<PAGE> 1
September 30, 1996
[PHOTO]
SEMIANNUAL
REPORT
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
[LOGO]
<PAGE> 2
PERFORMANCE INFORMATION
SAFECO MONEY MARKET FUND
Average Weekly Yield for Six-Month Period Ended September 24, 1996
Money Market Mutual Fund
MMKT Donoghue
--------------------
04/02 4.52 4.70
04/09 4.31 4.68
04/16 4.50 4.70
04/23 4.44 4.67
04/30 4.46 4.68
05/07 4.47 4.67
05/14 4.51 4.67
05/21 4.50 4.67
05/28 4.50 4.67
06/04 4.48 4.69
06/11 4.51 4.68
06/18 4.53 4.69
06/25 4.57 4.71
07/02 4.60 4.73
07/09 4.58 4.72
07/16 4.63 4.73
07/23 4.80 4.73
07/30 4.70 4.74
08/06 4.69 4.78
08/13 4.71 4.75
08/20 4.65 4.74
08/27 4.66 4.73
09/03 4.64 4.74
09/10 4.59 4.74
09/17 4.64 4.75
09/24 4.63 4.75
SAFECO TAX-FREE MONEY MARKET FUND
Average Weekly Yield for Six-Month Period Ended September 30, 1996
Tax-Free Money Market
IBC
TFMM Donoghue
------------------------
04/01 2.91 2.83
04/08 2.74 2.69
04/15 2.95 2.84
04/22 3.13 2.99
04/29 3.27 3.17
05/06 3.23 3.14
05/13 3.17 3.13
05/20 3.22 3.12
05/27 3.15 3.06
06/03 3.20 2.97
06/10 2.87 2.73
06/17 2.94 2.79
06/24 2.99 2.88
07/01 3.00 2.85
07/08 2.80 2.65
07/15 2.53 2.38
07/22 2.91 2.81
07/29 3.05 2.94
08/05 2.98 2.92
08/12 2.97 2.91
08/19 3.04 2.98
08/26 2.91 2.90
09/02 2.94 2.91
09/09 2.84 2.81
09/16 2.93 2.88
09/23 3.03 2.99
09/30 3.13 3.09
Yields are historical and not predictive of future
performance.
<PAGE> 3
LETTER FROM THE PRESIDENT
September 30, 1996
[Photo of David F. Hill]
SAFECO Money Market Fund.............. 3
SAFECO Tax-Free Money Market Fund .... 7
Financial Statements.................. 15
Notes to Financial Statements......... 18
DEAR
SHAREHOLDER:
Ambiguous economic indicators seemed to fuel investor unease, resulting in
significant volatility in the financial markets over the last six months. Still,
the net effect on the major asset classes was unsurprising: The broad stock
market as measured by the S&P rose, bond values declined slightly, and money
rates were relatively unchanged.
Those who had bailed out of the stock market in fear of the "coming
decline" missed out. Those of you who followed the rule of staying in the stock
market, but only with money that you can tolerate moving up and down, were
rewarded.
The S&P was up and down, and down severely in July, but finished the
six months with a 7.71% gain.
While some market watchers heralded the July downturn as the end of
the long-running bull market, it was not the case. The Dow Jones Industrial
Average, closed the third quarter flirting with the 6000 barrier. And the
S&P's latest 12-month return of 20.32% is far ahead of 14.95%, its average
annual return over the last ten years. It is unrealistic to expect the stock
market to continue to outgain its historical averages year after year. For
that reason we advise that the money you need for nearer-term goals be
invested in more stable investments.
Small Stocks proved more volatile than the larger market -- gaining more
in 1995 and giving back more in 1996. The Russell Small Company Index was up
15.79%, and NASDAQ gained 17.57% compared to the S&P's 20.32% gain for the year
ended September 30. Returning 8.94%, international stocks as measured
(Continued on next page.)
-1-
<PAGE> 4
LETTER FROM THE PRESIDENT (Continued)
by the EAFE Index continued to substantially lag the U.S. market.
Bond index returns were generally below their 10-year average annual
return.
Interest rates continued to rise during the six-month period, but the
increase was less dramatic than that experienced in the first quarter of 1996.
Thirty-year U.S. Treasury yields went from 6.67% on March 31 to 6.92% on
September 30. Since June, rates have gyrated within a fairly narrow range, and
the third quarter ended with interest rates basically unchanged.
At this writing, bonds are earning their coupons and holding their
values. This is what we want from bonds -- income and relative stability of
principal.
Municipal bonds, long suppressed by cries for flat taxes, outperformed
Treasury bonds during the last six months as the flat-tax advocates were
eliminated from political contention.
While the economy so far in 1996 has been more robust than we expected,
its overall pace of growth has been modest, and recently has shown signs of
moderating further.
Despite rising nearly one full percentage point since January, interest
rates remain near 30-year lows -- levels that are more likely to contribute to
growing, not to slowing the economy. Meanwhile, the inflation rate, which is
reasonably low by historical standards, is slowly increasing. And, the Fed has
declined to raise interest rates to brake the economy. We can only assume the
Fed is watching to see if today's higher interest rates will adequately slow
economic growth, effectively exorcising the specter of inflation.
Our view on the economy is that we will see a slowing of GDP growth in
1997 and that inflation will remain under control. The year 1997 could be quite
similar to 1996.
And, while we will manage your portfolios with due care and caution
given the current environment, our philosophy on investing has little to do with
our economic outlook. Fund investors should select their investments based on
their objectives, their time horizons and their comfort level.
/s/ David F. Hill
- --------------------------
David F. Hill, President
-2-
<PAGE> 5
REPORT FROM THE FUND MANAGER
SAFECO MONEY MARKET FUND
SEPTEMBER 30, 1996
[Photo of Naomi Urata]
In the six-month period ended September 30, 1996, the SAFECO Money Market
Fund's seven-day current yield fell to 4.31%, then rose to 4.81% and ended about
where it started at 4.59%. The average money fund yield as reported by
IBC/Donoghue was 4.75% on October 1, 1996. The Consumer Price Index, a broad
inflation measure, rose 3.0% for the 12 months ending September 30, 1996.
In the same period, 90-day commercial paper rates rose from 5.36% to a
peak of 5.61% just before the Federal Open Market Committee meeting on September
24, 1996. Many investors thought that the Fed would raise rates at that time due
to a tight labor market, increasing wage pressures and continued strength in
home sales. These factors were offset by slower consumer spending and no signs
of inflation in the CPI. The Fed did not raise rates and commercial paper rates
fell to 5.49% by the end of the quarter. The yield curve out to one year was
upward sloping, reflecting beliefs that inflation may become a problem resulting
in higher future short-term rates.
The average maturity of the portfolio fell to 25 days in July, as I
shortened it in anticipation of a possible rate hike. I moved it back up to 35
days when it became questionable whether the Federal Reserve would raise rates
as anticipated. I invested in U.S. agency securities, commercial paper issued by
top tier corporations and bank certificates of deposit and notes. All of the
securities were less than 13 months maturity. Three securities have a rate that
floats monthly so investors can benefit from higher yields if short-term rates
continue to rise.
I added the following new issuers' paper to the Fund: Associates
Corporation, a finance company, Crestar Bank, a regional financial institution,
and MBNA America Bank, a credit card issuer. All of these companies
(Continued on next page.)
-3-
<PAGE> 6
REPORT FROM THE FUND MANAGER
SAFECO MONEY MARKET FUND
(Continued)
have credit ratings in the top tier category. We do not invest in second tier
paper as the added return is not high enough to offset the risk. Additionally,
it does not fit my conservative investment style.
Looking ahead, economic signals are mixed and not moving as expected based
on past experience. For example, usually when unemployment is as low as it is
currently, inflation occurs, but it hasn't. I will manage the SAFECO Money
Market Fund in a neutral position based on that and other uncertainties.
Naomi Urata
Money Market Fund Manager
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the SAFECO Money Market Fund in August of 1994. Naomi holds a Masters in
Management from Yale University and is a Chartered Financial Analyst.
HIGHLIGHTS
SAFECO MONEY
MARKET FUND
As of September 30, 1996
<TABLE>
<CAPTION>
SAFECO MONEY
MARKET FUND
Top 5 Categories
- ----------------------
<S> <C>
Banks-Domestic: 19%
Asset Backed: 10%
Finance-Diversified
& Business: 9%
Finance-Auto: 7%
Financial Services-
Brokerage: 7%
</TABLE>
<TABLE>
<S> <C>
Weighted Average Maturity..... 35 days
Total Return (1 Year)......... 4.84%
PORTFOLIO CREDIT QUALITY Percent
Highest Rated(1) ............. 100%
Split Rated(2) ............... 0
Not Rated(3) ................. 0
---
100%
===
</TABLE>
(1) Rated highest quality by at least two nationally recognized rating
organizations or, when rated by only one organization, received its highest
rating.
(2) Rated highest by one organization and second highest by another.
(3) Although unrated, comparable in credit quality to securities in the highest
or split-rated categories, in the opinion of SAFECO Asset Management
Company, the Fund's investment advisor.
-4-
<PAGE> 7
PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -------------------------------------------------
<S> <C>
COMMERCIAL PAPER - 73.6%
AGRICULTURE - FERTILIZER PRODUCTS - 2.4%
$4,000 Cargill, Inc.
5.32%, due 11/08/96............. $3,977
ASSET BACKED - 9.5%
4,000 Apreco, Inc.
5.35%, due 10/31/96............. 3,982
4,000 Corporate Asset Funding Co.
5.35%, due 12/19/96............. 3,953
(b)Receivables Capital Corp. 4(2)
4,000 5.35%, due 10/01/96............. 4,000
4,000 5.30%, due 11/21/96............. 3,970
BANKING & FINANCE - 7.1%
Associates Corp. of
North America
4,000 5.42%, due 12/11/96............. 3,957
4,000 5.25%, due 10/02/96............. 3,999
4,000 Transamerica Finance Corp.
5.27%, due 10/29/96............ 3,984
BANKS - DOMESTIC - 9.5%
8,000 Crestar Bank
5.40%, due 11/20/96............. 8,000
Norwest Corp.
4,000 5.44%, due 10/18/96............. 3,990
4,000 5.29%, due 10/25/96............. 3,986
BANKS - FOREIGN - 2.3%
$4,000 National Australia
Funding (DE), Inc.
5.45%, due 1/13/97.............. $3,937
CONGLOMERATES - 4.8%
B.A.T. Capital Corp.
4,000 5.32%, due 10/10/96............. 3,995
4,000 5.31%, due 10/15/96............. 3,992
FINANCE - AUTO - 7.1% 4,000
Ford Motor Credit Co.
5.39%, due 1/28/97............. 3,929
4,000 General Motors
Acceptance Corp.
5.30%, due 10/23/96............. 3,987
4,000 New Center Asset Trust
5.35%, due 12/09/96............. 3,959
FINANCE - CONSUMER - 2.4%
4,000 Household Finance Corp.
5.30%, due 10/28/96............. 3,984
FINANCE - DIVERSIFIED & BUSINESS - 9.5%
GENERAL ELECTRIC CAPITAL CORP.
4,000 5.31%, due 11/12/96............. 3,975
4,000 5.29%, due 10/17/96............. 3,991
Heller Financial, Inc.
4,000 5.55%, due 1/07/97.............. 3,940
4,000 5.35%, due 10/31/96............. 3,982
</TABLE>
-5-
<PAGE> 8
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- ----------------------------------------------------------
<S> <C>
FINANCE - EQUIPMENT LEASING - 2.4%
$4,000 International Lease Finance Corp.
5.45%, due 11/06/96 ............... $3,978
FINANCIAL SERVICES - BROKERAGE - 7.1%
CS First Boston Group, Inc.
4,000 5.40%, due 11/04/96............... 3,980
4,000 5.35%, due 11/26/96............... 3,967
4,000 Merrill Lynch & Co., Inc.
5.30%, due 11/14/96............... 3,974
INSURANCE NON-AFFILIATED MULTI-LINE - 4.8%
Prudential Funding Corp.
4,000 5.43%, due 10/16/96............... 3,991
4,000 5.25%, due 10/07/96............... 3,996
MISCELLANEOUS - 4.7%
Tasmanian Public Finance Corp.
4,000 5.48%, due 12/16/96............... 3,954
4,000 5.30%, due 11/19/96............... 3,971
--------
TOTAL COMMERCIAL PAPER........................ 123,280
--------
U.S. GOVERNMENT
AND AGENCY SECURITIES - 10.6%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION DISCOUNT NOTES - 10.6%
$17,710 5.70%, due 10/01/96 .............. $17,710
-------
TOTAL U.S. GOVERNMENT
AND AGENCY SECURITIES......................... 17,710
-------
FLOATING RATE MEDIUM-TERM NOTES* - 14.6%
8,500 Dean Witter Discover
5.39%, due 8/08/97.... ........... 8,500
8,000 First Bank N.A.
5.39%, due 11/20/96... ........... 8,000
8,000 MBNA America Bank
5.48%, due 6/17/97.... ........... 8,000
-------
TOTAL FLOATING RATE
MEDIUM-TERM NOTES................ ............ 24,500
-------
TOTAL INVESTMENTS - 98.8%....... ............. 165,490
Other Assets, less Liabilities.... ........... 1,941
-------
NET ASSETS..................... .............. $167,431
========
</TABLE>
(b) Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer". At September 30, 1996, such securities are Receivables
Capital Corp. 4(2) at 5.35%, acquired 9/04/96, due 10/01/96 and Receivables
Capital Corp. 4(2) at 5.30%, acquired 8/26/96, due 11/21/96. The total market
value of such securities is $7,970,000 or 4.8% of net assets.
* Securities have variable rates which change periodically based on specified
market rates or indices. Rates shown are those in effect on September 30, 1996.
SEE NOTES TO FINANCIAL STATEMENTS
-6-
<PAGE> 9
REPORT FROM THE FUND MANAGER
SAFECO TAX-FREE MONEY MARKET FUND
September 30, 1996
[PHOTO OF MARY V. METASTASIO]
The SAFECO Tax-Free Money Market Fund's seven-day average yield rose from
2.92% to 3.13% during the six-month period ending September 30, 1996. For
comparison, IBC's Money Fund Report Averages showed 3.09% for tax-free money
market funds on September 30, 1996.
As is always the case with municipal money markets, the yields were
somewhat volatile on that upward path. This happens because the tax-free market
is very much influenced by supply and demand, in addition to the general
interest rate and economic concerns that affect all markets.
Tax-exempt money market interest rates rose in the spring as states and
municipalities issued short-term notes to help with their cash flow needs.
(Rates rose because investors required higher yields to digest the additional
supply of short-term paper in the market.) Rates then fell in early July as
notes issued in 1995 matured, reducing supply, and investors with cash to place
looked to tax-free money market funds, increasing demand.
The supply and demand factors were exacerbated by the fact that investors'
beliefs about what the Fed would do seemed to change daily. These mood swings
and general uncertainties helped move yields higher from late July through the
end of September.
The SAFECO Tax-Free Money Market Fund has performed well in this
ever-changing environment. According to Lipper
(Continued on next page.)
-7-
<PAGE> 10
REPORT FROM THE FUND MANAGER
SAFECO TAX-FREE MONEY MARKET FUND (Continued)
Analytical Services, based on total return, the Fund ranked 23 of 132 tax-free
money market funds for the year ending September 30, 1996. The fund was 13 of 90
funds for the five-year, and 9 of 56 funds for the 10-year periods.
The graph on the inside cover shows how the Fund's yield exceeded the IBC
Money Fund Report Averages for tax-free money market funds, for the six-month
reporting period.
Our style in managing the Fund is consistent, although the markets are
not. We have maintained a barbell structure, with the portfolio heavily weighted
in very short maturities, and smaller portions invested in longer maturities.
The assets invested in short maturities let us take advantage of interest rate
fluctuations, and those invested in longer maturities enable us to lock in
attractive yields.
So what does the future bring? As I write this, investor uncertainty about
Fed action continues. I cannot predict what will happen in the financial markets
or what the economic data will portend, but I am certain that I will continue to
manage the Fund as I have in the past: to provide shareholders quality,
liquidity, and a competitive yield that is exempt from federal income tax.
/s/ Mary V. Metastasio
- ---------------------------
Mary V. Metastasio
Tax-Free Money
Market Fund Manager
Mary Metastasio joined SAFECO's investment department in 1985 as a securities
analyst and began managing the SAFECO Tax-Free Money Market Fund in 1987. Mary
holds a B.A. in Dramatic Art from Whitman College and an M.B.A. from the
University of Washington.
-8-
<PAGE> 11
HIGHLIGHTS
SAFECO TAX-FREE MONEY MARKET FUND
As of September 30, 1996
Comparison of the Fund's
Tax-Equivalent Yields to the Average
Taxable Money Market Fund Yield
<TABLE>
<CAPTION>
TAX BRACKETS
- ------------
<S> <C> <C>
15% Actual Yield 3.13
15% Tax-Equivalent Yield 3.68
28% Tax-Equivalent Yield 4.35
31% Tax-Equivalent Yield 4.54
36% Tax-Equivalent Yield 4.89
39.6% Tax-Equivalent Yield 5.18
IBC/Donoghue*
Taxable Yield 4.75
</TABLE>
* Represents IBC/Donoghue Taxable Money Fund on September 24, 1996.
** Represents the SAFECO Tax-Free Money Market Fund actual yield on September
30, 1996, and related tax-equivalent yields assuming various shareholder tax
brackets. Tax-equivalent yield comparisons vary with market conditions.
<TABLE>
<CAPTION>
PORTFOLIO CREDIT QUALITY Percent
<S> <C>
Highest Rated(1) ............. 100%
Split Rated(2) ............... 0
Not Rated(3).................. 0
---
100%
===
</TABLE>
<TABLE>
<CAPTION>
TOP 5 CATEGORIES
<S> <C>
Housing/
Uninsured: 18%
IDR/PCR* Utilities-
Electric: 12%
IDR/PCR*
Miscellaneous: 8%
Miscellaneous
Tax: 7%
IDR/PCR* Air
Transportation: 6%
</TABLE>
*Industrial Development Revenue/Pollution Control Revenue
Weighted Average Maturity......46 days
Total Return (1 Year)............3.20%
<TABLE>
<CAPTION>
TOP FIVE STATES Percent of Net Assets
<S> <C>
Washington...................... 13%
Texas........................... 10%
Arizona......................... 8%
California....................... 8%
Missouri........................ 7%
</TABLE>
(1) Rated highest quality by at least two nationally recognized rating
organizations or, when rated by only one organization, received its
highest rating.
(2) Rated highest by one organization and second highest by another.
(3) Although unrated, comparable in credit quality to securities in the
highest or split-rated categories, in the opinion of SAFECO Asset
Management Company, the Fund's investment advisor.
-9-
<PAGE> 12
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- ------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS - 100.3%
Alaska - 3.0%
Alaska Industrial Development
and Export Authority Revenue
$1,265 (b)4.00%, due 7/01/98,
put date 10/07/96.... $1,265
990 4.00%, due 7/01/01,
put date 10/07/96....... 990
Arizona - 8.5%
3,600 Apache County Industrial
Development Authority
Pollution Control Revenue
(Tucson Electric Power Co. Project)
3.85%, due 6/15/20,
put date 10/07/96..... 3,600
1,000 Apache County Industrial
Development Authority
Revenue (Tucson Electric Power Co.
Springerville Project)
3.85%, due 12/15/18,
put date 10/07/96..... 1,000
800 Pima County Industrial
Development Authority
Revenue (Tucson Electric Power
Co. Projects)
3.85%, due 12/01/22,
put date 10/07/96....... 800
1,000 Tucson Industrial
Development Authority
Revenue (Tucson City
Center Parking Garage Project)
Series 1985 A
3.925%, due 6/01/15,
put date 10/07/96..... 1,000
California - 8.0%
$1,000 California Student Education
Loan Marketing
Corp. (Student Loan
Revenue Ref. Bonds)
3.90%, due 11/01/02,
put date 11/01/96.... $1,000
2,300 Orange County (Irvine Coast
Assessment District #88-1)
3.90%, due 9/02/18,
put date 10/01/96..... 2,300
1,000 Orange County Local
Transportation Authority
Sales Tax Revenue
3.70%, due 12/12/96... 1,000
1,200 Regional Airports
Improvement Corp.
Revenue Bonds Series 1984 (LAX)
3.90%, due 12/01/24,
put date 10/01/96..... 1,200
500 South Coast Local
Education Agencies
Pooled Tax and Revenue
Anticipation Notes
4.75%, due 6/30/97...... 502
Delaware - 0.4%
300 Wilmington Delaware Hospital
Revenue Bonds Series 1986
3.90%, due 7/01/11,
put date 10/01/96....... 300
District of Columbia - 1.4%
1,000 District of Columbia Supplemental
Student Loan Revenue
4.33%, due 7/01/04,
put date 7/01/97...... 1,002
</TABLE>
(b) If a put date is indicated, the Fund has a right to sell a specified
underlying security or securities at an exercise price equal to the amortized
cost of the underlying security plus accrued interest, if any, as of that date.
-10-
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- ------------------------------------------------------------
<S> <C>
Florida - 3.2%
$ 650 Dade County Equipment
Special Obligation Revenue
4.10%, due 10/01/99,
put date 10/07/96.... $ 650
1,750 Florida Housing Finance Agency
Multifamily Revenue
4.50%, due 12/01/09,
put date 12/01/96..... 1,750
Georgia - 5.5%
2,000 Marietta Housing Authority
Multifamily Housing Revenue
(Falls at Bells Ferry)
3.55%, due 1/15/09,
put date 1/15/97..... 2,000
2,100 Municipal Electric Authority of
Georgia General Resolution
Projects Subordinated Bonds,
Series C
3.60%, due 3/01/20,
put date 10/02/96..... 2,100
Illinois - 3.1%
2,320 Chicago - O'Hare
International Airport
Revenue 1984
3.90%, due 1/01/15,
put date 10/07/96..... 2,320
Iowa - 2.7%
1,000 Iowa Municipalities
Workers' Compensation
Association Revenue
4.10%, due 7/01/97.... 1,000
1,000 Iowa School Corporations
Warrant Certificates
4.75%, due 6/27/97.... 1,006
Kansas - 1.3%
$1,000 Wichita Revenue
(CSJ Health System)
4.00%, due 10/01/11,
put date 10/07/96... $1,000
Louisiana - 2.7%
1,000 Louisiana Public
Facilities Authority
Special Insurance
Assessment Revenue
4.10%, due 12/01/13,
put date 10/07/96..... 1,000
1,000 Louisiana Recovery District
Sales Tax Bonds Series 1988
3.90%, due 7/01/97,
put date 10/01/96..... 1,000
Maryland - 3.0%
2,000 Howard County Multifamily
Housing Revenue
(Sherwood Crossing Ltd.
Partnership)
3.75%, due 6/01/08,
put date 6/01/97..... 2,000
300 Montgomery County Industrial
Development Revenue
(Information Systems &
Networks)
3.80%, due 4/01/14,
put date 10/01/96....... 300
Missouri - 7.0%
2,100 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(Coach House II Project)
3.95%, due 12/01/15,
put date 10/01/96.... 2,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-11-
<PAGE> 14
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO TAX-FREE MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- ------------------------------------------------------------
<S> <C>
Missouri (Continued)
$ 600 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(J.C. Nichols Co.)
3.95%, due 5/01/15,
put date 10/01/96.... $ 600
1,000 Missouri Health and
Educational Facilities
Authority Educational Facilities
Revenue Bonds
(The Washington University)
Series 1996 C
3.95%, due 9/01/30,
put date 10/01/96..... 1,000
1,600 St. Louis Planned Industrial
Expansion Authority
Industrial Development Revenue
(Italgrani U.S.A., Inc.)
3.80%, due 6/01/03,
put date 10/01/96..... 1,600
Montana - 2.8%
2,110 Havre Industrial Development
Revenue (Safeway, Inc., Projects)
3.65%, due 6/01/06,
put date 12/01/96..... 2,110
New York - 1.3%
1,000 New York State Energy R & D
Authority PCR
(Long Island Lighting Co.
Project) 1985
Series B
3.30%, due 3/15/15,
put date 3/15/97...... 1,000
Ohio - 4.3%
300 Akron Sanitary Sewer
System Revenue
3.80%, due 12/01/14,
put date 10/07/96....... 300
Ohio (Continued)
$3,000 Cleveland-Cuyahoga County
Port Authority Revenue
(Rock and Roll Hall of Fame and
Museum Project)
3.80%, due 12/01/15,
put date 10/07/96.... $3,000
Oklahoma - 1.3%
1,000 Oklahoma Water Resources
Board State Loan Program
Revenue
3.75%, due 9/01/23,
put date 3/01/97...... 1,000
Oregon - 2.8%
1,800 Port of Portland Pollution
Control Revenue
(Reynolds Metals ) Series 1985
3.90%, due 12/01/09,
put date 10/01/96..... 1,800
300 Umatilla County Hospital
Revenue Bond
3.90%, due 12/01/04,
put date 10/01/96....... 300
Pennsylvania - 0.2%
165 Commonwealth Tax Exempt
Mortgage Trust
4.50%, due 11/01/05,
put date 11/01/96....... 165
South Carolina - 4.6%
1,000 South Carolina Jobs
Economic Development
Revenue Bonds
3.90%, due 7/01/22,
put date 10/01/96..... 1,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-12-
<PAGE> 15
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- ----------------------------------------------------------
<S> <C>
SOUTH CAROLINA (CONTINUED)
$1,500 York County Pollution Control
Revenue (North Carolina Electric
Membership Corp. Project)
Series N-6
3.80%, due 9/15/14,
put date 3/15/97..................... $1,500
1,000 York County Pollution Control
Revenue
(Saluda River Electric
Coop., Inc. Project)
Series 1984 E-2
3.65%, due 8/15/14,
put date 2/15/97..................... 1,000
TENNESSEE - 5.2%
3,400 Hamilton County Industrial
Development Revenue
(Komatsu American
Manufacturing Corp.)
4.00%, due 11/01/05,
put date 10/07/96.................... 3,400
500 Knox County Industrial
Development Board
Industrial Development Revenue
(Service Merchandise)
3.60%, due 12/01/08,
put date 10/15/96.................... 500
TEXAS - 10.4%
2,300 Cedar Hill Industrial Development
Corp. Revenue (Minyard
Properties Project)
3.80%, due 5/01/02,
put date 10/01/96.................... 2,300
3,000 Grapevine Industrial Development
Corp. Revenue (American
Airlines) 1984 Series B-1
3.90%, due 12/01/14,
put date 10/01/96.................... 3,000
TEXAS (CONTINUED)
$1,000 Harris County Housing Finance
Corp. Multifamily Housing
Revenue (Arbor II, Ltd. Project)
3.95%, due 10/01/05,
put date 10/01/96.................... $1,000
500 Lone Star Airport Improvement
Authority, Inc.
(American Airlines Inc. Project)
Revenue Series 1984 A-2
3.90%, due 12/01/14,
put date 10/01/96.................... 500
1,000 Tarrant County Housing Finance
Corp. Multifamily Housing
Revenue
(Lincoln Meadows Project)
Series 1988
4.30%, due 12/01/14,
put date 12/01/96.................... 1,000
VIRGINIA - 4.6%
2,500 Harrisonburg Development and
Housing Authority
Multifamily Housing Revenue
(Rolling Brook Village Apts. Project)
3.50%, due 2/01/09,
put date 2/01/97..................... 2,500
1,000 Peninsula Ports Authority of
Virginia Port Facility Revenue
(CSX Transportation, Inc. Project)
3.50%, due 12/15/12,
put date 11/07/96.................... 1,000
WASHINGTON - 13.0%
2,000 Chelan County Public Utility
District #1 Revenue
3.80%, due 6/01/15,
put date 10/07/96.................... 2,000
285 Federal Way School District #210
King County General Obligation
Bonds 1996
4.00%, due 12/01/96.................. 285
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-13-
<PAGE> 16
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000's) VALUE (000's)
- ----------------------------------------------------------
<S> <C>
WASHINGTON (CONTINUED)
$1,000 Richland Golf Enterprise
Revenue 1996
3.80%, due 12/01/21,
put date 10/07/96...................... $1,000
1,900 Washington State General
Obligation
Series VR-96 A
3.90%, due 6/01/20,
put date 10/07/96...................... 1,900
2,045 Washington State Housing
Finance Commission
Revenue (Pioneer Human
Services)
3.90%, due 7/01/11,
put date 10/07/96...................... 2,045
1,480 Washington State Housing
Finance Commission
Revenue (YMCA of Greater
Seattle Program)
4.00%, due 7/01/11,
put date 10/01/96...................... 1,480
WASHINGTON (CONTINUED)
$1,100 Washington State Housing
Finance Commission
Revenue (YMCA of
Snohomish County Program)
4.10%, due 8/01/19,
put date 10/01/96...................... $1,100
TOTAL MUNICIPAL BONDS........................... 75,570
-------
TOTAL INVESTMENTS - 100.3%...................... 75,570
Liabilities, less Other Assets.................. (209)
-------
NET ASSETS...................................... $75,361
=======
</TABLE>
Securities with a maturity of more than thirteen months have variable rates
and/or demand features which qualify them as short-term securities. Rates shown
are those in effect on September 30, 1996. These rates change periodically based
on specified market rate or indices.
SEE NOTES TO FINANCIAL STATEMENTS
-14-
<PAGE> 17
STATEMENTS OF ASSETS AND LIABILITIES
As of September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
(In Thousands, Except Per-Share Amounts) MARKET FUND MONEY MARKET FUND
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Value (Amortized Cost
$165,490 and $75,570, respectively) $165,490 $75,570
Cash 3 1
Receivables
Trust Shares Sold 3,373 717
Interest 96 367
-------- -------
Total Assets 168,962 76,655
-------- -------
LIABILITIES
Payables
Trust Shares Redeemed 1,370 1,175
Investment Advisory Fees 73 32
Dividends 26 18
Notes Payable -- 50
Other 62 19
-------- -------
Total Liabilities 1,531 1,294
-------- -------
NET ASSETS $167,431 $75,361
======== =======
SHARES OUTSTANDING 167,431 75,361
======== =======
NET ASSET VALUE PER SHARE $ 1.00 $ 1.00
======== =======
(Net Assets Divided by Shares Outstanding)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-15-
<PAGE> 18
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
(In Thousands) MARKET FUND MONEY MARKET FUND
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $4,575 $1,407
EXPENSES
Investment Advisory Fees 425 192
Shareholder Servicing Fees 228 37
Custodian Fees 12 6
Legal and Auditing Fees 11 9
Reports to Shareholders 16 4
Trustees' Fees 3 2
Loan Interest Expense -- 1
------ ------
Total Expenses 695 251
------ ------
NET INVESTMENT INCOME AND NET CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS $3,880 $1,156
====== ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-16-
<PAGE> 19
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO Money SAFECO Tax-Free
Market Fund Money Market Fund
-------------------------------------------------------------------------------
For the For the
Six-Month For the Six-Month For the
Period Ended Year Ended Period Ended Year Ended
(In Thousands) Sept. 30, 1996 March 31, 1996 Sept. 30, 1996 March 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 3,880 $ 8,735 $ 1,156 $ 2,586
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (3,880) (8,735) (1,156) (2,586)
NET TRUST SHARE TRANSACTIONS
No-Load 2,109 (6,836) (4,341) 2,382
Class A 100 -- -- --
Class B 100 -- -- --
----------- ----------- ----------- -----------
Total 2,309 (6,836) (4,341) 2,382
TOTAL CHANGE IN NET ASSETS 2,309 (6,836) (4,341) 2,382
NET ASSETS AT BEGINNING OF PERIOD 165,122 171,958 79,702 77,320
----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 167,431 $ 165,122 $ 75,361 $ 79,702
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN
TRUST SHARES AND AMOUNTS
SHARES SOLD 220,892 1,017,443 45,082 134,041
SHARES REINVESTED 3,525 7,446 1,033 2,265
SHARES REDEEMED (222,108) (1,031,725) (50,456) (133,924)
----------- ----------- ----------- -----------
NET CHANGE 2,309 (6,836) (4,341) 2,382
=========== =========== =========== ===========
</TABLE>
Because share value is equal to $1.00,
dollar amounts and share amounts are identical.
<TABLE>
<S> <C> <C>
As of September 30, 1996
Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $ .001
Paid in Capital $ 167,431 $ 75,361
Shares Outstanding
No-Load 167,231 75,361
Class A 100 N/A
Class B 100 N/A
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-17-
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The SAFECO Money Market Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust consists of the SAFECO Money Market Fund ("Money
Fund") and SAFECO Tax-Free Money Market Fund ("Tax-Free Money Fund") (together
the "Funds").
Effective September 30, 1996, the SAFECO Money Market Fund began issuing two
new classes of shares -- Class A and Class B shares. These new shares are
distributed by financial professionals and, like the no-load class, have no
associated sales or distribution charges. Financial highlights (see note 4) are
provided only for the no-load class of shares since the new classes of shares
were first issued on September 30, 1996.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
SECURITY VALUATION. Investments consist of short-term securities maturing
within thirteen months from the date of purchase. Securities in the Tax-Free
Money Fund with maturities of more than thirteen months have floating rates
and/or demand features which qualify them as short-term securities. Securities
purchased at par are valued at cost. All other securities are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
The cost of each portfolio is the same for financial statement and federal
income tax purposes.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. In the Tax-Free Money Fund,
securities purchased on a when-issued or delayed basis may be settled a month or
more after the trade date. The securities purchased are carried in the portfolio
at market and are subject to market fluctuation during this period. These
securities begin earning
-18-
<PAGE> 21
interest on the settlement date. As commitments to purchase when-issued
securities become fixed, the Tax-Free Money Fund segregates liquid assets in an
amount equal to the total obligation.
INCOME RECOGNITION. Interest is accrued on portfolio investments daily. Bond
premiums, original issue discounts and market discounts are amortized to either
call or maturity dates.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment income is
declared as a dividend to shareholders of record as of the close of each
business day and payment is made as of the last business day of each month.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all income to shareholders in a manner
which results in no tax to the Fund. Therefore, no federal income or excise tax
provision is required. The Tax-Free Money Fund intends to satisfy conditions
which will enable it to designate its dividends from net investment income as
tax-exempt dividend distributions.
3. INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
SAFECO Asset Management Company receives investment advisory fees from the
Funds. For the Money Fund, the fee is based on average daily net assets at the
annual rate of 50/100 of one percent on the first $250 million, declining in
three levels to 25/100 of one percent on net assets over $750 million. For the
Tax-Free Money Fund, the fee is based on average daily net assets at the annual
rate of 50/100 of one percent on the first $100 million, declining in three
levels to 20/100 of one percent on net assets over $500 million. SAFECO Services
Corporation receives shareholder servicing fees.
The Funds may borrow money for temporary purposes from SAFECO Corporation or
its affiliates at interest rates equivalent to commercial bank interest rates.
-19-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED
SEPTEMBER 30 FOR THE YEAR ENDED MARCH 31
----------------- --------------------------------------------------
1996 1996 1995 1994 1993
- --------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.05 0.04 0.02 0.03
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.05) (0.04) (0.02) (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
TOTAL RETURN 2.33%** 5.15% 4.20% 2.48% 2.98%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $167,231 $165,122 $171,958 $186,312 $144,536
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.83%* 0.78% 0.78% 0.79% 0.77%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 4.63%* 5.04% 4.21% 2.47% 3.02%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
-20-
<PAGE> 23
4. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO TAX-FREE MONEY MARKET FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED
SEPTEMBER 30 FOR THE YEAR ENDED MARCH 31
----------------- ----------------------------------------------
1996 1996 1995 1994 1993
- -------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.03 0.03 0.02 0.03
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.03) (0.03) (0.02) (0.03)
------- ------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN 1.52%** 3.44% 2.84% 1.98% 2.53%
NET ASSETS AT
END OF PERIOD (000'S OMITTED) $75,361 $79,702 $77,320 $94,589 $82,098
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.66%* 0.65% 0.64% 0.64% 0.61%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 3.04%* 3.40% 2.79% 1.96% 2.48%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
-21-
<PAGE> 24
This page left blank intentionally.
-22-
<PAGE> 25
This page left blank intentionally.
-23-
<PAGE> 26
This page left blank intentionally.
-24-
<PAGE> 27
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
SAFECO Managed 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
SAFECO Balanced Fund
LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
SAFECO International Stock 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.
-25-
<PAGE> 28
SAFECO MONEY MARKET FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
David F. Hill
Richard W. Hubbard
Richard E. Lundgren
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer
Neal A. Fuller
Vice President and Controller
INVESTMENT ADVISOR:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
U.S. Bank of Washington, N.A.
FOR SHAREHOLDER SERVICE:
Monday-Friday,
5:30am - 7:00pm Pacific Time
Nationwide: 1-800-624-5711
Seattle: 545-7319
TTY/TDD: 1-800-438-8718
FOR ACCOUNT INFORMATION,
YIELDS, PRICES AND
PERFORMANCE INFORMATION:
24 hours a day, 7 days a week
NATIONWIDE: 1-800-835-4391
SEATTLE: 545-5113
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
HOME PAGE:
http://networth.galt.com/
www/home/mutual/safeco
E-mail: [email protected]
GMF 663 11/96
Printed on Recycled Paper.
This report must be preceded or
accompanied by a current prospectus.
(R) Registered trademark of SAFECO Corporation.
