<PAGE> 1
LETTER FROM SAFECO LIFE'S PRESIDENT
DEAR SPINNAKER PARTICIPANT:
We are pleased to present the SAFECO Life Spinnaker Variable Annuity Annual
Report. Inside you will find schedules of investments and financial statements
for each of the 12 portfolios. In addition, reports from each of the portfolio
managers are provided. The information presented covers the year ending
December 31, 1996.
1996 FINANCIAL MARKET REVIEW
We entered 1996 with rather modest expectations for the equity markets and look
what happened. The Standard & Poor's 500 index gained 22.94% on the heels of
its astonishing 37.50% growth in 1995. The good news is, investors who had the
conviction to stay invested in common stocks were amply rewarded. For the
second straight year, we're glad to have been "in" the market, rather than
"out".
The bad news is that such market conditions can cause amnesia -- amnesia when
it comes to the volatile nature of the stock market (which delivered 1.32% in
1994), and forgetfulness regarding the diversification that bonds and money
market funds provide.
The neglected cousins of 1996 were the bond markets. Bonds struggled through
the year -- despite the fact inflation remained at bay -- reversing directions
and ultimately delivering lackluster total returns. The broader market as
measured by Lehman Brothers Government/Corporate Index, returned 2.90% for the
year.
Three elements seem to be props for the stock market. Inflation has remained
in control, corporate earnings have continued to grow and there has been a
fundamental shift in the way individuals invest. Investors are increasingly
recognizing the superior long-term potential of stocks, at the same time they
are taking control of more of their retirement savings.
FINANCIAL OUTLOOK
While the shift from traditional company-controlled pensions to employee
directed plans such as 401(k)s seem irreversible, it doesn't seem possible for
the stock market to sustain its present level of growth. Still, we believe
common stocks offer the potential for superior long-term returns as they have
over the past 70 years. At the same time, we remind you of the historical
level of stock market returns.
All in all, our 1997 outlook is that the financial markets will do "okay". We
anticipate bonds will earn, or nearly earn, their coupons. And that stream of
interest payments is what people should buy bonds for anyway. In short, do not
expect big gains in bond prices, just steady income. Stocks will have a more
difficult time, especially if corporate earnings fail to meet expectations.
Nonetheless, there are always opportunities for stock pickers. And that's what
we do best.
SAFECO LIFE'S COMMITMENT
SAFECO Life remains committed to providing you quality service with efficient
and accurate reporting. We have added new customer service representatives in
our IRA and TSA units as well as toll free telephone lines designed to link you
directly with the service representative handling your account. Watch for news
in 1997 about a voice responsive unit allowing you access to your information
and an investor newsletter to better serve your needs.
We appreciate your business and the opportunity to serve you. Call us at the
toll free number listed on your statement anytime between 7:00 am and 4:30 pm
(PST) if we can be of assistance.
Sincerely,
/s/ RICHARD E. ZUNKER
Richard E. Zunker
President
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS: PAGE:
<S> <C>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES 4
STATEMENT OF OPERATIONS 6
STATEMENT OF CHANGES IN NET ASSETS 8
NOTES TO FINANCIAL STATEMENTS 10
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS 13
</TABLE>
<PAGE> 3
December 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------
SAFECO SAFECO SAFECO SAFECO SAFECO
AS OF DECEMBER 31, 1996 EQUITY GROWTH NW BOND MMKT
- ------------------------------------------------------------------------------------------------------------------
-- (In Thousands, Except Per-Unit and Per Share Amounts) --
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in underlying Portfolios:
Investments, at cost $39,827 $30,352 $ 1,665 $ 2,087 $ 3,749
======= ======= ======= ======= =======
Shares owned 1,925 1,742 144 188 3,749
Net asset value per share $ 21.75 $ 19.26 $ 12.12 $ 10.75 $ 1.00
------- ------- ------- ------- -------
Investments, at value 41,867 33,554 1,748 2,022 3,749
Cash 3 1 -- 1 --
------- ------- ------- ------- -------
Total assets 41,870 33,555 1,748 2,023 3,749
LIABILITIES:
Mortality and expense risk charge payable 45 34 2 1 4
Fees payable 8 5 -- -- 1
------- ------- ------- ------- -------
Total liabilities 53 39 2 1 5
------- ------- ------- ------- -------
NET ASSETS $41,817 $33,516 $ 1,746 $ 2,022 $ 3,744
======= ======= ======= ======= =======
ACCUMULATION UNITS OUTSTANDING 1,055 1,245 147 113 252
======= ======= ======= ======= =======
ACCUMULATION UNIT VALUE*
(Net assets divided by accumulation
units outstanding) $39.633 $26.928 $11.905 $17.915 $14.874
======= ======= ======= ======= =======
</TABLE>
*Redemption price per unit is the unit value less any applicable contingent
deferred sales charge.
See Notes to Financial Statements
4
<PAGE> 4
SAFECO SEPARATE ACCOUNT C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
<CAPTION>
LEXINGTON LEXINGTON FEDERATED
SCUDDER SCUDDER NATURAL EMERGING FEDERATED HIGH FEDERATED
INT'L BAL RESOURCES MRKTS UTILITY INCOME INT'L
--------------------------------------------------------------------------------------
-- (In Thousands, Except Per-Unit and Per Share Amounts) --
<S> <C> <C> <C> <C> <C> <C>
$ 6,338 $ 8,631 $ 960 $ 869 $ 963 $ 430 $ 367
======== ======= ======= ======= ======= ======= =======
537 784 73 85 86 43 34
$ 13.25 $ 11.61 $ 14.29 $ 10.08 $ 11.81 $ 10.24 $ 11.16
-------- ------- ------- ------- ------- ------- -------
7,109 9,103 1,042 860 1,011 443 377
4 1 3 -- -- -- --
-------- ------- ------- ------- ------- ------- -------
7,113 9,104 1,045 860 1,011 443 377
7 10 1 1 1 -- --
5 2 3 -- -- -- --
-------- ------- ------- ------- ------- ------- -------
12 12 4 1 1 -- --
-------- ------- ------- ------- ------- ------- -------
$ 7,101 $ 9,092 $ 1,041 $ 859 $ 1,010 $ 443 $ 377
======== ======= ======= ======= ======= ======= =======
545 660 73 86 83 41 34
======== ======= ======= ======= ======= ======= =======
$ 13.022 $13.771 $14.148 $ 9.946 $12.117 $10.899 $11.056
======== ======= ======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
5
<PAGE> 5
December 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-----------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 1996
SAFECO SAFECO SAFECO SAFECO SAFECO
EQUITY* GROWTH* NW* BOND* MMKT*
-------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income dividends and capital gain distributions $ 3,918 $ 2,724 $ 12 $ 111 $ 116
EXPENSES:
Mortality and expense risk charge 340 259 15 20 30
Administration charge 41 31 2 3 4
-------- -------- --------- --------- --------
Total expenses 381 290 17 23 34
-------- -------- --------- --------- --------
NET INVESTMENT INCOME (LOSS) 3,537 2,434 (5) 88 82
-------- -------- --------- --------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments 504 667 34 (19) --
Net change in unrealized appreciation 1,849 2,587 87 (70) --
-------- -------- --------- --------- --------
NET GAIN ON INVESTMENTS 2,353 3,254 121 (89) --
-------- -------- --------- --------- --------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 5,890 $ 5,688 $ 116 $ (1) $ 82
======== ======== ========= ========= ========
</TABLE>
* For the year ended December 31, 1996.
+ For the period January 25, 1996 (inception date) through December 31, 1996.
See Notes to Financial Statements
6
<PAGE> 6
SAFECO SEPARATE ACCOUNT C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS
- -----------------------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 1996
LEXINGTON LEXINGTON FEDERATED
SCUDDER SCUDDER NATURAL EMERGING FEDERATED HIGH FEDERATED
INT'L* BAL* RESOURCES+ MRKTS+ UTILITY+ INCOME+ INT'L+
---------------------------------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C>
$ 93 $ 213 $ 3 $ -- $ 15 $ 13 $ --
65 73 5 4 4 2 2
8 8 -- 1 1 -- --
---- ---- ---- --- ---- --- ---
73 81 5 5 5 2 2
---- ---- ---- --- ---- --- ---
20 132 (2) (5) 10 11 (2)
---- ---- ---- --- ---- --- ---
64 137 8 (6) 4 -- 1
561 325 82 (9) 48 14 10
---- ---- ---- --- ---- --- ---
625 462 90 (15) 52 14 11
---- ---- ---- --- ---- --- ---
$ 645 $ 594 $ 88 $ (20) $ 62 $ 25 $ 9
==== ==== ==== === ==== === ===
</TABLE>
See Notes to Financial Statements
7
<PAGE> 7
December 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
-----------------------------------------------------------------------------------------------------
SAFECO SAFECO SAFECO SAFECO SAFECO
EQUITY GROWTH NW BOND MMKT
------------------- ------------------ ---------------- ----------------- -------------------
FOR THE PERIOD ENDED DECEMBER 31
1996* 1995* 1996* 1995* 1996* 1995* 1996* 1995* 1996* 1995*
------------------- ------------------ ---------------- ----------------- -------------------
-- (In Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 3,537 $ 1,436 $ 2,434 $1,217 $ (5) $ 3 $ 88 $ 31 $ 82 $ 48
Net realized gain (loss)
on investments 504 82 667 78 34 4 (19) 4 -- --
Net change in unrealized
appreciation 1,849 470 2,587 642 87 (3) (70) 17 -- --
-------- -------- -------- ------ ------- ---- ------- ---- -------- -------
Net change in net assets
resulting from
operations 5,890 1,988 5,688 1,937 116 4 (1) 52 82 48
NET ACCUMULATION UNIT
TRANSACTIONS 21,814 8,464 17,927 5,673 1,004 398 1,382 370 2,252 (358)
-------- -------- -------- ------ ------- ---- ------- ---- -------- -------
TOTAL CHANGE IN NET ASSETS 27,704 10,452 23,615 7,610 1,120 402 1,381 422 2,334 (310)
NET ASSETS AT BEGINNING OF
YEAR 14,113 3,661 9,901 2,291 626 224 641 219 1,410 1,720
-------- -------- -------- ------ ------- ---- ------- ---- -------- -------
\NET ASSETS AT END OF YEAR $41,817 $14,113 $33,516 $9,901 $ 1,746 $626 $ 2,022 $ 641 $ 3,744 $ 1,410
======== ======== ======== ====== ======= ==== ====== ==== ======== =======
OTHER INFORMATION
Increase (Decrease) in
Units and Amounts
UNITS:
Sales 697 312 850 339 108 38 125 29 2,092 618
Redemptions (80) (18) (84) (14) (19) (2) (47) (8) (1,938) (645)
-------- -------- -------- ------ ------- ---- ------- ---- -------- -------
Net change 617 294 766 325 89 36 78 21 154 (27)
======== ======== ======== ====== ======= ==== ====== ==== ======== =======
AMOUNTS:
Sales $24,683 $ 8,986 $19,902 $5,916 $ 1,230 $419 $ 2,212 $ 500 $ 30,613 $ 8,740
Redemptions (2,869) (522) (1,975) (243) (226) (21) (830) (130) (28,361) (9,098)
-------- -------- -------- ------ ------- ---- ------- ---- -------- -------
Net change $21,814 $ 8,464 $17,927 $5,673 $ 1,004 $398 $ 1,382 $ 370 $ 2,252 $ (358)
======== ======== ======== ====== ======= ==== ====== ==== ======== =======
DECEMBER 31, 1996
Paid in capital $33,889 $25,818 $1,626 $1,970 $ 3,604
Par value per unit None None None None None
Accumulation units
authorized Unlimited Unlimited Unlimited Unlimited Unlimited
</TABLE>
* For the year ended December 31.
+ For the period January 25, 1996 (inception date) through December 31, 1996.
See Notes to Financial Statements
8
<PAGE> 8
SAFECO SEPARATE ACCOUNT C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------------------------------------------------------------
LEXINGTON LEXINGTON FEDERATED
SCUDDER SCUDDER NATURAL EMERGING FEDERATED HIGH FEDERATED
INT'L BAL RESOURCES MRKTS UTILITY INCOME INT'L
----------------------- ----------------------- ---------- --------- --------- --------- ---------
FOR THE PERIOD ENDED DECEMBER 31
1996* 1995* 1996* 1995* 1996+ 1996+ 1996+ 1996+ 1996+
----------------------- ----------------------- ---------- --------- --------- --------- ---------
-- (In Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20
$ $ (25) $ 132 $ 15 $ (2) $ (5) $ 10 $ 11 $ (2)
64 2 137 9 8 (6) 4 -- 1
561 261 325 151 82 (9) 48 14 10
-------- -------- -------- -------- -------- -------- -------- -------- --------
645 238 594 175 88 (20) 62 25 9
3,258 1,516 6,816 1,012 953 879 948 418 368
-------- -------- -------- -------- -------- -------- -------- -------- --------
3,903 1,754 7,410 1,187 1,041 859 1,010 443 377
3,198 1,444 1,682 495 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
$ 7,101 $ 3,198 $ 9,092 $ 1,682 $ 1,041 $ 859 $ 1,010 $ 443 $ 377
======== ======== ======== ======== ======== ======== ======== ======== ========
307 168 569 92 78 96 98 41 35
(40) (28) (44) (7) (5) (10) (15) -- (1)
-------- -------- -------- -------- -------- -------- -------- -------- --------
267 140 525 85 73 86 83 41 34
======== ======== ======== ======== ======== ======== ======== ======== ========
$ 3,744 $ 1,817 $ 7,394 $ 1,091 $ 1,019 $ 975 $ 1,117 $ 421 $ 380
(486) (301) (578) (79) (66) (96) (169) (3) (12)
-------- -------- -------- -------- -------- -------- -------- -------- --------
$ 3,258 $ 1,516 $ 6,816 $ 1,012 $ 953 $ 879 $ 948 $ 418 $ 368
======== ======== ======== ======== ======== ======== ======== ======== ========
$ 6,274 $ 8,325 $ 953 $ 879 $ 948 $ 418 $ 368
None None None None None None None
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
</TABLE>
See Notes to Financial Statements
9
<PAGE> 9
December 31, 1996
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
SAFECO Separate Account C (Separate Account C) is registered under the
Investment Company Act of 1940, as amended, as a segregated unit investment
trust of SAFECO Life Insurance Company (SAFECO), a wholly-owned subsidiary
of SAFECO Corporation. Separate Account C is comprised of fifteen
portfolios. The information contained in this financial statement relates to
the sub-accounts invested in shares of the twelve portfolios designated
below.
<TABLE>
<CAPTION>
SUB-ACCOUNTS UNDERLYING PORTFOLIO
-------------------------------------------------------------------------------------------
<S> <C>
SAFECO Resource Series Trust --
SAFECO Resource Equity (SAFECO Equity) Equity Portfolio
SAFECO Resource Growth (SAFECO Growth) Growth Portfolio
SAFECO Resource Northwest (SAFECO NW) Northwest Portfolio
SAFECO Resource Bond (SAFECO Bond) Bond Portfolio
SAFECO Resource Money Market (SAFECO MMKT) Money Market Portfolio
Scudder Fund --
Scudder International (Scudder Int'l) Scudder International Portfolio
Scudder Balanced (Scudder Bal) Scudder Balanced Portfolio
Lexington Natural Resources Trust --
Lexington Natural Resources Natural Resources Portfolio
Lexington Emerging Markets (Lexington Lexington Emerging Markets Fund, Inc. --
Emerging Mrkts) Emerging Markets Portfolio
Federated Insurance Series --
Federated Utility Utility Portfolio
Federated High Income Bond (Federated
High Income) High Income Bond Portfolio
Federated International Equity (Federated Int'l) International Equity Portfolio
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Investments in portfolio shares are carried in the
statement of assets and liabilities at net asset value as reported by the
respective portfolio. 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.
10
<PAGE> 10
SAFECO SEPARATE ACCOUNT C
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. EXPENSES
SAFECO deducts on each valuation date a mortality and expense risk premium
which is equal on an annual basis to 1.25% of the 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 owner, to waive contingent deferred sales charges in the
event of the death of the owner and to guarantee the payment of the greater
of the guaranteed minimum death benefit or the contract value upon the death
of the owner. 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 charges.
SAFECO also deducts on each valuation date an amount which is equal on an
annual basis to .15% of the average daily net asset value of Separate
Account C. This charge is 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.
SAFECO deducts an annual administration 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, which is for general administrative expenses, is
deducted from contracts only if the contract value is less than $50,000. In
certain situations where an owner withdraws all or a portion of his or her
contract value, a contingent deferred sales charge is deducted from the
withdrawal. This charge is imposed on withdrawals made in the first eight
(8) contract years. Any premium tax levied by a state or government entity
with respect to the Separate Account C contract will be charged against the
contract.
4. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------------
SAFECO SAFECO SAFECO SAFECO SAFECO SCUDDER SCUDDER
EQUITY* GROWTH* NW* BOND* MMKT* INT'L* BAL*
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
<CAPTION>
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C> <C> <C>
PURCHASES for the
period ended
December 31, 1996 $28,781 $22,813 $ 1,269 $ 2,425 $30,930 $ 3,959 $ 7,741
======= ======= ====== ====== ======= ====== ======
SALES for the period
ended December 31,
1996 $ 3,395 $ 2,423 $ 269 $ 955 $28,593 $ 677 $ 785
======= ======= ====== ====== ======= ====== ======
* For the year ended December 31, 1996
</TABLE>
11
<PAGE> 11
December 31, 1996 SAFECO SEPARATE ACCOUNT C
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT TRANSACTIONS -- CONTINUED
<TABLE>
<CAPTION>
SUB-ACCOUNTS
---------------------------------------------------------
LEXINGTON LEXINGTON FEDERATED
NATURAL EMERGING FEDERATED HIGH FEDERATED
RESOURCES+ MRKTS+ UTILITY+ INCOME+ INT'L+
------------------------------------------------------------------------------------------------
-- ($ in Thousands) --
<S> <C> <C> <C> <C> <C>
PURCHASES for the period ended
December 31, 1996 $ 1,029 $ 994 $ 1,178 $ 496 $ 405
======= ======= ======= ======= =======
SALES for the period ended December
31, 1996 $ 77 $ 119 $ 219 $ 66 $ 39
======= ======= ======= ======= =======
+ For the period January 25, 1996 (inception date) through December 31,
1996.
</TABLE>
5. ACCUMULATION UNIT DATA
<TABLE>
<CAPTION>
SUB-ACCOUNTS
--------------------------------------------------------------------------
SAFECO SAFECO SAFECO SAFECO SAFECO SCUDDER SCUDDER
EQUITY GROWTH NW BOND MMKT INT'L BAL
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
February 11, 1994
(Inception Date) $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
December 31, 1995 32.209 20.668 10.737 18.045 14.370 11.504 12.481
December 31, 1996 39.633 26.928 11.905 17.915 14.874 13.022 13.771
</TABLE>
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------------------------------------------------
LEXINGTON LEXINGTON FEDERATED
NATURAL EMERGING FEDERATED HIGH FEDERATED
RESOURCES MRKTS UTILITY INCOME INT'L
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 -- -- -- -- --
December 31, 1995 -- -- -- -- --
January 25, 1996
(Inception Date) $ 11.330 $10.350 $11.110 $ 9.870 $10.220
December 31, 1996 14.148 9.946 12.117 10.899 11.056
</TABLE>
12
<PAGE> 12
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 statements of assets and liabilities of certain
Sub-Accounts of SAFECO Separate Account C (comprising, respectively, the SAFECO
Resource Equity, SAFECO Resource Growth, SAFECO Resource Northwest, SAFECO
Resource Bond, SAFECO Resource Money Market, Scudder International, Scudder
Balanced, Lexington Natural Resources, Lexington Emerging Markets, Federated
Utility, Federated High Income Bond and Federated International Equity Sub-
Accounts) as of December 31, 1996, and the related statements of operations, the
statements of changes in net assets, and the accumulation unit data for each of
the periods indicated therein. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and 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 and accumulation unit data. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with the SAFECO
Resource Series Trust, Scudder Variable Life Investment Fund, Lexington Natural
Resources Trust, Lexington Emerging Markets Fund, Inc., and Federated Insurance
Series. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and accumulation unit data referred to
above present fairly, in all material respects, the financial position of each
of the respective Sub-Accounts of SAFECO Separate Account C as listed above at
December 31, 1996, the results of their operations, the changes in their net
assets, and the accumulation unit data for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Seattle, Washington
January 31, 1997
13
