary to convert the proceeds of the sale of foreign securities in the
Fund's portfolio into U.S. dollars.
3. The Money Fund may invest up to five percent (5%) of its total assets in
restricted securities eligible for resale under Rule 144A ("Rule 144A
securities") or Section 4(2) of the Securities Act of 1933 ("Section 4(2)
securities"), provided that SAFECO Asset Management Company ("SAM"), the
Fund's investment advisor, has determined that such securities are liquid
under guidelines adopted by the Board of Trustees.
FUNDAMENTAL INVESTMENT POLICIES OF THE TAX-FREE MONEY FUND
The Tax-Free Money Fund has adopted the following fundamental policies. The
Tax-Free Money Fund may NOT:
1. Purchase the securities of any issuer (except the U.S. Government, its
4
<PAGE> 47
agencies or instrumentalities), if as a result more than five percent (5%)
of the value of its total assets would be invested in the securities of
such issuer, except that up to twenty-five percent (25%) of the value of
the Tax-Free Money Fund's assets (which twenty-five percent (25%) shall not
include securities issued by another investment company) may be invested
without regard to this five percent (5%) limitation;
2. Underwrite any issue of securities, except to the extent that the pur-
chase of municipal obligations or other permitted investments directly from
the issuer in accordance with the Tax-Free Money Fund's investment
objective, policies and restrictions and the later disposition thereof may
be deemed to be underwriting;
3. Purchase or sell real estate, but this shall not prevent the Tax-Free Money
Fund from investing in municipal obligations or other permitted investments
secured by real estate or interests therein;
4. Purchase or retain for the Tax-Free Money Fund's portfolio the securities
of any issuer if, to the Tax-Free Money Fund's knowledge, the officers or
directors of the Tax-Free Money Fund, or its investment adviser, who
individually own more than one-half of one percent (.5%) of the
outstanding securities of such an issuer, together own more than five
percent (5%) of such outstanding securities;
5. Participate on a joint or a joint-and-several basis in any trading account
in securities, except that the Tax-Free Money Fund may, for the purpose of
seeking better net results on portfolio transactions or lower brokerage
commission rates, join with other transactions executed by the investment
adviser or the investment adviser's parent company or any subsidiary
thereof;
6. Purchase from, or sell portfolio securities to, any officer or director,
the Tax-Free Money Fund's investment adviser, principal underwriter or any
affiliates or subsidiaries thereof;
7. Borrow money, except from a bank or affiliates of SAFECO Corporation at an
interest rate not greater than that available to the Tax-Free Money Fund
from commercial banks, for temporary or emergency purposes and not for
investment purposes, and then only in an amount not exceeding twenty
percent (20%) of its total assets (including borrowings) less liabilities
(other than borrowings) immediately after such borrowing. The Tax-Free
Money Fund will not purchase securities if borrowings equal to or greater
than five percent (5%) of the Fund's total assets are outstanding;
8. Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph 7 above, it may pledge securities
having a market value at the time of pledge not exceeding ten percent (10%)
of the cost of the Tax-Free Money Fund's total assets;
9. Make loans, except through the purchase of a portion of an issue of debt
securities in accordance with the Tax-Free Money Fund's investment
objective, policies and restrictions, and through investments in qualified
repurchase agreements;
5
<PAGE> 48
10. Purchase or sell commodities or commodity contracts or invest in oil, gas
or other mineral exploration or development programs;
11. Make short sales of securities or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions;
12. Knowingly purchase or otherwise acquire any securities that are subject to
legal or contractual restrictions on resale or for which there is no
readily available market, except, however, the Tax-Free Money Fund may
invest up to ten percent (10%) of its net assets in qualified repurchase
agreements that mature in more than seven (7) days;
13. Purchase securities (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities), if as a result more
than twenty-five percent (25%) of the Tax-Free Money Fund's total assets
would be invested in any one industry (governmental issuers of special or
general tax-exempt securities are not considered part of any one industry);
14. Purchase an industrial development bond, if as a result of such purchase
more than five percent (5%) of the Tax-Free Money Fund's total assets would
be invested in industrial development bonds where the payment of principal
and interest is the responsibility of a company with less than three years'
operating history;
15. Issue or sell any senior security, except that this restriction shall not
be construed to prohibit the Tax-Free Money Fund from borrowing funds (i)
on a temporary basis as permitted by Section 18(g) of the Investment
Company Act of 1940, or (ii) from any bank, provided that immediately after
such borrowing, there is an "asset coverage" of at least three hundred
percent (300%) for all such borrowings and provided, further, that in the
event that such "asset coverage" shall at any time fall below three hundred
percent (300%), the Tax-Free Money Fund shall, within three (3) days
thereafter (not including Sundays and holidays), or such longer period as
the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to an extent that the
asset coverage of such borrowings shall be at least three hundred percent
(300%) (for purposes of this restriction, the terms "senior security" and
"asset coverage" shall have the meanings assigned to those terms in the
Investment Company Act of 1940);
16. Permit more than twenty-five (25%) of its total assets to be invested in
municipal obligations and other permitted investments, the interest on
which is payable from revenues on similar types of projects, such as:
sports, convention or trade show facilities; airports or mass
transportation; sewage or solid waste disposal facilities; or air or water
pollution control projects;
17. Write, purchase or sell puts, calls or combinations thereof; however, the
Tax-Free Money Fund may purchase municipal obligations subject to standby
commitments, variable rate demand notes or repurchase agreements in accord
with its investment objective and policies;
18. Permit more than twenty percent (20%) of its net assets to be invested,
during normal market conditions, in securities whose interest is NOT, in
the Tax-Free Money Fund's opinion, exempt from federal income tax, as long
6
<PAGE> 49
as the Fund has as its investment objective to provide as high a level of
current interest income exempt from federal income tax as is consistent
with the relative stability of capital. As a matter of operating policy,
the Tax-Free Money Fund may base its opinion on an opinion of counsel for
the issuer. The Tax-Free Money Fund may invest in taxable securities if
the Fund's investment adviser believes the yields then available on
municipal obligations are not attractive and wishes to defer the investment
in municipal obligations having longer maturities until conditions in the
municipal bond market improve. If any taxable securities are held, as a
matter of operating policy, the Tax-Free Money Fund will not hold more than
five percent (5%) of its total assets in the securities of any one issuer;
or
19. Purchase securities if as a result of such purchase more than five percent
(5%) of the Tax-Free Money Fund's total assets would be invested in
securities where the payment of principal and interest is the
responsibility of a company with less than three years' operating history.
For purposes of the above investment restrictions, the entity which has the
ultimate responsibility for the payment of interest and principal on a
particular security will be deemed to be its issuer.
NON-FUNDAMENTAL INVESTMENT POLICIES OF THE TAX-FREE MONEY FUND
The Tax-Free Money Fund has adopted the following non-fundamental policies with
respect to its investment activities:
1. The Fund will not purchase the securities of any issuer, other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if as a result, more than five percent (5%) of the value
of its total assets would be invested in the securities of such issuer.
Notwithstanding this policy, the Tax-Free Money Fund may invest up to 25%
of its total assets in the first tier securities (as defined below) of a
single issuer for up to three business days after purchase. First tier
securities are securities (1) rated in the highest short-term category by
two nationally recognized statistical rating organizations ("NRSROs");
(2) rated in the highest short-term rating category by a single NRSRO if
only that NRSRO has assigned the securities a short-term rating; or (3)
unrated, but determined by SAM to be of comparable quality.
2. The Fund will not invest in securities with unlimited liability; e.g.,
securities the holder of which may be assessed for amounts in addition to
the subscription or other price paid for the security.
3. The Fund will not buy or sell foreign currency, except as may be necessary
to convert the proceeds of the sale of foreign securities in the Fund's
portfolio into U.S. dollars.
4. The Fund may purchase shares of no-load, open-end investment companies
that invest in tax-exempt securities with remaining maturities of thirteen
(13) months or less.
5. While the Tax-Free Money Fund does not seek profits from short-term
trading, it may sell any security prior to maturity to enhance yield,
protect principal or improve liquidity.
6. The Fund reserves the right to hold cash, if necessary, as a temporary
defensive measure or in an emergency situation.
7
<PAGE> 50
7. The Fund may invest up to five percent (5%) of its total assets in Rule
144A securities or Section 4(2) securities, provided that SAM has
determined that such securities are liquid under guidelines adopted by the
Board of Trustees.
ADDITIONAL INVESTMENT INFORMATION
1. QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of
Trustees, the Funds may purchase only high-quality securities that SAM
believes present minimal credit risks. To be considered high quality, a
security must be rated, or the issuer must have received a rating for a
comparable short-term security, in accordance with applicable rules in one
of the two highest categories for short-term securities by at least two
nationally recognized rating services (or by one, if only one rating
service has rated the security); or, if unrated, judged to be of equivalent
quality by SAM.
High-quality securities are divided into "first tier" and "second tier"
securities. First tier securities are those deemed to be in the highest
rating category (e.g., A-1 by Standard & Poor's Rating Group ("S&P")) and
second tier securities are those deemed to be in the second highest rating
category (e.g., A-2 by S&P).
The Money Market Fund may not invest more then 5% of its total assets in
second tier securities. In addition, the Money Market Fund may not invest
more than 1% of its total assets or $1 million (whichever is greater) in
the second tier securities of a single issuer.
The Funds currently intend to limit their investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, a Fund may look to an interest rate reset or demand feature.
A security is considered to be rated if either the security itself is
assigned a rating or the issuer is assigned a rating for comparable
short-term debt obligations. Alternatively, a security (whether or not
rated) with an unconditional demand feature (as defined in Rule 2a-7) may
be considered to be rated if the demand feature or its issuer has been
assigned a rating. See "Description of Ratings" on page 20 for further
explanation of rating categories.
2. RESTRICTED SECURITIES AND RULE 144A SECURITIES. Restricted securities are
securities that may be sold only in a public offering with respect to which
a registration statement is in effect under the 1933 Act or, if they are
unregistered, in a privately negotiated transaction or pursuant to an
exemption from registration. In recognition of the increased size and
liquidity of the institutional markets for unregistered securities and the
importance of institutional investors in the formation of capital, the
Securities and Exchange Commission ("SEC") has adopted Rule 144A under the
1933 Act, which is designed to further facilitate efficient trading among
institutional investors by permitting the sale of Rule 144A securities to
qualified institutional buyers. To the extent privately placed securities
held by a Fund qualify under Rule 144A and an institutional market develops
8
<PAGE> 51
for those securities, the Fund likely will be able to dispose of the
securities without registering them under the 1933 Act. SAM, acting under
guidelines established by the Trust's Board of Trustees, may determine that
certain securities qualified for trading under Rule 144A are liquid.
Where registration is required, a Fund may be obligated to pay all or part
of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a
less favorable price then prevailed when it decided to sell. To the extent
privately placed securities are illiquid, purchases thereof will be subject
to any limitations on investments in illiquid securities. Restricted
securities for which no market exists are priced at fair value as
determined in accordance with procedures approved and periodically reviewed
by the Trust's Board of Trustees.
3. MUNICIPAL BONDS. Municipal bonds are issued to raise longer-term capital
but, when purchased by the Tax-Free Fund, will have thirteen (13) months or
less remaining until maturity or will have a variable or floating rate of
interest. These issues may be either general obligation bonds or revenue
bonds.
4. VARIABLE AND FLOATING RATE INSTRUMENTS. Certain municipal obligations may
carry variable or floating rates of interest. Variable rate instruments
bear interest at rates that are readjusted at periodic intervals so as to
cause the instruments' market value to approximate their par value.
Floating rate instruments bear interest at rates which vary automatically
with changes in specified market rates or indices, such as the bank prime
rate. A Fund's right to obtain payment at par on a demand instrument upon
demand could be affected by events occurring between the date the Fund
elects to redeem the instrument and the date redemption proceeds are due
which affect the ability of the issuer to pay the instrument at par value.
5. TERM PUT BONDS. Term put bonds are variable rate obligations which have a
maturity in excess of one year with the option to put back (sell back) the
bonds on a specified put date. On the put date, the interest rate of the
bond is reset according to current market conditions and accrues at the
reset rate until the next put date. The Fund may also hold mandatory put
bonds. Mandatory put bonds require the holder to take certain action to
retain the bonds. Put bonds are generally credit-enhanced by collateral,
guaranteed investment contracts, surety bonds, a letter of credit or
insurance which guarantees the payment of principal and interest.
6. BOND ANTICIPATION NOTES (BANS). These notes are usually general
obligations of state and local governmental issuers which are sold to
obtain interim financing for projects that will eventually be funded
through the sale of long-term debt obligations or bonds. The ability of an
issuer to meet the obligations on its BANs is primarily dependent on the
issuer's access to the long-term municipal bond market and the likelihood
that the proceeds of such bond sales will be used to pay the principal and
interest on the BANs.
7. TAX ANTICIPATION NOTES (TANS). These notes are issued by state and local
governments to finance their current operations. Repayment is generally to
be derived from specific future tax revenues. Tax anticipation notes are
9
<PAGE> 52
usually general obligations of the issuer. A weakness in an issuer's
capacity to raise taxes due to, among other things, a decline in its tax
base or a rise in delinquencies, could adversely affect the issuer's
ability to meet its obligations on outstanding TANs.
8. REVENUE ANTICIPATION NOTES (RANS). These notes are issued by governments
or governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
project revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
9. TAX-EXEMPT COMMERCIAL PAPER. These are short-term securities issued by
states, municipalities and their agencies. Tax-exempt commercial paper may
be structured similarly to put bonds with credit enhancements, long nominal
maturities, and mandatory put dates, which are agreed upon by the buyer and
the seller at the time of purchase. The put date acts as a maturity date
for the security, and generally will be shorter than the maturities of
Project Notes (PNs), BANs, RANs or TANs. There is a limited secondary
market for issues of tax-exempt commercial paper.
10. ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
sold within seven days in the ordinary course of business for approximately
the amount at which they are valued. Due to the absence of an active
trading market, a Fund may experience difficulty in valuing or disposing of
illiquid securities. SAM determines the liquidity of the securities under
guidelines adopted by the Trust's Board of Trustees.
11. FOREIGN ISSUERS. Obligations of foreign issuers involve certain additional
risks. These risks may include future unfavorable political and economic
developments, withholding taxes, seizures of foreign deposits, currency
controls, interest limitations, or other governmental restrictions that
might affect payment of principal or interest. Additionally, there may be
less public information available about foreign banks and their branches.
Foreign issuers may be subject to less governmental regulation and
supervision than U.S. issuers. Foreign issuers also generally are not
bound by uniform accounting, auditing, and financial reporting requirements
comparable to those applicable to U.S. issuers.
12. SECURITIES ISSUED BY BANKS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. branches and agencies of foreign banks, and foreign branches
of foreign banks. The Funds may also invest in U.S. dollar-denominated
securities issued or guaranteed by other U.S. or foreign issuers, including
U.S. and foreign corporations or other business organizations, foreign
governments, foreign government agencies or instrumentalities, and U.S. and
foreign financial institutions, including savings and loan institutions,
insurance companies and mortgage bankers, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by
10
<PAGE> 53
the terms of a specific obligation and by governmental regulation. Payment
of interest and principal on these obligations may also be affected by
governmental action in the country of domicile of the branch (generally
referred to as sovereign risk). In addition, evidence of ownership of
portfolio securities may be held outside of the U.S. and the Funds may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation
of U.S. branches do not apply to foreign branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
ADDITIONAL TAX INFORMATION REGARDING THE TAX-FREE MONEY FUND
The tax-exempt interest portions of each daily dividend will be based upon the
ratio of the Tax-Free Money Fund's tax-exempt income to taxable income for the
entire fiscal year (average annual method). As a result, the percentage of
tax-exempt income for any particular distribution may be substantially
different from the percentage of the Tax-Free Money Fund's income that was
tax-exempt during the period covered by that distribution. The Tax-Free Money
Fund will advise its shareholders of this ratio within 60 days after the close
of the Tax-Free Money Fund's fiscal year.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Tax-Free Money Fund is not deductible. In addition,
entities or persons who are "substantial users" (or related persons) of
facilities financed by most "private activity" bonds should consult their tax
advisers before purchasing shares of the Tax-Free Money Fund. "Substantial
user" is generally defined to include a "non-exempt person" who regularly uses
in a trade or business a part of a facility financed from the proceeds of most
"private activity" bonds.
In the future, proposals may be introduced before Congress for the purpose of
further restricting or even eliminating the federal income tax exemption for
interest on all or certain types of municipal obligations. If such a proposal
were enacted, the availability of municipal obligations for investment by the
Fund and the value of the Fund's portfolio would be affected. In such event,
the Fund would review its investment objective and policies.
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
Each Fund determines its net asset value per share ("NAV") by subtracting its
liabilities (including accrued expenses and dividends payable) from its total
assets (the market value of the securities the Fund holds plus cash or other
assets, including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding. The NAV of each Fund is
calculated as of the close of regular trading on the New York Stock Exchange
("Exchange") every day the Exchange is open for trading and at such other times
and/or on such other days as there is sufficient trading. The Exchange is
closed on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
11
<PAGE> 54
The portfolio instruments of each Fund are valued on the basis of amortized
cost. The valuation of each Fund's portfolio securities based upon amortized
cost, and the maintenance of each Fund's NAV at $1.00, are permitted pursuant
to Rule 2a-7 under the Investment Company Act of 1940. Pursuant to that Rule,
each Fund maintains a dollar-weighted average portfolio maturity of 90 days or
less, purchases only securities having remaining maturities of thirteen months
or less, and invests only in securities determined by SAM, under guidelines
adopted by the Trust's Board of Trustees, to be of high quality and to present
minimal credit risks. The Board of Trustees has established procedures
designed to stabilize, to the extent reasonably possible, each Fund's
price-per-share as computed for the purpose of sales and redemptions at $1.00.
These procedures include a review of each Fund's portfolio holdings by the
Board of Trustees, at such intervals as the Board deems appropriate, to
determine whether a Fund's net asset value per share, calculated by using
available market quotations, deviates from $1.00 per share and, if so, whether
such deviation may result in material dilution or is otherwise unfair to
existing shareholders of that Fund. In the event the Board determines that
such a deviation exists in a Fund, the Trustees will take such corrective
action with respect to the Fund as they regard as necessary and appropriate,
including: selling portfolio investments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding
dividends, redeeming shares in kind, establishing the NAV by using available
market quotations; or such other measures as the Trustees deem appropriate.
ADDITIONAL PERFORMANCE INFORMATION
The yield and effective yield for the Money Fund for the 7-day period ended
March 31, 1996 was 4.60% and 4.70%, respectively.
The yield and tax-equivalent yield at a tax rate of 39.6% for the Tax-Free
Money Fund for the 7-day period ended March 31, 1996 was 2.92% and 4.83%,
respectively.
Yield is computed using the following formula:
<TABLE>
<S> <C> <C>
(x-y)-z 365
Yield = [------- ] = Base Period Return x ---
y 7
Where: x = value of one share at the end of a 7-day period
y = value of one share at the beginning of a 7-day period ($1.00)
z = capital changes during the 7-day period, if any
</TABLE>
Effective yield is computed using the following formula:
Effective yield = [(Base Period Return + 1) 365/7] -1
Tax-equivalent yield is computed using the following formula:
eg
Tax-equivalent yield = [ ----- ] + [e (1-g)]
1-f
12
<PAGE> 55
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Where: e = yield as calculated above
f = tax rate
g = percentage of yield which is tax-free
</TABLE>
During periods of declining interest rates, each Fund's yield based on
amortized cost may be higher than the yield based on market valuations. Under
these circumstances, a shareholder in either Fund would be able to obtain a
somewhat higher yield than would result if each Fund utilized market valuations
to determine its NAV. The converse would apply in a period of rising interest
rates.
Each Fund may present in its advertisements and sales literature (i) a
biography or the credentials of its portfolio manager (including but not
limited to educational degrees, professional designations, work experience,
work responsibilities and outside interests), (ii) current facts (including but
not limited to number of employees, number of shareholders, business
characteristics) about its investment adviser (SAM) the investment adviser's
parent company (SAFECO Corporation) or the SAFECO Family of Funds, and (iii)
descriptions, including quotations attributable to the portfolio manager, of
the investment style used to manage a Fund's portfolio, the research
methodologies underlying securities selection and a Fund's investment
objective, and (iv) information about particular securities held in a Fund's
portfolio.
Performance information and quoted ratings are indicative only of past
performance and are not intended to represent future investment results.
ADDITIONAL INFORMATION ON DIVIDENDS
Because each Fund intends to hold its portfolio securities to maturity and
expects that most of its portfolio securities will be valued at their amortized
cost, realized gains or losses should not be a significant factor in the
computation of net income. Should, however, in an unusual circumstance, either
Fund experience a realized gain or loss, a shareholder of that Fund could
receive an increased, reduced, or no dividend for a period of time. In such an
event, the Trust's Board of Trustees would consider whether to adhere to its
present dividend policy or to revise it in light of the then-prevailing
circumstances.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C>
Position(s) Held Principal Occupation(s)
Name, Address and Age with the Trust During Past 5 Years
- --------------------- -------------- -------------------
Boh A. Dickey* Chairman Executive Vice
SAFECO Plaza and Trustee President, Chief
Seattle, Washington 98185 Financial Officer
(51) and Director of
SAFECO Corporation.
He has been an
executive officer
of SAFECO
Corporation
subsidiaries since
1982. See table
under "Investment
Advisory and Other
Services."
</TABLE>
13
<PAGE> 56
<TABLE>
<CAPTION>
<S> <C> <C>
Barbara J. Dingfield Trustee Manager, Corporate
Microsoft Corporation Contributions and Community
One Microsoft Way Programs for Microsoft
Redmond, WA 98052 Corporation, Redmond,
(50) Washington, a computer
software company; Director
and former Executive Vice
President of Wright Runstad
& Co., Seattle, Washington,
a real estate development
company; Director of First
SAFECO National Life
Insurance Company of New
York.
Richard W. Hubbard* Trustee Retired Vice President and
1270 NW Blakely Court Treasurer of the Trust and
Seattle, WA 98177 other SAFECO Trusts; retired
(67) Senior Vice President and
Treasurer of SAFECO
Corporation; former
President of SAFECO Asset
Management Company.
Richard E. Lundgren Trustee Director of Marketing and
764 S. 293rd Street Customer Relations, Building
Federal Way, Washington 98032 Materials Distribution,
(58) Weyerhaeuser Company,
Tacoma, Washington;
Director of First SAFECO
National Life Insurance
Company of New York.
Larry L. Pinnt Trustee Retired Vice President and
1600 Bell Plaza Chief Financial Officer, U S
Room 1802 WEST Communications,
Seattle, Washington 98191 Seattle, Washington;
(61) Director of Key Bank of
Washington, Seattle,
Washington; Director of
University of Washington
Medical Center, Seattle,
Washington; Director of
Cascade Natural Gas
Corporation, Seattle,
Washington; Director of
First SAFECO National Life
Insurance Company of New
York.
John W. Schneider Trustee President of Wallingford
1808 N 41st Street Group, Inc., Seattle,
Seattle, Washington 98103 Washington; former
(54) President of Coast Hotels,
Inc.; Director of First
SAFECO National Life
Insurance Company of New
York.
</TABLE>
14
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C> <C>
David F. Hill President President of SAFECO
SAFECO Plaza Securities, Inc. and SAFECO
Seattle, Services Corporation and
Washington 98185 Senior Vice President of
(47) SAFECO Asset Management
Company. See table under
"Investment Advisory and
Other Services."
Neal A. Fuller Vice President, Vice President,
SAFECO Plaza Controller, Controller,
Seattle, Washington 98185 Assistant Treasurer and
(34) Secretary Assistant Secretary
of SAFECO
Securities, Inc.
and SAFECO Services
Corporation; Vice
President,
Controller,
Secretary and
Treasurer of SAFECO
Asset Management
Company. See table
under "Investment
Advisory and Other
Services."
Ronald L. Spaulding Vice President Vice Chairman of
SAFECO Plaza Treasurer SAFECO Asset
Seattle, Washington 98185 Management Company;
(52) Vice President and
Treasurer of SAFECO
Corporation; Vice
President and
Director of SAFECO
Life Insurance
Company; former
Senior Portfolio
Manager of SAFECO
Insurance
Companies; former
Portfolio Manager
for several SAFECO
mutual funds. See
table under
"Investment
Advisory and Other
Services."
</TABLE>
* Trustees who are interested persons as defined by the Investment Company Act
of 1940.
15
<PAGE> 58
COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED
MARCH 31, 1996
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual From Registrant and
Compensation from Accrued As Part of Benefits Upon Fund Complex Paid
Trustee Registrant Fund Expenses Retirement to Trustees
- -------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Barbara J. Dingfield $2,095 N/A N/A $24,813
Richard E. Lundgren $2,095 N/A N/A $24,813
L.D. McClean $2,095 N/A N/A $24,813
Larry L. Pinnt $2,095 N/A N/A $24,813
John W. Schneider $2,095 N/A N/A $24,813
Boh A. Dickey $0 $0
Richard W. Hubbard $2,095 N/A N/A $23,000
</TABLE>
Currently, there is no pension, retirement, or other plan or any arrangement
pursuant to which Trustees or officers of the Trust are compensated by the
Trust. Each Trustee also serves as trustee for six other registered open-end,
management investment companies that have, in the aggregate, twenty-nine
series companies managed by SAM.
At June 30, 1996 the Trustees and officers of the Trust as a group owned less
than 1% of the outstanding shares of each Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
SAM, SAFECO Securities, Inc. ("SAFECO Securities") and SAFECO Services
Corporation ("SAFECO Services") are wholly-owned subsidiaries of SAFECO
Corporation. SAFECO Securities is the principal underwriter of each Fund and
SAFECO Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent of each Fund.
16
<PAGE> 59
The following individuals have the following positions and offices with the
Trust, SAM, SAFECO Securities and SAFECO Services:
<TABLE>
<CAPTION>
SAFECO SAFECO
Name Trust SAM Securities Services
- -------------- ----- --- ---------- --------
<S> <C> <C> <C> <C>
B. A. Dickey Chairman Director Director
Trustee Chairman
D. F. Hill President Senior Vice President President
President Director Secretary Secretary
Director Director
N. A. Fuller Vice President Vice Vice Vice
Controller President President President
Assistant Controller Controller Controller
Secretary Secretary Assistant Assistant
Treasurer Secretary Secretary
Treasurer Treasurer
R.L. Spaulding Vice President Vice Chairman Director Director
Treasurer Director
S. C. Bauer President
Director
</TABLE>
Mr. Dickey is Chief Financial Officer, Executive Vice President and a director
of SAFECO Corporation and Mr. Spaulding is Treasurer and Vice President of
SAFECO Corporation. Messrs. Dickey and Spaulding are also directors of several
other SAFECO Corporation subsidiaries.
In connection with its investment advisory contract with the Trust, SAM
furnishes or pays for all facilities and services furnished or performed for or
on behalf of the Trust and each Fund which includes furnishing office
facilities, books, records and personnel to manage the Trust's and each Fund's
affairs and paying certain expenses.
For the services and facilities furnished by SAM, each Fund has agreed to pay
an annual fee computed on the basis of the average market value of the net
assets of each Fund ascertained each business day and paid monthly in
accordance with the following schedules. The reduction in fees occurs only at
such time as the respective Fund's net assets reach the dollar amounts of the
break points and applies only to those assets that fall within the specified
range:
MONEY MARKET FUND
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS FEE
$0 - $250,000,000 .5 of 1%
$250,000,001 - $500,000,000 .4 of 1%
$500,000,001 - $750,000,000 .3 of 1%
Over $750,000,000 .25 of 1%
</TABLE>
17
<PAGE> 60
TAX-FREE MONEY FUND
<TABLE>
<S> <C>
NET ASSETS FEE
$0 - $100,000,000 .5 of 1%
$100,000,001 - $250,000,000 .4 of 1%
$250,000,001 - $500,000,000 .3 of 1%
Over $500,000,000 .2 of 1%
</TABLE>
Each Fund bears all expenses of its operations not specifically assumed by SAM.
SAM has agreed to reimburse each Fund for the amount by which the Fund's
expenses in any full fiscal year (excluding interest expense, taxes, brokerage
expenses and extraordinary expenses) exceed the limits prescribed by any state
in which a Fund's shares are qualified for sale. Presently, the most
restrictive expense ratio limitation imposed by any such state is 2.5% of the
first $30 million of the Fund's average daily net assets, 2.0% of the next $70
million of such assets, and 1.5% of the remaining net assets. For the purpose
of determining whether a Fund is entitled to reimbursement, the expenses of the
Fund are calculated on a monthly basis. If a Fund is entitled to a
reimbursement, that month's advisory fee will be reduced or postponed, with any
adjustment made after the end of the fiscal year.
The following table states the total amounts of compensation paid to SAM for
the past three fiscal years for the Money and Tax-Free Money Funds:
Years Ended
<TABLE>
<CAPTION>
Fund March 31, 1996 March 31, 1995 March 31, 1994
- -------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Money Fund $864,914 $840,727 $690,549
Tax-Free Money Fund $380,360 $424,888 $401,632
</TABLE>
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101, is
the custodian of the securities, cash and other assets of each Fund under an
agreement with the Trust. Ernst & Young LLP, 999 Third Avenue, Suite 3500,
Seattle, Washington 98104, is the independent auditor of each Fund's financial
statements.
SAFECO Services, SAFECO Plaza, Seattle, Washington 98185, is the transfer,
dividend and distribution, disbursement and shareholder servicing agent for each
Fund under an agreement with the Trust. SAFECO Services provides, or through
subcontracts makes provision for, all required transfer agent activity,
including maintenance of records of each Fund's shareholders, records of
transactions involving each Fund's shares, and the compilation, distribution,
or reinvestment of income dividends or capital gains distributions. SAFECO
Services is paid a fee for these services equal to $34.00 per shareholder
account, but not to exceed .30% of each Fund's average net assets. The
following table shows the fees paid by each Fund to SAFECO Services during the
past three fiscal years:
18
<PAGE> 61
Years Ended*
<TABLE>
<CAPTION>
Fund March 31, 1996 March 31, 1995 March 31, 1994
- ---- -------------- -------------- --------------
<S> <C> <C> <C>
Money Fund $424,260 $385,495 $308,090
Tax-Free Money Fund $71,478 $74,294 $63,163
</TABLE>
*Table reflects fees of $3.10 per shareholder transaction payable pursuant to
the prior fee schedule.
SAFECO Securities is the principal underwriter for each Fund and distributes
each Fund's shares on a continuous best efforts basis under an agreement with
the Trust. SAFECO Securities is not compensated by the Trust or the Funds for
underwriting, distribution or other activities.
BROKERAGE PRACTICES
SAM places orders for the purchase or sale of the Funds' portfolio securities.
In deciding which broker to use in a given transaction, SAM uses the following
criteria:
(1) Which broker gives the best execution (i.e., which broker is able to trade
the securities in the size and at the price desired and on a timely basis);
(2) Whether the broker is known to SAM as being reputable; and
(3) All other things being equal, which broker has provided useful research
services to SAM.
Such research services as are furnished to SAM during the year (e.g., written
reports analyzing economic and financial characteristics of industries and
companies, telephone conversations between brokerage security analysts and
members of SAM's staff, and personal visits by such analysts and brokerage
strategists and economists to SAM's office) are used by SAM to advise all of
its clients including the Funds, but not all such research services furnished
to SAM are used by it to advise the Funds. SAM does not pay excess commissions
or mark-ups to any broker or dealer for research services or for any other
reason. Since purchases of money market instruments and municipal obligations
from brokers as principals do not involve the payment of brokerage commissions,
neither Fund expects to incur brokerage expense.
REDEMPTION IN KIND
If the Trust concludes that cash payment upon redemption to a shareholder would
be prejudicial to the best interest of the other shareholders of a Fund, a
portion of the payment may be made in kind. The Trust has elected to be
governed by Rule 18(f)(1) under the Investment Company Act of 1940, pursuant to
which the Trust must redeem shares tendered by a shareholder of a Fund solely
in cash up to the lesser of $250,000 or 1% of the net asset value of a Fund
during any 90-day period. Any shares tendered by the shareholder in excess of
the above-mentioned limit may be redeemed through distribution of a Fund's
assets. Any
19
<PAGE> 62
securities or other property so distributed in kind shall be
valued by the same method as is used in computing NAV. Distributions in kind
will be made in readily marketable securities, unless the investor elects
otherwise. Investors may incur brokerage costs in disposing of securities
received in such a distribution in kind.
FINANCIAL STATEMENTS
The following financial statements and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated herein by reference to the Trust's
Annual Report for the year ended March 31, 1996:
Portfolio of Investments as of March 31, 1996
Statement of Assets and Liabilities as of March 31, 1996
Statement of Operations for the Year ended March 31, 1996
Statement of Changes in Net Assets for the Years Ended March 31, 1996 and
March 31, 1995
Notes to Financial Statements
A copy of the Trust's Annual Report accompanies this Statement of Additional
Information. Additional copies may be obtained by calling SAFECO Services at
1-800-426-6730 nationwide or 206-545-5530 in Seattle or by writing to the
address on the Prospectus cover.
DESCRIPTION OF RATINGS
Ratings by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Rating Group ("Standard & Poor's") represent their respective opinions as to
the investment quality of the rated obligations. Investors should realize
these ratings do not constitute a guarantee that the principal and interest
payable under these obligations will be paid when due.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S.
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations with an original maturity not exceeding one
year.
Prime-1: Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
<TABLE>
<CAPTION>
<S> <C>
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
</TABLE>
20
<PAGE> 63
Prime-2: Issuers (or supporting institutions) rated Prime-2 (P-2) have a
strong ability for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
STANDARD & POOR'S.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
DESCRIPTION OF BOND RATINGS
Excerpts from MOODY'S description of its two highest bond ratings:
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
Excerpts from STANDARD & POOR'S description of its two highest bond ratings:
AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
PLUS (+) MINUS (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
21
<PAGE> 64
DESCRIPTION OF RATINGS FOR MUNICIPAL NOTES,
TAX-EXEMPT DEMAND NOTES AND OTHER SHORT-TERM OBLIGATIONS
STANDARD & POOR'S
Ratings for municipal notes and other short-term obligations are designated by
Standard & Poor's note rating. These ratings reflect liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
Standard & Poor's assigns "dual" ratings to all long-term debt issues that have
as part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For the newer "demand notes," Standard &
Poor's note rating symbols, combined with the commercial paper symbols, are
used (for example, "SP-1+/A-1+").
MOODY'S
Moody's rates municipal notes and other short-term obligations using Moody's
Investment Grade (MIG). A short-term obligation having a demand feature (a
variable-rate demand obligation) will be designated VMIG. This distinction
recognizes differences between short-term credit risk and long-term credit risk
as well as differences between short-term issues making payments on fixed
maturity dates (MIG) and those making payments on periodic demand (VMIG).
MIG/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
22
<PAGE> 65
TO REQUEST A PROSPECTUS:
Nationwide: 1-800-426-6730
Seattle: 545-5530
FOR 24-HOUR
PERFORMANCE FIGURES:
Nationwide: 1-800-835-4391
Seattle: 545-5113
FOR ACCOUNT INFORMATION
OR TELEPHONE TRANSACTIONS:
Nationwide: 1-800-624-5711
Seattle: 545-7319
TTY/TDD
Service: 1-800-438-8718
All telephone calls are tape-recorded for your protection.
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
EXPRESS/OVERNIGHT MAIL:
SAFECO Mutual Funds
4333 Brooklyn Avenue N.E.
Seattle, WA 98105
INTERNET ADDRESS:
http://networth.galt.com/safeco
SAFECO Securities, Inc.
Distributor
MEMBER OF
- ----------------------
100% NO-LOAD(TM) Printed on Recycled Paper [RECYCLE LOGO]
MUTUAL FUND
COUNCIL (R) Registered trademark of SAFECO Corporation.
- ----------------------
GMF 416 7/96
<PAGE> 66
SAFECO MONEY MARKET TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for each series of Registrant for the
fiscal year ended March 31, 1996 and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated in the Statement of Additional
Information by reference to pages 5-21 of the Registrant's Annual Report filed
with the SEC on or about May 30, 1996:
Portfolio of Investments as of March 31, 1996
Statement of Assets and Liabilities as of March 31, 1996
Statement of Operations For the Year Ended March 31, 1996
Statement of Changes in Net Assets For the Years Ended
March 31, 1996 and March 31, 1995
Notes to Financial Statements
Financial statements from the Registrant's Annual Report are filed as
Exhibit 12.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- -------- ----------------------- ----
<S> <C> <C>
(27.1-2) Financial Data Schedules
(1) Trust Instrument/Certificate of Trust *
(2) Bylaws *
(3) Inapplicable
(4) Stock Certificate *
(5) Investment Advisory and Management Contract *
(6) Distribution Agreement *
(7) Inapplicable
(8) Custody Agreement *
(9) Transfer Agent Agreement *
(99.9a) Amended Exhibit B to Transfer Agent Agreement
(10) Opinion of Counsel *
(99.11) Consent of Independent Auditors
(99.12) Registrant's Annual Report for the +
Year Ended March 31, 1996 including
Financial Statements
</TABLE>
<PAGE> 67
<TABLE>
<S> <C> <C>
(13) Subscription Agreement *
(14) Inapplicable
(15) Inapplicable
(99.16) Calculation of Performance Information
(18) Inapplicable
</TABLE>
+ The Registrant's Annual Report was filed with the SEC on or about May 30,
1996.
* Filed as an Exhibit to Post-Effective Amendment No. 16 dated July 31, 1995 and
filed with the SEC on May 30, 1995.
Item 25. Persons Controlled By or Under Common Control With Registrant
SAFECO Corporation, a Washington corporation, owns 100% of SAFECO Asset
Management Company (SAM), SAFECO Services Corporation (SAFECO Services) and
SAFECO Securities, Inc. (SAFECO Securities), each a Washington corporation.
SAM is the investment advisor, SAFECO Services is the transfer agent and SAFECO
Securities is the principal underwriter for each of the SAFECO Mutual Funds.
The SAFECO Mutual Funds consist of seven Delaware business trusts: SAFECO
Common Stock Trust, SAFECO Taxable Bond Trust, SAFECO Tax-Exempt Bond Trust,
SAFECO Advisor Series Trust, SAFECO Money Market Trust, SAFECO Institutional
Series Trust and SAFECO Resource Series Trust. The SAFECO Common Stock Trust
consists of seven mutual funds: SAFECO Growth Fund, SAFECO Equity Fund, SAFECO
Income Fund , SAFECO Northwest Fund, SAFECO International Fund, SAFECO Balanced
Fund and SAFECO Small Company Stock Fund. The SAFECO Taxable Bond Trust
consists of three mutual funds: SAFECO Intermediate-Term U.S. Treasury Fund,
SAFECO GNMA Fund and SAFECO High-Yield Bond Fund. The SAFECO Tax-Exempt Bond
Trust consists of five mutual funds: SAFECO Intermediate-Term Municipal Bond
Fund, SAFECO Insured Municipal Bond Fund, SAFECO Municipal Bond Fund, SAFECO
California Tax-Free Income Fund and SAFECO Washington State Municipal Bond
Fund. The SAFECO Advisor Series Trust consists of eight mutual funds: Advisor
Equity Fund, Advisor Northwest Fund, Advisor Intermediate-Term Treasury Fund,
Advisor GNMA Fund, Advisor U.S. Government Fund, Advisor Municipal Bond Fund,
Advisor Intermediate-Term Municipal Bond Fund and Advisor Washington Municipal
Bond Fund. The SAFECO Money Market Fund consists of two mutual funds: SAFECO
Money Market Fund and SAFECO Tax-Free Money Market Fund. The SAFECO
Institutional Series Trust consists of one mutual fund: Fixed-Income Portfolio.
The SAFECO Resource Series Trust consists of five mutual funds: Equity
Portfolio, Growth Portfolio, Northwest Portfolio, Bond Portfolio and Money
Market Portfolio.
SAFECO Corporation, a Washington corporation, owns 100% of the following
Washington corporations: SAFECO Insurance Company of America, General Insurance
Company of America, First National Insurance Company of America, SAFECO Life
Insurance Company of America, SAFECO Assigned Benefits Service Company, SAFECO
Administrative Services, Inc., SAFECO Properties Inc., SAFECO Credit Company,
Inc., SAFECO Asset Management Company, SAFECO Securities, Inc., SAFECO Services
Corporation, SAFECO Trust Company and
<PAGE> 68
General America Corporation. SAFECO Corporation owns 100% of SAFECO National
Insurance Company, a Missouri corporation, and SAFECO Insurance Company of
Illinois, an Illinois corporation. SAFECO Corporation owns 20% of Agena, Inc., a
Washington corporation. SAFECO Insurance Company of America owns 100% of SAFECO
Surplus Lines Insurance Company, a Washington corporation, and Market Square
Holding, Inc., a Minnesota corporation. SAFECO Life Insurance Company owns 100%
of SAFECO National Life Insurance Company, a Washington corporation, and First
SAFECO National Life Insurance Company of New York, a New York corporation.
SAFECO Administrative Services, Inc. owns 100% of Employee Benefit Claims of
Wisconsin, Inc. and Wisconsin Pension and Group Services, Inc., each a Wisconsin
corporation. General America Corporation owns 100% of COMAV Managers, Inc., an
Illinois corporation, F.B. Beattie & Co., Inc., a Washington corporation,
General America Corp. of Texas, a Texas corporation, Talbot Financial
Corporation, a Washington corporation and SAFECO Select Insurance Services,
Inc., a California corporation. F.B. Beattie & Co., Inc. owns 100% of F.B.
Beattie Insurance Services, Inc., a California corporation. General America
Corp. of Texas is Attorney-in-fact for SAFECO Lloyds Insurance Company, a Texas
corporation. Talbot Financial Corporation owns 100% of Talbot Agency, Inc., a
New Mexico corporation. Talbot Agency, Inc. owns 100% of PNMR Securities, Inc.,
a Washington corporation. SAFECO Properties Inc. owns 100% of the following,
each a Washington corporation: RIA Development, Inc., SAFECARE Company, Inc. and
Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the following, each a
Washington corporation: S.C. Bellevue, Inc., S.C. Everett, Inc., S.C.
Marysville, Inc., S.C. Simi Valley, Inc. and S.C. Vancouver, Inc. SAFECARE
Company, Inc. owns 50% of Lifeguard Ventures, Inc., a California corporation,
50% of Mission Oaks Hospital, Inc., a California corporation, S.C. River Oaks,
Inc., a Washington corporation, Mississippi Health Services, Inc., a Louisiana
corporation, and Safecare Texas, Inc., a Texas corporation. S.C. Simi Valley,
Inc. owns 100% of Simi Valley Hospital, Inc., a Washington corporation. Winmar
Company, Inc. owns 100% of the following: Barton Street Corp., C-W Properties,
Inc., Gem State Investors, Inc., Kitsap Mall, Inc., WNY Development, Inc.,
Winmar Cascade, Inc., Winmar Metro, Inc., Winmar Northwest, Inc., Winmar
Redmond, Inc. and Winmar of Kitsap, Inc., each a Washington corporation, and
Capitol Court Corp., a Wisconsin corporation, SAFECO Properties of Boise, Inc.,
an Idaho corporation, SCIT, Inc., a Massachusetts corporation, Valley Fair
Shopping Centers, Inc., a Delaware corporation, WDI Golf Club, Inc., a
California corporation, Winmar Oregon, Inc., an Oregon corporation, Winmar of
Texas, Inc., a Texas corporation, Winmar of Wisconsin, Inc., a Wisconsin
corporation, and Winmar of the Desert, Inc., a California corporation. Winmar
Oregon, Inc. owns 100% of the following, each an Oregon corporation: North Coast
Management, Inc., Pacific Surfside Corp., Winmar of Jantzen Beach, Inc. and W-P
Development, Inc., and 100% of the following, each a Washington corporation:
Washington Square, Inc. and Winmar Pacific, Inc.
Item 26. Number of Holders of Securities
At June 30, 1996, the Registrant had 10,089 and 2,008 shareholders of record
in its SAFECO Money Market Fund and SAFECO Tax-Free Money Market Fund,
respectively.
<PAGE> 69
Item 27. Indemnification
Under the Trust Instrument of the Registrant, the Registrant's trustees,
officers, employees and agents are indemnified against certain liabilities,
subject to specified conditions and limitations.
Under the indemnification provisions in the Registrant's Trust Instrument and
subject to the limitations described in the paragraph below, every person who
is, or has been, a trustee, officer, employee or agent of the Registrant shall
be indemnified by the Registrant or the appropriate Series of the Registrant to
the fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being, or having been, a trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof. As used in this paragraph, "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened, and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgements, amounts paid in settlement, fines, penalties and other liabilities.
No indemnification will be provided to a trustee, officer, employee or agent:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (a) to be liable to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, or (b) not to have
acted in good faith in the reasonable belief that his or her action was in the
best interest of the Registrant; or (ii) in the event of settlement, unless
there has been a determination that such trustee, officer, employee or agent did
not engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office; (a) by the
court or other body approving the settlement, (b) by the vote of at least a
majority of a quorum of those trustees who are neither interested persons, as
that term is defined by the Investment Company Act of 1940, of the Registrant
nor are the parties to the proceeding based upon a review of readily available
facts (as opposed to a full trial type inquiry); or (c) by written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial type inquiry).
To the maximum extent permitted by applicable law, expenses incurred in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described above may be paid by the
Registrant or applicable Series from time to time prior to final disposition
thereof upon receipt of an undertaking by or on behalf of such trustee,
officer, employee or agent that such amount will be paid over by him or her to
the Registrant or the applicable Series if it is ultimately determined that he
or she is not entitled to indemnification under the Trust Instrument; provided,
however, that either (i) such trustee, officer, employee or agent shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against such losses arising out of such advance payments or (iii)
either a majority of
<PAGE> 70
the trustees who are neither interested persons, as that
term is defined by the Investment Company Act of 1940, of the Registrant nor
parties to the proceeding, or independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial type inquiry), that there is reason to believe that such
trustee, officer, employee or agent, will not be disqualified from
indemnification under Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, employees and agents of the
Registrant pursuant to such provisions of the Trust Instrument or statutes or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in said Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
employee or agent of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such
a trustee, officer, employee or agent in connection with the shares of any
series of the Registrant, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
Under an agreement with its distributor ("Distribution Agreement"), Registrant
has agreed to indemnify, defend and hold the distributor, the distributor's
several directors, officers and employees, and any person who controls the
distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
distributor, its directors, officers or employees, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated or necessary to make
the Registration Statement not misleading.
In no event shall anything contained in the Distribution Agreement be construed
so as to protect the distributor against any liability to the Registrant or its
shareholders to which the distributor would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under the Distribution Agreement, and provided that the Registrant shall not
indemnify the distributor for conduct set forth in this paragraph.
Under an agreement with its transfer agent, Registrant has agreed to indemnify
and hold the transfer agent harmless against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from: (1) any claim, demand, action or suit brought by
<PAGE> 71
any person other than the Registrant, including by a shareholder, which names
the transfer agent and/or the Registrant as a party, and is not based on and
does not result from the transfer agent's willful misfeasance, bad faith or
negligence or reckless disregard of duties, and arises out of or in connection
with the transfer agent's performance hereunder; or (2) any claim, demand,
action or suit (except to the extent contributed to by the transfer agent's
willful misfeasance, bad faith or negligence or reckless disregard of duties)
which results from the negligence of the Registrant, or from the transfer agent
acting upon any instruction(s) reasonably believed by it to have been executed
or communicated by any person duly authorized by the Registrant, or as a result
of the transfer agent acting in reliance upon advice reasonably believed by the
transfer agent to have been given by counsel for the Registrant, or as a result
of the transfer agent acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
The investment adviser to Registrant, SAFECO Asset Management Company, serves
as an adviser to: (a) thirty-one series (portfolios) of seven registered
investment companies, including five series of an investment company that
serves as an investment vehicle for variable insurance products and (b) a
number of pension funds not affiliated with SAFECO Corporation or its
affiliates. The directors and officers of SAM serve in similar capacities with
SAFECO Corporation or its affiliates. The information set forth under
"Investment Advisory and Other Services" in the Statement of Additional
Information is incorporated herein by reference.
Item 29. Principal Underwriters
(a) SAFECO Securities, Inc., the principal underwriter for each series of
Registrant, also acts as the principal underwriter for each series of the
SAFECO Common Stock Trust, SAFECO Tax-Exempt Bond Trust, SAFECO Taxable
Bond Trust, SAFECO Institutional Series Trust, SAFECO Resource Series Trust
and SAFECO Advisor Series Trust. In addition, SAFECO Securities is the
principal underwriter for SAFECO Separate Account C, SAFECO Variable
Account B and SAFECO Separate Account SL, all of which are variable
insurance products.
(b) The information set forth under "Investment Advisory and Other Services" in
the Statement of Additional Information is incorporated by reference.
Item 30. Location of Accounts and Records
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101
maintains physical possession of the accounts, books and documents of the
Registrant relating to its activities as custodian of the Registrant. SAFECO
Asset Management Company, SAFECO Plaza, Seattle, Washington 98185, maintains
physical possession of all other accounts, books or documents of the Registrant
required to be maintained by Section
<PAGE> 72
31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly
authorized, in the City of Seattle and State of Washington on the 16th of
July, 1996.
SAFECO MONEY MARKET TRUST
By /S/DAVID F. HILL
------------------------
David F. Hill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
Name Title Date
- ---- ------ -----
/S/ DAVID F. HILL 7/16/96
- ---------------------- President ----------
David F. Hill Principal Executive Officer
RONALD L. SPAULDING*
- ---------------------- Vice President ----------
Ronald L. Spaulding Treasurer
NEAL A. FULLER*
- ---------------------- Vice President ----------
Neal A. Fuller Controller and
Assistant Secretary
(Principal Financial Officer)
/s/ BOH A. DICKEY 7/16/96
- ---------------------- Chairman and Trustee ----------
Boh A. Dickey
BARBARA J. DINGFIELD*
- ---------------------- Trustee ----------
Barbara J. Dingfield
RICHARD W. HUBBARD*
- ---------------------- Trustee ----------
Richard H. Hubbard
RICHARD E. LUNDGREN*
- ---------------------- Trustee ----------
Richard E. Lundgren
LARRY L. PINNT*
- ---------------------- Trustee ----------
Larry L. Pinnt
JOHN W. SCHNEIDER*
- ---------------------- Trustee ----------
John H. Schneider
</TABLE>
<TABLE>
<S> <C>
*By: /s/ DAVID F. HILL *By: /S/ BOH A. DICKEY
---------------------- -------------------
David F. Hill Boh A. Dickey
Attorney-in-Fact Attorney-in-Fact
</TABLE>
<PAGE> 74
SAFECO MONEY MARKET TRUST
Form N-1A
Post-Effective Amendment No. 19
Exhibit Index
<TABLE>
<S> <C> <C>
Exhibit
Number Description of Document Page
- -------- --------------------------------------------- ----
(27.1-2) Financial Data Schedule 11
(99.9a) Amended Exhibit B to Transfer Agent Agreement 12
(99.11) Consent of Independent Auditors 13
(99.12) Registrant's Annual Report for the Year Ended
March 31, 1996 including Financial Statements+ 14
(99.16) Calculation of Performance Information 15
</TABLE>
+ Filed with the SEC on or about May 30, 1996.
<PAGE> 75
Registration Nos. 2-25272 / 811-3347
==========================================================================
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
POST-EFFECTIVE AMENDMENT NO. 19
Under
The Securities Act of 1933
and
POST-EFFECTIVE AMENDMENT NO. 19
Under
The Investment Company Act of 1940
_________
SAFECO Money Market Trust
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza
Seattle, Washington 98185
(Address of Principal Executive Offices)
206-545-5000
(Registrant's Telephone Number, including Area Code)
==========================================================================
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000356822
<NAME> SAFECO MONEY MARKET TRUST
<SERIES>
<NUMBER> 1
<NAME> SAFECO MONEY MARKET FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 165,223
<INVESTMENTS-AT-VALUE> 165,223
<RECEIVABLES> 1,913
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 167,139
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,017
<TOTAL-LIABILITIES> 2,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 165,122
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,097
<OTHER-INCOME> 0
<EXPENSES-NET> 1,362
<NET-INVESTMENT-INCOME> 8,735
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,735
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,017,443
<NUMBER-OF-SHARES-REDEEMED> (1,031,725)
<SHARES-REINVESTED> 7,446
<NET-CHANGE-IN-ASSETS> (6,836)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 865
<INTEREST-EXPENSE> 2
<GROSS-EXPENSE> 1,362
<AVERAGE-NET-ASSETS> 173,445
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000356822
<NAME> SAFECO MONEY MARKET TRUST
<SERIES>
<NUMBER> 2
<NAME> SAFECO TAX-FREE MONEY MARKET FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 79,407
<INVESTMENTS-AT-VALUE> 79,407
<RECEIVABLES> 700
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80,107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 405
<TOTAL-LIABILITIES> 405
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 79,702
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,083
<OTHER-INCOME> 0
<EXPENSES-NET> 497
<NET-INVESTMENT-INCOME> 2,586
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,586
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,586
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 134,041
<NUMBER-OF-SHARES-REDEEMED> (133,924)
<SHARES-REINVESTED> 2,265
<NET-CHANGE-IN-ASSETS> 2,382
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 380
<INTEREST-EXPENSE> 4
<GROSS-EXPENSE> 497
<AVERAGE-NET-ASSETS> 76,506
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<PAGE> 1
EXHIBIT B
SAFECO MONEY MARKET TRUST
ALL SERIES
FEE SCHEDULE
SAFECO Services shall receive from each series fund ("Fund") of the Trust an
annual fee equal to $34 per account, but not to exceed a maximum of .30% of the
Fund's average net assets, which amount shall be calculated on a monthly basis
(by averaging the number of shareholder accounts at the beginning and end of
each month) and shall be billed and paid monthly. With respect to any omnibus
account maintained by any financial intermediary which is providing shareholder
services under a written sub-administration agreement with SAFECO Services, the
annual fee will be calculated based upon the average number of underlying
individual shareholder accounts comprising the omnibus account.
SAFECO Services Corporation SAFECO Money Market Trust
on behalf of each Series
/s/ David F. Hill /s/ David F. Hill
By:________________________ By:_______________________
Its: President Its: President
/s/ Neal A. Fuller /s/ Neal A. Fuller
Attest:____________________ Attest:___________________
Secretary Asst. Secretary
As of 06-01-96
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Investment Advisory and Other Services" and "Financial Statements"
in Post-Effective Amendment No. 19 to the Registration Statement (Form N-1A, No.
2-25272) and related Prospectus of SAFECO Money Market Trust dated July 19,
1996.
We also consent to the incorporation by reference therein of our report dated
April 26, 1996, with respect to the financial statements of SAFECO Money Market
Trust as of and for the year ended March 31, 1996 included in the 1996 Annual
Report filed with the Securities and Exchange Commission.
Seattle, Washington
July 16, 1996
<PAGE> 1
SAFECO TAX-FREE MONEY MARKET FUND
Calculation of Performance Quotations
The yield and effective yield for the SAFECO Tax-Free Money Market Fund for the
7-day period ended March 31, 1996 is calculated as follows:
( 1.000559 - 1.00)- 0
Yield = [--- ----------------------------- ] =
1.00
365
Base Period Return X ----- = 2.92%
7
365/7
Effective Yield = [( .000672610 + 1 ) ] - 1 = 2.96%
Where: $1.000559231 = value of one share at the end of a 7-day period
(as defined in the instructions to Item 22(b)(ii)
of Form N-1A)
$1.00 = value of one share at the beginning of a 7-day period
$0.00 = capital changes during the period, if any.
$0.000559231 = Base Period Return
The "tax-equivalent" yield for the Tax-Free Money Fund for the 7-day period
ended March 31, 1996 is calculated as follows:
2.92% x 1
Tax-equivalent yield = [ --------- ] + [2.92(1-1)] = = 4.83%
1 - .39.6
Where: 2.92% = "yield" as calculated above
39.6% = tax rate
100% = percentage of "yield" which is tax-free
<PAGE> 2
SAFECO TAX-FREE MONEY MARKET FUND
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year,
five-year, and ten-year periods ended March 31, 1996 are calculated as follows:
1-Year
- ----------------
1,034.40 - 1,000
Total return = ( ---------------------------) = 3.44%
1,000.00
____ ______________________
Average Annual Total Return = (1 \/ 1,034.40/ 1,000.00 -1) = 3.44%
Where: 1 = number of years
$1,034.40 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
5-Year
- ----------------
1,156.10 - 1,000
Total return = ( ---------------------------) = 15.61%
1,000.00
______________________
Average Annual Total Return = (5 \/ 1,156.10/ 1,000.00 -1) = 2.94%
Where: 5 = number of years
$1,156.10 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
10-Year
- ----------------
1,476.70 - 1,000
Total return = ( ----------------------------) = 47.67%
1,000.00
______________________
Average Annual Total Return = (10 \/ 1,476.70/ 1,000.00 -1) = 3.98%
Where: 10 = number of years
$1,476.70 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
<PAGE> 3
SAFECO MONEY MARKET FUND
Calculation of Performance Quotations
The yield and effective yield for the SAFECO Money Market Fund for the 7-day
period ended March 31, 1996 is calculated as follows:
( 1.000882 - 1.00)- 0
Yield = [- ----------------------- ] =
1.00
365
Base Period Return X --- = 4.60%
7
365/7
Effective Yield = [( .001039040 + 1 ) ] - 1 = 4.70%
Where: $1.000881942 = value of one share at the end of a 7-day period (as
defined in the instructions to Item 22(b)(ii)
of Form N-1A)
$1.00 = value of one share at the beginning of a 7-day period
$0.00 = capital changes during the period, if any.
$0.000881942 = Base Period Return
<PAGE> 4
SAFECO MONEY MARKET FUND
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year,
five-year, and ten-year periods ended March 31, 1996 are calculated as follows:
1-Year
- ----------------
1,051.50 - 1,000
Total return = ( --------------------------) = 5.15%
1,000.00
____ ______________________
Average Annual Total Return = (1 \/ 1,051.50/ 1,000.00 -1) = 5.15%
Where: 1 = number of years
$1,051.50 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
5-Year
- ----------------
1,214.50 - 1,000
Total return = ( ---------------------------) = 21.45%
1,000.00
______________________
Average Annual Total Return = (5 \/ 1,214.50/ 1,000.00 -1) = 3.96%
Where: 5 = number of years
$1,214.50 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
10-Year
- ----------------
1,740.80 - 1,000
Total return = ( --------------------------) = 74.08%
1,000.00
______________________
Average Annual Total Return = (10 \/ 1,740.80/ 1,000.00 -1) = 5.70%
Where: 10 = number of years
$1,740.80 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
