<PAGE> 1
ACCUMULATION
LIFE
[LOGO - Two puzzle pieces almost interlocked]
SAFECO LIFE
SEPARATE ACCOUNT SL
ANNUAL REPORT
December 31, 1996
This report is not to be construed as an offering for sale of any SAFECO Life
policy. No offering is made except in conjunction with a prospectus which must
precede or accompany this report
[LOGO] SAFECO LIFE
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PRESIDENT'S ANNUAL REPORT TO ENHANCED ACCUMULATION LIFE PARTICIPANTS
Dear Participant:
I am pleased to provide you with the audited 1996 SAFECO Life Separate Account
SL Annual Report for SAFECO's variable universal life product, Enhanced
Accumulation Life. Inside you will find audited financial statements from
Fidelity's Variable Insurance Products Fund (VIP), Variable Insurance Products
Fund II (VIP II), SAFECO Resources Series Trust (RST), Lexington Natural
Resources Trust, and Lexington Emerging Market Fund Inc. in which the product's
variable assets are invested. The investment options were expanded during 1996
with the addition of selected SAFECO and Lexington funds.
Enhanced Accumulation Life offers an effective solution to today's ever-changing
economic trends by combining life insurance protection with professionally
managed investment strategies. We value our relationship with you and appreciate
the opportunity to provide your life insurance protection and investment
services.
Sincerely,
R.E. Zunker
President
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SAFECO LIFE SEPARATE ACCOUNT SL
DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
Statement of Assets and Liabilities............................. A-3
Statement of Operations......................................... A-4
Statement of Changes in Net Assets.............................. A-5
Notes of Financial Statements................................... A-6
</TABLE>
A-1
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<PAGE> 7
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of SAFECO Life Insurance Company and
Unitholders of SAFECO Life Separate Account SL
We have audited the accompanying statement of assets and liabilities of the
Investment Divisions of SAFECO Life Separate Account SL (comprising,
respectively, the Fidelity VIP Growth, Fidelity VIP Money Market, Fidelity VIP
Equity Income, Fidelity VIP Overseas, Fidelity VIP High Income, Fidelity VIP II
Investment Grade Bond, Fidelity VIP II Asset Manager, Fidelity VIP II Index 500,
Fidelity VIP II Contrafund, Fidelity VIP II Asset Manager: Growth, SAFECO RST
Equity, SAFECO RST Growth, SAFECO RST Northwest, SAFECO RST Bond, Lexington
Natural Resources, and Lexington Emerging Markets Divisions) as of December 31,
1996, and the related statements of operations and changes in net assets, and
the unit values for each of the periods indicated therein. These financial
statements and unit values are the responsibility of SAFECO Life Separate
Account SL's management. Our responsibility is to express an opinion on these
financial statements and 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 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 and
the unit values. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with Fidelity Management and Research
Company, SAFECO Resource Series Trust, Lexington Natural Resources Trust, and
Lexington Emerging Markets Fund, Inc. 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 unit values referred to above
present fairly, in all material respects, the financial position of each of the
respective Investment Divisions of SAFECO Life Separate Account SL as listed
above at December 31, 1996, the results of their operations, the changes in
their net assets, and their unit values for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Seattle, Washington
January 31, 1997
<PAGE> 8
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
FIDELITY VIP MONEY EQUITY FIDELITY VIP
GROWTH MARKET INCOME OVERSEAS
DIVISION DIVISION DIVISION DIVISION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS:
Investments at fair value in:
Variable Insurance Products Fund ("VIP")
Cost:
Growth Portfolio _____________ $12,041,755 $13,828,604
Money Market Portfolio _______ 1,947,891 $ 1,947,891
Equity Income Portfolio _______ 5,878,562 $ 6,905,843
Overseas Portfolio _______ 3,756,282 $ 4,224,947
Due (To) From SAFECO LIFE.................... (15,850) 432 (688) (386)
----------- ----------- ----------- -----------
Net Assets................................... $13,812,754 $ 1,948,323 $ 6,905,175 $ 4,224,661
=========== =========== =========== ===========
Units Outstanding............................ 65,318.146 16,323.151 29,568.961 28,044.526
=========== =========== =========== ===========
Unit Value and Redemption Price
Per Unit................................... $ 211.469 $ 119.360 $ 233.528 $ 150.638
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
A-3
<PAGE> 9
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
FIDELITY VIP INVESTMENT ASSET FIDELITY VIP II
HIGH INCOME GRADE BOND MANAGER INDEX 500
DIVISION DIVISION DIVISION DIVISION
------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS:
Investments at fair value in:
Variable Insurance Products Fund ("VIP")
Cost:
High Income Portfolio ___________ $1,365,314 $1,445,332
Variable Insurance Products Fund ("VIP II")
Cost:
Investment Grade Bond Portfolio __ 692,913 $717,688
Asset Manager Portfolio __________ 6,971,437 $8,084,845
Index 500 Portfolio ______________ 2,741,349 $3,131,806
Due (To) From SAFECO LIFE .................... (160) 1,834 (1,700) (346)
---------- --------- ---------- ----------
Net Assets ................................... $1,445,172 $ 719,522 $8,083,145 $3,131,460
========== ========= ========== ==========
Units Outstanding ............................ 10,146.110 5,462.481 47,774.983 17,980.394
========== ========= ========== ==========
Unit Value and Redemption Price
Per Unit ................................... $ 142.436 $ 131.721 $ 169.192 $ 174.160
========== ========= ========== ==========
</TABLE>
See Notes to Financial Statements
A-3a
<PAGE> 10
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP II
FIDELITY VIP II ASSET SAFECO RST SAFECO RST
CONTRAFUND MANAGER: GROWTH EQUITY GROWTH
DIVISION DIVISION DIVISION DIVISION
--------------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSETS:
Investments at fair value in:
Variable Insurance Products Fund II
Cost:
Contrafund Portfolio _____________ $2,804,794 $3,193,743
Asset Manager: Growth Portfolio __ 768,244 $809,009
SAFECO Resource Series Trust ("RST")
Cost:
Equity Portfolio _________________ 332,030 $320,208
Growth Portfolio _________________ 1,391,837 $1,415,833
Due (To) From SAFECO LIFE...................... (152) (129) (5) 6,489
---------- --------- --------- ----------
Net Assets..................................... $3,193,591 $808,880 $320,203 $1,422,322
========== ========= ========= ==========
Units Outstanding.............................. 22,242.421 5,894.118 2,718.335 12,343.273
========== ========= ========= ==========
Unit Value and Redemption Price
Per Unit..................................... $143.581 $137.235 $117.794 $115.231
========== ========= ========= ==========
</TABLE>
See Notes to Financial Statements
A-3b
<PAGE> 11
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LEXINGTON LEXINGTON
SAFECO RST SAFECO RST NATURAL EMERGING
NORTHWEST BOND RESOURCES MARKETS
DIVISION DIVISION DIVISION DIVISION
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
NET ASSETS:
Investments at fair value in:
SAFECO Resource Series Trust ("RST")
Cost:
Northwest Portfolio _________________ $9,069 $9,216
Bond Portfolio ______________________ 8,391 $8,038
Lexington Natural Resources Trust
Cost:
Natural Resources Portfolio _________ 624,550 $683,427
Lexington Emerging Markets Fund, Inc.
Cost:
Emerging Markets Portfolio __________ 516,116 $512,750
Due (To) From SAFECO LIFE...................... (400) 0 (14) 0
------- -------- --------- ---------
Net Assets..................................... $8,816 $8,038 $683,413 $512,750
======= ======== ========= =========
Units Outstanding.............................. 88.842 79.865 5,936.067 5,424.580
======= ======== ========= =========
Unit Value and Redemption Price
Per Unit..................................... $99.237 $100.648 $115.129 $94.523
======= ======== ========= =========
</TABLE>
See Notes to Financial Statements
A-3c
<PAGE> 12
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------
FIDELITY VIP FIDELITY VIP
FIDELITY VIP MONEY EQUITY FIDELITY VIP
GROWTH MARKET INCOME OVERSEAS
DIVISION DIVISION DIVISION DIVISION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends......................................... $ 652,496 $106,904 $220,067 $ 73,902
Expenses (Note 3):
Mortality and Expense Risk Charge............... (106,992) (18,880) (52,471) (33,173)
---------- -------- -------- --------
Net Investment Income (Loss)...................... 545,504 88,024 167,596 40,729
---------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments........... 666,095 0 261,564 84,017
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 189,972 0 308,534 292,888
---------- -------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments.................................. $ 856,067 0 570,098 376,905
---------- -------- -------- --------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS:........................ $1,401,571 $ 88,024 $737,694 $417,634
========== ======== ======== ========
</TABLE>
See Notes to Financial Statements
A-4
<PAGE> 13
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------
FIDELITY VIP II FIDELITY VIP II
FIDELITY VIP INVESTMENT ASSET FIDELITY VIP II
HIGH INCOME GRADE BOND MANAGER INDEX 500
DIVISION DIVISION DIVISION DIVISION
------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends .................................... $ 62,691 $ 50,447 $440,128 $ 54,385
Expenses (Note 3):
Mortality and Expense Risk Charge .......... (9,849) (7,083) (66,690) (17,435)
-------- -------- -------- --------
Net Investment Income (Loss) ................. 52,842 43,364 373,438 36,950
-------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments ...... 14,163 7,591 67,740 68,068
Net Change in Unrealized Appreciation
(Depreciation) of Investments .............. 61,598 (36,058) 502,688 290,744
-------- -------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments ............................. 75,761 (28,467) 570,428 358,812
-------- -------- -------- --------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS .................... $128,603 $ 14,897 $943,866 $395,762
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements
A-4a
<PAGE> 14
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------
FIDELITY VIP II
FIDELITY VIP II ASSET SAFECO RST SAFECO RST
CONTRAFUND MANAGER: GROWTH EQUITY GROWTH
DIVISION DIVISION DIVISION* DIVISION*
--------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends .................................... $ 11,263 $41,438 $ 30,039 $115,216
Expenses (Note 3):
Mortality and Expense Risk Charge .......... (18,320) (4,651) (675) (3,614)
-------- ------- -------- --------
Net Investment Income (Loss) ................. (7,057) 36,787 29,364 111,602
-------- ------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments ...... 36,577 12,549 2,283 (3,530)
Net Change in Unrealized Appreciation
(Depreciation) of Investments .............. 383,171 43,534 (11,822) 23,996
-------- ------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments ............................. 419,748 56,083 (9,539) 20,466
-------- ------- -------- --------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS .................... $412,691 $92,870 $ 19,825 $132,068
======== ======= ======== ========
</TABLE>
- -----------
*For the period from April 30, 1996 (date of inception) through
December 31, 1996.
See Notes to Financial Statements
A-4b
<PAGE> 15
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------
LEXINGTON LEXINGTON
SAFECO RST SAFECO RST NATURAL EMERGING
NORTHWEST BOND RESOURCES RESOURCES
DIVISION* DIVISION* DIVISION* DIVISION*
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends .................................... $ 60 $ 439 $ 2,151 $ 0
Expenses (Note 3):
Mortality and Expense Risk Charge .......... (18) (17) (1,331) (1,451)
---- ----- ------- -------
Net Investment Income (Loss) ................. 42 422 820 (1,451)
---- ----- ------- -------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments ...... (13) 0 5,839 (3,540)
Net Change in Unrealized Appreciation
(Depreciation) of Investments .............. 147 (353) 58,877 (3,366)
---- ----- ------- -------
Net Realized and Unrealized Gain (Loss)
on Investments ............................. 134 (353) 64,716 (6,906)
---- ----- ------- -------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS .................... $176 $ 69 $65,536 $(8,357)
==== ===== ======= =======
</TABLE>
- -----------
*For the period from April 30, 1996 (date of inception) through
December 31, 1996.
See Notes to Financial Statements
A-4c
<PAGE> 16
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
GROWTH DIVISION MONEY MARKET DIVISION
-------------------------- ---------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ 545,504 $ (36,557) $ 88,024 $ 63,118
Net Realized Gain (Loss) on Investments........... 666,095 188,204 0 0
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 189,972 1,533,152 0 0
----------- ----------- ----------- -----------
Net Change in Net Assets from Operations.......... 1,401,571 1,684,799 88,024 63,118
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 4,124,943 2,788,510 3,446,186 2,556,160
Transfers out for Policy Related Transactions..... (1,568,735) (1,047,233) (130,228) (262,728)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... 1,043,497 1,455,022 (2,712,658) (3,011,769)
Gain (Loss) Attributable to SAFECO Life........... (3,620) (1,542) (10,424) 1,967
----------- ----------- ----------- -----------
Net Change in Net Assets from Policy
Transactions.................................... 3,596,085 3,194,757 592,876 (716,370)
----------- ----------- ----------- -----------
Net Change in Net Assets.......................... 4,997,656 4,879,556 680,900 (653,252)
Net Assets, Beginning of Period................... 8,815,098 3,935,542 1,267,423 1,920,675
----------- ----------- ----------- -----------
Net Asset, End of Period................. $13,812,754 $ 8,815,098 $ 1,948,323 $ 1,267,423
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
A-5
<PAGE> 17
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY INCOME DIVISION OVERSEAS DIVISION
------------------------- --------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ 167,596 $ 155,355) $ 40,729 $ (6,143)
Net Realized Gain (Loss) on Investments........... 261,564 40,434 84,017 20,370
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 308,534 707,446 292,888 204,791
---------- ---------- ---------- ----------
Net Change in Net Assets from Operations.......... 737,694 903,235 417,634 219,018
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 2,357,488 1,581,131 1,166,002 1,213,891
Transfers out for Policy Related Transactions..... (902,544) (503,402) (538,631) (334,256)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... 20,519 813,922 269,996) (217,295)
Gain (Loss) Attributable to SAFECO Life........... (1,691) (278) (673) (570)
---------- ---------- ---------- ----------
Net Change in Net Assets from Policy
Transactions.................................... 1,473,772 1,891,373 896,694 661,770
---------- ---------- ---------- ----------
Net Change in Net Assets.......................... 2,211,466 2,794,608 1,314,328 880,788
Net Assets, Beginning of Period................... 4,693,709 1,899,101 2,910,233 2,029,445
---------- ---------- ---------- ----------
Net Asset, End of Period................. $6,905,175 $4,693,709 $4,224,561 $2,910,233
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
A-5a
<PAGE> 18
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II
HIGH INCOME DIVISION INVESTMENT GRADE BOND DIVISION
-------------------------- ------------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ 52,842 $ 17,317 $ 43,364 $ 19,947
Net Realized Gain (Loss) on Investments........... 14,163 59,151 7,591 21,080
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 61,598 19,704 (36,058) 76,923
---------- -------- -------- --------
Net Change in Net Assets from Operations.......... 128,603 96,172 14,897 117,950
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 489,342 300,343 271,528 269,765
Transfers out for Policy Related Transactions..... (192,518) (78,496) (144,121) (185,044)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... 326,333 101,072 (412,302) 39,576
Gain (Loss) Attributable to SAFECO Life........... (37) (72) 64 192
---------- -------- -------- --------
Net Change in Net Assets from Policy
Transactions.................................... 623,120 322,847 (284,831) 124,489
---------- -------- -------- --------
Net Change in Net Assets.......................... 751,723 419,019 (269,934) 242,439
Net Assets, Beginning of Period................... 693,449 274,430 989,456 747,017
---------- -------- -------- --------
Net Asset, End of Period.......................... $1,445,172 $693,449 $719,522 $989,456
========== ======== ======== ========
</TABLE>
See Notes to Financial Statements
A-5b
<PAGE> 19
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
ASSET MANAGER DIVISION INDEX 500 DIVISION
-------------------------- ---------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ 373,438 $ 58,189 $ 36,950 $ 1,833
Net Realized Gain (Loss) on Investments........... 67,740 83,052 68,068 86,079
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 502,688 780,414 290,744 97,988
----------- ----------- ----------- ----------
Net Change in Net Assets from Operations.......... 943,866 921,655 395,762 185,900
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 2,044,200 2,403,059 1,192,914 512,837
Transfers out for Policy Related Transactions..... (1,211,057) (1,114,423) (284,721) (123,725)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... (424,044) (733,021) 670,973 403,638
Gain (Loss) Attributable to SAFECO Life........... (2,344) (322) (159) (182)
----------- ----------- ----------- ----------
Net Change in Net Assets from Policy
Transactions.................................... 408,755 555,293 1,579,007 792,568
----------- ----------- ----------- ----------
Net Change in Net Assets.......................... 1,352,621 1,476,948 1,974,769 978,468
Net Assets, Beginning of Period................... 6,730,524 5,253,576 1,156,691 178,223
----------- ----------- ----------- ----------
Net Asset, End of Period.......................... $8,083,145 $ 6,730,524 $ 3,131,460 $1,156,691
=========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements
A-5c
<PAGE> 20
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
CONTRAFUND DIVISION ASSET MANAGER: GROWTH DIVISION
--------------------------- ------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
1996 1995* 1996 1995*
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ ($7,057) $ 11,419 $ 36,787 $ 7,571
Net Realized Gain (Loss) on Investments........... 36,577 5,064 12,549 766
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... 383,171 5,779 43,534 (2,769)
---------- ---------- -------- --------
Net Change in Net Assets from Operations.......... 412,691 22,262 92,870 5,568
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 1,223,954 352,947 247,373 52,359
Transfers out for Policy Related Transactions..... (250,013) (34,578) (47,071) (5,450)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... 744,280 727,253 315,334 142,922
Gain (Loss) Attributable to SAFECO Life........... (4,087) (1,118) 3,877 1,098
---------- ---------- -------- --------
Net Change in Net Assets from Policy
Transactions.................................... 1,714,134 1,044,504 519,513 190,929
---------- ---------- -------- --------
Net Change in Net Assets.......................... 2,126,825 1,066,766 612,383 196,497
Net Assets, Beginning of Period................... 1,066,766 0 196,497 0
---------- ---------- -------- --------
Net Asset, End of Period.......................... $3,193,591 $1,066,766 $808,880 $196,497
========== ========== ======== ========
</TABLE>
- --------------
* For the period from April 30, 1995 (date of inception) through
December 31, 1995.
See Notes to Financial Statements
A-5d
<PAGE> 21
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SAFECO RST SAFECO RST SAFECO RST
EQUITY DIVISION GROWTH DIVISION NORTHWEST DIVISION
--------------- --------------- -------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31** DECEMBER 31** DECEMBER 31**
1996 1996 1996
--------------- --------------- -------------------
<S> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)............... $ 29,364 $ 111,602 $ 42
Net Realized Gain (Loss) on Investments.... 2,283 (3,530) (13)
Net Change in Unrealized Appreciation
(Depreciation) of Investments............ (11,822) 23,996 147
-------- ---------- ------
Net Change in Net Assets from Operations... 19,825 132,068 176
CHANGE IN NET ASSETS FROM POLICY
TRANSACTIONS:
Transfers in from Net Premiums............. 56,058 265,857 3,602
Transfers out for Policy Related
Transactions............................. (7,234) (36,206) (371)
Transfers between Separate Account SL's....
Divisions and (to) from Guaranteed
Interest Division, Net................... 251,559 1,054,115 5,808
Gain (Loss) Attributable to SAFECO Life.... (5) 6,488 (399)
-------- ---------- ------
Net Change in Net Assets from Policy
Transactions............................. 300,378 1,290,254 8,640
-------- ---------- ------
Net Change in Net Assets................... 320,203 1,422,322 8,816
Net Assets, Beginning of Period............ 0 0 0
-------- ---------- ------
Net Assets, End of Period.................. $320,203 $1,422,322 $8,816
======== ========== ======
</TABLE>
- ---------------
** For the period from April 30, 1996 (date of inception) through December 31,
1996.
See Notes to Financial Statements
A-5e
<PAGE> 22
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
LEXINGTON LEXINGTON
NATURAL EMERGING
SAFECO RST RESOURCES MARKETS
BOND DIVISION DIVISION DIVISION
------------- ------------ -----------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31** DECEMBER 31** DECEMBER 31**
1996 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS:
Net Investment Income (Loss)...................... $ 422 $ 820 $ (1,451)
Net Realized Gain (Loss) on Investments........... 0 5,839 (3,540)
Net Change in Unrealized Appreciation
(Depreciation) of Investments................... (353) 58,877 (3,366)
------ -------- --------
Net Change in Net Assets from Operations.......... 69 65,536 (8,357)
CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS:
Transfers in from Net Premiums.................... 7,138 136,380 132,526
Transfers out for Policy Related Transactions..... (41) (9,309) (14,320)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net.......................... 870 480,695 402,781
Gain (Loss) Attributable to SAFECO Life........... 2 10,111 120
------ -------- --------
Net Change in Net Assets from Policy
Transactions.................................... 7,969 617,877 521,107
------ -------- --------
Net Change in Net Assets.......................... 8,038 683,413 512,750
Net Assets, Beginning of Period................... 0 0 0
------ -------- --------
Net Asset, End of Period.......................... $8,038 $683,413 $512,750
====== ======== ========
</TABLE>
- -------------
**For the period from April 30, 1996 (date of inception) through December 31,
1996.
See Notes to Financial Statements
A-5f
<PAGE> 23
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS
1) ORGANIZATION
SAFECO Life Separate Account SL (Account SL) is a separate account of
SAFECO Life Insurance Company (SAFECO), a wholly-owned subsidiary of
SAFECO Corporation, and is a unit investment trust registered under the
Investment Company Act of 1940, as amended.
Account SL was formed by SAFECO to support the operations of its
variable life insurance policies. SAFECO Securities, Inc., a
wholly-owned subsidiary of SAFECO Corporation, is the principal
underwriter of the Policies issued through Account SL. The assets of
Account SL are the property of SAFECO and such assets applicable to the
Policies will not be chargeable with liabilities arising out of any
other business SAFECO may conduct.
On January 3, 1996, SAFECO was granted approval in an order by the SEC
to transfer Policy Account Values from Investment Divisions invested in
portfolios of Hudson River Trust to certain Investment Divisions
invested in portfolios of Variable Insurance Products (VIP) and Variable
Insurance Product II (VIPII). On February 20, 1996, SAFECO transferred
the Policy Account Values specified in the order. From February 20,
1996 to April 29, 1996, Account SL consisted solely of ten Investment
Divisions invested in portfolios of VIP and VIPII.
On April 30, 1996, Account SL introduced six new Investment Divisions to
policyholders. These divisions invest in the Equity, Growth, Northwest,
and Bond Portfolios of SAFECO Resource Series Trust, the Lexington
Natural Resources Portfolio of Lexington Natural Resources Trust, and
the Lexington Emerging Markets Portfolio of the Lexington Emerging
Markets Fund, Inc.
Policyowners are permitted to transfer their funds to other investment
divisions of Account SL and to the Guaranteed Interest Division, which
is not part of Account SL.
2) SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Account SL are prepared in conformity with
generally accepted accounting principles, which permits management to
make certain estimates and assumptions at the date of the financial
statements. Descriptions of the significant accounting policies used in
preparing the financial statements are set forth below.
SECURITY VALUATION. Investments in shares are valued at the net asset
value of the respective portfolio.
SECURITY TRANSACTIONS. Investment transactions are recorded on the
trade date. Realized gains (losses) on sales of shares are determined
on the basis of identified cost. Net investment income and net realized
and unrealized gain (loss) on investments are allocated to the contracts
on a pro rata basis.
FEDERAL INCOME TAXES. The operations of Account SL are included in the
Federal income tax return of SAFECO. Under the provisions of the
policies, SAFECO has the right to charge Account SL. No charge is
currently being made against Account SL for such tax since, under
current tax law, SAFECO pays no tax on investment income and capital
gains reflected in variable life insurance policy reserves.
3) EXPENSES
SAFECO assumes mortality and expense risks related to the operations of
Account SL and deducts a charge from the assets of Account SL at an
annual rate of .90% of policyowners' net assets to cover these risks.
SAFECO also makes deductions from premiums for administrative expenses
and state premium taxes before amounts are allocated to Account SL.
A-6
<PAGE> 24
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4) UNIT ACTIVITY
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
GROWTH DIVISION (1) MONEY MARKET DIVISION
---------------------- ----------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Units:
Units Sold............................ 25,612 25,127 30,477 22,743
Units Redeemed........................ (7,677) (6,124) (25,245) (29,287)
------- ------- ------- -------
Net Increase (Decrease)............... 17,935 19,003 5,232 (6,544)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY INCOME (1) OVERSEAS DIVISION (1)
---------------------- ----------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Units:
Units Sold............................ 10,927 13,207 10,117 9,562
Units Redeemed........................ (4,121) (2,775) (3,747) (4,317)
------- ------- ------- -------
Net Increase (Decrease)............... 6,806 10,432 6,370 5,245
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
HIGH INCOME DIVISION(1) INVESTMENT GRADE BOND DIVISION
----------------------- ------------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Units:
Units Sold............................ 6,059 3,566 2,123 2,446
Units Redeemed........................ (1,414) (667) (4,342) (1,508)
------- ------- ------- -------
Net Increase (Decrease)............... 4,645 2,899 (2,219) 938
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
ASSET MANAGER DIVISION(1) INDEX 500 DIVISION(1)
------------------------- -----------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Units:
Units Sold............................ 13,029 17,674 11,713 7,326
Units Redeemed........................ (10,432) (13,371) (1,817) (936)
------- ------- ------- -------
Net Increase (Decrease)............... 2,597 4,303 9,896 6,390
======= ======= ======= =======
</TABLE>
(1) Officers of SAFECO have minor investments in this division at December 31,
1996
A-6a
<PAGE> 25
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
CONTRAFUND DIVISION ASSET MANAGER: GROWTH DIVISION
-------------------------- ------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
1996 1995* 1996 1995*
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Units:
Units Sold........................................ 15,208 9,226 4,590 1,750
Units Redeemed.................................... (1,897) (295) (397) (48)
------ ----- ----- -----
Net Increase (Decrease)........................... 13,311 8,931 4,193 1,702
====== ===== ===== =====
<CAPTION>
SAFECO RST SAFECO RST
EQUITY DIVISION GROWTH DIVISION(1)
-------------------------- ------------------------------
PERIOD ENDED DECEMBER 31 PERIOD ENDED DECEMBER 31
1996** 1996**
-------------------------- ------------------------------
<S> <C> <C>
Units:
Units Sold........................................ 2,782 12,683
Units Redeemed.................................... (83) (340)
----- ------
Net Increase (Decrease)........................... 2,719 12,343
===== ======
<CAPTION>
SAFECO RST SAFECO RST
NORTHWEST DIVISION BOND DIVISION(1)
-------------------------- ------------------------------
PERIOD ENDED DECEMBER 31 PERIOD ENDED DECEMBER 31
1996** 1996**
-------------------------- ------------------------------
<S> <C> <C>
Units:
Units Sold........................................ 93 80
Units Redeemed.................................... (4) (0)
----- ------
Net Increase (Decrease)........................... 89 80
===== ======
<CAPTION>
LEXINGTON NATURAL LEXINGTON EMERGING
RESOURCES DIVISION MARKETS DIVISION(1)
-------------------------- ------------------------------
PERIOD ENDED DECEMBER 31 PERIOD ENDED DECEMBER 31
1996** 1996**
-------------------------- ------------------------------
<S> <C> <C>
Units:
Units Sold........................................ 6,044 5,577
Units Redeemed.................................... (108) (153)
----- ------
Net Increase (Decrease)........................... 5,936 5,424
===== ======
</TABLE>
(1) Officers of SAFECO have minor investments in this investment division at
December 31, 1996.
* For the period from April 30, 1995 (date of inception) through December
31, 1995.
** For the period from April 30, 1996 (date of inception) through December
31, 1996.
A-6b
<PAGE> 26
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5) INVESTMENTS TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------
FIDELITY VIP FIDELITY VIP FIDELITY VIP
GROWTH MONEY MARKET EQUITY INCOME
DIVISION DIVISION DIVISION
------------ ------------ -------------
<S> <C> <C> <C>
Purchases.................................. $ 6,750,699 $ 5,490,861 $ 2,728,393
=========== =========== ===========
Sales...................................... $(2,607,222) $(4,809,783) $(1,086,546)
=========== =========== ===========
Number of Shares Owned at
December 31, 1996........................ 444,078 1,947,891 328,381
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------
FIDELITY VIP II
FIDELITY VIP FIDELITY VIP INVESTMENT
OVERSEAS HIGH INCOME GRADE BOND
DIVISION DIVISION DIVISION
------------ ------------ ---------------
<S> <C> <C> <C>
Purchases.................................. $ 1,905,974 $ 1,705,017 $ 662,797
=========== =========== ===========
Sales...................................... $ (968,365) $(1,028,883) $ (903,820)
=========== =========== ===========
Number of Shares Owned at
December 31, 1996........................ 224,254 115,442 58,635
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------
FIDELITY VIP II
FIDELITY VIP II FIDELITY VIP II FIDELITY VIP II ASSET MANAGER:
ASSET MANAGER INDEX 500 CONTRAFUND GROWTH
DIVISION DIVISION DIVISION DIVISION
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Purchases.................... $ 2,252,000 $ 1,983,120 $ 2,139,301 $ 820,145
=========== =========== =========== ===========
Sales........................ $(1,469,149) $ (367,239) $ (432,126) $ (263,615)
=========== =========== =========== ===========
Number of Shares Owned at
December 31, 1996.......... 477,545 35,138 192,859 61,756
=========== =========== =========== ===========
</TABLE>
A-6c
<PAGE> 27
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1996*
---------------------------------------------
SAFECO RST SAFECO RST SAFECO RST
EQUITY GROWTH NORTHWEST
DIVISION DIVISION DIVISION
------------ ------------ -------------
<S> <C> <C> <C>
Purchases.................................. $389,981 $1,540,974 $10,151
======== ========== =======
Sales...................................... $(60,234) $ (145,606) $(1,069)
======== ========== =======
Number of Shares Owned at
December 31, 1996........................ 14,722 73,512 760
======== ========== =======
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1996*
-------------------------------------------
LEXINGTON LEXINGTON
SAFECO RST NATURAL EMERGING
BOND RESOURCES MARKETS
DIVISION DIVISION DIVISION
------------ ------------ -----------
<S> <C> <C> <C>
Purchases.................................. $8,440 $ 817,617 $582,683
====== ========= ========
Sales...................................... $ (50) $(198,906) $(71,684)
====== ========= ========
Number of Shares Owned at
December 31, 1996........................ 748 47,826 50,868
====== ========= ========
</TABLE>
- -----------------
* For the period from April 30, 1996 (date of inception) through
December 31, 1996.
A-6d
<PAGE> 28
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6) UNIT VALUES
The following are unit values attributable to unitholders as of the date
indicated:
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP
GROWTH MONEY MARKET EQUITY INCOME OVERSEAS
DIVISION DIVISION DIVISION DIVISION
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
December 31, 1992........................ $118.301 $103.032 $123.900 $ 90.087
December 31, 1993........................ 139.950 105.409 145.146 122.522
December 31, 1994........................ 138.673 108.907 154.013 123.521
December 31, 1995........................ 186.039 114.270 206.203 134.264
December 31, 1996........................ 211.469 119.360 233.528 150.638
<CAPTION>
FIDELITY VIP II FIDELITY VIP II
FIDELITY VIP INVESTMENT ASSET FIDELITY VIP II
HIGH INCOME GRADE BOND MANAGER INDEX 500
DIVISION DIVISION DIVISION DIVISION
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
December 31, 1992........................ N/A $105.619 $115.113 N/A
December 31, 1993........................ $108.076 116.148 138.097 $105.094
December 31, 1994........................ 105.455 110.786 128.527 105.239
December 31, 1995........................ 126.046 128.816 148.977 143.089
December 31, 1996........................ 142.436 131.721 169.192 174.160
<CAPTION>
FIDELITY VIP II
FIDELITY VIP II ASSET MANAGER: SAFECO RST SAFECO RST
CONTRAFUND GROWTH EQUITY GROWTH
DIVISION DIVISION DIVISION DIVISION
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
December 31, 1992........................ N/A N/A N/A N/A
December 31, 1993........................ N/A N/A N/A N/A
December 31, 1994........................ N/A N/A N/A N/A
December 31, 1995........................ $119.439 $115.467 N/A N/A
December 31, 1996........................ 143.581 137.235 $117.794 $115.231
<CAPTION>
LEXINGTON LEXINGTON
SAFECO RST SAFECO RST NATURAL EMERGING
NORTHWEST BOND RESOURCES MARKETS
DIVISION DIVISION DIVISION DIVISION
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
December 31, 1992........................ N/A N/A N/A N/A
December 31, 1993........................ N/A N/A N/A N/A
December 31, 1994........................ N/A N/A N/A N/A
December 31, 1995........................ N/A N/A N/A N/A
December 31, 1996........................ $ 99.237 $100.648 $115.129 $ 94.523
</TABLE>
N/A Unit Values are shown beginning the first year end after inception for the
respective division.
A-6e
