<PAGE>
December 31, 1997
ANNUAL
REPORT
MONEY MARKET FUNDS
NO-LOAD CLASS
--------
SAFECO Money Market Fund. . . . . . . . . . 2
SAFECO Tax-Free Money Market Fund . . . . . 6
[LOGO]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO MONEY MARKET FUND
December 31, 1997
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- --------------------------------------------------------------------------------
In the year ending December 31, 1997, the SAFECO Money Market Fund returned
4.93% while the average Money Market returned 4.90%, according to Lipper
Analytical Services. At year end, the Fund's seven-day yield was 4.96%. The
Money Market Fund yields are very attractive compared to the Consumer Price
Index that rose 1.70% for the 12 months ending December 31, 1997.
Early in 1997, ninety-day commercial paper rates fell from 5.30% to 5.20%
in March, when the Federal Reserve raised short-term interest rates. Since that
time, rates have traded in a range between 5.45% and 5.72%, ending the year at
5.57%. The yield curve (interest rates for various maturities) out to one year
remained flat throughout the period, reflecting the market's view of very little
risk of inflation and very steady rates going forward.
[PHOTOGRAPH]
NAOMI URATA
Recently, I invested in U.S. agency securities, commercial paper issued by
top-tier corporations, bank notes, medium-term notes, certificates of deposit,
taxable municipal bonds and an asset-backed student loan trust, a broad range of
assets to seek the best return for our money market investors. Seven securities
have a rate that floats so investors can benefit from higher yields if short
term rates rise. For example, I added a Merrill Lynch & Co. floating rate note
based on the prime rate. This security has an attractive current rate and should
continue to perform well. Banks are slower to lower their prime rates in a
falling rate environment and quicker to raise rates in a rising rate
environment.
I extended the seven-day weighted average maturity of the Fund from 36 days
at January 1, 1997, to 83 days at year end. I
- 2 -
<PAGE>
- --------------------------------------------------------------------------------
accomplished this by adding several pieces of one-year paper with attractive
yields, including Abbey National, a British bank, with a 5.88% yield, and
Bayerische Landesbank, a German bank, with a 5.81% yield.
It appears that the Federal Reserve will not raise interest rates in the
next few months as previously thought because inflation has remained low. Oil
prices are down due to greater supplies from OPEC and other countries. The Asian
financial turmoil is expected to reduce demand, keeping prices low. The dollar
has increased in value against Southeast Asian currencies, lowering the cost of
imports. As a result, economists are beginning to think that the next move by
the Fed may be an easing or lowering of interest rates in 1998. The timing is
uncertain. I will continue to keep a longer average maturity to retain
higher-yielding assets in the Fund as long as possible.
Naomi Urata
- --------------------------------------------------------------------------------
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the SAFECO Money Market Fund in August of 1994. She holds a Masters in
Management from Yale University and is a Chartered Financial Analyst.
- ------------------------------------------
HIGHLIGHTS
- ------------------------------------------
7-DAY WEIGHTED AVERAGE MATURITY 83 DAYS
TOTAL RETURN (1 YEAR) 4.93%
- ------------------------------------------
- 3 -
<PAGE>
<TABLE>
<CAPTION>
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PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
As of December 31, 1997
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER AND
FLOATING RATE NOTES++ - 97.2%
ASSET BACKED - 4.6%
$4,100 Ciesco L.P.
5.68%, due 1/27/98 . . . . . . . . . . . . . . . . . . . $4,083
4,000 + Receivables Capital Corp. 4(2)
5.88%, due 1/26/98
(acquired 12/15/97) . . . . . . . . . . . . . . . . . . . .3,984
BANKS - DOMESTIC - 13.5%
BankBoston N.A. BN
5,000 5.90%, due 7/23/98. . . . . . . . . . . . . . . . . . . . .5,000
3,000 5.84%, due 8/05/98. . . . . . . . . . . . . . . . . . . . .3,000
8,000 Bankers Trust CD
5.91%, due 8/07/98. . . . . . . . . . . . . . . . . . . . .7,998
8,000 U.S. Bank N.A. BN
5.83%, due 10/21/98 . . . . . . . . . . . . . . . . . . . .7,996
BANKS - FOREIGN - 14.7%
8,000 Abbey National Bank
5.88%, due 12/22/98 . . . . . . . . . . . . . . . . . . . .7,995
8,100 Bayerische Landesbank
5.81%, due 12/17/98 . . . . . . . . . . . . . . . . . . . .8,095
5,000 National Bank of Canada
6.15%, due 5/15/98. . . . . . . . . . . . . . . . . . . . .5,000
5,000 Societe Generale, NY
6.35%, due 4/15/98. . . . . . . . . . . . . . . . . . . . .5,001
CHEMICALS - 2.2%
4,000 Formosa Plastic
5.82%, due 2/27/98. . . . . . . . . . . . . . . . . . . . .3,963
CONGLOMERATES - 2.2%
4,000 B.A.T. Capital Corp.
5.82%, due 2/26/98. . . . . . . . . . . . . . . . . . . . .3,964
FINANCE - AUTO - 9.0%
4,000 Ford Motor Credit Co.
5.95%, due 1/09/98. . . . . . . . . . . . . . . . . . . . .3,995
4,000 General Motors Acceptance Corp.
5.52%, due 2/25/98. . . . . . . . . . . . . . . . . . . . .3,966
Hyundai Motors
4,000 5.87%, due 1/07/98. . . . . . . . . . . . . . . . . . . . .3,996
4,000 5.55%, due 1/06/98. . . . . . . . . . . . . . . . . . . . .3,997
FINANCE - CONSUMER - 8.1%
Associates Corp. of N.A.
2,380 6.73%, due 1/02/98. . . . . . . . . . . . . . . . . . . . .2,380
4,000 5.50%, due 1/08/98. . . . . . . . . . . . . . . . . . . . .3,996
4,000 Beneficial Corp.
5.78%, due 1/21/98. . . . . . . . . . . . . . . . . . . . .3,987
4,000 Household Financial Corp.
5.54%, due 1/13/98. . . . . . . . . . . . . . . . . . . . .3,993
FINANCE - DIVERSIFIED & BUSINESS - 15.7%
Finova Capital
4,000 5.73%, due 2/19/98. . . . . . . . . . . . . . . . . . . . .3,969
4,000 5.72%, due 1/16/98. . . . . . . . . . . . . . . . . . . . .3,990
4,000 General Electric Capital Corp.
5.91%, due 1/14/98. . . . . . . . . . . . . . . . . . . . .3,991
Heller Financial, Inc.
4,000 5.90%, due 2/10/98. . . . . . . . . . . . . . . . . . . . .3,974
4,000 5.85%, due 6/01/98. . . . . . . . . . . . . . . . . . . . .3,902
8,000 PHH Corp.
5.99%, due 6/11/98. . . . . . . . . . . . . . . . . . . . .8,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 4 -
<PAGE>
<TABLE>
<CAPTION>
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PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
As of December 31, 1997
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
FINANCE - MISCELLANEOUS - 2.0%
$3,570 PNC Student Loan Trust
5.75%, due 7/25/98. . . . . . . . . . . . . . . . . . . . $3,570
FINANCIAL SERVICES - BROKERAGE - 9.1%
8,200 Merrill Lynch & Co., Inc.
5.90%, due 12/21/98 . . . . . . . . . . . . . . . . . . . .8,200
4,000 Morgan Stanley Dean Witter
5.59%, due 1/22/98. . . . . . . . . . . . . . . . . . . . .3,987
4,000 5.57%, due 1/20/98. . . . . . . . . . . . . . . . . . . . .3,988
MACHINERY - 2.3%
4,100 Stanley Works
5.59%, due 1/30/98. . . . . . . . . . . . . . . . . . . . .4,082
METALS - 4.7%
BHP Finance (USA), Inc.
4,000 5.85%, due 2/04/98. . . . . . . . . . . . . . . . . . . . .3,978
4,415 5.59%, due 1/05/98. . . . . . . . . . . . . . . . . . . . .4,412
MUNICIPALITIES - 9.1%
4,100 Chicago, Illinois GO Unlimited
6.20%, due 1/01/01. . . . . . . . . . . . . . . . . . . . .4,100
4,000 City of Olathe, Kansas
6.15%, due 3/01/27. . . . . . . . . . . . . . . . . . . . .4,000
8,000 Wake Forest University
5.92%, due 7/01/17. . . . . . . . . . . . . . . . . . . . .8,000
--------
TOTAL COMMERCIAL PAPER AND
FLOATING RATE NOTES++ . . . . . . . . . . . . . . . . . . . . . . . . .172,532
--------
U.S. GOVERNMENT
AND AGENCY SECURITIES - 2.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DISCOUNT NOTES - 2.8%
5,000 5.71%, due 3/18/98. . . . . . . . . . . . . . . . . . . . $4,998
--------
TOTAL U.S. GOVERNMENT
AND AGENCY SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . .4,998
--------
TOTAL INVESTMENTS - 100.0% . . . . . . . . . . . . . . . . . . . . . . .177,530
Other Assets, less Liabilities . . . . . . . . . . . . . . . . . . . . . . . 44
--------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $177,574
--------
--------
</TABLE>
++ Certain 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 December 31, 1997. These rates change
periodically based on specified market rates or indices.
- --------------------------------------------------------------------------------
+ Security is exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer." The market value of such security is $3,983,667 and
represents 2.2% of net assets.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO TAX-FREE MONEY MARKET FUND
December 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PHOTOGRAPH]
MARY V. METASTASIO
In the year ending December 31, 1997, the SAFECO Tax-Free Money Market Fund
returned 3.12% while the average tax-free fund returned 3.08%, according to
Lipper Analytical Services. The Fund began 1997 with a seven-day weighted
average yield of 3.27% andended it at 3.44%.
Nineteen ninety-seven was a great year for fixed-income securities. A
"great year" in the bond market means that yields decline as bond prices rise.
For longer-maturity municipal bonds, yields dropped by more than half a percent
in 1997. However, rates for tax-free money market funds stayed fairly stable
during the year, fluctuating higher and lower, but showing no strong downward
movement. So what does this indicate? That there is investor resistance to lower
rates? That tax-exempt money market rates are driven largely by factors other
than general interest rate movements, such as supply and demand considerations?
That the yield curve (the difference between long and short-term rates) has
flattened? How about all of the above?
The important thing to remember about money markets is that it doesn't
really matter what happens in the other fixed-income markets or the equity
markets. And it doesn't really matter what happens in money markets relative to
these other markets. We don't invest in money market funds in order to "make a
killing." We invest in them in order to have some money set aside for expenses
we will have in the short term, and also some emergency funds. We want to get as
much yield as we can, while maintaining quality and liquidity.
It is the SAFECO Tax-Free Money Market Fund's goal to provide this quality
and liquidity,
<PAGE>
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along with a very competitive yield which is exempt from federal income tax.
During 1997, the Fund performed well, ranking 40th out of 136 comparable funds
for the year, according to Lipper Analytical Services. We continue to use our
barbell strategy, with a heavy weighting of the Fund's assets in short
maturities, and a lesser weighting in longer ones. This structure enables us to
take advantage of periodic upticks in interest rates, locking in higher yields
for longer periods of time for a portion of the Fund's assets.
For 1998, we plan to manage the SAFECO Tax-Free Money Market Fund as we
have in the past -- providing quality, liquidity, and a competitive, tax-exempt
yield.
Mary V. Metastasio
- --------------------------------------------------------------------------------
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. She
holds a B.A. in Dramatic Art from Whitman College and an M.B.A. from the
University of Washington.
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HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARISON OF THE FUND'S
TAX-EQUIVALENT YIELDS TO THE
THREE-MONTH TREASURY BILL YIELD
- --------------------------------------------
<S> <C>
SAFECO Tax-Free Money Market Fund*
Actual Yield 3.44
Tax-Equivalent Yield 4.05
Tax-Equivalent Yield 4.78
Tax-Equivalent Yield 4.99
Tax-Equivalent Yield 5.38
Tax-Equivalent Yield 5.7
Three-Month Treasury Bill**
Taxable Yield 5.35
</TABLE>
Tax Brackets 39.60% 36% 31% 28% 15%
* Represents the SAFECO Tax-Free Money Market Fund actual yield on December
31, 1997, and related tax-equivalent yields assuming various shareholder
tax brackets. Tax-equivalent yield comparisons vary with market conditions.
** Represents the Three-Month Treasury Bill Yield on December 31, 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
7-DAY WEIGHTED AVERAGE MATURITY. . . . . . . . . . . . . . . . . . . . .54 DAYS
TOTAL RETURN (1 YEAR). . . . . . . . . . . . . . . . . . . . . . . . . . .3.12%
- -------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE>
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PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS - 99.9%
ALABAMA - 2.0%
$1,500 North Alabama Environmental
Improvement Authority
(Reynolds Metals Co.) 1985
5.00%, due 12/01/00,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . $1,500
ALASKA - 5.0%
1,230 Alaska Industrial Development
and Export Authority
Revenue 1988 A-5
3.85%, due 7/01/98,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,230
2,575 Alaska Industrial Development
and Export Authority
Revenue 1988 A-6
3.85%, due 7/01/01,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .2,575
ARIZONA - 8.6%
3,600 Apache County Industrial
Development Authority
Pollution Control Revenue
(Tucson Electric Power Co.
Project) 1981
3.70%, due 6/15/20,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .3,600
1,000 Apache County Industrial
Development Authority
Revenue (Tucson Electric
Power Co. Springerville Project) 1983
3.70%, due 12/15/18,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,000
800 Pima County Industrial
Development Authority Revenue
(Tucson Electric Power Co.
Projects) 1982
3.70%, due 12/01/22,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . . .800
1,000 Tucson Industrial Development
Authority Revenue (Tucson City
Center Parking Garage Project)
Series 1985 A
4.28%, due 6/01/15,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,000
CALIFORNIA - 2.7%
1,000 California Student Education
Loan Marketing Corp. (Student
Loan Revenue Ref. Bonds)
3.85%, due 11/01/02,
put date 11/01/98 . . . . . . . . . . . . . . . . . . . . .1,000
500 Regional Airports Improvement
Corp. Fac. American Airlines
(LAX) Series E
5.00%, due 12/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .500
500 Regional Airports Improvement
Corp. Fac. American Airlines
(LAX) Series G
5.00%, due 12/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 8 -
<PAGE>
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PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
DISTRICT OF COLUMBIA - 1.9%
$1,420 District of Columbia Supplemental
Student Loan Revenue
4.10%, due 7/01/04,
put date 7/01/98. . . . . . . . . . . . . . . . . . . . . $1,421
FLORIDA - 3.8%
485 Dade County Equipment Special
Obligation Revenue 1987 A
3.90%, due 10/01/99,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . . .485
640 Dade County Equipment Special
Obligation Revenue 1988 A
3.90%, due 10/01/99,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . . .640
1,750 Florida Housing Finance Agency
Multifamily Revenue
4.10%, due 12/01/09,
put date 12/01/98 . . . . . . . . . . . . . . . . . . . . .1,750
GEORGIA - 3.2%
400 Burke County Development
Authority PCR (Georgia Power
Co.) 5th Series 1994
5.00%, due 7/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .400
2,000 Marietta Housing Authority
Multifamily Housing Revenue
(Falls at Bells Ferry)
3.65%, due 1/15/09,
put date 1/15/98. . . . . . . . . . . . . . . . . . . . . .2,000
ILLINOIS - 8.0%
3,120 Chicago - O'Hare International
Airport Revenue 1984 A
3.70%, due 1/01/15,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .3,120
580 Chicago - O'Hare International
Airport Revenue 1984 B
3.70%, due 1/01/15,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . . .580
1,300 Illinois Development Finance
Authority IDR (Countryside
Montessori Schools, Inc.
Project) Series 1997
4.25%, due 3/01/22,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,300
1,000 Illinois Development Finance
Authority Revenue (Sinai
Community Institute Project)
Series 1997
3.90%, due 3/01/22,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,000
IOWA - 5.3%
1,000 Iowa School Corporations
Warrant Certificates Series A
4.50%, due 6/26/98. . . . . . . . . . . . . . . . . . . . .1,003
3,030 Polk County Hospital Equipment
and Improvement Revenue 1985
3.80%, due 12/01/05,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .3,030
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 9 -
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
KANSAS - 4.2%
$2,100 Burlington Pollution Control
Revenue (Kansas City Power
and Light) Series B
3.75%, due 9/01/15,
put date 2/13/98. . . . . . . . . . . . . . . . . . . . . $2,100
1,100 Wichita Revenue (CSJ Health
System)
4.35%, due 10/01/11,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,100
KENTUCKY - 1.3%
1,000 Clark County Pollution Control
Revenue (East Kentucky
Power Co-op)
3.70%, due 10/15/14,
put date 4/15/98. . . . . . . . . . . . . . . . . . . . . .1,000
LOUISIANA - 1.3%
1,000 Louisiana Public Facilities
Authority Special Insurance
Assessment Revenue
4.35%, due 12/01/13,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,000
MARYLAND - 3.0%
2,000 Howard County Multifamily
Housing Revenue (Sherwood
Crossing Ltd. Partnership)
3.95%, due 6/01/08,
put date 6/01/98. . . . . . . . . . . . . . . . . . . . . .2,000
300 Montgomery County Industrial
Development Revenue
(Information Systems & Networks)
3.95%, due 4/01/14,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .300
MISSOURI - 5.7%
2,100 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(Coach House II Project)
4.15%, due 12/01/15,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .2,100
600 Kansas City Industrial
Development Authority
Multifamily Housing Revenue
(J.C. Nichols Co.)
4.15%, due 5/01/15,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .600
1,600 St. Louis Planned Industrial
Expansion Authority Industrial
Development Revenue
(Italgrani U.S.A., Inc.)
4.00%, due 6/01/03,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,600
MONTANA - 2.6%
1,990 Havre Industrial Development
Revenue (Safeway, Inc. Projects)
3.90%, due 6/01/06,
put date 6/01/98. . . . . . . . . . . . . . . . . . . . . .1,990
OKLAHOMA - 1.3%
1,000 Oklahoma Water Resources
Board State Loan Program
Revenue
3.75%, due 9/01/23,
put date 3/02/98. . . . . . . . . . . . . . . . . . . . . .1,000
OREGON - 0.5%
400 Umatilla County Hospital Facility
Authority (Franciscan Health
System Pooled Financing)
5.00%, due 12/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 10 -
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
PENNSYLVANIA - 4.8%
$2,135 Commonwealth Tax-Exempt
Mortgage Trust
4.05%, due 11/01/05,
put date 5/01/98. . . . . . . . . . . . . . . . . . . . . $2,135
1,490 Washington County Authority
(Higher Education Pooled
Equipment and Leasing Project)
Series 1985 A
3.85%, due 11/01/05,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,490
SOUTH CAROLINA - 2.0%
1,500 York County Pollution Control
Revenue (North Carolina Electric
Membership Corp. Project)
Pooled Series 1984 N-3
3.70%, due 9/15/14,
put date 3/15/98. . . . . . . . . . . . . . . . . . . . . .1,500
TENNESSEE - 5.2%
3,400 Hamilton County Industrial
Development Revenue
(Komatsu American
Manufacturing Corp.) 1985
4.35%, due 11/01/05,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .3,400
500 Knox County Industrial
Development Board Industrial
Development Revenue
(Service Merchandise)
3.80%, due 12/15/08,
put date 1/15/98. . . . . . . . . . . . . . . . . . . . . . .500
TEXAS - 14.3%
600 Grapevine Industrial Development
Corp. (American Airlines Inc.
Project) Series A2
5.00%, due 12/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .600
1,100 Grapevine Industrial Development
Corp. (American Airlines Inc.
Project) Series A4
5.00%, due 12/01/24,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,100
1,000 Harris County Housing Finance
Corp. Multifamily Housing
Revenue (Arbor II, Ltd. Project)
3.95%, due 10/01/05,
put date 10/01/98 . . . . . . . . . . . . . . . . . . . . .1,000
700 Lone Star Airport Improvement
Authority, Inc. (American
Airlines Inc. Project) Revenue
Series 1984 A-3
5.00%, due 12/01/14,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . . .700
1,200 Lone Star Airport Improvement
Authority, Inc. (American
Airlines Inc. Project) Revenue
Series 1984 A-4
5.00%, due 12/01/14,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,200
1,100 Lone Star Airport Improvement
Authority, Inc. (American
Airlines Inc. Project) Revenue
Series 1984 B-2
5.00%, due 12/01/14,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,100
1,000 North Central Texas Health
Facilities Development Corp.
(Presbyterian Medical Center
Project) Series 1985 C
5.00%, due 12/01/15,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,000
1,000 Sabine River Industrial
Development Authority
(Northeast Texas Electric
Cooperative, Inc. Project)
Series 1984 Q
3.65%, due 8/15/14,
put date 2/15/98. . . . . . . . . . . . . . . . . . . . . .1,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 11 -
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO TAX-FREE MONEY MARKET FUND
As of December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- --------------------------------------------------------------------------------
<S> <C>
TEXAS (CONTINUED)
$1,000 Tarrant County Housing Finance
Corp. Multifamily Housing
Revenue (Lincoln Meadows
Project) Series 1988
4.05%, due 12/01/14,
put date 12/01/98 . . . . . . . . . . . . . . . . . . . . $1,000
2,000 State of Texas Tax and Revenue
Anticipation Notes Series 1997 A
4.75%, due 8/31/98. . . . . . . . . . . . . . . . . . . . .2,011
VIRGINIA - 4.6%
2,500 Harrisonburg Development and
Housing Authority Multifamily
Housing Revenue (Rolling Brook
Village Apts. Project)
3.70%, due 2/01/26,
put date 2/01/98. . . . . . . . . . . . . . . . . . . . . .2,500
1,000 Peninsula Ports Authority of
Virginia Port Facility Revenue
(CSX Transportation, Inc. Project)
3.65%, due 12/15/12,
put date 2/06/98. . . . . . . . . . . . . . . . . . . . . .1,000
WASHINGTON - 8.6%
1,000 Richland Golf Enterprise
Revenue 1996
3.85%, due 12/01/21,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,000
1,955 Washington State Housing
Finance Commission Revenue
(Pioneer Human Services)
4.25%, due 7/01/11,
put date 1/07/98. . . . . . . . . . . . . . . . . . . . . .1,955
1,370 Washington State Housing
Finance Commission Revenue
(YMCA of Greater Seattle
Program) 1991
5.10%, due 7/01/11,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .1,370
2,130 Washington State Housing
Finance Commission Revenue
(YMCA of Snohomish County
Program) 1994
4.75%, due 8/01/19,
put date 1/01/98. . . . . . . . . . . . . . . . . . . . . .2,130
--------
TOTAL MUNICIPAL BONDS. . . . . . . . . . . . . . . . . . . . . . . . . . 75,315
--------
OTHER INVESTMENTS - 0.3%
INVESTMENT COMPANIES:
257 Federated Tax-Exempt
Money Market Fund, Inc. . . . . . . . . . . . . . . . . . . .257
--------
TOTAL OTHER INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .257
--------
TOTAL INVESTMENTS - 100.2% . . . . . . . . . . . . . . . . . . . . . . . 75,572
Liabilities, less Other Assets . . . . . . . . . . . . . . . . . . . . . . (135)
--------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$75,437
--------
--------
</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 December 31, 1997. These rates change periodically based
on specified market rates or indices.
- --------------------------------------------------------------------------------
If a put date is indicated, the Fund has a right to sell a specified underlying
security at an exercise price equal to the amortized cost of the underlying
security plus interest, if any, as of that date.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 12 -
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
As of December 31, 1997
(In Thousands, Except SAFECO MONEY SAFECO TAX-FREE
Per-Share Amounts) MARKET FUND MONEY MARKET FUND
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Value (Amortized Cost
$177,530 and $75,572, respectively) $ 177,530 $ 75,572
Receivables
Trust Shares Sold 1,245 289
Interest 1,019 432
--------- ---------
Total Assets 179,794 76,293
LIABILITIES
Payables
Trust Shares Redeemed 2,024 783
Dividends 35 18
Investment Advisory Fees 79 34
Other 82 21
--------- ---------
Total Liabilities 2,220 856
--------- ---------
Net Assets $ 177,574 $ 75,437
--------- ---------
--------- ---------
NO-LOAD CLASS:
Net Assets $ 176,623 $ 75,437
Trust Shares Outstanding 176,623 75,437
--------- ---------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 1.00 $ 1.00
--------- ---------
--------- ---------
CLASS A:
Net Assets $ 537 --
Trust Shares Outstanding 537
---------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 1.00
---------
---------
CLASS B:
Net Assets $ 414 --
Trust Shares Outstanding 414
---------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 1.00
---------
---------
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 13 -
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
SAFECO MONEY SAFECO TAX-FREE
(In Thousands) MARKET FUND MONEY MARKET FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $ 9,703 $ 2,743
EXPENSES
Investment Advisory Fees 865 366
Transfer Agent Fees 414 64
Legal and Auditing Fees 18 15
Custodian Fees 16 8
Reports to Shareholders 34 4
Trustees' Fees 5 4
Other Fees 4 4
--------- ---------
Total Expenses 1,356 465
--------- ---------
NET INVESTMENT INCOME AND NET CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS $ 8,347 $ 2,278
--------- ---------
--------- ---------
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 14 -
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SAFECO MONEY SAFECO TAX-FREE
MARKET FUND MONEY MARKET FUND
---------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR NINE-MONTH YEAR NINE-MONTH
ENDED PERIOD ENDED ENDED PERIOD ENDED
(In Thousands) DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 8,347 $ 5,795 $ 2,278 $ 1,710
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME
- No-Load Class (8,324) (5,792) (2,278) (1,710)
- Class A (15) (2) -- --
- Class B (8) (1) -- --
--------- --------- --------- ---------
Total (8,347) (5,795) (2,278) (1,710)
NET TRUST SHARE TRANSACTIONS
- No-Load Class 15,267 (3,766) 2,273 (6,538)
- Class A 243 295 -- --
- Class B 307 106 -- --
--------- --------- --------- ---------
Total 15,817 (3,365) 2,273 (6,538)
--------- --------- --------- ---------
TOTAL CHANGE IN NET ASSETS 15,817 (3,365) 2,273 (6,538)
NET ASSETS AT BEGINNING OF PERIOD 161,757 165,122 73,164 79,702
--------- --------- --------- ---------
NET ASSETS AT END OF PERIOD $ 177,574 $ 161,757 $ 75,437 $ 73,164
--------- --------- --------- ---------
--------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN
TRUST SHARES AND AMOUNTS
SALES 322,894 293,668 64,208 57,064
REINVESTMENTS 7,794 5,293 2,055 1,533
REDEMPTIONS (314,871) (302,326) (63,990) (65,135)
--------- --------- --------- ---------
NET CHANGE 15,817 (3,365) 2,273 (6,538)
--------- --------- --------- ---------
--------- --------- --------- ---------
Because share value is equal to $1.00,
dollar and share amounts are identical.
As of December 31, 1997:
Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $ .001
Paid in Capital $ 177,574 $ 75,437
- ----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 15 -
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 and
SAFECO Tax-Free Money Market Fund (together the "Funds").
Effective September 30, 1996, the 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.
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 which
permit management to make certain estimates and assumptions at the date of the
financial statements.
SECURITY VALUATION. Investments consist of short-term securities maturing
within thirteen months from the date of purchase. Securities in the Tax-Free
Money Market 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 Market
Fund, securities purchased on a when-issued or delayed basis may be settled a
month or more after the trade date. The securities purchased are carried in the
portfolio at market and are subject to market fluctuation during this period.
These securities begin earning interest on the settlement date. As commitments
to purchase when-issued securities become fixed, the Tax-Free Money Market Fund
segregates liquid assets in an amount equal to the total obligation.
- 16 -
<PAGE>
- --------------------------------------------------------------------------------
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. Each Fund intends 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 Market 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 Market 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 Market 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.
NOTES PAYABLE AND INTEREST EXPENSE. The Funds may borrow money for
temporary purposes from SAFECO Corporation or its affiliates. Interest rates
equivalent to commercial bank interest rates are charged on loans over $100,000.
No interest is charged on loans under $100,000.
LINE OF CREDIT. The Trust, together with all other management investment
companies for which SAFECO Asset Management Company serves as investment
advisor, has a line of credit arrangement with certain financial institutions.
Under these arrangements, $75 million is available to meet short-term finanicing
needs. No balance was outstanding under these arrangements at December 31, 1997.
- 17 -
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
FOR THE
YEAR NINE-MONTH
ENDED PERIOD ENDED
DECEMBER 31 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------------------------
1997 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.03 0.05 0.04 0.02
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.05) (0.03) (0.05) (0.04) (0.02)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN 4.93% 3.54%* 5.15% 4.20% 2.48%
NET ASSETS AT
END OF PERIOD (000'S) $ 176,623 $ 161,356 $ 165,122 $ 171,958 $ 186,312
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.78% 0.81%** 0.78% 0.78% 0.79%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 4.82% 4.66%** 5.04% 4.21% 2.47%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 18 -
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- --------------------------
FOR THE FOR THE
YEAR THREE-MONTH YEAR THREE-MONTH
ENDED PERIOD ENDED ENDED PERIOD ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
-------------------------- --------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.01 0.05 0.01
LESS DISTRIBUTIONS
Dividends from Net
Investment Income (0.05) (0.01) (0.05) (0.01)
--------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN 4.97% 1.21%* 4.94% 1.21%*
NET ASSETS AT
END OF PERIOD (000'S) $ 537 $ 295 $ 414 $ 106
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.72% 0.55%** 0.78% 0.54%**
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 4.91% 5.01%** 4.85% 4.96%**
- ------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 19 -
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
4. FINANCIAL HIGHLIGHTS (Continued)
(For a Share Outstanding Throughout the Period)
SAFECO TAX-FREE MONEY MARKET FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
FOR THE
YEAR NINE-MONTH
ENDED PERIOD ENDED
DECEMBER 31 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------------------------
1997 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.02 0.03 0.03 0.02
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.03) (0.02) (0.03) (0.03) (0.02)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN 3.12% 2.29%* 3.44% 2.84% 1.98%
NET ASSETS AT
END OF PERIOD (000'S) $ 75,437 $ 73,164 $ 79,702 $ 77,320 $ 94,589
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 0.63% 0.65%** 0.65% 0.64% 0.64%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 3.11% 3.03%** 3.40% 2.79% 1.96%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 20 -
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF THE SAFECO MONEY MARKET TRUST
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the SAFECO Money Market Trust
(comprising, respectively, the SAFECO Money Market Fund and SAFECO Tax-Free
Money Market Fund) as of December 31, 1997, and the related statements of
operations, the statements of changes in net assets, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting the SAFECO Money Market Trust at
December 31, 1997, the results of their operations, the changes in their net
assets, and the financial highlights for each of the periods indicated therein,
in conformity with generally accepted accounting principles.
ERNST & YOUNG, LLP
Seattle, Washington
January 30, 1998
- 21 -
<PAGE>
- --------------------------------------------------------------------------------
This page left blank intentionally.
- 22 -
<PAGE>
- --------------------------------------------------------------------------------
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
SAFECO U.S. Value 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.
- 23 -
<PAGE>
SAFECO MONEY MARKET FUNDS FOR SHAREHOLDER SERVICE:
BOARD OF TRUSTEES: Monday-Friday,
Boh A. Dickey, Chairman 5:30am-7:00pm Pacific Time
Barbara J. Dingfield
David F. Hill NATIONWIDE: 1-800-624-5711
Richard W. Hubbard
Richard E. Lundgren SEATTLE: (206) 545-7319
Larry L. Pinnt
John W. Schneider DEAF AND HARD OF HEARING
TTY/TDD SERVICE: 1-800-438-8718
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer FOR 24-HOUR AUTOMATED
Neal A. Fuller PERFORMANCE INFORMATION
Vice President and Controller AND TRANSACTIONS:
David H. Longhurst
Assistant Controller NATIONWIDE: 1-800-835-4391
INVESTMENT ADVISOR: SEATTLE: (206) 545-5113
SAFECO Asset
Management Company
DISTRIBUTOR: MAILING ADDRESS:
SAFECO Securities, Inc.
SAFECO Mutual Funds
TRANSFER AGENT: P.O. Box 34890
SAFECO Services Corporation Seattle, WA 98124-1890
CUSTODIAN: INTERNET:
State Street Bank www.safecofunds.com
INDEPENDENT AUDITORS: EMAIL: [email protected]
Ernst & Young, LLP
GMF 663 2/98
[LOGO] Printed on Recycled Paper.
This report must be preceded or
accompanied by a current prospectus.
- -Registered Trademark- Registered trademark of SAFECO Corporation.
2
