<PAGE>
SPINNAKER 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. [ ]
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Post-Effective Amendment No. 7 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 13 [X]
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(Check appropriate box or boxes.)
SAFECO SEPARATE ACCOUNT C
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(Exact Name of Registrant)
SAFECO Life Insurance Company
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(Name of Depositor)
15411 N.E. 51st Street, Redmond, Washington 98052
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (425) 867-8000
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Name and Address of Agent for Service
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WILLIAM E. CRAWFORD, ESQ.
15411 N.E. 51st Street
Redmond, Washington 98052
(425) 867-8257
Approximate date of Proposed Public Offering. . . . . . As Soon as Practicable
after Effective Date
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
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on May 1, 1998 pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a)(1) of Rule 485
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X on February 15, 1999 pursuant to paragraph (a)(1) of Rule 485
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If appropriate, check the following:
this post-effective amendment designates a new effective date for a
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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, 1997 on or about March 27, 1998.
<PAGE>
SAFECO SEPARATE ACCOUNT C
REGISTRATION STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
Item No. Location
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PART A
Item 1. Cover Page . . . . . . . . . . . . . . . Cover Page
Item 2. Definitions. . . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis or Highlights . . . . . . . . . Fee Table; Summary
Item 4. Condensed Financial Information. . . . . Appendix - Accumulation
Unit Value History
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . . Other Information
Item 6. Deductions and Expenses. . . . . . . . . Expenses; Fee Table
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . . The Annuity Contract
Item 8. Annuity Period . . . . . . . . . . . . . Annuity Payments (Income
Phase)
Item 9. Distribution Requirements. . . . . . . . Annuity Payments (Income
Phase) and Death Benefit
Item 10. Purchases and Contract Value . . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . . Other Information
Item 14. Table of Contents of the Statement
of Additional Information. . . . . . . . Other Information
<PAGE>
Item No. Location
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PART B
Item 15. Cover Page . . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . . Cover Page
Item 17. General Information and History. . . . . The Separate Account;
Experts
Item 18. Services . . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . . Financial Statements
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.
-5-
<PAGE>
PART A
PROSPECTUS
-6-
<PAGE>
SPINNAKER-TM-
Variable Annuity
ISSUED BY
SAFECO SEPARATE
ACCOUNT C
AND
SAFECO LIFE
INSURANCE COMPANY
This prospectus describes the Spinnaker Variable Annuity Contract and contains
important information. Please read it before investing and keep it on file for
future reference.
To learn more about the Spinnaker Variable Annuity Contract, you can obtain a
copy of the Statement of Additional Information (SAI) dated ______,1999. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is legally
part of the prospectus. You may request a free copy of the SAI, or a paper copy
of this prospectus if you have received it in an electronic format, by calling
us at (800) 426-7649 or writing us at: PO Box 34690, Seattle, WA 98124-1690.
SAFECO RESOURCE SERIES TRUST
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY
- RST Equity Portfolio
- RST Growth Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Money Market Portfolio
- RST Small Company Stock Portfolio
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED ADVISERS
- Federated High Income Bond Fund II
- Federated International Equity Fund II
- Federated Utility Fund II
LEXINGTON EMERGING MARKETS FUND
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Emerging Markets Fund, Inc.
LEXINGTON NATURAL RESOURCES TRUST
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Natural Resources Trust
SCUDDER VARIABLE LIFE INVESTMENT FUND
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
- Scudder Balanced Portfolio
- Scudder International Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
- VP Balanced
- VP International
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP II Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III ("VIP III")
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP III Growth Opportunities Portfolio
INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
- INVESCO VIF-Realty Portfolio
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
NEITHER THE SEC OR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dated: ,1999
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<PAGE>
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TABLE OF CONTENTS PAGE
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SUMMARY
FEE TABLE
EXAMPLES
1. THE ANNUITY CONTRACT
Owner
Annuitant
Beneficiary
Assignment
2. ANNUITY PAYMENTS (INCOME PHASE)
Changing Portfolios After the Annuity Date
3. PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
Right to Examine
4. INVESTMENT OPTIONS
Variable Investment Options
Fixed Account
Transfers
Dollar Cost Averaging
Appreciation or Interest Sweep
Portfolio Rebalancing
Substitution
5. EXPENSES
Insurance Charges
Annual Administration Maintenance Charge
Contingent Deferred Sales Charge
Withdrawal Charge
Transfer Charge
Premium Taxes
Income or Other Taxes
Portfolio Expenses
6. TAXES
Annuity Contracts in General
Qualified Contracts
Non-qualified Contracts
Diversification
Tax Withholding
7. ACCESS TO YOUR MONEY
Free Withdrawal Amount
Healthcare Confinement
Repetitive Withdrawals
Withdrawal Restrictions on TSA or 403(b)
Minimum Value
8. PERFORMANCE
9. DEATH BENEFIT
Death of Owner before Annuity Date
Death of Annuitant after Annuity Date
Beneficiary Designation
10. OTHER INFORMATION
SAFECO Life
Separate Account
General Account
Distribution (Principal Underwriter)
Legal Proceedings
Right to Suspend Annuity Payments, Transfers or Withdrawals
Voting Rights
Reduction of Charges or Additional Amounts Credited
Year 2000
Internet Information
Financial Statements
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
APPENDIX
Accumulation Unit Value History
INDEX OF SPECIAL TERMS
We have used simple, clear language as much as possible in this prospectus.
However, by the very nature of the contract certain technical words or terms are
unavoidable. We have identified the following as some of these words or terms.
They are identified in the text in italic and the page that is indicated here is
where we believe you will find the best explanation for the word or term.
PAGE
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Date
Annuity Payments
Annuity Unit
Beneficiary
Fixed Account
Income Phase
Joint Owner
Non-qualified
Owner
Portfolios
Purchase Payment
Qualified
Tax Deferral
<PAGE>
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SUMMARY
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TOPICS IN THIS SUMMARY CORRESPOND TO SECTIONS IN THE PROSPECTUS WHICH DISCUSS
THEM IN MORE DETAIL.
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THE ANNUITY CONTRACT
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This annuity contract is an agreement between you, the OWNER, and SAFECO Life
Insurance Company ("SAFECO Life", "we", and "us"). It is designed to help you
invest on a tax-deferred basis and meet long-term financial goals, such as
retirement funding. The contract provides for a guaranteed income or a death
benefit. You should not buy the contract if you are looking for a short-term
investment or if you cannot accept the risk of getting back less money than you
put in.
You may divide your money among any or all of our 18 variable investment
PORTFOLIOS and 1 FIXED ACCOUNT. The value of the PORTFOLIOS can fluctuate up or
down, based on the performance of the underlying investments. Your investment
in the PORTFOLIOS is not guaranteed and you may lose money. The FIXED ACCOUNT
offers an interest rate guaranteed by SAFECO Life. Your choices for the various
investment options are found in Section 4.
Like most annuities, this contract has an ACCUMULATION PHASE and an INCOME
PHASE. During the ACCUMULATION PHASE, you invest money in your contract.
Earnings accumulate on a tax-deferred basis and are treated as income when you
make a withdrawal. Your earnings are based on the investment performance of the
PORTFOLIOS you selected and/or the interest rate earned on the FIXED ACCOUNT.
During the INCOME PHASE, you will receive payments from your annuity.
The amount of money you are able to accumulate in your contract during the
ACCUMULATION PHASE will determine the amount of your payments during the INCOME
PHASE.
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ANNUITY PAYMENTS (INCOME PHASE)
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You can select from one of four payment options. This selection cannot be
changed after your payments begin. During the INCOME PHASE, you have the same
investment options you had during the ACCUMULATION PHASE. You can choose to
have payments come from the FIXED ACCOUNT, the PORTFOLIOS or both. If you
choose to have any part of your payments come from the PORTFOLIOS, the dollar
amount of your payments may go up or down.
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PURCHASE
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You can buy this contract with $2,000 or more under most circumstances. You can
add $250 or more as often as you like during the ACCUMULATION PHASE. Lower
limits apply to a contract purchased in connection with a qualified retirement
plan. PURCHASE PAYMENTS can be as little as $100 if they are made automatically
from your checking or savings account.
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INVESTMENT OPTIONS
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You can put money in any or all of these PORTFOLIOS which are described in the
prospectuses for the PORTFOLIOS:
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY
- RST Equity Portfolio
- RST Growth Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Money Market Portfolio
- RST Small Company Stock Portfolio
MANAGED BY FEDERATED ADVISERS
- Federated High Income Bond Fund II
- Federated International Equity Fund II
- Federated Utility Fund II
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Emerging Markets Fund, Inc.
- Lexington Natural Resources Trust
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
- Scudder Balanced Portfolio
- Scudder International Portfolio
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
- VP Balanced
- VP International
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP II Contrafund Portfolio
- VIP III Growth Opportunities Portfolio
MANAGED BY INVESCO FUNDS GROUP, INC.
- INVESCO VIF-Realty Portfolio
Depending upon market conditions, you can make or lose money in any of these
PORTFOLIOS. You may also allocate money to the FIXED ACCOUNT which credits
guaranteed interest.
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EXPENSES
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The contract has insurance features and investment features, and there are costs
related to each.
We deduct insurance charges which equal 1.40% annually of the average daily
value of your contract allocated to the PORTFOLIOS. The insurance charges
include: mortality and expense risk charge, 1.25%, and asset related
administration charge, .15%. These are not charged on money allocated to the
FIXED ACCOUNT.
Each contract year, we deduct a $30 annual administration maintenance charge
from your contract. This charge is waived if the value of your contract is
$50,000 or more.
<PAGE>
If you take money out, you may be assessed a contingent deferred sales charge.
The amount of this charge depends upon the age of your contract, not on the age
of each PURCHASE PAYMENT. The charge is based upon the amount withdrawn and
starts at 8% in the first contract year and decreases one percent each contract
year until in the ninth and later contract years when there is no charge.
If more than one withdrawal is made during a contract year, a separate
withdrawal charge equal to the lesser of $25 or 2% of the amount withdrawn may
apply.
You can transfer between investment options up to 12 times per contract year
free of charge. A transfer charge equal to the lesser of $10 or 2% of the
amount being transferred may apply to each additional transfer.
In a limited number of states there is a premium tax of up to 3.5%, depending
upon the state. In this case, a premium tax charge for the payment of these
taxes may be deducted.
There are also annual PORTFOLIO expenses which vary depending upon the
PORTFOLIOS you select. In 1997, these expenses ranged from 0.57% to 1.84%.
The Fee Table and Examples following this Summary show you the various expenses
you will incur directly and indirectly by investing in the contract. There are
situations where all or some of the OWNER transaction expenses do not apply.
See Section 5 - Expenses for a complete discussion.
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TAXES
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Generally, earnings and amounts equal to PURCHASE PAYMENTS made with pre-tax
dollars are not taxed until you take them out. During the ACCUMULATION PHASE,
taxable amounts generally come out first and are taxed as ordinary income.
Exceptions may apply to contracts issued in connection with certain qualified
retirement plans. If you are younger than 59 1/2 when you take money out, you
may be charged a 10% penalty on the taxable amount. During the INCOME PHASE,
ANNUITY PAYMENTS are considered partly a return of your original investment and
partly earnings, and are taxed in the year received.
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ACCESS TO YOUR MONEY
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You may take money out at any time during the ACCUMULATION PHASE unless you are
restricted by requirements of a retirement plan. Each contract year, you can
take up to 10% of the contract value without paying a contingent deferred sales
charge. Amounts in excess of 10% may be subject to a contingent deferred sales
charge. This charge varies based on the age of your contract, not on the age of
particular PURCHASE PAYMENTS. You may have to pay income taxes and tax
penalties on any money you take out.
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PERFORMANCE
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The value of your contract will vary up or down depending upon the investment
performance of the PORTFOLIOS you choose. Past performance is not a guarantee
of future results.
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DEATH BENEFIT
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If you die before moving to the INCOME PHASE, your BENEFICIARY will receive a
death benefit.
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OTHER INFORMATION
- --------------------------------------------------------------------------------
RIGHT TO EXAMINE. If you cancel the contract within 10 days after receiving it
(or whatever period is required in your state), we will send your money back
without assessing a contingent deferred sales charge. You will receive whatever
your contract is worth on the day we receive your request. This may be more or
less than your original PURCHASE PAYMENT. If required by law, we will return
your original PURCHASE PAYMENT.
TRANSACTIONS. You can initiate transfers or withdrawals as needed or schedule
them in advance under the following strategies:
- Dollar Cost Averaging: You may elect to automatically transfer a set
amount from any PORTFOLIO or the FIXED ACCOUNT to any of the other
PORTFOLIOS monthly or quarterly. This feature attempts to achieve a lower
average cost per unit over time.
- Appreciation or Interest Sweep: If your contract value exceeds $10,000,
you may elect to have interest from the FIXED ACCOUNT or earnings from
the RST Money Market Portfolio automatically swept monthly, quarterly,
or annually into any PORTFOLIO of your choice.
- Portfolio Rebalancing: If your contract value exceeds $10,000, you may
elect to have each PORTFOLIO rebalanced quarterly, semi-annually or
annually to maintain your specified allocation percentages.
- Repetitive Withdrawals: You may elect to receive monthly, quarterly or
annual checks during the ACCUMULATION PHASE. Any money you receive may
result in contract charges, income taxes and tax penalties.
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INQUIRIES
- --------------------------------------------------------------------------------
If you need more information, please contact us at:
SAFECO LIFE INSURANCE COMPANY
15411 N.E. 51ST STREET
REDMOND, WA 98052
800-426-7649
http://www.SAFECO.com
<PAGE>
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SAFECO SEPARATE ACCOUNT C FEE TABLE
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES (See Note 1)
Contingent Deferred Sales Charge
No charge for first 10% of contract value withdrawn in a contract year.
Thereafter, the charge is a percentage of the amount withdrawn:
year 1 . . . . 8% year 4 . . . . .5% year 7 . . . .2%
year 2 . . . . 7% year 5 . . . . .4% year 8 . . . .1%
year 3 . . . . 6% year 6 . . . . .3% year 9+. . . .0%
Withdrawal Charge
No charge for first withdrawal in a contract year; thereafter, the charge
is $25 per withdrawal or, if less, 2% of the amount of the withdrawal.
Transfer Charge
No charge for first 12 transfers in a contract year; thereafter, the charge
is $10 per transfer or, if less, 2% of the amount transferred.
Annual Administration Maintenance Charge
$30 per contract per contract year.
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge . . . . . . . . 1.25%
Asset Related Administration Charge. . . . . . . . .15%
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Total Separate Account Annual Expenses . . . . . . 1.40%
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</TABLE>
<TABLE>
<CAPTION>
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PORTFOLIO EXPENSES
Other Expenses
(as a percentage of average net assets) (after expense
Management reimbursement for Total Annual
Fees certain Portfolios) Portfolio Expenses
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY (a)
RST Equity Portfolio .73% .02% .75%
RST Growth Portfolio .74% .03% .77%
RST Northwest Portfolio .73% .00% .73%
RST Bond Portfolio .74% .00% .74%
RST Money Market Portfolio .64% .00% .64%
RST Small Company Stock Portfolio .85% .10% .95%
MANAGED BY FEDERATED ADVISERS (a)
Federated High Income Bond Fund II .51% .29% .80%
Federated International Equity Fund II .02% 1.21% 1.23%
Federated Utility Fund II .48% .37% .85%
MANAGED BY LEXINGTON MANAGEMENT CORPORATION (a)
Lexington Emerging Markets Fund, Inc. .85% .99% 1.84%
Lexington Natural Resources Trust 1.00% .25% 1.25%
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC. (a)
Scudder Balanced Portfolio .48% .09% .57%
Scudder International Portfolio .83% .17% 1.00%
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. (a)
VP Balanced 1.00% 0.00% 1.00%
VP International 1.50% 0.00% 1.50%
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY (b)
VIP II Contrafund Portfolio .60% .11% .71%
VIP III Growth Opportunities Portfolio .60% .14% .74%
MANAGED BY INVESCO FUNDS GROUP, INC. (a)
INVESCO VIF-Realty Portfolio (c) .90% .20% 1.10%
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</TABLE>
(a) In some cases the fund advisers agree to waive or reimburse all or a
portion of the PORTFOLIO expenses. For those PORTFOLIOS where such an
agreement exists, the expenses absent waiver or reimbursement would have
been .94% for the RST Equity Portfolio; .90% for the RST Bond Portfolio;
.81% for the RST Money Market Portfolio; ___% for the Federated High Income
Bond Fund II; ___% for the Federated International Equity Fund II; ___% for
the Federated Utility Fund II; ___% for the Lexington Emerging Markets
Fund, Inc.; and 1.58% for the INVESCO VIF-Realty Portfolio. We have Fund
Participation Agreements with all of the non-SAFECO fund managers.
(b) A portion of the brokerage commissions certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result
of uninvested cash balances were used to reduce custodian expenses.
Including these reductions, the total operating expenses presented in
the table would have been .68% for the VIP II Contrafund Portfolio and
.73% for the VIP III Growth Opportunities Portfolio.
(c) Estimated.
The above PORTFOLIO expenses were provided by the PORTFOLIOS. We have not
independently verified the accuracy of the information.
<PAGE>
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EXAMPLES
- --------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
MANAGED BY SAFECO ASSET MANAGEMENT COMPANY
RST Equity Portfolio (a) $ 97 (a) $128 (a) $161 (a) $257
(b) $ 23 (b) $ 70 (b) $120 (b) $257
RST Growth Portfolio (a) $ 97 (a) $129 (a) $162 (a) $259
(b) $ 23 (b) $ 70 (b) $121 (b) $259
RST Northwest Portfolio (a) $ 96 (a) $128 (a) $160 (a) $255
(b) $ 22 (b) $ 69 (b) $119 (b) $255
RST Bond Portfolio (a) $ 97 (a) $128 (a) $161 (a) $256
(b) $ 23 (b) $ 70 (b) $119 (b) $256
RST Money Market Portfolio (a) $ 96 (a) $125 (a) $156 (a) $246
(b) $ 22 (b) $ 67 (b) $114 (b) $246
RST Small Company Stock Portfolio (a) $ 99 (a) $134 (a) $171 (a) $277
(b) $ 25 (b) $ 76 (b) $130 (b) $277
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY FEDERATED ADVISERS
Federated High Income Bond Fund II (a) $ 97 (a) $130 (a) $163 (a) $262
(b) $ 23 (b) $ 71 (b) $122 (b) $262
Federated International Equity Fund II (a) $101 (a) $142 (a) $184 (a) $305
(b) $ 27 (b) $ 84 (b) $144 (b) $305
Federated Utility Fund II (a) $ 98 (a) $131 (a) $166 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
Lexington Emerging Markets Fund, Inc. (a) $107 (a) $159 (a) $212 (a) $362
(b) $ 34 (b) $102 (b) $173 (b) $362
Lexington Natural Resources Trust (a) $101 (a) $143 (a) $185 (a) $307
(b) $ 28 (b) $ 85 (b) $145 (b) $307
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Scudder Balanced Portfolio (a) $ 95 (a) $123 (a) $152 (a) $238
(b) $ 21 (b) $ 64 (b) $111 (b) $238
Scudder International Portfolio (a) $ 99 (a) $136 (a) $173 (a) $282
(b) $ 25 (b) $ 77 (b) $132 (b) $282
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
VP Balanced (a) $ 99 (a) $136 (a) $173 (a) $282
(b) $ 25 (b) $ 77 (b) $132 (b) $282
VP International (a) $104 (a) $150 (a) $197 (a) $330
(b) $ 30 (b) $ 92 (b) $157 (b) $330
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP II Contrafund Portfolio (a) $ 96 (a) $127 (a) $159 (a) $253
(b) $ 22 (b) $ 69 (b) $118 (b) $253
VIP III Growth Opportunities Portfolio (a) $ 97 (a) $128 (a) $161 (a) $256
(b) $ 23 (b) $ 70 (b) $119 (b) $256
- ---------------------------------------------------------------------------------------------------------------------------
MANAGED BY INVESCO FUNDS GROUP, INC.
INVESCO VIF-Realty Portfolio (a) $ 98 (a) $134 (a) $170 (a) $275
(b) $ 25 (b) $ 76 (b) $129 (b) $275
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. There are situations where all or some of the OWNER transaction expenses do
not apply. See Section 5 - Expenses for a complete discussion.
2. The examples do not reflect premium taxes that may apply depending on the
state where you live.
3. The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
The Appendix contains an ACCUMULATION UNIT value history.
<PAGE>
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1. THE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
This prospectus describes a variable annuity contract offered by SAFECO Life.
The annuity contract is an agreement between SAFECO Life and you, the OWNER,
where we promise to pay you (or someone else you choose) an income in the form
of ANNUITY PAYMENTS, beginning on a date you select, or a death benefit to your
BENEFICIARY(IES). Before you begin receiving ANNUITY PAYMENTS, your annuity is
in the ACCUMULATION PHASE. Once you begin receiving ANNUITY PAYMENTS, your
contract switches to the INCOME PHASE.
The contract benefits from TAX DEFERRAL. You can change your investment
allocation or transfer between investment options without paying tax on contract
earnings until you take money out.
The contact is called a variable annuity because you can choose among 18
variable investment PORTFOLIOS in which you can make or lose money depending
upon market conditions. The investment performance of the PORTFOLIO(S) you
select affects the value of your contract and the amount of any variable ANNUITY
PAYMENTS.
The contract also has a FIXED ACCOUNT. Your money earns interest at a rate we
set. The annual effective interest rate credited to a PURCHASE PAYMENT will
never be less than 3% and is guaranteed for at least 12 months. The total
interest credited to you in the FIXED ACCOUNT affects the value of your
contract. The amount of fixed ANNUITY PAYMENTS you receive remains level for
the entire INCOME PHASE.
OWNER
The OWNER is as shown on the contract application, unless changed. You, as the
OWNER, may exercise all ownership rights under the contract. Once ANNUITY
PAYMENTS begin, the ANNUITANT is the OWNER.
The contract can be owned by JOINT OWNERS. Each JOINT OWNER has equal ownership
rights and must exercise those rights jointly.
ANNUITANT
The ANNUITANT is the person on whose life ANNUITY PAYMENTS are based and who
receives ANNUITY PAYMENTS. You are the ANNUITANT unless you designate someone
else before ANNUITY PAYMENTS begin.
BENEFICIARY
The BENEFICIARY receives any benefit payable after you die, or if applicable,
after the ANNUITANT dies.
ASSIGNMENT
You can assign the contract. This may result in current taxation and, if you
are under age 59 1/2, a 10% tax penalty. Assignments are effective when we
receive and acknowledge them. We are not liable for payments made prior to
receipt of an effective assignment. We are not responsible for the validity of
any assignments, tax consequences or actions we may take based on an assignment
later determined to be invalid.
If your contract is an Individual Retirement Annuity ("IRA") or other qualified
retirement plan, your ability to assign the contract may be limited.
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2. ANNUITY PAYMENTS (INCOME PHASE)
- --------------------------------------------------------------------------------
When you switch to the INCOME PHASE, the ANNUITANT will receive ANNUITY PAYMENTS
beginning on the ANNUITY DATE. You may select or change an annuity option at
any time prior to the ANNUITY DATE.
If you want to retain ownership rights in the contract after the ANNUITY DATE,
including the right to receive ANNUITY PAYMENTS, you must designate yourself as
the ANNUITANT. After the ANNUITY DATE, you cannot change or add an ANNUITANT,
change your annuity option, or stop ANNUITY PAYMENTS. If you are not the
ANNUITANT and ANNUITY PAYMENTS begin, there may be gift tax and income tax
consequences.
You must take your money in a lump sum or begin ANNUITY PAYMENTS on the earlier
of:
- the first available payment date after you elect to begin ANNUITY
PAYMENTS;
- the latest ANNUITY DATE specified in your contract; or
- a different ANNUITY DATE if required by law.
You can choose separate ANNUITY DATEs for variable ANNUITY PAYMENTS and fixed
ANNUITY PAYMENTS. If the amount applied to an annuity option is less than
$5,000, we may pay you in a lump sum where permitted by state law. You can
choose one of the options listed below or any other option you want and that we
agree to provide. Life annuity options (the first three options) convert
ACCUMULATION UNITS to ANNUITY UNITS on the ANNUITY DATE. See the SAI for
additional information.
LIFE ANNUITY. The annuitant receives monthly ANNUITY PAYMENTS for life.
ANNUITY PAYMENTS stop when the annuitant dies.
LIFE ANNUITY WITH GUARANTEED PERIOD. The ANNUITANT receives monthly
ANNUITY PAYMENTS for life with the promise that payments will be made
for a guaranteed period, usually 10 or 20 years, as selected by you. If
the ANNUITANT dies before all guaranteed payments have been made, the
rest will be made to the BENEFICIARY. ANNUITY PAYMENTS stop the later
of the date the ANNUITANT dies or the date the last guaranteed payment
is made.
<PAGE>
JOINT AND SURVIVOR LIFE ANNUITY. The ANNUITANT receives monthly ANNUITY
PAYMENTS for life. After the ANNUITANT dies, the second ANNUITANT, if living,
receives a specified percentage of each ANNUITY PAYMENT for life. At the time
you elect ANNUITY PAYMENTS, you choose the second ANNUITANT and the percentage
of payment the second ANNUITANT is to receive. ANNUITY PAYMENTS stop on the
later of the date the ANNUITANT dies or the date the second ANNUITANT dies.
SYSTEMATIC WITHDRAWAL INCOME PLAN-TM-. The ANNUITANT receives substantially
equal ANNUITY PAYMENTS based on:
- the ANNUITANT'S life expectancy; or
- the joint life expectancy of the ANNUITANT and a BENEFICIARY, with at
least 50% of the contract value expected to be distributed during the
ANNUITANT'S life.
ANNUITY PAYMENTS can be monthly, quarterly, or annually as selected by you.
Each ANNUITY PAYMENT reduces the number of ACCUMULATION UNITS and/or value
of the FIXED ACCOUNT in the contract. ANNUITY PAYMENTS continue until the
ANNUITANT'S entire value in the PORTFOLIOS and/or FIXED ACCOUNT has been
paid out. This option does not promise to make payments for the
ANNUITANT'S life. If the ANNUITANT dies before all ANNUITY PAYMENTS have
been made, there will be a death benefit payable to the BENEFICIARY. See
Section 9 - Death Benefit for more information.
If you do not choose an annuity option by the ANNUITY DATE, we will make ANNUITY
PAYMENTS under the Life Annuity with Guaranteed Period option, with payments
guaranteed for 10 years, or less if required by law.
We reserve the right to change the payment frequency if payment amounts would be
less than $250. You may elect to have payments delivered by mail or
electronically transferred to a bank account.
We require proof of age before beginning ANNUITY PAYMENTS that are based on life
or life expectancy. If the age of any ANNUITANT has been misstated, ANNUITY
PAYMENTS will be based on the corrected information. Underpayments will be made
up in a lump sum with the next scheduled payment. Overpayments will be deducted
from future payments until the total is repaid. We may require evidence
satisfactory to us that an ANNUITANT is living before we make any payment.
You can choose whether ANNUITY PAYMENTS will be made on a fixed basis, variable
basis, or both. ANNUITY PAYMENTS based on investment in the FIXED ACCOUNT will
stay the same. Any portion of ANNUITY PAYMENTS based on investment in the
PORTFOLIOs will vary in amount depending on investment performance. If you
don't tell us otherwise, ANNUITY PAYMENTS will be based on the investment
allocations in place on the ANNUITY DATE. After the ANNUITY DATE, the ANNUITANT
may not switch between fixed and variable ANNUITY PAYMENTS.
If you choose to have any portion of ANNUITY PAYMENTS based on investment in the
PORTFOLIOs, the dollar amount of each payment will depend on:
- the value of your contract in the PORTFOLIOs as of the first close of
the New York Stock Exchange ("NYSE") on or after the 15th day of the
month preceding the ANNUITY DATE;
- an assumed investment return; and
- the investment performance of the PORTFOLIOs you selected.
If actual performance of the PORTFOLIOs exceeds the assumed investment return,
the value of ANNUITY UNITS increases and subsequent ANNUITY PAYMENTS will be
larger. Similarly, if the actual performance is less than the assumed
investment return, the value of your ANNUITY UNITS decreases and subsequent
ANNUITY PAYMENTS will be smaller. Under the Systematic Withdrawal Income Plan,
ANNUITY PAYMENTS remain substantially equal. However, investment performance
may increase or decrease the number of ACCUMULATION UNITS that will be
liquidated to make substantially equal payments and may shorten or lengthen the
period over which ANNUITY PAYMENTS are received.
CHANGING PORTFOLIOS AFTER THE ANNUITY DATE
After ANNUITY PAYMENTS start, the ANNUITANT may request to change PORTFOLIO
elections once a month. Transfers are not allowed to or from the FIXED ACCOUNT.
Certain election requests may be modified to ensure that the value remaining in
a PORTFOLIO after the change is sufficient to satisfy any distribution
requirements calculated for that tax year. Changes will affect the number of
ANNUITY UNITS used to calculate ANNUITY PAYMENTS. See the SAI for more
information.
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3. PURCHASE
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
A PURCHASE PAYMENT is the money you give us to buy the contract, plus any
additional money you invest in the contract after you own it. You can purchase
a NON-QUALIFIED contract with a minimum initial investment of $2,000.
Additional PURCHASE PAYMENTS of $250 or more may be added at anytime during the
ACCUMULATION PHASE. For a QUALIFIED contract, all PURCHASE PAYMENTS must be $30
or more. PURCHASE PAYMENTS for NON-QUALIFIED contracts and some QUALIFIED
contracts may be made automatically from your checking or savings account for as
little as $100. This is referred to as Systematic Investing. Initial PURCHASE
PAYMENTS in Maine and South Carolina may never be less than $1,000, even if made
in connection with a QUALIFIED contract or Systematic Investing.
Any PURCHASE PAYMENT in excess of $1 million requires our prior approval.
Your initial PURCHASE PAYMENT is normally credited to you within two days of our
receipt. If your initial PURCHASE
<PAGE>
PAYMENT is not accompanied by all the information we need to issue your
contract, we will contact you to get it. If we cannot get all the required
information within five days, we will either return your PURCHASE PAYMENT or get
your permission to keep it until we have received the necessary information.
Your contract date is the date your initial PURCHASE PAYMENT and all required
information are received at SAFECO Life.
We reserve the right to refuse any application or PURCHASE PAYMENT.
ALLOCATION OF PURCHASE PAYMENTS
You tell us how to apply your initial PURCHASE PAYMENT by specifying your
desired allocation on the contract application. Unless you tell us otherwise,
subsequent PURCHASE PAYMENTS will be allocated in the same proportion as your
most recent PURCHASE PAYMENT (unless that was a PURCHASE PAYMENT you directed us
to allocate on a one-time-only basis). You may change the way subsequent
PURCHASE PAYMENTS are allocated by providing us with written instructions or by
telephoning us, if we have your written authorization to accept telephone
instructions. See "Transfers" as discussed in Section 4.
Once a PURCHASE PAYMENT is received, the portion to be allocated to the FIXED
ACCOUNT is credited the day it is received. The portion to be allocated to the
PORTFOLIOS is effective and valued as of the next close of the NYSE. This is
usually 4:00 p.m. eastern time. If for any reason the NYSE has closed for the
day prior to our receipt of your PURCHASE PAYMENT it will be valued as of the
close of the NYSE on its next regular business day.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the PORTFOLIO(S) you choose. In order to
keep track of this we use a unit of measure called an ACCUMULATION UNIT, which
works like a share of a mutual fund. During the INCOME PHASE, we call them
ANNUITY UNITS.
We calculate the value of an ACCUMULATION UNIT, for each PORTFOLIO, after the
NYSE closes each day by:
1. determining the total value of the particular PORTFOLIO;
2. subtracting from that amount insurance and other charges; and
3. dividing this amount by the number of outstanding ACCUMULATION UNITS
of the particular PORTFOLIO.
The value of an ACCUMULATION UNIT may go up or down from day to day.
When you make PURCHASE PAYMENTS or transfers into a PORTFOLIO, we credit your
contract with ACCUMULATION UNITS. Conversely, when you request a withdrawal or
a transfer of money from a PORTFOLIO, ACCUMULATION UNITS are liquidated. In
either case, the increase or decrease in the number of your ACCUMULATION UNITS
is determined by taking the amount of the PURCHASE PAYMENT, transfer or
withdrawal and dividing it by the value of an ACCUMULATION UNIT on the date the
transaction occurs.
EXAMPLE: On Monday we receive a $1,000 PURCHASE PAYMENT from you before the
NYSE closes. You have told us you want this to go to the RST Growth
Portfolio. When the NYSE closes on that Monday, we determine that the
value of an ACCUMULATION UNIT for the RST Growth Portfolio is $34.12. We
then divide $1,000 by $34.12 and credit your contract on Monday night with
29.31 ACCUMULATION UNITS for the RST Growth Portfolio.
RIGHT TO EXAMINE
You may cancel the contract without charge by returning it to us or your
registered representative within the period stated on the front of your
contract. This period will be at least 10 days (longer in some states). You
will receive your contract value, a return of PURCHASE PAYMENTS or the greater
of the two depending on state requirements or if your contract is an IRA.
Contract value may be more or less than PURCHASE PAYMENTS. When we are required
to guarantee a return of PURCHASE PAYMENTS, we reserve the right to initially
apply amounts designated for the PORTFOLIOS to the RST Money Market Portfolio
until the contract is 15 days old. These amounts will then be allocated in the
manner you selected unless you have canceled the contract.
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4. INVESTMENT OPTIONS
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VARIABLE INVESTMENT OPTIONS
Managed by SAFECO Asset Management Company
- RST Equity Portfolio
- RST Growth Portfolio
- RST Northwest Portfolio
- RST Bond Portfolio
- RST Money Market Portfolio
- RST Small Company Stock Portfolio
MANAGED BY FEDERATED ADVISERS
- Federated High Income Bond Fund II
- Federated International Equity Fund II
- Federated Utility Fund II
MANAGED BY LEXINGTON MANAGEMENT CORPORATION
- Lexington Emerging Markets Fund, Inc.
- Lexington Natural Resources Trust
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
- Scudder Balanced Portfolio
- Scudder International Portfolio
MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
- VP Balanced
- VP International
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
- VIP II Contrafund Portfolio
- VIP III Growth Opportunities Portfolio
MANAGED BY INVESCO FUNDS GROUP, INC.
- INVESCO VIF-Realty Portfolio
<PAGE>
Not all PORTFOLIOS listed above may be available for all contracts. Additional
PORTFOLIOS may be available in the future. The PORTFOLIOS are not offered
directly to the public but are available exclusively to life insurance companies
as investment options for variable annuity and variable life insurance
contracts.
EACH PORTFOLIO HAS ITS OWN INVESTMENT OBJECTIVE. YOU SHOULD READ THE
PROSPECTUSES FOR THESE PORTFOLIOS CAREFULLY BEFORE INVESTING. COPIES OF THESE
PROSPECTUSES ARE INCLUDED WITH THIS PROSPECTUS AND MAY INCLUDE INFORMATION ON
OTHER PORTFOLIOS NOT AVAILABLE UNDER THIS CONTRACT.
FIXED ACCOUNT
The contract also offers a FIXED ACCOUNT with interest rates that are guaranteed
by SAFECO Life.
Each PURCHASE PAYMENT will be credited with the interest rate established for
the date that we receive the PURCHASE PAYMENT. This rate will apply to the
PURCHASE PAYMENT for at least 12 months from the date we receive it.
Thereafter we can adjust the interest rate. Adjusted rates will apply to
PURCHASE PAYMENTS and their credited interest for at least 12 months, when the
rate can be adjusted again.
Different interest rates may apply to each of your PURCHASE PAYMENTS depending
on the interest rate established for the date we receive the PURCHASE PAYMENT
and any subsequent rate adjustments. Annual effective interest rates will never
be less than 3%.
TRANSFERS
During the ACCUMULATION PHASE you can transfer money among the PORTFOLIOS and
the FIXED ACCOUNT 12 times per contract year free of charge. We measure a
contract year from the anniversary of your contract date. Each additional
transfer in a contract year may have a charge of $10 or 2% of the amount
transferred whichever is less.
The minimum amount you can transfer out of any investment option at one time is
$500. In addition to this $500 minimum, transfers out of the FIXED ACCOUNT are
limited to a maximum of 10% of the FIXED ACCOUNT value per contract year. You
must transfer the entire amount out of the investment option if, after a
transfer, the remaining balance would be less than $500. The minimum you can
transfer into any investment option is $50.
We will accept transfers by written request or by telephone. Each transfer must
identify:
- your contract;
- the amount of the transfer; and
- which investment options are affected.
Transfers by telephone will be accepted if we have properly signed authorization
on record. You may authorize someone else to make transfers by telephone on
your behalf. We will use reasonable procedures to confirm that instructions
given to us by telephone are genuine. If we do not use such procedures, we may
be liable for any losses due to unauthorized or fraudulent instructions. We
tape record all telephone instructions.
We reserve the right to modify, suspend or terminate transfer privileges at any
time.
DOLLAR COST AVERAGING
This is an investment strategy designed to achieve a lower average cost per unit
over time. It does not assure a profit nor protect against a loss. Investing
should continue at a consistent level in both market ups and downs. You can
systematically transfer set amounts of at least $50 each month or quarter from
any PORTFOLIO or the FIXED ACCOUNT to any of the other PORTFOLIOS. This is not
available from the FIXED ACCOUNT if there have been other withdrawals or
transfers from the FIXED ACCOUNT during the contract year. These transfers will
not count against your 12 free transfers per contract year as long as you
continue Dollar Cost Averaging for at least six months. You can initiate these
transfers any time by completing a form we will provide upon request.
Quarterly Dollar Cost Averaging transfers from the FIXED ACCOUNT are limited to
4% (1.33% monthly) of your value in the FIXED ACCOUNT as of the date of the
initial transfer. By choosing to have the transfer limit recalculated annually,
the limit is raised to 4.5% per quarter (1.5% monthly). There are no percentage
limits on transfers out of the PORTFOLIOS.
Dollar Cost Averaging will stop if:
- you do not have enough money in the "source" investment option
(remaining balance will be transferred);
- you make any other transfer from the "source" investment option;
- your requested number of transfers have been made;
- you surrender your contract; or
- you instruct us to stop.
APPRECIATION OR INTEREST SWEEP
If your contract value is at least $10,000, you can instruct us to automatically
transfer earnings up to 10% from the RST Money Market Portfolio or earned
interest up to 10% from the FIXED ACCOUNT to the other PORTFOLIOS monthly,
quarterly or annually. This is not available from the RST Money Market Portfolio
if transfers from the RST Money Market Portfolio are occurring under Dollar Cost
Averaging. This is not available from the FIXED ACCOUNT if there have been other
withdrawals or transfers from the FIXED ACCOUNT during the contract year. These
transfers are not taken into account in determining any transfer charge unless
you stop these transfers before six have been made.
PORTFOLIO REBALANCING
After your money has been invested, the performance of the PORTFOLIOS may cause
the percentage in each PORTFOLIO to change from your original allocations. If
your contract value
<PAGE>
is at least $10,000, you can instruct us to adjust your investment in the
PORTFOLIOS to maintain a predetermined mix quarterly, semiannually or annually.
Portfolio Rebalancing can be used with Dollar Cost Averaging and Appreciation
or Interest Sweep; however, it is not available for the FIXED ACCOUNT. You can
start or stop Portfolio Rebalancing once each contract year.
SUBSTITUTION
If any shares of the PORTFOLIOS are no longer available, or if in our view no
longer meet the purpose of the contract, it may be necessary to substitute
shares of another PORTFOLIO. We will seek prior approval of the SEC and give
you notice before doing this.
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5. EXPENSES
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There are charges and other expenses associated with the contract that reduce
the return on your investment in the contract. These charges and expenses are:
INSURANCE CHARGES
Each day, we make deductions for our insurance charges. We do this as part of
our calculation of the value of ACCUMULATION and ANNUITY UNITS. The insurance
charge has two parts: 1) the mortality and expense risk charge and 2) the asset
related administration charge.
MORTALITY AND EXPENSE RISK CHARGE. This charge is equal, on an annual
basis, to 1.25% of the average daily net asset value of each PORTFOLIO.
This charge is for all the insurance benefits (e.g., guaranteed annuity
rates and death benefits) and for the risk (expense risk) that the current
charges will not be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then we will bear the loss. If the charges are more than
sufficient, we will retain the excess. The rate of the mortality and
expense risk charge will not be increased.
ASSET RELATED ADMINISTRATION CHARGE. This charge is equal, on an annual
basis, to .15% of the average daily net asset value of each PORTFOLIO.
Since this charge is an asset-based charge, the amount of the charge
associated with your particular contract may have no relationship to the
administrative costs actually incurred. This charge, together with the
annual administration maintenance charge (see below), is for all the
expenses associated with contract administration. Some of these expenses
are: preparation of the contract, confirmations and statements; maintenance
of contract records; personnel costs; legal and accounting fees; filing
fees; and computer and system costs. If this charge and the annual
administration maintenance charge are not enough to cover the costs of the
contract in the future, we will bear the loss. We do not intend to profit
from this charge. The rate of the asset related administration charge will
not be increased.
ANNUAL ADMINISTRATION MAINTENANCE CHARGE
During the ACCUMULATION PHASE we will deduct a $30 annual administration
maintenance charge from your contract on the last day of each contract year and
if you make a complete withdrawal. This charge is for administrative expenses
(see above) and may be changed but may never exceed $35 per contract year. We
will not deduct this charge if the value of your contract is at least $50,000
when the deduction is to be made.
During the INCOME PHASE we will not deduct this charge unless you have chosen
the Systematic Withdrawal Income Plan as your annuity option and your contract
value is less than $50,000.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will be assessed on withdrawals in excess of
your free withdrawal amount that is described under Section 7 - Access to Your
Money. This charge is for expenses incurred in connection with the promotion,
sale and distribution of the contracts. If the contingent deferred sales charge
is insufficient, excess amounts resulting from the mortality and expense risk
charge may be used to recover these expenses.
Unlike many annuity contracts, this contract bases contingent deferred sales
charge on the age of your contract, not on the length of time each PURCHASE
PAYMENT is in your contract. Subsequent PURCHASE PAYMENTS do not begin a new
contingent deferred sales charge period. The contingent deferred sales charge
("CDSC" in the table below) is stated as a percentage of the amount you
withdraw. It starts at 8% in the first contract year and declines one percent
each contract year as follows:
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Contract Year 1 2 3 4 5 6 7 8 9+
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CDSC 8% 7% 6% 5% 4% 3% 2% 1% 0%
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When the withdrawal is for only part of the value of your contract, the
contingent deferred sales charge is deducted from the remaining value in your
contract.
We will not assess the contingent deferred sales charge for:
- ANNUITY PAYMENTS;
- Repetitive Withdrawals taken over life expectancy;
- withdrawals during eligible healthcare confinement; and
- death benefits.
WITHDRAWAL CHARGE
We will deduct a separate withdrawal charge equal to $25 or 2% of the amount
withdrawn whichever is less, for each withdrawal after the first withdrawal in
any contract year. This charge is deducted from the remaining value in your
contract.
We will not deduct this charge for ANNUITY PAYMENTS or Repetitive Withdrawals.
<PAGE>
TRANSFER CHARGE
You can make 12 free transfers every contract year. If you make more than 12
transfers in a contract year, we may deduct a transfer charge equal to $10 or 2%
of the amount that is transferred whichever is less.
If the transfer is part of Dollar Cost Averaging, Appreciation or Interest
Sweep, or Portfolio Rebalancing it will not be counted as part of your 12 free
transfers.
PREMIUM TAXES
States and other governmental entities (e.g., municipalities) may charge premium
taxes. These taxes vary by state and are subject to change. Some states charge
for these taxes at the time each PURCHASE PAYMENT is made. In this case,
PURCHASE PAYMENTS as discussed in this prospectus may reflect a deduction for
the premium tax. Other states charge for these taxes when ANNUITY PAYMENTS
begin. We may make a deduction from your contract for the payment of these
taxes.
INCOME OR OTHER TAXES
Currently we do not pay income or other taxes on earnings attributable to your
contract. However, if we ever incur such taxes, we reserve the right to deduct
them from your contract.
PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
PORTFOLIOS. These expenses are summarized in the Fee Table of this prospectus.
For more detailed information, you should refer to the enclosed PORTFOLIO
prospectuses.
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6. TAXES
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This section and additional information in the SAI discuss how federal income
tax applies to annuities in general. This information is not complete and is
not intended as tax advice. Tax laws and their interpretations are complex and
subject to change. No attempt is made to discuss state or other tax laws.
SAFECO Life does not guarantee the tax treatment of any contract or any
transaction involving a contract. You should consult a competent tax adviser
about your individual circumstances.
ANNUITY CONTRACTS IN GENERAL
Under the Internal Revenue Code of 1986, as amended ("Code"), you generally do
not pay tax on contract earnings until received. Different tax rules apply to
PURCHASE PAYMENTS and distributions depending on how you take money out and
whether your contract is QUALIFIED or NON-QUALIFIED.
Earnings for corporate owned contracts and other contracts not owned for the
benefit of natural persons are generally taxed as ordinary income in the current
year. Exceptions may apply.
QUALIFIED CONTRACTS
Contracts purchased as an IRA, Roth IRA, TSA, or specially sponsored retirement
plan, are referred to as QUALIFIED contracts. To the extent PURCHASE PAYMENTS
have a zero cost basis (were made with pre-tax dollars), distributions will be
taxed as ordinary income.
QUALIFIED plans are subject to special rules and limits on PURCHASE PAYMENTS and
distributions that vary according to the type of plan. Ineligible or excess
contributions to certain plans can result in substantial penalties and possible
loss of the contract's or plan's QUALIFIED status. Tax penalties of 10% or
more, may apply to certain distributions; for example if you are under age
59 1/2 and not disabled as defined by the Code. There may be substantial
penalties if you fail to take required minimum distributions, usually
beginning by age 70 1/2.
In some cases, you must satisfy plan or Code requirements before you take money
out. For example, the Code restricts certain withdrawals from TSAs.
NON-QUALIFIED CONTRACTS
Contracts purchased with after-tax money and not part of an IRA, Roth IRA, TSA,
or specially sponsored retirement plan, are referred to as NON-QUALIFIED
contracts and receive different tax treatment than QUALIFIED contracts. Your
cost basis equals the total amount of the after-tax PURCHASE PAYMENTS remaining
in the contract.
The Code generally treats distributions as coming first from earnings and then
from PURCHASE PAYMENTS. Contracts issued by the same insurer to the same OWNER
in the same year are treated as one contract for tax purposes. Distributions
from NON-QUALIFIED contracts are taxed as ordinary income to the extent they are
attributable to earnings. Since you have already been taxed on the cost basis,
distributions attributable to PURCHASE PAYMENTS are generally not taxed.
There may be a 10% tax penalty on earnings withdrawn before you reach age
59 1/2. Certain exceptions apply, such as death or disability as defined
by the Code.
DIVERSIFICATION
Variable annuity contracts receive TAX DEFERRAL as long as investment in the
PORTFOLIOS meet diversification standards set by Treasury Regulations. This
favorable tax treatment allows you to select and make transfers among PORTFOLIOS
without paying income tax until you take money out.
We believe the PORTFOLIOs offered under this contract are being managed to
comply with existing standards. To date, neither Treasury Regulations nor the
Code give specific guidance as to the circumstances under which your contract
might lose its tax favored status as an annuity because of the number and type
of PORTFOLIOS you can select from, and the extent to which you can make
transfers. If issued, such guidance could be applied either prospectively or
retroactively. Due to the uncertainty in this area, we reserve the right to
modify the contract in an attempt to maintain favorable tax treatment.
<PAGE>
TAX WITHHOLDING
Generally, federal income tax is withheld from the taxable portion of
withdrawals at a rate of 10%. Withholding on periodic payments as defined by
the Code is at the same rate as wages. Typically, you may elect not to have
income taxes withheld or to have withholding done at a different rate. Certain
distributions from 403(b) plans, which are not directly rolled over to another
eligible retirement plan or IRA, are subject to a mandatory 20% withholding.
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7. ACCESS TO YOUR MONEY
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Under your contract, money may be accessed:
- by withdrawing all or some of your money during the ACCUMULATION
PHASE;
- by receiving payments during the INCOME PHASE (see Section 2 - Annuity
Payments); or
- when a death benefit is paid to your BENEFICIARY (see Section 9 -
Death Benefit).
During the ACCUMULATION PHASE, you can take money out by writing to us.
Withdrawals must be at least $250. Unless you tell us differently, partial
withdrawals will be made pro rata from each investment option. Once we receive
your request, withdrawals from the PORTFOLIOS will be effective as of the next
close of the NYSE.
A withdrawal may have a contingent deferred sales charge, a withdrawal charge,
and, if you withdraw the entire contract, an annual administration maintenance
charge. There are situations where all or some of these charges don't apply.
See Section 5 - Expenses for a discussion of the charges.
FREE WITHDRAWAL AMOUNT
Your contract has a free withdrawal amount. There is no contingent deferred
sales charge on the first 10% of your contract value withdrawn in a contract
year. There is no withdrawal charge on the first withdrawal you make in a
contract year.
HEALTHCARE CONFINEMENT
If approved in your state, there is no contingent deferred sales charge on
withdrawals you make while you are confined in a eligible healthcare facility
if:
- the confinement began after your contract date; and
- we receive confirmation that your confinement has continued for 60 or
more consecutive days.
REPETITIVE WITHDRAWALS
You may request Repetitive Withdrawals at a predetermined frequency and amount.
The same restrictions, income taxes, and tax penalties that apply to random
withdrawals also apply to Repetitive Withdrawals.
WITHDRAWAL RESTRICTIONS ON TSA OR 403(b)
Withdrawals attributable to salary reduction contributions to TSAs for years
after 1988 and any earnings accrued after 1988, cannot be taken out unless:
- you attain age 59 1/2;
- you leave your job;
- you die or become disabled as defined by the Code;
- you experience a qualifying hardship (applies to contributions only);
or
- you divorce and a distribution to your former spouse is permitted
under a Qualified Domestic Relations Order.
Tax penalties may apply to withdrawals. Restrictions on withdrawals from TSAs
do not affect rollovers or transfers between certain QUALIFIED plans.
MINIMUM VALUE
If, after a withdrawal, the value in any PORTFOLIO or the FIXED ACCOUNT is less
than $500, the remaining amount will also be withdrawn. If, after a withdrawal,
the remaining contract value is less than $500 ($1,000 in Maine and South
Carolina), the entire contract value will be withdrawn and your contract will
terminate.
Withdrawals, including any charges, reduce the number of ACCUMULATION UNITS in
the PORTFOLIOS and/or the value of the FIXED ACCOUNT as well as the death
benefit. Income taxes, tax penalties and certain restrictions may also apply.
See Section 6 - Taxes.
- --------------------------------------------------------------------------------
8. PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, we may advertise "yield", "effective yield", "total return"
and "average annual total return" for some or all of the PORTFOLIOs. Some of
the PORTFOLIOs have been in existence prior to being offered in the contract.
We calculate performance data of any period prior to the PORTFOLIO being offered
in the contract as if the PORTFOLIO had been offered during those periods, using
current charges and expenses.
Performance data and rankings are based on historical results and do not promise
or project future performance.
Standardized performance makes it easier for you to compare performance of
variable contracts issued by different companies. It uses set time periods and
PURCHASE PAYMENT amounts and reflects the annual administration maintenance
charge and the contingent deferred sales charge.
Non-standardized performance helps you compare performance of PORTFOLIOs within
a contract. From time to time, non-standardized performance may accompany
standardized figures. Non-standardized performance uses different time periods
and PURCHASE PAYMENT amounts and may not reflect all of the charges included in
standardized figures. For this reason, non-standardized PORTFOLIO performance
may appear higher.
Each PORTFOLIO may, from time to time, advertise performance relative to certain
performance rankings and indices compiled on an industry-wide basis, for
example:
<PAGE>
- "Lipper Variable Insurance Products Performance Analysis" monitors
performance for variable annuity PORTFOLIOs and is published by Lipper
Analytical Services, Inc.
- "VARDS Report" is a monthly, variable annuity industry analysis
published by Financial Planning Resources, Inc.
- "Variable Annuity Performance Report" is a monthly analysis of
variable annuity performance published by Morningstar, Inc.
Rankings provided by these and other sources may not include all applicable
charges. More information on the method used to calculate performance for the
PORTFOLIOs and information about independent services that monitor and rank the
performance of variable annuities is in the SAI.
- --------------------------------------------------------------------------------
9. DEATH BENEFIT
- --------------------------------------------------------------------------------
DEATH OF OWNER BEFORE ANNUITY DATE
If you die before ANNUITY PAYMENTS start or while you are receiving ANNUITY
PAYMENTS under the Systematic Withdrawal Income Plan, we will pay a death
benefit under your contract as follows to the:
- surviving OWNER or JOINT OWNER; or if none, then
- surviving primary BENEFICIARIES; or if none, then
- surviving contingent BENEFICIARIES; or if none, then
- estate of the last OWNER to die.
The death benefit is the higher of:
1) your current contract value; or
2) if you are a sole OWNER or the oldest JOINT OWNER, the Minimum
Guaranteed Death Benefit.
When determining the higher of (1) or (2) above, the calculations are based on
the earlier of:
- the date we receive proof of death and the BENEFICIARY'S election of
how to receive payment; or
- six months from the date of death.
The initial Minimum Guaranteed Death Benefit is equal to your first PURCHASE
PAYMENT. It is reset on each 8-year contract anniversary until the oldest OWNER
attains age 72. The reset benefit is equal to the immediately preceding Minimum
Guaranteed Death Benefit or is "stepped up" to your contract value on that date,
if higher.
The Minimum Guaranteed Death Benefit is increased by additional PURCHASE
PAYMENTS and immediately adjusted for:
- withdrawals;
- amounts paid to you as ANNUITANT under the Systematic Withdrawal
Income Plan;
- any amounts paid or payable to a surviving ANNUITANT under the
Systematic Withdrawal Income Plan; and
- any portion of the contract value converted to ANNUITY UNITS as a
result of switching to the INCOME PHASE.
The death benefit is also reduced dollar for dollar for any withdrawals made
after the OWNER's death, including repayment of any loans.
The death benefit is immediately payable upon the death of the first OWNER to
die or, if the OWNER is not an individual (e.g. a corporation or trust), on the
death of the first ANNUITANT prior to the ANNUITY DATE. To pay the death
benefit, we need proof of death such as a certified copy of a death certificate,
plus written direction from your BENEFICIARY regarding how he or she wants to
receive the money.
If a death for which the death benefit is payable occurred more than six months
before we received proof of death or the BENEFICIARY selected how to receive
payment, the value of the benefit will be determined as of six months after the
date of death. From this point on the benefit value will be subject to
investment performance and applicable contract charges until the date payment is
made. This value may go up or down. Thus, BENEFICIARIES should notify us of a
death as promptly as possible to limit their risk of a decline in benefit value.
A BENEFICIARY under a NON-QUALIFIED contract may elect to receive the death
benefit as:
1) a lump sum made no later than five years from the date of death; or
2) ANNUITY PAYMENTS made over the BENEFICIARY's life or life expectancy.
To receive ANNUITY PAYMENTS, the BENEFICIARY must make this election
within 60 days from our receipt of proof of death. ANNUITY PAYMENTS
must begin within one year from the date of death. Once ANNUITY
PAYMENTS begin they cannot be changed.
A BENEFICIARY under a QUALIFIED contract may have different death benefit
elections depending upon the retirement plan.
In some cases, a spouse who is entitled to receive a death benefit may have the
option to continue the contract instead. If this spouse is also the oldest
JOINT OWNER, the Minimum Guaranteed Death Benefit will apply on the death of
this spouse. Otherwise, the benefit on the death of your spouse will be the
contract value.
DEATH OF ANNUITANT AFTER ANNUITY DATE
After the ANNUITY DATE the ANNUITANT is the OWNER. Once ANNUITY PAYMENTS start,
there is no longer a death benefit under the contract unless the last ANNUITANT
dies while receiving PAYMENTS under the Systematic Withdrawal Income Plan.
Other annuity options may direct remaining guaranteed payments to the
BENEFICIARY. All ANNUITY PAYMENTS will be distributed to the BENEFICIARY at
least as rapidly as they would have been made to the ANNUITANT. See Section 2 -
Annuity Payments for more information.
BENEFICIARY DESIGNATION
You may designate BENEFICIARIES on your contract application or by sending us a
signed and dated request. You may change the BENEFICIARY at any time. An
irrevocable BENEFICIARY must
<PAGE>
consent in writing to any change. A new BENEFICIARY designation revokes any
prior designation and is not effective until we record the change. We are not
responsible for the validity of any BENEFICIARY designation nor for any actions
we may take prior to receiving and recording a BENEFICIARY change.
- --------------------------------------------------------------------------------
10. OTHER INFORMATION
- --------------------------------------------------------------------------------
SAFECO LIFE
SAFECO Life was incorporated as a stock life insurance company under Washington
law on January 23, 1957. We provide individual and group life, accident and
health insurance, and annuity products and are licensed to do business in the
District of Columbia and all states except New York. We are a wholly owned
subsidiary of SAFECO Corporation which is a holding company whose subsidiaries
are primarily engaged in insurance and financial service businesses.
SEPARATE ACCOUNT
We adopted a Board Resolution to establish SAFECO Separate Account C ("Separate
Account") under Washington law on February 3, 1995. The Separate Account holds
the assets that underlie contract values invested in the PORTFOLIOS. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Under Washington law, the assets in the Separate Account are the property of
SAFECO Life. However, assets in the Separate Account that are attributable to
contracts are not chargeable with liabilities arising out of any other business
we may conduct. Income, gains and losses (realized and unrealized), resulting
from assets in the Separate Account are credited to or charged against the
Separate Account without regard to other income, gains or losses of SAFECO Life.
Promises we make in the contract are general corporate obligations of SAFECO
Life and are not dependent on assets in the Separate Account.
GENERAL ACCOUNT
If you put your money into the FIXED ACCOUNT, it goes into SAFECO Life's general
account. The general account is made up of all of SAFECO Life's assets other
than those attributable to separate accounts. All of the assets of the general
account are chargeable with the claims of any of our contract OWNERS as well as
our creditors. The general account invests its assets in accordance with state
insurance law.
We are not required to register the FIXED ACCOUNT or any interests therein, with
the SEC. For this reason, SEC staff has not reviewed disclosure relating to the
FIXED ACCOUNT. However, such disclosure may be subject to general provisions in
federal securities laws that relate to accuracy and completeness of statements
made in the prospectus.
DISTRIBUTION (PRINCIPAL UNDERWRITER)
The contracts are underwritten by SAFECO Securities, Inc. ("SSI"). They are
sold by individuals who, in addition to being licensed to sell variable annuity
contracts for SAFECO Life, are also registered representatives of broker-dealers
who have a current sales agreement with SSI. SSI is an affiliate of SAFECO Life
and is located at 10865 Willows Road NE, Redmond, Washington 98052. It is
registered as a broker-dealer with the SEC under the Securities Act of 1934 and
is a member of the National Association of Securities Dealers, Inc. No amounts
are retained by SSI for acting as principal underwriter for SAFECO Life
contracts.
The commissions paid to registered representatives on the sale of contracts are
not more than 6% of PURCHASE PAYMENTS. In addition, commissions, allowances and
bonuses may be paid to registered representatives and/or other distributors of
the contracts. A bonus dependent upon persistency is one type of bonus that may
be paid.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or SSI is a party.
SAFECO Life is engaged in various kinds of litigation which, in the opinion of
SAFECO Life, are not of material importance in relation to the total capital and
surplus of SAFECO Life.
RIGHT TO SUSPEND ANNUITY PAYMENTS, TRANSFERS OR WITHDRAWALS
We may be required to suspend or postpone payment of ANNUITY PAYMENTS,
transfers, or withdrawals from the PORTFOLIOS for any period of time when:
- the NYSE is closed (other than customary weekend or holiday closings);
- trading on the NYSE is restricted;
- an emergency exists such that disposal of or determination of the
value of the PORTFOLIO shares is not reasonably practicable; or
- the SEC, by order, so permits for your protection.
Additionally, we reserve the right to defer payment of ANNUITY PAYMENTS,
transfers, or withdrawals from the FIXED ACCOUNT for the period permitted by
law, but not for more than six months.
VOTING RIGHTS
SAFECO Life is the legal owner of the PORTFOLIOS' shares. However, when a
PORTFOLIO solicits proxies in conjunction with a shareholder vote, we are
required to ask you for instructions as to how to vote those shares. All shares
are voted in the same proportion as the instructions we received. Should we
determine that we are no longer required to comply with the above, we will vote
the shares in our own right.
REDUCTION OF CHARGES OR ADDITIONAL AMOUNTS CREDITED
Under some circumstances we may expect to experience lower costs or higher
revenues associated with issuing and administering certain contracts. For
example, sales expenses are expected to be less when contracts are sold to a
large group of individuals. Under such circumstances we may pass a portion of
these anticipated savings on to you by
<PAGE>
reducing OWNER transaction charges (including the contingent deferred sales
charge) or crediting additional FIXED ACCOUNT interest.
We may also take such action in connection with contracts sold to our officers,
directors, and employees and their family members, employees of our affiliates
and their family members, and registered representatives and employees of
broker-dealers that have a current selling agreement with us. In each
circumstance such actions will be reasonably related to the savings or revenues
anticipated and will be applied in a non-discriminatory manner. These actions
may be withdrawn or modified by us at any time.
YEAR 2000
Like other insurance, mutual fund, financial and business organizations, and
individuals around the world, SAFECO Life and the Separate Account could be
adversely affected if the computer systems used by SAFECO Life, its principal
underwriter, underlying mutual fund managers and investment advisers, or other
companies that provide services to the Separate Account do not properly process
and calculate date related information from and after January 1, 2000. This is
commonly called the "Year 2000 problem." SAFECO Life is taking steps it
believes are reasonably designed to address the Year 2000 problem with respect
to the computer systems that each of them uses and to obtain satisfactory
assurances that comparable steps are being taken by each of SAFECO Life's other,
major service providers. It is not anticipated that the Separate Account will
incur any charges or that there will be any difficulties in accurate and timely
reporting resulting from the change in year from 1999 to 2000. However, with
approximately 90% of its systems year 2000 ready, SAFECO Life is currently
developing business continuity plans for year 2000 contingencies.
INTERNET INFORMATION
You can find more information about the Spinnaker Variable Annuity Contract as
well as other products and financial services offered by SAFECO companies on the
Internet at http://www.SAFECO.com. This website is frequently updated with new
information and can help you locate a representative near you. If you already
own a Spinnaker Variable Annuity Contract you can obtain specific information
about your contract and additional online services.
The SEC also maintains a website at http://www.sec.gov, which contains a copy of
the Separate Account's most recent registration statement and general consumer
information.
FINANCIAL STATEMENTS
The financial statements of SAFECO Life and SAFECO Separate Account C have not
been included in the Statement of Additional Information. These financial
statements will be added by amendment at a later date.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Separate Account
Experts
Distribution
Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<PAGE>
<TABLE>
<CAPTION>
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APPENDIX
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes ACCUMULATION UNIT values for the periods indicated. This data has been extracted from the Separate
Account's Financial Statements. This information should be read in conjunction with the Separate Account's Financial Statements and
related notes which are included in the Statement of Additional Information.
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
SAFECO RESOURCE EQUITY SUB-ACCOUNT
February 11 value (initial public offering) $24.528
December 31 value $48.808 $39.633 $32.209 $25.373
December 31 units 1,868,135 1,055,113 438,184 144,290
SAFECO RESOURCE GROWTH SUB-ACCOUNT
February 11 value (initial public offering) $13.910
December 31 value $38.410 $26.928 $20.668 $14.864
December 31 units 2,188,705 1,244,669 479,054 154,127
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
February 11 value (initial public offering) $10.073
December 31 value $15.388 $11.905 $10.737 $10.134
December 31 units 445,999 146,690 58,302 22,082
SAFECO RESOURCE BOND SUB-ACCOUNT
February 11 value (initial public offering) $16.217
December 31 value $19.130 $17.915 $18.045 $15.521
December 31 units 164,114 112,876 35,531 14,107
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
February 11 value (initial public offering) $13.526
December 31 value $15.413 $14.874 $14.370 $13.811
December 31 units 469,011 251,704 98,132 124,541
SAFECO RESOURCE SMALL COMPANY STOCK SUB-ACCOUNT
May 1 value (initial public offering) $10.000
December 31 value $12.731
December 31 units 246,308
SCUDDER INTERNATIONAL SUB-ACCOUNT
February 11 value (initial public offering) $10.948
December 31 value $14.008 $13.022 $11.504 $10.498
December 31 units 595,188 545,285 278,030 137,600
SCUDDER BALANCED SUB-ACCOUNT
February 11 value (initial public offering) $10.435
December 31 value $16.872 $13.771 $12.481 $9.988
December 31 units 784,022 660,227 134,772 49,575
LEXINGTON NATURAL RESOURCES SUB-ACCOUNT
January 25 value (initial public offering) $11.330
December 31 value $14.952 $14.148
December 31 units 304,593 73,555
<PAGE>
ACCUMULATION UNIT VALUE HISTORY (CONTINUED)
LEXINGTON EMERGING MARKETS SUB-ACCOUNT
January 25 value (initial public offering) $10.350
December 31 value $8.670 $9.946
December 31 units 192,647 86,353
FEDERATED UTILITY SUB-ACCOUNT
January 25 value (initial public offering) $11.110
December 31 value $15.135 $12.117
December 31 units 263,094 83,361
FEDERATED HIGH INCOME BOND SUB-ACCOUNT
January 25 value (initial public offering) $9.870
December 31 value $12.236 $10.899
December 31 units 300,924 40,629
FEDERATED INTERNATIONAL EQUITY SUB-ACCOUNT
January 25 value (initial public offering) $10.220
December 31 value $12.003 $11.056
December 31 units 127,307 34,059
AMERICAN CENTURY VP BALANCED SUB-ACCOUNT
January 25 value (initial public offering) $7.020
December 31 value $9.008 $7.887
December 31 units 350,262 23,490
AMERICAN CENTURY VP INTERNATIONAL SUB-ACCOUNT
January 25 value (initial public offering) $5.330
December 31 value $7.039 $6.016
December 31 units 467,855 24,432
</TABLE>
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
-7-
<PAGE>
SPINNAKER-TM- VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
SAFECO SEPARATE ACCOUNT C
AND
SAFECO LIFE INSURANCE COMPANY
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 Contract.
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, Retirement
Services Department, P.O. Box 34690, Seattle, Washington 98124-1690.
This Statement of Additional Information and the Prospectus are both dated
________,1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortality and Expense Guarantee. . . . . . . . . . . . . . . . . . . . . . .
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction or Elimination of Contingent Deferred Sales Charge . . . . . . . .
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FEDERAL TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multiple Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contracts Owned by Other than Natural Persons. . . . . . . . . . . . . . . .
Income Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Treatment of Withdrawals - Non-Qualified Contracts . . . . . . . . . . .
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Treatment of Withdrawals - Qualified Contracts . . . . . . . . . . . . .
Tax Sheltered Annuities - Withdrawal Limitations . . . . . . . . . . . . . .
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
</TABLE>
<PAGE>
SEPARATE ACCOUNT
SAFECO Life Insurance Company ("the Company", "we", and "us"), is a wholly owned
subsidiary of SAFECO Corporation which is a holding company whose subsidiaries
are engaged primarily in insurance and financial services businesses. We
established SAFECO Separate Account C ("the Separate Account") on February 3,
1995, to hold assets that underlie contract values invested in the portfolios.
The Separate Account meets the definition of "separate account" under Washington
State law and under the federal securities laws. It is registered with the
Securities and Exchange Commission ("SEC") as a unit investment trust under the
Investment Company Act of 1940, as amended. This registration does not involve
supervision of the management of the Separate Account or the Company by the SEC.
The assets of the Separate Account are the property of the Company. The
Separate Account invests in the underlying portfolios that are offered under the
contract. Each portfolio is a part of a series of portfolios designed for use
in variable annuity and variable life insurance products, not all of which may
be available under the contracts described herein. We maintain records of all
Separate Account purchases and redemptions of the shares of the portfolios. We
do not guarantee the investment performance of the Separate Account, its assets,
or the portfolios. Contract values allocated to the Separate Account and the
amount of variable annuity payments will vary with the value of the shares of
the underlying portfolios, and are also reduced by expenses and transaction
charges assessed under the contracts.
Accumulation units and variable annuity payments will reflect the investment
performance of the Separate Account with respect to amounts allocated to it.
Since the Separate Account is always fully invested in the shares of the
portfolios, its investment performance reflects the investment performance of
those entities. 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 Life and the Separate Account committee. The values of such
shares held by the Separate Account fluctuate and are subject to the risks of
changing economic conditions. The contract owner bears the entire investment
risk. There can be no assurance that the aggregate value in the contract and
amount of variable annuity payments will equal or exceed the purchase payments
made under a contract for the reasons described above, or because of the
premature death of the annuitant after the annuity date.
MORTALITY AND EXPENSE GUARANTEE
We guarantee that the dollar amount of each variable annuity payment made after
the first payment will not be adversely affected by variations in actual
mortality experience or actual expenses incurred in excess of the expense
deductions provided for in the contract (although the Company does not guarantee
the amounts of the variable annuity payments).
To the extent that the contingent deferred sales charge is insufficient to cover
all the distribution costs and related expenses, some portion of the proceeds
from the mortality and expense risk charge may be utilized to meet such excess
distribution expenses. We have represented in documents filed with the SEC that
the mortality and expense risk charge is consistent with the mortality and
expense risks we assume and is within the range of industry practice, based on
our review of our requirements and industry practice. Moreover, we have
represented that use of any proceeds from such charge to defray distribution
expenses has a reasonable likelihood of benefiting the Separate Account and
owners.
EXPERTS
The financial statements of SAFECO Separate Account C and SAFECO Life Insurance
Company and Subsidiaries, to be included herein by post-effective amendment at a
later date, will be audited by Ernst & Young LLP, independent auditors, to the
extent indicated in their reports thereon. Such financial statements will be
included later in reliance on their reports given upon the authority of such
firm as experts in accounting and auditing.
2
<PAGE>
DISTRIBUTION
SAFECO Securities, Inc. (SSI), an affiliate of the Company, acts as the
principal underwriter for the contracts. The contracts issued by the Separate
Account are offered on a continuous basis.
REDUCTION OR ELIMINATION OF 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 or to
a group of individuals in a manner that results in savings of sales expenses.
Any reduction of the contingent deferred sales charge will be determined by us
after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than
for a smaller group because of the ability to implement large numbers of
contracts with fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per contract sales expenses are likely to be less on larger purchase
payments than on smaller ones.
3. Any prior or existing relationship with us. Per contract sales expenses
are likely to be less when there is a prior existing relationship because
of the likelihood of implementing the contracts with fewer sales contacts.
4. There may be other circumstances, of which we are not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, we determine that there will
be a reduction in sales expenses, the Company 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 the Company 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.
PERFORMANCE INFORMATION
TOTAL RETURN
"Total return" is the total percentage change in the unit value of an investment
over a stated period of time. It reflects all aspects of a portfolio's return,
including the automatic reinvestment by the portfolio of all distributions and
the deduction of all applicable charges to the portfolio on an annual basis,
including mortality and expense risk charges, the annual administration
maintenance charge, the asset related administration charge, and any other
charges against contract value. Quotations also will assume a termination
(surrender) at the end of the particular period and reflect the deduction of the
contingent deferred sales charge, if applicable. Additional quotations may be
given that do not assume a termination (surrender) and do not take into account
deduction of the contingent deferred sales charge, since the contracts are
intended as long-term products.
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 reflect 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 invested, and without the annual administration maintenance charge and/or
with or without the contingent deferred
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<PAGE>
sales charge. Non-standardized figures may cause the performance of the
portfolios to appear higher than performance calculated using standard
parameters.
"Average annual total return" is the annual percentage change in the unit value
of an investment over a stated period of time. It is calculated by determining
the growth or decline in value of a hypothetical investment in the portfolio
over certain periods, including 1, 5, and 10 years (up to the life of the
portfolio), and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. Investors should realize that the
portfolio's experience is not constant over time, but changes from year to year,
and that the average annual returns represent averaged figures as opposed to the
year-to-year performance of a portfolio. Average annual returns are calculated
pursuant to the following formula:
n
P(1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000;
T = the average annual total return;
n = the number of years; and
ERV = the withdrawal value at the end of the time period used.
"Cumulative total returns" are not averaged and reflect the simple change in
value of a hypothetical investment in the portfolio over a stated period of
time.
Total return, average total return, and cumulative total return assume
reinvestment of dividend and capital gains distributions.
From time to time, additional quotations of total return based on the historical
performance of the portfolios may also be presented.
YIELD
Some portfolios may advertise yields. Yields quoted in advertising reflect the
change in value of a hypothetical investment in the portfolio over a stated
period of time, not taking in to account capital gains or losses. Yield figures
will reflect deduction of the annual administration maintenance charge which is
assessed on an annual basis to contract owners whose contract value is less than
$50,000, but will not reflect any applicable contingent deferred sales charge.
Yields are annualized and stated as a percentage.
Current yield and effective yield are calculated for the RST Money Market
Portfolio. Current yield is based on the change in the value of a hypothetical
investment (exclusive of capital changes) over a particular seven (7) day
period, less a hypothetical charge reflecting deductions from values during the
period (the base period), and stated as a percentage of the investment at the
start of the base period (the base period return). The base period return is
then annualized by assuming that the income generated during the seven day
period continues to be generated each week for a 52 week period. It is
multiplied by 365/7, with the resulting yield figure carried to at least the
nearest hundredth of one percent. Effective yield assumes that all dividends
received during an annual period have been reinvested. This compounding effect
causes effective yield to be higher than current yield. Calculation of
effective yield begins with the same base period return used in the calculation
of current yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
For the RST Money Market Portfolio, total return and average annual total return
are non-standardized performance figures which may accompany the standardized
yield and effective yield.
Yield for portfolios other than RST Money Market Portfolio is based on all
investment income (including dividends and interest) per accumulation unit
earned during a particular thirty (30) day period, less expenses accrued during
the
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<PAGE>
period (net investment income). Yield is computed by dividing net investment
income by the value of an accumulation unit on the last day of the period,
according to the following formula:
6
Yield = 2[((a-b)/cd + 1) - 1]
where:
a = net investment income earned during the period by the corresponding
portfolio;
b = expenses accrued for the period (net of any reimbursements);
c = the average daily number of accumulation units outstanding during the
period; and
d = the value (maximum offering price) per accumulation unit on the last day
of the period.
The income is then annualized on a 360 day basis 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. Again, 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 reflect any applicable contingent deferred sales charge.
PERFORMANCE COMPARISON
The Company may also show historical accumulation unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual accumulation unit values. Performance information for a portfolio may be
compared, in reports and advertising, to: (i) Standard & Poor's Stock Index, Dow
Jones Industrial Averages, Donahue Money Market Institutional Averages, or other
unmanaged indices generally regarded as representative of the securities
markets; (ii) other variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services, Inc., the Variable Annuity
Research and Data Service, or Morningstar, Inc., which are widely used
independent research firms that rank mutual funds and other investment companies
by overall performance, investment objectives and assets; and (iii) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from an
investment in a contract. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for annuity charges,
investment management costs, brokerage costs and other transaction costs that
are normally paid when directly investing in securities.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising also may contain other information, including the ranking of any
portfolio derived from rankings of variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services, Inc. or by rating
services, companies, publications, or other persons which rank separate accounts
or other investment products on overall performance or other criteria.
TAX COMPARISON
Reports and advertising also may show the effect of tax deferred compounding on
investment returns, or returns in general, illustrated by graphs, charts, or
otherwise, which may include a comparison, at various points in time, of the
return from an investment in a contract (giving effect to all fees and charges),
or returns in general, on a tax-deferred basis (assuming one or more tax rates)
with the return on a taxable basis, and which will disclose the tax
characteristics of the investments shown, including the impact of withdrawals
and surrenders.
FEDERAL TAX STATUS
NOTE
The following description is based upon the Company's understanding of current
federal income tax law applicable to annuities in general. Tax laws are complex
and subject to change. We cannot predict the probability that any changes in
the interpretation of or the laws themselves, will occur. Purchasers are
cautioned to seek competent tax advice regarding the possibility of such
changes. We do 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 SAI or the Prospectus may be applicable in certain situations. Moreover,
no attempt has been made to consider any applicable state or other tax laws.
5
<PAGE>
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended, ("the Code")
governs taxation of annuities in general. An owner is generally 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
option elected. For a lump sum payment received as a total surrender (total
redemption), the recipient is generally taxed on the portion of the payment that
exceeds the cost basis in the contract. For non-qualified contracts, this cost
basis is generally the purchase payments, while for qualified contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
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 generally 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.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
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 portfolios
underlying variable contracts such as those described in the prospectus. 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."
The Company intends that all portfolios underlying the contracts will be managed
in such a manner as to comply with these diversification requirements.
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<PAGE>
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 contract 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 contract
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as your ability to transfer among portfolios or
the number and type of portfolios available, would cause you to be considered
the owner of the assets of the separate account resulting in the imposition of
federal income tax 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 contract owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the contract in an attempt to maintain favorable tax treatment.
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. You should consult a tax adviser prior to purchasing
more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the earnings on purchase payments for the
contracts will be taxed currently to the owner if the owner is not a natural
person, e.g. a corporation or certain other entities. Such contracts generally
may be treated as annuities for federal income tax purposes . However, this
treatment is not applied to a contract held by certain trusts or other entities
as an agent for a natural person nor to contracts held by qualified plans.
Purchasers who are not natural persons should consult their own tax counsel or
other tax advisor before purchasing a contract.
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. Special withholding rules apply to United States citizens residing
outside the United States and to non-resident aliens.
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 generally does not apply
to: a) a series of substantially equal payments made at least annually 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; or d) the portion of distributions not ineludible in
gross income (i.e. returns of after-tax contributions). You should consult your
own tax counsel or other tax advisor regarding income tax withholding.
7
<PAGE>
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.)
QUALIFIED PLANS
The contracts offered herein 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. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the contract
comply with applicable law. Following are general descriptions of some types of
qualified plans with which the contracts are most often 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 in
connection with a qualified plan.
Contracts issued in connection with qualified plans include special provisions
restricting contract provisions that may otherwise be available as described
herein. 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 the Company 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.
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<PAGE>
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as a traditional "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.) Traditional IRAs include the
SEP IRA and SIMPLE IRA. An employer can establish a SEP IRA or SIMPLE IRA
for its employees. Under an employer's SEP IRA or SIMPLE IRA,
contributions for each eligible employee can be made under a contract
issued as an IRA. 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.
c. Roth Individual Retirement Annuities
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth
Individual Retirement Annuity. Section 408A includes limits on how much
you may contribute to a Roth Individual Retirement Annuity and when
distributions may commence. Qualified distributions from Roth Individual
Retirement Annuities are excluded from taxable gross income. "Qualified
distributions" are distributions which (a) are made more than five years
after the taxable year of the first contribution to the Roth Individual
Retirement Annuity, and (b) meet any of the following conditions; (1) the
annuity owner has reached age 59 1/2; (2) the distribution is paid to a
beneficiary after the owner's death; (3) the annuity owner is disabled; or
(4) the distribution will be used for a first time home purchase.
(Qualified distributions for first time home purchases may not exceed
$10,000.) Non-qualified distributions are includable in taxable gross
income only to the extent that they exceed the contributions made to the
Roth Individual Retirement Annuity. The taxable portion of a non-qualified
distribution may be subject to the 10% penalty tax.
Subject to certain limitations, you may convert a regular Individual
Retirement Account or Annuity to a Roth Individual Retirement Annuity. You
will be required to include the taxable portion of the conversion in your
taxable gross income, but you will not be required to pay the 10% penalty
tax.
d. Deferred Compensation Plans
Section 457 of the Code permits governmental and certain other tax exempt
employers to establish deferred compensation plans for the benefit of their
employees. The Code establishes limitations and restrictions on
eligibility, contributions and distributions. Under these plans,
contributions made for the benefit of the employees will not be includable
in the employees' gross income until distributed from the plan. Special
rules apply to deferred compensation plans. Owners should consult their
own tax counsel or other tax adviser regarding any distributions.
9
<PAGE>
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
(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
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; (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order; (g)
distributions made to pay health insurance premiums for an unemployed owner or
annuitant; (h) distributions made to an owner or annuitant to pay qualified
higher education expenses; and (i) distributions made to an owner or annuitant
for first home purchases. 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
1st of the calendar year, following the year in which the employee attains age
70 1/2. Distributions from a TSA or Deferred Compensation Plan may, however, be
deferred until actual retirement, if later. 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.
Roth IRAs are not subject to the required minimum distribution rule.
Distributions from a Roth IRA may be deferred until the death of the owner or
annuitant.
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 or becomes disabled (within the meaning of
Section 72(m)(7) of the Code); (4) in the case of hardship, or (5) is divorced
and the distribution is permitted under a Qualified Domestic Relations Order.
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.
ANNUITY PROVISIONS
ANNUITY UNIT VALUE
The value of an annuity unit for each portfolio on any date varies to reflect
the investment experience of the portfolio, the assumed investment rate of 4% on
which the annuity tables are based, and the deduction for charges assessed and
imposed by the Company, including a mortality and expense risk charge, asset
related administration charge, and, if applicable, a charge for premium taxes.
For any valuation period the value of an annuity unit is determined by
multiplying the value of an annuity unit for each portfolio, as of the
immediately preceding valuation period by the Net Investment Factor for the
valuation period for
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which the value is being calculated, and dividing the result by a factor to
adjust for the assumed investment return of 4% used in calculating the annuity
rate tables.
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 PAYMENTS
The amount of the first annuity payment under a contract will be determined on
the basis of the annuity option selected, the annuity purchase rate, the date of
birth of the annuitant, and the annuity date. The amount of the first payment
is the sum of the payments from each investment option 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 tables contained in the
contract (which are guaranteed for the duration of the contract). For variable
annuitizations which take place beginning in the year 2000-2009, an age setback
of one year will be used; for those beginning in the year 2010-2019, an age
setback of two years will be used; and so on with an additional one year age
setback for each additional ten years.
The number of annuity units in each portfolio to be credited to the annuitant is
determined by dividing the amount of the first annuity payment from that
portfolio by the value of an annuity unit as of the 15th day of the month
preceding the annuity date. The number of annuity units used to calculate the
variable annuity payment each month remains constant unless the annuitant
changes portfolio elections. The value of annuity units in each portfolio will
fluctuate with the investment experience of the portfolios.
The dollar amount of the variable portion of each annuity payment after the
first is the sum of the payments from each portfolio, which are determined by
multiplying the number of annuity units per portfolio by the value of an annuity
unit (for that investment option) as of the 15th day of the preceding month.
To illustrate the manner in which variable annuity payments are determined
consider this example. Item (4) in the example shows the applicable monthly
payment rate for an annuitant with an adjusted age 63, who has elected a life
variable annuity payment plan with a guarantee period of 10 years with the
assumed investment rate of 4%. (Option 2, as described in the Prospectus).
<TABLE>
<S> <C>
(1) Assumed number of accumulation units in a portfolio on
maturity date. . . . . . . . . . . . . . . . . . . . . . . . 25,000
(2) Assumed value of an accumulation unit in a portfolio
at maturity. . . . . . . . . . . . . . . . . . . . . . . . $12.5000
(3) Cash value of contract at maturity, (1) x (2). . . . . . . $312,500
(4) Consideration required to purchase $1 of monthly
annuity from annuity rate table. . . . . . . . . . . . . . .$183.53
(5) Amount of first payment from a portfolio, (3) divided
by (4) . . . . . . . . . . . . . . . . . . . . . . . . . .$1,702.72
(6) Assumed value of annuity unit in a portfolio at
maturity . . . . . . . . . . . . . . . . . . . . . . . . . $13.0000
(7) Number of annuity units credited in a portfolio, (5)
divided by (6) . . . . . . . . . . . . . . . . . . . . . . 130.9785
</TABLE>
The $312,500 value at maturity provides a first payment from the portfolio of
$1,702.72, and payments thereafter of the varying dollar value of 130.9785
annuity units. The amount of subsequent payments from the portfolio is
determined by multiplying 130.9785 units by the value of an annuity unit in the
portfolio on the applicable valuation
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<PAGE>
date. For example, if that unit value is $13.25, the monthly payment from the
portfolio will be 130.9785 multiplied by $13.25, or $1,735.46.
However, the value of the annuity unit depends on the investment experience
of the portfolio. Thus in the example above, if the net investment rate for
the following month was less than the assumed investment rate of 4%, the
annuity unit would decline in value. If the annuity unit value declined to
$12.75 the succeeding monthly payment would then be 130.9785 x $12.75, or
$1,669.98.
For the sake of simplicity the foregoing example assumes that all of the
annuity units are in one portfolio. If there are annuity units in two or
more portfolios, the annuity payment from each portfolio is calculated
separately, in the manner illustrated, and the total monthly payment is the
sum of the payments from the portfolios.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company and subsidiaries are not
included herein. This information along with the "Consent of Independent
Auditors" will be added by amendment to be filed under Rule 485(b), prior to
this registration's effective date.
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<PAGE>
FINANCIAL STATEMENTS
(To be added by Post-Effective Amendment)
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<PAGE>
SAFECO SEPARATE ACCOUNT C
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. FINANCIAL STATEMENTS The audited financial statements of SAFECO Separate
Account C and SAFECO Life Insurance Company are not included in the
Statement of Additional Information of this Registration Statement. These
statements will be filed by subsequent post-effective amendment:
REGISTRANT:
Statement of Assets and Liabilities as of December 31, 1998.
Statement of Operations and Changes in Net Assets for the year or
period ended December 31, 1998 and 1997.
Notes to Financial Statements (including accumulation unit data).
SAFECO LIFE INSURANCE COMPANY AND SUBSIDIARIES:
Consolidated Balance Sheet as of December 31, 1998 and 1997.
Statement of Consolidated Income for the years ended December 31,
1998, 1997 and 1996.
Statement of Changes in Shareholder's Equity for the years ended
December 31, 1998, 1997 and 1996.
Statement of Consolidated Cash Flows for the years ended December 31,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
b. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Document
- -------------- -----------------------
<S> <C>
1. Resolution of Board of Directors of SAFECO authorizing the
establishment of the Separate Account. 1/
2. Not Applicable.
3. (i) Form of Principal Underwriter's Agreement. 1/
(ii) Selling Agreement. 2/
4. (i) Individual Flexible Purchase Payment Deferred Variable
Annuity Contracts. 2/
(ii) Riders and Endorsements. 2/
5. Application for Annuity Contract. 2/
6. (i) Copy of Articles of Incorporation of SAFECO. 1/
(ii) Copy of the Bylaws of SAFECO. 1/
7. Not Applicable.
8.a. (i) Fund Participation Agreement (Scudder). 2/
(ii) Reimbursement Agreement (Scudder). 2/
(iii) Participating Contract and Policy Agreement (Scudder). 2/
(iv) Services Agreement (Scudder). 6/
8.b. Participation Agreement by and among SAFECO Life Insurance Company,
Federated Insurance Series, on behalf of the Federated High Income
Bond Fund II, Federated International Equity Fund II, Federated
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<PAGE>
Utility Fund II, Federated Securities Corp. and Federated Advisers.
3/
8.c. Participation Agreement by and among SAFECO Life Insurance Company,
Lexington Emerging Markets Fund, Inc., Lexington Natural Resources
Trust, and Lexington Management Corporation. 3/
8.d Participation Agreement by and among SAFECO Life Insurance Company,
TCI Portfolios, Inc. and/or Adviser for TCI Balanced Fund and TCI
International Fund. 4/
8.e. Form of Participation Agreement (Fidelity). 5/
8.f. Participation Agreement by and among INVESCO Variable Investment
Funds, Inc., INVESCO Funds Group, Inc. and SAFECO Life Insurance
Company. 6/
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors. 7/
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information. 3/
14. Power of Attorney. 6/
15. Representation of Counsel.
1/ 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).
2/ Incorporated by reference to Registrants Post-Effective Amendment
filed with the SEC on December 29, 1995 (File No. 33-69712).
3/ Incorporated by reference to Registrants Post-Effective Amendment
filed with the SEC on April 29, 1996 (File No. 33-69712).
4/ Incorporated by reference to Post-Effective Amendment of SAFECO
Separate Account C filed with the SEC on April 29, 1996 (File No.
33-60331).
5/ Incorporated by reference to Post-Effective Amendment of SAFECO
Separate Account SL filed with the SEC on April 30, 1997 (File No.
33-10248).
6/ Incorporated by reference to Registrants Post-Effective Amendment
filed with the SEC on May 1, 1998 (File No. 33-69712).
7/ To be filed by post-effective amendment.
</TABLE>
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
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<PAGE>
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.
<TABLE>
<CAPTION>
Name Position with SAFECO
---- --------------------
<S> <C>
* Roger H. Eigsti Director, Chairman of the Board
Randall H. Talbot Director and President
Richard E. Zunker Director and Vice Chairman
* Boh A. Dickey Director
Roger F. Harbin Executive Vice President, Actuary
John P. Fenlason Senior Vice President
* Rod A. Pierson Director, Senior Vice President
and Secretary
* Donald S. Chapman Director
* James W. Ruddy Director
** Dale E. Lauer Director
* W. Randall Stoddard Director
James T. Flynn Vice President, Controller
and Assistant Secretary
Michael J. Kinzer Vice President and Chief Actuary
* Ronald L. Spaulding Director, Vice President and Treasurer
William C. Huff Actuary
George C. Pagos Associate General Counsel,
Vice President and Assistant
Secretary
</TABLE>
* The principal business address of these officers and directors is SAFECO
Plaza, Seattle, Washington 98185.
** The principal business address of Dale Lauer is 500 N. Meridian Street,
Indianapolis, IN 46204.
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, 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, SAFECO Insurance Company of Illinois, an Illinois corporation and
SAFECO Insurance Company of Pennsylvania, a Pennsylvania corporation. SAFECO
Insurance Company of America owns 100% of SAFECO Surplus Lines
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<PAGE>
Insurance Company, a Washington corporation, and Market Square Holding, Inc., a
Minnesota corporation. SAFECO Life Insurance Company owns 100% of SAFECO
National Life Insurance Company, a Washington corporation, First SAFECO
National Life Insurance Company of New York, a New York corporation, and 100% of
Empire Life Insurance Company, a Washington 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 Managers, 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, Goldware & Taylor Insurance Service, a California corporation and
SAFECO Select Insurance Services, 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 Talbot Agency, Inc., a New Mexico corporation. Talbot Agency, Inc.
owns 100% of PNMR Securities, Inc., a Washington corporation. SAFECO Properties
Inc. owns 100% of the following, each a Washington corporation: SAFECARE
Company, Inc. and Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the
following, each a Washington corporation: RIA Development, Inc., S.C. Arkansas,
Inc., S.C. Bellevue/Lynn, S.C. Bellevue, Inc., S.C. Everett, Inc., S.C.
Everett/Lynn, S.C. Lynden, Inc., S.C. Lynden/Lynn, S.C. Marysville, Inc., S.C.
Northgate, Inc., S.C. Northgate/LR1, L.L.C., S.C. Vancouver, Inc., S.C.
Vancouver/Lynn (Joint Venture), SAFECARE S.C. Bakersfield, Inc. and SAFECARE
S.C. Bakersfield/Lynn Limited Partnership. SAFECARE Company, Inc. owns 50% of
Lifeguard Ventures, Inc., a California corporation, and S.C. River Oaks, Inc., a
Washington corporation. Winmar Company, Inc. owns 100% of the following: C-W
Properties, Inc., 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., 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, 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.
SAFECO Corporation, a Washington corporation, owns 100% of American States
Financial Corporation, an Indiana corporation. American States Financial
Corporation owns 100% of American States Insurance Company, an Indiana
corporation. American States Insurance Company owns 100% of the following
Indiana corporations: American Economy Insurance Company, American States
Preferred Insurance Company, American States Life Insurance company, and City
Insurance Agency, Inc. American States Insurance Company owns 100% of Insurance
Company of Illinois, an Illinois corporation, and American States Lloyds
Insurance Company, a Texas corporation. American Economy Insurance Company owns
100% of American States Insurance Company of Texas, a Texas corporation.
No person is directly or indirectly controlled by Registrant.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1998, there were 12,903 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,
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<PAGE>
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.
b. The following information is provided for each principal officer and
director of the principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address* with Underwriter
----------------- ---------------------
<S> <C>
Rod A. Pierson Director
Ronald Spaulding Director
David F. Hill Director, President and Secretary
Neal A. Fuller Vice President, Controller, Treasurer,
Financial Principal and Assistant
Secretary
</TABLE>
*The business address for all individuals listed is SAFECO Plaza, Seattle,
Washington 98185.
c. During the fiscal year ended December 31, 1997, PNMR Securities, Inc.,
through SAFECO Securities, Inc., received $4,615,262 in commissions
for the distribution of certain annuity contracts sold in connection
with Registrant of which no payments were retained. PNMR did not
receive any other compensation in connection with the sale of
Registrant's contracts.
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<PAGE>
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.
e. Pursuant to Section 26(e) of the Investment Company Act of 1940,
Registrant represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
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<PAGE>
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(a) 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 4th day of December, 1998.
SAFECO Separate Account C
-------------------------
Registrant
By: SAFECO Life Insurance Company
-----------------------------
By: /S/ RANDALL H. TALBOT
---------------------
Randall H. Talbot, President
SAFECO Life Insurance Company
-----------------------------
Depositor
By: /S/ RANDALL H. TALBOT
---------------------
Randall H. Talbot, 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
/S/ BOH A. DICKEY Director
- -------------------------
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)
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<PAGE>
RONALD SPAULDING* Director, Vice
- -------------------------- President and Treasurer
Ronald Spaulding
ROD A. PIERSON* Director, Senior Vice
- -------------------------- President and Secretary
Rod Pierson
JAMES W. RUDDY* Director
- --------------------------
James W. Ruddy
W. RANDALL STODDARD* Director
- --------------------------
W. Randall Stoddard
DALE E. LAUER* Director
- --------------------------
Dale E. Lauer
/S/ RANDALL H. TALBOT Director and President (Principal
- -------------------------- Executive Officer)
Randall H. Talbot
RICHARD E. ZUNKER* Director and Vice Chairman
- --------------------------
Richard E. Zunker
*By: /S/ BOH A. DICKEY
-----------------
Boh A. Dickey
Attorney-in-Fact
*By: /S/ RANDALL H. TALBOT
---------------------
Randall H. Talbot
Attorney-in-Fact
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<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
99.9 Opinion and Consent of Counsel
99.15 Representation of Counsel
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<PAGE>
EXHIBIT 99.9
December 4, 1998
Board of Directors
SAFECO Life Insurance Company
SAFECO Plaza
Seattle, WA 98185
Gentlemen:
I have acted as counsel to the Company in connection with the filing with the
Securities and Exchange Commission of 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 judgment 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. SAFECO 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 a prospective Contract
Owner pursuant to a Contract issued in accordance with the Prospectus
contained in the Registration Statement and upon compliance with applicable
law, such 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
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<PAGE>
EXHIBIT 99.15
December 4, 1998
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, NW
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. 7, 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. 7, is consistent with the purposes and requirements for filing
under Rule 485(a) 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. 7, are consistent with the purposes and
requirements described in the adopting release for the changes to Rule 485
(IC-Rel. 20486).
Based on the above, the filing of Post-Effective Amendment No. 7, is made
pursuant to Rule 485(a) of the 1933 Act to become effective February 15, 1999.
The undersigned has prepared and reviewed Post-Effective Amendment No. 7, and it
is his opinion that Post-Effective Amendment No. 7 does not contain disclosures
which would render it ineligible to become effective pursuant to paragraph (a)
of Rule 485.
Sincerely,
/s/ William E. Crawford
William E. Crawford
Counsel
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