<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
----------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investments in Variable Insurance Products Fund ("VIP"):
Fidelity VIP Growth Portfolio 481,729 $ 14,246,974 $ 17,872,159
Fidelity VIP Money Market Portfolio 2,155,090 2,155,090 2,155,090
Fidelity VIP Equity Income Portfolio 410,297 7,929,444 9,962,002
Fidelity VIP Overseas Portfolio 270,450 4,783,501 5,192,639
Fidelity VIP High Income Portfolio 124,382 1,571,235 1,689,105
Investments in Variable Insurance Products Fund II ("VIP II"):
Fidelity VIP II Investment Grade Bond Portfolio 69,245 818,372 869,715
Fidelity VIP II Asset Manager Portfolio 527,583 7,972,973 9,501,768
Fidelity VIP II Index 500 Portfolio 50,122 4,537,759 5,733,444
Fidelity VIP II Contrafund Portfolio 265,163 4,344,910 5,287,355
Fidelity VIP II Asset Manager: Growth Portfolio 93,052 1,334,963 1,522,327
Investments in Variable Insurance Products Fund III ("VIP III"):
Fidelity VIP III Growth Opportunities Portfolio 11 200 215
Fidelity VIP III Growth & Income Portfolio 17 206 216
Fidelity VIP III Balanced Portfolio 14 200 210
Investments in Lexington Natural Resources Trust:
Lexington Natural Resources Portfolio 68,652 1,004,350 1,023,599
Investments in Lexington Emerging Markets Fund, Inc.:
Lexington Emerging Markets Portfolio 69,538 745,585 619,582
Investments in SAFECO Resource Series Trust ("SAFECO RST"):
SAFECO RST Equity Portfolio 99,572 2,555,545 2,507,230
SAFECO RST Growth Portfolio 204,690 4,759,508 4,779,504
SAFECO RST Northwest Portfolio 11,366 177,870 172,765
SAFECO RST Bond Portfolio 16,894 191,150 186,511
SAFECO RST Small Company Stock Portfolio 230 2,905 2,834
Investments in Wanger Advisors Trust:
Wanger U.S. Small Cap Advisor Portfolio 132 2,801 2,834
Investments in American Century Variable Portfolios, Inc.:
American Century VP International Portfolio 733 5,001 5,016
American Century VP Balanced Portfolio 25 200 205
-------------- --------------
TOTAL ASSETS $ 59,140,742 69,086,325
-------------- --------------
--------------
LIABILITIES
Payable (To) From SAFECO Life (10,937)
--------------
TOTAL LIABILITIES (10,937)
--------------
--------------
NET ASSETS $ 69,075,388
--------------
--------------
</TABLE>
See Notes To Financial Statements
1
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNITS UNIT VALUE NET ASSETS
------------- ----------- --------------
<S> <C> <C> <C>
Net Assets represented in units:
Accumulation Life:
Fidelity VIP Growth Division 68,969.046 $ 258.785 $ 17,848,160
Fidelity VIP Money Market Division 16,480.691 124.936 2,059,034
Fidelity VIP Equity Income Division 33,565.935 296.489 9,951,921
Fidelity VIP Overseas Division 31,128.490 166.539 5,184,093
Fidelity VIP High Income Division 10,155.335 166.098 1,686,784
Fidelity VIP II Investment Grade Bond Division 6,121.270 142.369 871,479
Fidelity VIP II Asset Manager Division 46,953.948 202.303 9,498,945
Fidelity VIP II Index 500 Division 24,797.596 229.037 5,679,555
Fidelity VIP II Contrafund Division 29,894.414 176.648 5,280,776
Fidelity VIP II Asset Manager: Growth Division 8,939.899 170.101 1,520,688
Lexington Natural Resources Division 8,345.503 122.254 1,020,272
Lexington Emerging Markets Division 7,395.103 82.854 612,716
SAFECO RST Equity Division 16,971.864 145.745 2,473,560
SAFECO RST Growth Division 28,815.751 165.079 4,756,876
SAFECO RST Northwest Division 1,268.243 128.860 163,426
SAFECO RST Bond Division 1,722.889 108.135 186,304
Premier Accumulation Life:
Fidelity VIP Growth Division* 376.315 10.474 3,942
Fidelity VIP Money Market Division* 9,979.358 10.083 100,617
Fidelity VIP Equity Income Division* 828.604 10.688 8,856
Fidelity VIP Overseas Division* 807.155 10.049 8,111
Fidelity VIP High Income Division* 201.866 10.191 2,057
Fidelity VIP II Investment Grade Bond Division* 20.000 10.129 203
Fidelity VIP II Asset Manager Division* 243.092 10.443 2,539
Fidelity VIP II Index 500 Division* 4,944.463 10.764 53,224
Fidelity VIP II Contrafund Division* 370.892 10.274 3,810
Fidelity VIP II Asset Manager: Growth Division* 134.461 10.554 1,419
Fidelity VIP III Growth Opportunities Division* 20.000 10.765 215
Fidelity VIP III Growth & Income Division* 20.000 10.494 210
Fidelity VIP III Balanced Division* 20.000 10.512 210
Lexington Natural Resources Division* 355.341 9.316 3,311
Lexington Emerging Markets Division* 706.832 9.820 6,941
SAFECO RST Equity Division* 3,160.043 10.643 33,631
SAFECO RST Growth Division* 2,955.562 10.693 31,605
SAFECO RST Northwest Division* 838.553 10.504 8,808
SAFECO RST Bond Division* 20.000 10.134 203
SAFECO RST Small Company Stock Division* 282.490 10.031 2,834
Wanger U.S. Small Cap Advisor Division* 280.917 10.089 2,834
American Century VP International Division* 481.844 10.406 5,014
American Century VP Balanced Division* 20.000 10.236 205
--------------
Total $ 69,075,388
--------------
--------------
</TABLE>
- ------------------------
* SAFECO Life owns twenty units in this investment division at December 31,
1997.
See Notes To Financial Statements
2
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 4,111,948 $ 1,861,626
Mortality and Expense Charge (Note 3) (530,007) (342,650)
------------ ------------
Net Investment Income (Loss) 3,581,941 1,518,976
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net Realized Gain (Loss) on Investments 2,916,978 1,219,403
Net Change in Unrealized Appreciation
(Depreciation) of Investments 4,556,931 2,104,550
------------ ------------
Net Realized and Unrealized Gain (Loss) on
Investments 7,473,909 3,323,953
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 11,055,850 4,842,929
------------ ------------
CHANGES IN NET ASSETS FROM POLICY RELATED
TRANSACTIONS:
Transfers in from Net Premiums 18,502,688 17,165,491
Transfers out for Policy Related
Transactions (7,729,946) (5,337,120)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net 14,439 2,039,756
Transfers in (out) - Operational Seed Money 4,600 0
Gain (Loss) Attributable to SAFECO Life (368) (2,777)
------------ ------------
NET CHANGE IN NET ASSETS FROM POLICY
TRANSACTIONS 10,791,413 13,865,350
------------ ------------
NET CHANGE IN NET ASSETS 21,847,263 18,708,279
NET ASSETS, BEGINNING OF PERIOD 47,228,125 28,519,846
------------ ------------
NET ASSETS, END OF PERIOD $ 69,075,388 $ 47,228,125
------------ ------------
------------ ------------
</TABLE>
See Notes To Financial Statements
3
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
TOTAL FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP
SEPARATE GROWTH MONEY MARKET EQUITY INCOME OVERSEAS
ACCOUNT DIVISION DIVISION DIVISION DIVISION
----------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 4,111,948 $ 516,357 $ 123,914 $ 730,426 $ 374,033
Mortality and Expense Charge (Note 3) (530,007) (142,564) (20,204) (78,115) (44,562)
----------- ------------ ------------ ------------- ------------
Net Investment Income (Loss) 3,581,941 373,793 103,710 652,311 329,471
----------- ------------ ------------ ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments 2,916,978 827,060 0 370,199 184,852
Net Change in Unrealized Appreciation (Depreciation)
of Investments 4,556,931 1,838,335 0 1,005,276 (59,527)
----------- ------------ ------------ ------------- ------------
Net Realized and Unrealized Gain (Loss) on Investments 7,473,909 2,665,395 0 1,375,475 125,325
----------- ------------ ------------ ------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 11,055,850 3,039,188 103,710 2,027,786 454,796
----------- ------------ ------------ ------------- ------------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 18,502,688 3,258,766 3,453,897 2,034,589 1,054,250
Transfers out for Policy Related Transactions (7,729,946) (1,806,612) (304,339) (1,045,252) (621,451)
Transfers between Separate Account SL's Divisions and
(to) from Guaranteed Interest Division, Net 14,439 (447,640) (3,046,340) 38,834 79,895
Transfers in (out) - Operational Seed Money 4,600 200 200 200 200
Gain (Loss) Attributable to SAFECO Life (368) (4,554) 4,200 (555) (47)
----------- ------------ ------------ ------------- ------------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 10,791,413 1,000,160 107,618 1,027,816 512,847
----------- ------------ ------------ ------------- ------------
NET CHANGE IN NET ASSETS 21,847,263 4,039,348 211,328 3,055,602 967,643
NET ASSETS, BEGINNING OF PERIOD 47,228,125 13,812,754 1,948,323 6,905,175 4,224,561
----------- ------------ ------------ ------------- ------------
NET ASSETS, END OF PERIOD $69,075,388 $ 17,852,102 $2,159,651 $9,960,777 $ 5,192,204
----------- ------------ ------------ ------------- ------------
----------- ------------ ------------ ------------- ------------
</TABLE>
See Notes To Financial Statements
4
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------
FIDELITY FIDELITY VIP II FIDELITY VIP
VIP HIGH INVESTMENT II ASSET FIDELITY VIP II FIDELITY VIP II
INCOME GRADE BOND MANAGER INDEX 500 CONTRAFUND
DIVISION DIVISION DIVISION DIVISION DIVISION
----------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 118,089 $ 41,932 $ 990,660 $ 112,819 $ 104,398
Mortality and Expense Charge (Note 3) (14,472) (6,857) (80,822) (38,183) (38,914)
----------- --------------- ------------- --------------- ---------------
Net Investment Income (Loss) 103,617 35,075 909,838 74,636 65,484
----------- --------------- ------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net Realized Gain (Loss) on Investments 106,691 (2,286) 264,306 212,725 264,916
Net Change in Unrealized Appreciation
(Depreciation) of
Investments 37,852 26,567 415,386 805,228 553,496
----------- --------------- ------------- --------------- ---------------
Net Realized and Unrealized Gain (Loss) on
Investments 144,543 24,281 679,692 1,017,953 818,412
----------- --------------- ------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 248,160 59,356 1,589,530 1,092,589 883,896
----------- --------------- ------------- --------------- ---------------
CHANGES IN NET ASSETS FROM POLICY RELATED
TRANSACTIONS:
Transfers in from Net Premiums 515,592 154,794 1,536,942 1,624,150 1,401,808
Transfers out for Policy Related
Transactions (211,691) (105,048) (1,463,169) (516,224) (551,232)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net (308,488) 42,724 (246,774) 400,922 359,783
Transfers in (out) - Operational Seed Money 200 200 200 200 200
Gain (Loss) Attributable to SAFECO Life (104) 134 1,610 (318) (3,460)
----------- --------------- ------------- --------------- ---------------
NET CHANGE IN NET ASSETS FROM POLICY
TRANSACTIONS (4,491) 92,804 (171,191) 1,508,730 1,207,099
----------- --------------- ------------- --------------- ---------------
NET CHANGE IN NET ASSETS 243,669 152,160 1,418,339 2,601,319 2,090,995
NET ASSETS, BEGINNING OF PERIOD 1,445,172 719,522 8,083,145 3,131,460 3,193,591
----------- --------------- ------------- --------------- ---------------
NET ASSETS, END OF PERIOD $ 1,688,841 $ 871,682 $9,501,484 $5,732,779 $5,284,586
----------- --------------- ------------- --------------- ---------------
----------- --------------- ------------- --------------- ---------------
</TABLE>
See Notes To Financial Statements
5
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------------
FIDELITY VIP
II ASSET FIDELITY VIP III LEXINGTON
MANAGER: GROWTH FIDELITY VIP III FIDELITY VIP III NATURAL
GROWTH OPPORTUNITIES GROWTH & INCOME BALANCED RESOURCES
DIVISION DIVISION* DIVISION* DIVISION* DIVISION
-------------- ---------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 1,396 $ 0 $ 6 $ 0 $ 28,016
Mortality and Expense Charge (Note 3) (11,707) 0 0 0 (8,036)
-------------- ---------------- ---------------- ---------------- ----------
Net Investment Income (Loss) (10,311) 0 6 0 19,980
-------------- ---------------- ---------------- ---------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net Realized Gain (Loss) on Investments 136,339 0 0 0 67,477
Net Change in Unrealized Appreciation
(Depreciation) of Investments 146,598 15 10 10 (39,627)
-------------- ---------------- ---------------- ---------------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments 282,937 15 10 10 27,850
-------------- ---------------- ---------------- ---------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 272,626 15 16 10 47,830
-------------- ---------------- ---------------- ---------------- ----------
CHANGES IN NET ASSETS FROM POLICY RELATED
TRANSACTIONS:
Transfers in from Net Premiums 403,875 0 0 0 311,597
Transfers out for Policy Related
Transactions (309,588) 0 0 0 (116,998)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net 345,415 0 0 0 98,814
Transfers in (out) - Operational Seed
Money 200 200 200 200 200
Gain (Loss) Attributable to SAFECO Life 699 0 (6) 0 (1,273)
-------------- ---------------- ---------------- ---------------- ----------
NET CHANGE IN NET ASSETS FROM POLICY
TRANSACTIONS 440,601 200 194 200 292,340
-------------- ---------------- ---------------- ---------------- ----------
NET CHANGE IN NET ASSETS 713,227 215 210 210 340,170
NET ASSETS, BEGINNING OF PERIOD 808,880 0 0 0 683,413
-------------- ---------------- ---------------- ---------------- ----------
NET ASSETS, END OF PERIOD $1,522,107 $ 215 $ 210 $ 210 $1,023,583
-------------- ---------------- ---------------- ---------------- ----------
-------------- ---------------- ---------------- ---------------- ----------
</TABLE>
- ------------------------
* For the period from October 30, 1997 (date of inception) to December 31,
1997.
See Notes To Financial Statements
6
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
LEXINGTON
EMERGING SAFECO RST SAFECO RST SAFECO RST SAFECO RST
MARKETS EQUITY GROWTH NORTHWEST BOND DIVI-
DIVISION DIVISION DIVISION DIVISION SION
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 403 $ 181,882 $ 770,267 $ 7,403 $ 9,834
Mortality and Expense Charge (Note 3) (6,227) (11,138) (26,851) (695) (658)
----------- ----------- ----------- ----------- -----------
Net Investment Income (Loss) (5,824) 170,744 743,416 6,708 9,176
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments 41,428 59,430 370,229 11,705 1,907
Net Change in Unrealized Appreciation (Depreciation) of
Investments (122,637) (36,494) (4,000) (5,253) (4,286)
----------- ----------- ----------- ----------- -----------
Net Realized and Unrealized Gain (Loss) on Investments (81,209) 22,936 366,229 6,452 (2,379)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (87,033) 193,680 1,109,645 13,160 6,797
----------- ----------- ----------- ----------- -----------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 276,890 974,116 1,424,172 61,727 15,523
Transfers out for Policy Related Transactions (70,244) (179,705) (413,515) (8,104) (6,724)
Transfers between Separate Account SL's Divisions and (to)
from Guaranteed Interest Division, Net (13,442) 1,198,913 1,242,542 96,599 162,638
Transfers in (out) - Operational Seed Money 200 200 200 200 200
Gain (Loss) Attributable to SAFECO Life 536 (216) 3,115 (164) 35
----------- ----------- ----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 193,940 1,993,308 2,256,514 150,258 171,672
----------- ----------- ----------- ----------- -----------
NET CHANGE IN NET ASSETS 106,907 2,186,988 3,366,159 163,418 178,469
NET ASSETS, BEGINNING OF PERIOD 512,750 320,203 1,422,322 8,816 8,038
----------- ----------- ----------- ----------- -----------
NET ASSETS, END OF PERIOD $ 619,657 $2,507,191 $4,788,481 $ 172,234 $ 186,507
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See Notes To Financial Statements
7
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------
SAFECO RST WANGER U.S.
SMALL COMPANY SMALL CAP AMERICAN CENTURY AMERICAN CENTURY
STOCK ADVISOR VP INTERNATIONAL VP BALANCED
DIVISION* DIVISION* DIVISION* DIVISION*
------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 113 $ 0 $ 0 $ 0
Mortality and Expense Charge (Note 3) 0 0 (2) 0
------------- -------------- ---------------- ----------------
Net Investment Income (Loss) 113 0 (2) 0
------------- -------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments 0 0 0 0
Net Change in Unrealized Appreciation (Depreciation) of
Investments (71) 34 15 4
------------- -------------- ---------------- ----------------
Net Realized and Unrealized Gain (Loss) on Investments (71) 34 15 4
------------- -------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 42 34 13 4
------------- -------------- ---------------- ----------------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 0 0 0 0
Transfers out for Policy Related Transactions 0 0 (50) 0
Transfers between Separate Account SL's Divisions and (to)
from Guaranteed Interest Division, Net 2,592 2,601 4,851 0
Transfers in (out) - Operational Seed Money 200 200 200 200
Gain (Loss) Attributable to SAFECO Life 0 (1) 0 1
------------- -------------- ---------------- ----------------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 2,792 2,800 5,001 201
------------- -------------- ---------------- ----------------
NET CHANGE IN NET ASSETS 2,834 2,834 5,014 205
NET ASSETS, BEGINNING OF PERIOD 0 0 0 0
------------- -------------- ---------------- ----------------
NET ASSETS, END OF PERIOD $ 2,834 $ 2,834 $ 5,014 $ 205
------------- -------------- ---------------- ----------------
------------- -------------- ---------------- ----------------
</TABLE>
- ------------------------
* For the period from October 30, 1997 (date of inception) to December 31,
1997.
See Notes To Financial Statements
8
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------
TOTAL FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP
SEPARATE GROWTH MONEY MARKET EQUITY INCOME OVERSEAS
ACCOUNT DIVISION DIVISION DIVISION DIVISION
----------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 1,861,626 $ 652,496 $ 106,904 $ 220,067 $ 73,902
Mortality and Expense Charge (Note 3) (342,650) (106,992) (18,880) (52,471) (33,173)
----------- ------------ ------------ ------------- ------------
Net Investment Income (Loss) 1,518,976 545,504 88,024 167,596 40,729
----------- ------------ ------------ ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments 1,219,403 666,095 0 261,564 84,017
Net Change in Unrealized Appreciation (Depreciation) of
Investments 2,104,550 189,972 0 308,534 292,888
----------- ------------ ------------ ------------- ------------
Net Realized and Unrealized Gain (Loss) on Investments 3,323,953 856,067 0 570,098 376,905
----------- ------------ ------------ ------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 4,842,929 1,401,571 88,024 737,694 417,634
----------- ------------ ------------ ------------- ------------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 17,165,491 4,124,943 3,446,186 2,357,488 1,166,002
Transfers out for Policy Related Transactions (5,337,120) (1,568,735) (130,228) (902,544) (538,631)
Transfers between Separate Account SL's Divisions and
(to) from Guaranteed Interest Division, Net 2,039,756 1,043,497 (2,712,658) 20,519 269,996
Transfers in (out) - Operational Seed Money 0 0 0 0 0
Gain (Loss) Attributable to SAFECO Life (2,777) (3,620) (10,424) (1,691) (673)
----------- ------------ ------------ ------------- ------------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 13,865,350 3,596,085 592,876 1,473,772 896,694
----------- ------------ ------------ ------------- ------------
NET CHANGE IN NET ASSETS 18,708,279 4,997,656 680,900 2,211,466 1,314,328
NET ASSETS, BEGINNING OF PERIOD 28,519,846 8,815,098 1,267,423 4,693,709 2,910,233
----------- ------------ ------------ ------------- ------------
NET ASSETS, END OF PERIOD $47,228,125 $ 13,812,754 $1,948,323 $6,905,175 $ 4,224,561
----------- ------------ ------------ ------------- ------------
----------- ------------ ------------ ------------- ------------
</TABLE>
See Notes To Financial Statements
9
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------
FIDELITY FIDELITY VIP II FIDELITY VIP
VIP HIGH INVESTMENT II ASSET FIDELITY VIP II FIDELITY VIP II
INCOME GRADE BOND MANAGER INDEX 500 CONTRAFUND
DIVISION DIVISION DIVISION DIVISION DIVISION
----------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 62,691 $ 50,447 $ 440,128 $ 54,385 $ 11,263
Mortality and Expense Charge (Note 3) (9,849) (7,083) (66,690) (17,435) (18,320)
----------- --------------- ------------- --------------- ---------------
Net Investment Income (Loss) 52,842 43,364 373,438 36,950 (7,057)
----------- --------------- ------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net Realized Gain (Loss) on Investments 14,163 7,591 67,740 68,068 36,577
Net Change in Unrealized Appreciation
(Depreciation) of
Investments 61,598 (36,058) 502,688 290,744 383,171
----------- --------------- ------------- --------------- ---------------
Net Realized and Unrealized Gain (Loss) on
Investments 75,761 (28,467) 570,428 358,812 419,748
----------- --------------- ------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 128,603 14,897 943,866 395,762 412,691
----------- --------------- ------------- --------------- ---------------
CHANGES IN NET ASSETS FROM POLICY RELATED
TRANSACTIONS:
Transfers in from Net Premiums 489,342 271,528 2,044,200 1,192,914 1,223,954
Transfers out for Policy Related
Transactions (192,518) (144,121) (1,211,057) (284,721) (250,013)
Transfers between Separate Account SL's
Divisions and (to) from Guaranteed
Interest Division, Net 326,333 (412,302) (422,044) 670,973 744,280
Transfers in (out) - Operational Seed Money 0 0 0 0 0
Gain (Loss) Attributable to SAFECO Life (37) 64 (2,344) (159) (4,087)
----------- --------------- ------------- --------------- ---------------
NET CHANGE IN NET ASSETS FROM POLICY
TRANSACTIONS 623,120 (284,831) 408,755 1,579,007 1,714,134
----------- --------------- ------------- --------------- ---------------
NET CHANGE IN NET ASSETS 751,723 (269,934) 1,352,621 1,974,769 2,126,825
NET ASSETS, BEGINNING OF PERIOD 693,449 989,456 6,730,524 1,156,691 1,066,766
----------- --------------- ------------- --------------- ---------------
NET ASSETS, END OF PERIOD $ 1,445,172 $ 719,522 $8,083,145 $3,131,460 $3,193,591
----------- --------------- ------------- --------------- ---------------
----------- --------------- ------------- --------------- ---------------
</TABLE>
See Notes To Financial Statements
10
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------
FIDELITY VIP
II ASSET LEXINGTON LEXINGTON
MANAGER: NATURAL EMERGING SAFECO RST SAFECO RST
GROWTH RESOURCES MARKETS EQUITY GROWTH
DIVISION DIVISION* DIVISION* DIVISION* DIVISION*
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 41,438 $ 2,151 $ 0 $ 30,039 $ 115,216
Mortality and Expense Charge (Note 3) (4,651) (1,331) (1,451) (675) (3,614)
------------- ----------- ----------- ----------- -----------
Net Investment Income (Loss) 36,787 820 (1,451) 29,364 111,602
------------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments 12,549 5,839 (3,540) 2,283 (3,530)
Net Change in Unrealized Appreciation (Depreciation) of
Investments 43,534 58,877 (3,366) (11,822) 23,996
------------- ----------- ----------- ----------- -----------
Net Realized and Unrealized Gain (Loss) on Investments 56,083 64,716 (6,906) (9,539) 20,466
------------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 92,870 65,536 (8,357) 19,825 132,068
------------- ----------- ----------- ----------- -----------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 247,373 136,380 132,526 56,058 265,857
Transfers out for Policy Related Transactions (47,071) (9,309) (14,320) (7,234) (36,206)
Transfers between Separate Account SL's Divisions and (to)
from Guaranteed Interest Division, Net 315,334 480,695 402,781 251,559 1,054,115
Transfers in (out) - Operational Seed Money 0 0 0 0 0
Gain (Loss) Attributable to SAFECO Life 3,877 10,111 120 (5) 6,488
------------- ----------- ----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 519,513 617,877 521,107 300,378 1,290,254
------------- ----------- ----------- ----------- -----------
NET CHANGE IN NET ASSETS 612,383 683,413 512,750 320,203 1,422,322
NET ASSETS, BEGINNING OF PERIOD 196,497 0 0 0 0
------------- ----------- ----------- ----------- -----------
NET ASSETS, END OF PERIOD $ 808,880 $ 683,413 $ 512,750 $ 320,203 $1,422,322
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------
* For the period from April 30, 1996 (date of inception) to December 31, 1996.
See Notes To Financial Statements
11
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------
SAFECO RST SAFECO RST
NORTHWEST BOND
DIVISION* DIVISION*
------------- -------------
<S> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends $ 60 $ 439
Mortality and Expense Charge (Note 3) (18) (17)
------------- -------------
Net Investment Income (Loss) 42 422
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net Realized Gain (Loss) on Investments (13) 0
Net Change in Unrealized Appreciation (Depreciation) of
Investments 147 (353)
------------- -------------
Net Realized and Unrealized Gain (Loss) on Investments 134 (353)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 176 69
------------- -------------
CHANGES IN NET ASSETS FROM POLICY RELATED TRANSACTIONS:
Transfers in from Net Premiums 3,602 7,138
Transfers out for Policy Related Transactions (371) (41)
Transfers between Separate Account SL's Divisions and (to) from
Guaranteed Interest Division, Net 5,808 870
Transfers in (out) - Operational Seed Money 0 0
Gain (Loss) Attributable to SAFECO Life (399) 2
------------- -------------
NET CHANGE IN NET ASSETS FROM POLICY TRANSACTIONS 8,640 7,969
------------- -------------
NET CHANGE IN NET ASSETS 8,816 8,038
NET ASSETS, BEGINNING OF PERIOD 0 0
------------- -------------
NET ASSETS, END OF PERIOD $ 8,816 $ 8,038
------------- -------------
------------- -------------
</TABLE>
- ------------------------
* For the period from April 30, 1996 (date of inception) to December 31, 1996.
See Notes To Financial Statements
12
<PAGE>
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 registered as a unit investment trust 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
associated with 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 Products II (VIP II).
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 VIP II.
On April 30, 1996, six new Investment Divisions were made available 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.
On October 30, 1997, a new policy type was introduced with an additional seven
Investment Divisions to the sixteen Investment Divisions mentioned above. These
divisions invest in the Growth Opportunities, Growth and Income, and Balanced
Portfolios of Fidelity Variable Insurance Products Fund III, the Small Company
Stock Portfolio of SAFECO Resource Series Trust, the Wanger U.S. Small Cap
Advisor Portfolio of Wanger Advisors Trust, and the American Century VP
International and American Century VP Balanced Portfolios of American Century
Variable Portfolios, Inc.
Policyholders are permitted to transfer their funds among Investment Divisions
in Account SL available under their policy, and to the Guaranteed Interest
Division, which is not part of Account SL. Available Investment Divisions vary
by policy type.
2) SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION. Investments in portfolio 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 portfolio 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 policies on a pro
rata basis.
ESTIMATES. The financial statements of Account SL are prepared in conformity
with generally accepted accounting principles, which permit management to make
certain estimates and assumptions at the date of the financial statements.
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.
13
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 to cover these
risks. The daily charge varies by policy type and is equal to an annual rate
of .70% to .90% of net assets of Account SL.
SAFECO also deducts state premium taxes and administrative expenses from
premiums before they are allocated to Account SL. These charges vary by policy
type.
4) INVESTMENT TRANSACTIONS
Purchase and sales activity in underlying portfolio shares for the year ended
December 31, 1997 was as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Fidelity VIP Growth Portfolio $ 3,744,964 $ (2,371,033)
Fidelity VIP Money Market Portfolio 6,233,772 (6,026,509)
Fidelity VIP Equity Income Portfolio 2,891,341 (1,210,961)
Fidelity VIP Overseas Portfolio 1,817,335 (976,368)
Fidelity VIP High Income Portfolio 1,880,969 (1,781,744)
Fidelity VIP II Investment Grade Bond Portfolio 279,248 (152,707)
Fidelity VIP II Asset Manager Portfolio 2,296,856 (1,568,421)
Fidelity VIP II Index 500 Portfolio 2,288,690 (706,098)
Fidelity VIP II Contrafund Portfolio 2,280,812 (1,004,311)
Fidelity VIP II Asset Manager: Growth Portfolio 1,149,281 (718,943)
Fidelity VIP III Growth Opportunities Portfolio* 200 0
Fidelity VIP III Growth & Income Portfolio* 206 0
Fidelity VIP III Balanced Portfolio* 200 0
Lexington Natural Resources Portfolio 699,000 (385,849)
Lexington Emerging Markets Portfolio 669,805 (481,784)
SAFECO RST Equity Portfolio 2,716,816 (552,738)
SAFECO RST Growth Portfolio 4,966,543 (1,970,897)
SAFECO RST Northwest Portfolio 254,255 (97,122)
SAFECO RST Bond Portfolio 257,004 (76,189)
SAFECO RST Small Company Stock Portfolio* 2,905 0
Wanger U.S. Small Cap Advisor Portfolio* 2,801 0
American Century VP International Portfolio* 5,051 (50)
American Century VP Balanced Portfolio* 200 0
------------ -------------
Total $ 34,438,254 $ (20,081,724)
------------ -------------
------------ -------------
</TABLE>
* For the period from October 30, 1997 (date of inception) to December
31, 1997.
14
<PAGE>
SAFECO LIFE SEPARATE ACCOUNT SL
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5) HISTORICAL UNIT VALUES
The following are unit values attributable to unitholders as of the date
indicated:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Accumulation Life:
Fidelity VIP Growth Division $ 258.785 $ 211.469 $ 186.039 $ 138.673 $ 139.950
Fidelity VIP Money Market Division 124.936 119.360 114.270 108.907 105.409
Fidelity VIP Equity Income Division 296.489 233.528 206.203 154.013 145.146
Fidelity VIP Overseas Division 166.539 150.638 134.264 123.521 122.522
Fidelity VIP High Income Division 166.098 142.436 126.046 105.455 108.076
Fidelity VIP II Investment Grade Bond
Division 142.369 131.721 128.816 110.786 116.148
Fidelity VIP II Asset Manager Division 202.303 169.192 148.977 128.527 138.097
Fidelity VIP II Index 500 Division 229.037 174.160 143.089 105.239 105.094
Fidelity VIP II Contrafund Division 176.648 143.581 119.439 N/A N/A
Fidelity VIP II Asset Manager: Growth
Division 170.101 137.235 115.467 N/A N/A
Lexington Natural Resources Division 122.254 115.129 N/A N/A N/A
Lexington Emerging Markets Division 82.854 94.523 N/A N/A N/A
SAFECO RST Equity Division 145.745 117.794 N/A N/A N/A
SAFECO RST Growth Division 165.079 115.231 N/A N/A N/A
SAFECO RST Northwest Division 128.860 99.237 N/A N/A N/A
SAFECO RST Bond Division 108.135 100.648 N/A N/A N/A
<CAPTION>
DECEMBER 31
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Premier Accumulation Life:
Fidelity VIP Growth Division $ 10.474 $ N/A $ N/A $ N/A $ N/A
Fidelity VIP Money Market Division 10.083 N/A N/A N/A N/A
Fidelity VIP Equity Income Division 10.688 N/A N/A N/A N/A
Fidelity VIP Overseas Division 10.049 N/A N/A N/A N/A
Fidelity VIP High Income Division 10.191 N/A N/A N/A N/A
Fidelity VIP II Investment Grade Bond
Division 10.129 N/A N/A N/A N/A
Fidelity VIP II Asset Manager Division 10.443 N/A N/A N/A N/A
Fidelity VIP II Index 500 Division 10.764 N/A N/A N/A N/A
Fidelity VIP II Contrafund Division 10.274 N/A N/A N/A N/A
Fidelity VIP II Asset Manager: Growth
Division 10.554 N/A N/A N/A N/A
Fidelity VIP III Growth Opportunities
Division 10.765 N/A N/A N/A N/A
Fidelity VIP III Growth & Income
Division 10.494 N/A N/A N/A N/A
Fidelity VIP III Balanced Division 10.512 N/A N/A N/A N/A
Lexington Natural Resources Division 9.316 N/A N/A N/A N/A
Lexington Emerging Markets Division 9.820 N/A N/A N/A N/A
SAFECO RST Equity Division 10.643 N/A N/A N/A N/A
SAFECO RST Growth Division 10.693 N/A N/A N/A N/A
SAFECO RST Northwest Division 10.504 N/A N/A N/A N/A
SAFECO RST Bond Division 10.134 N/A N/A N/A N/A
SAFECO RST Small Company Stock
Division 10.031 N/A N/A N/A N/A
Wanger U.S. Small Cap Advisor Division 10.089 N/A N/A N/A N/A
American Century VP International
Division 10.406 N/A N/A N/A N/A
American Century VP Balanced Division 10.236 N/A N/A N/A N/A
</TABLE>
- ------------------------
N/A indicates the Investment Division was not yet available.
15
<PAGE>
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, Fidelity VIP
III Growth Opportunities, Fidelity VIP III Growth & Income, Fidelity VIP III
Balanced, Lexington Natural Resources, Lexington Emerging Markets, SAFECO RST
Equity, SAFECO RST Growth, SAFECO RST Northwest, SAFECO RST Bond, SAFECO RST
Small Company Stock, Wanger U.S. Small Cap Advisor, American Century VP
International, and American Century VP Balanced Investment Divisions) as of
December 31, 1997, and the related statements of operations and changes in net
assets, and the historical unit values for each of the periods indicated
therein. These financial statements and historical 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
historical 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 historical unit values. Our procedures included confirmation of portfolio
shares owned as of December 31, 1997, by correspondence with the underlying
portfolio of each Investment Division. 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 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, 1997, the results of their operations, the changes
in their net assets, and their historical unit values for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
[SIGNATURE]
Seattle, Washington
February 6, 1998
