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December 31, 1997
[SAFECO LOGO]
ANNUAL
REPORT
SAFECO RESOURCE VARIABLE ACCOUNT B
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[SAFECO LIFE LOGO]
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STATEMENT OF ASSETS AND LIABILITIES
SAFECO Resource Variable Account B
As of December 31, 1997
<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO
(In Thousands, Except Per-Share and SAFECO SAFECO SAFECO SAFECO SAFECO SMALL
Per-Unit Amounts) EQUITY GROWTH NW BOND MMKT COMPANY
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<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 145,281 $ 73,425 $ 4,003 $ 9,661 $ 2,704 $ 181
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
SHARES OWNED 6,787 3,571 304 875 2,704 14
NET ASSET VALUE PER SHARE $ 25.18 $ 23.35 $ 15.20 $ 11.04 $ 1.00 $ 12.33
---------- --------- --------- --------- --------- ---------
Investments, at value 170,907 83,376 4,626 9,663 2,704 176
Cash 39 2 -- 4 1 --
---------- --------- --------- --------- --------- ---------
Total assets 170,946 83,378 4,626 9,667 2,705 176
LIABILITIES:
Mortality and expense risk charge
payable 189 92 5 11 3 --
Other 40 2 -- 4 1 --
---------- --------- --------- --------- --------- ---------
Total liabilities 229 94 5 15 4 --
---------- --------- --------- --------- --------- ---------
NET ASSETS $ 170,717 $ 83,284 $ 4,621 $ 9,652 $ 2,701 $ 176
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
ACCUMULATION UNITS OUTSTANDING 3,475 2,153 298 501 174 14
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
ACCUMULATION UNIT VALUE*
(Net assets divided by accumulation
units oustanding) $ 49.122 $ 38.686 $ 15.493 $ 19.265 $ 15.509 $ 12.759
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
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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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LEX LEX FED
SCUDDER SCUDDER NATURAL EMERGING FED HIGH FED AMC AMC
INT'L BALANCED RESOURCES MARKETS UTILITY INCOME INT'L BALANCED INT'L
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $ 15,505 $ 10,298 $ 646 $ 292 $ 639 $ 732 $ 295 $ 347 $ 453
-------- -------- --------- --------- -------- ------- ------- --------- ------
-------- -------- --------- --------- -------- ------- ------- --------- ------
SHARES OWNED 1,184 891 45 27 53 70 25 42 66
NET ASSET VALUE PER SHARE $ 14.11 $ 13.30 $ 14.91 $ 8.91 $ 14.29 $ 10.95 $ 12.27 $ 8.24 $ 6.84
-------- -------- --------- --------- -------- ------- ------- --------- ------
Investments, at value 16,704 11,856 678 238 757 761 311 349 450
Cash -- 1 -- -- -- -- -- -- --
-------- -------- --------- --------- -------- ------- ------- --------- ------
Total assets 16,704 11,857 678 238 757 761 311 349 450
LIABILITIES:
Mortality and expense risk charge
payable 19 13 1 -- 1 1 1 1 --
Other -- -- -- -- -- -- -- -- --
-------- -------- --------- --------- -------- ------- ------- --------- ------
Total liabilities 19 13 1 -- 1 1 1 1 --
-------- -------- --------- --------- -------- ------- ------- --------- ------
NET ASSETS $ 16,685 $ 11,844 $ 677 $ 238 $ 756 $ 760 $ 310 $ 348 $ 450
-------- -------- --------- --------- -------- ------- ------- --------- ------
-------- -------- --------- --------- -------- ------- ------- --------- ------
ACCUMULATION UNITS OUTSTANDING 1,184 693 45 27 50 62 26 43 66
-------- -------- --------- --------- -------- ------- ------- --------- ------
-------- -------- --------- --------- -------- ------- ------- --------- ------
ACCUMULATION UNIT VALUE*
(Net assets divided by accumulation
units oustanding) $ 14.094 $ 17.080 $ 14.996 $ 8.703 $ 15.144 $12.290 $12.017 $ 8.185 $6.793
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-------- -------- --------- --------- -------- ------- ------- --------- ------
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
SAFECO Resource Variable Account B
Year or Period Ended December 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO SAFECO SAFECO
EQUITY GROWTH NW
--------------------- --------------------- ---------------------
(In Thousands) 1997 1996 1997 1996 1997 1996
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<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 12,420 $ 12,467 $ 13,463 $ 3,680 $ 198 $ 18
Mortality and expense risk charge (1,934) (1,394) (784) (395) (43) (30)
Net realized gain (loss) on
investments 9,610 4,626 5,338 1,462 227 66
Net change in unrealized appreciation 11,494 7,840 5,019 3,825 442 175
--------- --------- --------- --------- --------- ---------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 31,590 23,539 23,036 8,572 824 229
UNIT TRANSACTIONS:
Purchases 37,076 32,687 28,799 22,046 1,905 969
Redemptions (30,507) (13,315) (13,657) (4,576) (757) (435)
--------- --------- --------- --------- --------- ---------
NET UNIT TRANSACTIONS 6,569 19,372 15,142 17,470 1,148 534
--------- --------- --------- --------- --------- ---------
TOTAL CHANGE IN NET ASSETS 38,159 42,911 38,178 26,042 1,972 763
NET ASSETS AT BEGINNING OF YEAR 132,558 89,647 45,106 19,064 2,649 1,886
--------- --------- --------- --------- --------- ---------
NET ASSETS AT END OF YEAR $ 170,717 $ 132,558 $ 83,284 $ 45,106 $ 4,621 $ 2,649
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
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</TABLE>
* For the period from May 1, 1997 (inception date) to December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
SUB-ACCOUNTS
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SAFECO
SAFECO SAFECO SMALL SCUDDER
BOND MMKT COMPANY INT'L
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1997 1996 1997 1996 1997* 1997 1996
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<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 509 $ 495 $ 172 $ 241 $ 6 $ 349 $ 219
Mortality and expense risk charge (113) (111) (43) (63) -- (204) (142)
Net realized gain (loss) on
investments (143) (20) -- -- 1 1,473 173
Net change in unrealized appreciation 371 (425) -- -- (5) (467) 1,164
--------- --------- --------- --------- --- --------- ---------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 624 (61) 129 178 2 1,151 1,414
UNIT TRANSACTIONS:
Purchases 1,459 1,555 14,068 10,520 220 7,878 5,680
Redemptions (1,494) (1,150) (16,594) (10,042) (46) (6,231) (1,518)
--------- --------- --------- --------- --- --------- ---------
NET UNIT TRANSACTIONS (35) 405 (2,526) 478 174 1,647 4,162
--------- --------- --------- --------- --- --------- ---------
TOTAL CHANGE IN NET ASSETS 589 344 (2,397) 656 176 2,798 5,576
NET ASSETS AT BEGINNING OF YEAR 9,063 8,719 5,098 4,442 -- 13,887 8,311
--------- --------- --------- --------- --- --------- ---------
NET ASSETS AT END OF YEAR $ 9,652 $ 9,063 $ 2,701 $ 5,098 $ 176 $ 16,685 $ 13,887
--------- --------- --------- --------- --- --------- ---------
--------- --------- --------- --------- --- --------- ---------
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
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STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Year or Period Ended December 31
<TABLE>
<CAPTION>
SUB-ACCOUNTS
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LEX LEX
SCUDDER NATURAL EMERGING
BALANCED RESOURCES MARKETS
--------------------- --------------------- ---------------------
(In Thousands) 1997 1996 1997 1996# 1997 1996#
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<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 672 $ 249 $ 21 $ 1 $ -- $ --
Mortality and expense risk charge (121) (70) (8) (3) (4) (1)
Net realized gain (loss) on
investments 350 218 42 9 3 --
Net change in unrealized appreciation 1,044 148 (6) 38 (49) (5)
--------- --------- --------- --- --------- ---
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 1,945 545 49 45 (50) (6)
UNIT TRANSACTIONS:
Purchases 4,296 4,418 450 344 299 207
Redemptions (1,677) (966) (206) (5) (211) (1)
--------- --------- --------- --- --------- ---
NET UNIT TRANSACTIONS 2,619 3,452 244 339 88 206
--------- --------- --------- --- --------- ---
TOTAL CHANGE IN NET ASSETS 4,564 3,997 293 384 38 200
NET ASSETS AT BEGINNING OF YEAR 7,280 3,283 384 -- 200 --
--------- --------- --------- --- --------- ---
NET ASSETS AT END OF YEAR $ 11,844 $ 7,280 $ 677 $ 384 $ 238 $ 200
--------- --------- --------- --- --------- ---
--------- --------- --------- --- --------- ---
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</TABLE>
# For the period from February 15, 1996 (inception date) to December 31, 1996.
* For the period from May 1, 1997 (inception date) to December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
SUB-ACCOUNTS
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FED
FED HIGH FED AMC AMC
UTILITY INCOME INT'L BALANCED INT'L
- ------------------------------------------------------------- ------------------- ------------------- -------- --------
1997 1996# 1997 1996# 1997 1996# 1997* 1997*
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Dividend income $ 16 $ 6 $ 15 $ 5 $ -- $ -- $ -- $ --
Mortality and expense risk charge (6) (2) (4) -- (3) -- (1) (1)
Net realized gain (loss) on
investments 15 -- 5 -- 1 -- 1 --
Net change in unrealized appreciation 97 20 24 4 14 1 1 (3)
--- --- --- --- --- --- --- ---
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 122 24 40 9 12 1 1 (4)
UNIT TRANSACTIONS:
Purchases 431 265 682 109 273 43 363 492
Redemptions (77) (9) (77) (3) (18) (1) (16) (38)
--- --- --- --- --- --- --- ---
NET UNIT TRANSACTIONS 354 256 605 106 255 42 347 454
--- --- --- --- --- --- --- ---
TOTAL CHANGE IN NET ASSETS 476 280 645 115 267 43 348 450
NET ASSETS AT BEGINNING OF YEAR 280 -- 115 -- 43 -- -- --
--- --- --- --- --- --- --- ---
NET ASSETS AT END OF YEAR $ 756 $ 280 $ 760 $ 115 $ 310 $ 43 $ 348 $ 450
--- --- --- --- --- --- --- ---
--- --- --- --- --- --- --- ---
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
SAFECO Resource Variable Account B (the Separate Account) is registered under
the Investment Company Act of 1940, as amended, as a segregated unit investment
trust of SAFECO Life Insurance Company (SAFECO), a wholly-owned subsidiary of
SAFECO Corporation. 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.
<TABLE>
<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 (SAFECO Small Company Stock
Small Company) Portfolio
Scudder Variable Life Investment
Scudder International (SCUDDER Int'l) Fund
Scudder Balanced International Portfolio
Balanced Portfolio
Lexington Natural Resources Trust
Lexington Natural Resources (LEX Natural Natural Resources Portfolio
Resources)
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets (LEX Emerging Emerging Markets Portfolio
Markets)
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
American Century Balanced (AMC Balanced) Portfolios, Inc.
American Century International (AMC Int'l) VP Balanced Portfolio
VP International Portfolio
</TABLE>
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NOTES TO FINANCIAL STATEMENTS
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 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 related to the operations of the
Separate Account. SAFECO deducts a daily charge from the assets of the Separate
Account to cover these risks. This charge is, on an annual basis, equal to a
rate of 1.25% of the daily net assets of the Separate Account.
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 year ended
December 31, 1997 was as follows:
<TABLE>
<CAPTION>
(In Thousands)
SUB-ACCOUNT PURCHASES SALES
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<S> <C> <C>
SAFECO Equity $ 50,277 $ 33,178
SAFECO Growth 42,786 14,921
SAFECO NW 2,195 890
SAFECO Bond 2,097 1,735
SAFECO MMKT 15,049 17,449
SAFECO Small Company 226* 46*
SCUDDER Int'l 8,480 6,685
SCUDDER Balanced 5,122 1,948
LEX Natural Resources 480 222
LEX Emerging Markets 300 216
FED Utility 594 229
FED High Income 698 81
FED Int'l 350 98
AMC Balanced 368* 22*
AMC Int'l 508* 54*
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</TABLE>
* For the period from May 1, 1997 (inception date) to December 31, 1997.
5. HISTORICAL ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------------
SUB-ACCOUNT 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
SAFECO Equity $ 49.122 $ 39.829 $ 32.321 $ 25.424 $ 23.630
SAFECO Growth 38.686 27.082 20.756 14.897 13.480
SAFECO NW 15.493 11.968 10.777 10.156 9.923
SAFECO Bond 19.265 17.991 18.117 15.559 16.253
SAFECO MMKT 15.509 14.944 14.417 13.837 13.516
SAFECO Small Company* 12.759 -- -- -- --
SCUDDER Int'l 14.094 13.083 11.540 10.519 10.743
SCUDDER Balanced 17.080 13.919 12.596 10.066 10.346
LEX Natural Resources** 14.996 14.169 -- -- --
LEX Emerging Markets** 8.703 9.968 -- -- --
FED Utility** 15.144 12.106 -- -- --
FED High Income** 12.290 10.933 -- -- --
FED Int'l** 12.017 11.052 -- -- --
AMC Balanced* 8.185 -- -- -- --
AMC Int'l* 6.793 -- -- -- --
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</TABLE>
* Unit value on the inception date (May 1, 1997) was $10.000, $7.160, and
$6.200, for the SAFECO Small Company, AMC Balanced and AMC Int'l
Sub-accounts, respectively.
** Unit value on the inception date (February 15, 1996) was $11.920, $10.540,
$11.410, $10.050, and $10.480, for the LEX Natural Resources, LEX Emerging
Markets, FED Utility, FED High Income, and FED Int'l Sub-accounts,
respectively.
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of SAFECO Life Insurance Company and
Participants of SAFECO Resource Variable Account B
We have audited the accompanying statement of assets and liabilities of
SAFECO Resource Variable Account B (comprising, respectively, the SAFECO
Resource Equity, SAFECO Resource Growth, SAFECO Resource Northwest, SAFECO
Resource Bond, SAFECO Resource Money Market, SAFECO Resource Small Company
Stock, Scudder International, Scudder Balanced, 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 each of the periods indicated therein. These financial statements and
historical accumulation unit values are the responsibility of the SAFECO
Resource Variable Account B'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 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 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
audits provide 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 SAFECO Resource Variable
Account B at December 31, 1997, the results of their operations, the changes in
their net assets, and the historical accumulation unit values for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.
[SIGNATURE]
Seattle, Washington
January 30, 1998
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