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December 31, 1997
ANNUAL
REPORT
FIRST SAFECO SEPARATE ACCOUNT S
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[FIRST SAFECO NATIONAL LIFE LOGO]
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STATEMENT OF ASSETS AND LIABILITIES
First SAFECO Separate Account S
As of December 31, 1997
<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO SAFECO SAFECO SAFECO SAFECO
EQUITY GROWTH NW BOND MMKT
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<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 5,554 $ 2,995 $ 1,127 $ 106 $170,602
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SHARES OWNED 211 114 72 10 170,602
NET ASSET VALUE PER SHARE $ 25.18 $ 23.35 $ 15.20 $ 11.04 $ 1.00
-------- -------- -------- -------- --------
Investments, at value 5,316 2,666 1,094 106 170,602
LIABILITIES:
Mortality and expense risk charge
payable 13 9 5 -- 135
Other 1 1 -- -- 15
-------- -------- -------- -------- --------
Total liabilities 14 10 5 -- 150
-------- -------- -------- -------- --------
NET ASSETS $ 5,302 $ 2,656 $ 1,089 $ 106 $170,452
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SPINNAKER
Net Assets $ 271 $ 2,593 $ 1,033 $ 53 $165,379
Accumulation units outstanding 6 68 67 3 10,730
-------- -------- -------- -------- --------
Accumulation unit value*
(Net assets divided by accumulation
units oustanding) $ 48.808 $ 38.410 $ 15.388 $ 19.130 $ 15.413
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SPINNAKER PLUS
Net Assets $ 5,031 $ 63 $ 56 $ 53 $ 5,073
Accumulation units outstanding 102 2 4 3 327
-------- -------- -------- -------- --------
Accumulation unit value*
(Net assets divided by accumulation
units oustanding) $ 49.122 $ 38.686 $ 15.493 $ 19.265 $ 15.509
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
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</TABLE>
* The redemption price per unit is the accumulation unit value less any
applicable contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO LEX LEX FED
SMALL NATURAL EMERGING FED HIGH FED AMC AMC
COMPANY RESOURCES MARKETS UTILITY INCOME INT'L BALANCED INT'L
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 499 $ 103 $ 100 $ 5,219 $ 101 $ 501 $ 9,883 $ 103
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SHARES OWNED 41 7 9 377 10 39 1,221 15
NET ASSET VALUE PER SHARE $ 12.33 $ 14.91 $ 8.91 $ 14.29 $ 10.95 $ 12.27 $ 8.24 $ 6.84
-------- -------- -------- -------- -------- -------- -------- --------
Investments, at value 507 104 76 5,391 107 482 10,058 102
LIABILITIES:
Mortality and expense risk charge
payable 6 -- -- 7 -- 1 7 3
Other -- -- -- -- -- -- 0 --
-------- -------- -------- -------- -------- -------- -------- --------
Total liabilities 6 -- -- 7 -- 1 7 3
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSETS $ 501 $ 104 $ 76 $ 5,384 $ 107 $ 481 $ 10,051 $ 99
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SPINNAKER
Net Assets $ 443 $ 52 $ 38 $ 58 $ 54 $ 432 $ 37 $ 50
Accumulation units outstanding 35 3 4 4 4 36 6 7
-------- -------- -------- -------- -------- -------- -------- --------
Accumulation unit value*
(Net assets divided by accumulation
units oustanding) $ 12.731 $ 14.952 $ 8.670 $ 15.135 $ 12.236 $ 12.003 $ 9.008 $ 7.039
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SPINNAKER PLUS
Net Assets $ 58 $ 52 $ 38 $ 5,326 $ 53 $ 49 $ 10,014 $ 49
Accumulation units outstanding 5 3 4 352 4 4 1,223 7
-------- -------- -------- -------- -------- -------- -------- --------
Accumulation unit value*
(Net assets divided by accumulation
units oustanding) $ 12.759 $ 14.996 $ 8.703 $ 15.144 $ 12.290 $ 12.017 $ 8.185 $ 6.793
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
First SAFECO Separate Account S
Period from June 25, 1997 (Inception date) to December 31, 1997
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<CAPTION>
SUB-ACCOUNTS
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SAFECO SAFECO SAFECO SAFECO SAFECO
EQUITY GROWTH NW BOND MMKT
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<S> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 387 $ 430 $ 47 $ 6 $ 558
Mortality and expense risk charge (13) (9) (5) -- (135)
Administrative charge (1) (1) (1) -- (15)
Net realized gain (loss) on
investments (358) (95) (394) -- --
Net change in unrealized appreciation (238) (329) (33) -- --
--------- --------- --------- --- ---------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS (223) (4) (386) 6 408
UNIT TRANSACTIONS:
Purchases 30,967 2,661 1,476 100 199,166
Redemptions (25,442) (1) (1) -- (29,122)
--------- --------- --------- --- ---------
NET UNIT TRANSACTIONS 5,525 2,660 1,475 100 170,044
--------- --------- --------- --- ---------
TOTAL CHANGE IN NET ASSETS 5,302 2,656 1,089 106 170,452
NET ASSETS AT BEGINNING OF PERIOD -- -- -- -- --
--------- --------- --------- --- ---------
NET ASSETS AT END OF PERIOD $ 5,302 $ 2,656 $ 1,089 $ 106 $ 170,452
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO LEX LEX FED
SMALL NATURAL EMERGING FED HIGH FED AMC AMC
COMPANY RESOURCES MARKETS UTILITY INCOME INT'L BALANCED INT'L
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 20 $ 3 $ -- $ 1 $ 2 $ -- $ -- $ --
Mortality and expense risk charge (6) -- -- (7) -- (1) (7) (3)
Administrative charge -- -- -- -- -- -- -- --
Net realized gain (loss) on
investments (18) -- -- 337 -- -- (56) 19
Net change in unrealized appreciation 8 1 (24) 172 5 (18) 175 (1)
--
--- --- --- -------- --- ------ ---------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 4 4 (24) 503 7 (19) 112 15
UNIT TRANSACTIONS:
Purchases 497 100 100 4,931 100 500 9,939 84
Redemptions -- -- -- (50) -- -- -- --
--
--- --- --- -------- --- ------ ---------
NET UNIT TRANSACTIONS 497 100 100 4,881 100 500 9,939 84
--
--- --- --- -------- --- ------ ---------
TOTAL CHANGE IN NET ASSETS 501 104 76 5,384 107 481 10,051 99
NET ASSETS AT BEGINNING OF PERIOD -- -- -- -- -- -- -- --
--
--- --- --- -------- --- ------ ---------
NET ASSETS AT END OF PERIOD $ 501 $ 104 $ 76 $ 5,384 $ 107 $ 481 $10,051 $ 99
--
--
--- --- --- -------- --- ------ ---------
--- --- --- -------- --- ------ ---------
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SEE NOTES TO FINANCIAL STATEMENTS
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NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
First SAFECO Separate Account S (the Separate Account) is registered under
the Investment Company Act of 1940, as amended, as a segregated unit investment
trust of First SAFECO National Life Insurance Company of New York (SAFECO), a
wholly-owned subsidiary of SAFECO Life Insurance Company. All of the Separate
Account accumulation units are owned by First SAFECO National Life Insurance
Company of New York or SAFECO Life Insurance Company. Purchasers of various
SAFECO variable annuity products direct their investment to one or more of the
sub-accounts of the Separate Account. Each sub-account invests in shares of a
designated portfolio as indicated below. Not all sub-accounts are available in
all SAFECO variable annuity products.
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<CAPTION>
SUB-ACCOUNTS UNDERLYING PORTFOLIOS
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<S> <C> <C>
SAFECO Resource Series Trust
SAFECO Resource Equity (SAFECO Equity) Equity Portfolio
SAFECO Resource Growth (SAFECO Growth) Growth Portfolio
SAFECO Resource Northwest (SAFECO NW) Northwest Portfolio
SAFECO Resource Bond (SAFECO Bond) Bond Portfolio
SAFECO Resource Money Market (SAFECO MMKT) Money Market Portfolio
SAFECO Resource Small Company Stock Small Company Stock Portfolio
(SAFECO Small Company)
Lexington Natural Resources Trust
Lexington Natural Resources (LEX Natural Resources) Natural Resources Portfolio
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets (LEX Emerging Markets) Emerging Markets Portfolio
Federated Insurance Series
Federated Utility (FED Utility) Utility Fund II
Federated High Income Bond (FED High Income) High Income Bond Fund II
Federated International Equity (FED Int'l) International Equity Fund II
American Century Variable Portfolios, Inc.
American Century Balanced (AMC Balanced) VP Balanced Portfolio
American Century International (AMC Int'l) VP International Portfolio
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2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Separate Account in the preparation of its financial statements.
These policies are in conformity with generally
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NOTES TO FINANCIAL STATEMENTS
accepted accounting principles, which permit management to make certain
estimates and assumptions at the date of the financial statements.
SECURITY VALUATION. Investments in portfolio shares are carried in the
statement of assets and liabilities at net asset value as reported by the
underlying portfolio. Realized gains or losses on securities transactions are
determined using the First-In First-Out (FIFO) cost method. Security
transactions are recorded on the trade date.
DISTRIBUTIONS. The net investment income and realized capital gains of the
Separate Account are not distributed, but are retained and reinvested for the
benefit of accumulation unit owners.
FEDERAL INCOME TAX. Operations of the Separate Account are included in the
federal income tax return of SAFECO, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current federal income tax law,
no income taxes are payable with respect to operations of the Separate Account.
3. EXPENSES
SAFECO assumes mortality and expense risks and incurs administrative expenses
related to the operations of the Separate Account. SAFECO deducts a daily charge
from the assets of the Separate Account related to these costs. The daily charge
for the Spinnaker product is, on an annual basis, equal to a rate of 1.40%
(1.25% for mortality and expense risks and 0.15% for administrative charges) of
the daily net assets of the Separate Account. The daily charge for the Spinnaker
Plus product is, on an annual basis, equal to 1.25% (for mortality and expense
risks) of the daily net assets of the Separate Account. There is is no
administrative charge for the Spinnaker Plus product.
There may be fees deducted by SAFECO from a contractholder's account and not
directly from the Separate Account. These fees may vary by product.
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NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT TRANSACTIONS
Purchase and sales activity in underlying portfolio shares for the period
from June 25, 1997 (inception date) to December 31, 1997 was as follows:
<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SALES
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<S> <C> <C>
SAFECO Equity $ 31,470 $ 25,559
SAFECO Growth 13,358 10,268
SAFECO NW 11,459 9,937
SAFECO Bond 106 --
SAFECO MMKT 473,031 302,429
SAFECO Small Company 10,864 10,347
LEX Natural Resources 103 --
LEX Emerging Markets 100 --
FED Utility 15,941 11,059
FED High Income 101 --
FED Int'l 501 --
AMC Balanced 16,427 6,488
AMC Int'l 6,656 6,572
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</TABLE>
5. HISTORICAL ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
SPINNAKER SPINNAKER PLUS
-------------------------- --------------------------
DECEMBER 31 JUNE 25 DECEMBER 31 JUNE 25
SUB-ACCOUNT 1997 1997* 1997 1997*
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<S> <C> <C> <C> <C>
SAFECO Equity $ 48.808 $ 46.489 $ 49.122 $ 46.752
SAFECO Growth 38.410 30.597 38.686 30.795
SAFECO NW 15.388 13.955 15.493 14.039
SAFECO Bond 19.130 18.169 19.265 18.283
SAFECO MMKT 15.413 15.125 15.509 15.208
SAFECO Small Company 12.731 11.053 12.759 11.070
LEX Natural Resources 14.952 14.377 14.996 14.409
LEX Emerging Markets 8.670 11.449 8.703 11.483
FED Utility 15.135 12.941 15.144 12.938
FED High Income 12.236 11.445 12.290 11.489
FED Int'l 12.003 12.377 12.017 12.381
AMC Balanced 9.008 8.534 8.185 7.748
AMC Int'l 7.039 7.195 6.793 6.938
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</TABLE>
* Inception date
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of First SAFECO National Life Insurance Company of New
York and Participants of First SAFECO Separate Account S
We have audited the accompanying statement of assets and liabilities of First
SAFECO Separate Account S (comprising, respectively, the SAFECO Resource Equity,
SAFECO Resource Growth, SAFECO Resource Northwest, SAFECO Resource Bond, SAFECO
Resource Money Market, SAFECO Resource Small Company Stock, Lexington Natural
Resources, Lexington Emerging Markets, Federated Utility, Federated High Income
Bond, Federated International Equity, American Century Balanced, and American
Century International Sub-Accounts) as of December 31, 1997, and the related
statements of operations and changes in net assets, and the historical
accumulation unit values for the period from June 25, 1997 (inception date) to
December 31, 1997. These financial statements and historical accumulation unit
values are the responsibility of the First SAFECO Separate Account S's
management. Our responsibility is to express an opinion on these financial
statements and historical accumulation unit values based on our audits.
We conducted our audit 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 historical
accumulation unit values 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 portfolio
shares owned as of December 31, 1997, by correspondence with the underlying
portfolio of each Sub-Account. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and historical accumulation unit
values referred to above present fairly, in all material respects, the financial
position of each of the Sub-Accounts constituting First SAFECO Separate Account
S at December 31, 1997, the results of their operations, the changes in their
net assets, and the historical accumulation unit values for the period from June
25, 1997 (inception date) to December 31, 1997, in conformity with generally
accepted accounting principles.
Seattle, Washington /s/ Ernst & Young LLP
January 30, 1998
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