<PAGE> 1
SPINNAKER Q/NQ File Nos. 33-69712/811-8052
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 3 [X]
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 6 [X]
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(Check appropriate box or boxes.)
SAFECO SEPARATE ACCOUNT C
(Exact Name of Registrant)
SAFECO Life Insurance Company
(Name of Depositor)
15411 N.E. 51st Street, Redmond, Washington 98052
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (206) 867-8000
Name and Address of Agent for Service
WILLIAM E. CRAWFORD
15411 N.E. 51st Street
Redmond, Washington 98052
(206) 867-8257
Copies to:
JOAN E. BOROS, ESQ.
Katten Muchin & Zavis
1025 Thomas Jefferson Street, N.W.
Suite 700 East
Washington, D.C. 20007
(202) 625-3780
<TABLE>
<S> <C>
Approximate date of Proposed Public Offering . . . . . As Soon as Practicable
after Effective Date
</TABLE>
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b) of Rule 485
---
on _______, 1995 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on (date) pursuant to paragraph (a)(1) of Rule 485
---
If appropriate, check the following:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed a Rule 24f-2 Notice for the
fiscal year ending December 31, 1994 on or about February 28, 1995.
<PAGE> 2
SAFECO SEPARATE ACCOUNT C
REGISTRATION STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C> <C>
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . Definitions
Item 3. Synopsis or Highlights . . . . . . . . . . . . . . . . . . . . . . Expense Table; Highlights
Item 4. Condensed Financial Information . . . . . . . . . . . . . . . . . Schedule of Accumulation
Unit Values &
Accumulation Units
Outstanding; Performance
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . . . . . . . . . . . . . . . SAFECO; The
Separate Account;
SAFECO Resource
Series Trust; Insurance
Management Series;
Lexington Emerging
Markets Fund, Inc.;
Lexington Natural
Resources Trust; Scudder
Variable Life Investment
Fund
Item 6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . Charges and
Deductions; Expense
Table
Item 7. General Description of Variable Annuity Contracts . . . . . . . . Cover Page; Rights
under the Contract;
Purchasing a Contract
Item 8. Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity and Death Benefit
Provisions
Item 9. Distribution Requirements . . . . . . . . . . . . . . . . . . . . Annuity and Death Benefit
Provisions
Item 10. Purchases and Contract Value . . . . . . . . . . . . . . . . . . . Purchasing a Contract
Item 11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . Withdrawals and Transfers
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Status
Item 13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . . . . . . . . . . . . . . . Table of Contents
of Statement of
Additional Information
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C> <C>
PART B
Item 15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Item 17. General Information and History . . . . . . . . . . . . . . . . . General Information
Item 18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . General Information/
Distributor
Item 21. Calculation of Performance Data . . . . . . . . . . . . . . . . . Additional Performance
Information
Item 22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
PART A
PROSPECTUS
<PAGE> 5
December 29, 1995 SAFECO LIFE INSURANCE COMPANY
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
issued by
SAFECO SEPARATE ACCOUNT C
and
SAFECO LIFE INSURANCE COMPANY
<TABLE>
<S> <C>
Home Office: Annuity Service Office:
SAFECO Life Insurance Company SAFECO Life Insurance Company
Pension Department Pension Department
15411 N.E. 51st Street P.O. Box 34690
Redmond, WA 98052 Seattle, WA 98124-1690
Telephone: 1-800-426-7649 Fax: 206-867-8793
</TABLE>
The Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
(the Contracts) described in this Prospectus provide for accumulation of
Contract Values and payment of monthly annuity payments on a fixed and variable
basis. The Contracts are designed for use by individuals in conjunction with
retirement plans on a Qualified or Non-Qualified basis. Some of the Portfolios
listed below may not be immediately available in states that have not yet
approved the corresponding Contract endorsements.
At the Owner's direction, Purchase Payments for the Contracts will be allocated
to a segregated investment account of SAFECO Life Insurance Company (SAFECO)
which has been designated SAFECO Separate Account C (the Separate Account) or to
SAFECO's Fixed Account. Under certain circumstances, however, Purchase Payments
may initially be allocated to the SAFECO Resource Money Market Sub-Account of
the Separate Account. (See "Highlights.") The Separate Account invests in shares
of SAFECO Resource Series Trust (see "SAFECO Resource Series Trust"), Insurance
Management Series (see "Insurance Management Series"), Lexington Emerging
Markets Fund, Inc. (see "Lexington Emerging Markets Fund, Inc."), Lexington
Natural Resources Trust (see "Lexington Natural Resources Trust"), and Scudder
Variable Life Investment Fund (see "Scudder Variable Life Investment Fund").
SAFECO Resource Series Trust currently consists of the SAFECO Resource Equity,
Growth, Northwest, Bond and Money Market Portfolios. Insurance Management Series
consists of six Portfolios, three of which are offered hereunder; the Corporate
Bond Fund ("Federated Corporate Bond Portfolio"), the International Stock Fund
("Federated International Stock Portfolio") and the Utility Fund ("Federated
Utility Portfolio"). Lexington Emerging Markets Fund, Inc. ("Lexington Emerging
Markets Fund") and Lexington Natural Resources Trust each currently consist of
only one Portfolio which are offered hereunder; the Lexington Emerging Markets
Portfolio and the Lexington Natural Resources Portfolio, respectively. Scudder
Variable Life Investment Fund ("Scudder Fund") consists of five Portfolios, two
of which are offered hereunder; the Scudder Balanced Portfolio and the Scudder
International Portfolio. See "Highlights" and "Tax Status - Diversification"
for a discussion of owner control of the underlying investments in a variable
annuity contract.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Table of Contents of the Statement of Additional Information can be
found on page 43 of this Prospectus. Some of the discussions contained in this
Prospectus will refer to the more detailed description contained in the
Statement of Additional Information which is incorporated by reference in this
Prospectus. For the Statement of Additional Information, call 1-800-426-7649 or
write to the Annuity Service Office address above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SPINNAKER Q AND SPINNAKER NQ FLEX ARE NOT INSURED BY THE FDIC. THEY ARE NOT
DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION
THROUGH WHICH THEY MAY BE SOLD. SPINNAKER Q AND SPINNAKER NQ FLEX ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
This Prospectus and the Statement of Additional Information are dated December
29, 1995.
INQUIRIES: Any inquiries should be made by telephone to the number listed on the
cover page of the Prospectus or the representative from whom this Prospectus was
obtained. All other questions should be directed to the Annuity Service Office,
1-800-426-7649 listed on the cover page of this Prospectus.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Expense Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Schedule of Accumulation Unit Values and Accumulation Units Outstanding . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
All Sub-Accounts (Other than SAFECO Resource Money Market Sub-Account) . . . . . . . 16
SAFECO Resource Money Market Sub-Account . . . . . . . . . . . . . . . . . . . . . . 16
Rankings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trust and Fund Performance Information . . . . . . . . . . . . . . . . . . . . . . . 17
Hypothetical Performance Information . . . . . . . . . . . . . . . . . . . . . . . . 17
SAFECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SAFECO Resource Equity Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . 19
SAFECO Resource Growth Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . 19
SAFECO Resource Northwest Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . 19
SAFECO Resource Bond Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SAFECO Resource Money Market Sub-Account . . . . . . . . . . . . . . . . . . . . . . 20
Federated Corporate Bond Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . 20
Federated International Stock Sub-Account . . . . . . . . . . . . . . . . . . . . . . 20
Federated Utility Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Lexington Emerging Markets Sub-Account . . . . . . . . . . . . . . . . . . . . . . . 21
Lexington Natural Resources Sub-Account . . . . . . . . . . . . . . . . . . . . . . . 21
Scudder Balanced Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Scudder International Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SAFECO Resource Series Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Insurance Management Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<TABLE>
<S> <C>
Lexington Emerging Markets Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Lexington Natural Resources Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Scudder Variable Life Investment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Substitution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Purchasing a Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Purchase Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of Purchase Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Accumulation Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Charges and Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Deduction for Premium and Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . 25
Deduction for Mortality and Expense Risk Charge . . . . . . . . . . . . . . . . . . . 26
Deduction for Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . 26
Reduction or Elimination of the Contingent Deferred Sales Charge . . . . . . . . . . 27
Deduction for Withdrawal Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Deduction for Asset Related Administration Charge . . . . . . . . . . . . . . . . . . 27
Deduction for Annual Administration Maintenance Charge . . . . . . . . . . . . . . . 28
Deduction for Transfer Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Rights Under the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Owner, Annuitant and Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Misstatement of Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Evidence of Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Contract Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Contract Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Substitute Payee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Non-Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Modification of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Termination of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Annuity and Death Benefit Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selection and Change of Settlement Options . . . . . . . . . . . . . . . . . . . . . 30
Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Frequency and Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . . . 31
Death of Owner Prior to Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . 31
Death of Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Death of Owner After Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Settlement Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mortality and Expense Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Withdrawals and Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Suspension of Payments or Transfers . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<TABLE>
<S> <C>
Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
The Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Dollar Cost Averaging Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Automatic Transfer Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Appreciation or Interest Sweep Program . . . . . . . . . . . . . . . . . . . . . . . 37
Sub-Account Rebalancing Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Systematic Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Periodic Withdrawal Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Multiple Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Tax Treatment of Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Income Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Tax Treatment of Withdrawals - Non-Qualified Contracts . . . . . . . . . . . . . . . 40
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Tax Treatment of Withdrawals - Qualified Contracts . . . . . . . . . . . . . . . . . 42
Tax-Sheltered Annuities - Withdrawal Limitations . . . . . . . . . . . . . . . . . . 42
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table of Contents of the Statement of Additional Information . . . . . . . . . . . . . . 43
</TABLE>
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DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of
a Sub-Account prior to the Annuity Date.
ANNUITANT - The natural person on whose life Annuity payments are payable. The
Contract will not be issued if the Annuitant is 76 years of age or older on the
Contract Date.
ANNUITY - Any series of payments starting on the Annuity Date.
ANNUITY DATE - The date selected by the Owner for commencing Annuity payments
under the Contract. The day of the month on which the payments will be made will
be determined by SAFECO. The Annuity Date cannot be later than the date the
Annuitant attains age 85.
ANNUITY UNIT - An accounting unit of measure used to calculate Annuity payments
after the Annuity Date.
BENEFICIARY - The person or persons entitled to receive benefits under the
Contract upon the death of the Owner.
CONTRACT ANNIVERSARY - Any anniversary of the Contract Date.
CONTRACT DATE - For all Contracts issued prior to June 1, 1994, Contract Date
shall mean the earlier of the date on which the initial Purchase Payment is
allocated to the Separate Account or the Fixed Account. For Contracts issued on
or after June 1, 1994, see "Rights under the Contract - Contract Date."
CONTRACT VALUE - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and the Fixed Account.
CONTRACT YEAR - The twelve month period which commences on the Contract Date and
each succeeding twelve month period thereafter.
ELIGIBLE INVESTMENT(S) - An investment entity in which a Sub-Account invests as
an underlying investment of the Contract.
FIXED ACCOUNT - SAFECO's General Account, referred to in the Contract as the
"Fixed Account," consists of the total Purchase Payments received by SAFECO
under a fixed annuity rider to the Contract and not previously withdrawn, plus
interest on each such Purchase Payment, less any applicable charges and
deductions. Purchase Payments allocated to the Fixed Account will become part of
the general corporate fund of SAFECO to be so used and invested consistent with
state insurance laws and will not be segregated from SAFECO's other assets.
FUNDS - The funding vehicles for the Separate Account, other than the Trust:
Certain portfolios of Insurance Management Series; Lexington Emerging Markets
Fund, Inc.; Lexington Natural Resources Trust; and Scudder Variable Life
Investment Fund.
NET PURCHASE PAYMENT - Purchase Payment less premium taxes.
NON-QUALIFIED CONTRACTS - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 403(b) or 408 of the Internal
Revenue Code.
OWNER - The person(s) or entity named in the Application who/which has all
rights under the Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must jointly
exercise those rights.
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PORTFOLIO - A segment of an Eligible Investment which constitutes a separate and
distinct class of shares.
PURCHASE PAYMENTS - Payments made to purchase Accumulation Units or which are
allocated to the Fixed Account.
QUALIFIED CONTRACTS - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 403(b) or 408 of the Internal Revenue
Code.
SAFECO - SAFECO Life Insurance Company at its Annuity Service Office shown on
the cover page of this Prospectus.
SEPARATE ACCOUNT - A separate investment account of SAFECO, designated as SAFECO
Separate Account C, into which Purchase Payments or Contract Values may be
allocated. The Separate Account is divided into Sub-Accounts.
TRUST - SAFECO Resource Series Trust, one of the Eligible Investments for the
Separate Account.
VALUATION DATE - Each day that the New York Stock Exchange is open for business,
which is Monday through Friday, except for New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
VALUATION PERIOD - The period commencing at the close of business on each
Valuation Date and ending at the close of business for the next succeeding
Valuation Date.
WITHDRAWAL - Any payment, including Contract charges and deductions, from the
Contracts.
HIGHLIGHTS
The Contracts described in this Prospectus provide for accumulation of Contract
Values and payment of monthly annuity payments on a fixed and variable basis.
At the Owner's direction, Purchase Payments for the Contracts are allocated to a
segregated investment account of SAFECO, which account has been designated
SAFECO Separate Account C, or to the Fixed Account. (See "Definitions - Fixed
Account.") Under certain circumstances, however, Purchase Payments may initially
be allocated to the SAFECO Resource Money Market Sub-Account of the Separate
Account (see below). The assets of the Separate Account are the property of
SAFECO and obligations arising under the Contracts are SAFECO's general
corporate obligations.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of the Trust or the Funds. The Trust and
the Funds are open-end, diversified, management investment companies. There are
currently five Portfolios available to the Separate Account under the Trust: the
SAFECO Resource Equity, Growth, Northwest, Bond and Money Market Portfolios.
There are currently three Portfolios available to the Separate Account under the
Insurance Management Series: the Federated Corporate Bond Portfolio, the
Federated International Stock Portfolio and the Federated Utility Portfolio. The
Lexington Emerging Markets Portfolio is currently the only Portfolio of the
Emerging Markets Fund available to the Separate Account. The Lexington Natural
Resources Portfolio is currently the only Portfolio of the Lexington Natural
Resources Trust available to the Separate Account. There are currently two
Portfolios available to the Separate Account under the Scudder Fund: the Scudder
Balanced Portfolio and the International Portfolio. Each Portfolio of the Trust
and the Funds has different investment objectives. Owners bear the investment
risk for all amounts allocated to the Separate Account. For more information on
the Trust and each of the Funds and their respective Portfolios, please see
"SAFECO Resource Series Trust," "Insurance Management Series," "Lexington
Emerging Markets Fund, Inc.,"
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<PAGE> 11
"Lexington Natural Resources Trust," and "Scudder Variable Life Investment
Fund," and the Prospectuses for the Trust and the Funds which accompany and
should be read with this Prospectus.
Within ten (10) days of the date of receipt of the Contract by the Owner, or a
longer period as may be required by the state of issuance, it may be returned by
delivering or mailing it to SAFECO at its Annuity Service Office or to the agent
through whom it was purchased. When the Contract is received by SAFECO, it will
be voided as if it had never been in force and SAFECO will refund the Contract
Value (which may be more or less than the Purchase Payments) computed at the end
of the Valuation Period during which the Contract is received by SAFECO.
However, in states where required and in the case of Contracts purchased
pursuant to an Individual Retirement Annuity, SAFECO will refund the Purchase
Payments rather than the Contract Value. Initial Purchase Payments are allocated
to the appropriate Sub-Account(s) in accordance with the election made by the
Owner in the Application. SAFECO reserves the right, however, to allocate all
initial Purchase Payments to the SAFECO Resource Money Market Sub-Account until
the expiration of fifteen (15) days from the date the first Purchase Payment is
received (except for any Purchase Payment to be allocated to the Fixed Account
as elected by the Owner). If SAFECO chooses to automatically allocate Purchase
Payments to the SAFECO Resource Money Market Sub-Account, SAFECO will refund the
greater of Purchase Payments or the Contract Value. Upon the expiration of the
fifteen day period, the Sub-Account Value of the SAFECO Resource Money Market
Sub-Account will be allocated to the appropriate Sub-Account(s) in accordance
with the election made by the Owner in the Application.
Various charges and deductions from Purchase Payments and the Separate Account
are described below.
A Contingent Deferred Sales Charge (sales load) may be deducted in the event of
a Withdrawal of all or a portion of the Contract Value. The Contingent Deferred
Sales Charge is imposed on Withdrawals made in the first eight (8) Contract
Years and is assessed as a percentage of the amount withdrawn. The maximum
Contingent Deferred Sales Charge is 8% of the amount withdrawn. An Owner may
make Withdrawals in any Contract Year of up to 10% of the Contract Value free
from the Contingent Deferred Sales Charge. There are certain other additional
instances in which this Charge is not applied. (See "Charges and Deductions -
Deduction for Contingent Deferred Sales Charge.") SAFECO deducts a Withdrawal
Charge which is equal to the lesser of $25 or 2% of the amount withdrawn for
each Withdrawal after the first in any Contract Year. (See "Charges and
Deductions - Deduction for Withdrawal Charge.")
There is a deduction made for the Mortality and Expense Risk Charge computed on
a daily basis which is equal, on an annual basis, to 1.25% of the average daily
net asset value of the Separate Account. This charge compensates SAFECO for
assuming the mortality and expense risks under the Contracts. (See "Charges and
Deductions - Deduction for Mortality and Expense Risk Charge.")
There is an Asset Related Administration Charge computed on a daily basis which
is equal, on an annual basis, to .15% of the average daily net asset value of
the Separate Account. This Charge compensates SAFECO for costs associated with
the administration of the Contracts and the Separate Account. (See "Charges and
Deductions - Deduction for Asset Related Administration Charge.")
SAFECO deducts an Annual Administration Maintenance Charge of $30 from the
Contract Value on the last day of each Contract Year and in the event of a
complete Withdrawal. This Charge is only deducted from Contracts where the
Contract Value is less than $50,000. (See "Charges and Deductions - Deduction
for Annual Administration Maintenance Charge.")
Under certain circumstances, a Transfer Charge may be assessed when an Owner
transfers Contract Values from one Sub-Account to another Sub-Account or to or
from the Fixed Account. (See "Charges and Deductions - Deduction for Transfer
Charge.")
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values with respect to Non-Qualified
Contracts. SAFECO reserves the right to deduct these taxes from Contract
-7-
<PAGE> 12
Values with respect to Qualified Contracts. (See "Charges and Deductions -
Deduction for Premium and Other Taxes.")
There are deductions from and expenses paid out of the assets of the Trust and
the Funds. See the accompanying Trust and Funds Prospectuses.
There is a ten percent (10%) federal income tax penalty applied to the income
portion of any premature distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, as amended (the "Code")); (d) in a series of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the taxpayer or for the joint lives (or joint
life expectancies) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior to
August 14, 1982. For federal income tax purposes, withdrawals are deemed to be
on a last-in, first-out basis. Separate tax withdrawal penalties and
restrictions apply to Qualified Contracts. (See "Tax Status - Tax Treatment of
Withdrawals - Qualified Contracts.") For a further discussion of the taxation of
the Contracts see "Tax Status."
Withdrawals of amounts attributable to contributions made pursuant to a salary
reduction agreement (as defined in Section 403(b)(11) of the Code) are limited
to circumstances only when the Owner attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship. Withdrawals for hardship are restricted to the portion
of the Owner's Contract Value which represents contributions made by the Owner
and does not include any investment results. The limitations on withdrawals
became effective on January 1, 1989, and apply only to: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Tax penalties may also apply. (See "Tax
Status - Tax Treatment of Withdrawals - Qualified Contracts.") Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
(See "Tax Status - Tax-Sheltered Annuities - Withdrawal Limitations.")
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract for
tax purposes if the owner of the contract has excessive control over the
investments underlying the contract. The issuance of such guidelines may require
SAFECO to impose limitations on an Owner's right to control the investment. It
is not known whether any such guidelines would have a retroactive effect (See
"Tax Status - Diversification").
Because of certain exemptive and exclusionary provisions, interests in the Fixed
Account are not registered under the Securities Act of 1933 and the Fixed
Account is not registered as an investment company under the Investment Company
Act of 1940, as amended. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these Acts, and SAFECO has
been advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in the Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
-8-
<PAGE> 13
E X P E N S E T A B L E
SAFECO SEPARATE ACCOUNT C +
+ The information in this Expense Table set forth below with respect to the
Portfolios was provided to the Separate Account by the Portfolios and such
information was not independently verified by the Separate Account.
CONTRACT OWNER TRANSACTION EXPENSES:
DEFERRED SALES LOAD: Contingent Deferred Sales Charge (as a percentage of
amount withdrawn)*: This charge applies to Withdrawals in
any Contract Year which exceed 10% of the Owner's
Contract Value:
<TABLE>
<S> <C>
Contract Year 1 8% of amount withdrawn
Contract Year 2 7% of amount withdrawn
Contract Year 3 6% of amount withdrawn
Contract Year 4 5% of amount withdrawn
Contract Year 5 4% of amount withdrawn
Contract Year 6 3% of amount withdrawn
Contract Year 7 2% of amount withdrawn
Contract Year 8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
</TABLE>
*While the Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule, total Contingent Deferred Sales
Charges collected by SAFECO will not exceed 8.5% of the Purchase Payments made
under the Contract.
SURRENDER FEES: Equal to the lesser of $25 or 2% of the amount
withdrawn for each Withdrawal after the first in any
Contract Year. Not deducted where the Owner is
participating in the Systematic Withdrawal Income
Plan(TM) or is exercising a Settlement Option.
EXCHANGE FEE: First 12 Transfers in a Contract Year are free.
Thereafter, SAFECO reserves the right to assess a
Transfer Charge which will be equal to the lesser of $10
or 2% of the amount transferred. The charge is not
imposed under the Programs, subject to certain
requirements.
ANNUAL CONTRACT FEE
$30 per Contract per Contract Year.* Waived if Contract Value is $50,000 or more
SEPARATE ACCOUNT ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Fees 1.25%
Asset Related Administration Charge .15%
Total Separate Account Annual Expenses 1.40%
</TABLE>
-9-
<PAGE> 14
SAFECO RESOURCE SERIES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fees
SAFECO Resource Equity Portfolio .74%
SAFECO Resource Growth Portfolio .74%
SAFECO Resource Northwest Portfolio .74%
SAFECO Resource Bond Portfolio .74%
SAFECO Resource Money Market Portfolio .65%
Other Expenses**
SAFECO Resource Equity Portfolio .06%
SAFECO Resource Growth Portfolio .16%
SAFECO Resource Northwest Portfolio .00%
SAFECO Resource Bond Portfolio .00%
SAFECO Resource Money Market Portfolio .00%
Total Trust Annual Expenses
SAFECO Resource Equity Portfolio .80%
SAFECO Resource Growth Portfolio .90%
SAFECO Resource Northwest Portfolio .74%
SAFECO Resource Bond Portfolio .74%
SAFECO Resource Money Market Portfolio .65%
INSURANCE MANAGEMENT SERIES ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
Federated Corporate Bond Portfolio .00%
Federated International Stock Portfolio .52%
Federated Utility Portfolio .00%
Other Expenses***
Federated Corporate Bond Portfolio .80%
Federated International Stock Portfolio .73%
Federated Utility Portfolio .85%
Total Fund Annual Expenses***
Federated Corporate Bond Portfolio .80%
Federated International Stock Portfolio 1.25%
Federated Utility Portfolio .85%
LEXINGTON EMERGING MARKETS FUND, INC. ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .85%
Other Expenses**** .45%
Total Fund Annual Expenses**** 1.30%
</TABLE>
-10-
<PAGE> 15
LEXINGTON NATURAL RESOURCES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fees 1.00%
Other Expenses***** .55%
Total Fund Annual Expenses***** 1.55%
SCUDDER VARIABLE LIFE INVESTMENT FUND ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
Scudder Balanced Portfolio .475%
Scudder International Portfolio .875%
Other Expenses******
Scudder Balanced Portfolio .275%
Scudder International Portfolio .205%
Total Fund Annual Expenses******
Scudder Balanced Portfolio .75%
Scudder International Portfolio 1.08%
</TABLE>
* For purposes of the Examples, the Annual Administration Maintenance
Charge is calculated as a ratio of total Annual Administration
Maintenance Charges collected during the year to the total average net
assets of all Sub-Accounts. The Annual Administration Maintenance
Charge percentage will change each year because of changes in total
Annual Administration Maintenance Charges collected during the year and
the total average net assets of all Sub-Accounts. This will result in
variations in the Expense Table each year.
** Prior to May 5, 1994 SAFECO paid all other expenses of SAFECO Resource
Series Trust. Beginning on May 5, 1994 SAFECO will pay all other
expenses of the SAFECO Resource Portfolios of the Trust until a SAFECO
Resource Portfolio's assets reach $20 million. Once a SAFECO Resource
Portfolio's assets reach $20 million, the other expenses of the SAFECO
Resource Portfolio will be paid by such SAFECO Resource Portfolio. The
SAFECO Resource Equity Portfolio currently has assets in excess of $20
million. In 1994, other expenses incurred by the SAFECO Resource Equity
Portfolio equaled .04%. In 1995, it is anticipated that the SAFECO
Resource Growth Portfolio will also have assets in excess of $20
million. The Other Expenses above and the Examples below of the SAFECO
Resource Equity and Growth Portfolios reflect expenses expected to be
incurred in 1995. They are only estimates. Other expenses actually
incurred by the SAFECO Resource Equity and Growth Portfolios in 1995
may vary.
*** SAFECO has entered into a Participation Agreement with the Insurance
Management Series in connection with the Separate Account's investment
in the shares of the Insurance Management Series. Other Participating
Insurance Companies have entered into similar Participation Agreements
with the Insurance Management Series. For the six months ended June 30,
1995, the adviser voluntarily waived or reimbursed expenses, as
follows: Federated Corporate Bond Fund $116,027, absent reimbursement
$127,025; Federated Utility Fund $123,561, absent reimbursement
$144,557.
-11-
<PAGE> 16
**** SAFECO has entered into a Participation Agreement with the Lexington
Emerging Markets Fund in connection with the Separate Account's
investment in the shares of the Lexington Emerging Markets Fund. Other
Participating Insurance Companies have entered into similar
Participation Agreements with the Lexington Emerging Markets Fund. For
the six months ended June 30, 1995, the adviser voluntarily waived or
reimbursed expenses, as follows: Lexington Emerging Markets Fund
$70,426, absent reimbursement $105,813.
***** SAFECO has entered into a Participation Agreement with the Lexington
Natural Resources Trust in connection with the Separate Account's
investment in the shares of the Lexington Natural Resources Trust.
Other Participating Insurance Companies have entered into similar
Participation Agreements with the Lexington Natural Resources Trust.
****** SAFECO has entered into a Participation Agreement with the Scudder Fund
in connection with the Separate Account's investment in the shares of
the Scudder Fund. Other insurance companies (together, with SAFECO,
collectively referred to herein as "Participating Insurance Companies")
have entered into similar Participation Agreements with the Scudder
Fund. For a period of five years from the date of execution of a
Participation Agreement with the Scudder Fund, and from year to year
thereafter if agreed to by the Participating Insurance Company and the
Fund, each Participating Insurance Company (including SAFECO) has
agreed to reimburse the Scudder Fund to the extent that annual
operating expenses of the Scudder Balanced Portfolio of the Scudder
Fund exceed 0.75% of such Portfolio's average annual net assets and to
the extent that the annual operating expenses of the Scudder
International Portfolio of the Scudder Fund exceed 1.50% of such
Portfolio's average annual net assets. Under these arrangements, no
reimbursement of expenses of either of these Portfolios was required of
SAFECO for the year ended December 31, 1994.
For the year ended December 31, 1994, Scudder Investor Services, Inc.
did not impose a portion of its administrative fee due with respect to
the Scudder Balanced Portfolio. If such fee had been imposed, the
percentages shown for "Other Expenses" and for "Total Fund Annual
Expenses" would have been .305% and 0.78%, respectively, for the
Scudder Balanced Portfolio.
<TABLE>
<CAPTION>
Examples for SAFECO Resource Equity Sub-Account Year 1 Year 3 Year 5
- ----------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $103 $149 $196
Assuming annuitization at end of period . $ 30 $ 91 $156
Assuming no withdrawal . . . . . . . . . $ 30 $ 91 $156
<CAPTION>
Examples for SAFECO Resource Growth Sub-Account Year 1 Year 3 Year 5
- ----------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $104 $152 $201
Assuming annuitization at end of period . $ 31 $ 95 $161
Assuming no withdrawal . . . . . . . . . $ 31 $ 95 $161
</TABLE>
-12-
<PAGE> 17
<TABLE>
<CAPTION>
Examples for SAFECO Resource Money Market Sub-Account Year 1 Year 3 Year 5
- ----------------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $102 $145 $189
Assuming annuitization at end of period . $ 29 $ 87 $149
Assuming no withdrawal . . . . . . . . . $ 29 $ 87 $149
<CAPTION>
Examples for SAFECO Resource Northwest and Bond Sub-Accounts Year 1 Year 3 Year 5
- ------------------------------------------------------------ ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $103 $148 $193
Assuming annuitization at end of period . $ 29 $ 90 $153
Assuming no withdrawal . . . . . . . . . $ 29 $ 90 $153
<CAPTION>
Examples for Federated Corporate Bond Sub-Account Year 1 Year 3 Year 5
- ------------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $103 $149 $196
Assuming annuitization at end of period . $ 30 $ 92 $156
Assuming no withdrawal . . . . . . . . . $ 30 $ 92 $156
<CAPTION>
Examples for Federated International Stock Sub-Account Year 1 Year 3 Year 5
- ------------------------------------------------------ ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $108 $162 $217
Assuming annuitization at end of period . $ 34 $105 $178
Assuming no withdrawal . . . . . . . . . $ 34 $105 $178
<CAPTION>
Examples for Federated Utility Sub-Account Year 1 Year 3 Year 5
- ------------------------------------------ ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $104 $151 $198
Assuming annuitization at end of period . $ 31 $ 93 $159
Assuming no withdrawal . . . . . . . . . $ 31 $ 93 $159
<CAPTION>
Examples for Lexington Emerging Markets Sub-Account Year 1 Year 3 Year 5
- --------------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $108 $163 $219
Assuming annuitization at end of period . $ 35 $107 $180
Assuming no withdrawal . . . . . . . . . $ 35 $107 $180
</TABLE>
-13-
<PAGE> 18
<TABLE>
<CAPTION>
Examples for Lexington Natural Resources Sub-Account Year 1 Year 3 Year 5
- ---------------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $110 $170 $230
Assuming annuitization at end of period . $ 37 $114 $192
Assuming no withdrawal . . . . . . . . . $ 37 $114 $192
<CAPTION>
Examples for Scudder Balanced Sub-Account Year 1 Year 3 Year 5
- ----------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $103 $148 $194
Assuming annuitization at end of period . $ 29 $ 90 $154
Assuming no withdrawal . . . . . . . . . $ 29 $ 90 $154
<CAPTION>
Examples for Scudder International Sub-Account Year 1 Year 3 Year 5
- ---------------------------------------------- ------ ------ ------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
<S> <C> <C> <C>
Assuming withdrawal at end of period . . $106 $157 $209
Assuming annuitization at end of period . $ 33 $100 $170
Assuming no withdrawal . . . . . . . . . $ 33 $100 $170
</TABLE>
The information in the "Examples" is estimated and provided to assist the Owner
in understanding the various costs and expenses charged to an Owner's Contract
Value either directly or indirectly and reflects expenses of the Separate
Account, the Trust and the Funds. The Examples do not reflect premium taxes
which may be applicable. Contingent Deferred Sales Charges may be waived in
certain circumstances. For additional information, see "Charges and Deductions"
in this Prospectus for the Separate Account, "Management of the Trust" in the
Prospectus for the Trust, "Insurance Management Series Information" in the
Prospectus for the Insurance Management Series, "Management of the Fund" in the
Prospectus for the Lexington Emerging Markets Fund, and "Investment Adviser,
Sub-Adviser and Distributor" in the Prospectus for the Lexington Natural
Resources Trust, and "Investment Adviser" in the Prospectus for the Scudder
Fund.
THE INFORMATION ABOVE IS NOT INTENDED TO BE REPRESENTATIVE OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
-14-
<PAGE> 19
SCHEDULE OF ACCUMULATION UNIT VALUES AND ACCUMULATION UNITS OUTSTANDING
SAFECO SEPARATE ACCOUNT C
The financial information on this page has been audited by Ernst & Young LLP,
independent auditors, whose report thereon appears in the Separate Account's
Statement of Additional Information. (See "Accumulation Unit" for more
information about the calculation of unit values.) Such information is not
included for the Federated Corporate Bond Sub-Account, Federated International
Stock Sub-Account, Federated Utility Sub-Account, Lexington Emerging Markets
Sub-Account and Lexington Natural Resources Sub-Account as these are new
Sub-Accounts.
<TABLE>
<CAPTION>
1994
----
<S> <C>
SAFECO RESOURCE EQUITY SUB-ACCOUNT
February 11 value (initial public offering) $24.528
December 31 value $25.373
December 31 units 144,290
SAFECO RESOURCE BOND SUB-ACCOUNT
February 11 value (initial public offering) $16.217
December 31 value $15.521
December 31 units 14,107
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
February 11 value (initial public offering) $13.526
December 31 value $13.811
December 31 units 124,541
SAFECO RESOURCE GROWTH SUB-ACCOUNT
February 11 value (initial public offering) $13.910
December 31 value $14.864
December 31 units 154,127
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
February 11 value (initial public offering) $10.073
December 31 value $10.134
December 31 units 22,082
SCUDDER BALANCED SUB-ACCOUNT
February 11 value (initial public offering) $10.435
December 31 value $ 9.988
December 31 units 49,575
SCUDDER INTERNATIONAL SUB-ACCOUNT
February 11 value (initial public offering) $10.948
December 31 value $10.948
December 31 units 137,600
</TABLE>
-15-
<PAGE> 20
FINANCIAL STATEMENTS
The financial statements for SAFECO are contained in the Statement of Additional
Information which is available at no charge by calling 1-800-426-7649 or writing
to the Annuity Service Office address on the cover.
PERFORMANCE INFORMATION
In advertisements, the "yield," "effective yield," "total return" and "average
annual total return" of the Sub-Accounts may be quoted.
ALL SUB-ACCOUNTS (OTHER THAN SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT)
"Yield" is the annualization on a 360-day basis of net income per unit over a
30-day period divided by the accumulation unit value on the last day of the
period. Yield figures are calculated by determining the income generated by an
investment in the Sub-Account over a 30-day period. The income is then
annualized by assuming that the income generated during the 30-day period
continues to be generated each month for a 12-month period and is shown as a
percentage of the investment. Yield figures will reflect deduction of the Annual
Administration Maintenance Charge which is assessed on an annual basis to Owners
whose Contract Value is less than $50,000, but will not include any applicable
Contingent Deferred Sales Charge.
"Total return" is the total percentage change in the unit value of an investment
over a stated period of time. "Average annual total return" is the annual
percentage change in the unit value of an investment over a stated period of
time. Both total return and average annual total return assume the reinvestment
of dividend and capital gains distributions.
Standardized total return figures which appear in advertisements or sales
literature will be calculated for required time periods based on a set initial
investment amount and include the Annual Administration Maintenance Charge and
the Contingent Deferred Sales Charge. From time to time, non-standardized total
return figures may accompany the standardized figures. Non-standardized total
return figures may be calculated in a variety of ways including but not
necessarily limited to different time periods, different initial investment
amounts, additions of periodic payments, use of time weighted average annual
returns which take into consideration the length of time each investment has
been on deposit, and without the Annual Administration Maintenance Charge and/or
with or without the Contingent Deferred Sales Charge. Non-standardized figures
may cause the performance of the Sub-Accounts to appear higher than performance
calculated using standard parameters.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
"Yield" is the annualization on a 365-day basis of the SAFECO Resource Money
Market Sub-Account's net income over a 7-day period. Yield figures are
calculated by determining the income generated by an investment in the
Sub-Account over a 7-day period. The income is then annualized by assuming that
the income generated during the 7-day period continues to be generated each week
for a 52-week period and is shown as a percentage of the investment.
"Effective yield" is the annualization, on a 365-day basis, of the Sub-Account's
net income over a 7-day period with dividends reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
As explained above, yield figures will reflect deduction of the Annual
Administration Maintenance Charge which is assessed on an annual basis to Owners
whose Contract Value is less than $50,000, but will not include any applicable
Contingent Deferred Sales Charge.
-16-
<PAGE> 21
For the SAFECO Resource Money Market Portfolio, total return and average annual
total return are non-standardized performance figures which may accompany the
standardized yield and effective yield. "Total return" is the total percentage
change in the unit value of an investment over a stated period of time and
"average annual total return" is the annual percentage change in the unit value
of an investment over a stated period of time. Non-standardized total return and
average annual total return figures for the SAFECO Resource Money Market
Portfolio may be calculated in a variety of ways, as described above.
RANKINGS
In addition to these performance figures, the Sub-Accounts may advertise
rankings as provided by the Lipper Variable Insurance Products Performance
Analysis Service published by Lipper Analytical Services, Inc. which monitors
separate account performance for variable annuity products such as the
Contracts, the VARDS Report which is a monthly variable annuity industry
analysis compiled by Variable Annuity Research & Data Service of Roswell,
Georgia and published by Financial Planning Resources, Inc. or the Variable
Annuity Performance Report published by Morningstar, Inc. which is also a
monthly analysis of variable annuity performance. Rankings provided by these
sources may or may not include all applicable charges.
Performance figures and quoted rankings are indicative only of past performance
and are not intended to represent future investment results.
TRUST AND FUNDS PERFORMANCE INFORMATION
Although certain Sub-Accounts of the Separate Account are new and therefore have
no investment performance history, the corresponding Portfolios of the Trust and
the Funds have been in existence for some time and consequently have an
investment performance history. In order to demonstrate how the actual
investment experience of the various Portfolios of the Trust and Funds affects
Accumulation Unit values, the following hypothetical performance information was
developed. The information is based upon the historical experience of the
Portfolios and is for the periods shown.
The performance of the various Sub-Accounts will vary and the hypothetical
results shown are not necessarily representative of future results. Performance
for periods ending after those shown may vary substantially from the examples
shown below. The performance of the various Sub-Accounts is calculated for a
specified period of time by assuming an initial Purchase Payment of $1,000
allocated to each of the Sub-Accounts and a deduction of all charges and
deductions. (See "Charges and Deductions" for more information.) No withdrawals
are assumed. The percentage increases are determined by subtracting the initial
Purchase Payment from the ending value and dividing the remainder by the
beginning value.
HYPOTHETICAL PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
Percent
Period Value Increase
------ ----- --------
<S> <C> <C> <C>
SAFECO Resource
Money Market Sub-Account July 21, 1987-December 31, 1994 $1,078 7.79%
SAFECO Resource
Bond Sub-Account July 21, 1987-December 31, 1994 $1,227 22.71%
SAFECO Resource
Equity Sub-Account July 21, 1987-December 31, 1994 $1,615 61.49%
SAFECO Resource
Growth Sub-Account January 7, 1993-December 31, 1994 $1,406 40.60%
</TABLE>
-17-
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
SAFECO Resource
Northwest Sub-Account January 7, 1993-December 31, 1994 $ 950 -4.98%
Federated Corporate Bond Sub- March 1, 1994-December 31, 1994 $ 880 -11.98%
Account
Federated International Stock Sub- May 8, 1995-November 30, 1995 $1,001 .11%
Account
Federated Utility Sub-Account February 10, 1994-December 31, 1994 $ 918 -8.25%
Lexington Emerging Markets Sub- March 31, 1994-December 31, 1994 $ 989 -1.05%
Account
Lexington Natural Resources Sub- October 14, 1991-December 31, 1994 $ 967 -3.27%
Account
Scudder Balanced Sub-Account July 16, 1985-December 31, 1994 $1,745 74.51%
Scudder International Sub-Account May 1, 1987-December 31, 1994 $1,432 43.24%
</TABLE>
SAFECO
SAFECO is a stock life insurance company which was organized under the laws of
the state of Washington on January 23, 1957. SAFECO writes individual and group
life, accident and health insurance and annuities. SAFECO is licensed to do
business in the District of Columbia and all states except New York. SAFECO is a
wholly-owned subsidiary of SAFECO Corporation which is a holding company whose
subsidiaries are engaged primarily in insurance and financial service
businesses. The home office of SAFECO is located at 15411 N.E. 51st Street,
Redmond, Washington 98052.
THE SEPARATE ACCOUNT
The Board of Directors of SAFECO adopted a resolution to establish a segregated
asset account pursuant to Washington insurance law on February 6, 1986. This
segregated asset account has been designated SAFECO Separate Account C. SAFECO
has caused the Separate Account to be registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940. The Separate Account meets the definition of a
"separate account" under the federal securities laws.
The assets of the Separate Account are the property of SAFECO. However, the
assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business SAFECO may conduct. Income, gains
and losses, whether or not realized, are in accordance with the Contracts
credited to or charged against the Separate Account without regard to other
income, gains or losses of SAFECO. SAFECO's obligations arising under the
Contracts are general corporate obligations. The investments of the Separate
Account will be valued at their fair market value in accordance with the
procedures approved by the Board of Directors of SAFECO and the Separate Account
committee.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one of the Portfolio(s) of the Trust or the Funds.
Currently there are five SAFECO Resource Portfolios available under the Trust:
the SAFECO Resource Equity Portfolio, SAFECO Resource Growth Portfolio, SAFECO
Resource Northwest Portfolio, SAFECO Resource Bond Portfolio and SAFECO Resource
Money Market Portfolio. Currently there are three Portfolios available under the
Insurance Management Series: the Federated Corporate Bond Portfolio, the
Federated International Stock Portfolio and the Federated Utility Portfolio. The
Lexington Emerging Markets
-18-
<PAGE> 23
Portfolio is currently the only Portfolio of the Emerging Markets Fund available
to the Separate Account. The Lexington Natural Resources Portfolio is currently
the only Portfolio of the Lexington Natural Resources Trust available to the
Separate Account. There are two Portfolios available under the Scudder Fund: the
Scudder Balanced Portfolio and the Scudder International Portfolio. There is no
assurance that the investment objective of any of the Portfolios will be met.
Owners bear the complete investment risk for Purchase Payments allocated to a
Sub-Account. Contract Values will fluctuate in accordance with the investment
performance of the Sub-Account(s) to which Purchase Payments are allocated, and
in accordance with the imposition of the fees and charges assessed under the
Contracts.
SAFECO RESOURCE EQUITY SUB-ACCOUNT
The investment objective of the SAFECO Resource Equity Sub-Account is to seek
long-term growth of capital and reasonable current income.
The SAFECO Resource Equity Sub-Account invests in the SAFECO Resource Equity
Portfolio. To pursue its investment objective, the SAFECO Resource Equity
Portfolio ordinarily invests principally in common stocks or securities
convertible into common stocks. Fixed-Income securities may be purchased in
accordance with business and financial conditions.
SAFECO RESOURCE GROWTH SUB-ACCOUNT
The investment objective of the SAFECO Resource Growth Sub-Account is to seek
growth of capital and the increased income that ordinarily follows from such
growth.
The SAFECO Resource Growth Sub-Account invests in the SAFECO Resource Growth
Portfolio. To pursue its investment objective, the SAFECO Resource Growth
Portfolio will ordinarily invest a preponderance of its assets in common stocks
selected primarily for potential appreciation. To determine those common stocks
which have the potential for long-term growth, SAFECO Asset Management Company,
the Trust's investment adviser, will evaluate the issuer's financial strength,
quality of management and earnings power.
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
The investment objective of the SAFECO Resource Northwest Sub-Account is to seek
long-term growth of capital through investing primarily in Northwest companies.
The SAFECO Resource Northwest Sub-Account invests in the SAFECO Resource
Northwest Portfolio. To pursue its investment objective, the SAFECO Resource
Northwest Portfolio will invest at least 65% of its total assets in securities
issued by companies with their principal executive offices located in
Washington, Alaska, Idaho, Oregon or Montana.
The SAFECO Resource Northwest Portfolio will ordinarily invest its assets in
shares of common stock selected primarily for potential long-term appreciation.
The SAFECO Resource Northwest Portfolio may also occasionally invest in
securities convertible into common stock.
SAFECO RESOURCE BOND SUB-ACCOUNT
The investment objective of the SAFECO Resource Bond Sub-Account is to seek as
high a level of current income as is consistent with the relative stability of
capital.
The SAFECO Resource Bond Sub-Account invests in the SAFECO Resource Bond
Portfolio. To pursue its investment objective, the SAFECO Resource Bond
Portfolio invests primarily in medium-term debt securities. Although the SAFECO
Resource Bond Portfolio does not intend to purchase below investment grade bonds
during
-19-
<PAGE> 24
the coming year, it may hold up to 20% of total assets in bonds which are
downgraded after purchase to below investment grade quality by Standard & Poor's
Corporation or Moody's Investors Service, Inc. Below investment grade bonds are
commonly referred to as high-yield or "junk" bonds and have special risks
associated with them. See the Trust's Prospectus and Statement of Additional
Information for more information.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
The investment objective of the SAFECO Resource Money Market Sub-Account is to
seek as high a level of current income as is consistent with the preservation of
capital and liquidity through investments in high-quality money market
investments maturing in thirteen months or less.
The SAFECO Resource Money Market Sub-Account invests in the SAFECO Resource
Money Market Portfolio which seeks to maintain a net asset value per share of
$1.00. SHARES OF THE SAFECO RESOURCE MONEY MARKET PORTFOLIO ARE NEITHER INSURED,
NOR GUARANTEED, BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE SAFECO
RESOURCE MONEY MARKET PORTFOLIO WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
FEDERATED CORPORATE BOND SUB-ACCOUNT
The investment objective of the Federated Corporate Bond Sub-Account is to seek
high current income.
The Federated Corporate Bond Sub-Account invests in the Federated Corporate Bond
Portfolio. To pursue its investment objective, the Federated Corporate Bond
Portfolio invests primarily in a diversified portfolio of professionally managed
fixed-income securities. The fixed-income securities in which the Federated
Corporate Bond Portfolio intends to invest are lower-rated corporate debt
obligations, which are commonly referred to as "junk bonds." Some of these
fixed-income securities may involve equity features. Capital growth will be
considered, but only when consistent with the investment objective of high
current income.
FEDERATED INTERNATIONAL STOCK SUB-ACCOUNT
The investment objective of the Federated International Stock Sub-Account is to
seek to obtain a total return on its assets.
The Federated International Stock Sub-Account invests in the Federated
International Stock Portfolio. To pursue its investment objective, the Federated
International Stock Portfolio invests in a diversified portfolio of equity
securities issued by non-U.S. issuers. The Federated International Stock
Portfolio will invest at least 65% of its total assets, and under normal market
conditions substantially all of its assets, in equity securities of issuers
located in at least three different countries outside of the United States. The
equity securities will be selected primarily for superior growth potential and
to reduce portfolio volatility. The Federated International Stock Portfolio may
purchase sponsored or unsponsored American Depository Receipts, Global
Depository Receipts, and European Depository Receipts; corporate and government
fixed income securities of issuers outside of the United States; convertible
securities; and options and financial futures contracts. While the Federated
International Stock Portfolio primarily invests in dividend-paying equity
securities of established companies that appear to have growth potential, it may
as a temporary defensive position, shift its emphasis to such other securities
if such investments appear to offer potential higher return.
FEDERATED UTILITY SUB-ACCOUNT
The investment objective of the Federated Utility Sub-Account is to seek high
current income and moderate capital appreciation.
The Federated Utility Sub-Account invests in the Federated Utility Portfolio. To
pursue its investment objective, the Federated Utility Portfolio invests
primarily in a professionally managed and diversified portfolio of equity and
-20-
<PAGE> 25
debt securities of utility companies that produce, transmit, or distribute gas
and electric energy as well as those companies that provide communications
facilities, such as telephone and telegraph companies. Under normal market
conditions, the Federated Utility Portfolio invests at least 65% of its total
assets in securities of utility companies.
LEXINGTON EMERGING MARKETS SUB-ACCOUNT
The investment objective of the Lexington Emerging Markets Sub-Account is to
seek long-term growth of capital primarily through investment in equity
securities and equivalents of companies domiciled in, or doing business in,
emerging countries and emerging markets.
The Lexington Emerging Markets Sub-Account invests in the Lexington Emerging
Markets Portfolio. To pursue its investment objective, the Lexington Emerging
Markets Portfolio invests primarily in emerging country and emerging market
equity securities of all types of common stocks and equivalents (the following
constitute equivalents: convertible debt securities and warrants), although the
Portfolio also may invest in preferred stocks, bonds, and money market
instruments of foreign and domestic companies, the U.S. government, and its
agencies. The Lexington Emerging Markets Portfolio, under normal conditions,
will invest at least 65% of its total assets in emerging country and emerging
market equity securities in at least three countries outside of the U.S. and at
all times will invest in a minimum of three countries outside of the U.S.
Investments in emerging country equity securities are not subject to a maximum
limit, and it is the intention of the Lexington Emerging Markets Portfolio's
adviser to invest substantially all of the Portfolio's assets in such
securities. For purposes of its investment objective, the Lexington Emerging
Markets Portfolio considers emerging country equity securities to be any country
whose economy and market the World Bank or United Nations considers to be
emerging or developing, and the Portfolio also may invest in equity securities
and equivalents, traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in such emerging
countries and emerging markets or sales made in such countries.
LEXINGTON NATURAL RESOURCES SUB-ACCOUNT
The investment objective of the Lexington Natural Resources Sub-Account is to
seek long-term growth of capital through investing primarily in common stocks of
companies that own or develop natural resources and other basic commodities, or
supply goods and services to such companies.
The Lexington Natural Resources Sub-Account invests in the Lexington Natural
Resources Portfolio. To pursue its investment objective, the Lexington Natural
Resources Portfolio seeks to identify securities of companies that, in its
management's opinion, are undervalued relative to the value of natural resource
holdings of such companies in light of current and anticipated economic or
financial conditions. The Lexington Natural Resources Portfolio will consider a
company to have substantial natural resource assets when, in its management's
opinion, the company's holdings of the assets are of such magnitude, when
compared to the capitalization, revenues or operating profits of the company,
that changes in the economic value of the assets will affect the market price of
the equity securities of such company, which, generally, is when at least 50% of
the non-current assets, capitalization, gross revenues or operating profits of
the company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Up to 25%
of the Lexington Natural Resources Portfolio's total assets may be invested in
securities principally traded in markets outside the U.S.
SCUDDER BALANCED SUB-ACCOUNT
The investment objective of the Scudder Balanced Sub-Account is to seek a
balance of growth and income from a diversified portfolio of equity and fixed
income securities. The Scudder Balanced Sub-Account also seeks long-term
preservation of capital through a quality-oriented investment approach that is
designed to reduce risk.
-21-
<PAGE> 26
The Scudder Balanced Sub-Account invests in the Scudder Balanced Portfolio. In
seeking its objectives of a balance of growth and income, as well as long-term
preservation of capital, the Scudder Balanced Portfolio invests in a diversified
portfolio of equity and fixed income securities. The Scudder Balanced Portfolio
invests, under normal circumstances, at least 50%, but no more than 75%, of its
net assets in common stocks and other equity investments. The Scudder Balanced
Portfolio's equity investments consist of common stocks, preferred stocks,
warrants and securities convertible into common stocks, of companies that, in
the investment adviser's judgment, are of above-average financial quality and
offer the prospect for above-average growth in earnings, cash flow, or assets
relative to the overall market as defined by the Standard and Poor's 500
Composite Stock Price Index. To enhance income and stability, the Scudder
Balanced Portfolio's remaining assets are allocated to bonds and other fixed
income securities, including cash reserves. The Scudder Balanced Portfolio will
normally invest 25% to 50% of its net assets in fixed income securities.
However, at least 25% of the Scudder Balanced Portfolio's net assets must always
be invested in fixed income securities.
SCUDDER INTERNATIONAL SUB-ACCOUNT
The investment objective of the Scudder International Sub-Account is to seek
long-term growth of capital primarily through diversified holdings of marketable
foreign equity investments.
The Scudder International Sub-Account invests in the Scudder International
Portfolio. The Scudder International Portfolio invests in companies, wherever
organized, which do business primarily outside the United States. The Scudder
International Portfolio intends to diversify investments among several countries
and to have represented in its holdings business activities in not less than
three different countries. The Scudder International Portfolio invests primarily
in equity securities of established companies listed on foreign exchanges. It
may also invest in fixed income securities of foreign governments and companies.
SAFECO RESOURCE SERIES TRUST
The Trust has been established to act as one of the funding vehicles for the
Contracts offered. The investment adviser to the Trust is SAFECO Asset
Management Company, SAFECO Plaza, Seattle, Washington. The Trust is an open-end,
diversified, management investment company.
INSURANCE MANAGEMENT SERIES
The Insurance Management Series is one of the funding vehicles for the Contracts
offered. The investment adviser to the Insurance Management Series is Federated
Advisers, Federated Investors Tower, Pittsburgh, Pennsylvania. The Insurance
Management Series is an open-end, diversified management investment company.
LEXINGTON EMERGING MARKETS FUND, INC.
The Lexington Emerging Markets Fund is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Emerging Markets Fund
is Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey. The Lexington Emerging Markets Fund is an open-end,
diversified management investment company.
LEXINGTON NATURAL RESOURCES TRUST
The Lexington Natural Resources Trust is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Natural Resources
Trust is Lexington Management Corporation, P.O. Box 1515/Park 80
-22-
<PAGE> 27
West Plaza Two, Saddle Brook, New Jersey. The Lexington Natural Resources Trust
is an open-end, diversified management investment company.
SCUDDER VARIABLE LIFE INVESTMENT FUND
The Scudder Fund is one of the funding vehicles for the Contracts offered. The
investment adviser to the Scudder Fund is Scudder, Stevens & Clark, Inc., Two
International Place, Boston, Massachusetts. The Scudder Fund is an open-end,
diversified management investment company.
WHILE A BRIEF SUMMARY OF THE INVESTMENT OBJECTIVES OF EACH PORTFOLIO IS SET
FORTH ABOVE, MORE COMPREHENSIVE INFORMATION IS FOUND IN THE CURRENT RESPECTIVE
TRUST OR FUND PROSPECTUS. THE TRUST AND FUNDS' PROSPECTUSES ARE ATTACHED AND
ACCOMPANY THIS PROSPECTUS. ALL DOCUMENTS SHOULD BE READ TOGETHER AND CAREFULLY
BEFORE INVESTING. AN ADDITIONAL PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION FOR THE TRUST AND ANY OF THE FUNDS CAN BE OBTAINED BY CALLING THE
NUMBER ON THE COVER PAGE OF THIS PROSPECTUS OR WRITING TO THE ADDRESS OF THE
ANNUITY SERVICE OFFICE LISTED THERE. ADDITIONAL PORTFOLIOS MAY BE ESTABLISHED BY
THE TRUST AND THE FUNDS FROM TIME TO TIME AND MAY BE MADE AVAILABLE TO OWNERS.
IN ADDITION, CERTAIN EXISTING PORTFOLIOS OF THE FUNDS, WHICH ARE NOT CURRENTLY
BEING MADE AVAILABLE, MAY BE MADE AVAILABLE TO OWNERS IN THE FUTURE. SOME OF THE
PORTFOLIOS LISTED BELOW MAY NOT BE IMMEDIATELY AVAILABLE IN STATES THAT HAVE NOT
YET APPROVED THE CORRESPONDING CONTRACT ENDORSEMENTS.
VOTING RIGHTS
In accordance with its view of present applicable law, SAFECO will vote the
shares of the Trust and the Funds held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account. SAFECO will vote
shares it owns for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. Neither the Trust nor the Funds hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by SAFECO not more than sixty (60) days prior to the meeting
of the Trust or the Funds. Voting instructions will be solicited by written
communication at least fourteen (14) days prior to such meeting with respect to
the Trust and at least ten (10) days prior to such meeting with respect to the
Funds.
The Funds are intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies which may or may not be affiliated and in
compliance with certain regulatory requirements. The Funds currently do not
foresee any disadvantages to the Owners arising from the fact that the interests
of the holders of the variable annuity contracts and the variable life insurance
policies may differ. Nevertheless, the Funds' Directors and Trustees intend to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto.
SUBSTITUTION OF SECURITIES
If the shares of the Trust or the Funds (or any Portfolio within the Trust or
the Funds) should no longer be available for investment by the Separate Account
or, if in the judgment of SAFECO, further investment in such shares should
become inappropriate in view of the purpose of the Contracts, SAFECO may
substitute shares of another mutual fund (or Portfolio within the Trust or the
Funds) for fund shares already purchased or to be purchased in the future
-23-
<PAGE> 28
by Purchase Payments under the Contracts. No substitution of securities may take
place without prior approval of the Securities and Exchange Commission and under
such requirements as it may impose.
PURCHASING A CONTRACT
PURCHASE PAYMENTS
The Contracts are purchased under a flexible purchase payment plan. The initial
Purchase Payment is due on the Contract Date. The minimum initial Purchase
Payment for Non-Qualified Contracts is $2,000 and the minimum subsequent
Purchase Payment is $250. For Qualified Contracts, the minimum initial and
subsequent Purchase Payments must be at least $30 ($1,000 minimum initial
Purchase Payments required in Maine, South Carolina and Texas). Subject to these
minimums, the Owner may increase or decrease or change the frequency of
subsequent Purchase Payments. SAFECO reserves the right to reject any
Application or Purchase Payment.
ALLOCATION OF PURCHASE PAYMENTS
The allocation of the initial Purchase Payment is elected by the Owner in the
Application. Unless the Owner elects otherwise, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation of the
Purchase Payments is subject to the terms and conditions imposed by SAFECO.
Under certain circumstances, Purchase Payments which have been designated by
prospective purchasers to be allocated to Sub-Accounts other than the SAFECO
Resource Money Market Sub-Account, may be initially allocated to the SAFECO
Resource Money Market Sub-Account. (See "Highlights.") For each Sub-Account,
Purchase Payments are converted into Accumulation Units. The number of
Accumulation Units in a Sub-Account credited to the Contract is determined by
dividing each Net Purchase Payment by the value of an Accumulation Unit for that
Sub-Account. Purchase Payments allocated to the Fixed Account are credited in
dollars.
If the Application for a Contract is in good order, SAFECO will apply the
Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the Application for a Contract
is not in good order, SAFECO will attempt to get it in good order or SAFECO will
return the Application and the Purchase Payment within five (5) business days.
SAFECO will not retain a Purchase Payment for more than five (5) business days
while processing an incomplete Application unless it has been so authorized by
the purchaser. For subsequent Purchase Payments in good order, SAFECO will apply
the Net Purchase Payment to the Separate Account and credit the Owner's Contract
with Accumulation Units during the next Valuation Period after the Purchase
Payment was received.
ACCUMULATION UNIT
Purchase Payments allocated to the Separate Account and amounts transferred to
or within the Separate Account are converted into Accumulation Units. This is
done by dividing each Net Purchase Payment by the value of an Accumulation Unit
for the Valuation Period during which the Purchase Payment is allocated to the
Sub-Account or the transfer is made. Accumulation Units for each Sub-Account are
valued separately. The Accumulation Unit value for each Sub-Account was
arbitrarily set at $10 when the Sub-Account was established. The Accumulation
Unit value for any later Valuation Period is determined by multiplying the
Accumulation Unit value for the Sub-Account, as of the immediately preceding
Valuation Period, by the Net Investment Factor for the current Valuation Period.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) and (d) from the result,
where:
(a) is the net result of:
(i) The net asset value per share of the Portfolio, determined as of
the current Valuation Period, plus
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<PAGE> 29
(ii) The per share amount of any dividend or capital-gain
distribution made by the Portfolio if the "ex-dividend" date
occurs during the current Valuation Period, plus or minus
(iii) A per share credit or charge, which is determined by SAFECO, for
changes in tax reserves resulting from investment operations of
the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the Portfolio determined as of
the immediately preceding Valuation Period, plus or minus
(ii) The per share credit or charge for any changes in tax reserves
for the immediately preceding Valuation Period.
(c) is the percentage factor equal to the Mortality and Expense Risk
Charge. Such factor is equal on an annual basis to a percentage of the
average daily net asset value of the Sub-Account.
(d) is the percentage factor equal to the Asset Related Administration
Charge. Such factor is equal on an annual basis to a percentage of the
average daily net asset value of the Sub-Account.
The Net Investment Factor may be greater or less than one. Therefore, the
Accumulation Unit value may increase or decrease.
PRINCIPAL UNDERWRITER
Currently, SAFECO Securities, Inc. (SSI) acts as the principal underwriter of
the Contracts. SSI has its business address at SAFECO Plaza, Seattle, Washington
98185. Prior to April 29, 1994, PNMR Securities, Inc. (PNMR), 15411 N.E. 51st
Street, Redmond, Washington, acted as the principal underwriter of the
Contracts. SSI and PNMR are wholly-owned subsidiaries of SAFECO Corporation and
therefore are affiliates of SAFECO. The Contracts are offered on a continuous
basis.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Purchase Payments, Contract Values,
the Separate Account and the Deposit Fund. These charges and deductions are:
DEDUCTION FOR PREMIUM AND OTHER TAXES
Any premium taxes or other taxes levied by any governmental entity which SAFECO,
in its sole discretion, determines have resulted from the establishment or
maintenance of the Contract or any portion of the Contract, or from the
investment experience of the Separate Account, or from the receipt by SAFECO of
Purchase Payments or from the commencement of annuity payments will be deducted
from the Contract Value with respect to Non-Qualified Contracts. SAFECO reserves
the right to deduct these taxes from Contract Values with respect to Qualified
Contracts. Premium taxes currently imposed by certain states on the type of
Contracts offered hereby range from 0% to 4%. Some states assess their premium
taxes at the time Purchase Payments are made; others assess their premium taxes
at the time annuity payments commence. Premium taxes are subject to change or
amendment by state legislatures, administrative interpretations or judicial
acts. Such premium taxes will depend on, among other things, the classification
of the Contract by the states, the status of SAFECO within such state and the
insurance tax laws of such state. These taxes are deducted first from the SAFECO
Resource Money Market Sub-Account. In the event there are no Accumulation Units
in the SAFECO Resource Money Market Sub-Account or not enough in value to pay
for these taxes, the balance of deductions necessary is then taken from the
SAFECO
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<PAGE> 30
Resource Bond Sub-Account, the Federated Utility Sub-Account, the Federated
Corporate Bond Sub-Account, the Scudder Balanced Sub-Account, the Lexington
Natural Resources Sub-Account, the Scudder International Sub-Account, the
Federated International Stock Sub-Account, the Lexington Emerging Markets
Sub-Account, the SAFECO Resource Equity Sub-Account, the SAFECO Resource
Northwest Sub-Account, the SAFECO Resource Growth Sub-Account, and finally from
the Fixed Account.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
SAFECO deducts on each Valuation Date a Mortality and Expense Risk Charge which
is equal on an annual basis to 1.25% of the average daily net asset value of the
Separate Account. The mortality risks assumed by SAFECO arise from its
contractual obligation to make annuity payments after the Annuity Date for the
life of the Owner, to waive Contingent Deferred Sales Charges in the event of
the death of the Owner and to guarantee to pay the greater of Purchase Payments
or Contract Value. The expense risk assumed by SAFECO is that the costs of
administering the Contracts and the Separate Account will exceed the amount
received from the Annual Administration Maintenance Charge and the Asset Related
Administration Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by SAFECO. Conversely, if the amount deducted
proves more than sufficient, the excess will be profit to SAFECO. SAFECO expects
a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by SAFECO and cannot be
increased.
DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE
In the event that an Owner withdraws all or a portion of his or her Contract
Value, a Contingent Deferred Sales Charge (sales load) is deducted from the
Withdrawal. This charge reimburses SAFECO for expenses incurred in connection
with the promotion, sale and distribution of the Contracts. The Contingent
Deferred Sales Charge is imposed on Withdrawals made in the first eight (8)
Contract Years. The Contract provides for the deduction of a Contingent Deferred
Sales Charge for withdrawals of some or all of an Owner's Contract Value other
than those made (i) on Transfers between Sub-Accounts, (ii) on the sum of
Withdrawals taken in any Contact Year which does not exceed 10% of the Contract
Value, (iii) on Withdrawals made under a Settlement Option, (iv) on Systematic
Withdrawals over the life expectancy of the Owner or the joint life expectancy
of the Owner and Beneficiary under the Systematic Withdrawal Income Plan(TM),
(v) on Withdrawals made pursuant to the death of the Owner, (vi) on Withdrawals
for payment of the Annual Administration Maintenance Charge, or (vii) on
Transfers from a Sub-Account to the Fixed Account or on certain Transfers from
the Fixed Account to a Sub-Account. (See "Withdrawals and Transfers" and "The
Programs.")
The amount of the Contingent Deferred Sales Charge will be based on the
following:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Contract Year as a Percentage of Amount Withdrawn
------------- -----------------------------------
<S> <C>
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
</TABLE>
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The Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule. However, total Contingent Deferred
Sales Charges collected by SAFECO will not exceed 8.5% of the Purchase Payments
made under a Contract.
The commissions paid to registered representatives on the sale of Contracts are
not more than 5.8% of the Purchase Payments. In addition, commissions, overrides
and bonuses may be paid to SSI's registered representatives and/or other
distributors of the Contracts. A bonus dependent upon persistency of funds on
deposit in the Contracts is one type of bonus that may be paid. Noncash
compensation may include accrual of conference travel credits and prizes. To the
extent that the Contingent Deferred Sales Charge is insufficient to cover the
actual cost of distribution, SAFECO may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Premium, to make up any difference.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals in a
manner that results in savings of sales expenses. The entitlement to reduction
of the Contingent Deferred Sales Charge will be determined by SAFECO after
examination of all the relevant factors such as:
1. The total amount of Purchase Payments to be received. Per Contract
sales expenses are likely to be less on larger Purchase Payments than
on smaller ones.
2. Any prior or existing relationship with SAFECO. Per Contract sales
expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract
with fewer sales contacts.
3. There may be other circumstances, of which SAFECO is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, SAFECO determines that there
will be a reduction in sales expenses, SAFECO may provide for a reduction or
elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of SAFECO or any of its affiliates.
In no event will reductions or elimination of the Contingent Deferred Sales
Charge be permitted where reductions or elimination will be unfairly
discriminatory to any person.
DEDUCTION FOR WITHDRAWAL CHARGE
SAFECO deducts a Withdrawal Charge which is equal to the lesser of $25 or 2% of
the amount withdrawn for each Withdrawal (whether it be a partial Withdrawal or
a complete Withdrawal) after the first in any Contract Year. No Withdrawal
Charge is deducted where the Owner is participating in the Systematic Withdrawal
Income Plan(TM) or the Periodic Withdrawal Program subject to certain
limitations (see "The Program") or is exercising a Settlement Option.
DEDUCTION FOR ASSET RELATED ADMINISTRATION CHARGE
SAFECO deducts on each Valuation Date an amount which is equal on an annual
basis to .15% of the average daily net asset value of the Separate Account for
costs associated with the administration of the Sub-Accounts. Since this Charge
is an asset-based charge, the amount of the Charge attributable to a particular
Contract may have no relationship to the administrative costs actually incurred
by that Contract. SAFECO does not intend to profit from this Charge. This Charge
will be reduced to the extent that the amount of this Charge is in excess of
that necessary
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to reimburse SAFECO for its administrative expenses. Should this Charge prove to
be insufficient, SAFECO will not increase this Charge and will incur the loss.
DEDUCTION FOR ANNUAL ADMINISTRATION MAINTENANCE CHARGE
SAFECO deducts an Annual Administration Maintenance Charge of $30 from the
Contract Value on the last day of each Contract Year and in the event of a
complete Withdrawal. This Charge is deducted from Contracts only if the Contract
Value is less than $50,000. This Charge, which is for general administrative
expenses, is deducted first from the SAFECO Resource Money Market Sub-Account.
In the event there are no Accumulation Units in the SAFECO Resource Money Market
Sub-Account or not enough in value to pay for this Charge, the balance of
deductions necessary is then taken from the SAFECO Resource Bond Sub-Account,
the Federated Utility Sub-Account, the Federated Corporate Bond Sub-Account, the
Scudder Balanced Sub-Account, the Lexington Natural Resources Sub-Account, the
Scudder International Sub-Account, the Federated International Stock
Sub-Account, the Lexington Emerging Markets Sub-Account, the SAFECO Resource
Equity Sub-Account, the SAFECO Resource Northwest Sub-Account, the SAFECO
Resource Growth Sub-Account, and finally from the Fixed Account.
Prior to the Annuity Date, this Charge is not guaranteed and may be changed for
future years. However, this Charge may never exceed $35 per Contract Year.
SAFECO has set this Charge at a level so that, when considered in conjunction
with the Asset Related Administration Charge, it will not make a profit from the
charges assessed for administration. SAFECO may receive compensation from the
investment advisers or administrators of the Available Funds consistent with the
administrative services and cost savings rendered to such entities.
DEDUCTION FOR TRANSFER CHARGE
An Owner may make up to twelve (12) Transfers annually without the imposition of
any fee or charge. If more than twelve (12) Transfers have been made in a
Contract Year, SAFECO reserves the right to assess a Transfer Charge which will
be equal to the lesser of $10 or 2% of the amount transferred. Specific
requirements may apply to transfers under the Programs. (See "The Programs.")
OTHER EXPENSES
There are other deductions from and expenses paid out of the assets of the Trust
and the Funds which are described in the accompanying Trust and Funds
Prospectuses. SAFECO may receive compensation from the investment advisers or
administrators of the Available Funds consistent with the administrative
services rendered to such entities.
RIGHTS UNDER THE CONTRACT
OWNER, ANNUITANT AND BENEFICIARY
The Owner has all rights and may receive all benefits under the Contract. Prior
to the Annuity Date, the Owner is the person designated in the Application,
unless changed. On and after the Annuity Date, the Annuitant is the Owner. The
Annuitant is the person on whose life Annuity payments are based and is the
person designated in the Application, unless changed.
The Owner may designate a Beneficiary in the Application to receive any proceeds
payable due to the death of the Owner. Unless the Owner provides otherwise, the
death benefit will be paid in equal shares to all surviving primary
Beneficiaries. If the Owner has not provided otherwise and there are no
surviving primary Beneficiaries, the death benefit will be paid in equal shares
to all surviving contingent Beneficiaries. If the Owner has not provided
otherwise and there are no surviving primary or contingent Beneficiaries, the
death benefit will be paid to the estate of the Owner.
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If the Owner has made an irrevocable Beneficiary designation, no change of
Beneficiary is permitted. If the Owner has not made an irrevocable Beneficiary
designation, the Owner may file a signed request with SAFECO to change the
Beneficiary designation. The change of Beneficiary will be effective upon
recording by SAFECO at its Home Office. SAFECO shall not be liable for any
payments made or other action taken by SAFECO before the change in Beneficiary
was recorded by SAFECO at its Home Office. A recorded change of Beneficiary will
revoke any prior Beneficiary designations. SAFECO will pay any death proceeds to
the most recently recorded Beneficiary.
MISSTATEMENT OF AGE
SAFECO may require proof of the age of the Annuitant before making any Life
Annuity payment provided for by the Contract. If the age of the Annuitant has
been misstated, the amount payable will be the amount that the Contract Value
would have provided at the correct age. Once Annuity payments have begun, any
underpayments will be made up in one sum with the next Annuity payment. Any
overpayment will be deducted from future Annuity payments until the total is
repaid.
EVIDENCE OF SURVIVAL
If any benefits under the Contracts are contingent upon the Annuitant being
alive on a given date, SAFECO may require evidence satisfactory to SAFECO that
such condition continues to be met.
CONTRACT DATE
For all Contracts issued on or after June 1, 1994, Contract Date is defined as
follows:
(a) The Contract Date with respect to transfers from a Contract qualified
under Section 401(a) to a Contract qualified under Section 408 of the
Code, shall be the earlier of the date on which the initial Purchase
Payment is invested and the second certificate anniversary of a SAFECO
Qualified Pension Annuity Series III, III Plus, IV, or Resource
Variable Account B certificate, from which funds are being transferred
to this Contract. If no funds are being transferred to this Contract
from Qualified Pension Annuity Series III, III Plus, IV, or Resource
Variable Account B certificate, the Contract Date shall be the earlier
of the date on which the initial Purchase Payment is invested and the
second contract anniversary of a SAFECO Qualified Pension Annuity
Series I or II contract, a Qualified Access Annuity contract, or a
SAFECO Resource Variable Account A contract, from which funds are being
transferred to this Contract. If funds are being transferred from
SafeFlex Annuity, the Contract Date shall be the earlier of the date on
which the initial Purchase Payment is invested and the certificate
issue date of an existing SAFECO SafeFlex Annuity certificate, if the
entire certificate value is being transferred to this Contract. The
Contract Issue Date shall be the earlier of the date on which the
initial Purchase Payment is allocated to the Separate Account or the
Fixed Account.
(b) The Contract Date with respect to transfers to a Contract qualified
under Section 408 of the Code, shall be the earlier of the date on
which the initial Purchase Payment is invested and the second
certificate anniversary of an existing SAFECO Qualified Pension Annuity
Series V or V Plus contract, if the entire contract value is being
transferred to this Contract. The Contract Issue Date shall be the
earlier of the date on which the initial Purchase Payment is allocated
to the Separate Account or the Fixed Account.
(c) The Contract Date with respect to transfers to a Contract qualified
under Section 403 of the Code, shall be the earlier of the date on
which the initial Purchase Payment is invested, and the second
certificate anniversary of an existing SAFECO Qualified Pension Annuity
Series III Plus certificate, if the entire certificate value is being
transferred to this Contract, or, the contract date of an existing
SAFECO Preference Annuity, if the entire contract value is being
transferred to this Contract. The
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Contract Issue Date shall be the earlier of the date on which the
initial Purchase Payment is allocated to the Separate Account or the
Fixed Account.
(d) The Contract Date with respect to all transfers to Non-qualified
Contracts, transfers to Contracts qualified under Section 408 of the
Code other than from SAFECO's Qualified Pension Annuity Series I, II,
III, III Plus, IV, V, V Plus, Resource Variable Account A, Resource
Variable Account B, or Qualified Access Annuity, and transfers to
Contracts qualified under Section 403 of the Code other than from
SAFECO's Qualified Pension Annuity Series III Plus or the Preference
Annuity, shall be the earlier of the date on which the initial Purchase
Payment is allocated to the Separate Account or the Fixed Account.
CONTRACT SETTLEMENT
Unless otherwise designated in writing by SAFECO, all sums payable under the
Contracts are payable at SAFECO's Home Office. The Contract must be returned to
SAFECO upon any settlement.
SUBSTITUTE PAYEE
If SAFECO determines that any person is incapable of personally receiving and
giving a valid receipt for any payment due under the Contracts and no claim has
been made by a duly appointed guardian, SAFECO may make such payment to any
person or institution that SAFECO determines has assumed the care and support of
such person. Such payment shall completely discharge the liability of SAFECO
with respect to the amount so paid.
NON-ASSIGNMENT
To the extent permitted by law, the Contracts and the benefits or payments under
the Contracts are not assignable or otherwise transferable. The Contract may be
assigned for purposes of an Internal Revenue Code Section 1035 exchange.
MODIFICATION OF THE CONTRACTS
The terms and conditions of the Contracts may be amended by written agreement
between SAFECO and the Owner by written endorsement or amendment. All agreements
made by SAFECO will be signed by the President or one of the Vice Presidents. No
other person has power on behalf of SAFECO to amend or modify the Contract,
extend any due date, or waive any proof required by the Contract. SAFECO may
unilaterally amend the provisions of the Contract as required to conform to any
state or federal law which affects the Contract.
TERMINATION OF CONTRACT
All benefit provisions under the Contract continue in force until the Contract
Value is completely Withdrawn. Discontinuance of Purchase Payments will not
result in termination of the Contract.
ANNUITY AND DEATH BENEFIT PROVISIONS
SELECTION AND CHANGE OF SETTLEMENT OPTIONS
The Owner may select or change the Settlement Option or Annuity Date by written
notification to SAFECO at its Home Office. In order to be effective, the written
notification must be received by SAFECO prior to any Annuity Date previously
selected.
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PAYMENT OF BENEFITS
SAFECO will, upon the written direction of the Owner, issue an Annuity or make a
cash distribution to any person who is entitled to such benefits. SAFECO may
rely on the written direction of the Owner and shall not be liable because of
any failure to question or challenge such direction regarding the issuance of an
Annuity or payment of a cash distribution.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments, except as described
below. If the net amount available to apply under any Settlement Option is less
than $5,000, SAFECO shall have the right to pay such amount in a lump sum cash
distribution. If Annuity payments would be or become less than $250, SAFECO
shall have the right to change the frequency of payments to such intervals as
will result in payments of at least $250.
DEATH OF OWNER PRIOR TO ANNUITY DATE
The Contract provides for a minimum guaranteed death benefit, provided that
SAFECO receives due proof of death in a satisfactory form and election of a
Settlement Option prior to six months from the date of the Owner's death. If the
due proof of death or the election of a Settlement Option is received later than
six months after the date of death of the Owner, SAFECO provides a death benefit
that is subject to change based upon investment experience, as discussed below.
On the Valuation Date following receipt at the Home Office of the due proof of
death and election of a Settlement Option before the Annuity Date and while the
Contract was in force, SAFECO generally will pay to the designated Beneficiary a
minimum guaranteed death benefit that is the greater of: (i) the Contract Value
on the later of the date of receipt of due proof of death or the election of a
Settlement Option; or (ii) the last determined minimum guaranteed death benefit.
The initial minimum guaranteed death benefit is equal to the initial Net
Purchase Payment. In those states where approved, the minimum guaranteed death
benefit is reset at each eighth Contract Anniversary ("Eight Year Contract
Anniversary") to equal the greater of (i) the then current Contract Value or
(ii) the current minimum guaranteed death benefit. The greater of the two values
becomes the new minimum guaranteed death benefit. The minimum guaranteed death
benefit is fixed for the remaining duration of the Contract as of the last Eight
Year Contract Anniversary preceding the Owner's 76th birthday.
If the Contract is owned by joint Owners, the minimum guaranteed death benefit,
or any other applicable death benefit, is payable only on the death of the elder
Owner. Moreover, following the death of the elder Owner, if the joint Owner
elects to continue the Contract, there is no minimum guaranteed death benefit.
The death benefit will be the Contract Value, which reflects Net Purchase
Payments and withdrawals. Contract Value is subject to change as a result of
investment experience.
Each form of minimum guaranteed death benefit is adjusted to reflect Net
Purchase Payments and withdrawals. If an Owner makes withdrawals, the minimum
guaranteed death benefit is reset to equal the previous minimum guaranteed death
benefit multiplied by the ratio of the Contract Value after the withdrawal to
the Contract Value before the withdrawal. The recomputed minimum guaranteed
death benefit will be used in determining the new minimum guaranteed death
benefit at the next Eight Year Contract Anniversary. This method of adjusting
the guaranteed minimum death benefit will be applied if the Owner is
participating in the Systematic Withdrawal Income Plan(TM) at the time of death.
After the Owner's death, the minimum guaranteed death benefit will be reduced
dollar for dollar by any withdrawals by the Beneficiary. The Beneficiary may
only make withdrawals at the time of or prior to the election of a Settlement
Option.
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If due proof of death or the election of a payment option (a Settlement Option
or lump sum payment) are made later than six months following the date of the
Owner's death, the value as of the six month anniversary of the date of death
will apply. Thus, for example, if notification of death is not received until
nine (9) months after the date of death, the death benefit under (i) will be
calculated as follows:
Upon notification of death, SAFECO will determine what the Contract Value was on
the six-month anniversary of the date of death. Assuming that Contract Value was
$90,000 on that date and the last determined minimum guaranteed death benefit
was $100,000, SAFECO will contribute $10,000 to Contract Value as of that date
and will guarantee the portion of the Contract Value attributable to SAFECO's
contribution and pay interest thereon at the then prevailing money market rate
until the date of election of a payment option. SAFECO will then calculate the
effects of investment experience on the portion of the Contract Value existing
on the six-month anniversary of the date of death, and hence, the death benefit
will consist of the combined value of the guaranteed and nonguaranteed portions
of the Contract Value from that six-month anniversary date to the date of
election of a payment option. If on the six-month anniversary of the date of
death the Contract Value exceeds the last determined minimum guaranteed death
benefit, the entire Contract Value will be subject to market risk from that date
to the date of election of a payment option and no portion of the Contract Value
will be guaranteed. Any withdrawals made by the Beneficiary prior to electing a
payment option will be deducted from the death benefit. The Beneficiary bears
the risk and enjoys the rewards of negative or positive investment experience on
any nonguaranteed portion of the Contract Value during the period from the
six-month anniversary of the date of death and the date of election of a payment
option. Beneficiaries should be encouraged to promptly notify SAFECO of the
Owner's death.
In all cases, SAFECO will pay the Beneficiary a lump sum payment of the death
benefit if the election of the Settlement Option is not made within sixty (60)
days of the receipt of due proof of death.
With respect to non-qualified Contracts if the Owner dies on or after the
Annuity Date and before the entire value of the Contract has been distributed,
any remaining value must be distributed at least as rapidly as the method of
distribution in effect at the time of the Owner's death. If the Owner dies
before the Annuity Date, generally the entire value under the Contract must be
distributed within five years after the date of the Owner's death or must be
distributed over the designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or substantially
equal payments, with payments beginning within one year of the Owner's death.
DEATH OF ANNUITANT
In the event of the Annuitant's death prior to the Annuity Date, the Owner must
designate a new Annuitant. If no designation is made within thirty (30) days of
notification to SAFECO of the death of the Annuitant, the Owner will become the
Annuitant. The election of a Settlement Option must be made by the Beneficiary
during the sixty (60) day period commencing with the date of SAFECO's receipt of
notice of the Owner's death. If no election is made within the sixty (60) day
period, then a single lump sum payment will be made to the Beneficiary. In the
event that the Beneficiary is a surviving spouse, the Contract can be continued.
Upon the death of a co-Owner, the surviving Owner becomes the designated
Beneficiary. Any other named Beneficiary will be a contingent Beneficiary. If
the Contract is owned by a non-natural person, the death of the Annuitant will
be treated as the death of the Owner.
DEATH OF OWNER AFTER ANNUITY DATE
If the Owner dies on or after a Settlement Option has commenced, payments must
continue at least as rapidly as under the method of distribution in effect prior
to the Owner's death.
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SETTLEMENT OPTIONS
An Annuity may be issued in any of the forms described below, or such other
forms which SAFECO agrees to issue under the Contract. Options (a), (b), and (c)
are irrevocable once they have begun. Option (d) is irrevocable for the first
eight Contract Years, and then may be changed.
(a) Variable Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and
the last payment is that payment due immediately on or before the
Annuitant's death. No death benefit is payable under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the
Annuity Date. If at the death of the Annuitant the guaranteed
number of payments has not been received by the Annuitant,
payments will be made to the Beneficiary for the remainder of the
guarantee period. The Beneficiary may elect to have the present
value of the guaranteed Annuity remaining as of the date the
notice of death is received by SAFECO commuted at the assumed
investment rate of 4% and paid in a single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are
made to the Annuitant commencing on the Annuity Date. After the
death of the Annuitant, payments will be continued to the
co-annuitant for as long as he or she lives. The written request
for this option must specify the percentage value of monthly
payments to continue to the co-annuitant.
(d) Systematic Withdrawal Income Plan(TM): A specified number of whole
or partial Accumulation Units are liquidated for payment to the
Annuitant on a monthly, quarterly, or annual basis. The number o
be liquidated during a given year shall be a sufficient number so
as to be expected to deplete the Contract over the life expectancy
of the Annuitant or the joint life expectancy of the Annuitant and
the Beneficiary, with at least 50% of the payments expected to be
made during the Annuitant's life. Systematic Withdrawal Income
Plan is a trademark of SAFECO Life Insurance Company.
If, as of the Annuity Date, a Settlement Option has not been selected, SAFECO
will make payments under Option (d) above.
Similar fixed annuity Settlement Options are available with respect to the
monies held in the Fixed Account.
MORTALITY AND EXPENSE GUARANTEE
SAFECO guarantees that the dollar amount of each Variable Annuity payment made
after the first payment will not be affected by variations in mortality
experience or expenses.
WITHDRAWALS AND TRANSFERS
WITHDRAWALS
SAFECO, upon written request to it by the Owner, will allow the Withdrawal of
all or a portion of the Contract Value. Withdrawals will result in the
cancellation of Accumulation Units from each applicable Sub-Account of the
Separate Account or a reduction in the Fixed Account Value in the ratio that the
Sub-Account Value and/or the Fixed Account Value bears to the total Contract
Value. The Owner must specify in writing in advance which units are to be
canceled or values are to be reduced if other than the above-mentioned method of
cancellation is desired. SAFECO will pay the amount of any Withdrawal within
seven (7) days of receipt of a request, unless the "Suspension of Payments or
Transfers" provision is in effect (see "Suspension of Payments or Transfers"
below).
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SAFECO retains the right to defer the payment of Withdrawals from the Fixed
Account for a period of six (6) months after receiving a Withdrawal request.
(See also "The Programs.")
The minimum Withdrawal allowed is the lesser of $250 or the Contract Value. If
any Withdrawal reduces the remaining balance in a Sub-Account or the Fixed
Account to less than $500 ($1,000 in Maine, South Carolina and Texas), the
remaining balance will also be withdrawn.
Upon a Withdrawal, the number of Accumulation Units remaining under the Contract
will be reduced by the number of such units equal to the total of the
Withdrawal, including applicable charges and taxes, including income taxes
withheld.
Certain tax withdrawal penalties and restrictions may apply to withdrawals from
Contracts. (See "Tax Status.") For Contracts purchased in connection with 403(b)
plans, the Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship.
However, withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
TRANSFERS
An Owner may transfer Contract Values among Sub-Accounts up to twelve (12) times
annually without the imposition of any fee or charge. If more than twelve (12)
Transfers have been made in a Contract Year, SAFECO reserves the right to assess
a Transfer Charge which will be equal to the lesser of $10 or 2% of the amount
transferred. The minimum Transfer from a Sub-Account must be at least $500,
except in the case of Automatic Transfers (described below). If the Sub-Account
from which the Transfer is being made contains less than $500, or is reduced to
less than $500 after a Transfer, the Owner's entire interest in the Sub-Account
will be transferred. The minimum Transfer into a Sub-Account must be at least
$50.
Upon a Transfer from a Sub-Account, the number of Accumulation Units remaining
under that Sub-Account will be reduced by the number of such units equal to the
total of the requested Transfer, including applicable charges and taxes.
Transfers will be effected during the Valuation Period next following receipt by
SAFECO of a written transfer request (or by telephone, if authorized) containing
all required information. (See "Transfers by Written Request" and "Transfers by
Telephone," below.)
Transfers also may be effected under certain of the Programs and certain
specific limitations on transfers may apply under the Programs.
TRANSFERS BY WRITTEN REQUEST
Contract Values may be transferred by writing SAFECO at the address on
the cover page of this Prospectus and specifying the Contract number, the
amount to be transferred, and the Sub-Accounts to be effected. The
request must be signed by the Owner or a third party to whom the Owner
has given appropriate authority. SAFECO must have a copy of the document
granting such authority. Transfers will be effected during the Valuation
Period next following receipt by SAFECO of the written transfer request.
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TRANSFERS BY TELEPHONE
If the Owner has previously elected in writing the privilege of making
transfers by telephone, SAFECO will accept transfer instructions by
telephone from the Owner or a third party to whom the Owner has given
appropriate authority. SAFECO must have a copy of the document granting
such authority. Withdrawals will not be processed by telephone.
SAFECO will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including tape recording all
telephone instructions, requiring some form of personal identification
prior to acting upon instructions received by telephone and confirming in
writing all such transactions. If SAFECO fails to take such reasonable
procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions.
SAFECO reserves the right to refuse telephone transfers when it is unable
to confirm to its satisfaction that a caller is the Owner or a
preauthorized third party. SAFECO is not responsible for the authenticity
of telephone instructions or for acting on the telephone instructions of
persons who falsely identify themselves as Owners or preauthorized third
parties.
To transfer by telephone, call 1-800-899-5280. Transfer directions must
specify the Contract number, the amount to be transferred and the
Sub-Accounts which are to be effected. (See also "The Programs," below.)
SUSPENSION OF PAYMENTS OR TRANSFERS
SAFECO reserves the right to suspend or postpone payments for a Withdrawal or
Transfer for any period when:
(i) The New York Stock Exchange is closed (other than customary
weekend and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted, as
determined by the rules and regulations of the Securities and
Exchange Commission;
(iii) An emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it
is not reasonably practicable to determine the value of the
Separate Account's net assets, as determined by the rules and
regulations of the Securities and Exchange Commission; or
(iv) During any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners
provided that applicable rules and regulations of the Securities
and Exchange Commission will govern as to whether the conditions
described in (ii) and (iii) exist.
OTHER SERVICES
THE PROGRAMS
SAFECO offers several investment related programs which are available only prior
to the Annuity Date: Dollar Cost Averaging; Automatic Transfers; Appreciation or
Interest Sweeps; Sub-Account Rebalancing; Systematic Investment; and Periodic
Withdrawal Programs. Certain of the Programs are alternatives with respect to
any one Sub-Account; other Programs may be combined. Thus, the Dollar Cost
Averaging Program, the Automatic Transfer Program and the Appreciation or
Interest Sweep Program are alternatives with respect to the selected
Sub-Account, and in all cases with respect to the Fixed Account. However, the
Sub-Account Rebalancing Program may be combined with each of the other Programs,
but it is not available with respect to the Fixed Account. Under each Program,
the related transfers between and among Sub-Accounts and the Fixed Account are
not counted as one of the twelve
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free transfers. However, if an Owner executes an unrelated voluntary transfer
from the Sub-Account participating in a Program, other than the Sub-Account
Rebalancing Program, the Program will be terminated for the remainder of the
Contract Year. In addition, if a Program is terminated before six Program
transfers have occurred, the six Program transfers are counted as part of the
twelve free transfers. If the balance in a Sub-Account would be less than $500
as a result of a transfer pursuant to one of these Programs, other than the
Appreciation or Interest Sweep and Sub-Account Rebalancing Programs, then the
entire balance in that Sub-Account will also be transferred. Each of the
Programs has its own requirements, as discussed below. Some of the Programs
described herein may not be immediately available in states that have not yet
approved the corresponding Contract endorsements.
If the Owner has submitted the required telephone authorization form, certain
changes may be made by telephone. For those programs involving transfers, Owners
may change instructions by telephone with regard to which Sub-Accounts or the
Fixed Account Contract Value may be transferred. If SAFECO does not employ
reasonable verification procedures to confirm that instructions communicated by
telephone are genuine, it may be liable for any losses arising out of any action
on its part or any failure or omission to act as a result of its own negligence,
lack of good faith, or willful misconduct.
DOLLAR COST AVERAGING PROGRAM
SAFECO offers a Dollar Cost Averaging Program during the Accumulation Period
whereby an Owner may predesignate a portion of any Sub-Account's Contract Value
or the Fixed Account's Contract Value to be automatically transferred on a
monthly or quarterly basis to one or more of the other Sub-Accounts or to the
Fixed Account. The amount to be transferred may be expressed as a set dollar
amount or as a percentage of the Contract Value in the selected Sub-Account or
the Fixed Account. Transfers from the Fixed Account are subject to a maximum of
1.33% monthly or 4% quarterly of the Contract Value in the Fixed Account at the
time of the initial transfer. Upon election of the Dollar Cost Averaging Program
the limitations on transfers from the Fixed Account will be calculated. The
resultant limitations will apply for the entire duration of participation in
this Program. Each Dollar Cost Averaging transfer is subject to a minimum
transfer of fifty dollars ($50).
The Dollar Cost Averaging Program is available for Purchase Payments and for
Contract Value transferred into any Sub-Account. An Owner may enroll in this
Program at the time the Contract is issued or anytime thereafter by properly
completing the Dollar Cost Averaging enrollment form and returning it to SAFECO
at its Home Office at least ten (10) business days prior to the first business
day of the month, which is the date that all Program transfers will be made
("Transfer Date"). This Program must be elected for at least a six (6) month
period.
If the Contract Value in the participating Sub-Account or the Fixed Account does
not equal or exceed the amount designated to be transferred on each Transfer
Date, Dollar Cost Averaging will cease automatically and the remaining amount
will be transferred.
Dollar Cost Averaging will terminate when (i) the designated monthly or
quarterly amounts of transfers have been completed, (ii) the Owner requests
termination in writing and such writing is received at the Home Office at least
ten (10) business days prior to the next Transfer Date in order to cancel the
transfer scheduled to take effect on such date, (iii) the Owner effects any
other transfer from the participating Sub-Account or the Fixed Account while the
Dollar Cost Averaging Program is in effect, or (iv) the Contract is surrendered.
In addition, if any transfer or withdrawal has been made from the Fixed Account
during the Contract Year, the Dollar Cost Averaging Program may not be
established through the Fixed Account for that Contract Year.
An Owner may initiate, reinstate or change the Dollar Cost Averaging terms by
properly completing a new enrollment form and returning it to the Home Office at
least ten (10) business days prior to the next Transfer Date such transfer is to
be made.
When utilizing Dollar Cost Averaging an Owner may be invested in either a
Sub-Account or the Fixed Account and may be invested in any other Sub-Accounts
or the Fixed Account at any given time.
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AUTOMATIC TRANSFER PROGRAM
The Automatic Transfer Program is identical to the Dollar Cost Averaging Program
in all respects other than with regard to the limitations on transfers from the
Fixed Account. The limitations on transfers from the Fixed Account are
recalculated annually. Transfers from the Fixed Account are limited to 1.5%
monthly and 4.5% quarterly.
APPRECIATION OR INTEREST SWEEP PROGRAM
An Owner may enroll in the Appreciation or Interest Sweep Program through either
or both the SAFECO Resource Money Market Sub-Account or the Fixed Account.
Enrollment is limited to Owners whose total Contract Value is greater than
$10,000. Under the Program, if appreciation on Contract Value in the SAFECO
Resource Money Market Sub-Account or credited interest earned on Contract Value
in the Fixed Account ("Earnings") is greater than 10%, the Earnings up to 10% of
the Contract Value in the Fixed Account or the SAFECO Resource Money Market
Sub-Account, respectively, will be transferred to any of the Sub-Accounts, other
than the SAFECO Resource Money Market Sub-Account. Earnings in the SAFECO
Resource Money Market Sub-Account may not be transferred to the Fixed Account.
In no event may the total Contract Value transferred from the Fixed Account in
each Contract Year exceed a total of 10% of the Contract Value for each such
Contract Year in the Fixed Account computed at the time of the transfer.
Moreover, the Program may not be instituted for the Fixed Account in any
Contract Year during which transfers or withdrawals have been made from the
Fixed Account. Transfers under this Program will be processed monthly or
quarterly on the Transfer Date.
SUB-ACCOUNT REBALANCING PROGRAM
In accordance with the Owner's election of the relative purchase payments
percentage allocations, SAFECO will automatically rebalance the Contract Value
of each Sub-Account either quarterly, semi-annually, or annually. SAFECO will
automatically rebalance the Contract Value in each of the Sub-Accounts to match
the current purchase payments percentage allocations as of the first Transfer
Date during the period selected. Enrollment is limited to Owners whose total
Contract Value is greater than $10,000 at the time the Program is selected. The
Program may be terminated at any time and the percentages may be altered by
written authorization. The requested change must be received at the Home Office
ten (10) days prior to the Transfer Date. If the Owner terminates the Program, a
new Program may not be instituted until the next Contract Year.
SYSTEMATIC INVESTMENT PROGRAM
Purchase Payments may be made by monthly draft against the bank account of any
Owner that has completed and returned to SAFECO a Systematic Investment Program
application and authorization form. The application and authorization form may
be obtained from SAFECO or from the sales representative. Each Systematic
Investment Program Purchase Payment is subject to a minimum of one hundred
dollars ($100).
PERIODIC WITHDRAWAL PROGRAM
SAFECO will make monthly, quarterly or annual distributions of a predetermined
dollar amount to an Owner that has enrolled in the Periodic Withdrawal Program.
The Periodic Withdrawal Program is to be distinguished from the Systematic
Withdrawal Income Plan(TM). (See "Settlement Options.") Under the Program, all
distributions will be made directly to the Owner and will be treated for federal
tax purposes as any other withdrawal or distribution of Contract Value. (See
"Tax Status.") An Owner may specify the amount of each withdrawal, subject to a
minimum of $250. In each Contract Year, up to 10% of Contract Value may be
withdrawn without the imposition of any Contingent Deferred Sales Charge. If
withdrawals pursuant to the Program are greater than 10% of Contract Value in
any Contract Year, the amount of the withdrawals greater than 10% will be
subject to the applicable Contingent Deferred Sales Charge. Any ad hoc
withdrawals an Owner makes during a Contract Year will be aggregated with
withdrawals pursuant to the Program to determine the applicability of any
Contingent Deferred
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<PAGE> 42
Sales Charge. If the frequency of withdrawals under the Program is greater than
annual, SAFECO will charge an annual fee of $25 to compensate it for the added
administrative costs.
Unless the Owner specifies the Sub-Account or Sub-Accounts or the Fixed Account
from which withdrawals of Contract Value shall be made or if the amount in a
specified Sub-Account is less than the predetermined amount, SAFECO will make
withdrawals under the Program from the Sub-Accounts and the Fixed Account in
amounts proportionate to the amounts in the Sub-Accounts and the Fixed Account.
Withdrawals are subject to the applicable minimum Sub-Account balances. All
withdrawals under the Program will be effected by canceling the number of
Accumulation Units equal in value to the amount to be distributed to the Owner
and any applicable Contingent Deferred Sales Charge.
The Program may be combined with all other Programs except those entailing
transfers or withdrawals from the Fixed Account. However, the Owner may
terminate such other program and may begin participation in the Program on the
first day of the next Contract Year.
It may not be advisable to participate in the Program and incur a Contingent
Deferred Sales Charge when making additional Purchase Payments under the
Contract.
TAX STATUS
NOTE: The following description is based upon SAFECO's understanding of current
federal income tax law applicable to annuities in general. SAFECO cannot predict
the probability that any changes in such laws will be made. Purchasers are
cautioned to seek competent tax advice regarding the possibility of such
changes. SAFECO does not guarantee the tax status of the Contracts. Purchasers
bear the complete risk that the Contracts may not be treated as "annuity
contracts" under federal income tax laws. It should be further understood that
the following discussion is not exhaustive and that special rules not described
in this Prospectus may be applicable in certain situations. Moreover, no attempt
has been made to consider any applicable state or other tax laws.
GENERAL
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment, a withdrawal or as annuity payments under the
Settlement Option elected. For a lump sum payment received as a total surrender
(total redemption), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the Purchase Payments, while for Qualified Contracts there
may be no cost basis.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includable in taxable income. The exclusion amount for payments based on a
fixed annuity is determined by multiplying the payment by the ratio that the
cost basis of the Contract (adjusted for any period certain or refund feature)
bears to the expected return under the Contract. The exclusion amount for
payments based on a variable annuity is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amounts equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code resulting in the annuity payments being fully includable
in taxable income. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
SAFECO is taxed as a life insurance company under the Code. For federal income
tax purposes, the Separate Account is not a separate entity from SAFECO and its
operations form a part of SAFECO.
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DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
SAFECO intends that all Portfolios of the Trust and the Funds underlying the
Contracts will be managed in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of separate account. It is unknown whether
these differences, such as the Owner's ability to transfer among investment
choices or the number and type of investment choices available, would cause the
Owner to be considered as the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, SAFECO reserves the right to modify the
Contract in an attempt to maintain favorable tax treatment.
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<PAGE> 44
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or any portion(s) thereof which are includable in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in most cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
Federal income tax. The 20% withholding requirement does not apply to: a)
distributions for the life or life expectancy of the participant or joint and
last survivor expectancy of the participant and a designated beneficiary; or b)
distributions for a specified period of 10 years or more; or c) distributions
which are required minimum distributions. Participants should consult their own
tax counsel or other tax advisor regarding withholding.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
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QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Following are general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not exhaustive and are
for general informational purposes only. The tax rules regarding Qualified Plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by SAFECO in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code.
These qualifying employers may make contributions to the Contracts for
the benefit of their employees. Such contributions are not includable in
the gross income of the employees until the employees receive
distributions from the Contracts. The amount of contributions to the
tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such
items as transferability, distributions, nondiscrimination and
withdrawals. (See "Tax Treatment of Withdrawals - Qualified Contracts"
below.) Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to
an individual retirement program known as an "Individual Retirement
Annuity" ("IRA"). Under applicable limitations, certain amounts may be
contributed to an IRA which will be deductible from the individual's
gross income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals - Qualified Contracts" below.) Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled
over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers
of Contracts to be qualified as Individual Retirement Annuities should
obtain competent tax advice as to the tax treatment and suitability of
such an investment.
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TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Sections 403(b) (Tax-Sheltered Annuities) and 408(b)
(Individual Retirement Annuities). To the extent amounts are not includable in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) if distribution is made on or after the date
on which the Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Owner or Annuitant (as
applicable) (for this purpose disability is as defined in Section 72(m)(7) of
the Code); (c) after separation from service, distributions that are part of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the Owner or Annuitant (as applicable) or the
joint lives (or joint life expectancies) of such Owner or Annuitant (as
applicable) and his or her designated Beneficiary; (d) distributions to an Owner
or Annuitant (as applicable) who has separated from service after he has
attained age 55; (e) distributions made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; and (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order. The
exceptions stated in (d), (e) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in (c) above applies to an
Individual Retirement Annuity without the requirement that there be a separation
from service.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year, following the year in which the employee attains age
70 1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required maximum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year in the
case of periodic distributions and in excess of $750,000 in the case of lump sum
distributions may be subject to an additional 15% excise tax unless an exemption
applies.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account, SSI or PNMR is a
party. On January 9, 1995 a class action seeking actual and punitive damages was
brought by an owner of a qualified pension annuity contract. DeVoy v. SAFECO
Life Insurance Company, Case No. 684407 pending in the Superior Court of
California, County of San Diego. With respect to such contracts plaintiffs
challenge both the representations as to interest rates and the calculation of
interest. The Company is defending against the action. SAFECO is also engaged in
various kinds of litigation which, in the opinion of SAFECO, is not of material
importance in relation to the total capital and surplus of SAFECO.
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TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Assumed Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Variable Annuity Payment Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ADDITIONAL PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SAFECO Resource Bond Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SAFECO Resource Equity, SAFECO Resource Bond, SAFECO Resource Growth,
SAFECO Resource Northwest, Scudder Balanced and Scudder International Sub-Accounts . . . . . 4
Standardized Total Return Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Non-Standardized Total Return Figures . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SAFECO Resource Money Market Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Yield and Effective Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Non-Standardized Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SAFECO Separate Account C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SAFECO Life Insurance Company and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 48
STATEMENT OF ADDITIONAL INFORMATION
SAFECO LIFE INSURANCE COMPANY
GENERAL INFORMATION
SAFECO
SAFECO Life Insurance Company (SAFECO) is a wholly-owned subsidiary of SAFECO
Corporation which is a holding company whose subsidiaries are engaged primarily
in insurance and financial services businesses.
SAFEKEEPING OF THE ASSETS OF THE SEPARATE ACCOUNT
SAFECO holds the assets of the Separate Account. The assets are kept segregated
and held separate and apart from the general account assets of SAFECO. SAFECO
maintains records of all Separate Account purchases and redemptions of the
shares of each Portfolio of SAFECO Resource Series Trust (Trust), Insurance
Management Series, Lexington Emerging Markets Fund, Inc., Lexington Natural
Resources Trust, and Scudder Variable Life Investment Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle, Washington 98104, is
the independent auditor of the financial statements of SAFECO and the Separate
Account.
DISTRIBUTOR
Currently, SAFECO Securities, Inc. (SSI), acts as the principal underwriter for
the Contracts. The offering is on a continuous basis. Prior to April 29, 1994,
PNMR Securities, Inc. (PNMR) acted as the principal underwriter for the
Contracts. SSI and PNMR are both wholly-owned subsidiaries and affiliates of
SAFECO. For the year ended 1994, PNMR, through SSI, received $663,188 in
commissions for the distribution of the Contracts of which no payments were
retained.
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts.
The Prospectus concisely sets forth information that a prospective investor
should know before investing. For a copy of the Prospectus, call 1-800-426-7649
or write to SAFECO Life Insurance Company, Annuity Service Office, Pension
Department, P.O. Box 34690, Seattle, Washington 98124-1690.
This Statement of Additional Information and the Prospectus are both dated
December 29, 1995.
- --------------------------------------------------------------------------------
1
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Assumed Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Variable Annuity Payment Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ADDITIONAL PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SAFECO Resource Bond Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SAFECO Resource Equity, SAFECO Resource Bond, SAFECO Resource Growth,
SAFECO Resource Northwest, Scudder Balanced and Scudder International Sub-Accounts . . . . . . . . . 4
Standardized Total Return Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Non-Standardized Total Return Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SAFECO Resource Money Market Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Yield and Effective Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Non-Standardized Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SAFECO Separate Account C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SAFECO Life Insurance Company and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 50
ANNUITY PROVISIONS
GENERAL
The Settlement Options and related provisions are described in the Prospectus.
ANNUITY UNIT
The value of an Annuity Unit for each Sub-Account was arbitrarily set at $10
when each Sub-Account was established. The value of the Annuity Unit for any
subsequent Valuation Period is determined by multiplying the value of the
Annuity Unit for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the value is being
calculated, and dividing the result by the Assumed Investment Factor for such
Valuation Period.
ASSUMED INVESTMENT FACTOR
The Assumed Investment Factor for a one day Valuation Period is 1.00010746. This
factor neutralizes the assumed investment return of 4% in the Variable Annuity
purchase rate table in the Contract.
VARIABLE ANNUITY PAYMENT CALCULATION
A Variable Annuity is an Annuity with payments which are not predetermined as to
dollar amount. Payments will vary in accordance with the net investment results
of the Separate Account. The dollar amount of the first monthly Variable Annuity
payment under Settlement Options (a), (b) or (c), will be determined by applying
the Contract Value (after deduction for premium taxes, if applicable), as of the
15th day of the preceding month, to the Variable Annuity purchase rate table in
the Contract. The number of Annuity Units to be credited to the Annuitant will
be determined by dividing the first monthly payment by the Annuity Unit value
calculated as of the 15th day of the preceding month. This number of Annuity
Units remains fixed during the Annuity payment period. The dollar amount of each
Variable Annuity payment after the first shall be determined by multiplying the
number of Annuity Units credited to the Annuitant by the Annuity Unit value as
of the 15th day of the preceding month.
ADDITIONAL PERFORMANCE INFORMATION
SAFECO RESOURCE BOND SUB-ACCOUNT
YIELD
The yield for the SAFECO Resource Bond Sub-Account of the Separate Account for
the 30-day period ended December 31, 1994 is 5.30%.
Yield is computed using the following formula:
6
Yield = 2[(a - b + 1) - 1]
-----
cd
Where: a = net investment income earned during the period by the
portfolio company attributable to shares owned by the
Sub-Account
b = expenses accrued for the period (net of reimbursements and
including a proportional amount of the annual
administration charge deducted from Participants' accounts
during a 30-day period)
c = the average daily number of accumulation units outstanding
during the period
d = the maximum offering price per accumulation unit on the
last day of the period
3
<PAGE> 51
SAFECO RESOURCE EQUITY, SAFECO RESOURCE BOND, SAFECO RESOURCE GROWTH, SAFECO
RESOURCE NORTHWEST, SCUDDER BALANCED AND SCUDDER INTERNATIONAL SUB-ACCOUNTS
STANDARDIZED TOTAL RETURN FIGURES
The "standardized" total return figures quoted below are calculated for required
time periods based on a set initial investment amount, include the deduction of
an annual Administration Charge assessed to each Participant's Accumulation
Account, include any applicable Contingent Deferred Sales Charge and assume the
reinvestment of dividend and capital gains distributions. The amount of the
Contingent Deferred Sales Charge ranges from 8% to 1% of withdrawal depending on
the Certificate Year in which the withdrawal occurs.
FISCAL PERIODS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
TOTAL RETURN PUBLIC
OFFERING DATE*
<S> <C>
SAFECO Resource Equity Sub-Account -6.88%*
SAFECO Resource Bond Sub-Account -13.85%*
SAFECO Resource Growth Sub-Account -3.81%*
SAFECO Resource Northwest Sub-Account -9.44%*
Scudder Balanced Sub-Account -13.68%*
Scudder International Sub-Account -13.84%*
</TABLE>
*Represents a 10 month period (from February 11, 1994 to December 31, 1994) (not
annualized)
NON-STANDARDIZED TOTAL RETURN FIGURES
Following are several examples of "non-standardized" total return figures which
can be calculated in a variety of ways including non-standard time periods,
different initial investment amounts, additions of periodic payments, use of
time-weighted average annual total returns, deducting or not deducting the
Administration Charge and deducting or not deducting the Contingent Deferred
Sales Charge. The net change in unit value is the percentage change from the
ending unit value to the beginning unit value and is not affected by specific
investment amounts.
4
<PAGE> 52
NET CHANGE IN UNIT VALUE BASED ON ANY SINGLE SUM INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
PUBLIC
TOTAL RETURN OFFERING DATE*
<S> <C>
SAFECO Resource Equity Sub-Account 3.45%*
SAFECO Resource Bond Sub-Account -4.29%*
SAFECO Resource Growth Sub-Account 6.86%*
SAFECO Resource Northwest Sub-Account .61%*
Scudder Balanced Sub-Account -4.28%*
Scudder International Sub-Account -4.11%*
</TABLE>
*Represents a 10 month period (from February 11, 1994 to December 31, 1994) (not
annualized)
NET CHANGE IN UNIT VALUE
BASED ON UNIFORM INITIAL AND MONTHLY INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
PUBLIC
TOTAL RETURN OFFERING DATE*
<S> <C>
SAFECO Resource Equity Sub-Account 2.72%*
SAFECO Resource Bond Sub-Account -.74%*
SAFECO Resource Growth Sub-Account 5.29%*
SAFECO Resource Northwest Sub-Account -.22%*
Scudder Balanced Sub-Account -.52%*
Scudder International Sub-Account -3.59%*
</TABLE>
*Represents a 10 month period (from February 11, 1994 to December 31, 1994) (not
annualized)
The formulas used to calculate "standardized" total return and average annual
total return are set forth below. For "nonstandardized" total return and average
annual total return, the "CDSC" component is removed to calculate figures which
do not contain the Contingent Deferred Sales Charge, the "AF" is removed to
calculate figures which do not contain the Administration Charge, the "P"
component will vary depending on the initial investment amount and the "N"
component will vary depending on the time period selected. Time-weighted average
annual total return figures take into account the length of time an investment
has been on deposit. Non-standardized figures may cause the performance of the
Sub-Accounts to appear higher.
5
<PAGE> 53
Total return is computed using the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical investment of $1,000
T = total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5, or 10
year periods at the end of the 1, 5, or 10 year
periods (or fractional portion thereof).
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
YIELD AND EFFECTIVE YIELD
The yield and effective yield for the SAFECO Resource Money Market Sub-Account
of the Separate Account for the 7-day period ended December 31, 1994, were 3.71%
and 3.78%, respectively.
Yield is computed using the following formula:
Yield = [(X - Y) - Z - AF] = Base Period Return x 365
---------------- ---
Y 7
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
Where: X = value of one Accumulation Unit at the end of a 7-day
period.
Y = value of one Accumulation Unit at the beginning of a
7-day period.
Z = capital changes during the 7-day period, if any.
AF = proportional amount of annual Administration Charge
deducted from Participant's account during a 7-day
period.
The computation of yield and effective yield described in this section does not
include any Contingent Deferred Sales Charge that may be applicable if all or a
portion of the Accumulation Account is withdrawn within the first eight
Certificate Years. The amount of the Contingent Deferred Sales Charge ranges
from 8% to 1% depending upon the Certificate Year in which the withdrawal
occurs. See "Deduction for Contingent Deferred Sales Charge" in the Prospectus
for more information.
NONSTANDARDIZED TOTAL RETURN
Following are several examples of "non-standardized" total return figures for
the SAFECO Resource Money Market Portfolio which can be calculated in a variety
of ways including non-standard time periods, different initial investment
amounts, additions of periodic payments, use of time-weighted average annual
total returns and deducting or not deducting the Administration Charge and
deducting or not deducting the Contingent Deferred Sales Charge. The net change
in unit value is the percentage change from the ending unit value to the
beginning unit value and is not affected by investment amount.
6
<PAGE> 54
NET CHANGE IN UNIT VALUE BASED ON ANY SINGLE SUM INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
PUBLIC
TOTAL RETURN OFFERING DATE*
<S> <C>
SAFECO Resource Money Market Sub-Account 2.11%
</TABLE>
*Represents a 10 month period (from February 11, 1994 to December 31, 1994) (not
annualized)
NET CHANGE IN UNIT VALUE BASED ON ANY UNIFORM INITIAL AND MONTHLY INVESTMENT
ADMINISTRATION CHARGE NOT DEDUCTED
CONTINGENT DEFERRED SALES CHARGE NOT DEDUCTED
<TABLE>
<CAPTION>
PERIOD
FROM INITIAL
PUBLIC
TOTAL RETURN OFFERING DATE*
<S> <C>
SAFECO Resource Money Market Sub-Account 1.28%
</TABLE>
*Represents a 10 month period (from February 11, 1994 to December 31, 1994) (not
annualized)
For "non-standardized" total return and average annual total return, the "CDSC"
component is removed to calculate figures which do not contain the Contingent
Deferred Sales Charge, the "AF" is removed to calculate figures which do not
contain the Administration Charge, the "P" component will vary depending on the
initial investment amount and the "N" component will vary depending on the time
period selected. Time-weighted average annual total return figures take into
consideration the length of time each investment has been on deposit.
Total return is computed using the following formula:
[(AU - AF) x AUV] - (CDSC x P) - P
T = --------------------------------- x 100
P
Average annual total return is computed using the following formula:
A = ((the Nth root of {[(AU-AF) x AUV] - (CDSC x P)}/P) - 1) x 100
Where: T = total return
A = average annual total return
N = number of years
AU = number of Accumulation Units purchased
at the beginning of the period
AF = number of Accumulation Units redeemed
from Participant's account to pay
annual Administration Charge
7
<PAGE> 55
AUV = Accumulation Unit value at the end of
the period.
CDSC = Contingent Deferred Sales Charge,
which may be applicable if all or a
portion of the Accumulation Account is
withdrawn within the first eight
Certificate Years. The amount of the
Contingent Deferred Sales Charge
ranges from 8% to 1% depending upon
the Certificate Year in which the
withdrawal occurs.
P = a hypothetical investment of $1,000
FINANCIAL STATEMENTS
The consolidated financial statements of SAFECO included herein should be
considered only as bearing upon the ability of SAFECO to meet its obligations
under the Contracts.
8
<PAGE> 56
FINANCIAL STATEMENTS
SAFECO SEPARATE ACCOUNT C
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ......................... 10
Statements of Assets and Liabilities as of December 31, 1994................ 11
Statements of Operations for the period ended December 31, 1994............. 12
Statements of Changes in Net Assets for the period ended December 31, 1994.. 13
Notes to Financial Statements (including accumulation unit data)............ 14
</TABLE>
-9-
<PAGE> 57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of SAFECO Life Insurance Company and
Participants of SAFECO Separate Account C:
We have audited the accompanying statement of assets and liabilities of SAFECO
Separate Account C (comprising, respectively, the Equity, Growth, Northwest,
Bond, Money Market, International, and Balanced Sub-Accounts), as of December
31, 1994, and the related statement of operations, statement of changes in net
assets and accumulation unit data for the period from February 11, 1994
(commencement of operations) to December 31, 1994. These financial statements
and accumulation unit data are the responsibility of the SAFECO Separate
Account C's management. Our responsibility is to express an opinion on these
financial statements and accumulation unit data based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
accumulation unit data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994, by correspondence with the SAFECO Resource
Series Trust and Scudder Variable Life Investment Fund. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and accumulation unit data referred to
above present fairly, in all material respects, the financial position of each
of the respective Sub-Accounts constituting SAFECO Separate Account C at
December 31, 1994, the results of their operations, the changes in their net
assets, and the accumulation unit data for the period referred to above, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
January 27, 1995
-10-
<PAGE> 58
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------------------------------------------------------------------
As of December 31, 1994 EQUITY GROWTH NW BOND MMKT INT'L BAL
- --------------------------------------------------------------------------------------------------------------
-- (In Thousands, Except Per-Unit Amounts) --
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value:
SAFECO Resource Series Trust -
Equity Portfolio
217,779 shares at net asset
value of $16.83 per share
(identified cost $3,944) $ 3,665
SAFECO Resource Series Trust -
Growth Portfolio
176,723 shares at net asset
value of $12.98 per share
(identified cost $2,320) $ 2,293
SAFECO Resource Series Trust -
Northwest Portfolio
21,878 shares at net asset
value of $10.24 per share
(identified cost $225) $ 224
SAFECO Resource Series Trust -
Bond Portfolio
21,496 shares at net asset
value of $10.20 per share
(identified cost $230) $ 219
SAFECO Resource Series Trust -
Money Market Portfolio
1,721,216 shares at net
asset value of $1.00 per share
(identified cost $1,721) $ 1,721
Scudder Variable Life Investment
Fund - International Portfolio
135,256 shares at net asset
value of $10.69 per share
(identified cost $1,497) $ 1,446
Scudder Variable Life Investment
Fund - Balanced Portfolio
55,259 shares at net asset
value of $8.97 per share
(identified cost $500) $ 496
------- ------- ------- ------- ------- ------- ------
Total assets 3,665 2,293 224 219 1,721 1,446 496
LIABILITIES:
Mortality and expense risk
charge payable 4 2 -- -- 1 2 1
------- ------- ------- ------- ------- ------- ------
NET ASSETS $ 3,661 $ 2,291 $ 224 $ 219 $ 1,720 $ 1,444 $ 495
======= ======= ======= ======= ======= ======= ======
Accumulation units
outstanding (Note 4) 144 154 22 14 125 138 50
======= ======= ======= ======= ======= ======= ======
Accumulation unit value and
redemption price per unit
(Note 2)
(Net assets divided by
accumulation units outstanding) $25.373 $14.864 $10.134 $15.521 $13.811 $10.498 $9.988
======= ======= ======= ======= ======= ======= ======
</TABLE>
See Notes to Financial Statements
-11-
<PAGE> 59
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
---------------------------------------------------------------------
For the Period Ended December 31, 1994
EQUITY* GROWTH* NW* BOND* MMKT* INT'L* BAL*
---------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Income dividends and
capital gain
distributions $ 335 $ 104 $ 1 $ 12 $ 13 $ -- $ 4
Expenses:
Mortality and expense
risk charge (Note 3) 14 7 1 2 4 7 2
------- ------ ------ ------- ------ ------ -------
Net investment income (loss) 321 97 -- 10 9 (7) 2
------- ------ ------ ------- ------ ------ -------
Net realized and unrealized
gain (loss) on investments:
Net realized gain on
investment transactions 7 3 1 -- -- 1 --
Net change in unrealized
appreciation (279) (27) (1) (11) -- (51) (4)
------- ----- ------ ------ ------ ------ -------
Net loss on investments (272) (24) -- (11) -- (50) (4)
------- ----- ------ ------ ------ ------ -------
Net change in net assets
resulting from operations $ 49 $ 73 $ -- $ (1) $ 9 $ (57) $ (2)
======= ====== ====== ======= ====== ====== =======
</TABLE>
*Commencement of Operations was February 11, 1994.
See Notes to Financial Statements
-12-
<PAGE> 60
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-------------------------------------------------------------------
For the Period Ended December 31, 1994
EQUITY* GROWTH* NW* BOND* MMKT* INT'L* BAL*
-------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 321 $ 97 $ -- $ 10 $ 9 $ (7) $ 2
Net realized gain on
investment transactions 7 3 1 -- -- 1 --
Net change in unrealized
appreciation (279) (27) (1) (11) -- (51) (4)
------- ------ ---- ------ ------ ------ ------
Net change in net assets
resulting from operations 49 73 -- (1) 9 (57) (2)
Net accumulation unit
transactions (Note 4) 3,612 2,218 224 220 1,711 1,501 497
------- ------ ---- ------ ------ ------ ------
Total change in net assets 3,661 2,291 224 219 1,720 1,444 495
Net assets at beginning
of period -- -- -- -- -- -- --
------- ----- ---- ------ ------ ------ ------
Net assets at end of period $ 3,661 $2,291 $224 $ 219 $1,720 $1,444 $ 495
======= ====== ==== ====== ====== ====== ======
</TABLE>
*Commencement of Operations was February 11, 1994.
See Notes to Financial Statements
-13-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
SAFECO Separate Account C is registered under the Investment Company Act of
1940, as amended, as a segregated unit investment account of SAFECO Life
Insurance Company (SAFECO), a wholly-owned subsidiary of SAFECO Corporation.
Separate Account C is divided into sub-accounts which are invested in shares of
a designated portfolio of either the SAFECO Resource Series Trust or the
Scudder Variable Life Investment Fund. Separate Account C became available to
unitholders on February 11, 1994 (commencement of operations).
The five portfolios of the SAFECO Resource Series Trust are available to
unitholders -- the Equity, Growth, Northwest (NW), Bond, and Money Market
(MMKT) portfolios. Two portfolios of the Scudder Variable Life Investment Fund
are also available to unitholders - the International (INTL) and Balanced
(BAL) portfolios.
The assets of Separate Account C are the property of SAFECO and are not
commingled with liabilities arising out of any other business of SAFECO.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Investments in mutual fund shares are carried in the
statement of assets and liabilities at net asset value as reported by the Fund.
Security transactions are recorded on the trade date. Realized gains or losses
on securities transactions are determined using the First-In First-Out (FIFO)
cost method.
DISTRIBUTIONS -- The net investment income and realized capital gains of
Separate Account C are not distributed, but are retained and reinvested for the
benefit of accumulation unit owners.
FEDERAL INCOME TAX -- Operations of Separate Account C 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 Separate Account
C.
UNIT VALUE CALCULATION -- For financial reporting purposes, amounts have been
rounded to the nearest thousand dollars, except for per unit amounts, which may
result in minor rounding differences. Per unit amounts are calculated based on
precise amounts.
3. EXPENSES
A mortality and expense risk charge is deducted by SAFECO from Separate Account
C on a daily basis which is equal, on an annual basis, to 1.25% of the average
daily net asset value of Separate Account C. The mortality risks assumed by
SAFECO arise from its contractual obligation to make annuity payments after the
annuity date for the life of the participant and to waive withdrawal charges in
the event of the death of a participant. The expense risk assumed by SAFECO is
that the costs of administering the contracts and Separate Account C will
exceed the amount received from the administration charge. The mortality and
expense risk charge is guaranteed by SAFECO and cannot be increased.
SAFECO deducts on each Valuation Date an amount which is equal on an annual
basis to .15% of the average daily net asset value of the Separate Account for
costs associated with the administration of the Sub-Accounts. Since this
charge is an asset-based charge, the amount of the charge attributable to a
particular contract may have no relationship to the administrative costs
actually incurred by that contract. SAFECO does not intend to profit from this
charge. This charge will be reduced to the extent that the amount of this
charge is in excess of that necessary to reimburse SAFECO for its
administrative expenses.
-14-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. EXPENSES - Continued
The following expenses are deducted from a contractholder's contract value by
SAFECO and not directly from Separate Account C. As a fee for expenses
associated with the administration of the contract owner's contract value, an
annual charge of $30 is deducted by SAFECO from the accumulated value of each
contract value on the last day of each Contract Year and in the event of a
complete withdrawal, this charge is only deducted from contracts where the
contract value is less than $50,000. SAFECO has the right to increase this fee
to $35. In the event that an owner withdraws all or a portion of the contract
value, a contingent deferred sales charge is imposed on the amount withdrawn in
the first eight certificate years. Any premium tax levied by a state or
government entity with respect to the Separate Account C contract will be
charged against the contract. See the Prospectus "Expense Table" for further
information.
4. ACCUMULATION UNITS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------------------------------------------------------------------------------
For the Period Ended December 31, 1994
EQUITY* GROWTH* NW* BOND* MMKT* INT'L* BAL*
------------------------------------------------------------------------------------
-- (In Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
Units:
Sales 146 156 22 14 452 140 50
Redemptions (2) (2) -- -- (327) (2) --
------ ------ ---- ---- ------- ------ ----
Net change 144 154 22 14 125 138 50
====== ====== ==== ==== ======= ====== ====
Amounts:
Sales $3,674 $2,247 $225 $223 $ 6,195 $1,525 $497
Redemptions (62) (29) (1) (3) (4,484) (24) --
------ ------ ---- ---- ------- ------ ----
Net change $3,612 $2,218 $224 $220 $ 1,711 $1,501 $497
====== ====== ==== ==== ======= ====== ====
December 31, 1994:
Paid in capital $3,612 $2,218 $224 $220 $ 1,711 $1,501 $497
Par value per unit None None None None None None None
Accumulation units authorized Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
</TABLE>
*Commencement of Operations was February 11, 1994.
-15-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------
EQUITY GROWTH NW BOND MMKT INT'L BAL
- -----------------------------------------------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases for the period ended
December 31, 1994 $4,080 $2,363 $240 $245 $6,448 $1,541 $502
====== ====== ==== ==== ====== ====== ====
Sales for the period ended
December 31, 1994 $ 143 $ 46 $ 16 $ 15 $4,727 $ 45 $ 2
====== ====== ==== ==== ====== ====== ====
</TABLE>
6. ACCUMULATION UNIT DATA
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------
EQUITY GROWTH NW BOND MMKT INT'L BAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
February 11, 1994 $24.528 $13.910 $10.073 $16.217 $13.526 $10.948 $10.435
December 31, 1994 25.373 14.864 10.134 15.521 13.811 10.498 9.988
</TABLE>
-16-
<PAGE> 64
Audited Consolidated Financial Statements
SAFECO Life Insurance Company
and Subsidiaries
For the Year Ended December 31, 1994
<PAGE> 65
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Financial Statements
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . 2
Statement of Consolidated Income . . . . . . . . . . . . . . . . . . 3
Statement of Changes in Stockholder's Equity . . . . . . . . . . . . 4
Statement of Consolidated Cash Flows . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 66
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
SAFECO Life Insurance Company
We have audited the accompanying consolidated balance sheet of SAFECO Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
related statements of consolidated income, changes in stockholder's equity, and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 referred to above present fairly, in
all material respects, the consolidated financial position of SAFECO Life
Insurance Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As described in Note 1 to the Consolidated Financial Statements, SAFECO Life
Insurance Company and subsidiaries adopted certain new accounting standards in
1994 and 1993 as required by the Financial Accounting Standards Board.
/s/ Ernst & Young LLP
Seattle, Washington
February 10, 1995
<PAGE> 67
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<Caption)
December 31
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Investments (Note 2):
Fixed Maturities Available-for-Sale, at Market Value
(Amortized Cost: 1994--$6,116,932) ............................................. $5,915,662 $ --
Fixed Maturities Held-to-Maturity, at Amortized Cost
(Market Value: 1994--$1,948,309; 1993--$8,112,537) ............................. 2,053,132 7,422,664
Marketable Equity Securities, at Market Value
(Cost: 1994--$15,846; 1993--$14,833) ........................................... 22,747 25,166
First Mortgage Loans on Real Estate:
Nonaffiliates (Less allowance for losses: 1994--$9,511; 1993--$7,000) .......... 418,440 400,219
Affiliates ..................................................................... 134,157 86,871
Real Estate (At cost, less accumulated depreciation:
1994--$412; 1993--$331) ........................................................ 5,149 6,453
Policy Loans ..................................................................... 53,329 50,488
Short-Term Investments (At cost which approximates market) ....................... 62,789 74,573
Investment in Limited Partnerships ............................................... 1,219 1,039
---------- ----------
Total investments ............................................................ 8,666,624 8,067,473
Cash ............................................................................. 26,710 19,210
Accured investment income ........................................................ 141,907 128,212
Accounts and Notes Receivable (Less allowance for doubtful accounts:
1994--$160; 1993--$68) ......................................................... 21,189 27,703
Reinsurance Recoverables ......................................................... 15,517 15,166
Deferred Policy Acquisition Costs ................................................ 247,190 234,200
Other Assets ..................................................................... 6,494 7,100
Deferred Income Tax Recoverable (Includes tax on unrealized
depreciation of investment securities: 1994--$68,028) (Note 9) ................. 30,229 --
Assets Held in Separate Accounts ................................................. 158,266 95,321
---------- ----------
Total Assets ................................................................. $9,314,126 $8,594,385
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy and Contract Liabilities (Note 5):
Future Policy Benefits ......................................................... $ 155,322 $ 151,488
Policy and Contract Claims ..................................................... 29,050 33,186
Premiums Paid in Advance ....................................................... 8,783 9,957
Funds Held Under Deposit Contracts ............................................. 7,988,456 7,229,439
Other Policyholders' Funds ..................................................... 74,308 71,857
---------- ----------
Total Policy and Contract Liabilities ........................................ 8,255,919 7,495,927
Other Liabilities ................................................................ 89,239 87,797
Federal Income Taxes (Note 9):
Current ........................................................................ 12,464 15,665
Deferred (Includes tax on unrealized appreciation of
investment securities: 1993--$3,617) ......................................... -- 51,570
Liabilities Related to Separate Accounts ......................................... 158,266 95,321
---------- ----------
Total Liabilities ............................................................ 8,515,888 7,746,280
---------- ----------
Stockholder's Equity:
Common Stock, $250 Par Value:
20,000 Shares Authorized, Issued and Outstanding ............................. 5,000 5,000
Additional Paid-In Capital ..................................................... 85,000 85,000
Retained Earnings (Note 7) ..................................................... 834,467 751,277
Unrealized (Depreciation) Appreciation of Investment Securities,
Net of Tax (Note 2) .......................................................... (126,229) 6,828
---------- ----------
Total Stockholder's Equity ................................................. 798,238 848,105
---------- ----------
Total Liabilities and Stockholder's Equity ............................... $9,314,126 $8,594,385
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 68
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1994 1993 1992
-------- ---------- --------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums............................................................ $252,929 $ 279,628 $303,288
Investment income:
Interest on Fixed Maturities....................................... 648,296 612,805 567,458
Interest on Mortgage Loans......................................... 51,135 48,207 48,883
Interest on Short-Term Investments................................. 3,351 3,334 3,112
Dividends from Marketable Equity Securities........................ 1,446 1,817 2,258
Dividends from Redeemable Preferred Stock.......................... 618 -- --
Other Investment Income............................................ 4,375 4,862 4,534
-------- ---------- --------
Total............................................................ 709,221 671,025 626,245
Less Investment Expenses........................................... 3,551 3,303 2,992
-------- ---------- --------
Net Investment Income.............................................. 705,670 667,722 623,253
-------- ---------- --------
Other Revenue...................................................... 9,795 11,850 13,363
Realized Investment Gain........................................... 5,639 53,544 3,377
-------- ---------- --------
Total............................................................ 974,033 1,012,744 943,281
-------- ---------- --------
Benefits and Expenses:
Policy Benefits..................................................... 674,215 675,479 674,139
Commissions......................................................... 84,760 82,262 81,113
Personnel Costs..................................................... 42,439 43,244 42,036
Taxes Other Than Payroll and Income Taxes........................... 7,652 8,477 9,209
Other Operating Expenses............................................ 44,519 40,430 38,447
Amortization of Deferred Policy Acquisition Costs................... 29,407 26,350 18,861
Deferral of Policy Acquisition Costs................................ (43,360) (38,925) (45,257)
-------- ---------- --------
Total............................................................ 839,632 837,317 818,548
-------- ---------- --------
Income before Federal Income Taxes................................... 134,401 175,427 124,733
-------- ---------- --------
Provision (Benefit) for Federal Income Taxes (Note 9):
Current............................................................. 57,365 91,597 71,314
Deferred............................................................ (10,154) (26,135) (22,973)
-------- ---------- --------
Total............................................................ 47,211 65,462 48,341
-------- ---------- --------
Income Before Cumulative Effect of Accounting Changes................ 87,190 109,965 76,392
Cumulative Effect of Accounting Changes (Notes 8 and 9):
Postretirement Benefits (Net of Tax)................................ -- (2,493) --
Income Taxes........................................................ -- 9,092 --
-------- ---------- --------
Net Income........................................................... $ 87,190 $ 116,564 $ 76,392
======== ========== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 69
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
1994 1993 1992
--------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Common Stock............................... $ 5,000 $ 5,000 $ 5,000
--------- -------- --------
Additional Paid-In Capital................. 85,000 85,000 85,000
--------- -------- --------
Retained Earnings:
Balance at the Beginning of Year......... 751,277 638,713 566,321
Net Income............................... 87,190 116,564 76,392
Dividends to Parent...................... (4,000) (4,000) (4,000)
--------- -------- --------
Balance at the End of Year............... 834,467 751,277 638,713
--------- -------- --------
Unrealized Appreciation (Depreciation)
of Investment Securities, Net of Tax
(Note 2):
Balance at the Beginning of Year....... 6,828 5,968 6,124
Net Effect of Adoption of FASB
Statement 115........................ 279,957 - -
Change in Unrealized Appreciation
(Depreciation)....................... (413,014) 860 (156)
--------- -------- --------
Balance at the End of Year............. (126,229) 6,828 5,968
--------- -------- --------
Stockholder's Equity................. $ 798,238 $848,105 $734,681
========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 70
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1994 1993 1992
----------- ------------ -----------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Insurance Premiums Received........................................ $ 233,129 $ 264,254 $ 289,049
Dividends and Interest Received.................................... 641,234 589,916 538,512
Other Operating Receipts........................................... 11,419 11,814 11,535
Insurance Claims and Policy Benefits Paid.......................... (242,523) (270,702) (283,062)
Underwriting, Acquisition and Insurance Operating Costs Paid....... (177,188) (168,809) (167,400)
Income Taxes Paid.................................................. (60,566) (94,169) (58,082)
----------- ----------- -----------
Net Cash Provided by Operating Activities...................... 405,505 332,304 330,552
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of:
Fixed Maturities Available-for-Sale.............................. (1,110,154) - -
Fixed Maturities Held-to-Maturity................................ (358,297) (2,106,558) (2,088,419)
Marketable Equity Securities..................................... (407) (132) (239)
Other Investments................................................ (24,381) (53) (73)
Real Estate...................................................... - - (101)
Policy and Nonaffiliated Mortgage Loans.......................... (68,710) (62,156) (70,176)
Affiliated Mortgage Loans........................................ (54,000) - -
Maturities of Fixed Maturities Available-for-Sale.................. 476,410 - -
Maturities of Fixed Maturities Held-to-Maturity.................... 54,564 644,532 573,602
Sale of:
Fixed Maturities Available-for-Sale.............................. 250,227 - -
Fixed Maturities Held-to-Maturity................................ - 675,044 776,352
Marketable Equity Securities..................................... 65 6,323 2,841
Other Investments................................................ 23,992 - 9,499
Real Estate...................................................... 1,885 115 485
Policy and Nonaffiliated Mortgage Loans.......................... 42,038 43,107 30,008
Affiliated Mortgage Loans........................................ 6,714 2,324 36,375
Net (increase) Decrease in Short-Term Investments.................. 11,793 10,343 (40,174)
Other.............................................................. 947 (1,190) (1,963)
----------- ----------- -----------
Net Cash Used in Investing Activities......................... (747,314) (788,301) (771,983)
----------- ----------- -----------
FINANCING ACTIVITIES:
Funds Received Under Deposit Contracts............................. 1,012,164 1,001,880 954,813
Return of Funds Held Under Deposit Contracts....................... (659,697) (555,429) (506,090)
Dividends to Parent................................................ (4,000) (4,000) (3,000)
Net Proceeds from Short-Term Borrowings............................ 842 15,569 -
----------- ----------- -----------
Net Cash Provided by Financing Activities..................... 349,309 458,020 445,723
----------- ----------- -----------
Net Increase in Cash................................................. 7,500 2,023 4,292
Cash at Beginning of Year............................................ 19,210 17,187 12,895
----------- ----------- -----------
Cash at End of Year.................................................. $ 26,710 $ 19,210 $ 17,187
=========== =========== ===========
</TABLE>
For purposes of reporting cash flows, cash consists of balances on hand
and on deposit in banks and financial institutions.
See Notes to Consolidated Financial Statements
5
<PAGE> 71
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS-
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Net Income.................................................... $ 87,190 $116,564 $ 76,392
-------- -------- --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Realized Investment Gain.................................. (5,639) (53,544) (3,377)
Amortization of Fixed Maturity Investments................ (12,247) (10,476) (7,036)
Deferred Federal Income Tax Benefit....................... (10,154) (26,135) (22,973)
Interest Expense on Deposit Contracts..................... 405,536 400,122 375,305
Cumulative Effect of Accounting Changes................... - (6,599) -
Other..................................................... (440) 205 171
Changes in:
Future Policy Benefits.................................. 3,834 1,322 3,521
Policy and Contract Claims.............................. (4,136) (5,577) (4,925)
Premiums Paid in Advance................................ (1,174) (476) (1,510)
Deferred Policy Acquisition Costs....................... (12,990) (12,575) (26,396)
Accrued Investment Income............................... (13,695) (9,185) (9,443)
Accrued Interest on Accrual Bonds....................... (41,285) (56,712) (68,509)
Other Receivables....................................... 5,064 (3,937) 1,244
Current Federal Income Taxes............................ (3,201) (2,572) 13,232
Other Assets and Liabilities............................ 1,820 22,966) 3,762
Other Policyholders' Funds.............................. 7,022 (5,518) 1,094
-------- -------- --------
Total Adjustments..................................... 318,315 231,309 254,160
-------- -------- --------
Net Cash Provided by Operating Activities..................... $405,505 $347,873 $330,552
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 72
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
include the accounts of SAFECO Life Insurance Company (the Company) and its
wholly-owned subsidiaries, SAFECO National Life Insurance Company and First
SAFECO National Life Insurance Company of New York. The Company is a
wholly-owned subsidiary of SAFECO Corporation.
All significant intercompany transactions have been eliminated in the
consolidated financial statements. Certain reclassifications have been
made in the 1993 and 1992 financial statements to conform to current
classifications.
ACCOUNTING FOR PREMIUMS. Life and health insurance premiums are reported
as income when collected for traditional individual life policies and when
earned for group and individual health policies. Funds received under
pension deposit contracts, annuities and universal life policies are
recorded as liabilities rather than premium income when received. Revenues
for universal life products consist of front-end loads, mortality charges
and expense charges assessed against individual policyholder account
balances. These loads and charges are recognized as income when earned.
INVESTMENTS. The Company adopted Financial Accounting Standards Board
(FASB) Statement 115, "Accounting for Certain Investments in Debt and
Equity Securities," on January 1, 1994, applying the provisions of the
Statement to Investments held as of, or acquired after that date. See
discussion of new accounting standards on page 9.
Fixed maturity investments (bonds and redeemable preferred stocks) which
the Company has the positive intent and ability to hold to maturity are
classified as held-to-maturity and carried at amortized cost in the balance
sheet. Fixed maturities classified as available-for-sale are carried at
market value, with changes in unrealized gains and losses recorded directly
to stockholder's equity, net of applicable income taxes and deferred policy
acquisition costs valuation allowance. The Company has no fixed maturities
classified as trading.
All marketable equity securities are classified as available-for-sale and
carried at market value, with changes in unrealized gains and losses
recorded directly to stockholder's equity, net of applicable income taxes.
When the collectibility of income on certain investments is considered
doubtful, they are placed on non-accrual status and thereafter interest
income is recognized only when payment is received. Investments that have
declined in market value below cost and for which the decline is judged to
be other than temporary are written down to fair value. Writedowns are
made directly on an individual security basis and are included in realized
investment losses in the Statement of Consolidated Income.
The cost of security investments sold is determined by the "identified
cost" method.
Mortgage loans are carried at outstanding principal balances, less an
allowance for loan losses.
REAL ESTATE AND DEPRECIATION. Income-producing real estate is classified
as an investment. The Company provides straight-line depreciation on its
buildings based upon their estimated useful lives.
Investment real estate that has declined in market value below cost and for
which the decline is judged to be other than temporary is written down to
estimated realizable value. The writedowns are included in realized
investment losses in the Statement of Consolidated Income.
7
<PAGE> 73
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 (continued)
DEFERRED POLICY ACQUISITION COSTS. Acquisition costs, consisting of
commissions and certain other underwriting expenses, which vary with and
are primarily related to the production of new business, are deferred.
Acquisition costs for annuities and universal life policies are amortized
over the lives of the policies in proportion to the present value of
estimated future gross profits. To the extent actual experience differs
from assumptions, and to the extent estimates of future gross profits
require revision, the unamortized balance of deferred policy acquisition
costs is adjusted accordingly. There were no significant revisions made in
1994, 1993 or 1992.
Acquisition costs for traditional individual life insurance policies are
amortized over the premium payment period of the related policies using
assumptions consistent with those used in computing policy benefit
liabilities.
FUTURE POLICY BENEFITS. Liabilities for universal life insurance policies,
deferred annuity and pension deposit contracts are equal to the accumulated
account value of such policies or contracts as of the valuation date.
Liabilities for structured settlement annuities are based on interest rate
assumptions using market rates at issue, graded downward over 40 years to a
range of 5-1/2% to 8-3/4%.
Liabilities for future policy benefits under traditional individual life
insurance policies have been computed on the level premium method using
interest, mortality and persistency assumptions based on Company experience
modified to provide for adverse deviation. Interest assumptions range from
8-1/2% graded to 3-1/4%.
POLICY AND CONTRACT CLAIMS. The liability for policy and contract claims
is established on the basis of reported losses ("case basis" method).
Provision is also made for claims incurred but not reported, based on
historical experience. The estimates for claims incurred but not reported
are continually reviewed and any necessary adjustments are reflected in
current operations.
SEPARATE ACCOUNTS. The Company administers segregated asset accounts for
pension and other clients. The assets of these Separate Accounts, which
consist of common stocks, are the property of the Company. The liabilities
of these Separate Accounts represent reserves established to meet
withdrawal and future benefit payment provisions of contracts with these
pension and other clients. The assets of the Separate Accounts, equal to
the reserves and other contract liabilities of the Separate Accounts, are
not chargeable with liabilities arising out of any other business the
Company may conduct. Investment risks associated with market value changes
are borne by the clients. Deposits, withdrawals, net investment income and
realized and unrealized capital gains and losses on the assets of the
Separate Account are not reflected in the Statement of Consolidated Income.
Management fees and other charges assessed against the contracts are
included in other revenue.
FEDERAL INCOME TAXES. The Company and its subsidiaries file a consolidated
federal income tax return with SAFECO Corporation. Tax payments (credits)
are made to or received from SAFECO Corporation on a separate tax return
filing basis. The Company provides for federal income taxes based on
financial reporting income and deferred federal income taxes on temporary
differences between financial reporting and taxable income.
8
<PAGE> 74
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 (continued)
NEW ACCOUNTING STANDARDS. The Company adopted Financial Accounting
Standards Board (FASB) Statements 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and 109, "Accounting for
Income Taxes," in the first quarter of 1993. See the Statement of
Consolidated Income for the effect on income of adoption of Statements 106
and 109. For additional disclosure relating to Statements 106 and 109, see
Note 8 and Note 9, respectively.
The Company adopted FASB Statement 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1994. Adoption had no
effect on net income.
The Company adopted FASB Statement 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," in the first
quarter of 1993. Adoption had no effect on net income. See Note 5 for
disclosures relating to reinsurance.
In May of 1993, the FASB issued Statement 114, "Accounting by Creditors for
Impairment of a Loan," which provides guidance on valuing impaired loans.
The FASB also issued Statement 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures," in October of 1994, which
amends Statement 114. Both Statements are effective for 1995. Based on
current analysis, the impact on the Company's net income and financial
condition of adopting these Statements is not expected to be significant.
In May of 1993, the FASB issued Statement 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expands the use of fair
value accounting for debt and equity securities. As of January 1, 1994,
the Company adopted the provisions of this Statement for investments held
as of, or acquired after that date. Statement 115 requires that debt and
equity securities be classified as trading, available-for-sale, or
held-to-maturity. Fixed maturity securities that the Company has the
positive intent and ability to hold to maturity (as narrowly defined by
Statement 115) are classified as held-to-maturity and are reported at
amortized cost. Fixed maturity securities classified as available-for-sale
are carried at market value, with changes in unrealized gains and losses
recorded directly to stockholder's equity, net of applicable income taxes
and deferred policy acquisition costs valuation allowance. Under Statement
115, trading securities are carried at market value with immediate
recognition in income of changes in market value. Since the Company does
not have any securities held for trading, the adoption of this Statement
had no effect on net income. All marketable equity securities are
classified as available-for-sale and continue to be carried at market
value, with changes in unrealized gains and losses recorded directly to
stockholder's equity, net of applicable income taxes. As required by
Statement 115, no restatement of prior period amounts has been made. See
Note 2 for details of the effect on stockholder's equity of the adoption of
Statement 115.
The FASB issued Statement 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," in October of 1994.
Statement 119 requires the presentation of certain disclosures about
derivative financial instruments and is effective for 1994. The Company
has made the additional required disclosures for 1994 in Note 4.
9
<PAGE> 75
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SUMMARY
A summary of fixed maturities and marketable equity securities classified
as available-for-sale at December 31, 1994 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 664,605 $ 704 $ (28,960) $ (28,276) $ 636,529
States, municipalities and political subdivisions ...... 139,415 4,392 (1,723) 2,669 142,084
Foreign governments .................................... 71,599 1,019 (2,522) (1,503) 70,096
Public utilities ....................................... 1,347,080 21,223 (66,446) (45,223) 1,301,857
All other corporate bonds .............................. 2,133,189 26,027 (97,641) (71,614) 2,061,575
Mortgage-backed securities ............................. 1,745,427 30,508 (87,962) (57,454) 1,687,973
Other fixed maturities ................................. 15,417 208 (77) 131 15,548
---------- ------- --------- --------- ----------
Total fixed maturities classified as
available-for-sale ................................... 6,116,932 84,081 (285,351) (201,270) 5,915,662
Marketable equity securities ........................... 15,846 7,577 (676) 6,901 22,747
---------- ------- --------- --------- ----------
Total investment securities classified as
available-for-sale ................................... $6,132,778 $91,658 $(286,027) (194,369) $5,938,409
========== ======= ========= ==========
Deferred policy acquisition costs valuation allowance ....................................... -
Applicable federal income tax ............................................................... 68,140
---------
Unrealized depreciation of investment securities,
net of tax, included in stockholder's equity .............................................. $(126,229)
=========
</TABLE>
A summary of fixed maturities classified as held-to-maturity at December
31, 1994 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 124,266 $ 649 $ (10,953) $ (10,304) $ 113,962
States, municipalities and political subdivisions ...... 36,517 2,260 (527) 1,733 38,250
Foreign governments .................................... 139,951 2,651 (2,434) 217 140,168
Public utilities ....................................... 436,145 14,090 (19,454) (5,364) 430,781
All other corporate bonds .............................. 794,824 10,401 (56,808) (46,407) 748,417
Mortgage-backed securities ............................. 521,429 8,374 (53,072) (44,698) 476,731
---------- ------- --------- --------- ----------
Total fixed maturities classified as
held-to-maturity ..................................... $2,053,132 $38,425 $(143,248) $(104,823) $1,948,309
========== ======= ========= ========= ==========
</TABLE>
A summary of all fixed maturities at December 31, 1993 follows:
<TABLE>
<CAPTION>
Gross Gross Net Estimated
Amortized Unrealized Unrealized Unrealized Market
Cost Gains Losses Gain Value
---------- ---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
United States government and
government agencies and authorities .................. $ 684,679 $ 66,049 $ (210) $ 65,839 $ 750,518
States, municipalities and political subdivisions ...... 162,344 25,749 (39) 25,710 188,054
Foreign governments .................................... 219,355 31,586 (157) 31,429 250,784
Public utilities ....................................... 1,625,212 192,918 (2,548) 190,370 1,815,582
All other corporate bonds .............................. 2,532,550 236,054 (14,595) 221,459 2,754,009
Mortgage-backed securities ............................. 2,198,155 169,045 (13,997) 155,048 2,353,203
Other fixed maturities ................................. 369 35 (17) 18 387
---------- -------- -------- -------- ----------
Total fixed maturities ............................... $7,422,664 $721,436 $(31,563) $689,873 $8,112,537
========== ======== ======== ======== ==========
</TABLE>
10
<PAGE> 76
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
As discussed in Note 1, the Company adopted the provisions of FASB
Statement 115 as of January 1, 1994. The net effect on stockholder's
equity of the adoption of Statement 115 was an increase of $279,957,000 as
of January 1, 1994. The net increase was comprised of the following
amounts: aggregate market value in excess of amortized cost of fixed
maturities classified as available-for-sale of $458,471,000, less deferred
policy acquisition costs valuation allowance of $27,768,000 and deferred
income taxes at 35% of $150,746,000.
The aggregate market value of marketable equity securities was in excess
of cost by $10,333,000 at December 31, 1993. This amount included gross
unrealized gains of $10,354,000 and gross unrealized losses of $21,000.
The amortized cost and estimated market value of fixed maturities at
December 31, 1994, by contractual maturity, are presented below. Expected
maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Fixed Maturities Classified as Available-for-Sale Cost Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less............................. $ 98,510 $ 98,700
Due after one year through five years............... 1,116,030 1,088,664
Due after five years through ten years.............. 1,601,463 1,534,146
Due after ten years................................. 1,555,502 1,506,179
Mortgage-backed securities.......................... 1,745,427 1,687,973
---------- ----------
Total..................................... $6,116,932 $5,915,662
========== ==========
Estimated
Amortized Market
Fixed Maturities Classified as Held-to-Maturity Cost Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less............................. $ 113 $ 113
Due after one year through five years............... 5,000 4,600
Due after five years through ten years.............. 3 4
Due after ten years................................. 1,526,587 1,466,861
Mortgage-backed securities.......................... 521,429 476,731
---------- ----------
Total..................................... $2,053,132 $1,948,309
========== ==========
</TABLE>
At December 31, 1994 and 1993, the Company held below investment grade
fixed maturities of $174 million and $152 million at amortized cost,
respectively. The respective market values of these investments were
approximately $156 million and $152 million. These holdings amounted to
2.0% of the Company's investments in fixed maturities at December 31, 1994
and 1993.
The carrying value of investments in fixed maturities and mortgage loans
that did not produce income during the year ended December 31, 1994 is
less than one percent of the total of such investments.
11
<PAGE> 77
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
Certain bonds amounting to $4,161,000 and $4,066,000 at December 31, 1994
and 1993, respectively, were on deposit with various regulatory
authorities to meet requirements of insurance and financial codes.
At December 31, 1994 and 1993, mortgage loans constituted approximately
5.9% and 5.7% of total assets, respectively, and are secured by first
mortgage liens on income-producing commercial real estate, primarily in
the retail, industrial and office building sectors. The majority of the
properties are located in the western United States, with 43.7% of the
total in California. Individual loans generally do not exceed $5 million.
For each of these years, less than 2% of the loans were non-performing.
The proceeds from sales of investment securities and related gains and
losses for 1994 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
---------------------------------------------------------
Fixed Maturities Fixed Maturities Marketable
Available-for-Sale Held-to-Maturity Equity Securities
------------------ ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Proceeds from sales........................................... $250,227 $ - $ 65
======== ============ =====
Gross realized gains on sales................................. $ 12,994 $ - $ 115
Gross realized losses on sales................................ (1,533) - (224)
-------- ------------ -----
Realized gains (losses) on sales.................... 11,461 - (109)
Other (including net gain on calls and redemptions)........... 2,475 - -
Writedowns (including writedowns on
securities subsequently sold)............................... (4,804) - -
-------- ------------ -----
Total realized gain (loss).................................... $ 9,132 $ - $(109)
======== ============ =====
</TABLE>
The proceeds from sales of investments in fixed maturities and related
gains and losses for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
1993 1992
--------- --------
(In Thousands)
<S> <C> <C>
Proceeds from sales................................................................. $675,044 $776,352
======== ========
Gross realized gains on sales....................................................... $ 75,895 $ 40,456
Gross realized losses on sales...................................................... (20,653) (23,189)
-------- --------
Realized gains on sales........................................................ 55,242 17,267
Other (including net gain on calls and redemptions)................................. 12,749 6,593
Writedowns (including writedowns on securities subsequently sold)................... (11,665) (16,592)
-------- --------
Total realized gain................................................................. $ 56,326 $ 7,268
======== ========
</TABLE>
12
<PAGE> 78
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 (continued)
The following summarizes the realized gains and losses, the changes in
unrealized gains and losses, and applicable income taxes on all
investments:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Realized gains (losses):
Fixed maturities........................................ $ 9,132 $56,326 $ 7,268
Marketable equity securities............................ (109) 2,063 175
First mortgage loans on real estate..................... (3,000) (4,336) (3,555)
Real estate............................................. (184) (509) (511)
Short-term investments.................................. (200) - -
------- ------- -------
Realized gain before federal income taxes....... $ 5,639 $53,544 $ 3,377
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1994 1993 1992
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Increase (decrease) in unrealized appreciation of:
Fixed maturities classified as available-for-sale...... $(201,270) $ - $ -
Marketable equity securities........................... (3,432) 1,291 (236)
Applicable federal income tax (expense) benefit........ 71,645 (431) 80
--------- ------ -----
Net change in unrealized appreciation
(depreciation)............................... $(133,057) $ 860 $(156)
========= ====== =====
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company is obligated under a real estate lease with an affiliate,
General America Corporation, which expires in 2010. The minimum annual
rental commitments under this obligation are $2,211,000. At December 31,
1994, unfunded mortgage loan commitments approximated $9,360,000. The
Company had no other material commitments at December 31, 1994.
In January 1995, a class action seeking actual and punitive damages, DeVoy
v. SAFECO Life Insurance Company, Case No. 684407 in the Superior Court of
California, County of San Diego, was brought against the Company by an
owner of a qualified pension annuity contract. With respect to such
contracts, the plaintiffs have challenged both the representations as to
interest rates and the calculation of interest. The Company is defending
against the action.
13
<PAGE> 79
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FINANCIAL INSTRUMENTS
ESTIMATED FAIR VALUES. Fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgment is required in developing the estimates of
fair value. Accordingly, these estimates are not necessarily indicative of
the amount that could be realized in a current market exchange. The use of
different market assumptions and/or estimating methodologies may have a
material effect on the estimated fair value amounts.
Carrying value is a reasonable estimate of fair value for cash, policy
loans, short-term investments, accounts receivable and other liabilities.
Fair value amounts for investments in fixed maturities and marketable
equity securities are the same as market value. Market value generally
represents quoted market prices for securities traded in the public market
place or analytically determined values for securities not publicly traded.
The fair values of mortgage loans have been estimated by discounting the
projected cash flows using the current rate at which loans would be made to
borrowers with similar credit ratings and for the same maturities.
The fair value of investment contracts with defined maturities is estimated
by discounting projected cash flows using rates that would be offered for
similar contracts with the same remaining maturities. For investment
contracts with no defined maturity, fair value is estimated to be the
present surrender value. These investment contracts are included in Funds
Held Under Deposit Contracts.
Other insurance-related financial instruments are exempt from fair value
disclosure requirements.
Estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION> 1994 1993
-------------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturities available-for-sale.............. $5,915,662 $5,915,662 $ - $ -
Fixed maturities held-to-maturity................ 2,053,132 1,948,309 7,422,664 8,112,537
Marketable equity securities..................... 22,747 22,747 25,166 25,166
Mortgage loans................................... 552,597 540,000 487,090 529,000
Financial liabilities:
Funds held under deposit contracts............... 7,988,456 7,678,000 7,229,439 7,531,000
</TABLE>
DERIVATIVE FINANCIAL INSTRUMENTS. The Company's investments in
mortgage-backed securities of $2.2 billion are primarily residential
collateralized mortgage obligations and pass-throughs ("CMOs") . CMOs,
while technically defined as derivative instruments, are exempt from FAS
119 disclosure requirements. The Company's investment in CMOs comprised of
the riskier, highly-volatile type (e.g., interest only, inverse floaters,
etc.) has been intentionally limited to only a small amount (i.e., less
than 1% of total CMOs at December 31, 1994).
The Company's involvement in other investment-type derivatives is also,
intentionally, of a very limited nature. Such derivatives include
currency-linked bonds and fixed-rate loan commitments. Individually, and
in the aggregate, these derivatives are not material and thus no additional
disclosures are warranted.
14
<PAGE> 80
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. POLICY AND CONTRACT LIABILITIES
REINSURANCE. The Company protects itself from excessive losses by ceding
reinsurance to other companies, using automatic and facultative treaties.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. A continuing liability exists in the event a reinsurance
company is unable to meet its obligations to the Company. The financial
condition of its reinsurers is evaluated by the Company to minimize its
exposure to losses from reinsurer insolvencies.
The balance sheet caption "Reinsurance Recoverables" is comprised of the
following amounts:
<TABLE>
<CAPTION>
December 31
-------------------
1994 1993
------- -------
(In Thousands)
<S> <C> <C>
Unpaid losses and adjustment expense............. $ 646 $ 132
Paid claims...................................... 506 1,037
Life policy liabilities.......................... 14,033 13,821
Other reinsurance recoverable.................... 332 176
------- -------
Total reinsurance recoverables............. $15,517 $15,166
======= =======
</TABLE>
The effects of reinsurance on the premium and policy benefit amounts in the
Statement of Consolidated Income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Reinsurance Ceded:
Premiums................................ $(9,060) $(9,576) $(9,192)
======= ======= =======
Policy benefits......................... $(5,588) $(7,441) $(6,463)
======= ======= =======
Reinsurance Assumed:
Premiums................................ $ 327 $ 544 $ 1,936
======= ======= =======
Policy benefits......................... $ 3,421 $ 3,474 $ 4,920
======= ======= =======
</TABLE>
POLICY AND CONTRACT CLAIMS. Loss reserves and health claims, which are
generally incurred and paid in full within a one-year period, amount to
less than 1% of total policy and contract liabilities. Therefore, no
additional disclosures are warranted.
15
<PAGE> 81
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STATUTORY BASIS INFORMATION
The Company and its subsidiaries are required to file annual statements
with state regulatory authorities prepared on an accounting basis as
prescribed or permitted by such authorities (statutory basis). Prescribed
statutory accounting practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the National
Association of Insurance Commissioners (NAIC). Permitted statutory
accounting practices encompass all accounting practices that are not
prescribed.
Statutory net income differs from income reported in accordance with
generally accepted accounting principles primarily because policy
acquisition costs are expensed when incurred, reserves are based on
different assumptions and income tax expense reflects only taxes paid or
currently payable.
Statutory net income and stockholder's equity, by company, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
-------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Statutory Net income:
SAFECO Life Insurance Company....................... $47,280 $17,724 $29,115
SAFECO National Life Insurance Company.............. 1,242 1,192 1,370
First SAFECO National Life Insurance Company
of New York....................................... 108 225 144
------- ------- -------
Total........................................... $48,630 $19,141 $30,629
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31
------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Statutory Stockholder's Equity:
SAFECO Life Insurance Company........................ $391,328 $357,081 $339,119
SAFECO National Life Insurance Company............... 15,849 16,228 16,651
First SAFECO National Life Insurance Company
of New York........................................ 9,644 9,569 9,354
-------- -------- --------
Total............................................ $416,821 $382,878 $365,124
======== ======== ========
</TABLE>
The Company has received written approval from the Washington State
Insurance Department to treat certain loans (all made at market rates) to
related SAFECO Corporation subsidiaries as admitted assets. The allowance
of such loans has not materially enhanced surplus at December 31, 1994.
7. DIVIDEND RESTRICTIONS
Insurance companies are restricted by certain states as to the amount of
dividends they may pay within a given calendar year to their parent without
regulatory consent. That restriction is the greater of statutory net gain
from operations for the previous year or 10% of policyholder surplus at the
close of the previous year, subject to a maximum limit equal to statutory
earned surplus. The amount of retained earnings available for the payment
of dividends to SAFECO Corporation without prior regulatory approval was
$51,033,000 at December 31, 1994.
16
<PAGE> 82
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EMPLOYEE BENEFIT PLANS
SAFECO Corporation and subsidiary companies (the Companies) administer
defined contribution, defined benefit and profit sharing bonus plans
covering substantially all employees. The defined contribution plans
include profit sharing retirement plans and a savings plan. Benefits are
earned under the defined benefit plan for each year of service after 1988,
based on the employee's compensation level plus a stipulated rate of return
on the benefit balance. It is SAFECO Corporation's policy to fund the
defined benefit plan on a current basis to the full extent deductible under
federal income tax regulations. The cost of these plans to the Company was
$6,329,000, $7,962,000 and $6,519,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
The Companies also provide certain healthcare and life insurance benefits
("other postretirement benefits") for retired employees. Substantially all
employees may become eligible for these benefits if they reach retirement
age while working for the Companies. The cost of these benefits is shared
with the retiree.
Effective January 1, 1993, the Company adopted FASB Statement 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
Under Statement 106, the Company now accrues for other postretirement
benefits during the years that employees provide services. Prior to
adoption of Statement 106, other postretirement benefits were accounted for
on a pay-as-you-go (cash) basis. The transition obligation (i.e., the
accumulated postretirement benefit obligation) of $3,777,000 was recorded
as a cumulative effect adjustment in the first quarter of 1993 which, net
of tax, resulted in a reduction of net income of $2,493,000.
Components of the net periodic other postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1994 1993
--------- --------
(in Thousands)
<S> <C> <C>
Service cost-benefits earned during the period.................... $153 $151
Interest cost on accumulated postretirement benefit
obligation...................................................... 283 318
Actual return on plan assets...................................... 3 (4)
Net amortization and deferral..................................... (7) 4
---- ----
Total....................................................... $432 $469
==== ====
</TABLE>
Under the cash basis of accounting for these other postretirement benefits,
the expense for the year ended December 31, 1992 was $109,000.
17
<PAGE> 83
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 (continued)
The following table summarizes the funded status of the plan:
<TABLE>
<CAPTION>
December 31
--------------------
1994 1993
------ ------
(In Thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees................................................................. $1,332 $1,578
Fully eligible active plan participants.................................. 496 725
Other active plan participants........................................... 1,245 1,555
------ ------
Total APBO........................................................... 3,073 3,858
Less: plan assets at fair value............................................ 91 66
------ ------
Funded status.............................................................. 2,982 3,792
Unrecognized gain.......................................................... 1,424 301
------ ------
Accrued postretirement benefit cost recorded on the balance sheet.......... $4,406 $4,093
====== ======
</TABLE>
Other postretirement benefit cost is determined using actuarial assumptions
at the beginning of the year. The funded status is determined using
assumptions at the end of the year. The discount rate used was 8-1/2%,
7-1/2% and 8% at December 31, 1994, December 31, 1993 and January 1, 1993,
respectively. The accumulated postretirement benefit obligation at
December 31, 1994 was determined using a healthcare cost trend rate of 12%
for 1995, declining by 1% per year to 6% and remaining at that level
thereafter. The ultimate trend rate of 6% represents a 1% reduction from
the 7% rate used for the prior year's valuation. A one percentage point
increase in the assumed healthcare cost trend rate for each year would
increase the accumulated other postretirement benefit obligation as of
December 31, 1994 by $341,000 and the annual net periodic other
postretirement benefit cost for the year then ended by $71,000.
18
<PAGE> 84
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
As of January 1, 1993, the Company adopted the liability method of
accounting for income taxes pursuant to FASB Statement 109, "Accounting for
Income Taxes." This accounting change was implemented through a cumulative
effect adjustment which reduced the net deferred tax liability (and
increased net income in the first quarter of 1993) by $9,092,000. Prior
year financial statements and related disclosures which follow the
guidelines provided in APB 11 were not restated. Under the liability
method, deferred tax assets and liabilities are determined based on the
differences between their financial reporting and their tax bases and are
measured using the enacted tax rates.
Differences between income tax computed by applying the U.S. federal income
tax rate of 35% in 1994 and 1993 and 34% in 1992 to income before income
taxes and the provision for federal income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Computed "expected" tax expense ................................ $47,040 $61,399 $42,409
Dividends received deduction ................................... (64) (52) (58)
Tax exempt interest ............................................ (8) (9) (11)
Provision for settlement of prior years' tax obligation ........ - 2,000 6,000
Federal tax rate change ........................................ - 2,040 -
Other .......................................................... 243 84 1
------- ------- -------
Income tax expense ......................................... $47,211 $65,462 $48,341
======= ======= =======
Percent of income tax expense to income before tax ............. 35.1% 37.3% 38.8%
======= ======= =======
</TABLE>
The tax effect of temporary differences which give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1994 1993
-------- -------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Discounted loss and adjustment expense reserves .............. $ 1,679 $ 1,026
Unearned premium reserves .................................... 2,012 1,699
Adjustment to life policy liabilities ........................ 20,444 7,838
Capitalization of policy acquisition costs -- 1990 Tax Act ... 18,263 14,105
Postretirement benefits ...................................... 1,542 1,435
Realized capital gains ....................................... 5,422 6,310
Guarantee fund assessment .................................... 3,250 2,282
Unrealized depreciation of investment securities ............. 68,028 -
Other ........................................................ 1,343 1,569
-------- -------
Total deferred tax assets .................................. 121,983 36,264
-------- -------
Deferred tax liabilities:
Deferred policy acquisition costs ............................ 86,798 82,048
Bond discount accrual ........................................ 4,133 2,164
Unrealized appreciation of marketable equity securities ...... - 3,617
Other ........................................................ 823 5
-------- -------
Total deferred tax liabilities ........................... 91,754 87,834
-------- -------
Net deferred tax (asset) liability ....................... $(30,229) $51,570
======== =======
</TABLE>
19
<PAGE> 85
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 (continued)
The deferred tax benefit of $10,154,000 for 1994 represents the decrease in
the net deferred tax liability of $81,799,000 excluding a decrease of
$71,645,000 related to unrealized depreciation of investment securities.
The deferred federal income tax benefit of $26,135,000 for 1993 represents
a decrease in the net deferred federal income tax liability of $25,704,000
excluding an increase of $431,000 related to unrealized appreciation of
marketable equity securities. The tax related to the increase in
appreciation of marketable equity securities approximated $543,000 during
1993. Of that amount, $112,000, which related to the 1% increase in the
federal income tax rate, was charged directly to income with the remainder
charged directly to stockholder's equity.
Deferred federal income taxes for 1992 were provided on the difference
between the Company's taxable income and income for financial reporting
purposes according to the guidelines provided in APB 11. The components of
the deferred federal income tax benefit using these guidelines are as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1992
------------
(In Thousands)
<S> <C>
Increase in deferred policy acquisition costs................ $ 8,975
Capitalization of policy acquisition costs - 1990 Tax Act.... (4,162)
Basis difference on capital gains............................ (280)
Adjustment to policy reserves................................ (27,393)
Accrual of market discount................................... 1,179
Other........................................................ (1,292)
--------
Deferred federal income tax benefit..................... $(22,973)
========
</TABLE>
20
<PAGE> 86
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT DATA
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------------
Financial Employee
Services Benefits Total
--------- -------- --------
(in Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (Including $27,955 of financial
services revenue received from affiliates)............... $ 42,805 $219,919 $262,724
Identifiable Investment Income.............................. 395,127 245,909 641,036
Investment Income Allocated................................. 39,909 24,725 64,634
Identifiable Realized Gain from Investments................. 6,744 1,267 8,011
Realized Loss from Investments Allocated.................... (1,463) (909) (2,372)
-------- -------- --------
Total Revenue........................................... $483,122 $490,911 $974,033
======== ======== ========
Income Before Income Taxes.................................... $ 70,200 $ 64,201 $134,401
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------
FinanciaL Employee
Services Benefits Total
--------- -------- ----------
(in Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Costs........................... $ 151,614 $ 95,576 $ 247,190
Policy Loans................................................ 28,467 24,862 53,329
Invested Assets............................................. 4,859,921 2,874,141 7,734,062
Other....................................................... 153,120 248,641 401,761
Invested Assets Allocated..................................... 542,890 336,343 879,233
Other Assets Allocated........................................ (880) (569) (1,449)
---------- ---------- ----------
Total Assets............................................ $5,735,132 $3,578,994 $9,314,126
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs............. $ 9,914 $ 19,493 $ 29,407
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and
assets is specifically identifiable with an industry segment. The
remainder of these amounts has been allocated in proportion to the
investment income identified with each segment.
21
<PAGE> 87
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1993
-------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (including $23,195 of financial services revenue
received from affiliates)................................................ $ 40,000 $ 251,478 $ 291,478
Identifiable Investment Income............................................. 352,076 251,740 603,816
Investment Income Allocated................................................ 38,408 25,498 63,906
Identifiable Realized Gain (Loss) from Investments......................... 64,442 (6,567) 57,875
Realized Loss from Investments Allocated................................... (2,956) (1,375) (4,331)
---------- ---------- ----------
Total Revenue............................................... $ 491,970 $ 520,774 $1,012,744
========== ========== ==========
Income Before Income Taxes................................................. $ 117,287 $ 58,140 $ 175,427
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Cost........................................... $ 137,479 $ 96,721 $ 234,200
Policy Loans............................................................... 26,181 24,307 50,488
Invested Assets............................................................ 4,253,688 2,906,514 7,160,202
Other...................................................................... 98,972 159,396 258,368
Invested Assets Allocated...................................................... 513,921 342,861 856,782
Other Assets Allocated......................................................... 21,160 13,185 34,345
---------- ---------- ----------
Total Assets................................................... $5,051,401 $3,542,984 $8,594,385
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs.............................. $ 7,395 $ 18,955 $ 26,350
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and
assets is specifically identifiable with an industry segment. The
remainder of these amounts has been allocated in proportion to the
investment income identified with each segment.
22
<PAGE> 88
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1992
------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Revenue:
Premiums and Other (including $20,517 of financial
services revenue received from affiliates)................ $ 39,010 $ 277,641 $ 316,651
Identifiable Investment Income................................. 304,764 250,969 555,733
Investment Income Allocated.................................... 40,158 27,362 67,520
Identifiable Realized Gain (Loss) from Investments............. 11,518 (8,659) 2,859
Realized Gain (Loss) from Investments Allocated................ (237) 755 518
---------- ---------- ----------
Total Revenue............................................ $ 395,213 $ 548,068 $ 943,281
========== ========== ==========
Income Before Income Taxes......................................... $ 66,030 $ 58,703 $ 124,733
========== ========== ==========
December 31, 1992
------------------------------------
Financial Employee
Services Benefits Total
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Identifiable Assets:
Deferred Policy Acquisition Cost............................... $ 124,459 $ 97,166 $ 221,625
Policy Loans................................................... 26,245 24,210 50,455
Invested Assets................................................ 3,524,626 2,751,097 6,275,723
Other.......................................................... 78,986 118,172 197,158
Invested Assets Allocated.......................................... 481,718 341,961 823,679
Other Assets Allocated............................................. 20,920 12,623 33,543
---------- ---------- ----------
Total Assets............................................ $4,256,954 $3,345,229 $7,602,183
========== ========== ==========
Amortization of Deferred Policy Acquisition Costs.................. $ 4,940 $ 13,921 $ 18,861
========== ========== ==========
</TABLE>
A major portion of investment income, realized gains or losses and assets
is specifically identifiable with an industry segment. The remainder of
these amounts has been allocated in proportion to the investment income
identified with each segment.
23
<PAGE> 89
SAFECO SEPARATE ACCOUNT C
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. FINANCIAL STATEMENTS The following audited financial statements of SAFECO
Life Insurance Company are included in the Statement of Additional
Information of this Registration Statement:
REGISTRANT:
Statements of Assets and Liabilities as of December 31, 1994.
Statements of Operations for the period ended December 31, 1994.
Statements of Changes in Net Assets for the period ended December 31,
1994.
Notes to Financial Statements (including accumulation unit data).
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES:
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Statement of Consolidated Income for the years ended December 31,
1994, 1993 and 1992.
Statement of Changes in Stockholder's Equity for the years ended
December 31, 1994, 1993 and 1992.
Statement of Consolidated Cash Flows for the years ended December 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
b. EXHIBITS
Exhibit Number Description of Document
-------------- -----------------------
1. Resolution of Board of Directors of SAFECO
authorizing the establishment of the
Separate Account. *
2. Not Applicable
3. (i) Form of Principal Underwriter's Agreement *
(ii) Selling Agreement
4. (i) Individual Flexible Purchase Payment Deferred
Variable Annuity Contracts
(ii) Riders and Endorsements
5. Application for Annuity Contract
6. (i) Copy of Articles of Incorporation of SAFECO *
(ii) Copy of the Bylaws of SAFECO *
7. Not Applicable
8.a. (i) Fund Participation Agreement
(ii) Reimbursement Agreement
(iii) Participating Contract and Policy Agreement
+8.b. Participation Agreement by and among SAFECO Life Insurance Company,
Investment Management Series, on behalf of the Federated Corporate
Bond Fund, Federated Securities Corp. and Federated Advisers.
+8.c. Participation Agreement by and among SAFECO Life Insurance Company,
Investment Management Series, on behalf of the Federated Utility
Fund, Federated Securities Corp. and Federated Advisers.
C-1
<PAGE> 90
+8.d. Participation Agreement by and among SAFECO Life Insurance Company,
Investment Management Series, on behalf of the Federated
International Stock Fund, Federated Securities Corp. and Federated
Advisers.
+8.e. Participation Agreement by and among SAFECO Life Insurance Company,
Lexington Natural Resources Trust, and Lexington Management
Corporation.
+8.f. Participation Agreement by and among SAFECO Life Insurance Company,
Lexington Emerging Markets Fund, Inc., and Lexington Management
Corporation.
9. Opinion and Consent of Counsel
10. Consent of Independent Auditors
11. Not Applicable
12. Not Applicable
+13. Calculation of Performance Information
14. Power of Attorney
15. Representation of Counsel
* Incorporated by reference to SAFECO Separate Account C's
registration statement filed on Form N-4, filed with the Securities
and Exchange Commission on June 16, 1995. (Files No. 33-60331 and
811-8052).
+ To be filed by amendment.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Set forth below is a list of each director and officer of SAFECO Life Insurance
Company ("SAFECO") who is engaged in activities relating to SAFECO Separate
Account C or the variable annuity contracts offered through SAFECO Separate
Account C. Unless otherwise indicated the principal business address of all
officers or directors listed is 15411 N. E. 51st Street, Redmond, Washington
98052.
Name Position with SAFECO
---- --------------------
* Roger H. Eigsti Director, Chairman of the Board
Richard E. Zunker Director and President
* Boh A. Dickey Director and Executive Vice President
John P. Fenlason Senior Vice President
Roger F. Harbin Senior Vice President
* Rod A. Pierson Director, Senior Vice President and
Secretary
* Donald S. Chapman Director
* Dan D. McLean Director
* James W. Ruddy Director
-2-
<PAGE> 91
Name Position with SAFECO
---- --------------------
* Robert W. Swegle Director
F. Gregory Clarke Vice President
James T. Flynn Vice President, Controller
and Assistant Secretary
Michael H. Kinzer Vice President and Chief Actuary
* Ron L. Spaulding Director, Vice President
* Michael C. Knebel Vice President and Treasurer
William C. Huff Actuary
George C. Pagos Associate General Counsel, Vice
President and Assistant Secretary
* The principal business address of these officers and directors is SAFECO
Plaza, Seattle, Washington 98185.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SAFECO Life Insurance Company ("SAFECO") established SAFECO Separate Account C
("Registrant") by resolution of its Board of Directors pursuant to Washington
law. SAFECO is a wholly-owned subsidiary of SAFECO Corporation, which is a
publicly-owned company. Both companies were organized under Washington law.
SAFECO Corporation, a Washington corporation, owns 100% of the following
Washington corporations: SAFECO Insurance Company of America, General Insurance
Company of America, First National Insurance Company of America, SAFECO Life
Insurance Company of America, SAFECO Assigned Benefits Service Company, SAFECO
Administrative Services, Inc., SAFECO Properties Inc., SAFECO Credit Company,
Inc., SAFECO Asset Management Company, SAFECO Securities, Inc., SAFECO Services
Corporation, SAFECO Trust Company and General America Corporation. SAFECO
Corporation owns 100% of SAFECO National Insurance Company, a Missouri
corporation, and SAFECO Insurance Company of Illinois, an Illinois corporation.
SAFECO Corporation owns 20% of Agena, Inc., a Washington corporation. SAFECO
Insurance Company of America owns 100% of SAFECO Management Corp., a New York
corporation, and SAFECO Surplus Lines Insurance Company, a Washington
corporation. SAFECO Life Insurance Company owns 100% of SAFECO National Life
Insurance Company, a Washington corporation, and First SAFECO National Life
Insurance Company of New York, a New York corporation. SAFECO Administrative
Services, Inc. owns 100% of Employee Benefit Claims of Wisconsin, Inc. and
Wisconsin Pension and Group Services, Inc., each a Wisconsin corporation.
General America Corporation owns 100% of COMAV Mangers, Inc., an Illinois
corporation, F.B. Beattie & Co., Inc., a Washington corporation, General America
Corp. of Texas, a Texas corporation, Talbot Financial Corporation, a Washington
corporation and Whitehall Insurance Brokers, Inc., a California corporation.
F.B. Beattie & Co., Inc. owns 100% of F.B. Beattie Insurance Services, Inc., a
California corporation. General America Corp. of Texas is Attorney-in-fact for
SAFECO Lloyds Insurance Company, a Texas corporation. Talbot Financial
Corporation owns 100% of PNMR Securities, Inc., a Washington corporation and
Talbot Agency, Inc., New Mexico corporation. SAFECO Properties Inc. owns 100% of
the following, each a Washington corporation: RIA Development, Inc., SAFECARE
Company, Inc. and Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the
following, each a Washington corporation: S.C. Bellevue, Inc., S.C. Everett,
Inc., S.C. Marysville, Inc., S.C. Simi Valley, Inc. and S.C. Vancouver, Inc.
SAFECARE Company, Inc. owns 50% of Lifeguard Ventures, Inc., a California
corporation. S.C. Simi Valley, Inc. owns 100% of Simi Valley Hospital, Inc., a
Washington corporation. Winmar Company, Inc. owns 100% of C-W Properties, Inc.,
a Washington corporation. Winmar Company, Inc. owns 100% of the following:
Barton Street Corp., Gem State Investors, Inc., Kitsap Mall, Inc. WNY
Development, Inc., Winmar Cascade, Inc., Winmar Metro, Inc., Winmar Northwest,
Inc., Winmar Redmond, Inc. and Winmar of Kitsap, Inc.,
-3-
<PAGE> 92
each a Washington corporation, and Capitol Court Corp., a Wisconsin corporation,
SAFECO Properties of Boise, Inc., an Idaho corporation, SCIT, Inc., a
Massachusetts corporation, Valley Fair Shopping Centers, Inc., a Delaware
corporation, WDI Golf Club, Inc., a California corporation, Winmar Oregon, Inc.,
an Oregon corporation, Winmar of Texas, Inc., a Texas corporation, Winmar of
Wisconsin, Inc., a Wisconsin corporation, and Winmar of the Desert, Inc., a
California corporation. Winmar Oregon, Inc. owns 100% of the following, each an
Oregon corporation: North Coast Management, Inc., Pacific Surfside Corp., Winmar
of Jantzen Beach, Inc. and W-P Development, Inc., and 100% of the following,
each a Washington corporation: Washington Square, Inc. and Winmar Pacific, Inc.
No person is directly or indirectly controlled by Registrant.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 30, 1995, there were 2,095 Contract Owners of the Registrant.
ITEM 28. INDEMNIFICATION
Under its Bylaws, SAFECO, to the full extent permitted by the Washington
Business Corporation Act, shall indemnify any person who was or is a party to
any proceeding (whether brought by or in the right of SAFECO or otherwise) by
reason of the fact that he or she is or was a director of SAFECO, or, while a
director of SAFECO, is or was serving at the request of SAFECO as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him or her in connection with such proceeding.
SAFECO shall extend such indemnification as is provided to directors above to
any person, not a director of SAFECO, who is or was an officer of SAFECO or is
or was serving at the request of SAFECO as a director, officer, partner,
trustee, or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan. In addition, the
Board of Directors of SAFECO may, by resolution, extend such further
indemnification to an officer or such other person as may to it seem fair and
reasonable in view of all relevant circumstances.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of SAFECO
pursuant to such provisions of the bylaws or statutes or otherwise, SAFECO has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by SAFECO of expenses incurred or paid
by a director, officer or controlling person of SAFECO in the successful defense
of any such action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Contracts issued by the Separate
Account, SAFECO will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in said Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
a. SAFECO Securities, Inc., the principal underwriter for the
Contracts, also acts as the principal underwriter for SAFECO's
Individual Flexible Premium Variable Life Insurance Policies and
Group Variable Annuity Contracts.
-4-
<PAGE> 93
b. The following information is provided for each officer and director
of the principal underwriter:
Name and Principal Positions and Offices
Business Address* with Underwriter
------------------ ----------------------
Boh A. Dickey Director
Ronald Spaulding Director
David F. Hill Director, President and Secretary
Neal A. Fuller Controller, Treasurer, Financial
Principal and Assistant Secretary
*The business address for all individuals listed is SAFECO Plaza, Seattle,
Washington 98185.
c. During the fiscal year ended December 31, 1994, PNMR Securities,
Inc., through SAFECO Securities, Inc., received $663,188 in
commissions for the distribution of certain annuity contracts sold
in connection with Registrant of which no payment were retained.
PNMR did not receive any other compensation in connection with the
sale of Registrant's contracts.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
SAFECO Life Insurance Company at 15411 N.E. 51st Street, Redmond, Washington
98052, and/or SAFECO Asset Management Company at SAFECO Plaza, Seattle,
Washington 98185 maintain physical possession of the accounts, books or
documents of the Separate Account required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
Registrant hereby represents that it is relying upon a No-Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:
a. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
b. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
c. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants;
d. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2)
other investment alternatives available under the employer's Section
403(b) arrangement to which the participant may elect to transfer
his contract value.
-5-
<PAGE> 94
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Seattle, and
State of Washington on this 21st day of December, 1995.
SAFECO Separate Account C
-------------------------
Registrant
By: SAFECO Life Insurance Company
------------------------------
By: /S/ RICHARD E. ZUNKER
------------------------------
Richard E. Zunker, President
SAFECO Life Insurance Company
------------------------------
Depositor
By: /S/ RICHARD E. ZUNKER
------------------------------
Richard E. Zunker, President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Name Title Date
DONALD S. CHAPMAN* Director
- -----------------------
Donald S. Chapman
DAN D. McLEAN* Director
- -----------------------
Dan D. McLean
/S/ BOH A. DICKEY Director and
- ----------------------- Executive Vice President
Boh A. Dickey
R. H. EIGSTI* Director and Chairman
- -----------------------
R. H. Eigsti
JAMES T. FLYNN* Vice President, Controller and
- ----------------------- Assistant Secretary (Principal
James T. Flynn Accounting Officer)
-6-
<PAGE> 95
RONALD SPAULDING* Director and Vice
- ----------------------- President
Ronald Spaulding
ROD A. PIERSON* Director, Senior Vice
- ----------------------- President and Secretary
Rod Pierson
JAMES W. RUDDY* Director
- -----------------------
James W. Ruddy
ROBERT SWEGLE* Director
- -----------------------
Robert Swegle
/S/ RICHARD E. ZUNKER Director and President
- ----------------------- (Principal Executive Officer)
Richard E. Zunker
*By: /S/ BOH A. DICKEY
-------------------------
Boh A. Dickey
Attorney-in-Fact
*By: /S/ RICHARD E. ZUNKER
-------------------------
Richard E. Zunker
Attorney-in-Fact
-7-
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER DESCRIPTION NUMBERED PAGE*
<S> <C> <C>
3(ii) Selling Agreement
4(i) Individual Flexible Purchase Payment Deferred
Variable Annuity Contract
4(ii) Riders and Endorsements
5 Application for Annuity Contract
8.a.(i) Fund Participation Agreement
8.a.(ii) Reimbursement Agreement
8.a.(iii) Participating Contract and Policy Agreement
9 Opinion and Consent of Counsel
10 Consent of Independent Auditors
13+ Calculation of Performance Information
14 Power of Attorney
15. Representation of Counsel
</TABLE>
- -----------------------------------------
* In manually-signed original only.
+ To be filed by amendment.
-8-
<PAGE> 1
EXHIBIT 3(ii)
SALES AGREEMENT
Agreement dated as of _______, 199_ ("Agreement"), by and among SAFECO LIFE
INSURANCE COMPANY, a Washington insurance company ("SAFECO Life"), SAFECO
SECURITIES, INC., a Washington corporation ("SSI"), (together with SSI,
"SAFECO"), and
______________________________________________________________________________,
a __________ corporation ("Broker-Dealer") and__________________________________
_______________________________________, a _____________ corporation ("Insurance
Agency").
RECITALS:
A. SAFECO Life pursuant to distribution agreements with SSI (the
"Distribution Agreements") has appointed SSI as the principal underwriter of
the class or classes of group and individual variable life insurance and
annuity contracts identified in Schedule 1 to this Agreement at the time that
this Agreement is executed, and such other class or classes of variable
insurance products that may be added to Schedule 1 from time to time in
accordance with Section 2(f) of this Agreement (each, a "class of Contracts";
all such classes, the "Contracts"). For the purposes of this Agreement
(including the schedules), a group life insurance or annuity "enrollment form"
shall mean the same as the individual "application," "certificate" shall mean
the same as "contract" and all other group insurance terms shall have the same
meaning as their individual insurance contract counterpart. Each class of
Contracts will be issued by SAFECO Life through one or more separate accounts
of SAFECO Life ("Separate Accounts") and each class of Contracts will be funded
by shares of certain registered investment companies (each, a "Fund"; together,
the "Funds") and/or by a fixed account option(s). SAFECO Life has authorized
SSI to enter into separate written agreements with broker-dealers pursuant to
which such broker-dealers would be authorized to participate in the sale of the
Contracts.
B. Broker-Dealer is a broker-dealer and Insurance Agency is a life
insurance agency. Insurance Agency is (__) an Affiliate of Broker-Dealer;
Insurance Agency is (___) the same person as Broker-Dealer; or (___)
Broker-Dealer controls Insurance Agency's securities-related activity by
contract.
C. The parties to this Agreement desire that Broker-Dealer and
Insurance Agency be authorized to solicit applications for the sale of the
Contracts subject to the terms and conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. ADDITIONAL DEFINITIONS
(a) Registration Statement - With respect to each class of Contracts, the
most recent effective registration statement(s) filed with the SEC or
the most recent effective post-effective amendment(s) thereto,
including financial statements included therein and all exhibits
thereto.
-1-
<PAGE> 2
(b) Prospectus - With respect to each class of Contracts, the current
prospectus for such class of Contracts.
(c) 1933 Act - The Securities Act of 1933, as amended.
(d) 1934 Act - The Securities Exchange Act of 1934, as amended.
(e) 1940 Act - The Investment Company Act of 1940, as amended.
(f) Agent - An individual associated with Broker-Dealer and Insurance
Agency who (i) is registered with Broker-Dealer and who possesses the
requisite NASD and state securities registrations to offer and sell
the Contracts; (ii) possesses a variable product insurance agent
license; and (iii) is appointed with SAFECO Life.
(g) Premium - A payment made under a Contract to purchase benefits under
such Contract.
(h) Service Center - SAFECO Life Insurance Company, P.O. Box 34690,
Seattle, WA 98124-1690 or such other address as may be designated from
time to time by SAFECO Life and provided to Insurance Agency and
Broker-Dealer.
(i) SEC - The Securities and Exchange Commission.
(j) NASD - The National Association of Securities Dealers, Inc.
(k) Affiliate - With respect to a person, any other person controlling,
controlled by, or under common control with, such person.
(l) Broker-of-Record - Generally, the person designated in SAFECO Life
records as the person, with respect to a Contract, who is entitled to
receive compensation payable with respect to such Contract and who is
able to contact directly the owner of such Contract. In the case of
compensation payable with respect to a Premium, the Broker-of-Record
shall be the party designated as such in the SAFECO Life records at
the time such Premium is accepted by SAFECO Life. In the case of any
payment of compensation payable with respect to Contract value, the
Broker-of-Record shall be the party designated as such in SAFECO Life
records in accordance with SAFECO Life's policies and procedures in
effect at the time any such payment is payable.
-2-
<PAGE> 3
2. AUTHORIZATION OF BROKER-DEALER AND INSURANCE AGENCY
(a) Pursuant to the authority granted to it in the Distribution
Agreements, SSI hereby authorizes Broker-Dealer under the securities
laws, and SAFECO Life hereby authorizes Insurance Agency under the
insurance laws, each in a non-exclusive capacity, to sell the
Contracts. Broker-Dealer and Insurance Agency accept such
authorization.
(b) Broker-Dealer and Insurance Agency acknowledge that no territory is
exclusively assigned hereunder, and SAFECO reserves the right in its
sole discretion to establish or appoint one or more agencies in any
jurisdiction in which Insurance Agency transacts business hereunder.
(c) Insurance Agency is vested under this Agreement with power and
authority to select and recommend individuals associated with
Insurance Agency for appointment as Agents of SAFECO Life, and only
individuals so recommended by Insurance Agency shall become Agents,
provided that SAFECO Life reserves the right in its sole discretion to
refuse to appoint any proposed agent or, once appointed, to terminate
the same at any time with or without cause.
(d) Neither Broker-Dealer nor Insurance Agency shall expend or contract
for the expenditure of the funds of SSI or SAFECO Life. Broker-Dealer
and Insurance Agency each shall pay all expenses incurred by each of
them in the performance of this Agreement, unless otherwise
specifically provided for in this Agreement or unless SAFECO shall
have agreed in advance in writing to share the cost of any such
expenses. Initial and renewal state appointment fees for Insurance
Agency and appointees of Insurance Agency as Agents of SAFECO Life
will be paid by SAFECO Life or Insurance Agency in accordance with
SAFECO Life's policies and procedures, which may be changed by SAFECO
Life in its sole discretion at any time without notice. Neither
Broker-Dealer nor Insurance Agency shall possess or exercise any
authority on behalf of SAFECO Life other than that expressly conferred
on Broker-Dealer or Insurance Agency by this Agreement. In
particular, and without limiting the foregoing, neither Broker-Dealer
nor Insurance Agency shall have any authority, nor shall either grant
such authority to any Agent, on behalf of SAFECO Life: to make, alter
or discharge any Contract or other contract entered into pursuant to a
Contract; to waive any Contract provision; to extend the time of
paying any Premiums; to endorse checks or money orders payable to
SAFECO Life; or to receive any monies or Premiums from applicants for
or purchasers of the Contracts (except for the sole purpose of
forwarding monies or Premiums to SAFECO Life).
(e) Broker-Dealer and Insurance Agency acknowledge that, to the extent
permitted by law, SAFECO Life has the right in its sole discretion to
reject any applications or Premiums received by it and to return or
refund to an applicant such applicant's Premium.
(f) Schedule 1 to this Agreement may be amended upon notice by SAFECO Life
in its sole discretion from time to time to include other classes of
variable annuity contracts or variable life insurance contracts. The
provisions of this Agreement shall be equally applicable to each such
class of Contracts unless the context otherwise requires. Schedule 1
to this Agreement
-3-
<PAGE> 4
may be amended by SAFECO at its sole discretion from time to time to
delete classes of variable annuity contracts or variable life
insurance contracts.
(g) SAFECO acknowledges that Broker-Dealer and Insurance Agency are each
an independent contractor. Accordingly, Broker-Dealer and Insurance
Agency are not obliged or expected to give full time and energies to
the performance of their obligations hereunder, nor are Broker-Dealer
and Insurance Agency obliged or expected to represent SSI or SAFECO
Life exclusively. Nothing herein contained shall constitute
Broker-Dealer, Insurance Agency, the Agents or any agents or
representatives of Broker-Dealer or Insurance Agency as employees of
SSI or SAFECO Life in connection with the solicitation of applications
for the Contracts.
3. LICENSING AND REGISTRATION OF BROKER-DEALER, INSURANCE AGENCY AND AGENTS
(a) Broker-Dealer represents that it is a broker-dealer registered with
the SEC under the 1934 Act, and is a member of the NASD.
Broker-Dealer must, at all times when performing its functions and
fulfilling its obligations under this Agreement, be duly registered as
a broker-dealer under the 1934 Act and in each state or other
jurisdiction in which Broker-Dealer intends to perform its functions
and fulfill its obligations hereunder, and be a member in good
standing of the NASD.
(b) Insurance Agency represents that it is a licensed life insurance agent
where required to solicit applications, except that if Insurance
Agency cannot be qualified to be a licensed life insurance agent until
appointed by an insurer, Insurance Agency represents that it is
qualified to be a licensed insurance agent but for the appointment by
an insurer. Insurance Agency must, at all times when performing its
functions and fulfilling its obligations under this Agreement, be duly
licensed to sell the Contracts in each state or other jurisdiction in
which Insurance Agency intends to perform its functions and fulfill
its obligations hereunder.
(c) Broker-Dealer shall ensure that no individual shall offer or sell the
Contracts on behalf of Broker-Dealer in any state or other
jurisdiction in which the Contracts may lawfully be sold unless such
individual is an associated person of Broker- Dealer (as that term is
defined in section 3(a)(18) of the 1934 Act) and duly registered with
the NASD and any applicable state securities regulatory authority as a
registered person of Broker-Dealer qualified to sell the Contracts in
such state or jurisdiction.
(d) Insurance Agency shall ensure that no individual shall offer or sell
the Contracts on behalf of Insurance Agency in any state or other
jurisdiction unless such individual is duly licensed and appointed as
an agent of SAFECO Life, and appropriately licensed, registered or
otherwise qualified to offer and sell the Contracts to be offered and
sold by such individual under the insurance laws of such state or
jurisdiction. Insurance Agency shall furnish SAFECO Life with proof
of proper licensing of Agents or other proof, reasonably acceptable to
SAFECO, of satisfaction by Agents of licensing requirements prior to
SAFECO Life appointing any such individual as an Agent of SAFECO Life.
-4-
<PAGE> 5
(e) If Insurance Agency is an Affiliate of Broker-Dealer or if
Broker-Dealer controls Insurance Agency's securities-related
activities by contract as reflected in Recital B to this Agreement,
then by engaging in the distribution activities contemplated by the
Agreement, Broker-Dealer and Insurance Agency represent and warrant
either that:
(i) Broker-Dealer and Insurance Agency:
(A) have obtained a letter from the Staff of the SEC
advising Broker-Dealer and Insurance Agency that the
Staff will not recommend enforcement action if
Insurance Agency is not registered as a broker-dealer
with the Commission; and
(B) are complying and will continue to comply with the
conditions set forth in such letter at all times
while the Agreement is in effect; or
(ii) Broker-Dealer and Insurance Agency are relying on certain no
action letters issued by the SEC with respect to the
securities-related activities of licensed insurance agencies
involved in the distribution of variable insurance products
and agree that during the term of the Agreement Broker-Dealer
and Insurance Agency shall operate in compliance with
applicable provisions of such no action letters and
specifically agree that:
(A) (1) Broker-Dealer will control Insurance Agency's
securities-related activities by contract; or (2)
Insurance Agency is either wholly-owned by
Broker-Dealer or an affiliated person of
Broker-Dealer or is wholly-owned by one or more
associated persons of Broker-Dealer;
(B) Insurance Agency and its personnel will be
"associated persons" of Broker-Dealer within the
meaning of Section 3(a)(18) of the 1934 Act;
(C) Insurance Agency will engage in the offer or sale of
the Contracts only through persons who are registered
persons of Broker-Dealer;
(D) Insurance Agency will not receive or handle customer
funds or securities except through Agents who are
registered persons of Broker-Dealer;
(E) Broker-Dealer will be responsible for the training,
supervision and control of registered persons
engaging in the offer or sale of the Contracts on
behalf of Insurance Agency, as required under the
1934 Act, NASD rules and other applicable statutes or
regulations, and will also be responsible for the
supervision and control of any of its associated
persons who are owners, directors or executive
officers of Insurance Agency;
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<PAGE> 6
(F) Broker-Dealer will comply with all applicable
requirements of the 1934 Act and the NASD, including
the requirement to maintain and preserve books and
records under Section 17(a) of the 1934 Act and the
rules thereunder; and
(G) Commissions and fees relating to the Contracts will
be reflected in the quarterly FOCUS reports and the
fee assessment reports filed by Broker-Dealer with
the NASD.
Broker-Dealer and Insurance Agency shall notify SAFECO immediately in
writing if Broker-Dealer and/or Insurance Agency fail to comply with
any of the applicable provisions set forth above.
4. BROKER-DEALER AND INSURANCE AGENCY COMPLIANCE
(a) Insurance Agency shall train, supervise, and be solely responsible for
the conduct of the Agents in their solicitation activities in
connection with the Contracts, and shall supervise Agents' compliance
with applicable rules and regulations of any insurance regulatory
agencies that have jurisdiction over variable contracts activities, as
well as the rules and procedures of SAFECO Life pertaining to the
solicitation, sale and submission of applications for the Contracts,
as provided in writing to Insurance Agency by SAFECO Life from time to
time. Broker-Dealer shall be responsible for background
investigations of the Agents to determine their qualifications, good
character, and moral fitness to sell the Contracts.
(b) Broker-Dealer shall be responsible for securities training,
supervision and control of the Agents in connection with their
solicitation activities with respect to the Contracts and shall
supervise Agents' strict compliance with applicable federal and state
securities law and NASD requirements in connection with such
solicitation activities.
(c) Broker-Dealer and Insurance Agency hereby represent and warrant that
they are duly in compliance with all applicable federal and state
securities laws and regulations, including without limitation state
insurance laws and regulations imposing insurance licensing
requirements.
(d) Broker-Dealer and Insurance Agency each shall carry out their
respective sales and administrative obligations under this Agreement
in continued compliance with the rules and procedures of SAFECO Life
as provided to them in writing from time to time, and with federal and
state laws and regulations, including those governing securities
and/or insurance related activities or transactions, as applicable.
(e) Broker-Dealer, Insurance Agency and Agents shall not offer or attempt
to offer the Contracts, nor solicit applications for the Contracts,
nor deliver Contracts, in any state or jurisdiction in
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<PAGE> 7
which the Contracts may not be lawfully sold or offered for sale. For
purposes of determining where the Contracts may be offered and
applications solicited, Broker-Dealer and Insurance Agency may rely on
written notification, as revised from time to time, that they receive
from SAFECO Life.
(f) In addition to any other provisions of this Agreement applicable to
Agents, Broker-Dealer and Insurance Agency shall ensure that each
Agent shall comply with a standard of conduct applicable to licensed
insurance agents including, but not limited to, the following:
(i) An Agent shall recommend the purchase of a Contract to an
applicant only if he or she has reasonable grounds to believe
that such purchase is suitable for the applicant in accordance
with, among other things, applicable regulations of any state
insurance regulatory authority, the SEC and the NASD.
(ii) An Agent shall accept initial Premiums in the form of a check
or money order only if made payable to "SAFECO Life Insurance
Company" and signed by the applicant for the Contract. An
Agent shall not accept third-party checks or cash for
Premiums.
(iii) All checks and money orders and applications for the Contracts
received by an Agent shall be remitted promptly, and in any
event not later than 2 business days after receipt, to the
Service Center.
(iv) An Agent shall not encourage a prospective purchaser to
surrender or exchange an insurance policy or contract in order
to purchase a Contract, or conversely, to surrender or
exchange a Contract in order to purchase another insurance
policy or contract unless proper state required replacement
procedures are adhered to.
(g) Upon issuance of a Contract, SAFECO Life shall, in accordance with its
procedures with respect to each class of Contracts, either deliver
such Contract directly to the purchaser or deliver such Contract to
Insurance Agency or the Agent for delivery to the purchaser. Upon
issuance of a Contract by SAFECO Life and delivery of such Contract to
Insurance Agency or the Agent, Insurance Agency shall promptly deliver
such Contract, or ensure prompt delivery by Agent of such Contract, to
its purchaser. Insurance Agency or the Agent shall return promptly to
SAFECO Life all receipts for delivered Contracts, all undelivered
Contracts and all receipts for cancellation, in accordance with the
instructions provided by SAFECO Life.
(h) In the event that Premiums are sent to Insurance Agency or
Broker-Dealer, rather than to the Service Center, Insurance Agency and
Broker-Dealer shall promptly (and in any event, not later than 2
business days) remit such Premiums to SAFECO Life at the Service
Center. Insurance Agency and Broker-Dealer acknowledge that if any
Premium is held at any time by either of them, such Premium shall be
held on behalf of the customer, and Insurance Agency or Broker-Dealer
shall segregate such Premium from their own funds and promptly (and in
any
-7-
<PAGE> 8
event, within 2 business days) remit such Premium to SAFECO Life. All
such Premiums, whether by check, money order or wire, shall at all
times be the property of SAFECO Life.
(i) Neither Broker-Dealer, Insurance Agency nor any Agent, in connection
with the offer or sale of the Contracts, shall give any information or
make any representations or statements, written or oral, concerning
the Contracts, a Fund or Fund Shares, other than information or
representations which are in accordance with the Prospectuses,
statements of additional information and Registration Statements for
the Contracts, or a Fund, or in reports or proxy statements therefore,
or in promotional, sales or advertising material or other information
supplied and approved in writing by SAFECO.
(j) Neither Broker-Dealer, Insurance Agency nor any Agent shall use or
implement any promotional, sales or advertising material relating to
the Contracts without the prior written approval of SAFECO.
(k) Broker-Dealer and Insurance Agency shall be solely responsible under
applicable tax laws for the reporting of compensation paid to Agents.
(l) Insurance Agency represents that it maintains and shall maintain such
books and records concerning the activities of the Agents as may be
required by the appropriate insurance regulatory agencies that have
jurisdiction and that may be reasonably required by SAFECO to
adequately reflect the Contracts business processed through Insurance
Agency. Insurance Agency shall make such books and records available
to SAFECO at any reasonable time upon written request by SAFECO.
(m) Broker-Dealer represents that it maintains and shall maintain
appropriate books and records concerning the activities of the Agents
as are required by the SEC, the NASD and other agencies having
jurisdiction and that may be reasonably required by SAFECO to reflect
adequately the Contracts business processed through Insurance Agency.
Broker-Dealer shall make such books and records available to SAFECO at
any reasonable time upon written request by SAFECO.
(n) Each party shall promptly furnish to any other party, or its
authorized agent any reports and information that the requesting party
may reasonably request for the purpose of meeting such party's
reporting and recordkeeping requirements under the insurance laws of
any state, under any applicable federal and state securities laws,
rules and regulations, and the rules of the NASD.
5. SALES MATERIALS
(a) During the term of this Agreement, SAFECO will provide Broker-Dealer,
Insurance Agency, and Agents without charge, with as many copies of
current Prospectuses, current Fund prospectus(es), and applications
for the Contracts, as Broker-Dealer, Insurance Agency or
-8-
<PAGE> 9
Agents may reasonably request. Upon termination of this Agreement,
Broker-Dealer and Insurance Agency will promptly return to SAFECO any
Prospectuses, applications, Fund prospectuses, and other materials and
supplies furnished by SSI or SAFECO Life to Broker-Dealer or Insurance
Agency or to the Agents.
(b) During the term of this Agreement, SSI will be responsible for
providing and approving all promotional, sales and advertising
material to be used by Broker-Dealer and Insurance Agency. SSI will
file such materials or will cause such materials to be filed with the
SEC, the NASD, and/or with any state securities regulatory
authorities, as appropriate.
6. COMMISSIONS AND EXPENSES
(a) During the term of this Agreement, SAFECO Life, on behalf of SSI shall
pay to Insurance Agency as compensation for Contracts for which it is
the Broker-of-Record, the commissions and fees set forth in Schedules
2 and/or 3 to this Agreement, as such Schedule may be amended or
modified at any time, in any manner by SAFECO, and subject to other
provisions of this Agreement. Any amendment to Schedules 2 and/or 3
will be applicable to any Contract for which an application or premium
is received by the Service Center on or after the effective date of
such amendment or which is in effect after the effective date of such
amendment. Compensation with respect to any Contract shall be paid to
Insurance Agency only for so long as Insurance Agency is the
Broker-of-Record for such Contract. When the balance due to Insurance
Agency is less than a reasonable minimum established by SAFECO,
payments to Insurance Agency may be paid only when such minimum is
reached.
(b) Broker-Dealer and Insurance Agency recognize that all compensation
payable to Insurance Agency hereunder will be disbursed by SAFECO
after Premiums are received and accepted by SAFECO Life and that no
compensation of any kind other than that described in this Agreement
is payable to Insurance Agency.
(c) Chargebacks: The commissions payable pursuant to Schedules 2 and/or 3
may be adjusted, and any commission already paid, returned to SAFECO
by Insurance Agency on request as provided therein. If repayment
and/or payment under any of the provisions of Schedules 2 and/or 3 is
not promptly made following receipt of a notice of request for
repayment, Insurance Agency authorizes SAFECO, at its sole option and
to the extent permitted by applicable law, to deduct any such unrepaid
compensation or unpaid payment from any future compensation owed by
SAFECO or any affiliate of SAFECO to Insurance Agency as it becomes
due; provided, however, that this option on the part of SAFECO shall
not prevent it from pursuing any other means or remedies available to
it to recover such compensation and/or payment.
(d) Broker-Dealer or Insurance Agency shall immediately remit to SAFECO
Life any premium retained in error by Broker-Dealer or Insurance
Agency.
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<PAGE> 10
7. INTEREST IN AGREEMENT. Agents shall have no interest in this Agreement or
right to any commissions to be paid by SAFECO to Insurance Agency. Insurance
Agency shall be solely responsible for the payment of any commission or
consideration of any kind to Agents. Insurance Agency shall have no right to
withhold or deduct any commission from any Premiums in respect of the Contracts
which it may collect. Insurance Agency shall have no interest in any
compensation paid by SAFECO Life to SSI, now or hereafter, in connection with
the sale of any Contracts hereunder.
8. TERM OF AGREEMENT
(a) This Agreement relates solely to the classes of Contracts identified
in Schedule 1 to this Agreement.
(b) This Agreement:
(i) may be terminated by any party hereto by giving thirty (30)
days' prior written notice to the other parties; or
(ii) shall automatically terminate upon termination of one or more
of the Distribution Agreements referenced in Recital A of this
Agreement; or
(iii) if Broker-Dealer or Insurance Agency, on the one side, or SSI
or SAFECO Life, on the other side, should default in a
material respect, in their respective obligations under this
Agreement, or breach in a material respect, any of their
respective representations or warranties made in this
Agreement, any non-defaulting or non-breaching party may, at
their option, cancel and terminate this Agreement without
notice.
(c) Upon termination of this Agreement, all authorizations, rights, and
obligations hereunder shall cease except:
(i) the obligation to settle accounts hereunder, including the
payment of compensation with respect to Contracts in effect at
the time of termination or issued pursuant to applications
received by SAFECO Life prior to termination or Premiums
received on such Contracts subsequent to termination of this
Agreement provided, however, that if this Agreement is
terminated by SAFECO Life or SSI pursuant to Section
8(b)(iii), SAFECO's obligations under this subparagraph (i)
shall cease upon such termination;
(ii) the provisions with respect to indemnification set forth in
Section 13 hereof;
(iii) the provisions of Sections 4(l) and 4(m) hereof that require
Insurance Agency and Broker-Dealer to maintain certain books
and records;
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<PAGE> 11
(iv) the confidentiality provisions contained in Section 11 hereof;
(v) the audit provisions contained in Section 21; and
(vi) the provisions with respect to complaints and investigations
set forth in Section 9 hereof.
9. COMPLAINTS AND INVESTIGATIONS
(a) SSI, SAFECO Life, Broker-Dealer and Insurance Agency each shall
cooperate fully in any insurance regulatory investigation or
proceeding or judicial proceeding arising in connection with the
Contracts marketed under this Agreement. In addition, SSI, SAFECO
Life, Broker-Dealer and Insurance Agency shall cooperate fully in any
securities regulatory investigation or proceeding or judicial
proceeding with respect to SSI, Broker-Dealer, their Affiliates and
their agents, to the extent that such investigation or proceeding is
in connection with the Contracts marketed under this Agreement.
Without limiting the foregoing, each party shall promptly notify the
other parties of any written customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding received
by such party with respect to any other party, any Agent, or in
connection with any Contract marketed under this Agreement or any
activity in connection with any such Contract.
(b) In the case of a customer complaint, SSI, SAFECO Life, Broker-Dealer
and Insurance Agency will cooperate in investigating such complaint
and any response by Broker-Dealer or Insurance Agency to such
complaint will be sent to SAFECO for approval not less than five
business days prior to its being sent to the customer or regulatory
authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or facsimile.
10. ASSIGNMENT. This Agreement shall be nonassignable by the parties hereto
unless an authorized officer of the non-assigning parties agrees to the
proposed assignment in writing prior to its effective date.
11. CONFIDENTIALITY. Each party shall maintain the confidentiality of any
other party's customer list or any other proprietary information that it may
acquire in the performance of this Agreement.
12. MODIFICATION OF AGREEMENT. This Agreement supersedes all prior
agreements, either oral or written, between the parties relating to the
Contracts or among Broker-Dealer and/or Insurance Agency, SAFECO Life and PNMR
Securities, Inc., and, except for any amendment of Schedule 1 pursuant to the
terms of Section 2 hereof or Schedules 2 and/or 3 pursuant to the terms of
Section 6 hereof, may not be modified in any way unless by written agreement
signed by all of the parties.
13. INDEMNIFICATION
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<PAGE> 12
(a) Broker-Dealer and Insurance Agency, jointly and severally, shall
indemnify and hold harmless SAFECO and each person who controls or is
associated with SAFECO within the meaning of such terms under the
federal securities laws, and any officer, director, employee or agent
of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon:
(i) violation(s) by Broker-Dealer, Insurance Agency, or an Agent
of federal or state securities law or regulation(s), insurance
law or regulation(s), or any rule or requirement of the NASD;
(ii) any unauthorized use of sales or advertising material, any
oral or written misrepresentations, or any unlawful sales
practices concerning the Contracts, by Broker-Dealer,
Insurance Agency or an Agent;
(iii) claims by the Agents or other agents or representatives of
Insurance Agency or Broker-Dealer for commissions or other
compensation or remuneration of any type;
(iv) any action or inaction by a clearing broker through whom
Broker-Dealer or Insurance Agency processes any transaction
pursuant to this Agreement;
(v) any failure on the part of Broker-Dealer, Insurance Agency, or
an Agent to submit Premiums or applications to SAFECO Life, or
to submit the correct amount of a Premium, on a timely basis
and in accordance with Section 4 of this Agreement; or
(vi) a breach by Broker-Dealer or Insurance Agency of any provision
of this Agreement.
This indemnification will be in addition to any liability which
Broker-Dealer and Insurance Agency may otherwise have.
(b) SAFECO shall indemnify and hold harmless Broker-Dealer and
Insurance Agency and each person who controls or is associated
with Broker-Dealer or Insurance Agency within the meaning of
such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid
in settlement of, any action, suit or proceeding or any claim
asserted), to which they or any of them may become subject
under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise
out of or are based upon:
(i) any breach by SSI or SAFECO Life of any provision of
this Agreement;
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<PAGE> 13
(ii) any untrue statement of a material fact contained in
the Registration Statement or Prospectus relating to
any Contract;
(iii) the omission therefrom of a material fact required to
be stated therein or necessary to make the statements
therein not misleading;
(iv) violation(s) by SAFECO of federal or state securities
law or regulation(s), insurance law or regulation(s),
or any rule or requirement of the NASD; or
(v) any breach of a fiduciary duty owed by SAFECO Life to
a contractholder with respect to a Contract.
This indemnification will be in addition to any liability which SAFECO
may otherwise have.
(c) After receipt by a party entitled to indemnification
("indemnified party") under this Section 13 of notice of the
commencement of any action, if a claim in respect thereof is
to be made against any person obligated to provide
indemnification under this Section 13 ("indemnifying party"),
such indemnified party will notify the indemnifying party in
writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability
under this Section 13, except to the extent that the omission
results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a
result of the failure to give such notice. The indemnifying
party, upon the request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written
consent, but if such proceeding is settled with such consent
or if final judgment is entered in such proceeding for the
plaintiff, the indemnifying party shall indemnify the
indemnified party from and against any loss or liability by
reason of such settlement or judgment.
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<PAGE> 14
14. RIGHTS, REMEDIES, ETC., ARE CUMULATIVE. The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws. Failure of a
party to insist upon strict compliance with any of the conditions of this
Agreement shall not be construed as a waiver of any of the conditions, but the
same shall remain in full force and effect. No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
15. NOTICES. All notices hereunder are to be made in writing and shall be
given:
if to SSI, to: SAFECO Securities, Inc.
Attention: David F. Hill, President
SAFECO Plaza
Seattle, WA 98185
if to SAFECO Life Insurance Company, to:
SAFECO Life Insurance Company
Attention: Richard E. Zunker, President
15411 N.E. 51st Street
Redmond, WA 98052
if to Broker-Dealer, to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
if to Insurance Agency, to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
16. INTERPRETATION, JURISDICTION, ETC. This Agreement constitutes the whole
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to the subject matter hereof. No
prior writings by or between the parties hereto with respect to the subject
matter hereof
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<PAGE> 15
shall be used by a party in connection with the interpretation of any provision
of this Agreement. This Agreement shall be construed and its provisions
interpreted under and in accordance with the internal laws of the state of
Washington without giving effect to principles of conflict of laws.
17. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration in a forum
selected by SAFECO in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
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<PAGE> 16
18. HEADINGS. The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
19. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
20. SEVERABILITY. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action required
by applicable federal or state law, then it is the intention of the parties
hereto that such provision shall be enforced to the extent permitted under the
law, and, in any event, that all other provisions of this Agreement shall
remain valid and duly enforceable as if the provision at issue had never been a
part hereof.
21. AUDIT OF RECORDS. To the extent not otherwise provided herein, each party
hereto (the "Requesting Party") shall have the right at its expense, upon
reasonable notice to any other party hereto (the "Other Party"), during regular
business hours, to audit all the records and practices of the Other Party
relating to the business contemplated hereunder in order to determine whether
such Other Party is complying with the terms of this Agreement, including the
payment of commissions and fees. The Requesting Party shall have the right to
copy any of such records at its expense. At its option, such audit may be
conducted by the Requesting Party's own personnel or by a qualified independent
auditor selected by it. The Requesting Party shall make reasonable efforts to
conduct each such audit in a manner that avoids any material disruption of the
Other Party's business.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
SAFECO SECURITIES, INC. BROKER-DEALER
By: By:
------------------------------- ---------------------------------
Name: Name:
---------------------------- ------------------------------
Title: Title:
---------------------------- ----------------------------
SAFECO LIFE INSURANCE COMPANY INSURANCE AGENCY
By: By:
------------------------------- ---------------------------------
Name: Name:
----------------------------- -------------------------------
Title: Title:
---------------------------- ------------------------------
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<PAGE> 17
SCHEDULE 1
EFFECTIVE SEPTEMBER 1, 1995
CONTRACTS SUBJECT TO THIS AGREEMENT
Variable Annuity Contracts (Schedule 2)
MainSail
Resource B
Spinnaker Q
Spinnaker NQ Flex
Spinnaker Plus
Spinnaker Group
Variable Universal Life Contracts (Schedule 3)
Accumulation Life
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<PAGE> 18
SCHEDULE 2-A
VARIABLE ANNUITY COMPENSATION
SAFECO Life Insurance Company ("SAFECO Life")
Retirement Services Department
TERMS
1. VARIABLE ANNUITY PRODUCTS
Spinnaker Q, Spinnaker Group, Spinnaker NQ Flex and Spinnaker Plus
shall be referred to herein as the Spinnaker Series. The MainSail
Variable Annuity shall be referred to herein as MainSail. The Resource
Variable Account B annuity shall be referred to herein as Resource B.
For the purposes of this Schedule, the term "deposit" shall mean a
payment under a Contract to purchase benefits under such Contract.
2. BASE COMMISSIONS
Commissions for deposits shall be limited to those specified by the
most current Schedule 2-A in effect at the time the business is
approved by the Pension Department. The right to receive the
commissions set forth in this Schedule is conditioned upon satisfactory
service by Insurance Agent and Agents to Contract owners.
3. CHANGE OF SERVICING AGENT
Requests for a change of servicing Agent may be granted if it appears
to be in the best interests of the Contract owner and SAFECO Life. A
change of servicing Agent may result in transfer of the rights to base
commissions to the broker/dealer and/or insurance agent of the new
servicing Agent. Contracts for which an Agent cannot be located, within
a reasonable amount of time, will be converted to SAFECO Life accounts.
4. TERMINATION OF SALES AGREEMENT
If the Sales Agreement is terminated, SAFECO shall continue to pay base
commissions on additional deposits to existing Contracts for which
Agent is Broker-of-Record subject to all terms and conditions of the
most current Schedule 2-A in effect, regardless of whether such
schedule was part of the Sales Agreement at the time of termination.
5. AVAILABILITY OF PRODUCTS
New sales to individuals over attained age 75 are not allowed for the
Spinnaker Series and Resource B. New sales to individuals over attained
age 80 are not allowed for MainSail.
6. SINGLE SUM DEPOSITS
Single Sum Deposits shall mean deposits which are not ongoing in
nature.
7. CONTINUING DEPOSITS
Continuing Deposits shall mean ongoing deposits expected to be made
each contract year. Increases in continuing deposits are determined by
comparing continuing deposits with the highest prior continuing
deposits received for a contract year.
Renewals of continuing deposits are those received after the first
contract year, excluding any increases.
8. ATTAINED AGES
1
<PAGE> 19
Attained Ages are determined as of the date deposits are received by
SAFECO Life. For products with joint owners, attained age shall be
determined using the birth date of the older owner.
9. CONTINGENT DEFERRED SALES CHARGE PERIOD (CDSCP)
CDSCP is the time during which Contingent Deferred Sales Charges apply
as described in the prospectus for the variable annuity.
SCHEDULE OF BASE COMMISSIONS
Subject to the applicable conditions specified below, base commissions as a
percent of new deposits will be paid as follows:
<TABLE>
<CAPTION>
RESOURCE B % OF DEPOSITS
<S> <C>
First Year Continuing Deposits and Increases for individuals of attained age:
59 1/2 and under........................................................................... 7.00%
over 59 1/2 ............................................................................... 3.00%
Renewal of Continuing Deposits ................................................................ 3.00%
Single Sum Deposits for individuals of attained age:
70 and under................................................................................ 4.00%
71 through 75............................................................................... 2.00%
</TABLE>
FOR MAINSAIL AND THE SPINNAKER SERIES A CHOICE OF COMMISSION IS ALLOWED ON EACH
SALE. THE INSURANCE AGENT MAY SELECT FROM THE FOLLOWING OPTIONS. OPTION A IS THE
DEFAULT UNLESS OTHERWISE REQUESTED. FOR EACH CONTRACT, ONCE AN OPTION IS CHOSEN,
IT MAY NOT BE CHANGED.
OPTION A : DEPOSIT- BASED WITH NO TRAIL
<TABLE>
<CAPTION>
MAINSAIL % OF DEPOSITS
<S> <C>
Continuing and Single Sum Deposits for individuals
Of attained age 75 and under, received:
In the first contract year ............................................................... 5.00%
After the first contract year............................................................. 3.50%
Of attained age 76 through 80, received:
In the first contract year................................................................ 2.50%
After the first contract year............................................................. 1.75%
SPINNAKER Q AND SPINNAKER GROUP
First Year Continuing Deposits and Increases.................................................. 5.00%
Renewal of Continuing Deposits ............................................................... 4.00%
Single Sum Deposits for individuals of attained age:
71 and under................................................................................ 5.00%
72 through 75............................................................................... 2.50%
SPINNAKER NQ FLEX % OF DEPOSITS
</TABLE>
2
<PAGE> 20
<TABLE>
<CAPTION>
SPINNAKER NQ FLEX % OF DEPOSITS
<S> <C>
Continuing and Single Sum Deposits for individuals
Of attained age 71 and under, received:
In the first contract year ............................................................... 5.00%
After the first contract year............................................................. 4.00%
Of attained age 72 through 75, received:
In the first contract year................................................................ 2.50%
After the first contract year............................................................. 2.00%
SPINNAKER PLUS
Single Sum Deposits for individuals of attained age:
71 and under................................................................................ 3.80%
72 through 75............................................................................... 1.30%
</TABLE>
All eligible subsequent deposits to Spinnaker Plus must be made within six (6)
months from the Contract Date.
OPTION B : DEPOSIT- BASED WITH 25 BP TRAIL
TRAIL COMMISSIONS BASED ON CONTRACT VALUES:
Under Option B, a trail commission will be paid based on the full Contract
value. An annual rate of 25 BASIS POINTS (0.25%) will be paid in monthly
installments, beginning with the 13th month of the Contract.
DEPOSIT-BASED COMMISSIONS
<TABLE>
<CAPTION>
MAINSAIL % OF DEPOSITS
<S> <C>
Continuing and Single Sum Deposits for individuals
Of attained age 75 and under, received:
In the first contract year................................................................ 3.75%
After the first contract year:............................................................ 2.50%
Of attained age 76 through 80, received :
In the first contract year................................................................ 1.875%
After the first contract year............................................................. 1.25%
SPINNAKER Q AND SPINNAKER GROUP
First Year Continuing Deposits and Increases:................................................. 5.00%
Renewal of Continuing Deposits:............................................................... 1.60%
Single Sum Deposits for individuals of attained age:
71 and under................................................................................ 4.25%
72 through 75............................................................................... 2.10%
SPINNAKER NQ FLEX % OF DEPOSITS
Continuing and Single Sum Deposits for individuals
Of attained age 71 and under, received:
</TABLE>
3
<PAGE> 21
<TABLE>
<CAPTION>
SPINNAKER NQ FLEX % OF DEPOSITS
<S> <C>
In the first contract year ............................................................... 4.25%
After the first contract year............................................................. 3.20%
Of attained age 72 through 75, received:
In the first contract year................................................................ 2.10%
After the first contract year............................................................. 1.60%
SPINNAKER PLUS
Single Sum Deposits for individuals of attained age:
71 and under................................................................................ 3.05%
72 through 75............................................................................... 0.90%
</TABLE>
All eligible subsequent deposits to Spinnaker Plus must be made within six
(6) months from the ..............................................Contract Date.
OPTION C: DEPOSIT- BASED WITH LARGER TRAIL
TRAIL COMMISSIONS BASED ON CONTRACT VALUES:
Under Option C, a trail commission will be paid on the full Contract value. For
the Spinnaker Series, an annual rate of 40 BASIS POINTS (0.40%) will be paid.
For MainSail, an annual rate of 70 BASIS POINTS (0.70%) will be paid. All trail
commissions are paid in monthly installments, beginning with the 13th month of
the Contract.
DEPOSIT-BASED COMMISSIONS
<TABLE>
<CAPTION>
MAINSAIL % OF DEPOSITS
<S> <C>
Continuing and Single Sum Deposits for individuals
Of attained age 75 and under, received:
In the first contract year ............................................................... 1.00%
After the first contract year............................................................ 0.00%
Of attained age 76 through 80, received:
In the first contract year................................................................ 0.50%
After the first contract year............................................................. 0.00%
SPINNAKER Q AND SPINNAKER GROUP
First Year Continuing Deposits and Increases: .............................................. 5.00%
Renewal of Continuing Deposits:............................................................. 0.00%
Single Sum Deposits for individuals of attained age:
71 and under................................................................................ 2.75%
72 through 75............................................................................... 1.10%
SPINNAKER NQ FLEX % OF DEPOSITS
Continuing and Single Sum Deposits for individuals
Of attained age 71 and under, received:
In the first contract year ............................................................... 2.75%
</TABLE>
4
<PAGE> 22
<TABLE>
<CAPTION>
SPINNAKER NQ FLEX % OF DEPOSITS
<S> <C>
After the first contract year........................................................... 2.50%
Of attained age 72 through 75, received:
In the first contract year............................................................... 1.10%
After the first contract year............................................................ 1.00%
SPINNAKER PLUS
Single Sum Deposits for individuals of attained age:
71 and under............................................................................... 1.55%
72 through 75.............................................................................. 0.25%
</TABLE>
All eligible subsequent deposits to Spinnaker Plus must be made within six (6)
months from the Contract Date.
CONDITIONS
A. RECALL OF BASE COMMISSIONS
Insurance Agent will repay SAFECO base commissions, not to exceed amounts
paid to Insurance Agent, under the following conditions:
1. Withdrawals during the first Contract year (all products)
If withdrawals in excess of 10% of the contract value are made during
the first 12 months from any variable annuity products, Insurance
Agent will repay SAFECO base commission on the amount withdrawn, less
applicable distribution charges.
2. Withdrawals during the second certificate year
If withdrawals in excess of 10% of the certificate value are made
during the second 12 months, Insurance Agent will repay SAFECO an
amount equal to the renewal rate for base commission on the amount
withdrawn. This provision will apply only to withdrawals attributed to
Resource B first year Continuing Deposits and Increases for
individuals under attained age 59 1/2 at certificate issue date.
3. Withdrawals after the expiration of CDSCP
If withdrawals in excess of 10% of the Contract value are made after
the expiration of CDSCP, Insurance Agent will repay SAFECO the
following base commissions generated in the current and prior two
contract years on the amount withdrawn:
(i) Resource B, Spinnaker Q and Spinnaker Group first-year base
commissions due to Increases in Continuing Deposits which are in
excess of commissions which would been payable at the renewal
commission rate;
(ii) Resource B, Spinnaker Q and Spinnaker Group Single Sum base
commissions; and
(iii) MainSail and Spinnaker NQ Flex base commissions on Continuing
and Single Sum deposits. If transfers are made between QPA Series III
and Resource B, or between QPA Series V and Spinnaker Q in the current
and prior two contract years, then the two products will be considered
together for purposes of recall provision A. 3.
5
<PAGE> 23
For purposes of tracking deposits for which recalls are processed
under Provisions A.1., 2. and 3., first-year Continuing Deposits and
Increases are considered first, followed by Single Sum Deposits, and
finally commissionable transfers.
Provisions A.1., 2., and 3 will not apply to:
- Annuity payments;
- Non-commissionable transfers between SAFECO Life Company
products;
- Death benefit payments;
- Systematic withdrawals made according to IRC Section 72(t), 72(q)
or 401(a)(9);
- Systematic withdrawals from nonqualified plans which are
calculated in the same manner as IRC Section 401(a)(9); or
- Payments for long term care.
4. Nonrecurring Resource B Deposits in the Second Certificate Year
Compensation for First-Year Continuing Deposits is based on the
certificateholder depositing in the second certificate year at least
50% of the First-Year Continuing Deposits. If that does not occur,
Insurance Agent will reimburse SAFECO compensation at the Single Sum
rate on the difference between the first and second year Continuing
Deposits. If annual deposits to existing SAFECO Life pension annuity
products cease with subsequent deposits going to Resource B, base
commissions will be paid at the renewal rate only. If a
certificateholder has both QPA III and Resource B products, deposits
will be combined for application of this Provision A.4.
5. Nonrecurring Spinnaker Q and Spinnaker Group Deposits under Trail
Commissions Options B and C, in the Second Contract Year.
Base commissions for First-Year Continuing Deposits are based on the
Contractowners depositing in the second Contract year at least 50% of
the First-Year Continuing Deposits. If that does not occur, Insurance
Agent will reimburse SAFECO base commissions at a rate of 2.75% on the
difference between the first and second year Continuing Deposits.
B. NON-COMMISSIONABLE TRANSACTIONS & EXCEPTIONS
No commissions will be paid on any deposit resulting from the withdrawal,
re-deposit and/or transfer of funds from one SAFECO Life Company product
to another or between variable annuity sub-accounts except for:
1. Proceeds from any matured GIC or GRA; or
2. Transfers including 10% penalty-free amounts and amounts after paying
any distribution charges from Resource B to QPA Series V, V Plus or
VI, where the sucessor contract is not backdated.
No other transactions between SAFECO Life Company products other than
those listed herein will generate any base commissions.
6
<PAGE> 24
SCHEDULE 2-B
VARIABLE ANNUITY EXPENSE ALLOWANCE
TERMS
1. PAYMENT OF EXPENSE ALLOWANCE
For each calendar year, the expense allowance will be calculated and
accumulated based on the schedule set forth herein. Accumulated expense
allowance will be paid on the commission statement following the date
Minimum Production Requirements (MPR) are met during the calendar year.
Expense allowance for deposits during the remainder of the calendar
year will be paid to the Insurance Agent as deposits are received and
applied by SAFECO Life.
Expense allowance for commissionable deposits shall be limited to those
specified by the most current Schedule 2-B in effect at the time the
business is approved by the Pension Department.
2. PRODUCTION REQUIREMENTS
The expense allowance will be paid when the Insurance Agent meets the
MPR as announced by SAFECO Life. Selected MPR restrictions may apply
for the first three years. MPR will be measured on a calendar year
basis and pro-rated for partial years, based on the number of remaining
months in the year, for agent appointments made during the current
calendar year.
3. ATTAINED AGE
Attained ages are determined as of the date deposits are received by
SAFECO Life. For products with joint owners, attained age shall be
determined by using the birthdate of the older owner.
Expense allowance will be CALCULATED AS A PERCENTAGE OF COMMISSIONABLE DEPOSITS
according to the schedule specified below.
SCHEDULE
<TABLE>
<CAPTION>
RESOURCE VARIABLE ACCOUNT B % OF DEPOSITS
<S> <C>
First year Continuing Deposits and Increases for individuals of attained age:
59 1/2 and under.......................................................................... 1.40%
over 59 1/2 .............................................................................. 60%
Renewal of Continuing Deposits ............................................................... 0.60%
Single Sum Deposits for individuals of attained age:
70 and under.............................................................................. 0.80%
71 through 75............................................................................. 0.40%
</TABLE>
1
<PAGE> 25
FOR THE MAINSAIL AND SPINNAKER SERIES, A CHOICE OF BASE COMMISSION IS ALLOWED ON
EACH SALE. THE INSURANCE AGENT MAY SELECT FROM THE OPTIONS DETAILED IN SCHEDULE
2-A. OPTION A IS THE DEFAULT UNLESS OTHERWISE REQUESTED. FOR EACH CONTRACT, ONCE
AN OPTION IS CHOSEN, IT MAY NOT BE CHANGED.
OPTION A AND OPTION B
<TABLE>
<CAPTION>
MAINSAIL % OF DEPOSITS
<S> <C>
Continuing and Single Sum Deposits for individuals
Of attained age 75 and under, received:
In the first contract year .............................................................. 1.00%
After the first contract year............................................................ 0.50%
Of attained age 76 through 80, received:
In the first contract year............................................................... 0.50%
After the first contract year............................................................ 0.25%
SPINNAKER Q
First Year Continuing Deposits and Increases ................................................ 1.00%
Renewal of Continuing Deposits .............................................................. 1.00%
Single Sum Deposits for individuals of attained age:
71 and under............................................................................... 1.00%
72 through 75.............................................................................. 0.50%
SPINNAKER NQ FLEX
Continuing and Single Sum Deposits for individuals
Of attained age 71 and under, received:
In the first contract year .............................................................. 1.00%
After the first contract year............................................................ 1.00%
Of attained age 72 through 75, received:
In the first contract year............................................................... 0.50%
After the first contract year........................................................... 0.50%
SPINNAKER PLUS
Single Sum Deposits for individuals of attained age:
71 and under............................................................................... 1.00%
72 through 75.............................................................................. 0.50%
All eligible subsequent deposits to Spinnaker Plus must be made within six
(6) months from the Contract Date.
</TABLE>
OPTION C : DEPOSIT- BASED WITH TRAIL
2
<PAGE> 26
TRAIL COMMISSIONS BASED ON CONTRACT VALUES:
Under Option C, a trail commission will be paid based on the full Contract
value. For the Spinnaker Series, an annual rate of 10 BASIS POINTS (0.10%) will
be paid. For MainSail, an annual rate of 15 BASIS POINTS (0.15%) will be paid.
All trail commmissions are paid in monthly installments, beginning with the 13th
month of the Contract.
DEPOSIT-BASED COMMISSIONS
<TABLE>
<CAPTION>
MAINSAIL % OF DEPOSITS
<S> <C>
All Deposits ............................................................................ 0.00%
SPINNAKER Q
First Year Continuing Deposits and Increases: ............................................. 1.00%
Renewal of Continuing Deposits:............................................................ 0.20%
Single Sum Deposits for individuals of attained age:
71 and under............................................................................... 1.00%
72 through 75.............................................................................. 0.50%
SPINNAKER NQ FLEX
Continuing and Single Sum Deposits for individuals
Of attained age 71 and under, received:
In the first contract year .............................................................. 1.00%
After the first contract year............................................................ 0.20%
Of attained age 72 through 75, received:
In the first contract year............................................................... 0.50%
After the first contract year............................................................ 0.10%
SPINNAKER PLUS
Single Sum Deposits for individuals of attained age:
71 and under............................................................................... 1.00%
72 through 75.............................................................................. 0.15%
</TABLE>
All eligible subsequent deposits to Spinnaker Plus must be made within six (6)
months from the Contract Date.
RECALL OF EXPENSE ALLOWANCE
Insurance Agent will repay SAFECO expense allowance, not to exceed amount paid,
under the conditions of the Schedule 2-A, base commissions.
Recalls due to withdrawals during the first 12 months of the Contract year shall
be reduced by any distribution charges as follows:
1. Base commission recalls shall be reduced first, and then
2. Expense allowance recalls shall be reduced by the remaining
balance, if any, of the distribution charges.
3
<PAGE> 27
For nonrecurring deposits in the second certificate year, expense allowance
shall be recalled a the rate of 0.80% for Resource B. For Spinnaker Q and
Spinnaker Group, there will be no expense allowance recall applied for
nonrecurring deposits, nor for withdrawals in excess of 10% of the Contract
value made after the expiration of CDSCP for first year commissions due to
Increases.
4
<PAGE> 1
EXHIBIT 4(i)
[SAFECO LETTERHEAD]
- --------------------------------------------------------------------------------
INDIVIDUAL VARIABLE ANNUITY CONTRACT
SAFECO Life Insurance Company, a stock company with its Home Office in Redmond,
Washington, (hereafter called SAFECO), in consideration of the payment of the
Purchase Payments as provided herein, agrees to provide an Annuity and other
benefits in accordance with the Contract provisions.
10-DAY RIGHT TO EXAMINE CONTRACT
Within 10 days of the date of receipt of this Contract by the Owner, it may be
returned by delivering or mailing it to SAFECO or to the agent through whom it
was purchased. When this Contract is received by SAFECO, it will be voided as if
it had never been in force, and SAFECO will refund the Contract Value. This may
be more or less than Purchase Payments. In states where required SAFECO will
refund the Purchase Payments rather than the Contract Value. SAFECO reserves the
right to allocate all payments to the Money Market Sub-Account until the
expiration of 15 days from the date the first Purchase Payment is received. If
SAFECO so allocates payments, SAFECO will refund the greater of Purchase
Payments or the Contract Value.
Signed for the Company
/s/ R.A. PIERSON /s/ R.E. Zunker
- ---------------------------------------------- ----------------------
R.A. Pierson, Sr. Vice President and Secretary R.E. Zunker, President
BRIEF DESCRIPTION
Individual Variable Annuity, Flexible Premium Deferred Annuity,
Non-Participating, Monthly Income at Annuity Date, Cash Value Payable at Death
of Owner before Annuity Date.
VALUES PROVIDED BY THIS CONTRACT ARE BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT AND ARE, THEREFORE, VARIABLE AND NOT GUARANTEED AS TO DOLLAR
AMOUNT. SEE SECTION D OF YOUR CONTRACT FOR DETAILS REGARDING THE SEPARATE
ACCOUNT PROVISIONS.
- --------------------------------------------------------------------------------
LPC-412 7/93 (R) Registered trademark of SAFECO Corporation
<PAGE> 2
INDEX
<TABLE>
<S> <C>
SECTION A: DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION B: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 1
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Contract Amendments . . . . . . . . . . . . . . . . . . . . . . . 1
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Misstatement of Age . . . . . . . . . . . . . . . . . . . . . . . 2
Evidence of Survival . . . . . . . . . . . . . . . . . . . . . . . 2
Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . 2
Change of Beneficiary . . . . . . . . . . . . . . . . . . . . . . 2
Non-Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Termination of Contract . . . . . . . . . . . . . . . . . . . . . 2
SECTION C: PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . 3
Place and Form of Purchase Payments . . . . . . . . . . . . . . . 3
Purchase Payments . . . . . . . . . . . . . . . . . . . . . . . . 3
Change in Purchase Payments . . . . . . . . . . . . . . . . . . . 3
Allocation of Purchase Payments . . . . . . . . . . . . . . . . . 3
Application of Purchase Payments to Eligible Investments . . . . . 3
SECTION D: SEPARATE ACCOUNT PROVISIONS E . . . . . . . . . . . . . . . . 3
The Separate Account . . . . . . . . . . . . . . . . . . . . . . . 3
Non-Participation in Surplus . . . . . . . . . . . . . . . . . . . 3
Value of Accumulation Units . . . . . . . . . . . . . . . . . . . 3
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . 4
SECTION E: SETTLEMENT OPTIONS AND DEATH BENEFITS . . . . . . . . . . . . 4
Selection and Change of Settlement Option . . . . . . . . . . . . 4
Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . 4
State Required Minimum Benefits . . . . . . . . . . . . . . . . . 4
Frequency and Amount of Annuity Payments . . . . . . . . . . . . . 4
Death of Annuitant . . . . . . . . . . . . . . . . . . . . . . . . 5
Death of Owner Prior to Annuity Date . . . . . . . . . . . . . . . 5
Death of Owner After Annuity Date . . . . . . . . . . . . . . . . 5
Settlement Options . . . . . . . . . . . . . . . . . . . . . . . . 5
Automatic Option . . . . . . . . . . . . . . . . . . . . . . . . . 6
Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Variable Annuity Payment Calculation . . . . . . . . . . . . . . . 6
Mortality and Expense Risk Guarantee . . . . . . . . . . . . . . . 6
SECTION F: WITHDRAWALS AND TRANSFERS . . . . . . . . . . . . . . . . . . 6
Minimum Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . 6
Minimum Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 6
Systematic Withdrawal . . . . . . . . . . . . . . . . . . . . . . . 6
Automatic Transfers . . . . . . . . . . . . . . . . . . . . . . . . 7
Deferral of Withdrawal Payment . . . . . . . . . . . . . . . . . . 7
SECTION G: CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . 7
Deduction for Annual Administration Maintenance Charge . . . . . . 7
Deduction for Asset Related Administration Charge . . . . . . . . . 7
Deduction for Contingent Deferred Sales Charge . . . . . . . . . . 8
Deduction for Withdrawal Charge . . . . . . . . . . . . . . . . . 8
Deduction for Transfer Charge . . . . . . . . . . . . . . . . . . 8
Deduction for Mortality and Expense Risk Premium . . . . . . . . 8
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION H: VARIABLE ANNUITY PURCHASE RATE TABLE . . . . . . . . . . . . 9
Mortality Tables Used . . . . . . . . . . . . . . . . . . . . . . . 9
Variable Annuity Purchase Rate Table . . . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 3
SECTION A: DEFINITIONS
A1 Accumulation Unit: An accounting unit of measure used to calculate the
value of a Sub-Account prior to the Annuity Date.
A2 Annuitant: The natural person on whose life Annuity payments are
payable in accordance with this Contract. This Contract will not be
issued if the Annuitant is 76 years of age or older on the Contract
Date.
A3 Annuity: Any series of payments starting on the Annuity Date, payable
in accordance with this Contract.
A4 Annuity Date: The date selected by the Owner for commencing Annuity
payments under this Contract. The day of the month on which the
payments will be made will be determined by SAFECO. The Annuity Date
cannot be later than the date the Annuitant attains age 85.
A5 Annuity Unit: An accounting unit of measure used to calculate Annuity
payments after the Annuity Date.
A6 Beneficiary: The person or persons entitled to receive benefits under
this Contract upon the death of the Owner.
A7 Contract: This Individual Variable Annuity Contract by and between
SAFECO and the Owner.
A8 Contract Anniversary: Any anniversary of the Contract Date.
A9 Contract Date: The date on which the initial Purchase Payment is
allocated to the Separate Account, as shown on the Contract Data Page.
A10 Contract Value: The sum of the Owner's interest in the Sub-Accounts of
the Separate Account.
A11 Contract Year: The twelve month period which commences on the Contract
Date and each succeeding twelve month period thereafter.
A12 Eligible Investments: An investment entity shown on the Contract Data
Page.
A13 Net Purchase Payment: Purchase Payment less any premium taxes.
A14 Owner: The person or persons named in the Application who has all
rights under this Contract. Joint Owners are allowed only if the joint
Owners are spouses. Each joint Owner shall have equal ownership rights
and must jointly exercise those rights.
A15 Purchase Payments: Payments made to purchase Accumulation Units.
A16 SAFECO: SAFECO Life Insurance Company.
A17 Separate Account: The separate investment account of SAFECO, as shown
on the Contract Data Page.
A18 Sub-Account: A segment of the Separate Account, as shown on the
Contract Data Page.
A19 Withdrawal: Withdrawal is any payment, including Contract charges and
deductions, from the Contract.
SECTION B: GENERAL PROVISIONS
B1 Contract: The entire contract between SAFECO and the Owner consists of
this Contract, any Riders or Endorsements, and the Application, a copy
of which is attached to the Contract.
B2 Contract Amendments: The terms and conditions of this Contract may be
amended by written agreement between SAFECO and the Owner by written
endorsement or amendment. All agreements made by SAFECO will be signed
by the President or one of the Vice Presidents. No other person has
power on behalf of SAFECO to amend or modify this Contract, extend any
due date, or waive any proof required by this Contract.
-1-
<PAGE> 4
SAFECO may unilaterally amend the provisions of this Contract as
required to conform to any state or federal law which affects this
Contract. The Owner may reject any such amendment by notifying SAFECO
of such rejection within 10 days after receiving the amendment.
B3 Communications: All communications to SAFECO shall be made to the
office of SAFECO shown on the Contract Data Page.
B4 Essential Data: The Owner shall furnish to SAFECO any information
necessary for the administration of this Contract.
B5 Annual Report: SAFECO will provide the Owner with an annual calendar
year report showing the Contract Value, and any other information
required by law. Reports will be sent to the last known address of the
Owner.
B6 Misstatement of Age: SAFECO may require proof of the age of the
Annuitant before making any Life Annuity payment provided for by this
Contract. If the age of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided
at the correct age.
Once Annuity payments have begun, any underpayment will be made up in
one sum with the next Annuity payment. Any overpayment will be
deducted from future Annuity payments until the total is repaid.
B7 Evidence of Survival: If any benefits under this Contract are
contingent upon the Annuitant being alive on a given date, SAFECO may
require evidence satisfactory to SAFECO that such condition continues
to be met.
B8 Beneficiary Designation: The Owner may designate a Beneficiary in the
Application to receive any proceeds payable due to the death of the
Owner. Unless the Owner provides otherwise, the death benefit will be
paid in equal shares to all surviving primary Beneficiaries. If the
Owner has not provided otherwise and there are no surviving primary
Beneficiaries, the death benefit will be paid in equal shares to all
surviving contingent Beneficiaries. If the Owner has not provided
otherwise and there are no surviving primary or contingent
Beneficiaries, the death benefit will be paid to the estate of the
Owner.
B9 Changes of Beneficiary: If the Owner has made an irrevocable
Beneficiary designation, no change of Beneficiary is permitted. If the
Owner has not made an irrevocable Beneficiary designation, the Owner
may file a signed request with SAFECO to change the Beneficiary
designation. The change of Beneficiary will be effective upon recording
by SAFECO at its Home Office. SAFECO shall not be liable for any
payments made or other action taken by SAFECO before the change in
Beneficiary was recorded by SAFECO at its Home Office. A recorded
change of Beneficiary will revoke any prior Beneficiary designations.
SAFECO will pay any death proceeds to the most recently recorded
Beneficiary.
B10 Contract Settlement: Unless otherwise designated in writing by SAFECO,
all sums payable under this Contract are payable at SAFECO's Home
Office. This Contract must be returned to SAFECO upon any settlement.
B11 Substitute Payee: If SAFECO determines that any person is incapable of
personally receiving and giving a valid receipt for any payment due
under this Contract and no claim has been made by a duly appointed
guardian, SAFECO may make such payment to any person or institution
that SAFECO determines has assumed the care and support of such person.
Such payment shall completely discharge the liability of SAFECO with
respect to the amount so paid.
B12 Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or
otherwise transferable. This Contract may be assigned for purposes of
an Internal Revenue Code Section 1035 exchange.
B13 Termination of Contract: All benefit provisions under this Contract
continue in force until the Contract Value is completely Withdrawn.
Discontinuance of Purchase Payments will not result in termination of
the Contract.
This Contract will terminate and cease to be of any further force or
effect at the close of the first day upon which SAFECO has completed
all of the duties and obligations which have arisen under this
Contract.
-2-
<PAGE> 5
SECTION C: PURCHASE PAYMENTS
C1 Place and Form of Payments: All payments to SAFECO under this Contract
shall be payable at the office of SAFECO as shown on the Contract Data
Page.
All amounts to be paid under this Contract, whether payable to SAFECO
or by SAFECO, shall be paid in lawful money of the United States of
America.
C2 Purchase Payments: The initial Purchase Payment is due on the Contract
Date. The minimum initial and subsequent Purchase Payments are shown
on the Contract Data Page. SAFECO reserves the right to reject any
Application or Purchase Payment.
C3 Change in Purchase Payments: Subject to the minimum shown on the
Contract Data Page, the Owner may increase or decrease or change the
frequency of subsequent Purchase Payments.
C4 Allocation of Purchase Payments: The allocation of the initial Purchase
Payment is elected by the Owner on the Application. Unless the Owner
elects otherwise, subsequent Purchase Payments are allocated in the
same manner as the initial Purchase Payment. Allocation of the
Purchase Payments is subject to the terms and conditions imposed by
SAFECO.
C5 Application of Purchase Payments to Eligible Investments: Purchase
Payments applied to the Separate Account are allocated to Sub-Account
of the Separate Account.
SECTION D: SEPARATE ACCOUNT PROVISIONS
D1 The Separate Account: SAFECO has established a Separate Account for
this and other similar Contracts. A portion of SAFECO's assets has been
allocated to the Separate Account for this and other similar Contracts.
The assets of the Separate Account are the property of SAFECO and are
not chargeable with liabilities arising out of any other business
SAFECO may conduct. The investments of the Separate Account will be
valued at their fair market value in accordance with the procedures
approved by the Board of Directors of SAFECO and the Separate Account
committee.
The Separate Account is divided into Sub-Accounts with the assets of
each Sub-Account invested as set forth on the Contract Data Page.
The assets of the Sub-Accounts are allocated to the Eligible
Investments and the portfolios, if any, within Eligible Investments
shown on the Contract Data Page. SAFECO may, from time to time, add
Eligible Investments or portfolios, or remove Eligible Investments or
portfolios. If the shares of any Eligible Investment or portfolio
within an Eligible Investment become unavailable for investment by the
Separate Account, or SAFECO's Board of Directors deems further
investment in these shares inappropriate, SAFECO may substitute shares
of another Eligible Investment or portfolio for shares already
purchased under this Contract.
D2 Non-Participation in Surplus: The Variable Annuity portion of this
Contract will not share in any distribution of profits, losses, or
surplus of SAFECO.
D3 Valuation Dates and Periods: A Valuation Date is each day the New York
Stock Exchange is open for business. A Valuation Period is the period
commencing at the close of business on each Valuation Date and ending
at the close of business for the next succeeding Valuation Date.
D4 Value of Accumulation Units: Each Purchase Payment is allocated to a
Sub-Account and is converted into Accumulation Units. The number of
Accumulation Units in a Sub-Account credited to this Contract is
determined by dividing each Net Purchase Payment by the value of an
Accumulation Unit for that Sub-Account. Accumulation Units for each
Sub-Account are valued separately. The Accumulation Unit value for each
Sub-Account was arbitrarily set at $10 when the Sub-Account was
established. The Accumulation Unit value for any later Valuation Period
is determined by multiplying the Accumulation Unit value for the
Sub-Account, as of the immediately preceding Valuation Period, by the
Net Investment Factor for the current Valuation Period.
-3-
<PAGE> 6
D5 Net Investment Factor: The Net Investment Factor for any Sub-Account
for any Valuation Period is determined by dividing (a) by (b) and
subtracting (c) and (d) from the result, where:
(a) is the net result of:
(i) The net asset value per share of the portfolio set out
on the Contract Data Page as the investment of the
Sub-Account, determined as of the current Valuation
Period, plus
(ii) The per share amount of any dividend or capital-gain
distribution made by the portfolio if the
"ex-dividend" date occurs during the current Valuation
Period, plus or minus
(iii) A per share credit or charge, which is determined by
SAFECO, for changes in tax reserves resulting from
investment operations of the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the portfolio
determined as of the immediately preceding Valuation
Period, plus or minus
(ii) The per share credit or charge for any changes in tax
reserves for the immediately preceding Valuation
Period.
(c) is the percentage factor equal to the Mortality and Expense
Risk Premium. Such factor is equal on an annual basis to a
percentage of the daily net asset value of the Sub-Account, as
shown on the Contract Data Page.
(d) is the percentage factor equal to the Asset Related
Administration Charge. Such factor is equal on an annual basis
to a percentage of the daily net asset value of the
Sub-Account, as shown on the Contract Data Page.
The Net Investment Factor may be greater or less than one.
Therefore, an Accumulation Unit value may increase or decrease.
SECTION E: SETTLEMENT OPTIONS AND DEATH BENEFITS
E1 Selection and Change of Settlement Option: The Owner may select or
change the Settlement Option or Annuity Date by written notification to
SAFECO at its Home Office. In order to be effective, the written
notification must be received by SAFECO prior to any Annuity Date
previously selected.
E2 Payment of Benefits: Subject to the provisions of this Contract, SAFECO
will, upon the written direction of the Owner, issue an Annuity or
make a cash distribution to any person who is entitled to such
benefits.
SAFECO shall not be obligated to issue an Annuity or to make a cash
distribution until it receives written direction from the Owner
containing the terms and conditions of the Annuity or cash
distribution.
SAFECO may rely on the written direction of the Owner and shall not be
liable because of any failure to question or challenge such direction
regarding the issuance of an Annuity or payment of a cash distribution.
E3 State Required Minimum Benefits: The death benefit, the surrender
value, and the Settlement Options under this Contract will not be less
than the minimum benefits required by any statute of the state in which
this Contract is delivered.
E4 Frequency and Amount of Annuity Payments: Except as described below,
Annuity payments will be paid monthly. If the amount available to
apply under any Settlement Option is less than $5,000, SAFECO shall
have the right to pay such amount in a lump sum cash distribution. If
Annuity payments would be or become less than $250, SAFECO shall have
the right to change the frequency of payments to such intervals as will
result in payment of at least $250.
-4-
<PAGE> 7
E5 Death of Annuitant:
(a) If the Annuitant dies before a Settlement Option has commenced,
the Owner must designate a new Annuitant. If no designation is
made within 30 days of the death of the Annuitant, the Owner
will become the Annuitant.
(b) If the Contract is owned by a non-natural person, the death of
the Annuitant will be treated as the death of the Owner.
E6 Death of Owner Prior to Annuity Date:
(a) Guaranteed Death Benefit: If the Owner dies before a Settlement
Option has commenced, the amount of the death benefit will be
the greater of:
(i) Net Purchase Payments less any prior Withdrawals,
including applicable charges; or
(ii) The Contract Value determined as of the Valuation
Period next following the date both proof of death and
an election of single sum payment or a Settlement
Option is received by SAFECO.
(b) Election Period: The election must be made by the Beneficiary
during the sixty day period commencing with the date of receipt
by SAFECO of notification of death. If no election is made
within the sixty day period, then a single sum payment will be
made to the Beneficiary.
(c) The death benefit must be distributed:
(i) By the fifth anniversary of the Owner's death; or
(ii) Over a designated Beneficiary's life or over a period
not extending beyond the Beneficiary's life
expectancy, in equal or substantially equal payments,
with payments beginning within one year of the death
of the Owner.
(d) If the Beneficiary is the spouse of the Owner, the Contract may
be continued by the spouse, and the spouse will become the
Owner.
(e) Upon the death of a joint Owner, the surviving Owner will be
the designated Beneficiary. Any other named Beneficiary shall
be a contingent Beneficiary.
E7 Death of Owner After Annuity Date: If the Owner dies on or after a
Settlement Option has commenced, payments must continue at least as
rapidly as under the method of distribution in effect prior to the
Owner's death.
E8 Settlement Options: An Annuity may be issued in any of the forms
described below, or such other forms which SAFECO agrees to issue under
this Contract. Options (a), (b), and (c) are irrevocable once they have
begun. Option (d) is irrevocable for the first eight Contract Years,
and then may be changed. The Annuitant will become the Owner on
commencement of a Settlement Option.
(a) Variable Life Annuity: Monthly payments are made to the
Annuitant commencing on the Annuity Date, if he or she is then
living, and the last payment is that payment due immediately on
or before the Annuitant's death. No death benefit is payable
under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments
Guaranteed: Monthly payments are made to the Annuitant
commencing on the Annuity Date. If at the death of the
Annuitant the guaranteed number of payments has not been
received by the Annuitant, payments will be made to the
Beneficiary for the remainder of the guarantee period. The
Beneficiary may elect to have the present value of the
guaranteed Annuity remaining as of the date the notice of death
is received by SAFECO commuted at the assumed investment rate
of 4% and paid in a single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are
made to the Annuitant commencing on the Annuity Date. After the
death of the Annuitant, payments will be continued to the
co-annuitant for as
-5-
<PAGE> 8
long as he or she lives. The written request for this option
must specify the percentage value of monthly payments to
continue to the co-annuitant.
(d) Systematic Withdrawal Income Plan: A specified number of whole
or partial Accumulation Units are liquidated for payment to the
Annuitant on a monthly, quarterly, or annual basis. The number
to be liquidated during a given year shall be a sufficient
number so as to be expected to deplete the Contract over the
life expectancy of the Annuitant or the joint life expectancy
of the Annuitant and Beneficiary, with at least 50% of the
payments expected to be made during the Annuitant's life.
E9 Automatic Option: If, as of the Annuity Date, a Settlement Option has
not been selected, SAFECO will make payments under Section E8(d).
E10 Annuity Unit: The value of an Annuity Unit was arbitrarily set at $10
when each Sub-Account was established. The value of the Annuity Unit
for any subsequent Valuation Period is determined by multiplying the
value of the Annuity Unit for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which
the value is being calculated (as described in Section D5), and
dividing the result by the Assumed Investment Factor for such Valuation
Period (as described in Section E11).
E11 Assumed Investment Factor: The Assumed Investment Factor for a one day
Valuation Period is 1.00010746. This factor neutralizes the assumed
investment return of 4% in the Variable Annuity Purchase Rate Table in
Section H2.
E12 Variable Annuity Payment Calculation: A Variable Annuity is an Annuity
with payments which are not predetermined as to dollar amount. Payments
will vary in accordance with the net investment results of the Separate
Account. The dollar amount of the first monthly Variable Annuity
payment under Section E8(a), E8(b), or E8(c) will be determined by
applying the Contract Value (after deduction for premium taxes, if
applicable), as of the 15th day of the preceding month, to the Variable
Annuity Purchase Rate Table in Section H2. The number of Annuity Units
to be credited to the Annuitant will be determined by dividing the
first monthly payment by the Annuity Unit value calculated as of the
15th day of the preceding month. This number of Annuity Units remains
fixed during the Annuity payment period. The dollar amount of each
Variable Annuity payment after the first shall be determined by
multiplying the number of Annuity Units credited to the Annuitant by
the Annuity Unit value as of the 15th day of the preceding month.
E13 Mortality and Expense Risk Guarantee: SAFECO guarantees that the dollar
amount of each Variable Annuity payment made after the first payment
will not be affected by variations in mortality experience or expenses.
SECTION F: WITHDRAWALS AND TRANSFERS
F1 Minimum Withdrawal: The minimum Withdrawal is as shown on the Contract
Data Page, or the Contract Value, if less. Except as otherwise
provided in this Contract, the Owner may, at or prior to the Annuity
Date, withdraw all or part of the Contract Value.
F2 Minimum Balance After Withdrawal: If any Withdrawal reduces the
remaining balance in a Sub-Account to less than $500, the remaining
balance will also be Withdrawn.
F3 Minimum Transfer: The minimum Transfer from a Sub-Account must be at
least $500, except for the Automatic Transfers described in Section F7.
If the Sub-Account from which the Transfer is being made is less than
$500, the entire Sub-Account will be Transferred.
The minimum Transfer into a Sub-Account must be at least $50.
F4 Systematic Withdrawal: The Owner may elect a Systematic Withdrawal
program under which the Owner will receive cash distributions from the
Contract in a predetermined amount on a predetermined frequency.
Payments under this election will be made directly to the Owner by
SAFECO, and will not be made more often than monthly.
-6-
<PAGE> 9
F5 Withdrawal of Accumulation Units: Upon a Withdrawal, the number of
Accumulation Units remaining under this Contract will be reduced by the
number of such units equal to the total of the Withdrawal, including
applicable charges and taxes, including income taxes withheld, if
applicable.
F6 Transfer of Accumulation Units: Upon Transfer from a Sub-Account, the
number of Accumulation Units remaining under that Sub-Account will be
reduced by the number of such units equal to the total of the requested
Transfer, including applicable charges, and taxes.
F7 Automatic Transfers: The Owner may elect pre-established automatic
monthly or quarterly Transfers of a single dollar amount of at least
$250 from a Sub-Account. The Automatic Transfers will continue until
the Owner requests discontinuance or there are no funds left in the
Sub-Account to Transfer.
F8 Minimum Balance After Transfer: If any Transfer reduces the remaining
balance in a Sub-Account to less than $500, the remaining balance will
also be Transferred.
F9 Deferral of Withdrawal Payment:
(a) Except as provided in Section F7(b), payments by SAFECO from
the Contract will be made within seven days after receiving a
Withdrawal request.
(b) SAFECO reserves the right to suspend or postpone payments for a
Withdrawal or Transfer for any period when:
(i) The New York Stock Exchange is closed (other than
customary weekend and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted,
as determined by the rules and regulations of the
Securities and Exchange Commission;
(iii) An emergency exists as a result of which disposal of
securities held in the Separate Account is not
reasonably practicable or it is not reasonably
practicable to determine the value of the Separate
Account's net assets, as determined by the rules and
regulations of the Securities and Exchange Commission;
or
(iv) During any other period when the Securities and
Exchange Commission, by order, so permits for the
protection of Owners.
SECTION G: CHARGES AND DEDUCTIONS
G1 Deduction for Annual Administration Maintenance Charge: There is no
annual fee if the Contract Value is $50,000 or above. If the Contract
Value is below $50,000, SAFECO deducts the fee shown on the Contract
Data Page for each Contract Year, or any portion thereof, for general
administrative expenses. This fee is deducted on the last day of each
Contract Year, and in the event of a complete Withdrawal.
The Sub-Account from which the Annual Administration Maintenance Charge
is deducted is determined by the hierarchical order of the Sub-Accounts
as shown on the Contract Data Page.
Prior to the Annuity Date the fee for general administrative expenses
is not guaranteed and may be changed for future years. However, the
Annual Administration Maintenance Charge may never exceed $35 per
Contract Year.
G2 Deduction for Asset Related Administration Charge: SAFECO deducts an
amount computed on a daily basis as compensation for administration of
the Sub-Accounts. The Asset Related Administration Charge shall be a
percentage of the average daily net asset value of the Separate Account
on an annual basis, as shown on the Contract Data Page.
-7-
<PAGE> 10
G3 Deduction for Contingent Deferred Sales Charge:
(a) A Contingent Deferred Sales Charge will be assessed against any
Withdrawal or Transfer, based upon the following schedule:
<TABLE>
<CAPTION>
CONTRACT YEAR CHARGE
<S> <C>
1 8% of amount Withdrawn
2 7% of amount Withdrawn
3 6% of amount Withdrawn
4 5% of amount Withdrawn
5 4% of amount Withdrawn
6 3% of amount Withdrawn
7 2% of amount Withdrawn
8 1% of amount Withdrawn
After 8 0% of amount Withdrawn
</TABLE>
(b) A Contingent Deferred Sales Charge will not be deducted:
(i) On Transfers between Sub-Accounts;
(ii) On the sum of Withdrawals taken in any Contract Year
which does not exceed 10% of the Contract Value;
(iii) On Withdrawals made under a Settlement Option;
(iv) On Systematic Withdrawals over the life expectancy of
the Owner or the joint life expectancy of the Owner
and Beneficiary;
(v) On Withdrawals made pursuant to the death of the
Owner; or
(vi) On Withdrawals for payment of the Annual
Administration Maintenance Charge.
G4 Deduction for Withdrawal Charge: The first Withdrawal each Contract
Year will have no Withdrawal Charge assessed. All further Withdrawals
each Contract Year will be subject to a Withdrawal Charge as shown on
the Contract Data Page, which will be deducted from the amount being
Withdrawn. Settlement Options and Systematic Withdrawal will have no
Withdrawal Charge assessed.
G5 Deduction for Transfer Charge: SAFECO reserves the right to assess a
Transfer Charge for Transfers in excess of twelve Transfers per
calendar year, as shown on the Contract Data Page. Automatic Transfers
that continue for at least six months will not be counted for purposes
of deduction of the Transfer Charge.
G6 Deduction for Mortality and Expense Risk Premium: SAFECO deducts an
amount computed on a daily basis as compensation for assuming the
mortality and expense risk. The Mortality and Expense Risk Premium
shall be a percentage of the average daily net asset value of the
Separate Account on an annual basis, as shown on the Contract Data
Page.
G7 Taxes: Any premium taxes or other taxes levied by any governmental
entity which SAFECO, in its sole discretion, determines have resulted
from the establishment or maintenance of this Contract or any portion
of this Contract, the receipt by SAFECO of Purchase Payments, or the
commencement of Annuity payments, will be deducted from the Contract.
The Sub-Account from which the taxes are deducted is determined by the
hierarchical order of the Sub-Accounts as shown on the Contract Data
Page.
-8-
<PAGE> 11
SECTION H: ANNUITY PURCHASE RATE TABLE
H1 Mortality Tables Used: The rates in the Variable Annuity Purchase Rate
Table are based upon the 1983a Mortality Table Projected 20 Years with
Projection Scale G; 50% Male and 50% Female. An age setback of 1 year
will be used if the Annuity payment begins in the year 2000-2009, 2
years if the Annuity payment begins in the year 2010-2019, and an
additional 1 year setback for each additional ten years. The effective
interest rate assumed in the Variable Annuity Purchase Rate table is
4.00%.
H2 Variable Annuity Purchase Rate Table:
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
Life Joint & Survivor Annuity**
Annuity
Age of Life 120-Months 100% 50%
Annuitant Annuity Certain Annuity Annuity
- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
55 $208.85 $210.55 $233.18 $221.02
56 205.59 207.42 230.40 218.00
57 202.23 204.22 227.53 214.88
58 198.76 200.94 224.55 211.66
59 195.20 197.58 221.47 208.34
60 191.54 194.16 218.29 204.91
61 187.79 190.67 215.00 201.39
62 183.95 187.12 211.61 197.78
63 180.01 183.53 208.11 194.06
64 176.00 179.88 204.51 190.25
65 171.91 176.20 200.80 186.36
66 167.75 172.50 197.00 182.38
67 163.53 168.77 193.09 178.31
68 159.25 165.04 189.08 174.16
69 154.90 161.31 184.98 169.94
70 150.50 157.59 180.77 165.64
71 146.05 153.89 176.48 161.26
72 141.55 150.23 172.10 156.82
73 137.02 146.62 167.63 152.32
74 132.46 143.09 163.09 147.78
75 127.90 139.63 158.49 143.19
</TABLE>
*The consideration shown refers to the net value used to purchase an Annuity,
after premium taxes or other applicable charges are deducted.
**Annuitant and co-annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months. Values
for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished by
SAFECO upon request.
-9-
<PAGE> 12
CONTRACT DATA PAGE
PRODUCT: SPINNAKER NQ FLEX
OWNER: JOHN DOE
321 CAPITOL BLVD
CAPITOL CITY, WA 99999-8888
ANNUITANT: JOHN DOE
CONTRACT NUMBER: LP12345678
CONTRACT DATE: 11/01/1995
ANNUITANT'S AGE ON CONTRACT DATE: 35
ANNUITY DATE: 01/01/2030
DELIVERED IN THE STATE OF WASHINGTON AND GOVERNED BY ITS LAWS.
MINIMUM INITIAL PURCHASE PAYMENT: $2,000.00
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $250.00
ANNUAL ADMINISTRATION MAINTENANCE CHARGE: $30 each Contract Year, waived if
Contract Value is $50,000 or more. Guaranteed never to exceed $35.
ASSET RELATED ADMINISTRATION CHARGE: Equal on an annual basis to .15% of the
average daily net asset value of the Separate Account
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
average daily net asset value of the Separate Account
TRANSFER CHARGE: The lesser of $10 or 2% of amount transferred, for each
Transfer in excess of twelve per Contract Year
MINIMUM WITHDRAWAL: The lesser of $250 or the Contract Value
CONTINGENT DEFERRED SALES CHARGE:
CONTRACT YEAR CHARGE
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After 8 0% of amount withdrawn
Total Contingent Deferred Sales Charges will not exceed 8.5% of the Purchase
Payments and Deposits made under this Contract
WITHDRAWAL CHARGE: The lesser of $25 or 2% of the amount withdrawn, for each
Withdrawal in excess of one per Contract Year
ELIGIBLE INVESTMENTS:
1. SAFECO Resource Money Market Sub-Account
2. SAFECO Resource Bond Sub-Account
3. Federated Utility Sub-Account
4. Federated Corporate Bond Sub-Account
5. Scudder Variable Life Investment Fund Balanced Sub-Account
6. Lexington Natural Resources Sub-Account
7. Scudder Variable Life Investment Fund International Sub-Account
8. Federated International Stock Sub-Account
9. Lexington Emerging Markets Sub-Account
10. SAFECO Resource Equity Sub-Account
11. SAFECO Resource Northwest Sub-Account
12. SAFECO Resource Growth Sub-Account
13. SAFECO Fixed Account Annuity Rider
SEPARATE ACCOUNT: SAFECO Separate Account C
ANNUITY SERVICE OFFICE:
HOME OFFICE: MAILING ADDRESS:
SAFECO Life Insurance Company SAFECO Life Insurance Company
Pension Department Pension Department
15411 NE 51st Street P.O. Box 34690
Redmond, Washington 98052 Seattle, Washington 98124-1690
Telephone: 1-800-426-7649
Fax: 206-867-8793
LPC-410/EP 9/95
<PAGE> 13
CONTRACT DATA PAGE
PRODUCT: SPINNAKER Q
OWNER: JOHN DOE
321 CAPITOL BLVD
CAPITOL CITY, WA 99999-8888
ANNUITANT: JOHN DOE
CONTRACT NUMBER: LP12345678
CONTRACT DATE: 11/01/1995
ANNUITANT'S AGE ON CONTRACT DATE: 35
ANNUITY DATE: 01/01/2028
DELIVERED IN THE STATE OF WASHINGTON AND GOVERNED BY ITS LAWS.
MINIMUM INITIAL PURCHASE PAYMENT: $30.00
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $30.00
ANNUAL ADMINISTRATION MAINTENANCE CHARGE: $30 each Contract Year, waived if
Contract Value is $50,000 or more. Guaranteed never to exceed $35.
ASSET RELATED ADMINISTRATION CHARGE: Equal on an annual basis to .15% of the
average daily net asset value of the Separate Account
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
average daily net asset value of the Separate Account
TRANSFER CHARGE: The lesser of $10 or 2% of amount transferred, for each
Transfer in excess of twelve per Contract Year
MINIMUM WITHDRAWAL: The lesser of $250 or the Contract Value
CONTINGENT DEFERRED SALES CHARGE:
CONTRACT YEAR CHARGE
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After 8 0% of amount withdrawn
Total Contingent Deferred Sales Charges will not exceed 8.5% of the Purchase
Payments and Deposits made under this Contract
WITHDRAWAL CHARGE: The lesser of $25 or 2% of the amount withdrawn, for each
Withdrawal in excess of one per Contract Year
ELIGIBLE INVESTMENTS:
1. SAFECO Resource Money Market Sub-Account
2. SAFECO Resource Bond Sub-Account
3. Federated Utility Sub-Account
4. Federated Corporate Bond Sub-Account
5. Scudder Variable Life Investment Fund Balanced Sub-Account
6. Lexington Natural Resources Sub-Account
7. Scudder Variable Life Investment Fund International Sub-Account
8. Federated International Stock Sub-Account
9. Lexington Emerging Markets Sub-Account
10. SAFECO Resource Equity Sub-Account
11. SAFECO Resource Northwest Sub-Account
12. SAFECO Resource Growth Sub-Account
13. SAFECO Fixed Account Annuity Rider
SEPARATE ACCOUNT: SAFECO Separate Account C
ANNUITY SERVICE OFFICE:
HOME OFFICE: MAILING ADDRESS:
SAFECO Life Insurance Company SAFECO Life Insurance Company
Pension Department Pension Department
15411 NE 51st Street P.O. Box 34690
Redmond, Washington 98052 Seattle, Washington 98124-1690
Telephone: 1-800-426-7649
Fax: 206-867-8793
LPC-407/EP 9/95
<PAGE> 1
EXHIBIT 4(ii)
FIXED ACCOUNT ANNUITY RIDER
The Rider is a part of the Contract to which it is attached with regard to the
general account of SAFECO, the Fixed Account. This Rider is effective upon
issuance and restates in its entirety any prior Fixed Account Annuity Rider.
SECTION A4, Annuity Date, is amended to read as follows:
Annuity Date: The date selected by the Owner for commencing Annuity
payments under this Contract. Separate dates may be selected by the
Owner for commencing variable Annuity payments and fixed Annuity
payments. The day of the month on which the payments will be made will
be determined by SAFECO. Any Annuity Date selected cannot be later than
the date the Annuitant attains age 85.
SECTION A9, Contract Date, is amended to read as follows:
Contract Date: The earlier of the date on which the initial Net Purchase
Payment is allocated to the Separate Account or the initial Net Purchase
Payment is allocated to the Fixed Account, as shown on the Contract Data
Page.
SECTION A10, Contract Value, is amended to read as follows:
Contract Value: The sum of the Owner's interest in the Sub-Accounts of
the Separate Account and the Fixed Account. Fixed Account Contract Value
refers to that portion of the Contract Value held in the Fixed Account.
SECTION A15, Purchase Payments, is amended to read as follows:
Purchase Payments: Payments made to purchase Accumulation Units or
payments allocated to the Fixed Account as provided in Section I1.
SECTION A18(a), Transfer, is added to the Contract:
The redemption of units from a Sub-Account(s) and the purchase of units
of another Sub-Account(s), and the transfer of Contract Value to or from
the Fixed Account from or to the Sub-Account(s).
SECTION C5, Application of Purchase Payments to Eligible Investments, is
amended to read as follows:
Application of Purchase Payments to Eligible Investments: Purchase
Payments applied to the Separate Account are allocated to Sub-Accounts of
the Separate Account and the Fixed Account as provided in Section I1.
SECTION D2, Non-Participation in Surplus, is amended to read as follows:
The Variable Annuity and Fixed Annuity portions of this Contract will not
share in any distribution of profits, losses, or surplus of SAFECO.
SECTION G1, Deduction for Annual Administration Maintenance Charge, is amended
to read as follows:
Deduction for Annual Administration Maintenance Charge: There is no
annual fee if the Contract Value is $50,000 or above. If the Contract
Value is below $50,000, SAFECO deducts the fee shown on the Contract Data
Page for each Contract Year, or any portion thereof, for general
administrative expenses. This fee is deducted on the last day of each
Contract Year, and in the event of a complete Withdrawal.
The Sub-Account from which the Annual Administration Maintenance Charge
is deducted is determined by the order of the Sub- Accounts as shown on
the Contract Data Page.
Prior to the Annuity Date the fee for general administrative expenses is
not guaranteed and may be changed for future years. However, the Annual
Administration Maintenance Charge may never exceed the guaranteed maximum
fee of $35 per Contract Year.
If the Annual Administration Maintenance Charge is to be deducted from
the Fixed Account, the charge will be reduced if it is greater than the
Purchase Payments received for the current Contract Year and the excess
of the charge over those Purchase Payments reduces net interest to below
three percent. The charge shall be limited to Purchase Payments received
during the current Contract Year plus the amount of interest credited in
excess of three percent.
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SECTION G3(b), A Contingent Deferred Sales Charge will not be deducted, is
amended to include the following:
(vi) On Transfers from a Sub-Account to the Fixed Account; or
(vii) On Transfers from the Fixed Account under Section I11.
SECTION I: FIXED ACCOUNT, is added to the Contract.
SECTION I1, Fixed Account Allocations, is added to the Contract:
Fixed Account Allocations: The Owner may make payments into the Fixed
Account, subject to acceptance and approval by SAFECO. The Fixed Account
consists of the total Fixed Account Allocations received by SAFECO under
this Rider and not previously withdrawn, plus interest on each such Fixed
Account Allocation, less any applicable charges and deductions. Fixed
Account Allocations will become part of the general account of SAFECO to
be so used and invested and will not be segregated from SAFECO's other
assets.
SECTION I2, Interest Crediting, is added to the Contract:
Interest Crediting:
(a) After receipt of each Fixed Account Allocation, and in accordance
with paragraph (b) below, SAFECO will credit interest to the Fixed
Account Allocation at a rate determined according to SAFECO's
investment year method of assigning interest credits. Under this
method the interest credits will be based on the original period of
receipt of such funds.
(b) Each Fixed Account Allocation will be credited with the Guaranteed
Interest Rate determined for such Fixed Account Allocation
commencing on the date the Fixed Account Allocation is received by
SAFECO.
(c) For purposes of crediting interest, the last-in, first-out
accounting method will apply to Withdrawals.
SECTION I3, Establishment of Interest Rates, is added to the Contract:
Establishment of Interest Rates: Guaranteed Interest Rates for each
Fixed Account Allocation will be determined by SAFECO as soon as
practicable prior to each Initial or Subsequent Interest Guarantee
Period.
SECTION I4, Guaranteed Interest Rate, is added to the Contract:
Guaranteed Interest Rate:
(a) SAFECO's Guaranteed Interest Rate on any Fixed Account Allocation
will be effective for the Initial Interest Guarantee Period
applicable to such Fixed Account Allocation. The Initial Interest
Guarantee Period shall be no less than the twelve (12) month period
commencing on the date a Fixed Account Allocation is received by
SAFECO.
(b) Upon the expiration of the Initial Interest Guarantee Period
applicable to any Fixed Account Allocation, the Guaranteed Interest
Rate applicable to such a Fixed Account Allocation plus credited
interest will be that rate determined by SAFECO to be effective for
each successive Subsequent Interest Guarantee Period and may or may
not be the same as any interest rate applicable to new Fixed Account
Allocations. The Subsequent Interest Guarantee Period shall be the
period commencing on the expiration of the Initial Guarantee Period
and shall be no less than twelve (12) months. Each successive
Subsequent Interest Guarantee Period shall be the period commencing
on the expiration of the prior Subsequent Interest Guarantee Period
and shall be no less than twelve (12) months.
(c) SAFECO's Guaranteed Interest Rate on any subsequent Fixed Account
Allocation will be that rate in effect at the time of such Fixed
Account Allocation, and may or may not be the same as any interest
rate previously applicable to Fixed Account Allocations or any
interest rate for Subsequent Interest Rate Guarantee Periods.
(d) The Guaranteed Interest Rate credited to monies allocated to the
Fixed Account will never be less than an annual effective interest
rate of 3% for any Contract Year.
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<PAGE> 3
SECTION I5, Settlement Options, is added to the Contract:
Settlement Options: On the date upon which SAFECO is to issue an Annuity
under this Rider, SAFECO shall charge the premium for such Annuity
against the Fixed Account. Such premium shall be the premium calculated
in accordance with the Fixed Annuity Purchase Rate Table in Section I8,
plus premium taxes, if required by state law. An Annuity may be issued
only in one of the forms described below, or such other forms which
SAFECO agrees to issue under this Rider. Options (a), (b) and (c) are
irrevocable once they have begun.
(a) Fixed Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the
last payment is that payment due immediately on or before his or her
death. No death benefit is payable under this option.
(b) Fixed Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the Annuity
Date. If at the death of the Annuitant the guaranteed number of
payments has not been received by the Annuitant, then payments will
be made to the Beneficiary for the remainder of the guaranteed
period.
(c) Fixed Joint and Survivor Life Annuity: Monthly payments are made to
the Annuitant commencing on the Annuity Date. After the death of
the Annuitant, payments will be continued to the Annuitant's spouse
for as long as he or she lives.
(d) Systematic Withdrawal Income Plan: A specified amount is withdrawn
for payment to the Annuitant on a monthly, quarterly, or annual
basis. The amount withdrawn shall be the amount calculated to
deplete the Fixed Account over the life expectancy of the Annuitant
or the joint life expectancy of the Annuitant and Beneficiary, with
at least 50% of the payments expected to be made during the
Annuitant's life. The balance remaining in the Fixed Account after
any such payment will continue to earn interest in the same manner
as prior to the Withdrawal.
SECTION I6, Automatic Option, is added to the Contract:
Automatic Option: If, as of the Annuity Date, a Settlement Option has
not been selected under this Rider, SAFECO will make payments under
Section I5(d), if the Beneficiary is a natural person. If, as of the
Annuity Date, a Settlement Option has not been selected and the
Beneficiary is a non-natural person, SAFECO will make payments under
Section I5(a).
SECTION I7, Commencement of Annuity Payments, is added to the Contract:
Commencement of Annuity Payments: Subject to the limitations of Sections
A4, E8, and I5, an Owner may elect:
(a) to have variable Annuity payments commence on the Annuity Date,
pursuant to one of the Settlement Options described in Section E8,
and:
(i) continue to have Net Purchase Payments credited to the Fixed
Account; and
(ii) choose a "second Annuity Date" for the commencement of fixed
Annuity payments; or
(b) to have fixed Annuity payments commence on the Annuity Date,
pursuant to one of the Settlement Options described in Section I5,
and:
(i) continue to have Net Purchase Payments credited to a
Sub-Account(s); and
(ii) choose a "second Annuity Date" for the commencement of variable
Annuity payments.
SAFECO must receive any such election and the selected "second Annuity
Date" prior to any Annuity Date. If no such election is made, SAFECO
will commence both variable and fixed Annuity payments on the Annuity
Date pursuant to the applicable Settlement Options. Any Annuity Date
selected, including the "second Annuity Date," cannot be later than the
date the Annuitant attains age 85.
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<PAGE> 4
SECTION I8, Mortality Tables Used, is added to the Contract:
Mortality Tables Used: The rates in the Fixed Annuity Purchase Rate
Table are based upon the 1983a Mortality Table Projected 20 years with
Projection Scale G: 50% Male and 50% Female. The effective interest
rate assumed in the Fixed Annuity Purchase Rate Table is 3%.
Fixed Annuity Purchase Rate Table
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
Life Joint & Survivor Annuity**
Annuity
Age of Life 10-Years 100% 50%
Annuitant Annuity Certain Annuity Annuity
--------- ------- -------- ------- -------
<S> <C> <C> <C> <C>
55 $236.33 $238.26 $267.87 $252.10
56 231.98 234.07 263.96 247.97
57 227.55 229.82 259.98 243.77
58 223.04 225.49 255.83 239.44
59 218.43 221.11 251.58 235.01
60 213.73 216.66 247.23 230.48
61 208.95 212.15 242.77 225.88
62 204.08 207.60 238.20 221.14
63 199.13 203.02 233.54 216.33
64 194.11 198.41 228.77 211.44
65 189.04 193.78 223.91 206.47
66 183.90 189.14 218.95 201.43
67 178.71 184.51 213.91 196.31
68 173.48 179.90 208.77 191.12
69 168.20 175.32 203.55 185.87
70 162.88 170.77 198.24 180.56
71 157.59 166.32 192.99 175.29
72 152.29 161.93 187.69 169.99
73 146.98 157.62 182.22 164.60
74 141.67 153.42 176.70 159.19
75 136.38 149.34 171.13 153.75
</TABLE>
*The consideration shown refers to the net value used to purchase an Annuity,
after premium taxes or other applicable charges are deducted. For example, it
would cost $189,040 for an Annuitant age 65 to receive a Fixed Life Annuity
which provides a monthly income of $1,000.
**Annuitant and spouse are assumed to be the same age.
Age is to be taken for the exact number of years and completed
months. Values for fractional ages are obtained by simple
interpolation.
Consideration for ages or combination of lives not shown will be
furnished by SAFECO upon request.
SECTION I9, Minimum Balance After Withdrawal, is added to the Contract:
Minimum Balance After Withdrawal: If any Withdrawal reduces the
remaining balance in the Fixed Account to less than $500, the remaining
balance will also be Withdrawn.
SECTION I10, Minimum Transfer, is added to the Contract:
Minimum Transfer: All Transfers from the Fixed Account, other than
pursuant to a Program, are subject to a $500 minimum.
The minimum Transfer into the Fixed Account must be at least $50.
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<PAGE> 5
SECTION I11, Transfers, is added to the Contract:
Transfers: The Owner may elect to participate in only one of the
Programs relating to transfers from the Fixed Account in any Contract
Year or elect to transfer up to a total of 10% of the value of the Fixed
Account Contract Value at the time of the Transfer, in a Contract Year.
SAFECO may waive this limitation upon written notice to the Owner.
SECTION I12, Deferral of Withdrawal Payment, is added to the Contract:
Deferral of Withdrawal Payment: SAFECO retains the right to defer the
payment of Withdrawals from the Fixed Account for a period of six months
after receiving a Withdrawal request. If SAFECO defers payment of
Withdrawals under this Section, SAFECO will pay interest on the deferred
payments at the rate specified by state law at the time of the Withdrawal
request.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
R.A. Pierson
Sr. Vice President and Secretary
-5-
<PAGE> 6
ENDORSEMENT
Tax Sheltered Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 403(b) of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is
effective upon issuance to the Owner and restates in its entirety any prior Tax
Sheltered Annuity Endorsement.
SECTION A14, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under this
Contract. The Annuitant shall be the Owner of this Contract.
SECTION B12, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferrable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
SECTION B14, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive
benefit of the Annuitant and Beneficiaries.
SECTION B15, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B16, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit: If contributions to this Contract are made under a
salary reduction agreement, the maximum contribution when combined with
all other plans, contracts, or arrangements may not exceed the amount of
the limitation provided for in Section 402(g) of the Internal Revenue
Code.
SECTION C7, Plan, is added to the Contract:
Plan: The terms of this Contract are subject to the provisions of any
plan under which this Contract is issued.
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and periodic
withdrawals are subject to and shall distribute the Contract Value
pursuant to the Minimum Distribution Rules in Section 403(b)(10) and
Section 401(a)(9) of the Internal Revenue Code, including the minimum
distribution incidental benefit requirement of Section 401(a)(9)(G) of
the Internal Revenue Code and Section 1.401(a)(9)-2 of the Proposed
Income Tax Regulations.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by
the Annuitant's Required Beginning Date, defined as April 1
following the year the Annuitant reaches age 70 1/2.
(I) For an Annuitant who was born prior to July 1, 1917, the
Required Beginning Date is April 1 following the calendar
year in which the annuitant retires.
(II) For an Annuitant who is a participant in a governmental
or church plan, the Required Beginning Date is April 1
following the later of the calendar year in which the
Annuitant reaches age 70 1/2 or retires.
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LPC 414 9/95
<PAGE> 7
If the Annuitant has reached age 70 1/2 as of the Contract
Date, the Required Beginning Date is no later than the close
of the taxable year following the taxable year during which
the Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions
must be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant
and the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of
the Annuitant, or the joint and last survivor expectancy
of the Annuitant and the designated Beneficiary.
(iii) Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with
the first calendar year for which distributions are required to
begin and for each calendar year thereafter) must be at least
an amount equal to the quotient obtained by dividing the
Contract Value by the lesser of (1) the applicable life
expectancy of the Annuitant or (2) if the Annuitant's spouse is
not the designated Beneficiary, the applicable divisor
determined from the table set forth in Question and Answer 4 or
Question and Answer 5, as applicable, of Proposed Income Tax
Regulation 1.401(a)(9)-2. Payments must be made in periodic
payments of intervals no longer than one year. In addition,
payments must be either non-increasing or they may increase
only as provided in Question and Answer F-3 of Proposed Income
Tax Regulation 1.401(a)(9)-1. Distributions after the death of
the Annuitant shall be calculated using the applicable life
expectancy as the relevant divisor without regard to Proposed
Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is
the spouse of a deceased Annuitant may elect whether or not to
recalculate life expectancy. Life expectancy may be recalculated no
more frequently than annually. This election is irrevocable and
shall apply to all subsequent years. It must be made by written
notice to SAFECO at its Home Office no later than the Required
Beginning Date. If an election is not made, life expectancy for the
Annuitant and a designated Beneficiary who is a spouse will be
recalculated.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent
years shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
Life expectancy and joint and last survivor expectancy are computed
by use of the expected return multiples contained in Tables V and
VI, Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the
Annuitant dies before distributions are considered to have
commenced, the Contract Value must be distributed according to one
of the following options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary
of the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the
entire Contract Value must be distributed over a period not
extending beyond a designated Beneficiary's life or life
expectancy in substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31st of the calendar year
immediately following the calendar year of the Annuitant's
death. The Beneficiary may elect at any time to receive
greater payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Annuitant's death or the date distributions
are required to begin, to receive equal or substantially equal
payments over the life or life expectancy of the surviving
spouse commencing at any date prior to the later of (1)
December 31 of the calendar year Immediately following the
calendar year in which the Annuitant died and (2) December 31
of the calendar year in which the Annuitant would have
attained age 70 1/2. The surviving spouse may increase the
frequency or amount of such payments at any time.
-2-
<PAGE> 8
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of
April following the calendar year in which the spouse reaches
age 70 1/2 if that date is later than the Annuitant's death or
the date the Annuitant would have reached age 70 1/2. Such
election is considered made if:
(I) Amounts required to be distributed on the Annuitant's
death have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is
made to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the
Annuitant dies on or after the date distributions are
considered to have commenced, payment to the designated
Beneficiary must continue at least as rapidly as the method in
effect prior to the Annuitant's death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following
the year in which the Annuitant attains age 70 1/2, unless the
Annuitant sends written notice to SAFECO that the minimum
distributions for this Contract will be taken from another TSA and
requests that distributions not be taken from this Contract or that
distributions are to be deferred under one of the exceptions
described in Section E5(a)(i).
(b) If SAFECO has not received written notice prior to March 1 following
the year in which the Annuitant attains age 70 1/2:
(i) If designated Beneficiary information has been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on joint life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
(ii) If designated Beneficiary information has not been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on single life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
SECTION F10, Withdrawal Restrictions, is added to the Contract:
Withdrawal Restrictions:
(a) Withdrawals are restricted under Section 403(b) of the Internal
Revenue Code for:
(i) Salary reduction contributions made after December 31, 1988;
(ii) Income attributable to salary reduction contributions made
after December 31, 1988;
(iii) Income attributable to amounts held as of December 31, 1988;
and
(iv) Contracts that contain a full or partial transfer of funds
from a previous Section 403(b)(7) account.
(b) The Withdrawal restrictions under Section 403(b) of the Internal
Revenue Code allow withdrawals only when the Annuitant:
(i) Attains age 59 1/2;
(ii) Separates from service;
(iii) Dies;
-3-
<PAGE> 9
(iv) Becomes disabled (as defined in Section 72(m)(7) of the
Internal Revenue Code); or
(v) In the case of hardship. Withdrawals for hardship are
restricted to the portion of the Contract Value which
represents contributions made by the Annuitant and does not
include any income attributable to salary reduction
contributions made after December 31, 1988 or income
attributable to amounts held as of December 31, 1988.
(c) Withdrawal of restricted funds may result in disqualification of the
Contract as a tax qualified plan and subject the Withdrawal to
federal income tax penalties.
SECTION F11, Direct Rollovers is added to the Contract:
Direct rollovers: The Annuitant or Beneficiary may elect to have any
eligible rollover distribution or any portion of an eligible rollover
distribution paid directly to an eligible retirement plan.
SECTION G7, Taxes, is amended to read as follows:
Taxes: SAFECO reserves the right to deduct premium taxes or other taxes
levied by any governmental entity which SAFECO, in its sole discretion,
determines have resulted from the establishment or maintenance of this
Contract or any portion of this Contract, the receipt by SAFECO of
Purchase Payments, or the commencement of Annuity payments. If SAFECO
exercises this right the Sub-Account from which the taxes will be
deducted will be determined by the hierarchical order of the Sub-Accounts
as listed on the Contract Data Page.
SECTION I13, Loans, is added to the Contract:
Loans: Upon the approval of application to SAFECO, an Annuitant may
borrow funds from SAFECO using the Annuitant's interest in the Fixed
Account of the Fixed Annuity Rider as collateral. Any such loan is
subject to Section 72(p) of the Internal Revenue Code and the terms of
the loan program as established by SAFECO.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
R.A. Pierson
Sr. Vice President and Secretary
-4-
<PAGE> 10
ENDORSEMENT
Individual Retirement Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 408 of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is
effective upon issuance to the Owner and restates in its entirety any prior
Individual Retirement Annuity Endorsement.
SECTION A14, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under this
Contract. The Annuitant shall be the Owner of this Contract.
SECTION B12, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferrable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
SECTION B14, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive
benefit of the Annuitant and Beneficiaries.
SECTION B15, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B16, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION B17, Life Insurance Contracts, is added to the Contract:
Life Insurance Contracts: No part of the Contract Value will be invested
in life insurance contracts.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit:
(a) If this Contract is purchased to fund an Individual Retirement
Annuity under Section 408(b) of the Internal Revenue Code, the
annual contribution to the Contract must be in cash and may not
exceed the lesser of $2,000 or 100% of Compensation. In the case of
a spousal IRA, separate Contracts are established for each spouse.
Annual contributions to the two Contracts together may not exceed
$2,250, while no more than $2,000 may be contributed to any one of
the two Contracts. Such limitations shall not include rollover
contributions under Section 402(c), 403(a)(4), 403(b)(8), or
408(d)(3) of the Internal Revenue Code. Deductibility of
contributions depends on active participation in an employer
sponsored retirement plan and adjusted gross income.
(b) If this Contract is purchased to fund a Simplified Employee Pension
under Section 408(k) of the Internal Revenue Code, the annual
contribution to the Contract may not exceed the lesser of 15% of
Compensation or $30,000.
(c) Compensation is defined in Internal Revenue Code Section 219(f) and
the regulations thereunder as follows: Wages, salaries,
professional fees, or other amounts derived from or received for
personal services actually rendered (including, but not limited to
commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips,
and bonuses) and includes earned income, as defined in Section
401(c)(2) of the Internal Revenue Code (reduced by the deduction the
self-employed individual takes for contributions made to a
self-employed retirement plan). For purposes of this definition,
IRC Section 401(c)(2) shall be applied as if the term "trade" or
-1-
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<PAGE> 11
"business" for purposes of IRC Section 1402 included service
described in Subsection (c)(6). Compensation does not include
amounts derived from or received as earnings or profits from
property (including but not limited to interest and dividends) or
amounts not includible in gross income. Compensation also does not
include any amount received as a pension or annuity or as deferred
compensation. Compensation shall include any amount includible in
the individual's gross income under IRC Section 71 with respect to a
divorce or separation instrument described in Subparagraph (A) of
Section 71(b)(2).
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and periodic
withdrawals are subject to and shall distribute the Contract Value
pursuant to the Minimum Distribution Rules in Section 408(a)(6) or
Section 408(b)(3) and Section 401(a)(9) of the Internal Revenue Code,
including the minimum distribution incidental benefit requirement of
Section 401(a)(9)(G) of the Internal Revenue Code and Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations, all of which are
incorporated by reference.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by
the Annuitant's Required Beginning Date, defined as April 1
following the year the Annuitant reaches age 70 1/2. If the
Annuitant has reached age 70 1/2 as of the Contract Date, the
Required Beginning Date is no later than the close of the
taxable year following the taxable year during which the
Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions
must be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant
and the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of
the Annuitant and the designated Beneficiary.
(iii) Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with
the first calendar year for which distributions are required to
begin and for each calendar year thereafter) must be at least
an amount equal to the quotient obtained by dividing the
Contract Value by the lesser of (1) the applicable life
expectancy of the Annuitant or (2) if the Annuitant's spouse is
not the designated Beneficiary, the applicable divisor
determined from the table set forth in Question and Answer 4 or
Question and Answer 5, as applicable, of Proposed Income Tax
Regulation 1.401(a)(9)-2. Payments must be made in periodic
payments of intervals no longer than one year. In addition,
payments must be either non-increasing or they may increase
only as provided in Question and Answer F-3 of Proposed Income
Tax Regulation 1.401(a)(9)-1. Distributions after the death of
the Annuitant shall be calculated using the applicable life
expectancy as the relevant divisor without regard to Proposed
Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is
the spouse of a deceased Annuitant may elect whether or not to
recalculate life expectancy. Life expectancy may be recalculated no
more frequently than annually. This election is irrevocable and
shall apply to all subsequent years. It must be made by written
notice to SAFECO at its Home Office no later than the Required
Beginning Date. If an election is not made, life expectancy for the
Annuitant and a designated Beneficiary who is a spouse will be
recalculated.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent
years shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
Life expectancy and joint and last survivor expectancy are computed
by use of the expected return multiples contained in Tables V and
VI, Section 1.72-9 of the Income Tax Regulations.
-2-
<PAGE> 12
(c) Annuitant's Death Prior to Required Beginning Date: If the
Annuitant dies before distributions are considered to have
commenced, the Contract Value must be distributed according to one
of the following options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary
of the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the
entire Contract Value must be distributed over a period not
extending beyond a designated Beneficiary's life or life
expectancy in substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31st of the calendar year
immediately following the calendar year of the Annuitant's
death. The Beneficiary may elect at any time to receive
greater payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Annuitant's death or the date distributions
are required to begin, to receive equal or substantially equal
payments over the life or life expectancy of the surviving
spouse commencing at any date prior to the later of (1)
December 31 of the calendar year Immediately following the
calendar year in which the Annuitant died and (2) December 31
of the calendar year in which the Annuitant would have
attained age 70 1/2. The surviving spouse may increase the
frequency or amount of such payments at any time.
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of
April following the calendar year in which the spouse reaches
age 70 1/2 if that date is later than the Annuitant's death or
the date the Annuitant would have reached age 70 1/2. Such
election is considered made if:
(I) Amounts required to be distributed on the Annuitant's
death have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is
made to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the
Annuitant dies on or after the date distributions are
considered to have commenced, payment to the designated
Beneficiary must continue at least as rapidly as the method in
effect prior to the Annuitant's death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following
the year in which the Annuitant attains age 70 1/2, unless the
Annuitant sends written notice to SAFECO that the minimum
distributions for this Contract will be taken from another IRA and
requests that distributions not be taken from this Contract.
An individual may satisfy the minimum distribution requirements
under Sections 408(a)(6) and 408(b)(3) of the Internal Revenue Code
by receiving a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements for two or
more IRAs. For this purpose, the owner of two or more IRAs may use
the "alternative method" described in Notice 88-38, 1988-1 C.B.524,
to satisfy the minimum distribution requirements described above.
(b) If SAFECO has not received written notice prior to March 1 following
the year in which the Annuitant attains age 70 1/2:
(i) If designated Beneficiary information has been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on joint life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
-3-
<PAGE> 13
(ii) If designated Beneficiary information has not been provided to
SAFECO, SAFECO will make the Required Minimum Distributions
based on single life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
SECTION G7, Taxes, is amended to read as follows:
Taxes: SAFECO reserves the right to deduct premium taxes or other taxes
levied by any governmental entity which SAFECO, in its sole discretion,
determines have resulted from the establishment or maintenance of this
Contract or any portion of this Contract, the receipt by SAFECO of
Purchase Payments, or the commencement of Annuity payments. If SAFECO
exercises this right the Sub-Account from which the taxes will be
deducted will be determined by the hierarchical order of the Sub-Accounts
as listed on the Contract Data Page.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
R.A. Pierson
Sr. Vice President and Secretary
-4-
<PAGE> 14
ENDORSEMENT
Individual Variable Annuity Contract Endorsement
This Endorsement forms a part of the Contract to which it is attached. In the
case of a conflict with any provision in the Contract or Rider, the terms of
this Endorsement will control. This Endorsement is effective upon issuance to
the Owner.
SECTION A11(a), Eight-Year Contract Anniversary, is added to the Contract:
Eight-Year Contract Anniversary: Each eighth Contract Year.
SECTION A12, Eligible Investments, is amended to read as follows:
Eligible Investments: An investment entity shown on the Contract Data Page,
including the Fixed Account pursuant to any Fixed Account Annuity Rider.
SECTION A14, Owner, is amended to read as follows:
Owner: The person or persons named in the Application who has all rights
under this Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must
jointly exercise those rights. On the date the Application is signed, the
Owner must not be older than age 75 (if joint Owners, neither may be older
than 75).
SECTION A15(a), Programs, is added to the Contract:
Programs: Programs are features whereby an Owner may elect to have Purchase
Payments, Contract Value or appreciation under the Contract allocated,
transferred, withdrawn or otherwise designated pursuant to requirements and
procedures described in the then current prospectus or registration
statement for the Contract under the Securities Act of 1933, as amended.
SECTION A18(a), Transfer, is added to the Contract:
Transfer: The redemption of units from a Sub-Account(s) and the purchase of
units of another Sub-Account(s).
SECTION B12, Non-Assignment, is deleted from the Contract.
SECTION B12, Assignment, is added to the Contract:
Assignment: To the extent permitted by law, this Contract and the benefits
or payments under this Contract are assignable or otherwise transferrable.
This Contract may be assigned for purposes of an Internal Revenue Code
Section 1035 exchange.
SECTION E5, Death of Annuitant, is amended to read as follows:
Death of Annuitant:
(a) If the Annuitant dies before a Settlement Option has commenced, the
Owner must designate a new Annuitant. If no designation is made within
30 days of notification to SAFECO of the death of the Annuitant, the
Owner will become the Annuitant.
(b) If the Contract is owned by a non-natural person, the death of the
Annuitant will be treated as the death of the Owner.
SECTION E6, Death of Owner Prior to Annuity Date, is amended to read as follows:
Death of Owner Prior to Annuity Date:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum Guaranteed
Death Benefit shall be equal to the initial Net Purchase Payment.
Additional Net Purchase Payments are added to the Minimum Guaranteed
Death Benefit. The Minimum Guaranteed Death Benefit will be adjusted
after any Withdrawal by multiplying it by the ratio of the Contract
Value after the Withdrawal to the Contract Value before the
LPC-715 8/95
- 1 -
<PAGE> 15
Withdrawal. The Minimum Guaranteed Death Benefit shall be redetermined
on each Eight Year Contract Anniversary by taking the greater of the
Contract Value on that Eight Year Contract Anniversary or the previous
Minimum Guaranteed Death Benefit. The Minimum Guaranteed Death Benefit
shall subsequently be increased for additional Net Purchase Payments
and adjusted after any Withdrawals in the same manner as the initial
Minimum Guaranteed Death Benefit is adjusted. After the Owner's death,
the Minimum Guaranteed Death Benefit will be reduced dollar for dollar
by any Withdrawals.
(b) Death Benefit Options: Upon the death of the Owner prior to the
Annuity Date, the Beneficiary may elect a Settlement Option or to
receive a single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Owner dies prior to age 72 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to SAFECO and has elected a Death Benefit
Option within six (6) months of the date of death, the amount of the
Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
(d) Death Benefit (After age 71)
If the Owner dies after age 71 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to SAFECO and has elected a Death Benefit
Option within six (6) months of the date of death, the amount of the
Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit established on the last
Eight Year Contract Anniversary preceding the Owner's 72nd
birthday, adjusted for any Net Purchase Payments received or
Withdrawals taken since that Eight Year Contract Anniversary.
(e) Death Benefit (Death notification or Death Benefit Option election
more than Six Months after Date of Death)
If notification of death or election of a Death Benefit Option occurs
after the six month anniversary of the date of death, the death
benefit will be the Contract Value on the date of election of a Death
Benefit Option determined as follows: the Contract Value calculated as
of the six-month anniversary of the date of death will be compared
with the last calculated Minimum Guaranteed Death Benefit to determine
if additional funds are required to be added by SAFECO to equal such
Minimum Guaranteed Death Benefit. SAFECO will supplement any
deficiency in Contract Value, such that Contract Value will equal the
Minimum Guaranteed Death Benefit. Thereafter, until the date of
election of a Death Benefit Option, the Contract Value attributable to
SAFECO's contribution will be guaranteed and interest paid thereon at
prevailing money market rates; the portion of Contract Value existing
on the six month anniversary of the date of death will be subject to
adjustment reflecting the investment experience for the period from
the six-month anniversary to the date of election of a Death Benefit
Option. In addition, the amount of the death benefit will be reduced
dollar for dollar by any Withdrawal after the Owner's death.
(f) Election Period: The election of a Settlement Option or other form of
payment must be made by the Beneficiary during the 60-day period
commencing with the date of receipt by SAFECO of notification of the
Owner's death. If no election is made within the 60-day period, then a
single sum payment will be made to the Beneficiary.
(g) The Death Benefit must be distributed:
(i) By the fifth anniversary of the Owner's death; or
(ii) Over a designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or
substantially equal payments, with payments beginning within one
year of the death of the Owner.
(h) If the Beneficiary is the spouse of the Owner, the Contract may be
continued by the spouse, and the spouse will become the Owner.
- 2 -
<PAGE> 16
(i) Joint Owners:
(i) The Minimum Guaranteed Death Benefit will only be payable on the
death of the older joint Owner. Upon the death of the older joint
Owner, if the Contract is continued, no Minimum Guaranteed Death
Benefit applies for the remaining duration of the Contract.
(ii) Upon the death of a joint Owner, the surviving Owner shall be the
designated Beneficiary. Any other named Beneficiary shall be a
contingent Beneficiary.
(iii) Upon the death of a joint Owner, the surviving Owner may elect a
Settlement Option or a lump sum payment, or may elect to continue
the Contract.
SECTION F3, Minimum Transfer, is amended to read as follows:
Minimum Transfer: The minimum Transfer from a Sub-Account must be at least
$500, except for Transfers pursuant to certain Programs. If the Sub-Account
from which the Transfer is being made is less than $500 the entire
Sub-Account will be transferred, including a Transfer pursuant to certain
Programs.
The minimum Transfer into a Sub-Account must be at least $50.
SECTION F4, Systematic Withdrawal, is deleted from the Contract.
SECTION F7, Automatic Transfers, is deleted from the Contract.
SECTION F8, Minimum Balance After Transfer, is amended to read as follows:
Minimum Balance After Transfer: If any Transfer, including a Transfer
pursuant to certain Programs, reduces the remaining balance in a
Sub-Account to less than $500, the remaining balance will also be
transferred.
SECTION G5, Deduction for Transfer Charge, is amended to read as follows:
Deduction for Transfer Charge: SAFECO reserves the right to assess a
Transfer Charge for each Transfer in excess of twelve Transfers per
calendar year, as shown on the Contract Data Page. Transfers pursuant to
any Program offered by SAFECO may or may not be subject to the Transfer
Charge, subject to SAFECO's administrative procedures under the Programs.
All other terms and conditions of the Contract remain unchanged.
SAFECO LIFE INSURANCE COMPANY
/s/ R.A. Pierson
--------------------------------
R.A. Pierson
Sr. Vice President and Secretary
- 3 -
<PAGE> 1
EXHIBIT 5
<TABLE>
<S> <C> <C>
[SAFECO LIFE INSURANCE LOGO] Spinnaker(TM) Variable Annuity Complete and mail with payment to:
Individual Variable Annuity Application SAFECO Life Insurance Company
Pension Department
P.O. Box 34690
Seattle, WA 98124-1690
- ------------------------------------------------------------------------------------------------------------------------------------
/ / SPINNAKER Q / / SPINNAKER NQ FLEX / / SPINNAKER PLUS
Qualified Only, Flexible Premium Non-Qualified Only, Flexible Premium Qualified or Non-Qualified, Single Premium
INITIAL PURCHASE PAYMENT MINIMUMS: Q is $30, NQ Flex is $2,000 (unless Systematic Investing: $100 min), PLUS is $50,000
- ------------------------------------------------------------------------------------------------------------------------------------
1. OWNER CONTRACT OWNER:
INFORMATION Name / / Male / / Female / / Trustee
----------------------------------------------------------
Non-Qualified: First Middle Last
If no annuitant
specified in Mailing Address
Section 2, ------------------------------------------------------------------------------------------
Contract Owner Street City State Zip
will also be the
Annuitant. Telephone ( ) Soc. Sec. # Date of Birth
------ ------------------ ----------------- --------------------------
JOINT OWNER (NON-QUALIFIED AND SPOUSE ONLY):
Name Soc. Sec. # Date of Birth
----------------------------------- -------------- --------------------------
First Middle Last
- ------------------------------------------------------------------------------------------------------------------------------------
2. ANNUITANT Name / / Male / / Female
INFORMATION ---------------------------------------------------------------------
First Middle Last
Non-Qualified
Only Mailing Address
------------------------------------------------------------------------------------------
Street City State Zip
Telephone ( ) Soc. Sec. # Date of Birth
------ ------------------ ----------------- --------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. TYPE OF A. / / INDIVIDUAL RETIREMENT ANNUITY B. / / NON-QUALIFIED ANNUITY
ANNUITY / / Contributory IRA for 19____ / / 1035(a) Exchange*
/ / Rollover from a Qualified C. / / SIMPLIFIED EMPLOYEE PENSION PLAN
Retirement Plan, IRA or TSA* (Internal Revenue Code Section 408(k))
/ / Transfer from another IRA* / / Salary Reduction (SARSEP)
Have you received an IRA Disclosure Name of Employer:_______________________
Statement (Form LP-592)? / / Yes / / No *NOTE: Must complete Form LP-547
- ------------------------------------------------------------------------------------------------------------------------------------
4. BENEFICIARIES PRIMARY: Name Percentage %
---------------------------------------------------------------------- ---------
First Middle Last
Soc. Sec. # Date of Birth Relationship to Annuitant
-------------------- ------------ --------------------
/ / PRIMARY
/ / CONTINGENT: Name Percentage %
--------------------------------------------------------------- --------
First Middle Last
Soc. Sec. # Date of Birth Relationship to Annuitant
-------------------- ------------ --------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5. INVESTMENT SAFECO RESOURCE FEDERATED INSURANCE MANAGEMENT LEXINGTON
INSTRUCTIONS SERIES TRUST: SERIES TRUST: ______ % Natural Resources Trust
______ % Money Market ______ % Utility ______ % Emerging Markets Fund, Inc.
Choose one or ______ % Bond ______ % Corporate Bond SCUDDER VARIABLE LIFE:
more of the ______ % Equity ______ % International Stock ______ % Balanced
following. Whole ______ % Northwest ______ % International
percentages ______ % Growth ______ % SAFECO FIXED ACCOUNT
only.
/ / PORTFOLIO REBALANCING: I elect to rebalance my variable sub-accounts / / quarterly / / semi-annually
TOTAL OF ALL / / annually in the same percentages as indicated above. $10,000 minimum balance required.
PERCENTAGES
MUST EQUAL Purchase Payments to the Fixed Account will be allocated immediately upon receipt. Purchase Payments to
100% the Variable Sub-Accounts may be invested in the Money Market Sub-Account until the expiration of 15 days
from the date the first Purchase Payment is received, and then will be invested according to your
investment instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
6. REPLACEMENT Will the annuity applied for here replace any life insurance or annuity from this or any other company?
ANNUITY / / Yes / / No If yes, you must complete the IRA & Non-Qualified Rollover, Direct Rollover
and Transfer form, LP-547, and submit it with this application.
- ------------------------------------------------------------------------------------------------------------------------------------
(R)Registered trademark of SAFECO Corporation
LPC-721 9/95 (TM)Spinnaker is a trademark of SAFECO Life Insurance Company
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
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7. SUITABILITY Do you understand that because variable benefits and contract values are based on investment experience
of the Separate Account and cannot be predicted or guaranteed as to dollar amounts, variable annuity
Questions must contracts should be purchased for long term retirement purposes? / / Yes / / No
be answered.
WHAT IS YOUR: WHAT IS YOUR INVESTMENT OBJECTIVE:
Occupation? High Income Long Term Growth
------------------------ ------- -------
Gross Income? $ Tax Advantage Growth with Income
------------------------ ------- -------
Net Worth? $ Other (specify)
------------------------ -------
Are you a Registered Representative of a Broker/Dealer? / / Yes / / No If yes, please give name
and address of broker dealer:
--------------------------------------------------------------------------
-------------------------------------------------------------- -----------------------------------
Broker/Dealer Authorized Principal (HOME OFFICE USE ONLY) Date
- ------------------------------------------------------------------------------------------------------------------------------------
8. TELEPHONE / / Yes, I would like the option to use Telephone Transfer. / / No, I do not wish to use the
TRANSFER option at this time.
I hereby authorize SAFECO to accept and act on telephone instructions from me or any person or persons
listed below, regarding the transfer of funds between, or change in the percentage of my allocations
among, portfolios of my variable annuity contract. This authorization will remain in effect until SAFECO
receives written revocation from me.
SAFECO will employ reasonable procedures to confirm that instructions communicated by telephone are
genuine. SAFECO reserves the right to refuse telephone instructions from any caller when unable to
confirm to SAFECO's satisfaction that the caller is authorized to give those instructions.
To transfer by telephone call SAFECO at 1-800-899-5280. All telephone transfer calls will be recorded.
You or your authorized third party will be required to provide the identification information listed
below. Written confirmation will be mailed to you. If additional room is needed for Third Party names,
please attach sheet.
AUTHORIZED THIRD PARTY: (please print full name)
--------------------------------------------------------
ID INFORMATION (REQUIRED): Mother's Maiden Name
---------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
9. PROGRAMS I have read the information in the Prospectus in regard to the following programs and would like to
elect:
Min $10,000
balance required 1. / / SYSTEMATIC INVESTING: Please complete Form LPS-5318 and remit with this application.
to elect Sweep.
2. / / INTEREST/APPRECIATION SWEEP: I elect to have / / the interest earned in my Fixed Account or
/ / appreciation of my Money Market sub-account, in excess of $_____________ (cannot be less
than total payments), transferred / / monthly / / quarterly / / annually into the
sub-accounts listed below:
3. / / DOLLAR COST AVERAGING: I elect to transfer $ (min $50) or % from the
------------- -------------
/ / variable sub-account OR / / Fixed Account*
------------------------------------------
*(max 1.33% per month, 4% per quarter) / / monthly / / quarterly to the sub-account(s) listed
below:
Money Market ______ % (DCA Only) Bond ______ % Equity ______ %
Growth ______ % Northwest ______ % Utility ______ %
Corporate Bond ______ % Nat. Resources ______ % Emerging Markets ______ %
International Stock ______ % Balanced ______ % International ______ %
- ------------------------------------------------------------------------------------------------------------------------------------
10. STATEMENT OF HAVE YOU RECEIVED A CURRENT PROSPECTUS? / / YES / / NO
OWNER(S) WOULD YOU LIKE TO RECEIVE A STATEMENT OF ADDITIONAL INFORMATION? / / YES / / NO
I declare that the statements and answers on this application are full, complete and true, to the best
of my knowledge and belief, and shall form a part of the annuity Contract issued hereon. I understand
and agree that any fees or taxes will be deducted from my Contract Value or Payment, as applicable.
Signed at
---------------------------------
on
-------------------------------- ---------------------------------------- ---------------------
Signature of Owner Signature of Joint Owner (if applicable) (mo, day, year)
- ------------------------------------------------------------------------------------------------------------------------------------
11. REGISTERED To the best of my knowledge, the annuity applied for here / / does / / does not replace any life
REPRESENTATIVE insurance or annuity in this or any other company. I hereby certify that I witnessed the signature(s)
INFORMATION above and that the answers to the questions above are true to the best of my knowledge and belief.
MAIL CONTRACT REGISTERED REPRESENTATIVE'S SIGNATURE:
DIRECTLY TO: ------------------------------------------------------------------
REGISTERED REPRESENTATIVE'S NAME (PLEASE PRINT):
--------------------------------------------------------
/ / client's address
/ / registered rep's SAFECO REP #: TELEPHONE #: ( )
office ---------------------------------------- ---------- ----------------------
STATE/LOCATION ID #: DATE:
--------------------------------- ------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
(SAFECO LOGO) TSA SPINNAKER (TM) PENSION DEPARTMENT
SAFECO INDIVIDUAL VARIABLE ANNUITY P.O. BOX 34690
LIFE INSURANCE APPLICATION SEATTLE, WA 98124-1690
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE CHECK ALL APPROPRIATE BOXES: /X/ New Participant / / Change of Employer / / Address/Name
/ / Investment Allocation Change / / Change of Agent
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACT Name John Quincy Doe /X/ Male / / Female
OWNER --------------------------------------------------------------------------------
INFORMATION First Middle Last
Mailing Address 321 Capitol Blvd. Capitol City WA 99999
-----------------------------------------------------------------------------------------------------
Street City State Zip
Telephone ( 206 ) 123-4567 Soc. Sec. # 042-33-1234 Date of Birth 11 1 65
----- --------------- -------------------- -------------------------------------
Mo. Day Yr.
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY Name Jessica Janice Doe / / Male /X/ Female
BENEFICIARY --------------------------------------------------------------------------------
First Middle Last
Address 321 Capitol Blvd. Capitol City WA 99999
------------------------------------------------------------------------------------------------------------
Street City State Zip
Soc. Sec. # ###-##-#### Date of Birth 11 15 66 Relationship to Annuitant Spouse
--------------- -------------------- ----------------------------
Mo. Day Yr.
CONSENT OF SPOUSE REQUIRED FOR ERISA PLAN PARTICIPANT NAMING A NON-SPOUSE PRIMARY BENEFICIARY:
I consent to the above designation of Beneficiary. I understand that if anyone other than me is designated as
Primary Beneficiary on this form, I am waiving my rights to receive benefits under the plan when my spouse dies.
Spousal Signature: Date:
---------------------------------------------------- -------------------------------------
/ / I'm not married
- ------------------------------------------------------------------------------------------------------------------------------------
CONTINGENT Name Jane Janice Doe / / Male /X/ Female
BENEFICIARY --------------------------------------------------------------------------------
First Middle Last
Address 321 Capitol Blvd. Capitol City WA 99999
------------------------------------------------------------------------------------------------------------
Street City State Zip
Soc. Sec. # ###-##-#### Date of Birth 11 15 86 Relationship to Annuitant Daughter
--------------- -------------------- ----------------------------
Mo. Day Yr.
NOTE: Please attach a separate page for multiple beneficiaries.
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYER Name ABC, Inc.
---------------------------------------------------------------------------------------------------------------
Address 123 Main Street Capitol City WA 99999
------------------------------------------------------------------------------------------------------------
Street City State Zip
Please verify that TSA transmittal checklist is on file with SAFECO Life Home Office. Application cannot be
processed without verification of Employer's eligibility to sponsor a 403(b) Plan.
PLANS COVERED BY ERISA:
This employee has satisfied all eligibility requirements to receive contributions under our plan. Furthermore, Joint
and Survivor Annuity option disclaimers (if required by Plan) are on file with the Plan Administrator.
PLAN ADMINISTRATOR SIGNATURE DATE 11/1/95
-------------------------------------------- ------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE OF /X/ DEFERRAL TSA
ANNUITY / / TRANSFER FROM ANOTHER TSA Original TSA was an: / / Annuity under Internal Revenue Code 403(b)
/ / Account under Internal Revenue Code 403(b)(7)
or Mutual Fund TSA
- ------------------------------------------------------------------------------------------------------------------------------------
CARRIER TO Is there an expected transfer pending? / / Yes /X/ No Transfer Amount: $
CARRIER ---------------------------------
TRANSFERS
If yes, TSA Transfer Authorization (Form LP-612) must be completed and submitted with this application.
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT /X/ SPINNAKER Q (MINIMUM DEPOSIT $30.) / / SPINNAKER PLUS (SINGLE SUM ONLY $50,000 MINIMUM)
INSTRUCTIONS
SAFECO SUB-ACCOUNT OPTIONS: OTHER COMPANY SUB-ACCOUNT OPTIONS:
Equity ______ % Scudder Balanced ______ %
Growth ______ % Scudder International ______ %
Bond ______ % Lexington Natural Resources ______ %
Northwest ______ % Lexington Emerging Markets ______ %
Money Market __50__ % Federated International Stock ______ %
Federated Corporate Bond ______ %
FIXED ACCOUNT __50__ % Federated Utility ______ %
TOTAL PERCENTAGE OF ALL INVESTMENT OPTIONS MUST EQUAL 100%
INVESTMENT INSTRUCTIONS FOR CARRIER TO CARRIER TRANSFER:
(If different from above) ------------------------------------------------------------
Deposits to the Fixed Account will be allocated to the Fixed Account immediately. The initial Deposit to Variable
Annuity Sub-Accounts may be allocated to the Money Market Sub-Account until the expiration of 15 days from the date
the first Purchase Payment is received. Then the deposit will be allocated according to your investment instructions
as shown above.
- ------------------------------------------------------------------------------------------------------------------------------------
(TM)Spinnaker is a trademark of SAFECO Life Insurance Company.
(R)Registered trademark of SAFECO Corporation
</TABLE>
LPC-722 9/95
<PAGE> 4
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRIBUTION Minimum investment for Spinnaker Q is $30 per deposit. SOURCE OF CONTRIBUTION:
FREQUENCY & Minimum $50,000 initial investment for Spinnaker Plus. /X/ Employee Salary Reduction
SOURCE
/ / Annual (01) / / Bi-Weekly (26) / / Employer
/ / Quarterly (04) / / Weekly (52)
/X/ Monthly (12) / / 10-Pay Periods Deductions will begin month of January
--------------------------
/ / Semi-Monthly (24) / / Other Months to exclude
--------------------- ---------------------------------------
Anticipated annual contributions: $ 1200
------------------------------------------
(AMOUNT MUST BE PROVIDED)
- ------------------------------------------------------------------------------------------------------------------------------------
REPLACEMENT Will the annuity applied for here replace any life insurance or annuity from this or any other company?
ANNUITY
/ / Yes / / No If yes, give policy number and full company name: Policy #
--------------------------------------
Company Name:
------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SUITABILITY I understand that a $30 non-refundable administrative fee will be deducted on the last day of each certificate year.
(Must be
completed) Do you understand that because variable benefits and contract values are based on the investment experience of the
Separate Account and cannot be predicted or guaranteed as to dollar amounts, variable annuity contracts should be
purchased for long term retirement purposes /X/ Yes / / No
Have you received a current Prospectus? /X/ Yes / / No
Would you like to receive a Statement of Additional Information: / / Yes /X/ No
What is your occupation? Teacher WHAT IS YOUR INVESTMENT OBJECTIVE:
------------------------------
What is your income? $30,000 _____ HIGH INCOME __X__ LONG TERM GROWTH
------------------------------
What is your net worth? $250,000 _____ TAX ADVANTAGE _____ GROWTH WITH INCOME
------------------------------
_____ OTHER (SPECIFY)
Are you a Registered Representative of another Broker-Dealer? / / Yes /X/ No
If yes, provide name and address of Broker-Dealer:
------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Broker-Dealer Authorized Principal (Home Office Use Only) Date
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENT I understand that the contract(s) I am applying for contains a surrender charge for the first eight years. I
OF OWNER understand that Minimum Distributions will automatically be sent to me in accordance with IRS regulations upon
attaining age 70-1/2. Further, I agree that if any deposits to my account result from salary deferrals that I am
solely responsible for determining my maximum allowable deferral. The Employer and SAFECO may rely fully on my
certification concerning my deferral limits. I am a of and understand the withdrawal restrictions imposed under IRC
Section 403(b)(11).
I DECLARE THAT THE STATEMENTS AND ANSWERS RECORDED ON THIS APPLICATION ARE COMPLETE AND ACCURATE TO THE BEST OF MY
KNOWLEDGE.
11/1/95
--------------------------------------------------------------------------------------------------------------------
Signature of Annuitant Date
- ------------------------------------------------------------------------------------------------------------------------------------
TELEPHONE / / Yes, I would like the option to use Telephone Transfer. /X/ No, I do not wish the option at this time.
TRANSFER
AUTHORIZATION I hereby authorize SAFECO to accept and act on my telephone instructions to transfer funds or to change the
percentage of my allocations among portfolios of my variable annuity contract.
SAFECO will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. SAFECO
reserves the right to refuse telephone instructions from any caller when unable to confirm to SAFECO's satisfaction
that the caller is authorized to give those instructions.
To transfer by telephone call SAFECO at 1-800-899-5280. The call will be recorded and you will be required to
provide the identification information listed below. If you would like to authorize a third party to act on your
behalf, provide their full name below.
ID INFORMATION (REQUIRED): Mother's Maiden Name
--------------------------------------------------------------------
and Authorized 3rd Party Name:
-------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
AGENCY/ To the best of my knowledge, the annuity applied for here [ / / does OR / / does not ] replace any life insurance or
AGENT annuity in this or any other company. I hereby certify that I witnessed the signature of the annuitant and that
his/her answers to the questions above are true to the best of my knowledge. ALSO, I HAVE ATTACHED THE INFORMATION
NECESSARY TO CALCULATE THE PARTICIPANT'S MAXIMUM EXCLUSION ALLOWANCE.
Agent Name(s): Agnes Agent Stat #: 123-45555 % 100
--------------------------------------------------------- ---------------------- ------------
Agent Name(s): Stat #: %
--------------------------------------------------------- ---------------------- ------------
Agency: AAA Agency 333-44-123
------------------------------------------------------------------------------------------------------------
State/Location ID#
Agent Signature: ( 206 ) 333-3455
------------------------------------------------------- -------- ---------------------------------
Telephone #
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 8a(i)
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER VARIABLE
LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust created under
a Declaration of Trust dated March 15, 1985, as amended with a principal place
of business in Boston, Massachusetts and SAFECO Life Insurance Companies, a
Washington corporation (the "Company"), with a principal place of business in
Seattle, Washington on behalf of the SAFECO SafeFlex Variable Account, a
separate account of the Company, and any other separate account of the Company
as designated by the Company from time to time, upon written notice to the Fund
in accordance with Section 10 herein (the "Account").
WHEREAS, the Fund acts as the investment vehicle for the separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively referred to herein as "Variable Insurance Products") to
the offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies") and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares of beneficial interest ("Shares"), and additional series of
Shares may be established, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities; and
WHEREAS, it is in the best interest of Participating Insurance
Companies to make capital contributions if required so that the annual expenses
of each Portfolio of the Fund in which a
1
<PAGE> 2
Participating Insurance Company is a shareholder will not exceed a fixed
percentage of the Portfolio's average annual net assets; and
WHEREAS, the Parties desire to evidence their agreement as to certain
other matters,
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Additional Definitions.
-----------------------
For the purposes of this Agreement, the following definitions shall
apply:
(a) The "expenses of a Portfolio" for any fiscal year
shall mean the expenses for such fiscal year as shown in the Statement of
Operations (or similar report) certified by the Fund's independent public
accountants;
(b) A "Portfolio's average daily net assets" for each
fiscal year shall mean the sum of the net asset values determined throughout the
year for the purpose of determining net asset value per Share, divided by the
number of such determinations during such year;
(c) The Company's "Required Contribution" on behalf of the
Account in respect of a Portfolio for any fiscal year shall mean an amount equal
to the expenses of that Portfolio for such year minus the below-indicated
percentage of that Portfolio's average daily net assets for the year:
<TABLE>
<S> <C>
Managed International Portfolio . . . . . . 1.5%
Each other Portfolio. . . . . . . . . . . . 0.75%
</TABLE>
multiplied by a fraction the denominator of which is the average daily net
assets of that Portfolio and the numerator of which is
2
<PAGE> 3
the average daily net asset value of the Shares of that Portfolio owned by the
Account (referred to herein as a "Participating Shareholder"). The Company's
Required Contribution in respect of a Portfolio shall be pro-rated based on the
number of business days on which this Agreement is in effect for periods of less
than a fiscal year.
(d) The "average daily net asset value of the Shares of
the Portfolio" owned by the Account for any fiscal year of the Fund shall mean
the greater of (i) $500,000 or (ii) the sum of the aggregate net asset values of
the Shares so owned determined during the fiscal year, as of each determination
of the net asset value per Share, divided by the total number of determinations
of net asset value during such year.
(e) "Shares" means shares of beneficial interest, without
par value, of any Portfolio, now or hereafter created, of the Fund.
2. Capital Contribution.
---------------------
The Company on behalf of the Account shall, within sixty days after the
end of each fiscal year of the Fund, make a capital contribution to the Fund in
respect of each Portfolio equal to the Required Contribution for that Portfolio
for such year; provided, however, that in the event that both clauses (i) and
(ii) of paragraph (d) of Section 1 of this Agreement or similar agreements are
applicable to different Participating Insurance Companies during the same fiscal
year, there shall be a proportionate reduction of the Required Contribution of
each Participating Insurance Company to which said clause (ii) is applicable so
that the total of all required capital contributions to the Fund on
3
<PAGE> 4
behalf of any Portfolio is not greater than the excess of the expenses of that
Portfolio for that fiscal year less the percentage of that Portfolio's total
expenses set forth in paragraph (c) of Section 1 of this Agreement for such
fiscal year.
3. Duty of Fund to Sell.
---------------------
The Fund shall make its Shares available for purchase at the applicable
net asset value per Share by Participating Insurance Companies and their
affiliates and separate accounts on those days on which the Fund calculates its
net asset value pursuant to rules of the Securities and Exchange Commission;
provided, however, that the Trustees of the Fund may refuse to sell Shares of
any Portfolio to any person, or suspend or terminate the offering of Shares of
any Portfolio, if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees, necessary in
the best interest of the shareholders of any Portfolio.
4. Requirement to Execute Participation Agreement; Requests.
---------------------------------------------------------
Each Participating Insurance Company shall, prior to purchasing Shares
in the Fund, execute and deliver a participation agreement in a form
substantially identical to this Agreement.
The Fund shall make available, upon written request from the
Participating Insurance Company given in accordance with Paragraph 10, to each
Participating Insurance Company which has executed an Agreement and which
Agreement has not been terminated pursuant to Paragraph 8(i)a list of all other
Participating Insurance Companies, and (ii) a copy of the Agreement as executed
by any other Participating Insurance Company.
4
<PAGE> 5
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
5. Indemnification.
----------------
The Company agrees to indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund within
the meaning of Section 15 of the Securities Act of 1933 (the "Act") against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
which (i) may be based upon any wrongful act by the Company, any of its
employees or representatives, any affiliate of or any person acting on behalf of
the Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a
5
<PAGE> 6
registration statement or prospectus covering Shares or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by the Company, or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company or any insurance company which is an affiliate thereof, or any
amendments or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, unless such statement or
omission was made in reliance upon information furnished to the Company or such
affiliate by or on behalf of the Fund; provided, however, that in no case (i) is
the Company's indemnity in favor of a Trustee or officer or any other person
deemed to protect such Trustee or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Company to be liable under its indemnity agreement
contained in this Paragraph 5 with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Company in writing pursuant to Paragraph 10 within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon the Fund or
upon such person (or after the Fund or such person shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it has to the
Fund or any person against whom such action is brought otherwise than on account
of its indemnity agreement contained in this Paragraph 5.
6
<PAGE> 7
The Company shall be entitled to participate, at its own expense, in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if it elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the Fund,
to its officers and Trustees, or to any controlling person or persons, defendant
or defendants in the suit. In the event that the Company elects to assume the
defense of any such suit and retain such counsel, the Fund, such officers and
Trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them,
but, in case the Company does not elect to assume the defense of any such suit,
the Company will reimburse the Fund, such officers and Trustees or controlling
person or persons, defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them. The Company agrees promptly to
notify the Fund pursuant to Paragraph 10 of the commencement of any litigation
or proceedings against it in connection with the issue and sale of any Shares.
The Fund agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the
7
<PAGE> 8
Fund, or (ii) may be based upon any untrue statement or alleged untrue statement
of a material fact contained in a registration statement or prospectus covering
Shares or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading unless such statement or
omission was made in reliance upon information furnished to the Fund by the
Company or (iii) may be based on any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering insurance products sold by the Company, or an amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; provided,
however, that in no case (i) is the Fund's indemnity in favor of a director or
officer or any other person deemed to protect such director or officer or other
person against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of obligations
and duties under this Agreement or (ii) is the Fund to be liable under its
indemnity agreement contained in this Paragraph 5 with respect to any claims
made against the Company or any such director, officer or controlling person
unless it or such director, officer or controlling person, as the case may be,
shall have notified the Fund in writing
8
<PAGE> 9
pursuant to Paragraph 10 within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon it or upon such director, officer or controlling person (or
after the Company or such director, officer or controlling person shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any claim shall not relieve it from any liability which it may have
to the person against whom such action is brought otherwise than on account of
its indemnity agreement contained in this Paragraph. The Fund will be entitled
to participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Company, its directors, officers or controlling
person or persons, defendant or defendants, in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
Company, its directors, officers or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, but, in case the Fund does not elect to assume the
defense of any such suit, it will reimburse the Company or such directors,
officers or controlling person or persons, defendant or defendants in the suit,
for the reasonable fees and expenses of any counsel retained by them. The Fund
agrees promptly to notify the Company pursuant to Paragraph 10 of the
commencement of any litigation or proceedings against it or any of
9
<PAGE> 10
its officers or trustees in connection with the issuance or sale of any Shares.
6. Procedure for Resolving Irreconcilable Conflicts.
-------------------------------------------------
(a) The Trustees of the Fund will monitor the operations of the
Fund for the existence of any material irreconcilable conflict among the
interests of all the contractholders and policyowners of Variable Insurance
Products (the "Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
insurance laws or regulations; (c) a tax ruling or provision of the Internal
Revenue Code or the regulations thereunder; (d) any other development relating
to the tax treatment of insurers, contractholders or policyowners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contractholders, on the one hand, and
variable life insurance policyowners, on the other hand, or by the
contractholders or policyowners of different participating insurance companies;
or (g) a decision by an insurer to override the voting instructions of
Participants.
(b) The Company will be responsible for reporting any potential or
existing conflicts to the Trustees of the Fund. The Company will be responsible
for assisting the Trustees in carrying out their responsibilities under this
Paragraph 6(b) and Paragraph 6(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund
10
<PAGE> 11
will also request its investment advisor to report to the Trustees any such
conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the Fund,
or a majority of its disinterested Trustees, that a material irreconcilable
conflict exists involving the Company, the Company shall, at its expense, and to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees), take whatever steps are necessary to eliminate the
irreconcilable material conflict, including withdrawing the assets allocable to
some or all of the separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including another
Portfolio of the Fund, offering to the affected Participants the option of
making such a change or establishing a new funding medium including a registered
investment company.
For purposes of this Paragraph 6(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios, as they in their sole discretion determine to be in the interest of
all shareholders and Participants in view of all applicable factors, such as
cost, feasibility, tax, regulatory and other considerations. In no event will
the Fund be required by this Paragraph 6(c) to establish a new funding medium
for any variable contract or policy.
The Company shall not be required by this Paragraph 6(c) to establish a
new funding medium for any variable contract or policy
11
<PAGE> 12
if an offer to do so has been declined by a vote of a majority of the
Participants materially adversely affected by the material irreconcilable
conflict. The Company will recommend to its Participants that they decline an
offer to establish a new funding medium only if the Company believes it is in
the best interest of the Participants.
(d) The Trustees' determination of the existence of an
irreconcilable material conflict and its implications promptly shall be
communicated to all Participating Insurance Companies by written notice thereof
delivered or mailed, first class postage prepaid.
7. Voting Privileges.
------------------
The Company shall be responsible for assuring that its separate account
or accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants permitted
to give instructions and the number of Shares for which instructions may be
given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such propostition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting
12
<PAGE> 13
instructions are received. Participants continued in effect under lapse options
will not be permitted to give voting instructions. Shares held in any other
insurance company general or separate account or sub-account thereof will be
voted in the proportion specified in the second preceding sentence for shares
attributable to policies.
8. Duration and Termination.
-------------------------
This Agreement shall remain in force for the period ending five years
from the date of its execution (such date and any anniversary of such date being
hereinafter called a "Renegotiation Date"), and from year to year thereafter
provided that neither the Company nor the Fund shall have given written notice
to the other within thirty (30) days prior to a Renegotiation Date that it
desires to renegotiate the amount of contribution to capital due hereunder
("Renegotiation Notice"). If a Renegotiation Notice is properly given as
aforesaid and the Fund and the Company shall fail, within sixty (60) days after
the Renegotiation Date, either to enter into an amendment to this Agreement or a
written acknowledgment that the Agreement shall continue in effect, this
Agreement shall terminate as of the one hundred twentieth day after such
Renegotiation Date. If this Agreement is so terminated, the Fund may, at any
time thereafter, automatically redeem the Shares of any Portfolio held by a
Participating Shareholder. This Agreement may be terminated at any time, at the
option of either of the Company or the Fund, when neither the Company, any
insurance company nor the separate account or accounts of such insurance company
which is an affiliate thereof which is not a Participating Insurance Company own
any Shares of the Fund or may be terminated
13
<PAGE> 14
by either party to the Agreement upon a determination by a majority of the
Trustees of the Fund, or a majority of its disinterested Trustees, following
certification thereof by a Participating Insurance Company given in accordance
with Paragraph 10 that an irreconcilable conflict exists among the interests of
(i) all contractholders and policyholders of Variable Insurance Products of all
separate accounts or (ii) the interests of the Participating Insurance Companies
investing in the Fund. Notwithstanding anything to the contrary in this
Agreement or its termination as provided herein, the Company's obligation to
make a capital contribution to the Fund in accordance with this Agreement at the
time in effect shall continue (i) following a properly given Renegotiation
Notice, in the absence of agreement otherwise, until termination of this
Agreement, and (ii) (except termination due to the existence of an
irreconcilable conflict), following termination of this Agreement, until the
later of the fifth anniversary of the date of this Agreement or the date on
which the Company, its separate account(s) or the separate account(s) of any
affiliated insurance company owns no Shares.
9. Compliance.
-----------
The Fund will comply with the provisions of Section 4240(a) of the New
York Insurance Law.
Each portfolio of the Fund will comply with the provisions of Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to diversification requirements for variable annuity, endowment and life
insurance contracts. Specifically, each Portfolio will comply with either (i)
the requirement of Section 817(h)(1) of the Code that its assets be adequately
diversified, or
14
<PAGE> 15
(ii) the "Safe Harbor for Diversification" specified in Section 817(h)(2) of the
Code, or (iii) the diversification requirement of Section 817(h)(1) of the Code
by having all or part of its assets invested in U.S. Treasury securities which
qualify for the "Special Rule for Investments in United States Obligations"
specified in Section 817(h)(3) of the Code.
The provisions of Paragraphs 6 and 7 of this Agreement shall be
interpreted in a manner consistent with any Rule or order of the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended,
applicable to the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general
public.
10. Notices.
--------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Scudder Variable Life Investment Fund
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
SAFECO Life Insurance Companies
15411 NE 51st Street
Redmond, Washington 98052
Attn: Mira Freiberg
11. Massachusetts Law to Apply.
---------------------------
15
<PAGE> 16
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous.
--------------
The name "Scudder Variable Life Investment Fund" is the designation of
the Trustees for the time being under a Declaration of Trust dated March 15,
1985, as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio shall
be liable for any obligations properly attributable to any other Portfolio.
The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
13. Entire Agreement.
-----------------
This Agreement incorporates the entire understanding and agreement
among the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the 31st day of
December, 1992.
16
<PAGE> 17
SEAL SCUDDER VARIABLE LIFE INVESTMENT FUND
By: /S/ David B. Watts
--------------------
President
SEAL SAFECO LIFE INSURANCE COMPANIES
By: /S/ John P. Fenlason
----------------------
Its: Senior Vice President
-----------------------
17
<PAGE> 1
EXHIBIT 8a(ii)
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT (the "Agreement") made by and between SCUDDER,
STEVENS & CLARK, INC., a Delaware corporation ("SS&C"), with a principal place
of business in Boston, Massachusetts and SAFECO LIFE INSURANCE COMPANIES, a
Washington corporation (the "Company"), with a principal place of business in
Seattle, Washington on behalf of the SAFECO SafeFlex Variable Account, a
separate account of the Company, and any other separate account of the Company
as designated by the Company from time to time, upon written notice to the Fund
in accordance with Section 9 herein (the "Account").
WHEREAS, SS&C has caused to be organized Scudder Variable Life
Investment Fund (the "Fund"), a Massachusetts business trust created under a
Declaration of Trust dated March 15, 1985, as amended, the beneficial interest
in which is divided into several series, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities; and
WHEREAS, the purpose of the Fund is to act as the investment vehicle
for the separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered into reimbursement agreements substantially identical to this Agreement
("Participating Insurance Companies"); and
WHEREAS, it is in the best interest of the parties hereto for
Participating Insurance Companies, including the Company, to assume a portion of
the organization and other expenses incurred
<PAGE> 2
by SS&C in connection with the Fund during the term of this agreement; and
WHEREAS, the parties desire to express their agreement as to certain
other matters;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Additional Definitions.
-----------------------
For purposes of this Agreement, the following definitions shall apply:
(a) The "average annual net asset value of the Shares of
each Portfolio of the Fund" shall mean the sum of the aggregate
net asset values of the Shares of such Portfolio owned by the
Account (referred to herein as the "Participating Shareholder")
determined as of each determination of the net asset value per
Share of the Fund during the fiscal year, divided by the number
of such determinations during such year.
(b) "Shares" means shares of beneficial interest,
without par value, of any Portfolio, now or hereafter created,
of the Fund.
2. Initial Reimbursement Fee.
--------------------------
Simultaneously with the execution of this Agreement, the Company on
behalf of the Account has paid to SS&C a fee ("Reimbursement Fee") in the amount
of $10,000 in order partially to defray expenses incurred by SS&C in connection
with the organization of the Fund.
2
<PAGE> 3
3. Access to Other Products.
-------------------------
SS&C shall permit a Participating Shareholder to participate in any
registered investment company other than the Fund which is intended as the
funding vehicle for insurance products and for which SS&C or an affiliate of
SS&C acts as investment adviser, on the same basis as other insurance companies
are permitted to participate in such a registered investment company. This
provision shall not require SS&C to make available to the Company shares of any
investment company which is organized solely as the funding vehicle for
insurance products offered by a single insurance company or a group of
affiliated insurance companies.
4. Right to Review and Approve Sales Materials.
--------------------------------------------
The Company shall furnish, or shall cause to be furnished, to SS&C or
its designee, at least twenty days prior to its intended use, each piece of
promotional material in which SS&C or the Fund is named. No such material shall
be used unless SS&C or its designee shall have approved such use in writing, or
twenty days shall have elapsed without approval, rejection or objection since
receipt by SS&C or its designee of such material.
SS&C shall furnish, or shall cause to be furnished, to the Company or
its designee, at least twenty days prior to its intended use, each piece of
promotional material in which the Company or its separate account(s) is named.
No such material shall be used unless the Company or its designee shall have
approved such use in writing, or twenty days shall have elapsed without
approval, rejection or objection since receipt by the Company or its designee of
such material.
3
<PAGE> 4
5. Sales Organization Meetings.
----------------------------
Representatives of SS&C or its designee shall meet with the sales
organizations of the Company at such reasonable times and places as may be
agreed upon by the Company and SS&C or its designee for the purpose of educating
sales personnel about the Fund.
6. Duration.
---------
This Agreement shall continue in effect for five (5) years from the
date of its execution, except that the obligation of each party hereto to
indemnify the other party hereto shall continue with respect to all losses,
claims, damages, liabilities or litigation based upon the acquisition of Shares
purchased as the funding vehicle for any variable life insurance policy or
variable annuity contract issued by the Company or any affiliated insurance
company.
7. Indemnification.
----------------
The Company agrees to indemnify and hold harmless SS&C and each of its
Directors and officers and each person, if any, who controls SS&C within the
meaning of Section 15 of the Securities Act of 1933 (the "Act") or any person,
controlled by or under common control with SS&C ("affiliate") against any and
all losses, claims, damages, liabilities or litigation (including legal and
other expenses) to which SS&C or such Directors, officers or controlling person
may become subject under the Act, under any other statute, at common law or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Company, any of its employees
4
<PAGE> 5
or representatives, any affiliate of or any person acting on behalf of the
Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to stated therein or necessary to make
the statements therein not misleading if such a statement or omission was made
in reliance upon information furnished to SS&C or the Fund by the Company,
provided, however, that in no case (i) is the Company s indemnity in favor of a
Director or officer or any other person deemed to protect such Director or
officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement or (ii) is the Company
to be liable under its indemnity agreement contained in Paragraph 7 with respect
to any claim made against SS&C or any person indemnified unless SS&C or such
person, as the case may be, shall have notified the Company in writing pursuant
to Paragraph 9 within a reasonable time after the summons or other first legal
process giving information of the nature of the claims shall have been served
upon SS&C or upon such person (or after SS&C or such person shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any
5
<PAGE> 6
liability which it has to SS&C or any person against whom such action is brought
otherwise than on account of the indemnity agreement contained in this Paragraph
7. The Company shall be entitled to participate, at its own expense, in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if it elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to SS&C, to
its officers and Directors, or to any controlling person or persons, defendant
or defendants in the suit. In the event that the Company elects to assume the
defense of any such suit and retain such counsel, SS&C, such officers and
Directors or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them,
but, in case the Company does not elect to assume the defense of any such suit,
the Company will reimburse SS&C, such officers and Directors or controlling
person or persons, defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them. The Company agrees promptly to
notify SS&C pursuant to Paragraph 9 of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any Shares.
SS&C agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or
6
<PAGE> 7
such directors, officers or controlling persons may become subject under the
Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by SS&C, any of its employees or representatives or a principal underwriter
of the Fund, or (ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering Shares or any amendment thereof or supplement thereto or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon information furnished to the
Company by SS&C; provided, however, that in no case (i) is SS&C s indemnity in
favor of a director or officer or any other person deemed to protect such
director or officer or other person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement or (ii) is
SS&C to be liable under its indemnity agreement contained in this Paragraph 7
with respect to any claims made against the Company or any such director,
officer or controlling person unless it or such director, officer or controlling
person, as the case may be, shall have notified SS&C in writing pursuant to
Paragraph 9 within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have
7
<PAGE> 8
been served upon it or upon such director, officer or controlling person (or
after the Company or such director, officer or controlling person shall have
received notice of such service on any designated agent), but failure to notify
SS&C of any claim shall not relieve it from any liability which it may have to
the person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 7. SS&C will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if SS&C
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Company, its directors, officers or controlling
person or persons, defendant or defendants, in the suit. In the event SS&C
elects to assume the defense of any such suit and retain such counsel, the
Company, its directors, officers or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, but, in case SS&C does not elect to assume the defense
of any such suit, it will reimburse the Company or such directors, officers or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. SS&C agrees
promptly to notify the Company pursuant to Paragraph 9 of the commencement of
any litigation or proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any Shares.
8. Massachusetts Law to Apply.
---------------------------
8
<PAGE> 9
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
9. Notices.
--------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to SS&C:
Scudder, Stevens & Clark, Inc.
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
SAFECO Life Insurance Companies
15411 N.E. 51st Street
Redmond, Washington 98052
Attn: Mira Freiberg
10. Miscellaneous.
--------------
The captions in the Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the 31st day of
December, 1992.
9
<PAGE> 10
SEAL SCUDDER, STEVENS & CLARK, INC.
By /S/ David B. Watts
---------------------
Managing Director
SEAL SAFECO LIFE INSURANCE COMPANIES
By /S/ John P. Fenlason
-----------------------
Its Senior Vice President
------------------------
10
<PAGE> 1
EXHIBIT 8a(iii)
Scudder Investor Services, Inc.
175 Federal Street
Boston, Massachusetts 02110
PARTICIPATING CONTRACT AND POLICY AGREEMENT
Dear Sirs:
We (sometimes hereinafter referred to as "Investor Services") are the
Principal Underwriter of shares of Scudder Variable Life Investment Fund (the
"Fund"), a no-load, open-end, diversified registered management investment
company established in 1985 as a Massachusetts business trust. The Fund is a
series fund consisting of the Money Market Portfolio, Managed Bond Portfolio,
Managed Capital Growth Portfolio, Managed Diversified Portfolio and the Managed
International Portfolio (individually or collectively hereinafter referred to as
the "Portfolio" or the "Portfolios"). Additional Portfolios may be created from
time to time. The Fund is the funding vehicle for variable annuity contracts and
variable life insurance policies ("Participating Contracts and Policies") to be
offered to the separate accounts (the "Accounts") of certain life insurance
companies ("Participating Insurance Companies"). Owners of Participating
Contracts and Policies will designate a portion of their premium to be invested
in insurance company separate accounts or sub-accounts which invest in, or
represent an investment in, directly or indirectly, shares of beneficial
interest ("Shares") of the Portfolios of the Fund. You are a registered
broker-dealer which intends to offer and sell Participating Contracts and
Policies. In connection with such offer and sale you will be obligated to
deliver the prospectuses of such Participating Contracts and
<PAGE> 2
Policies and, contemporaneously therewith, the prospectus of the Fund. Sales of
Shares to Participating Insurance Companies or their affiliates or the separate
accounts of either shall be effected solely by us as principal underwriter of
the Fund, and not by you; provided, however, that you shall be our agent in
connection with the receipt of purchase orders for Fund Shares and not in
connection with their offer and sale. The relationship between us shall be
further governed by the following terms and conditions:
1. To the extent, if any, that your activities or the activities
of the Participating Insurance Companies in connection with the
sale of Participating Contracts and Policies may constitute the
sale of Shares, you and we agree that (i) we are the sole
"principal underwriter" of the Fund and the sole "underwriter"
of the Shares as those terms are defined in the Investment
Company Act of 1940 (the "1940 Act") and the Securities Act of
1933 (the "1933 Act"), respectively, and (ii) neither you nor
the Participating Insurance Companies or the Accounts shall be
deemed to be "principal underwriters" of the Fund or
"underwriters" of the Fund within the meaning of the 1940 Act
and the 1933 Act, respectively.
2. You hereby represent and warrant to us as follows:
(a) You are a corporation duly organized and validly
existing in good standing under the laws of the State
of Washington and have full power and authority to
enter into this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by you and is a valid and binding obligation
enforceable against you in accordance with its terms.
(c) Your compliance with the provisions of this Agreement
will not conflict with or result in a violation of the
provisions of your charter or by-laws, or any statute
or any judgment, decree, order, rule or regulation of
any court or governmental agency or body having
jurisdiction.
3. We hereby represent and warrant to you as follows:
2
<PAGE> 3
(a) A registration statement (File No. 2-96461) on Form
N-1A with respect to the Shares (x) has been prepared
by the Fund in conformity with the requirements of the
1940 Act and the 1933 Act and all applicable published
instructions, rules and regulations (the "Rules and
Regulations") of the Securities and Exchange
Commission (the "Commission"), and (y) has been filed
with the Commission, and (z) is currently effective.
The registration statement, including financial
statements and exhibits, and the final prospectus,
including the statement of additional information, as
subsequently amended and supplemented, are herein
respectively referred to as the "Registration
Statement" and the "Prospectus".
(b) The Registration Statement and the Prospectus and any
amendment or supplement thereto will contain all
statements required to be stated therein and will
comply in all material respects with the requirements
of the 1940 Act, the 1933 Act and the Rules and
Regulations, and the Registration Statement and any
post-effective amendment thereto will not contain or
incorporate by reference any untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading, and the
Prospectus and any amendment or supplement thereto
will not contain or incorporate by reference any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading.
(c) We are a corporation duly organized and validly
existing in good standing under the laws of The
Commonwealth of Massachusetts and have full power and
authority to enter into this Agreement.
(d) This Agreement has been duly authorized, executed and
delivered by us and is a valid and binding obligation
enforceable against us in accordance with its terms.
(e) Our compliance with all of the provisions of this
Agreement will not conflict with or result in a
violation of the provisions of our charter or by-laws,
or any statute or any judgment, decree, order, rule or
regulation of any court or
3
<PAGE> 4
governmental agency or body having jurisdiction over
us.
4. You hereby covenant and agree with us as follows:
(a) You shall be an independent contractor and neither you
nor any of your directors, partners, officers or
employees as such, is or shall be an employee of us or
of the Fund. You are responsible for your own conduct
and the employment, control and conduct of your agents
and employees and for injury to such agents or
employees or to others through your agents or
employees.
(b) You or one or more Participating Insurance Companies
will be responsible for insuring compliance with all
applicable laws and regulations of any regulatory body
having jurisdiction over you or Participating
Contracts and Policies.
(c) No person is authorized to make any representations
concerning Shares except those contained in the
prospectus and statement of additional information
relating thereto and in such printed information as
issued by us for use as information supplemental to
the prospectus. In offering Participating Contracts
and Policies you shall, with respect to the Fund and
the Shares, rely solely on the representations
contained in the prospectus and statement of
additional information and in the above-mentioned
supplemental information.
(d) You are not entitled to any compensation whatsoever
from us or the Fund with respect to offers of
Participating Contracts and Policies.
5. We hereby covenant and agree with you as follows:
(a) If, at any time when a prospectus relating to the
Shares is required to be delivered under the 1940 Act,
the 1933 Act or the Rules and Regulations, we become
aware of the occurrence of any event as a result of
which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the
statements therein, in light of the circumstances
under which made, not misleading, or if we become
aware that it has become necessary at any time to
amend or supplement the Prospectus to comply with the
1940 Act, the 1933 Act or the Rules and Regulations,
we will promptly notify you and promptly request the
4
<PAGE> 5
Fund to prepare and to file with the Commission an
amendment to the Registration Statement or supplement
to the Prospectus which will correct such statement or
omission or an amendment or supplement which will
effect such compliance, and deliver to you copies of
any such amendment or supplement.
(b) We will cooperate with you in taking such action as
may be necessary to qualify the Shares for offering
and sale under the securities or Blue Sky laws of any
state or jurisdiction as you may request and will
continue such qualification in effect so long as is
required by applicable law in connection with the
distribution of Shares.
6. We reserve the right in our discretion, without notice, to
suspend sales or withdraw the offering of Shares entirely, as
to any person or generally. We reserve the right to amend this
agreement at any time and you agree that the sale of
Participating Contracts and Policies, after notice of any such
amendment has been sent to you, shall constitute your agreement
to any such amendment.
7. If we elect to provide to you for the purpose of your offering
Participating Contracts and Policies copies of any prospectus
and statement of additional information relating to the Shares
and printed information supplemental thereto, we shall furnish
you with such copies as you reasonably request upon the payment
of reasonable charges therefor by you or one or more
Participating Insurance Companies. If we elect not to provide
such copies of such documents, you or one or more Participating
Insurance Companies shall bear the entire cost of printing
copies for your use. You shall not use such copies of such
documents printed by you or one or more Participating Insurance
Companies until you shall have furnished us with a copy thereof
and we either have given you written approval for use or twenty
days shall have elapsed following our receipt thereof and we
have not objected thereto in writing.
8. (a) You will indemnify and hold harmless Investor Services
and each of its directors and officers and each
person, if any, who controls Investor Services within
the meaning of Section 15 of the 1933 Act, against any
loss, liability, damages, claim or expense (including
the reasonable cost of investigating or defending any
alleged loss, liability, damages, claim or expense and
reasonable counsel fees incurred in connection
therewith), arising by reason of any person s
acquiring any Shares, which may be based upon the
5
<PAGE> 6
1933 Act or any other statute or common law, and which
(i) may be based upon any wrongful act by you, any of
your employees or representatives, any affiliate of or
any person acting on behalf of you, or (ii) may be
based upon any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement or prospectus covering Shares
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to us or the Fund
by you, or (iii) may be based on any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement or prospectus
covering insurance products sold by you, or any
amendments or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, unless
such statement or omission was made in reliance upon
information furnished to you or a Participating
Insurance Company by or on behalf of Investor Services
or the Fund; provided, however, that in no case (i) is
the indemnity by you in favor of any person
indemnified to be deemed to protect Investor Services
or any such person against any liability to which
Investor Services or any such person would otherwise
be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its or his
duties or by reason of its or his reckless disregard
of its obligations and duties under this Agreement, or
(ii) are you to be liable under your indemnity
agreement contained in this paragraph with respect to
any claim made against Investor Services or any person
indemnified unless Investor Services or such person,
as the case may be, shall have notified you in writing
within a reasonable time after the summons or other
first legal process giving information of the nature
of the claim shall have been served upon Investor
Services or upon such person (or after Investor
Services or such person shall have received notice of
such service on any designated agent), but failure to
notify you of any such claim shall not relieve you
from any liability which you may have to Investor
Services or any person against whom such action is
brought otherwise than on account of your indemnity
agreement contained in this paragraph. You shall be
entitled to participate, at your own
6
<PAGE> 7
expense, in the defense, or, if you so elect, to
assume the defense of any suit brought to enforce any
such liability, but, if you elect to assume the
defense, such defense shall be conducted by counsel
chosen by you and satisfactory to Investor Services,
or to its officers or directors, or to any controlling
person or persons, defendant or defendants in the
suit. In the event that you assume the defense of any
such suit and retain such counsel, Investor Services
or such officers or directors or controlling person or
persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel
retained by them, but, in case you do not elect to
assume the defense or any such suit, you shall
reimburse Investor Services and such officers,
directors or controlling person or persons, defendant
of defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them. You
agree promptly to notify Investor Services of the
commencement of any litigation or proceedings against
it in connection with the offer, issue and sale of any
shares.
(b) Investor Services will indemnify and hold harmless you
and each of your directors and officers and each
person, if any, who controls you within the meaning of
Section 15 of the 1933 Act, against any loss,
liability, damages, claim or expense (including the
reasonable cost of investigating or defending any
alleged loss, liability, damages, claim or expense and
reasonable counsel fees incurred in connection
therewith), arising by reason of any person s
acquiring any Shares, which may be based upon the 1933
Act or any other statute or common law, and which (i)
may be based upon any wrongful act by Investor
Services, any of its employees or representatives, or
(ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement or prospectus covering Shares
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading unless such statement or omission was made
in reliance upon information furnished to Investor
Services or the Fund by you or (iii) may be based on
any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or
prospectus covering insurance products sold by you, or
any amendment or supplement thereto, or the omission
or alleged omission to state therein
7
<PAGE> 8
a material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading, if such statement or omission was made
in reliance upon information furnished to you by or on
behalf of Investor Services or the Fund; provided,
however, that in no case (i) is the indemnity by
Investor Services in favor of any person indemnified
to be deemed to protect you or any such person against
any liability to which you or any such person would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of
your or his duties by reason of your or his reckless
disregard of your or his obligations and duties under
this Agreement, or (ii) is Investor Services to be
liable under its indemnity agreement contained in this
paragraph with respect to any claim made against you
or any person indemnified unless you or such person,
as the case may be, shall have notified Investor
Services in writing within a reasonable time after the
summons or other first legal process giving
information of the nature of the claim shall have been
served upon you or upon such person (or after you or
such person shall have received notice of such service
on any designated agent), but failure to notify
Investor Services of any such claim shall not relieve
Investor Services from any liability to which Investor
Services may have to you or any person against whom
such action is brought otherwise than on account of
its indemnity agreement contained in this paragraph.
Investor Services shall be entitled to participate, at
its own expense, in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce
any such liability, but, if it elects to assume the
defense, such defense shall be conducted by counsel
chosen by Investor Services and satisfactory to you,
or to your officers or directors, or to any
controlling person or persons, defendant or defendants
in the suit. In the event that Investor Services
assumes the defense of any such suit and retains such
counsel, you or such officers or directors or
controlling person or persons, defendant or defendants
in the suit, shall bear the fees and expenses of any
additional counsel retained by it, but, in case
Investor Services does not elect to assume the defense
of any such suit, Investor Services shall reimburse
you and such officers, directors or controlling person
or persons, defendant or defendants in such suit, for
the reasonable fees and expenses of any counsel
retained by it. Investor Services agrees promptly to
notify you of
8
<PAGE> 9
the commencement of any litigation or proceedings
against it in connection with the offer, issue and
sale of any Shares.
9. The indemnities, representations, warranties, covenants and
agreements of each party to this Agreement as set forth in this
Agreement will remain in full force and effect regardless of
any investigation made by or on behalf of either of such
parties or any of their respective officers, directors,
partners or any controlling person, and will survive delivery
of and payment for the Shares.
10. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, each
party hereto waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
11. This Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof, and supersedes
any and all prior understandings.
12. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time by
either party by written notice given to the other party,
provided that the obligation of each party to indemnify the
other party pursuant to paragraph 8 hereof shall apply with
respect to any Shares sold before or after such termination.
13. Any notice hereunder shall be duly given if mailed or
telegraphed to the other party hereto at the address specified
below. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
14. This Agreement may be executed in any number of counterparts
which, taken together shall constitute one and the same
instrument. This Agreement shall become effective upon receipt
by us of your acceptance hereof.
15. This Agreement may not be modified or amended except by a
written instrument duly executed by the parties hereto.
9
<PAGE> 10
SCUDDER INVESTOR SERVICES, INC.
By: /S/ David S. Lee
------------------
Authorized Officer
175 Federal Street
Boston, Massachusetts 02110
The undersigned hereby accepts the
offer set forth in the above
letter.
PNMR SECURITIES INC.
Dated: 12/1/92 By: /S/ R. Neil Rucksdashel
------------- -------------------------
Authorized Representative
Address: 1541 N.E. 51st Street
Redmond, Washington 98052
10
<PAGE> 1
Exhibit 9
December 29, 1995
Board of Directors
SAFECO Life Insurance Company
SAFECO Plaza
Seattle, WA 98185
Gentleman:
I have acted as counsel to the Company in connection with the filing with the
Securities and Exchange Commission of Post-Effective Amendment No. 3 to the
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by the
Company and its separate account, SAFECO Separate Account C. I have made such
examination of the law and have examined such records and documents as in my
judgement are necessary or appropriate to enable me to render the following
opinion:
1. SAFECO Life Insurance Company is a validly existing stock life insurance
company of the state of Washington.
2. Separate Account C is a separate investment account of SAFECO Life Insurance
Company created and validly existing pursuant to the Washington insurance laws
and regulations thereunder.
3. All of the prescribed corporate procedures for the issuance of the Contracts
have been followed, and, when such Contracts are issued in accordance with the
prospectus contained in the Registration Statement, all state requirements
relating to such Contracts will have been complied with.
4. Upon the acceptance of the purchase payments made by an Owner pursuant to a
Contract issued in accordance with the prospectus contained in the Registration
Statement and upon compliance with acceptable law, such an Owner will have a
legally-issued, fully paid, non-assessable contractual interest in such
Contract.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
/S/ WILLIAM E. CRAWFORD
William E. Crawford
Counsel
<PAGE> 1
Exhibit 10
Consent of Independent Auditors
We consent to the references to our firm under the captions "Schedule of
Accumulation Unit Values and Accumulation Units Outstanding", "General
Information" and "Financial Statements" and to the use of our reports on the
financial statements of SAFECO Separate Account C, dated January 27, 1995, and
on the consolidated financial statements of SAFECO Life Insurance Company and
subsidiaries, dated February 10, 1995, in Post-Effective Amendment No. 3 to
the Registration Statement (Form N-4, No. 33-69712) and related Prospectus of
SAFECO Separate Account C dated December 29, 1995.
/S/ ERNST & YOUNG
Seattle, Washington
Date: December 27, 1995
<PAGE> 1
Exhibit 14
POWER OF ATTORNEY
SAFECO Life Insurance Company, a Washington Corporation, (the "Company") and
each of its undersigned officers and directors, hereby nominate and appoint Boh
A. Dickey and Richard E. Zunker (with full power to each of them to act alone)
his true and lawful attorney-in-fact and agent, for him and in his name and
place in any and all capacities, to execute and sign all amendments to the
Registration Statements of SAFECO Separate Account C on Form N-4, SAFECO
Separate Account SL on Form S-6, and SAFECO Resource Variable Account B on Form
N-4 (hereinafter the "Separate Accounts") under the Securities Act of 1933 and
the Investment Company Act of 1940, and to file with the Securities and Exchange
Commission and any other regulatory authority having jurisdiction over the offer
and sale of the variable insurance products issued from the Separate Accounts,
such amendments and any supplements thereto, as well as any and all exhibits and
other documents necessary or desirable to such amendment or supplement process,
granting to such attorneys and each of them, full power and authority to do and
perform each and every act necessary and/or appropriate as fully and with all
intents and purposes as the Company itself and the undersigned officers and
directors themselves might or could do.
IN WITNESS WHEREOF, SAFECO LIFE INSURANCE COMPANY has caused this power
of attorney to be executed in its full name and by its President and attested
by its Secretary and the undersigned officers and directors have each executed
such power of attorney, on this 13th day of January, 1995.
SAFECO LIFE INSURANCE COMPANY
By: /S/ RICHARD E. ZUNKER
-------------------------------
Richard E. Zunker, President
ATTEST:
/S/ ROD A. PIERSON
- -------------------------------
Rod A. Pierson, Secretary
(Signatures Continue on Next Page)
<PAGE> 2
NAME TITLE
/S/ RICHARD E. ZUNKER Director and President
- ------------------------------ (Principal Executive Officer)
Richard E. Zunker
/S/ JAMES T. FLYNN Vice President, Controller and
- ------------------------------ Assistant Secretary
James T. Flynn (Principal Accounting Officer)
/S/ ROD A PIERSON Director, Senior Vice President
- ------------------------------ and Secretary
Rod A. Pierson
/S/ R.H. EIGSTI Director and Chairman
- ------------------------------
R. H. Eigsti
/S/ BOH A. DICKEY Director and Executive Vice President
- ------------------------------
Boh A. Dickey
/S/ DONALD S. CHAPMAN Director
- ------------------------------
Donald S. Chapman
/S/ DAN D. McLEAN Director
- ------------------------------
Dan D. McLean
/S/ JAMES W. RUDDY Director
- ------------------------------
James W. Ruddy
/S/ ROBERT W. SWEGLE Director
- ------------------------------
Robert W. Swegle
/S/ RONALD SPAULDING Director and Vice President
- ------------------------------
Ronald Spaulding
<PAGE> 1
Exhibit 15
December 29, 1995
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: REPRESENTATION OF COUNSEL FOR SAFECO LIFE INSURANCE COMPANY ("SAFECO LIFE")
AND ITS SAFECO SEPARATE ACCOUNT C ("SEPARATE ACCOUNT") POST-EFFECTIVE AMENDMENT
NO. 3, FORM N-4
FILE NOS. 33-69712 AND 811-8052
Commissioners:
SAFECO and its Separate Account believe that the filing of Post-Effective
Amendment No. 3, is consistent with the purposes and requirements for filing
under Rule 485(b) under the Securities Act of 1933 ("1933 Act"). This
representation is based on the fact that the changes included in this
Post-Effective Amendment No. 3, are consistent with the purposes and
requirements described in the adopting release for the changes to Rule 485
(IC-Rel. 20486). In addition, these changes are substantially identical to
those referred to in the attached copy of our July 11, 1995, request for
authority to file under Rule 485(b), which was subsequently granted orally by
the SEC staff.
Based on the above, the filing of Post-Effective Amendment No. 3, is made
pursuant to Rule 485(b) of the 1933 Act to become automatically effective on
December 29, 1995. The undersigned has prepared and reviewed Post-Effective
Amendment No. 3, and it is his opinion that Post-Effective Amendment No. 3,
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of Rule 485.
Sincerely,
/S/ WILLIAM E. CRAWFORD
William E. Crawford, Esq.
Counsel
Attachment: July 11, 1995 Request to File Pursuant to Rule 485(b) under the
1933 Act.
<PAGE> 2
KATTEN MUCHIN & ZAVIS
<TABLE>
<S> <C> <C>
CHICAGO, IL 1025 THOMAS JEFFERSON STREET N. W. EAST LOBBY SUITE 700 TELEPHONE
IRVINE, CA (202) 625-3500
LOS ANGELES, CA TELECOPIER
NEW YORK, NY (202) 298-7570
</TABLE>
WASHINGTON, D. C. 20007-5201
<TABLE>
<CAPTION>
PLEASE RESPOND TO WRITER'S DIRECT DIAL NUMBER
<S> <C>
Joan E. Boros (202) 625-3780
</TABLE>
JULY 11, 1995
BY HAND DELIVERY
Division of Investment Management
Securities and Exchange Commission
450 5th Street, N. W.
Washington, D.C. 20549
Attn: Brenda D. Sneed, Esq.
RE: REQUEST TO FILE PURSUANT TO RULE 485(B) UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT")
Dear Ms. Sneed:
This is to request on behalf of SAFECO Life Insurance Company
("SAFECO") and certain of its separate accounts, as described more fully below,
(the "Separate Accounts") authority to file certain post-effective amendments
pursuant to Rule 485(b) under the 1933 Act ("Rule 485(b)").
SAFECO and its Separate Account C currently have pending for review a
registration statement (Files No. 33-60331 and 811-8052) regarding a new
variable annuity contract (the "New Contract"). The New Contract contains the
following relevant features: (i) a guaranteed death benefit that is readjusted
on each sixth Contract Anniversary, and (ii) certain programs pursuant to which
the Contract Owner may execute transfers and withdrawals on a regularly
scheduled basis, subject to certain limitations (referred to in the prospectus
and herein as the "Programs").
Separate Account C (File No. 69712) and Resource Variable Account B
(Files No. 33-69600 and 811-4716), another registered separate account of SAFECO
("Resource B"), currently offer certain variable annuity contracts (the
"Existing Contracts"). SAFECO and the Separate Accounts are currently preparing
post-effective amendments to the registration statements for the Existing
Contracts (the "Post-Effective Amendments") to add the above described features
to the Existing Contracts. We note that the guaranteed death benefit feature to
be added to the Existing Contracts differs from that of the New Contract only in
that the death benefit is reset each eighth Contract Anniversary.
SAFECO and the Separate Accounts are requesting authority to file the
Post-Effective Amendments pursuant to Rule 485(b) upon receipt of any comment
from the Commission staff with regard to the registration statement for the New
Contract, and the related changes, if any, to the disclosure regarding the added
features.
<PAGE> 3
KATTEN MUCHIN & ZAVIS
July 11, 1995
Page 2
As a point of information only, SAFECO and Separate Account C are also
preparing another registration statement for an additional contract, the
("Additional Contract") which is substantially similar to the New Contract. At
the time of filing that registration statement SAFECO and Separate Account C
will request expedited review based on the Additional Contract's substantial
similarity to the New Contracts.
SAFECO and its Separate Accounts believe that the above request is
consistent with the purposes and requirements as described in the adopting
release for the changes to Rule 485 (IC-Rel. 20486). The changes to be included
in the Post-Effective Amendments are "substantially identical revisions" as
compared to the registration statement for the New Contract that is currently
under review.
SAFECO and its Separate Accounts are most anxious to expedite the
effectiveness of both the Post-Effective Amendments and the registration
statements for the New and Additional Contracts. SAFECO believes that this
request is consistent with assisting the Commission staff in expeditious review
of its filings. In fact, if the subject request is granted and the subsequent
request for expedited review of the registration statement for the Additional
Contract is granted, the Commission staff will have facilitated the clearance of
four registration statements through the review of one such registration
statement.
The prompt reply by your office will assist SAFECO and the undersigned
in planning and scheduling its various filings. Please call the undersigned, if
you have any question or comment.
Very truly yours,
/S/ JOAN E. BOROS
Joan E. Boros
cc: William J. Crawford
