As filed with the Securities and Exchange Commission on , 1996
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 (X)
Amendment No. ( )
(Check appropriate box or boxes)
VARIABLE ANNUITY-1 SERIES ACCOUNT
(Exact name of Registrant)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Address of Depositor's Principal Executive Officers) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering: Upon the effective date of
this Registration Statement
It is proposed that this filing will become effective (check appropriate
space)
Immediately upon filing pursuant to paragraph (b) of Rule 485.
On , pursuant to paragraph (b) of Rule 485.
60 days after filing pursuant to paragraph (a) of Rule 485.
On , pursuant to paragraph (a)(i) of Rule 485.
75 days after filing pursuant to paragraph (a)(ii) of Rule 485.
On , pursuant to paragraph (a)(ii) of Rule 485.
The Registrant has chosen to register an indefinite number of securities in
accordance with Rule 24f-2.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.<PAGE>
VARIABLE ANNUITY-1 SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page.......................... Cover Page
2. Definitions......................... Glossary of Special Terms
3. Synopsis............................ Fee Table; Questions and
Answers about the Series
Account Variable Annuity
4. Condensed Financial Information..... Condensed Financial
Information
5. General Description of
Registrant, Depositor and
Portfolio Companies............... Great-West Life & Annuity
Insurance Company;
Variable Annuity-1
Series Account; Investments
of the Series Account;
Voting Rights
6. Deductions.......................... Administrative Charges;
Risk Charges, Premium
Taxes and Other
Deductions; Appendix A;
Distribution of the
Contracts
7. General Description of
Variable Annuity Contracts........ The Contracts; Investments
of the Series Account;
Statement of Additional
Information
8. Annuity Period...................... Annuity Options
9. Death Benefit....................... The Contracts-Accumulation
Period - Death Benefit;
Prior to Retirement Date;
Annuity Payments<PAGE>
10. Purchases and Contract Value........ The Contracts-General;
The Contracts-
Accumulation Period;
Distribution of the
Contracts; Cover Page;
Great-West Life & Annuity
Insurance Company
11. Redemptions......................... The Contracts-
Accumulation Period -
Total and Partial
Surrenders; Return
Privilege
12. Taxes............................... Federal Tax Consequences
13. Legal Proceedings................... Legal Proceedings
14. Table of Contents of
Statement of Additional
Information....................... Statement of Additional
Information
<PAGE>
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and
History........................... Not Applicable
18. Services............................ Custodian and Accountants
19. Purchase of Securities
Being Offered..................... Not Applicable
20. Underwriters........................ Underwriter
21. Calculation of
Performance Data.................. Calculation of Performance
Data
22. Annuity Payments.................... Not Applicable
23. Financial Statements................ Financial Statements<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.
SCHWAB ANNUITY
A FLEXIBLE PREMIUM DEFERRED FIXED AND VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
_____________________________________________
Issued by
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
This prospectus describes interests under a flexible premium
deferred annuity contract, The Schwab Annuity (the
"Contract"). The Contract is issued either on a group basis or as
individual contracts by Great-West Life & Annuity Insurance Company
("the Company"). Participation in a group contract will be
accounted for by the issuance of a certificate showing an interest
under the group contract. The certificate and the individual
contract are hereafter both referred to as the "Contract."
Your investment in the Contract may be allocated among nineteen
Investment Divisions of the Variable Annuity-1 Series Account
("Series Account") and the available Guarantee Periods under the
Guarantee Period Fund. The Investment Divisions invest in various
mutual funds (open-end investment companies) offered by fund
families such as Federated, INVESCO, Janus, Lexington, Alger,
Schwab Funds, Stein Roe, Strong, Montgomery, Twentieth Century and
Van Eck. You also have the option of allocating some or all of
your investment in the Contract to the Guarantee Period Fund which
allows you to select one or more Guarantee Periods, each of which
offers you a specified interest rate for a specified period. There
may be a market value adjustment on the amounts withdrawn from the
Guarantee Period Fund.
The minimum initial investment is $5,000 ($2,000 if an IRA) or
$1,000 if made under an Automatic Contribution Plan ("ACP"). The
minimum subsequent Contribution is $500 (or $100 per month if made
under an ACP).
There are no other sales charges, redemption, surrender or
withdrawal charges. The Contract provides a Free Look Period of 10
days from your receipt of the Contract (or longer, if required by
state law), during which time you may cancel your investment in the
Contract. During the Free Look Period, all Contributions allocated
to an Investment Division will be allocated first to the Schwab
Money Market Investment Division and will remain there until the
next Transaction Date following the end of the Free Look Period
plus five calendar days. Contributions to the Guarantee Period
Fund will be allocated immediately into the specified Guarantee
Period(s).
Your Variable Account Value will increase or decrease based on the
investment performance of the options you select. You bear the
entire investment risk under the Contract prior to the annuity
commencement date for all amounts in your Variable Sub Accounts.
While there is a guaranteed death benefit, there is no guaranteed
or minimum Variable Account Value on amounts allocated to
Investment Divisions. Therefore, the Annuity Account Value you
receive could be less than the total amount of your Contributions.
Amounts allocated to the Guarantee Period Fund may be subject to a
Market Value Adjustment which could result in receipt of less than
your Contributions if you surrender, Transfer, make a partial
withdrawal, apply amounts to purchase an annuity or take a
distribution upon the death of the Owner or Annuitant before a
Guarantee Period Maturity Date. Whether such a result actually
occurs depends on the timing of the transaction, the amount of the
Market Value Adjustment and the interest rate credited. The
interest rate in subsequent Guarantee Periods may be more or less
than the rate of a previous Guarantee Period.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSIONS PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERS
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. PLEASE READ THIS PROSPECTUS AND KEEP IT FOR
FUTURE REFERENCE.
Prospectus Dated ______________, 1996
The Contracts are not deposits of, or guaranteed or endorsed by any
bank, nor is the Contract federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
government agency. The Contracts involve certain investment risks,
including possible loss of principal.
To Place Orders and for Account Information: Contact the Schwab
Annuity Service Center at 800-838-0650 or P.O. Box 7785, San
Francisco, California 94120-9420.
About This Prospectus: This Prospectus concisely presents important
information you should have before investing in the Contract.
Please read it carefully and retain it for future reference. You
can find more detailed information pertaining to the Contract in
the Statement of Additional Information dated _____________, 1996
(as may be amended from time to time), and filed with the
Securities and Exchange Commission. The Statement of Additional
Information is incorporated by reference into this Prospectus, and
may be obtained without charge by contacting the Schwab Annuity
Service Center at 800-838-0650 or P.O. Box 7785 San Francisco,
California 94120-9420.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . iv
KEY FEATURES OF THE ANNUITY. . . . . . . . . . . . . . . . . . 1
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE SERIES ACCOUNT . . . . . . . . . . . . . . .7
THE ELIGIBLE FUNDS . . . . . . . . . . . . . . . . . . . . . . .8
THE GUARANTEE PERIOD FUND. . . . . . . . . . . . . . . . . . . 12
THE MARKET VALUE ADJUSTMENT. . . . . . . . . . . . . . . . . . 15
APPLICATION AND CONTRIBUTIONS. . . . . . . . . . . . . . . . . 16
ANNUITY ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . 17
TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CASH WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . 21
TELEPHONE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . 22
DEATH BENEFIT. . . . . . . . . . . . . . . . . . . . . . . . . 22
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . 25
PAYMENT OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . 27
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 31
ASSIGNMENTS OR PLEDGES . . . . . . . . . . . . . . . . . . . . 36
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . 36
DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . 37
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . 38
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 44
RIGHTS RESERVED BY THE COMPANY . . . . . . . . . . . . . . . . 45
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 45
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 45
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 46
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . .F-1
_________________________________________________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO
DEALER, SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED ON.
_________________________________________________________________
The Contract is not available in all states.
<PAGE>
_________________________________________________________________
DEFINITIONS
_________________________________________________________________
Accumulation Period - The period between the Effective Date and the
Payment Commencement Date.
Annuitant - The person named in the application upon whose life the
payment of an annuity is based and who will receive annuity
payments. If a Contingent Annuitant is named, then the Annuitant
will be considered the Primary Annuitant. While the Annuitant is
living and at least 30 days prior to the annuity commencement date,
the Owner may, by Request, change the Annuitant.
Annuity Account - An account established by the Company in the name
of the Owner that reflects all account activity under this
Contract.
Annuity Account Value - The sum of the Variable and Fixed Sub-
Accounts credited to the Owner under the Annuity Account; less
Transfers, partial withdrawals, amounts applied to an annuity
option, periodic withdrawals, charges deducted under the Contract
and, less Premium Tax, if any.
Annuity Payment Period - The period beginning on the annuity
commencement date and continuing until all annuity payments have
been made under the Contract.
Annuity Unit - An accounting measure used to determine the dollar
value of any variable annuity payment after the first annuity
payment is made.
Automatic Contribution Plan ("ACP") - A plan which allows for
automatic periodic Contributions. The Contribution amount will be
withdrawn from a designated pre-authorized account and
automatically credited to the Annuity Account.
Beneficiary - The person(s) designated by the Owner, in the
application, or as subsequently changed by the Owner by Request, to
receive any death benefit which may become payable under the terms
of the Contract. If the surviving spouse of an Owner is the
surviving Joint Owner, the surviving spouse will become the
Beneficiary upon such Owner's death and may elect to take the death
benefit, if any, or elect to continue the Contract in force.
Company - Great-West Life & Annuity Insurance Company, the issuer
of this annuity, located at 8515 East Orchard Road, Englewood,
Colorado 80111.
Contingent Annuitant - The person named in the application, unless
later changed by the Owner by Request while the Annuitant is alive
and before annuity payments have commenced, who becomes the
Annuitant when the Primary Annuitant dies. No new Contingent
Annuitant may be designated after the death of the Primary
Annuitant.
Contributions - Purchase amounts received under the Contract and
allocated to the Fixed or Variable Sub-Account(s) prior to any
Premium Tax or other deductions.
Effective Date - The date on which the first Contribution is
credited to the Annuity Account.
Eligible Fund - A registered management investment company, or
portfolio thereof, in which the assets of the Series Account may be
invested.
Fixed Sub-Accounts - The subdivision(s) of the Owner's Annuity
Account reflecting the value of Contributions made to a fixed
interest investment option available under the Contract and any
Fixed Sub-Account Riders.
Guarantee Period - One of the periods of time available in the
Guarantee Period Fund during which the Company will credit a stated
rate of interest. The Company may stop offering any term at any
time for new Contributions. Amounts allocated to one or more
Guaranteed Periods may be subject to a Market Value Adjustment.
Guarantee Period Fund - A Fixed Sub-Account in which amounts
allocated will be credited a stated rate of interest for the
applicable Guarantee Period(s).
Guarantee Period Maturity Date - The last day of any Guarantee
Period.
Guaranteed Interest Rate - The minimum interest rate applicable to
each Fixed Sub-Account equal to an annual effective rate in effect
at the time the Contribution is made and as reflected in written
confirmation of the Contribution. This is the minimum rate allowed
by law and is subject to change in accordance with changes in
applicable law.
Individual Retirement Annuity (IRA) - An annuity contract used in
a retirement savings program that is intended to satisfy the
requirements of Section 408 of the Internal Revenue Code of 1986,
as amended.
Investment Division - A division of the Series Account containing
the shares of an Eligible Fund. There is an Investment Division
for each Eligible Fund.
Market Value Adjustment - An adjustment which may be made to
amounts paid out before the Guarantee Period Maturity Date due to
surrenders, partial withdrawals, Transfers, amounts applied to the
periodic withdrawal option or to purchase an annuity, and
distributions resulting from death of the Owner or Annuitant, as
applicable. The Market Value Adjustment may increase or decrease
the amount payable on one of the above-described distributions. A
negative adjustment may result in an effective interest rate lower
than the applicable Guaranteed Interest Rate and the value of the
Contribution(s) allocated to the Guarantee Period being less than
the Contribution(s) made. The Market Value Adjustment is detailed
on page 15.
Non-Qualified Annuity Contract - An annuity contract which is not
intended to be part of a qualified retirement plan and is not
intended to satisfy the requirements of Section 408 of the Internal
Revenue Code of 1986, as amended.
Owner (Joint Owner) or You - The person(s), while the Annuitant is
living, named in the Contract Data Page who is entitled to exercise
all rights and privileges under the Contract. Joint Owners must be
husband and wife as of the date the Contract is issued. The
Annuitant will be the Owner unless otherwise indicated in the
application. If a Contract is purchased as an IRA, the Owner and
the Annuitant must be the same individual and no Joint Owner may be
named. Any reference to Owner in the singular tense shall include
the plural, and vice versa, as applicable.
Payment Commencement Date - The date on which annuity payments or
periodic withdrawals commence under a payment option. The Payment
Commencement Date must be at least one year after the Effective
Date of the Contract. If a Payment Commencement Date is not shown
on the Contract Data Page, annuity payments will commence on the
first day of the month of the Annuitant's 91st birthday. The
Payment Commencement Date may be changed by the Owner within 60
days prior to commencement of annuity payments or it may be changed
by the Beneficiary upon the death of the Owner. If this is an IRA,
payments which satisfy the minimum distribution requirements of the
Internal Revenue Code of 1986, as amended, must begin no later than
the Owner's attainment of age 701/2.
Premium Tax - The amount of tax, if any, charged by a state or
other governmental authority.
Request - Any written, telephoned, or computerized instruction in
a form satisfactory to the Company and received at the Schwab
Annuity Service Center (or other annuity service center
subsequently named) from the Owner or the Owner's designee (as
specified in a form acceptable to the Company) or the Beneficiary
(as applicable) as required by any provision of the Contract or as
required by the Company. All Requests are subject to any action
taken or payment made by the Company before it was processed.
Schwab Annuity Service Center - P.O. Box 7785, San Francisco,
California 94120-9420, telephone 800-838-0650.
Series Account - The segregated account established by the Company
under Colorado law and registered as an unit investment trust under
the Investment Company Act of 1940, as amended.
Simplified Employee Pension - An individual retirement annuity
(IRA) which may accept contributions from one or more employers
under a retirement savings program intended to satisfy the
requirements of Section 408(k) of the Internal Revenue Code of
1986, as amended.
Surrender Value - The Annuity Account Value with a Market Value
Adjustment, if applicable, on the effective date of the surrender,
less Premium Tax, if any.
Transaction Date - The date on which any Contribution or Request
from the Owner will be processed by the Company at the Schwab
Annuity Service Center. Contributions and Requests received after
4:00 p.m. EST/EDT will be deemed to have been received on the next
business day. Requests will be processed and the Variable Account
Value will be determined on each day that the New York Stock
Exchange is open for trading.
Transfer - The moving of money from among the Investment
Division(s) and the Guaranteed Period Fund.
Variable Account Value - The sum of the values of the Variable Sub-
Accounts credited to the Owner under the Annuity Account.
Variable Sub-Accounts - The sub-division(s) of the Owner's Annuity
Account containing the value credited to the Owner under the
Annuity Account from an Investment Division.
We, our, us, or GWL&A: Great-West Life & Annuity Insurance
Company.
<PAGE>
KEY FEATURES OF THE ANNUITY
The Contract currently allows you to invest in your choice of
nineteen different Investment Divisions offered by eleven different
mutual fund investment advisers. You can also invest in the
Guarantee Period Fund. Your Annuity Account Value allocated to an
Investment Division will vary with the investment performance of
the Investment Division you select. You bear the entire investment
risk for all amounts invested in the Investment Division(s). Your
Annuity Account Value could be less than the total amount of your
Contributions.
Who should invest. The Contract is designed for investors who are
seeking long-term tax deferred asset accumulation with a wide range
of investment options. The Contract can be used for retirement or
other long-term investment purposes. The deferral of income taxes
is particularly attractive to investors in high federal and state
tax brackets who have already fully taken advantage of their
ability to make IRA contributions or "pre-tax" contributions to
their employer sponsored retirement or savings plans.
A Wide Range of Variable Investment Choices. The Contract gives
you an opportunity to select among nineteen different Investment
Divisions. Each Investment Division invests in shares of an
Eligible Fund. The Eligible Funds cover a wide range of investment
objectives as follows:
Investment Objective Eligible Funds
Aggressive Growth Janus Aspen Aggressive
Growth Portfolio
SteinRoe Capital Appreciation
Fund
Strong Discovery Fund II
Alger American Small
Capitalization Portfolio
Growth Janus Aspen Growth
Portfolio
Alger American Growth Fund
TCI Growth
Montgomery Growth Fund
Growth & Income Federated Equity Growth and
Income Fund
INVESCO VIF-Industrial Income
Portfolio
Balanced/Asset Allocation INVESCO VIF-Total
Return Portfolio
Gold/Natural Resources Van Eck Gold and Natural
Resources Fund
International Lexington Emerging Markets
Fund
TCI International
Janus Aspen Worldwide Growth
Portfolio
Montgomery International Small
Cap Fund
High Yield Bond INVESCO VIF-High Yield
Portfolio
Government Bond Federated U.S. Government
Bond Fund
Money Market Schwab Money Market
Portfolio
The distinct investment objectives and policies for each Eligible
Fund are more fully described in their individual fund prospectuses
which are available from the Schwab Annuity Service Center, P.O.
Box 7785, San Francisco, California 94120-9420, or via telephone at
1-800-838-0650.
The Guarantee Period Fund. The Contract also gives you an
opportunity to allocate your Contributions and to transfer your
Annuity Account Value to the Guarantee Period Fund. This Fixed
Sub-Account option is comprised of Guarantee Periods, each of which
has its own stated rate of interest and its own maturity date. The
stated rate of interest for the Guarantee Period will depend on the
date the Guarantee Period is established and the duration of the
Guarantee Period you select from among those available. The rates
declared are subject to a minimum (Guaranteed Interest Rate), but
the Company may declare higher rates (the stated rate of interest).
The Guaranteed Interest Rate will be disclosed in the written
confirmation. The stated rate of interest will not be less than
the Guaranteed Interest Rate and will also be disclosed in the
written confirmation. Amounts withdrawn or transferred from a
Guarantee Period prior to the Guarantee Period Maturity Date may be
subject to a Market Value Adjustment. (See "Market Value
Adjustment," page 15.)
How to Invest. You must complete a Contract application form in
order to invest in the Contract and you must either have sufficient
funds available in your Schwab account or pay by check. The
minimum initial investment is $5,000 (or $2,000 if in an IRA).
Subsequent investments must be at least $500. The minimum initial
investment may be reduced to $1,000 should the Owner agree to make
additional $100 per month minimum recurring deposits through an
ACP.
Free Look Period. The Contract provides for a Free Look Period
which allows you to cancel your investment generally within 10 days
of your receipt of the Contract. You can cancel the Contract
during the Free Look Period by delivering or mailing the Contract
to the Schwab Annuity Service Center. The cancellation is not
effective unless we receive the notice before the end of the Free
Look Period. If the Contract is returned, the Contract will be
void from the start and the Annuity Account Value will be refunded.
These procedures may vary where required by state law. (See
"Application and Contributions," page 16.)
Allocation of the Initial Investment. Any initial Contribution
allocated to an Investment Division (other than certain 1035
exchanges (see "Application and Contributions," page 16) will be
allocated to the Schwab Money Market Portfolio until the next
Transaction Date following the end of the Free Look Period plus
five calendar days. At that time, the Variable Account Value will
be allocated to the Investment Divisions in accordance with your
instructions. (See "Annuity Account Value," page 17.) Your
initial investment in the Guarantee Period Fund will be immediately
allocated to the Guarantee Period(s) specified in the application.
Charges and Deductions Under the Contract. The Contract is a "no
load" variable annuity and, as such, imposes no sales charges,
redemption or withdrawal charges.
There is a Mortality and Expense Risk Charge at an effective annual
rate of 0.85% of the value of the net assets in the Variable
Account. A Contract Maintenance Charge of $25 will be deducted
from your Annuity Account Value. There will be a transfer fee of
$10 for each Transfer in excess of ten Transfers per calendar year.
(See "Charges and Deductions," page 25.)
Depending on your state of residence, we may deduct a charge for
Premium Tax from purchase payments or amounts withdrawn or at the
Payment Commencement Date. (See "Charges and Deductions," page
25.)
The Market Value Adjustment may increase or decrease the value of
a Guarantee Period if the Guarantee Period is broken prior to the
Guarantee Period Maturity Date. A negative adjustment may result
in an effective interest rate lower than the stated rate of
interest for the Guarantee Period and the Guaranteed Interest Rate
and the value of the Guarantee Period being less than
Contribution(s). (See "Market Value Adjustment," page 15).
Switching Investments. You may switch Contributions among the
Investment Divisions or Guarantee Period Fund as often as you like
with no immediate tax consequences. You may make a Transfer
Request to the Schwab Annuity Service Center. A transfer fee may
apply. (See "Charges and Deductions," page 25.) Amounts
Transferred out of a Guarantee Period prior to the Guarantee Period
Maturity Date may be subject to a Market Value Adjustment. (See
"Market Value Adjustment," page 15.)
Full and Partial Withdrawals. You may withdraw all or part of your
Annuity Account Value before the earlier of the annuity
commencement date you selected or the Annuitant's or Owner's death.
Withdrawals may be taxable and if made prior to age 59 1/2 may be
subject to a 10% penalty tax. Withdrawals of amounts allocated to
a Guarantee Period prior to the Guarantee Period Maturity Date may
be subject to Market Value Adjustment. (See "Market Value
Adjustment," page 15.) The minimum partial withdrawal prior to the
Market Value Adjustment is $500. There is no limit on the number
of withdrawals made. The Company may delay payment of withdrawals
from your Variable Sub-Accounts by up to 7 days and may delay
withdrawals from the Guarantee Period Fund by up to 6 months. (See
"Cash Withdrawals," page 21.)
Annuity Options. Beginning on the first day of the month
immediately following the annuity commencement date you select, you
may receive annuity payments on a fixed or variable basis. (The
default date is the first day of the month that the Annuitant
attains age 91.) A wide range of annuity options are available to
provide flexibility in choosing an annuity payment schedule that
meets your particular needs. These annuity options include
alternatives designed to provide payments for life (for either a
single or joint life), with or without a guaranteed minimum number
of payments. (See "Payment Options," page 27.)
Death Benefit. The amount of the death benefit, if payable before
annuity payments commence, will be the greater of (a) the Annuity
Account Value with a Market Value Adjustment, if applicable, as of
the date a Request for payment is received, less Premium Tax, if
any; or (b) the sum of Contributions paid, less partial withdrawals
and Periodic Withdrawals, less charges deducted under the Contract,
if any, less Premium Tax, if any. (See "Death Benefit," page 22.)
Customer Service. Schwab's professional representatives are
available toll-free to assist you. If you have any questions about
your Contract, please telephone the Schwab Annuity Service Center
(800-838-0650) or write to the Schwab Annuity Service Center at
P.O. Box 7785, San Francisco, California 94120-9420. All inquiries
should include the Contract number and the Owner's name. As a
Contract Owner you will receive periodic statements confirming any
transactions relating to your Contract, as well as a quarterly
statement and an annual report.
<PAGE>
VARIABLE ANNUITY FEE TABLE
The purpose of this table and the examples that follow is to
assist you in understanding the various costs and expenses that you
will bear directly or indirectly when investing in the Contract.
The table and examples reflect expenses related to the Investment
Divisions as well as of the Eligible Funds. The table assumes that
the entire Annuity Account Value is allocated to one or more
Investment Division. The information set forth should be
considered together with the narrative provided under the heading
"Charges and Deductions," page 25 of this Prospectus, and with the
Funds' prospectuses. In addition to the expenses listed below,
Premium Tax may be applicable.
Contract Owner Transaction Expenses
Sales Load None
Surrender Fee None
Transfer Fee (First 10 Per Year) None
Contract Maintenance Charge $25.00
Investment Division Annual Expenses1
(as a percentage of average Variable
Account assets)
Mortality and Expense Risk Charge 0.85%
Administrative Expense Charge 0.00%
Other Fees and Expenses
of the Variable Account 0.00%
Total Investment Division
Annual Expenses 0.85%
<PAGE>
Eligible Fund Annual Expenses (1)
(as a percentage of Eligible Fund net assets, after expenses
reimbursements)
Total
Management Other Eligible Fund
Fees Expenses Expenses
Portfolio
Alger American Growth Portfolio
Alger American Small
Capitalization Portfolio
Federated Equity Growth and Income Fund
Federated U.S. Government Bond Fund
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
Janus Aspen Aggressive
Growth Fund Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide
Growth Fund Portfolio
Lexington Emerging Markets Fund
Montgomery Growth Fund
Montgomery International
Small-Cap Fund
Schwab Money Market Portfolio
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
TCI Growth
TCI International
Van Eck Gold and Natural Resources Fund
_________________________________
(1) The figures given above reflect the amounts actually deducted
from the Eligible Funds during ----. From time to time, an
Eligible Fund's investment adviser, in its sole discretion, may
waive all or part of its fees and/or voluntarily assume certain
expenses. For a more complete description of the Eligible Funds'
fees and expenses, see the Eligible Funds' prospectuses. As of the
date of this Prospectus, certain fees are being waived or expenses
are being assumed, in each case on a voluntary basis. Without such
waivers or reimbursements, the total Eligible Fund annual expenses
that would have been incurred for the last completed fiscal year
would be: -----% for Federated Equity Growth & Income Fund; -----%
for Federated U.S. Government Bond Fund; -----% for INVESCO VIF-
High Yield Portfolio; -----% for INVESCO VIF-industrial Income
Portfolio; -----% for INVESCO VIF-Total Return Portfolio; -----%
for Janus Aspen Aggressive Growth; -----% for Janus Aspen Growth
Portfolio; -----% for Janus Aspen Worldwide Growth; -----% for
Lexington Emerging Markets Fund; and -----% for Schwab Money Market
Portfolio. See the Eligible Funds' prospectuses for a discussion
of fee waiver and expense reimbursements. <PAGE>
Examples(1
If you retain, annuitize, or surrender the Contract at the end of
the applicable time period, you would pay the following fees and
expenses on a $1,000 investment, assuming a 5% annual return on
assets:
Investment Divisions 1 Year 3 Years
Alger American Growth Portfolio
Alger American Small
Capitalization Portfolio
Federated Equity Growth and Income Fund
Federated U.S. Government Bond Fund
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
Janus Aspen Aggressive
Growth Fund Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide
Growth Fund Portfolio
Lexington Emerging Markets Fund
Montgomery Growth Fund
Montgomery International
Small-Cap Fund
Schwab Money Market Portfolio
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
TCI Growth
TCI International
Van Eck Gold and Natural Resources Fund
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN
THOSE SHOWN, SUBJECT TO THE GUARANTEES IN THE CONTRACT.
These examples assume that no premium taxes have been assessed
(although premium taxes may be
applicable - see "Premium Tax," page 26).
(1) The Eligible Fund Annual Expenses and these examples are based
on data provided by the Eligible Funds. The Company has no reason
to doubt the accuracy or completeness of that data, but the Company
has not verified the Eligible Funds' figures. In preparing the
Eligible Fund Expense table and the Examples above, the Company has
relied on the figures provided by the Eligible Funds.
<PAGE>
_________________________________________________________________
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
_________________________________________________________________
Great-West Life & Annuity Insurance Company ("GWL&A")
The Company is a stock life insurance company originally
organized under the laws of the state of Kansas as the National
Interment Association. Its name was changed to Ranger National
Life Insurance Company in 1963 and to Insuramerica Corporation
prior to changing to its current name in 1982. In September of
1990, GWL&A redomesticated and is now organized under the laws of
the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance,
accident and health insurance and annuities. It is qualified to do
business in the District of Columbia, Puerto Rico and 49 states in
the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life
Assurance Company. The Great-West Life Assurance Company is a
subsidiary of Great-West Lifeco Inc., a holding company. Great-
West Lifeco Inc. is in turn a subsidiary of Power Financial
Corporation of Canada, a financial services company. Power
Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation of Canada. Mr. Paul
Desmarais, through a group of private holding companies, which he
controls has voting control of Power Corporation of Canada.
The Series Account
The Variable Annuity-1 Series Account ("Series Account") was
established by the Company as a separate account under the laws
of the State of Colorado on July 24, 1995. The Series Account is
registered with the Securities and Exchange Commission
("Commission") under the Investment Company Act of 1940, as
amended ("1940 Act"), as a unit investment trust. The Series
Account meets the definition of a separate account under the
federal securities laws. However, such registration does not
involve supervision of the management of the Series Account or
the Company by the Commission.
The Company does not guarantee the investment performance of
the Series Account. The portion of the Annuity Account Value
attributable to the Series Account and the amount of variable
annuity payments depend on the investment performance of the
Eligible Funds. Thus, the Contract Owner bears the full
investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part
of the general business of the Company; but the income, capital
gains, or capital losses of each Investment Division are credited
to or charged against the assets held in that Investment Division
in accordance with the terms of the Contract, without regard to
other income, capital gains or capital losses of any other
Investment Division or arising out of any other business the
Company may conduct. Under Colorado law, the assets of the
Series Account are not chargeable with liabilities arising out of
any other business the Company may conduct. Nevertheless, all
obligations arising under the Contracts are generally corporate
obligations of the Company.
The Series Account currently has nineteen Investment
Divisions available for allocation of Contributions. If, in the
future, the Company determines that marketing needs and
investment conditions warrant, it may establish additional
Investment Divisions which will be made available to Owners to
the extent and on a basis to be determined by the Company, (See
"Addition, Deletion, or Substitution," page 12). Each Investment
Division invests in shares of an Eligible Fund, each having a
specific investment objective.
_________________________________________________________________
THE ELIGIBLE FUNDS
_________________________________________________________________
The Eligible Funds described below are offered exclusively
for use as funding vehicles for insurance products and,
consequently, are not publicly available mutual funds. Each
Eligible Fund has separate investment objectives and policies.
As a result, each Eligible Fund operates as a separate investment
portfolio and the investment performance of one Eligible Fund has
no effect on the investment performance of any other Eligible
Fund. See the Eligible Funds' prospectuses for more information.
The Alger American Fund
Alger American Small Capitalization Portfolio: Seeks long-
term capital appreciation by investing at least 65% of its
total assets, except during temporary defensive periods, in
equity securities of companies that, at the time of
purchase, have total market capitalization within the range
of companies included in the Russell 2000 Growth Index,
updated quarterly. The Russell 2000 Growth Index is
designed to track the performance of small capitalization
companies with market capitalizations which range from $
million to $ billion. The Portfolio may invest up to 35%
of its total assets in equity securities of companies that,
at the time of purchase, have total market capitalization
outside the range of companies included in the Russell 2000
Growth Index and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Alger American Growth Portfolio: Seeks long-term capital
appreciation by investment of at least 65% of its assets,
except during temporary defensive periods, in equity
securities of companies that, at the time of purchase of the
securities, have total market capitalization of $1 billion
or greater. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time
of purchase, have total market capitalization of less than
$1 billion and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Federated Investors Insurance Management Series
Federated Equity Growth and Income Portfolio: Seeks to
achieve long-term growth of capital as a primary objective
and seeks to provide income as a secondary objective through
investment of at least 65 % of its total assets (under
normal circumstances) in common stocks of "blue chip"
companies.
Federated U.S. Government Bond Portfolio: Seeks to provide
current income through investment of at least 65% of its
total assets in securities which are primary or direct
obligations of the U.S. government or its agencies or
instrumentalities or which are guaranteed as to principal
and interest by the U.S. government, its agencies, or
instrumentalities and in certain collateralized mortgage
obligations, and repurchase agreements.
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Industrial Income Portfolio: Seeks the best
possible current income while following sound investment
practices. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio
securities. The Industrial Income Portfolio seeks to
achieve its investment objective by investing in securities
which will provide a relatively high yield and stable return
and which, over a period of years, also may provide capital
appreciation.
INVESCO VIF-Total Return Portfolio: Seeks a high total
return on investment through capital appreciation and
current income. The Total Return Portfolio seeks to achieve
its investment objective by investing in a combination of
equity securities (consisting of common stocks and, to a
lesser degree, securities convertible into common stock) and
fixed income securities.
INVESCO VIF-High Yield Portfolio: Seeks a high level of
current income by investing substantially all of its assets
in lower rated bonds and other debt securities and in
preferred stock. These bonds and other securities are
sometimes referred to as "junk bonds." The High Yield
Portfolio pursues its investment objective through
investment in a variety of long-term, intermediate-term, and
short-term bonds. Potential capital appreciation is a
factor in the selection of investments, but is secondary to
the Portfolio's primary objective.
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio: Seeks long-term
growth of capital in a manner consistent with the
preservation of capital. The Portfolio normally invests at
least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those
whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the "MidCap Index").
Companies whose capitalization falls outside this range
after the Portfolio's initial purchase continue to be
considered medium-sized companies for the purpose of this
policy. As of December 29, 1995, the MidCap Index included
companies with capitalizations between approximately $118
million to $7.5 billion. The range of the MidCap Index is
expected to change on a regular basis. Subject to the above
policy, the Portfolio may also invest in smaller or larger
issuers.
Janus Aspen Growth Portfolio: Seeks long-term growth of
capital in a manner consistent with the preservation of
capital. The Portfolio pursues its objective by investing
in common stocks of companies of any size. This Portfolio
generally invests in larger, more established issuers.
Janus Aspen Worldwide Growth Portfolio: Seeks long-term
growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its
objective primarily through investments in common stocks of
foreign and domestic issuers. The Portfolio has the
flexibility to invest on a worldwide basis in companies and
organizations of any size, regardless of country of
organization or place of principal business activity. The
Portfolio normally invests in issuers from at least five
different countries, including the United States; however,
it may at times invest in fewer than five countries or even
a single country.
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets Fund: Seeks long term growth of
capital primarily through investment in equity securities of
companies domiciled in, or doing business in emerging
countries and emerging markets. For purposes of its
investment objective, the Fund considers emerging country
equity securities to be any country whose economy and market
the World Bank or United Nations considers to be emerging or
developing. The Fund may also invest in equity securities
and equivalents traded in any market of companies that
derive 50% or more of their total revenue from either goods
or services produced in such emerging countries or markets
or sales made in such countries.
Montgomery Variable Series
Montgomery Growth Fund: Seeks capital appreciation by
investing at least 65% of its total assets (under normal
conditions) in the equity securities of domestic
corporations. In addition to capital appreciation, this
Fund emphasizes value. While the Fund emphasizes
investments in common stock, it also invests in other types
of equity securities (including options on equity
securities, warrants and futures contracts on equity
securities). The Fund may invest up to 35% of its total
assets in debt securities rated within the three highest
grades of S&P, Moody's or Fitch, or unrated debt securities
deemed to be of comparable quality by its portfolio manager
using guidelines approved by the Board of Trustees.
Montgomery International Small Cap Fund: Seeks capital
appreciation by investing at least 65% of its total assets
(under normal conditions) in equity securities of companies
outside the United States having total market
capitalizations of less than $1 billion, sound fundamental
values and potential for long-term growth at a reasonable
price. The Fund generally invests the remaining 35% of its
total assets in a similar manner but may invest those assets
in companies having market capitalizations of $1 billion or
more, or in debt securities, including up to 5% of its total
assets in debt securities rated below investment grade.
Schwab Annuity Portfolios
Schwab Money Market Portfolio: Seeks maximum current income
consistent with liquidity and stability of capital. It
seeks to achieve its objective by investing in short-term
money market instruments. This Portfolio is neither insured
nor guaranteed by the United States Government and there can
be no assurance that it will be able to maintain a stable
net asset value of $1.00 per share.
SteinRoe Variable Investment Trust
SteinRoe Capital Appreciation Fund: Seeks capital growth by
investing primarily in common stocks, convertible
securities, and other securities selected for prospective
capital growth.
Strong Discovery Fund II, Inc.
Strong Discovery Fund II: Seeks capital growth by investing
in a diversified portfolio of securities that the Fund's
investment adviser believes represent attractive growth
opportunities. The Fund normally emphasizes equity
investments, although it has the flexibility to invest in
any security the Fund's investment adviser believes has the
potential for capital appreciation.
TCI Portfolios, Inc.
TCI Growth: Seeks capital growth by investing in common
stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet
certain fundamental and technical standards of selection and
have, in the opinion of the investment manager, better-than-
average potential for appreciation. The Portfolio's
investment manager intends to stay fully invested in such
securities, regardless of the movement of stock prices
generally.
TCI International: Seeks capital growth by investing
primarily in an internationally diversified portfolio of
securities of foreign companies that meet certain
fundamental and technical standards of selection and have,
in the opinion of the investment manager, potential for
capital appreciation. The Portfolio will invest primarily
in common stocks (defined to include depository receipts for
common stock and other equity equivalents) of such
companies. Investment in securities for foreign issues
typically involves a greater degree of risk than an
investment in domestic securities.
Van Eck Worldwide Insurance Trust
Van Eck Gold and Natural Resources Fund: Seeks long-term
capital appreciation by investing in equity and debt
securities of companies engaged in the exploration,
development, production and distribution of gold and other
natural resources, such as strategic and other metals,
minerals, forest products, oil, natural gas and coal.
Current income is not an investment objective.
The two Alger American Funds are advised by Alger Management
of New York, New York. The two Federated Investors Insurance
Management Services Portfolios are advised by Federated Advisers
of Pittsburgh, Pennsylvania. The three INVESCO Variable
Investment Funds, Inc., Portfolios are advised by INVESCO Funds
Group, Inc., of Denver, Colorado. The three Janus Aspen Series
Portfolios are advised by Janus Capital Corporation of Denver,
Colorado. The Lexington Emerging Markets Fund is advised by
Lexington Management Corporation of Saddle Brook, New Jersey.
The two Montgomery Variable Series Funds are advised by
Montgomery Asset Management, L.P. of San Francisco, California.
The Schwab Money Market Portfolio is advised by Charles Schwab
Investment Management, Inc., of San Francisco, California. The
SteinRoe Capital Appreciation Fund is advised by Stein Roe &
Farnham Incorporated of Chicago, Illinois. Strong Discovery Fund
II is advised by Strong/Corneliuson Capital Management, Inc. of
Milwaukee, Wisconsin. The two TCI Portfolios, Inc., are advised
by Investors Research Corporation of Kansas City, Missouri,
advisers to the Twentieth Century family of mutual funds. The
Van Eck Gold and Natural Resources Fund is advised by Van Eck
Associates Corporation of New York, New York.
***
Meeting investment objectives depends on various factors,
including, but not limited to, how well the Eligible Fund
managers anticipate changing economic and market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE ELIGIBLE FUNDS WILL
ACHIEVE THEIR STATED OBJECTIVES.
The Contracts are not deposits of, or guaranteed or endorsed
by, any bank, nor is the Contract federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. The Contracts involve certain
investment risks, including possible loss of principal.
Each Eligible Fund is registered with the Commission as an
open-end management investment company or portfolio thereof. The
Commission does not supervise the management or the investment
practices and policies of any of the Eligible Funds.
Since some of the Eligible Funds are available to registered
separate accounts of other insurance companies offering variable
annuity and variable life products, there is a possibility that a
material conflict may arise between the interests of the Series
Account and one or more other separate accounts investing in the
Eligible Funds. In the event of a material conflict, the
affected insurance companies are required to take any necessary
steps to resolve the matter, including stopping their separate
accounts from investing in the Eligible Funds. See the Eligible
Funds' prospectuses for more details.
Additional information concerning the investment objectives
and policies of all of the Eligible Funds and the investment
advisory services and administrative services and charges can be
found in the current prospectuses for the Eligible Funds, which
can be obtained by calling the Schwab Annuity Service Center at
800-838-0650, or by writing to Schwab Annuity Service Center,
P.O. Box 7785, San Francisco, California 94120-9420. The
Eligible Funds' prospectuses should be read carefully before any
decision is made concerning the allocation of Contributions to,
or Transfers among, the Investment Divisions.
Addition, Deletion, or Substitution
The Company does not control the Eligible Funds and cannot
guarantee that any of the Eligible Funds will always be available
for allocation of Contributions or Transfers. The Company
retains the right to make changes in the Series Account and in
its investments. Currently, Schwab must approve certain changes.
GWL&A and Schwab reserve the right to eliminate the shares
of any Eligible Fund held by an Investment Division and to
substitute shares of another Eligible Fund or of another
investment company, for the shares of any Eligible Fund, if the
shares of the Eligible Fund are no longer available for
investment or if, in our judgment, investment in any Eligible
Fund would be inappropriate in view of the purposes of the Series
Account. To the extent required by the 1940 Act, a substitution
of shares attributable to the Owner's interest in an Investment
Division will not be made without prior notice to the Owners and
the prior approval of the Commission. Nothing contained herein
shall prevent the Series Account from purchasing other securities
for other series or classes of variable annuity policies, or from
effecting an exchange between series or classes of variable
policies on the basis of Requests made by you.
New Investment Divisions may be established when, in our
discretion, marketing, tax, investment or other conditions so
warrant. Any new Investment Divisions will be made available to
Owners on a basis to be determined by us. Each additional
Investment Division will purchase shares in a Eligible Fund or in
another mutual fund or investment vehicle. We may also eliminate
one or more Investment Divisions if, in our sole discretion,
marketing, tax, investment or other conditions so warrant. In
the event any Investment Division is eliminated, we will notify
the Owners and request a re-allocation of the amounts invested in
the eliminated Investment Division.
In the event of any such substitution or change, we may make
such changes to your Contract as may be necessary or appropriate
to reflect such substitution or change. Furthermore, if deemed
to be in the best interests of persons having voting rights under
the Contracts, the Series Account may be operated as a management
company under the 1940 Act or any other form permitted by law,
may be de-registered under such Act in the event such
registration is no longer required, or may be combined with one
or more other separate accounts. Such changes will be made in
compliance with applicable law.
_________________________________________________________________
THE GUARANTEE PERIOD FUND
_________________________________________________________________
Guarantee Period Fund
Amounts allocated to the Guarantee Period Fund under the
Contract will be deposited to, and accounted for, in a non-
unitized separate account established by the Company under
Section 10-7-401, et. seq. of the Colorado Insurance Code and,
accordingly, are not part of the Series Account. A non-unitized
separate account is a separate account in which the Owner does
not participate in the performance of the assets through unit
values. Therefore, Owners allocating Contributions do not
receive a unit ownership of assets accounted for in this separate
account. The assets accrue solely to the benefit of the Company
and any gain or loss in the separate account is borne entirely by
the Company. For amounts allocated to the Guarantee Period Fund,
Owners will receive the Contract guarantees made by the Company.
Contributions allocated to or amounts transferred to the
Guarantee Period Fund will establish a new Guarantee Period of a
duration selected by the Owner from those currently being offered
by the Company. Every Guarantee Period offered by the Company
will have a duration of at least one year. Contributions
allocated to the Guarantee Period Fund will be credited on the
Transaction Date.
Each Guarantee Period will have its own stated rate of
interest and Guarantee Period Maturity Date. The stated rate of
interest applicable to a Guarantee Period will depend on the date
the Guarantee Period is established and the duration chosen by
the Owner.
As of the date of this Prospectus, Guarantee Periods with
annual durations of 1 to 10 years are offered. The Guarantee
Periods may be changed in the future; however, any such
modification will not have an impact on any Guarantee Period then
in effect.
The value of amounts in each Guarantee Period is the Owner's
Contributions, less Premium Tax, if any, in that Guarantee
Period, plus interest earned, less amounts distributed, withdrawn
(in whole or in part), Transferred or applied to an annuity
option, periodic withdrawals, and charges deducted under the
Contract. If a Guarantee Period is broken, a Market Value
Adjustment may be assessed. Any such amount withdrawn or
Transferred from a Guarantee Period will be paid in accordance
with the MVA formula (See "Market Value Adjustment," page 15.)
Investments
The Company intends to invest in assets which, in the
aggregate, have characteristics, especially cash flow patterns,
reasonably related to the characteristics of its liabilities.
Various techniques will be used to achieve the objective of close
aggregate matching of assets and liabilities. The Company will
primarily invest in investment-grade fixed income securities
including:
Securities issued by the U.S. Government or its
agencies or instrumentalities, which issues may or may not
be guaranteed by the U.S. Government.
Debt securities which have an investment grade, at the
time of purchase, within the four highest grades assigned by
Moody's Investment Services, Inc. (Aaa, Aa, A or Baa),
Standard & Poor's Corporation (AA, AA, A or BBB) or any
other nationally recognized rating service.
Other debt instruments, including, but not limited to,
issues of banks or bank holding companies and of
corporations, which obligations, although not rated by
Moody's, Standard & Poor's, or other nationally recognized
rating firms, are deemed by the Company's management to have
an investment quality comparable to securities which may be
purchased as stated above.
Commercial paper, cash or cash equivalents, and other
short-term investments having a maturity of less than one
year which are considered by the Company's management to
have investment quality comparable to securities which may
be purchased as stated above.
In addition, the Company may invest in futures and options.
Financial futures and related options thereon and options on
securities are purchased solely for non-speculative hedging
purposes. The Company may sell a futures contract or purchase a
put option on futures or securities to protect the value of
securities held in or to be sold for the general account or the
non-unitized separate account in the event the securities prices
are anticipated to decline. Similarly, if securities prices are
expected to rise, the Company may purchase a futures contract or
a call option thereon against anticipated positive cash flow or
may purchase options on securities.
WHILE THE FOREGOING GENERALLY DESCRIBES THE INVESTMENT
STRATEGY FOR THE GUARANTEE PERIOD FUND, THE COMPANY IS NOT
OBLIGATED TO INVEST THE ASSETS ATTRIBUTABLE TO THE GUARANTEE
PERIOD FUND ACCORDING TO ANY PARTICULAR STRATEGY, EXCEPT AS MAY
BE REQUIRED BY COLORADO AND OTHER STATE INSURANCE LAWS, NOR WILL
THE STATED RATE OF INTEREST THAT THE COMPANY ESTABLISHES
NECESSARILY RELATE TO THE PERFORMANCE OF THE NON-UNITIZED
SEPARATE ACCOUNT.
Subsequent Guarantee Periods
Prior to the date annuity payments commence, you may invest
the value of amounts held in a maturing Guarantee Period in any
Guarantee Period that we offer at that time. On the quarterly
statement issued prior to the end of any Guarantee Period, we
will notify you of the upcoming maturity of a Guarantee Period.
THE GUARANTEE PERIOD AVAILABLE FOR NEW CONTRIBUTIONS MAY BE
CHANGED AT ANY TIME, INCLUDING BETWEEN THE DATE OF NOTIFICATION
OF A MATURING GUARANTEE PERIOD AND THE DATE A SUBSEQUENT
GUARANTEE PERIOD BEGINS. Information regarding the current
Guarantee Periods then available and their stated rate of
interest may be obtained by calling the Schwab Annuity Service
Center at:
1-800-838-0650.
If the Company receives no direction from the Contract Owner
by the Guarantee Period Maturity Date, the Company will
automatically allocate the amount from the maturing Guarantee
Period to a Guarantee Period equal in duration to the one just
ended. If at that time, the duration previously chosen is no
longer available, the amount will be allocated to the next
shortest available Guarantee Period duration. Similarly, if no
allocation instructions have been received, but the Guarantee
Period equalling the one then ending is no longer available, the
amounts will be allocated to the next shortest available
Guarantee Period. If none of the above is available, the value
of matured Guarantee Periods will be allocated to the Schwab
Money Market Investment Division. In any event, a Guarantee
Period will not renew for a term equal in duration to the one
just ended if the Guarantee Period will mature after the Payment
Commencement Date. No Guarantee Period may mature later than six
months after a Payment Commencement Date. For example, if a 3-
year Guarantee Period matures and the Payment Commencement Date
begins 1 3/4 years from the Guarantee Period Maturity Date, the
matured value will be transferred to a 2-year Guarantee Period.
Breaking A Guarantee Period
Any Transfer, withdrawal or the selection of an annuity
option prior to the Guarantee Period Maturity Date will be known
as breaking a Guarantee Period. When a Request to break a
Guarantee Period is received, the Guarantee Period that is
closest to the Guarantee Period Maturity Date will be broken
first. If a Guarantee Period is broken, a Market Value
Adjustment may be assessed. The Market Value Adjustment may
increase or decrease the value of the Guarantee Period
Transferred or withdrawn. The Market Value Adjustment may reduce
the value of amounts held in a Guarantee Period below the amount
of your Contribution(s) allocated to that Guarantee Period. (See
Market Value Adjustment below.)
Interest Rates
Declared rates are effective annual rates of interest. The
rate is guaranteed throughout the Guarantee Period. FOR
GUARANTEE PERIODS NOT YET IN EFFECT, GWL&A MAY DECLARE INTEREST
RATES DIFFERENT THAN THOSE CURRENTLY IN EFFECT. When a
subsequent Guarantee Period begins, the rate applied will not be
less than the rate then applicable to new Contracts of the same
type with the same Guarantee Period.
The stated rate of interest must be at least equal to the
Guaranteed Interest Rate. The Company may declare higher rates.
The Guaranteed Interest Rate is based on the applicable state
standard non-forfeiture law. Please see Appendix A for the
standard non-forfeiture law rate applicable to the state in which
the Contract was issued.
The determination of the stated rate of interest is
influenced by, but does not necessarily correspond to, interest
rates available on fixed income investments which the Company may
acquire using funds deposited into the Guarantee Period Fund. In
addition, the Company will consider other items in determining
the stated rate of interest including regulatory and tax
requirements, sales commissions and administrative expenses borne
by the Company, general economic trends, and competitive factors.
Market Value Adjustment
Distributions from the amounts allocated to a Guarantee
Period due to a full surrender or partial withdrawal, Transfer,
application of amounts to the periodic withdrawal option or to
purchase an annuity, or distributions resulting from the death of
the Owner or Annuitant prior to a Guarantee Period Maturity Date
will be subject to a Market Value Adjustment ("MVA"). An MVA may
increase or decrease the amount payable on one of the above
described distributions. Amount available for a full surrender,
partial withdrawal or Transfer = amount Requested + MVA. The MVA
is calculated by multiplying the amount Requested by the Market
Value Adjustment Factor ("MVAF").
The MVA reflects the relationship as of the time of its
calculation between (a) the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last business day of
the week prior to the date the stated rate of interest was
established for the Guarantee Period; and (b) the U.S. Treasury
Strip ask side yield as published in the Wall Street Journal on
the last business day of the week prior to the week the Guarantee
Period is broken. There would be a downward adjustment if
Treasury rates at surrender exceed Treasury rates when the
Guarantee Period was created. There would be an upward
adjustment if Treasury rates at the time the Guarantee Period is
broken, are lower than when the Guarantee Period was created.
The MVA factor is the same for all Contracts.
1. The formula used to determine the MVA is:
MVA = (amount applied) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
MVAF = {[(1 + i)/(1 + j +.10%)] N/12} - 1
where:
a) i is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last
business day of the week prior to the date the stated
rate of interest was established for the Guarantee
Period. The term of i is measured in years and equals
the term of the Guarantee Period;
b) j is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last
business day of the week prior to the week the
Guarantee Period is broken. The term of j equals the
remaining term to maturity of the Guarantee Period,
rounded up to the higher number of years; and
c) N is the number of complete months remaining until
maturity.
If i + j differ by less than .10%, the MVA will equal 0. If
N is less than 6, the MVA will
equal 0.
2. The Market Value Adjustment will apply to any Guarantee
Period six or more months prior to the Guarantee Period Maturity
Date in each of the following situations:
a) Transfer to another Guarantee Period or to an
Investment Division offered under this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals; or
c) A single sum payment upon death of the Owner or
Annuitant.
3. The Market Value Adjustment will not apply to any Guarantee
Period having fewer than six months prior to the Guarantee Period
Maturity Date in each of the following situations:
a) Transfer to an Investment Division offered under
this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals.
c) A single sum payment upon death of the Owner or
Annuitant.
See Appendix B for Illustrations of the MVA.
<PAGE>
_________________________________________________________________
APPLICATION AND CONTRIBUTIONS
_________________________________________________________________
Contributions
All Contributions may be paid at the Schwab Annuity Service
Center by a check payable to Great-West Life & Annuity Insurance
Company (the Company) or by transfer to the Company of available
funds from your Schwab account.
The initial Contribution for the Contract must be at least
$5,000 (or $2,000 if for an IRA). Subsequent Contributions must
be at least $500. This minimum initial investment may be reduced
to $1,000, but only if you participate in an Automatic
Contribution Plan and contribute at least $100 per month through
a recurring deposit. A confirmation will be issued to you upon
the acceptance of each Contribution.
Your Contract will be issued and your Contribution generally
will be accepted and credited within two business days after
receipt of an acceptable application and receipt of the initial
Contribution at the Schwab Annuity Service Center. The
Contribution can be paid by check (payable to GWL&A) or by
transfer to GWL&A of available funds or amounts from your account
with Schwab. Acceptance is subject to there being sufficient
information in a form acceptable to us and we reserve the right
to reject any application or Contribution.
The Schwab Annuity Service Center will process your
application and Contributions. If your application is complete
and your initial Contribution is being transferred from funds
available in your Schwab account, then the Contribution will
generally be credited within two business days following receipt
of the application. If your application is incomplete, the
Schwab Annuity Service Center will either complete the
application from information Schwab has on file, or contact you
for the additional information. No transfer of funds will be
made from your Schwab account until your application is complete.
The funds will be credited as Contributions to the Contract when
they are transferred.
If your Contribution is by check, and the application is
complete, Schwab will use its best efforts to credit the
Contribution on the day of receipt, but in all such cases it will
be credited to your Contract within two business days of receipt.
If your application is incomplete, the Schwab Annuity Service
Center will complete the application from information Schwab has
on file or contact you by telephone to obtain the required
information. If your application remains incomplete for five
business days, we will return to you both the check and the
application unless you consent to our retaining the initial
Contribution and crediting it as soon as the requirements are
fulfilled.
A Contract may be returned within ten days after receipt, or
longer where required by law ("Free Look Period"). During the
Free Look Period, all contributions will be processed as follows:
(1) Amounts to be allocated to one or more of the then
available Guarantee Periods will be allocated as
directed, effective upon the Transaction Date.
(2) Amounts the Owner has directed to be allocated to one
or more of the Investment Divisions will first be
allocated to the Schwab Money Market Investment
Division until the next Transaction Date following the
end of the Free Look Period plus five calendar days.
On that date, the Variable Account Value held in the
Schwab Money Market Investment Division will be
allocated to the Investment Divisions selected by the
Owner.
(3) During the Free Look Period, you may change the
allocation percentages among the Investment Divisions
and/or your selection of Investment Divisions to which
Contributions will be allocated after the Free Look
Period.
(4) If the Contract is returned, the contract will be void
from the start and the greater of: (a)
Contributions received or (b) the Annuity Account Value
less surrenders, withdrawals and distributions, will be
refunded. Exercising the return privilege requires the
return of the Contract to the Company or to the Schwab
Annuity Service Center.
Amounts the Owner has contributed from a 1035 exchange of
the Schwab Investment Advantage Annuity Contract will be
immediately allocated to the Investment Divisions selected by the
Owner. If the Contract is returned, it will be void from the
start and the greater of: (a) Contributions received or (b) the
Annuity Account Value less surrenders, withdrawals and
distributions, will be refunded.
Additional Contributions may be made at any time prior to
the Payment Commencement Date, as long as the Annuitant is
living. Additional Contributions must be at least $500 or $100
per month if under an ACP.
Total Contributions may exceed $1,000,000 with our prior
approval.
The Company reserves the right to modify the limitations set
forth in this section.
_________________________________________________________________
ANNUITY ACCOUNT VALUE
_________________________________________________________________
Before the date annuity payments commence, your Annuity
Account Value is the sum of each Variable and Fixed Sub-Account
established under your Contract.
Before the annuity commencement date, the Variable Account
Value is the total dollar amount of all Accumulation Units under
each of your Variable Sub-Accounts. Initially, the value of each
Accumulation Unit was set at $10.00. Each Variable Sub-Account's
value prior to the annuity commencement date is equal to: (a) net
Contributions allocated to the corresponding Investment Division;
plus or minus (b) any increase or decrease in the value of the
assets of the Variable Sub-Account due to investment results;
less (c) the daily Mortality and Expense Risk Charge; less (d)
reductions for the Contract Maintenance Charge deducted on the
last business day of each Contract Year; less (e) any applicable
Transfer Fees; and less (f) any withdrawals or Transfers from the
Variable Sub-Account.
A Valuation Period is the period between successive
Valuation Dates. It begins at the close of the New York Stock
Exchange (generally 4:00 p.m. ET) on each Valuation Date and ends
at the close of the New York Stock Exchange on the next
succeeding Valuation Date. A Valuation Date is each day that the
New York Stock Exchange is open for regular business. The value
of an Investment Division's assets is determined at the end of
each Valuation Date. To determine the value of an asset on a day
that is not a Valuation Date, the value of that asset as of the
end of the previous Valuation Date will be used.
The Variable Account Value is expected to change from
Valuation Period to Valuation Period, reflecting the investment
experience of the selected Investment Division(s) as well as the
deductions for charges.
Contributions which you allocate to an Investment Division
are used to purchase Variable Accumulation Units in the
Investment Division(s) you select. The number of Accumulation
Units to be credited will be determined by dividing the portion
of each Contribution allocated to the Investment Division by the
value of an Accumulation Unit determined at the end of the
Valuation Period during which the Contribution was received. In
the case of the initial Contribution, Accumulation Units for that
payment will be credited to the Variable Account Value (and,
except for certain 1035 exchanges), held in the Schwab Money
Market Investment Division until the end of the Free Look Period
plus five calendar days (see "Application and Contributions,"
page 16). In the case of any subsequent Contribution,
Accumulation Units for that payment will be credited at the end
of the Valuation Period during which we receive the Contribution.
The value of an Accumulation Unit for each Investment Division
for a Valuation Period is established at the end of each
Valuation Period and is calculated by multiplying the value of
that unit at the end of the prior Valuation Period by the
Investment Division's Net Investment Factor for the Valuation
Period.
Unlike a brokerage account, amounts held under a Contract
are not covered by the Securities Investor Protection Corporation
("SIPC") .
_________________________________________________________________
TRANSFERS
_________________________________________________________________
In General
Prior to the Payment Commencement Date you may Transfer all
or part of your Annuity Account Value among and between the
Investment Divisions and the available Guarantee Periods by
telephone or by sending a Request to the Schwab Annuity Service
Center. The Request must specify the amounts being Transferred,
the Investment Division(s) and/or Guarantee Period(s) from which
the Transfer is to be made, and the Investment Division(s) and/or
Guarantee Period(s) that will receive the Transfer.
Currently, there is no limit on the number of Transfers you
can make among the Investment Divisions during any Contract Year.
There is no charge for the first ten Transfers each Contract
Year, but there will be a charge of $10 for each additional
Transfer in each Contract Year. We reserve the right to limit
the number of Transfers you make. All Transfers made on a single
Transaction Date will be aggregated to count as only one Transfer
toward the ten free Transfers; however, if a one time rebalancing
Transfer also occurs on the Transaction Date, it will be counted
as a separate and additional Transfer.
Transfers involving the Guarantee Period Fund (including
Transfers to or from the Investment Division(s)) are not limited
during any calendar year. These Guarantee Period Fund Transfers
are counted against your ten free Transfer as discussed above.
The $10 charge will apply to each Transfer made in excess of the
first ten Transfers each calendar year.
A Transfer generally will be effective on the date the
Request for Transfer is received by the Schwab Annuity Service
Center if received before 4:00 p.m. Eastern Time. Under current
law, there will not be any tax liability to you if you make a
Transfer.
Transfers involving the Investment Divisions will result in
the purchase and/or cancellation of Accumulation Units having a
total value equal to the dollar amount being Transferred to or
from a particular Investment Division. The purchase and/or
cancellation of such units generally shall be made using the
Variable Account Value as of the end of the Valuation Date on
which the Transfer is effective.
When a Transfer is made from amounts in a Guarantee Period
before the Guarantee Period Maturity Date, the amount Transferred
may be subject to a Market Value Adjustment. (See "Market Value
Adjustment," page 15.) A Request for Transfer from amounts in a
Guarantee Period made prior to the Guarantee Period Maturity Date
for Transfers on the Guarantee Period Maturity Date will not be
counted for the purpose of determining any Transfer Fee on
Transfers in excess of the ten Transfers per year if these
Transfers are to take place on the Guarantee Period Maturity
Date.
Possible Restrictions
We reserve the right without prior notice to modify,
restrict, suspend or eliminate the Transfer privileges (including
telephone Transfers) at any time. For example, restrictions may
be necessary to protect Owners from adverse impacts on portfolio
management of large and/or numerous Transfers by market timers or
others. We have determined that the movement of significant
amounts from one Investment Division to another may prevent the
underlying Eligible Fund from taking advantage of investment
opportunities because the Eligible Fund must maintain a
significant cash position in order to handle redemptions. Such
movement may also cause a substantial increase in Eligible Fund
transaction costs which must be indirectly borne by Owners.
Therefore, we reserve the right to require that all Transfer
Requests be made by the Owner and not by an Owner's designee and
to require that each Transfer Request be made by a separate
communication to us. We also reserve the right to request that
each Transfer Request be submitted in writing and be manually
signed by the Owner; facsimile Transfer Requests may not be
allowed. Transfers among the Investment Divisions may also be
subject to such terms and conditions as may be imposed by the
Eligible Funds.
Dollar Cost Averaging (Automatic Transfers)
The Owner may Request to automatically Transfer at regular
intervals, predetermined amounts from one Investment Division
selected from among those being allowed under this option (which
may be modified by the Company from time to time) to any of the
other Investment Divisions. The intervals between Transfers may
be monthly, quarterly, semi-annually or annually. The Transfer
will be initiated on the Transaction Date one frequency period
following the date of the Request. Transfers will continue on
that same day each interval unless terminated by you or for other
reasons as set forth in the Contract. If there are insufficient
funds in the applicable Variable Sub-Account on the date of
Transfer, no Transfer will be made; however, Dollar Cost
Averaging will resume once there are sufficient funds in the
applicable Variable Sub-Account. Dollar Cost Averaging will
terminate automatically upon the annuity commencement date.
Amounts transferred through Dollar Cost Averaging are not counted
against the ten free Transfers allowed in a calendar year.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the
selected Investment Division is $100 per month.
2. The Owner must specify dollar amount to be Transferred,
designate the Investment Division(s) to which the Transfer will
be made and the percent to be allocated to such Investment
Division(s), the Accumulation Unit values will be determined on
the Transfer Date.
Dollar Cost Averaging may be used to purchase Accumulation
Units of the Investment Divisions over a period of time. The
Owner, by Request, may cease Dollar Cost Averaging at any time.
Participation in Dollar Cost Averaging does not, however, assure
a greater profit, nor will it prevent or necessarily alleviate
losses in a declining market. The Company reserves the right to
modify, suspend or terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Owner may Request to automatically Transfer among the
Investment Divisions on a periodic basis by electing the
Rebalancer Option. This option automatically reallocates the
Variable Account Value to maintain a particular allocation among
Investment Divisions selected by the Owner. The amount allocated
to each Investment Division will increase or decrease at
different rates depending on the investment experience of the
Investment Division.
The Owner may Request that the rebalancing occur one time
only, in which case the Transfer will take place on the
Transaction Date of the Request. This Transfer will count as one
Transfer towards the ten free Transfers allowed in a calendar
year. (See "Transfer Fee," page 26.)
Rebalancing may also be set up on a quarterly, semiannual or
annual basis, in which case the first Transfer will be initiated
on the Transaction Date one frequency period following the date
of the Request. On the Transaction Date for the specified
Request, assets will be automatically reallocated to the selected
Investment Divisions. Rebalancing will continue on the same
Transaction Date for subsequent periods. In order to participate
in the Rebalancer Option, the entire Variable Account Value must
be included. Transfers set up with these frequencies will not
count against the ten free Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable Account
Value to be allocated to each Investment Division and the
frequency of rebalancing. The Owner, by Request, may modify the
allocations or cease the Rebalancer Option at any time. The
Rebalancer Option will terminate automatically upon the annuity
commencement date. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed.
Participation in the Rebalancer Option does not assure a greater
profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Company reserves the right to modify,
suspend, or terminate the Rebalancer Option at any time.
_________________________________________________________________
CASH WITHDRAWALS
_________________________________________________________________
Withdrawals
You (the Owner) may withdraw from the Contract all or part
of your Annuity Account Value at any time during the life of the
Annuitant and prior to the date annuity payments commence by
Request at the Schwab Annuity Service Center subject to the rules
below. Federal or state laws, rules or regulations may apply.
The amount payable to you if you surrender your Contract is your
Annuity Account Value, with a Market Value Adjustment, if
applicable, on the effective date of the surrender, and less any
applicable Premium Tax. No withdrawals may be made after the
date annuity payments commence.
A Request for a partial withdrawal will result in a
reduction in your Annuity Account Value equal to the sum of the
dollar amount withdrawn. A Market Value Adjustment may apply.
(See "Market Value Adjustment," page 15.) The partial withdrawal
proceeds may be greater or less than the amount requested,
depending on the effect of the Market Value Adjustment.
The minimum partial withdrawal before application of the MVA
is $500. Partial withdrawals are unlimited; however, you must
specify the Investment Division(s) or Guarantee Period(s) from
which the withdrawal is to be made. After any partial
withdrawal, if the remaining Annuity Account Value is less than
$2,000, then a full surrender may be required.
The following terms apply:
(a) No partial withdrawals are permitted after the date
annuity payments commence.
(b) A partial withdrawal will be effective upon the
Transaction Date.
(c) A partial withdrawal from amounts in a Guarantee Period
may be subject to the Market Value Adjustment
provisions, the Guarantee Period Fund provisions of the
Contract, and the terms of the attached Guarantee
Period Fund Rider(s), if any.
Withdrawals may be taxable (this includes Periodic
Withdrawals, discussed below). Moreover, the Internal Revenue
Code (the "Code") provides that a 10% penalty tax may be imposed
on the taxable portions of certain early withdrawals. The Code
generally requires us to withhold federal income tax from
withdrawals. However, generally you will be entitled to elect,
in writing, not to have tax withholding apply unless withholding
is mandatory for your Contract. Withholding applies to the
portion of the withdrawal which is included in your income and
subject to federal income tax. The tax withholding rate is 10%
of the taxable amount of the withdrawal. Withholding applies
only if the taxable amount of the withdrawal is at least $200.
Some states also require withholding for state income taxes.
(See "Federal Tax Matters," page 31.)
Withdrawal Requests must be in writing to ensure that your
instructions regarding withholding are followed. If an adequate
election is not made, the Request will be denied and no
withdrawal or partial withdrawal will be processed.
After a withdrawal of all of your total Annuity Account
Value, or at any time that your Annuity Account Value is zero,
all your rights under the Contract will terminate.
Since IRAs are offered by this Prospectus, reference should
be made to the applicable provisions of the Code for any
additional limitations or restrictions on cash withdrawals.
_________________________________________________________________
TELEPHONE TRANSACTIONS
_________________________________________________________________
We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if we
follow such procedures we will not be liable for any losses due
to unauthorized or fraudulent instructions. However, we may be
liable for such losses if we do not follow those reasonable
procedures. The procedures we will follow for telephone
transactions may include requiring some form of personal
identification prior to acting on instructions received by
telephone, providing written confirmation of the transaction,
and/or tape recording the instructions given by telephone.
We reserve the right to suspend telephone transaction
privileges at any time, for some or all Contracts, and for any
reason. Withdrawals are not permitted by telephone.
<PAGE>
_________________________________________________________________
DEATH BENEFIT
_________________________________________________________________
Payment of Death Benefit
Before the date annuity payments commence, the death
benefit, if any, will be equal to the greater of: (a) the Annuity
Account Value with an MVA, if applicable, as of the date the
Request for payment is received, less Premium Tax, if any, or (b)
the sum of Contributions paid, less partial withdrawals and/or
Periodic Withdrawals, less charges under the Contract, less
Premium Tax, if any. The death benefit will become payable
following the Company's receipt of a Request from the
Beneficiary. When an Owner or the Annuitant dies before the
annuity commencement date and a death benefit is payable to a
Beneficiary, the death benefit proceeds will remain invested in
accordance with the allocation instructions given by the Owner(s)
until new allocation instructions are Requested by the
Beneficiary or until the death benefit is actually paid to the
Beneficiary. The death benefit will be determined as of the date
payments commence; however, on the date a payment option is
processed, amounts in the Variable Sub-Account will be
Transferred to the Money Market Investment Division unless the
Beneficiary otherwise elects by Request. Subject to the
distribution rules set forth below, payment of the death benefit
may be Requested to be made as follows:
A. Proceeds from the Variable Sub-Account(s)
1. payment in a single sum; or
2. payment under any of the variable annuity options
provided under this Contract.
B. Proceeds from the Guarantee Period(s)
1. payment in a single sum with respect to which a
Market Value Adjustment may apply; or
2. payment under any of the annuity options provided
under this Contract with respect to which a Market
Value Adjustment may apply; or
3. payment on the Guarantee Period Maturity Date so
that a Market Value Adjustment will not apply.
In any event, no payment of benefits provided under the
Contract will be allowed that does not satisfy the requirements
of Section 72(s) of the Code and any other applicable federal or
state law, rules or regulations.
DISTRIBUTION RULES
1. Death of Annuitant
Upon the death of the Annuitant while the Owner is living,
and before the annuity commencement date, the Company will pay
the death benefit to the Beneficiary unless there is a Contingent
Annuitant.
If a Contingent Annuitant was named by the Owner(s) prior to
the Annuitant's death, and the Annuitant dies before the annuity
commencement date while the Owner and Contingent Annuitant are
living, no death benefit will be payable by reason of the
Annuitant's death and the Contingent Annuitant will become the
Annuitant.
If the Annuitant dies after the date annuity payments
commence and before the entire interest has been distributed, any
benefit payable must be distributed to the Beneficiary in
accordance with and at least as rapidly as under the payment
option applicable to the Annuitant on the Annuitant's date of
death.
If a corporation or other non-individual is an Owner, or if
the deceased Annuitant is an Owner, the death of the Annuitant
will be treated as the death of an Owner and the Contract will be
subject to the "Death of Owner" provisions described below.
2. Death of Owner
If the Owner is not the Annuitant:
(1) If there is a Joint Owner who is the surviving spouse
of the deceased Owner, the Joint Owner will become the Owner
and Beneficiary and may elect to take the death benefit or
elect to continue the Contract in force.
(2) In all other cases, the Company will pay the death
benefit to the Beneficiary even if a Joint Owner (who was
not the Owner's spouse on the date of the Owner's death),
the Annuitant and/or the Contingent Annuitant are alive at
the time of the Owner's death, unless the sole Beneficiary
is the deceased Owner's surviving spouse and the Beneficiary
elects to become the Owner and Annuitant and to continue the
Contract in force.
If the Owner is not the Annuitant, and the Owner dies after
annuity payments commence and before the entire interest has been
distributed while the Annuitant is living, any benefit payable
will continue to be distributed to the Annuitant at least as
rapidly as under the payment option applicable on the Owner's
death. All rights granted the Owner under the Contract will pass
to any surviving Joint Owner and, if none, to the Annuitant.
If the Owner is the Annuitant (Owner/Annuitant):
(1) If there is a Joint Owner who is the surviving spouse
of the deceased Owner and a Contingent Annuitant, the Joint
Owner will become the Owner and the Beneficiary, the
Contingent Annuitant will become the Annuitant, and the
Contract will continue in force.
(2) If there is a Joint Owner who is the surviving spouse
of the deceased Owner but no Contingent Annuitant, the Joint
Owner will become the Owner, Annuitant and Beneficiary and
may elect to take the death benefit or continue the Contract
in force.
(3) In all other cases, the Company will pay the death
benefit to the Beneficiary, even if a Joint Owner (who was
not the Owner's spouse on the date of the Owner's death),
Annuitant and/or Contingent Annuitant are alive at the time
of the Owner's death, unless the sole Beneficiary is the
deceased Owner's surviving spouse and the Beneficiary
Requests to become the Owner and Annuitant and to continue
the Contract in force.
Any death benefit payable to the Beneficiary upon an Owner's
death will be distributed as follows:
(1) If the Owner's surviving spouse is the person entitled
to receive benefits upon the Owner's death, the surviving
spouse will be treated as the Owner and will be allowed to
take the death benefit or continue the Contract in force; or
(2) If the Beneficiary is a non-spouse individual, she/he
may elect, not later than one year after the Owner's date of
death, to receive the death benefit in either a single sum
or payment under any of the variable or fixed annuity
options available under the Contract, provided that (a) such
annuity is distributed in substantially equal installments
over the life or life expectancy of the Beneficiary or over
a period not extending beyond the life expectancy of the
Beneficiary; and (b) such distributions begin not later than
one year after the Owner's date of death. If no election is
received by the Company from a non-spouse Beneficiary such
that substantially equal installments have begun not later
than one year after the Owner's date of death, then the
entire amount must be distributed within five years of the
Owner's date of death. The death benefit will be determined
as of the date the payments commence; or
(3) If a corporation or other non-individual entity is
entitled to receive benefits upon the Owner's death, the
death benefit must be completely distributed within five
years of the Owner's date of death.
Beneficiary
You may select one or more Beneficiaries. If more than one
Beneficiary is selected, unless you indicate otherwise, they will
share equally in any death benefit payable. You may change the
Beneficiary any time before the Annuitant's death.
You may, while the Annuitant is living, change the
Beneficiary by Request. A change of Beneficiary will take effect
as of the date the Request is processed by the Schwab Annuity
Service Center, unless a certain date is specified by the Owner.
If the Owner dies before the Request was processed, the change
will take effect as of the date the Request was made, unless the
Company has already made a payment or otherwise taken action on a
designation or change before receipt or processing of such
Request. A beneficiary designated irrevocably may not be changed
without the written consent of that Beneficiary, except as
allowed by law.
The interest of any Beneficiary who dies before the Owner or
the Annuitant will terminate at the death of the Beneficiary.
The interest of any Beneficiary who dies at the time of, or
within 30 days after, the death of an Owner or the Annuitant will
also terminate if no benefits have been paid to such Beneficiary,
unless the Owner otherwise indicates by Request. The benefits
will then be paid as though the Beneficiary had died before the
deceased Owner or Annuitant. If no Beneficiary survives the
Owner or Annuitant, as applicable, the Company will pay the death
benefit proceeds to the Owner's estate.
If the surviving spouse of an Owner is the surviving Joint
Owner, the surviving spouse will become the Beneficiary upon such
Owner's death and may elect to take the death benefit or may
elect to continue the Contract in force. If there is no
surviving Joint Owner, and no named Beneficiary is alive at the
time at the time of an Owner's death, any benefits payable will
be paid to the Owner's estate.
Contingent Annuitant
While the Annuitant is living, the Owner(s) may, by Request,
designate or change a Contingent Annuitant from time to time. A
change of Contingent Annuitant will take effect as of the date
the Request is processed at the Schwab Annuity Service Center,
unless a certain date is specified by the Owner(s).
_________________________________________________________________
CHARGES AND DEDUCTIONS
_________________________________________________________________
No deductions are made from Contributions except for any
applicable Premium Tax. Therefore, the full amount of the
Contributions (less any applicable Premium Tax) are invested in
the Contract.
As more fully described below, charges under the Contract
are assessed only as deductions for Premium Tax, if applicable,
for certain Transfers, as a Contract Maintenance Charge, and as
charges against the assets in the Owner's Variable Sub-Account(s)
for our assumption of mortality and expense risks. In addition,
a Market Value Adjustment may apply to withdrawals and
surrenders, Transfers, amounts applied to purchase an annuity,
and distributions resulting from death of the Owner or Annuitant
if the amounts held in a Guarantee Period are paid out prior to
the Guarantee Period Maturity Date.
Mortality and Expense Risk Charge
We deduct a Mortality and Expense Risk Charge from your
Variable Sub-Account(s) at the end of each Valuation Period to
compensate us for bearing certain mortality and expense risks
under the Contract. This is a daily charge equal to an effective
annual rate of 0.85% of the value of the net assets in your
Variable Sub-Account(s). The approximate portion of this charge
attributable to mortality risks is 0.68%; the approximate portion
of this charge estimated to be attributable to expense risk is
0.17% of the value of the net assets in your Variable Sub-
Account(s). We guarantee that this charge will never increase
beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the
Accumulation Unit Values for each of your Variable Sub-Accounts.
Annuity Account Values and annuity payments are not affected
by changes in actual mortality experience incurred by us. The
mortality risks assumed by us arise from our contractual
obligations to make annuity payments determined in accordance
with the annuity tables and other provisions contained in the
Contract. Thus you are assured that neither the Annuitant's
longevity nor an unanticipated improvement in general life
expectancy will adversely affect the annuity payments under the
Contract.
We bear substantial risk in connection with the death
benefit before the annuity commencement date, since we will pay a
death benefit equal to the greater of the Annuity Account Value
with a Market Value Adjustment, if applicable, as of the later of
the date of death or the date the Request for payment is
received, less Premium Tax, if any; or the sum of the
Contributions paid, less partial withdrawals and/or Periodic
Withdrawals, less any charges under Contract less Premium Tax, if
any (i.e., we bear the risk of unfavorable experience in your
Variable Sub-Accounts).
The expense risk assumed is the risk that our actual
expenses in administering the Contracts and the Series Account
will be greater than anticipated, or exceed the amount recovered
through the Contract Maintenance Charge plus the amount, if any,
recovered through Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to
cover actual costs and risks assumed, the loss will fall on us.
Conversely, if this charge is more than sufficient, any excess
will be profit to us. Currently, we expect a profit from this
charge. Our expenses for distributing the Contracts will be
borne by our general assets, including any profits from this
charge.
Contract Maintenance Charge
We currently deduct a $25 annual Contract Maintenance Charge
from the Annuity Account Value on each Contract anniversary to
partially cover our costs for administering the Contracts and the
Series Account. The Contract Maintenance Charge is deducted from
the Schwab Money Market Investment Division. If there are not
sufficient funds in the Schwab Money Market Investment Division
to cover the Contract Maintenance Charge, then the charge or any
portion thereof will be deducted on a pro rata basis from all
your Variable Sub-Accounts with current value. If the entire
Annuity Account is held in the Guarantee Period Fund or there is
not enough funds in any Variable Sub-Account to pay the entire
charge, then the Contract Maintenance Charge will be deducted on
a pro rata basis from amounts held in all Guarantee Periods.
There is no MVA on amounts deducted from a Guarantee Period for
the Contract Maintenance Charge. We do not expect a profit from
amounts held in the Contract Maintenance Charge.
Premium Tax
We may be required to pay state premium taxes or retaliatory
taxes currently ranging from 0% to 3.5% in connection with
Contributions or values under the Contracts. Depending upon
applicable state law, we will deduct charges for the premium
taxes we incur with respect to a particular Contract from the
Contributions, from amounts withdrawn, or from amounts applied on
the Payment Commencement Date. In some states, charges for both
direct premium taxes and retaliatory premium taxes may be imposed
at the same or different times with respect to the same
Contribution, depending on applicable state law.
Transfer Fee
There will be a $10 charge for each Transfer in excess of
ten Transfers in any calendar year. We do not expect a profit
from the Transfer fee for excess Transfers.
Other Taxes
Under present laws, we will incur state or local taxes (in
addition to the Premium Tax described above) in several states.
No charges are currently made for taxes other than Premium Tax.
However, we reserve the right to deduct charges in the future for
federal, state, and local taxes or the economic burden resulting
from the application of any tax laws that we determine to be
attributable to the Contracts.
<PAGE>
Expenses of the Eligible Funds
The value of the assets in the Investment Divisions reflect
the value of Eligible Fund shares and therefore the fees and
expenses paid by each Eligible Fund. A complete description of
the fees, expenses, and deductions from the Eligible Funds are
found in the Eligible Funds' prospectuses. (See "The Eligible
Funds," page 8.) Current prospectuses for the Funds can be
obtained by calling the Schwab Annuity Service Center at 800-838-
0650, or by writing to the Schwab Annuity Service Center, P.O.
Box 7785, San Francisco, California 94120-9420.
_________________________________________________________________
PAYMENT OPTIONS
_________________________________________________________________
Periodic Withdrawal Option
The Owner may Request that all or part of the Annuity
Account Value be applied to a Periodic Withdrawal Option. The
amount applied to a Periodic Withdrawal is the Annuity Account
Value with an MVA, if applicable, less Premium Tax, if any.
In Requesting Periodic Withdrawals, the Owner must elect:
- The withdrawal frequency of either 12-, 6-, 3-, or 1-
month intervals;
- A withdrawal amount; a minimum of $100 is required;
- The calendar day of the month on which withdrawals will
be made;
- One withdrawal option; and
- The allocation of withdrawals from the Owner's Variable
and/or Fixed Sub-Account(s) as follows:
1) Prorate the amount to be paid across all Variable
and Fixed Sub-Accounts in proportion to the assets
in each sub-account; or
2) Select the Variable and/or Fixed Sub-Account(s)
from which withdrawals will be made. Once the
Variable and/or Fixed Sub-Accounts have been
depleted, the Company will automatically prorate
the remaining withdrawals against all remaining
available Variable and/or Fixed Sub-Accounts
unless the Owner Requests the selection of another
Variable and/or Fixed Sub-Account.
The Owner may elect to change the withdrawal option and/or
the frequency once each calendar year.
While Periodic Withdrawals are being received:
1. the Owner may continue to exercise all contractual
rights that are available prior to electing an annuity
option, except that no Contributions may be made;
2. for Periodic Withdrawals from Guarantee Periods six or
more months prior to its Guarantee Period Maturity
Date, a Market Value Adjustment, if applicable, will be
assessed;
3. the Owner may keep the same investment options as were
in force before periodic withdrawals began;
4. charges and fees under the Contract continue to apply;
and
5. maturing Guarantee Periods renew into the shortest
Guarantee Period then available.
Periodic Withdrawals will cease on the earlier of the date:
1. the amount elected to be paid under the option selected
has been reduced to zero;
2. the Annuity Account Value is zero; or
3. the Owner Requests that withdrawals stop;
4. an Owner or the Annuitant dies.
The Owner must elect one of the following five (5)
withdrawal options:
1. Income for a Specified Period for at least thirty-six
(36) months - The Owner elects the duration over which
withdrawals will be made. The amount paid will vary based
on the duration.
2. Income of a Specified Amount for at least thirty-six
(36) months - The Owner elects the dollar amount of the
withdrawals. Based on the amount elected, the duration may
vary; or
3. Interest Only - The withdrawals will be based on the
amount of interest credited to the Guarantee Period Fund
between each withdrawal. Available only if 100% of the
account value is invested in the Guarantee Period Fund; or
4. Minimum Distribution - If this is an IRA contract, the
Owner may Request minimum distributions as specified under
Code Section 401(a)(9); or
5. Any Other Form for a period of at least thirty-six (36)
months - Any other form of Periodic Withdrawal which is
acceptable to the Company.
If Periodic Withdrawals cease, the Owner may resume making
Contributions. The Owner may elect to restart a Periodic
Withdrawal program; however, the Company may limit the number of
times the Owner may restart a Periodic Withdrawal program.
Periodic withdrawals may be taxable, subject to withholding
and subject to the 10% penalty tax. IRAs are subject to complex
rules with respect to restrictions on and taxation of
distributions, including the applicability of penalty taxes. A
competent tax adviser should be consulted before a Periodic
Withdrawal Option is requested. (See "Federal Tax Matters," page
31.)
Annuity Date
The date annuity payments commence may be chosen when the
Contract is purchased or at a later date. This date must be at
least one year after the initial Contribution. In the absence of
an election, the annuity date is the first day of the month of
the Annuitant's 91st birthday.
If an option has not been elected within 30 days of the
annuity commencement date, the Annuity Account Value held in the
Fixed Sub-Account(s) will be applied under Annuity Payment Option
3, discussed below, to provide payments for life with a
guaranteed period of 20 years. The Annuity Account Value held
in the Variable Sub-Account(s) will be applied under Variable
Annuity Payment Option 1, discussed below, to provide payments
for life with a guaranteed period of 20 years.
Under section 401(a)(9) of the Code, a Contract which is
purchased and used in connection with an Individual Retirement
Account or with certain other plans qualifying for special
federal income tax treatment is subject to complex "minimum
distribution" requirements, which require that distributions
under such a plan must begin by a specific date, and also that
the entire interest of the plan participant must be distributed
within certain specified periods under formulas that specify
minimum annual distributions. The application of the minimum
distribution requirements to each person will vary according to
the person's age and other circumstances. A prospective
purchaser may wish to consult a competent tax adviser regarding
the application of the minimum distribution requirements. (See
"Federal Tax Matters," page 31.)
Annuity Options
An annuity option may be selected by the Owner when the
Contract is purchased, or at a later date. This selection may be
changed, by Request, at any time up to 30 days before the annuity
date. In the absence of an election, payments will automatically
commence on the annuity date as described above. The amount to
be applied is the Annuity Account Value on the annuity date. The
minimum amount that may be withdrawn from the Annuity Account
Value to purchase an annuity payment option is $2,000 with an
MVA, if applicable. If the amount is less than $2,000, the
Company may pay the amount in a single sum subject to the
Contract provisions applicable to a partial withdrawal. Payments
may be elected to be received monthly, quarterly, semi-annually
or annually. Payments to be made under the annuity payment
option selected must be at least $50. The Company reserves the
right to make payments using the most frequent payment interval
which produces a payment of not less than $50. The maximum
amount that may be applied under any payment option is
$1,000,000, unless prior approval is obtained from the Company.
A single sum payment may be elected. If it is, then the
amount to be paid is the Surrender Value. If the Owner elects a
variable annuity with funds from the Owner's Variable Sub-
Accounts, then the amount to be applied is the Annuity Account
Value held in the Variable Sub-Account(s), as of the annuity
commencement date, less any applicable Premium Tax. If the Owner
elects a fixed annuity with funds from the Fixed Sub-Accounts,
then the amount to be applied is the Annuity Account Value held
in the Fixed Sub-Account(s), as of the annuity commencement date
with an MVA, if applicable, less any applicable Premium Tax.
Fixed Annuity Payment Options
Option 1: Income of Specified Amount
The amount applied under this option may be paid in equal
annual, semiannual, quarterly or monthly installments of the
dollar amount elected for not more than 240 months. Upon death
of the Annuitant, the Beneficiary will begin to receive the
remaining payments at the same interval that was elected by the
Owner.
Option 2: Income for a Specified Period
Payments are paid annually, semiannually, quarterly or
monthly, as elected, for a selected number of years not to exceed
240 months. Upon death of the Annuitant, the Beneficiary will
begin to receive the remaining payments at the same interval that
was elected by the Owner.
Option 3: Fixed Life Annuity with Guaranteed Period
This option provides for monthly payments during a
designated period and thereafter throughout the lifetime of the
Annuitant. The designated period may be 5, 10, 15 or 20 years.
Upon death of the Annuitant, for each remaining designated
period, the amounts payable under this payment option will be
paid to the Beneficiary.
Option 4: Fixed Life Annuity
This annuity is payable monthly during the lifetime of the
Annuitant, terminating with the last payment due prior to the
death of the Annuitant. Since no minimum number of payments is
guaranteed, this option may offer the maximum level of monthly
payments of the annuity options. It is possible that only one
payment may be made if the Annuitant died before the date on
which the second payment was due. No other payments nor death
benefits would be payable.
Option 5: Any Other Form
This option allows an Owner the ability to choose any other
form of annuity which is acceptable to the Company.
Variable Annuity Payment Options
Option 1: Variable Life Annuity with Guarantee Period
This option provides for payments during a designated period
and thereafter throughout the life time of the Annuitant. The
designated period may be 5, 10, 15 or 20 years. Upon death of
the Annuitant, for each remaining designated period, the amounts
payable under this payment option will be paid to the
Beneficiary.
Option 2: Variable Life Annuity
This annuity is payable during the lifetime of the
Annuitant. The annuity terminates with the last payment due
prior to the death of the Annuitant. Since no minimum number of
payments is guaranteed, this option may offer the maximum level
of monthly payments of the annuity options. It is possible that
only one payment may be made if the Annuitant died before the
date on which the second payment was due. No other payments nor
death benefits would be payable.
Option 3: Any other Form
This option allows an Owner the ability to choose any other
form of annuity which is acceptable to the Company.
Variable annuity payment options are subject to the
following provisions:
Amount of First Payment
The first payment under a variable annuity payment option
will be based on the value of the amounts held in each Variable
Sub-Account on the 5th Valuation Date preceding the annuity
commencement date. It will be determined by applying the
appropriate rate to the amount applied under the payment option.
Annuity Units
The number of Annuity Units paid to the Annuitant for each
Variable Sub-Account is determined by dividing the amount of the
first monthly payment by its Accumulation Unit Value on the 5th
Valuation Date preceding the date the first payment is due. The
number of Annuity Units used to calculate each payment for a
Variable Sub-Account remains fixed during the Annuity Payment
Period.
Amount of Payments after the First
Payments after the first will vary depending upon the
investment experience of the Investment Divisions. The
subsequent amount paid from each sub-account is determined by
multiplying (a) by (b) where (a) is the number of sub-account
Annuity Units to be paid and (b) is the sub-account Annuity Unit
value on the 5th Valuation Date preceding the date the annuity
payment is due. The total amount of each variable annuity
payment will be the sum of the variable annuity payments for each
Variable Sub-Account. The Company guarantees that the dollar
amount of each payment after the first will not be affected by
variations in expenses or mortality experience.
Transfers After the Annuity Commencement Date
Once annuity payments have begun, no Transfers may be made
from a fixed annuity payment option to a variable annuity payment
option, or vice versa; however, for variable annuity payment
options, Transfers may be made among Investment Divisions.
Transfers after the annuity commencement date will be made by
converting the number of Annuity Units being Transferred to the
number of Accumulation Units of the Variable Sub-Account to which
the Transfer is made. The result will be that the next annuity
payment, if it were made at that time, would be the same amount
that it would have been without the Transfer. Thereafter,
annuity payments will reflect changes in the value of the new
Annuity Units.
***
For annuity options involving life income, the actual age
and/or sex of the Annuitant will affect the amount of each payment.
We reserve the right to ask for satisfactory proof of the
Annuitant's age. We may delay annuity payments until satisfactory
proof is received. Since payments to older Annuitants are expected
to be fewer in number, the amount of each annuity payment under a
selected annuity form will be greater for older Annuitants than for
younger Annuitants.
If the age of the Annuitant has been misstated, the payments
established will be made on the basis of the correct age. If
payments were too large because of misstatement, the difference
with interest may be deducted by the Company from the next payment
or payments. If payments were too small, the difference with
interest may be added by the Company to the next payment. This
interest is at an annual effective rate which will not be less than
the Guaranteed Interest Rate.
The Payment Commencement Date and annuity options available
for IRAs may also be controlled by endorsements, the plan
documents, or applicable law.
Once payments start under the annuity form selected by the
Owner: (a) no changes can be made in the annuity form, (b) no
additional Contributions will be accepted under the Contract, and
(c) no further withdrawals, other than withdrawals made to provide
annuity benefits, will be allowed.
***
A portion or the entire amount of the annuity payments may be
taxable as ordinary income. If, at the time the annuity payments
begin, we have not received a proper written election not to have
federal income taxes withheld, we must by law withhold such taxes
from the taxable portion of such annuity payments and remit that
amount to the federal government (an election not to have taxes
withheld is not permitted for certain Qualified Contracts). State
income tax withholding may also apply. (See "Federal Tax-Matters,"
below.)
_________________________________________________________________
FEDERAL TAX MATTERS
_________________________________________________________________
Introduction
The following discussion is a general description of federal
income tax considerations relating to the Contracts and is not
intended as tax advice. Further, this discussion is based on the
assumption that the Contract qualifies as an annuity contract for
federal income tax purposes. This discussion is not intended to
address the tax consequences resulting from all of the situations
in which a person may be entitled to or may receive a distribution
under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before
initiating any transaction. This discussion is based upon our
understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of the continuation of
the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no
attempt has been made to consider any applicable state or other tax
laws.
The Contract may be purchased on a non-tax qualified basis
("Non-Qualified Contract") or purchased and used in connection with
IRAs. The ultimate effect of federal income taxes on the amounts
held under a Contract, on annuity payments, and on the economic
benefit to you, the Annuitant, or the Beneficiary may depend on the
type of Contract, and on the tax status of the individual
concerned. In addition, certain requirements must be satisfied in
purchasing an IRA and receiving distributions from an IRA in order
to continue receiving favorable tax treatment. Therefore,
purchasers of IRAs should seek competent legal and tax advice
regarding the suitability of the Contract for their situation, the
applicable requirements, and the tax treatment of the rights and
benefits of the Contract. The following discussion assumes that an
IRA is purchased with proceeds from and/or Contributions that
qualify for the intended special federal income tax treatment.
Tax Status
The Company is taxed as a life insurance company under Part I
of Subchapter L of the Code.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in
general. An Owner who is a natural person generally is not taxed
on increases (if any) in the value of an Annuity Account Value
until distribution occurs by withdrawing all or part of the Annuity
Account Value (e.g., withdrawals or annuity payments under the
annuity form elected). However, under certain circumstances, the
Owner may be subject to taxation currently. In addition, an
assignment, pledge, or agreement to assign or pledge any portion of
the Annuity Account Value generally will be treated as a
distribution. The taxable portion of a distribution (in the form
of a single sum payment or an annuity) is taxable as ordinary
income. An IRA Contract may not be assigned as collateral.
The Owner of any annuity contract who is not a natural person
(e.g. a corporation) generally must include in income any increase
in the excess of the Annuity Account Value over the "investment in
the contract" (discussed below) during each taxable year. The rule
does not apply where the non-natural person is the nominal owner of
a Contract and the beneficial owner is a natural person. The rule
also does not apply in the following circumstances: (1) where the
annuity Contract is acquired by the estate of a decedent, (2) where
the Contract is held under an IRA, (3) where the Contract is a
qualified funding asset for a structured settlement, and (4) where
the Contract is purchased on behalf of an employee upon termination
of a qualified plan. A prospective Owner that is not a natural
person may wish to discuss these matters with a competent tax
adviser.
The following discussion generally applies to a Contract owned
by a natural person.
Withdrawals
In the case of a withdrawal under an IRA, including
withdrawals under the Periodic Withdrawal Option, a ratable portion
of the amount received may be non-taxable. The amount of the non-
taxable portion is generally determined by the ratio of the
"investment in the contract" to the individual's total accrued
benefit under the retirement plan. The "investment in the
contract" generally equals the amount of any nondeductible
Contributions paid by or on behalf of any individual. Special tax
rules may be available for certain distributions from an IRA.
With respect to Non-Qualified Contracts, partial withdrawals,
including Periodic Withdrawals, are generally treated as taxable
income to the extent that the Annuity Account Value immediately
before the withdrawal exceeds the "investment in the contract" at
that time. If a partial withdrawal is made from a Guarantee Period
which is subject to a Market Value Adjustment, then the Annuity
Account Value immediately before the withdrawal will not be altered
to take into account the Market Value Adjustment. As a result, for
purposes of determining the taxable portion of the partial
withdrawal, the Annuity Account Value will not reflect the amount,
if any, deducted from or added to the Guarantee Period due to the
Market Value Adjustment. Full surrenders are treated as taxable
income to the extent that the amount received exceeds the
"investment in the contract." The taxable portion of any annuity
payment is taxed at ordinary income tax rates.
Annuity Payments
Although the tax consequences may vary depending on the
annuity form elected under the Contract, in general, only the
portion of the annuity payment that represents the amount by which
the Annuity Account Value exceeds the "investment in the contract"
will be taxed; after the investment in the contract is recovered,
the full amount of any additional annuity payments is taxable. For
fixed annuity payments, in general there is no tax on the portion
of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of
the annuity payments for the term of the payments; however, the
remainder of each annuity payment is taxable. Once the investment
in the Contract has been fully recovered, the full amount of any
additional annuity payments is taxable. If the annuity payments
cease as a result of an Annuitant's death before full recovery of
the "investment in the contract," you should consult a competent
tax adviser regarding the deductibility of the unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified
Contract, there may be imposed a federal income tax penalty equal
to 10% of the amount treated as taxable income. In general,
however, there is no penalty tax on distributions: (1) made on or
after the date on which the Owner attains age 59 1/2; (2) made as
a result of death or disability of the Owner; or (3) received in
substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the lives or life expectancies of the
Owner and a "designated beneficiary." Other exemptions or tax
penalties may apply to certain distributions pursuant to an IRA.
For more details regarding these exemptions or penalties consult a
competent tax adviser.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the
death of an Owner or the Annuitant. Generally such amounts are
includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a
full surrender, as described above, or (2) if distributed under an
annuity form, they are taxed in the same manner as annuity
payments, as described above.
Distribution-at-Death Rules
In order to be treated as an annuity contract, the terms of
the Contract must provide the following two distribution rules:
(A) if any Contract Owner dies on or after the date annuity
payments commence, and before the entire interest in the Contract
has been distributed, the remainder of his interest will not be
distributed under a slower distribution schedule than that provided
for in the method in effect on the Contract Owner's death; and (B)
if any Contract Owner dies before the date annuity payments
commence, his entire interest must generally be distributed within
five years after the date of death provided that if such interest
is payable to a designated Beneficiary, then such interest may be
made over the life of that designated Beneficiary or over a period
not extending beyond the life expectancy of that Beneficiary, so
long as payments commence within one year after the Contract
Owner's death. If the sole designated Beneficiary is the spouse of
the Contract Owner, the Contract may be continued in the name of
the spouse as Contract Owner. The designated Beneficiary is the
natural person designated by the terms of the Contract or by the
Contract Owner as the individual to whom ownership of the contract
passes by reason of the Contract Owner's death. If the Contract
Owner is not an individual, then for purposes of the distribution
at death rules, the Primary Annuitant is considered the Contract
Owner. In addition, when the Contract Owner is not an individual,
a change in the Primary Annuitant is treated as the death of the
Contract Owner.
Transfers, Assignments, or Exchanges
A Transfer of ownership of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Owner, or
the exchange of a Contract may result in adverse tax consequences
to the Owner that are not discussed herein. An Owner contemplating
any such designation, transfer, assignment, or exchange of a
Contract should contact a competent tax adviser with respect to the
potential tax effects of such a transaction.
<PAGE>
Multiple Contracts
All deferred, non-qualified annuity contracts that are issued
by the Company (or our affiliates) to the same Owner during any
calendar year will be treated as one annuity contract for purposes
of determining the amount includible in gross income under section
72(e) of the Code. Amounts received under any such Contract may be
taxable (and may be subject to the 10% Penalty Tax) to the extent
of the combined income in all such Contracts. In addition, the
Treasury Department has specific authority to issue regulations
that prevent the avoidance of section 72(e) through the serial
purchase of annuity contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat
the combination purchase of an immediate annuity contract and
separate deferred annuity contracts as a single annuity contract
under its general authority to prescribe rules as may be necessary
to enforce the income tax laws.
Withholding
Annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax
status. Recipients, however, generally are provided the
opportunity to elect not to have tax withheld from distributions.
Certain distributions from IRAs are subject to mandatory federal
income tax withholding.
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity.
There is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS
regulations, revenue rulings, judicial decisions, etc.). Moreover,
it is also possible that any change could be retroactive (that is,
effective prior to the date of the change).
Section 1035 Exchanges
Code Section 1035 provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A
replacement contract obtained in a tax-free exchange of contracts
succeeds to the status of the original contract. Special rules
apply to Contracts issued prior to August 14, 1982. Prospective
Owners wishing to take advantage of a Section 1035 exchange should
consult their tax adviser.
<PAGE>
Individual Retirement Annuities
The Contract may be used with IRAs as described in Section 408
of the Code. Section 408 of the Code permits eligible individuals
to contribute to an individual retirement program known as an
Individual Retirement Annuity. Also, certain kinds of
distributions from certain types of qualified and non-qualified
retirement plans may be "rolled over" following the rules set out
in the Code to maintain favorable tax treatment, to an Individual
Retirement Annuity. The sale of a Contract for use with an IRA may
be subject to special disclosure requirements of the Internal
Revenue Service. Purchasers of the Contract for use with IRA's
will be provided with supplemental information required by the
Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within
seven days of purchase of the IRA Contract.
Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000
annually, distributions that do not satisfy specified requirements,
and certain other transactions. The Contract will be amended as
necessary to conform to the requirements of the Code. Purchasers
should seek competent advice as to the suitability of the Contract
for use with IRA's.
If a Contract is issued in connection with an employer's
Simplified Employee Pension ("SEP") plan, Owners, Annuitants and
Beneficiaries are cautioned that the rights of any person to any of
the benefits under the Contract may be subject to the terms and
conditions of the plan itself, regardless of the terms and
conditions of the Contract.
If a Contract is purchased to fund an IRA the Annuitant must
also be the Owner. In addition, if a Contract is purchased to fund
an IRA, minimum distributions must commence not later than April
1st of the calendar year following the calendar year in which you
attain age 70 1/2. You should consult your tax adviser concerning
these matters.
The Contract and prototype IRA endorsement have been submitted
IRS approval that they are acceptable under Section 408 of the
Code, so that each individual who purchases a Contract with an IRA
endorsement will be considered to have adopted a retirement savings
program that satisfies the requirements of Section 408 of the Code.
The IRS approval is a determination only as to the form of the
Contract and does not represent a determination of the merits of
the Contract.
At the time the Initial Contribution is paid, a prospective
purchaser must specify whether he or she is purchasing a Non-
Qualified Contract or an IRA. If the initial Contribution is
derived from an exchange or surrender of another annuity contract,
we may require that the prospective purchaser provide information
with regard to the federal income tax status of the previous
annuity contract. We will require that persons purchase separate
Contracts if they desire to invest monies qualifying for different
annuity tax treatment under the Code. Each such separate Contract
would require the minimum initial Contribution stated above.
Additional Contributions under a Contract must qualify for the same
federal income tax treatment as the initial Contribution under the
Contract; we will not accept an additional Contribution under a
Contract if the federal income tax treatment of such Contribution
would be different from that of the initial Contribution.
Seek Tax Advice
The foregoing discussion of the federal income tax
consequences is only a brief summary and is not intended as tax
advice. Further, the federal income tax consequences discussed
herein reflect our understanding of current law and the law may
change. Federal estate tax consequences and state and local
estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual
circumstances of each Owner or recipient of the distribution. A
competent tax adviser should be consulted for further information.
_________________________________________________________________
ASSIGNMENTS OR PLEDGES
_________________________________________________________________
Generally, rights in the Contract may be assigned or pledged
for loans at any time during the life of the Annuitant; however, if
the Contract is an IRA, the Owner may not assign the Contract as
collateral.
If a non-IRA Contract is assigned, the interest of the
assignee has priority over the interest of the Owner and the
interest of the Beneficiary. Any amount payable to the assignee
will be paid in a single sum.
A copy of any assignment must be submitted to the Company at
the Schwab Annuity Service Center. Any assignment is subject to
any action taken or payment made by the Company before the
assignment was processed. The Company is not responsible for the
validity or sufficiency of any assignment.
If any portion of the Annuity Account Value is assigned or
pledged for a loan, it may be treated as a distribution. A
competent tax adviser should be consulted for further information.
_________________________________________________________________
PERFORMANCE DATA
_________________________________________________________________
From time to time, we may advertise yields and average annual
total returns for the Investment Divisions. In addition, we may
advertise the effective yield of the Schwab Money Market Investment
Division. These figures will be based on historical information
and are not intended to indicate future performance.
The yield of the Schwab Money Market Investment Division
refers to the annualized income generated by an investment in that
Investment Division over a specified seven-day period. The yield
is calculated by assuming that the income generated for that seven-
day period is generated each seven-day period over a 52-week period
and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income
earned by an investment in that Investment Division is assumed to
be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed
reinvestment.
The yield of an Investment Division (other than the Schwab
Money Market Investment Division) refers to the annualized income
generated by an investment in that Investment Division over a
specified thirty-day period. The yield is calculated by assuming
that the income generated by the investment during that thirty-day
period is generated each thirty-day period over a twelve-month
period and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any
Premium Tax that may be applicable to a particular Contract. To
the extent that premium taxes are applicable to a particular
Contract, the yield of that Contract will be reduced. For a
description of the methods used to determine yield and total
returns, see the Statement of Additional Information.
The average annual total return of an Investment Division
refers to return quotations assuming an investment has been held in
the Investment Division for various periods of time including, but
not limited to, a period measured from the date the Investment
Division commenced operations. When an Investment Division has
been in operation for 1, 5, and 10 years, respectively, the average
annual total return for these periods will be provided. The
average annual total return quotations will represent the average
annual compounded rates of return that would equate an initial
investment of $1,000 to the redemption value of that investment
(excluding Premium Tax) as of the last day of each of the periods
for which total return quotations are provided. For additional
information regarding yields and total returns calculated using the
standard formats briefly described herein, please refer to the
Statement of Additional Information.
Performance information for any Investment Division reflects
only the performance of a hypothetical Contract under which Annuity
Account Value is allocated to an Investment Division during a
particular time period on which the calculations are based.
Performance information should be considered in light of the
investment objectives and policies and characteristics of the
Eligible Funds in which the Investment Division invests, and the
market conditions during the given time period, and should not be
considered as a representation of what may be achieved in the
future.
Reports and promotional literature may also contain other
information including (1) the ranking of any Investment Division
derived from rankings of variable annuity separate accounts or
their investment products tracked by Lipper Analytical Services,
Inc., VARDS, Morningstar, Value Line, IBC/Donoghue's Money Fund
Report, Financial Planning Magazine, Money Magazine, Bank Rate
Monitor, Standard & Poor's Indices, Dow Jones Industrial Average,
and other rating services, companies, publications, or other
persons who rank separate accounts or other investment products on
overall performance or other criteria, and (2) the effect of tax-
deferred compounding on investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which
may include a comparison, at various points in time, of the return
from an investment in a Contract (or returns in general) on a tax-
deferred basis (assuming one or more tax rates) with the return on
a currently taxable basis. Other ranking services and indices may
be used.
We may from time to time also disclose cumulative (non-
annualized) total returns for the Investment Divisions. We may
from time to time also disclose yield and standard total returns
for any or all Investment Divisions.
We may also advertise performance figures for the Investment
Divisions based on the performance of a Eligible Fund prior to the
time the Series Account commenced operations.
For additional information regarding the calculation of other
performance data, please refer to the Statement of Additional
Information.
_________________________________________________________________
DISTRIBUTION OF THE CONTRACTS
_________________________________________________________________
Charles Schwab & Co., Inc. ("Schwab") is the distributor of
the Contracts. Schwab is registered with the Securities and
Exchange Commission as a broker/dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Its
principal offices are located at 101 Montgomery, San Francisco,
California 94104, telephone 800-838-0650.
Certain administrative services are provided by Schwab to
assist the Company in the processing of the Contracts, which
services are described in written agreements between Schwab and the
Company.
As compensation for distributing the Contracts, the Company
pays Schwab a distribution fee at an annual rate ranging from .30%
to .78% of total Annuity Account Values. The Company has agreed to
indemnify Schwab (and its agents, employees, and controlling
persons) for certain damages arising out of the sale of the
Contracts, including those arising under the securities laws.
_________________________________________________________________
SELECTED FINANCIAL DATA
_________________________________________________________________
The following is a summary of certain financial data of Great-
West Life & Annuity Insurance Company. This summary has been
derived in part from, and should be read in conjunction with, the
financial statements of Great-West Life & Annuity Insurance Company
included elsewhere in this Prospectus.
Year Ended December 31,
(In Millions) 1995 1994 1993
1992 1991
INCOME STATEMENT DATA
Premiums and other income $ 1,067 $ 1,000
$ 696 $ 245 $ 58
Net investment income 835 768 792 661
599
Realized investment gains (losses) 8 (72) 25 (4
) (30)
Total Revenues $ 1,910 $ 1,696 $ 1,513
$ 902 $ 627
Total benefits and expenses $ 1,733 $ 1,594
$ 1,417 $ 844 $ 596
Income tax expense 49 28 31 18 7
Cumulative effect of adopting a
new accounting method for income taxes _____ ____
____ (23) ___
Net income $ 128 $ 74 $ 65
$ 63 $ 24
BALANCE SHEET DATA
Investment assets $ 12,473 $11,791
$11,592 $10,771 $8,483
Separate account assets 3,999 2,555 1,680
937 550
Total assets 17,68215,616 14,296
12,948 9,571
Total policy liabilities 11,492 10,929
10,592 10,352 7,808
Total shareholders equity 993 777
821 769 624
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company
The Company operates in one business segment as a provider of
life, health and annuity products to groups of individuals
associated with employers or distributors; however, the business
operations of GWL&A will be discussed in terms of its major
business units: Employee Benefits Division, which distributes
life, health, disability income insurance and 401(k) products to
employee groups, primarily to small to mid-sized corporations; and
Financial Services Division, which distributes accumulation and
payout annuity products for both group and individual clients,
primarily in the public\non-profit sector, as well as insurance
products for individual clients.
GWL&A recognized the potential problems of high yielding
assets in the late 1980's and adjusted its investment policy
accordingly. The impact of problem mortgage and real estate
accounts showed marked improvement in the last few years as the
Company curtailed any new investment in mortgage loans. The
emphasis of quality over yield in the bond portfolio certainly has
proved to be beneficial to the overall strength of the investment
assets.
Going forward, GWL&A intends to increase the percentage of
assets and liabilities funded on a separate account basis.
Management believes this emphasis is in the best interests of its
customers and shareholders. GWL&A intends to continue to improve
its administrative and distribution systems in order to compete
with insurers, mutual fund companies, and other money managers.
YEARS ENDED DECEMBER 31, 1995 and 1994
Results of Operations
The net income of $128 million in 1995 is up significantly
from the $74 million recorded in 1994. The growth in earnings is
related to the Company's continued investment philosophy of
replacing mortgage loans with higher quality bonds which ultimately
resulted in a reduction of mortgage writedowns. This is very
apparent in the Financial Services Division where the asset
intensive lines benefited from a combination of lower mortgage
writedowns and capital gains in the bond portfolio. The Company's
strategy of increasing fee income and reducing interest rate
exposure is apparent in the growth of the separate accounts. The
Employee Benefits Division's net income from operations increased
in 1995, largely due to low healthcare inflation, favorable
mortality, outstanding 401(k) growth and effective expense
management.
Life, accident, and health premium increased $49 million from
1994 to a total of $988 million primarily due to an increase in
group health premium which primarily reflects the acquisition of a
block of business from Confederation Life Insurance Company.
Net investment income increased $67 million in 1994 to a total
of $835 million reflecting higher interest rates and growth in
policy loans associated with corporate owned life insurance (COLI)
business.
The net realized gains and losses improved significantly over
last year as the $8 million of gains in 1995 was substantially
better than the $72 million of losses recorded in 1994. Mortgage
writedowns, included in realized losses, continued to decline as
the $22 million in 1995 was $12 million better than the $34 million
recorded in 1994. As interest rates decreased in 1995, bond
capital gains of $28 million in 1995 were better than the $39
million of losses recorded in 1994.
The capital gains and losses recorded in 1994 and 1995 were
somewhat mitigated by adjustments to the amortization of deferred
acquisition costs and premium deficiency reserves totalling $(10)
million in 1995 and $19 million in 1994.
Policyholder benefits increased to $1.2 billion, up $76
million, which is a combination of an increase in interest credits
to policyholders and higher group life and health claims.
The commissions and operating expense increase of $56 million
to a total of $465 million includes expense increases associated
with managed care and the acquisition of a block of group life and
health business from Confederation Life Insurance Company.
The effective income tax rate in 1995 and 1994 was lower than
the statutory rate due to a reduction of $13 million and $7
million, respectively, in the deferred tax asset valuation
allowance held in a subsidiary company, GWL Properties Inc.
Balance Sheet
Total assets grew approximately $2.1 billion to a total of
$17.7 billion, reflecting continued growth in the separate accounts
of $1.4 billion and a $333 million increase in policy loans
associated with COLI business.
It is important to recognize the continued shift away from
mortgages as the portfolio dropped $298 million during 1995. The
mortgage portfolio of $1.7 billion at December 31, 1995 represented
13.7% of total investment assets compared to 17.1% at December 31,
1994.
Stockholder's equity at December 31, 1995 of $993 million
increased substantially from December 31, 1994, as the result of
higher earnings and a significant increase in the unrealized gains
on the bond portfolio that is available for sale.
YEARS ENDED DECEMBER 31, 1994 and 1993
Results of Operations
Net income in 1994 of $74 million increased from 1993's $65
million. The higher group life and health earnings more than
offset the lower asset intensive earnings associated with the
capital losses on the bond portfolio.
Premiums and other income consist primarily of life, accident,
and health premiums which increased 48% over 1993 to a total of
$939 million. The $306 million increase was primarily the result
of group life and health which was up $248 million as none of the
premium was reinsured to The Great-West Life Assurance Company (the
Parent) during 1994 compared to $179 million reinsured in 1993.
Net investment income decreased $24 million to a total of $768
million. The decrease was associated with a 0.68% drop in the
yield on investments as higher yielding mortgages and bonds
continued to be replaced by lower yielding, higher quality bonds.
The net realized losses of $72 million were significantly
worse than the $25 million of net gains recorded in 1993 reflecting
the decline in bond prices during 1994. However, mortgage
writedowns in 1994 of $34 million showed improvement over the $43
million in 1993, reflecting the overall decrease in mortgage
investments and the reduction in problem mortgages.
The capital losses in 1994 were somewhat mitigated by
adjustments to the amortization of deferred acquisition costs and
premium deficiency reserves totalling $19 million. The same
components were adjusted by $44 million in 1993.
The increase in benefits and expenses was primarily related to
a $69 million increase in policy benefits and a $98 million
increase in commission and operating expenses, both the result of
the group life and health business not being reinsured at all
during 1994. In 1993 the business had been reinsured to the Parent
for part of the year.
The 1994 effective income tax rate of 27.7% is lower than the
1993 rate of 32.5% as the result of a $7 million reduction in the
deferred income tax asset valuation allowance being held in a
subsidiary company, GWL Properties Inc.
Balance Sheet
Total assets increased $1.3 billion in 1994 to a total of
$15.6 billion. The only growth in the general account was the
acquisition of corporate owned life insurance (COLI) policies from
Confederation Life which increased assets $250 million. The
majority of the increase is associated with separate account assets
which grew by $875 million over 1993 to a total of $2.6 billion.
The growth in separate accounts is derived from a combination of
good sales in both the 401(k) and the public non-profit business
units and good investment performance.
The mortgage loans on real estate portfolio reduced $367
million bringing the total portfolio to $2.0 billion or 17.1% of
total investment assets. The reduction is related to a combination
of prepayments, renewals refinanced with other lenders, and the
Companys policy of not initiating any new mortgage loans.
Liquidity and Capital Resources
The principal short- and long-term liquidity needs of the
Company are to satisfy policyholder benefits. The liquidity needs
of the Company are closely managed through cash flow matching of
assets and liabilities, and the forecasting of earned and required
yields to ensure consistency between policyholder requirements and
the yield of assets. Over 88.1% of policy liabilities are non-
cashable prior to maturity or subject to market value adjustments
or withdrawal penalties.
Investments in highly marketable securities at the end of 1995
totaled $6.4 billion, including short-term investments of $135
million which have minimal market risk. For several years, the
Company has followed an investment policy that has emphasized high-
quality bonds and de-emphasized high-yield, lower quality bonds and
mortgage loans. At December 31, 1995, mortgages represented 13.7%
of investments, compared to 25.2% at December 31, 1991. Bonds
rated below investment grade were only 1.4% of investments at
December 31, 1995. The Company's investments in mortgage-backed
and asset-backed bonds do not include highly volatile issues. The
Company limits its use of derivative financial instruments to
contracts which change the interest rate characteristics of certain
bonds from variable to fixed rates or which effectively change
interest paid in foreign currencies to U.S. dollars.
Additional liquidity is available through the Company's
commercial paper program which is partially supported by a standby
letter of credit. At December 31, 1995, the program has an
outstanding balance of $85 million with maturities ranging from 25
to 160 days and interest rates ranging from 5.7% to 5.9%.
The National Association of Insurance Commissioners (NAIC)
utilize risk-based capital standards to determine the capital
requirements of a life insurance company based upon its inherent
operating risks. These standards require the computation of a
risk-based capital amount which is then compared to the Companys
actual adjusted capital. Based on current calculations of the
risk-based capital standards, the Companys percentage to total
adjusted capital is well in excess of ratios that would require
regulatory attention.
The Parent owns all of the Companys $122 million of preferred
shares and all of its common stock. The shareholders equity was
$993 million as of December 31, 1995 compared to $777 million as of
December 31, 1994. Most of the increase was related to the
increase in fair value of the Company's available-for-sale bond
portfolio, including $23 million related to the Company's
reclassification on December 31, 1995 of $2.1 billion of bonds from
the held-to-maturity portfolio.
Ratings
The Company operates in a very competitive market place, and
therefore its ratings from various rating agencies are very
important to its ability to distribute certain products. A.M. Best
Company has assigned the Company its highest financial strength and
operating performance rating of A++. Duff & Phelps Corporation and
Standard & Poors Corporation have also assigned the Company their
highest claims paying ability rating of AAA. Moodys Investors
Service has assigned the Company an insurance and financial
strength rating of Aa2.
These ratings represent the rating agencys independent
opinion of the Companys financial strength and ability to meet its
policyholder obligations, but have no relevance to the performance
or quality of the assets in the Series Account.
Regulation and Reserves
The Company is subject to regulation and supervision by the
insurance departments of the state in which it is licensed. This
regulation covers a variety of areas, including policy reserve
requirements, adequacy of company capital and surplus, operational
standards, and financial accounting policies and procedures.
Pursuant to state insurance laws and regulations, the Company
is obligated to hold policy reserves to meet its obligations under
all outstanding insurance contracts. These reserves are based on
a number of assumptions as to future experience. Neither the
reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance
contracts if the Company were to experience unexpected losses
(i.e., infectious diseases or catastrophic investment losses).
Competition
The Company is engaged in a business that is highly
competitive due to the large number of insurance companies and
other entities competing in marketing, administering, and selling
insurance products. There are approximately 2,300 insurers in the
life insurance business in the United States.
<PAGE>
Segment Information
The Company operates in one business segment as a provider of
life, health and annuity products to groups of individuals
associated with employers or distributors.
Employees and Facilities
The Company has an administrative services agreement with the
Parent Corporation, to provide total administrative support for all
aspects of the Companys business. The Parent Corporation has
approximately 4,288 employees in its U.S. operations. The home
office facilities are in Englewood, Colorado which includes 517,633
square feet in a three building complex. As well, there are sales
and claims offices located in several states.
State Regulation
As a life insurance company organized and operated under
Colorado law, GWL&A is subject to provisions governing such
companies and regulation by the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and
examination by the Colorado Division of Insurance at any time, and
a full examination of its operations is conducted triennially.
In addition, GWL&A is subject to comprehensive and detailed
regulation and supervision by the supervisory agencies in each
jurisdiction in which it conducts business. Each state's
supervisory agency has broad administrative authority which
includes, but is not limited to, the power to regulate licenses to
transact business, trade practices, agent licensing, policy forms,
claims practices, underwriting practices, reserve requirements,
fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, the form and
content of required financial statements and the type and amounts
of investments permitted. GWL&A is required to file detailed
annual reports with supervisory agencies in each of the
jurisdictions in which it does business and its accounts are
subject to examination by such agencies at regular intervals.
Under insurance guaranty fund laws in most states, insurers
can be assessed up to prescribed limits for insurance contract
losses incurred by insolvent companies. GWL&A has estimated that
the $9 million reserve being held at December 31, 1995 is adequate
to cover any obligations of known insolvencies.
In addition, most jurisdictions, including Colorado, regulate
affiliated groups of insurers such as GWL&A and its affiliates
under insurance holding company legislation. Under such laws,
intercorporate transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval,
depending on the size of such transfers and payments in relation to
the financial position of the company making the transfer. Changes
in control also are regulated under these laws.
Although the federal government generally does not directly
regulate the business of insurance, federal initiatives often have
an impact on the business in a variety of ways. Current and
proposed federal measures which may significantly affect GWL&A's
insurance business include employee benefits regulation, controls
on medical care costs, medical entitlement programs (e.g.,
Medicare), removal of barriers preventing banks from engaging in
the insurance and mutual fund businesses, the taxation of insurance
companies and the tax treatment of insurance products.
The Securities and Exchange Commission regulates certain
separate accounts of GWL&A and the mutual funds used as funding
vehicles for those accounts.
Directors and Executive Officers
Set forth below is information concerning the Company's
directors and executive officers, to the extent responsible for its
variable annuity operations, together with their principal
occupation for the past five years:
Directors
James Balog
James W. Burns, O.W.
Orest T. Dackow
Paul Desmarais, Jr.
Robert G. Graham
Robert Gratton
N. Berne Hart
Kevin P. Kavanagh
William Mackness
William T. McCallum
Jerry E.A. Nickerson
P. Michael Pitfield, P.C., Q.C.
Michel Plessis-Belair
Ross J. Turner
Brian E. Walsh
Executive Officers
William T. McCallum, President and Chief Executive Officer
Dennis Low, Executive Vice President, Financial Services
D. Craig Lennox, Senior Vice President, General Counsel and
Secretary
Alan D. MacLennan, Executive Vice President, Employee Benefits
John T. Hughes, Senior Vice President, Chief Investment Officer
Douglas L. Wooden, Senior Vice President, Chief Financial Officer
<PAGE>
Executive Compensation
Executive officers of the Company may also serve one or more
affiliated companies of Great-West Life & Annuity Insurance
Company. Allocations have been made as to each individual's time
devoted to his duties as an executive officer of the Company. The
following table shows the cash compensation paid, based on these
allocations, to the five most highly compensated executive officers
whose allocated compensation exceed $60,000, for services rendered
in all capacities in the Company in 1995.
Compensation Table
Ownership of Securities
All of the Company's outstanding shares are owned by The
Great-West Life Assurance Company, 100 Osborne Street North,
Winnipeg, Manitoba, Canada R3C 3A5. The Great-West Life Assurance
Company is owned 99.4% by Great-West Lifeco Inc., both of which
share the same address. Great-West Lifeco Inc. is owned 86.4% by
Power Financial Corporation of Canada, 751 Victoria Square,
Montreal, Quebec, Canada H2Y 2J3. It is owned 68.4% by 171263
Canada Inc., which is owned 100% by Power Corporation of Canada,
both of which share the same address as Power Financial Corporation
of Canada. Mr. Paul Desmarais, 751 Victoria Square, Montreal,
Quebec, Canada H2Y 2J3, through a group of private holding
companies, which he controls, has voting control of Power
Corporation of Canada.
_________________________________________________________________
VOTING RIGHTS
_________________________________________________________________
To the extent required by applicable law, all Eligible Fund
shares held in the Series Account will be voted by the Company at
regular and special shareholder meetings of the respective Eligible
Funds in accordance with instructions received from persons having
voting interests in the corresponding Investment Division. If,
however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, or
if we determine that we are allowed to vote all Eligible Funds
shares in our own rights, we may elect to do so.
Before the annuity commencement date, you the Owner, have the
voting interest. The number of votes which are available to you
will be calculated separately for each of your Variable Sub-
Account. That number will be determined by applying your
percentage interest, if any, in a particular Investment Division to
the total number of votes attributable to that Investment Division.
You hold a voting interest in each Investment Division to which
your Annuity Account Value is allocated. If you select a variable
annuity option, the votes attributable to a Contract will decrease
as annuity payments are made.
The number of votes of a Eligible Fund will be determined as
of the date coincident with the date established by that Eligible
Fund for determining shareholders eligible to vote at the meeting
of the Eligible Funds. Voting instructions will be solicited by
written communication prior to such meeting in accordance with
procedures established by the respective Eligible Funds.
Shares as to which no timely instructions are received and
shares held by us as to which Owners have no beneficial interest
will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in the
Investment Division. Voting instructions to abstain on any item to
be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person or entity having a voting interest in a Investment
Division will receive proxy material, reports and other material
relating to the appropriate Eligible Fund.
It should be noted that generally the Eligible Funds are not
required to, and do not intend to, hold annual or other regular
meetings of shareholders.
Contract Owners have no voting rights in the Company.
_________________________________________________________________
RIGHTS RESERVED BY THE COMPANY
_________________________________________________________________
The Company reserves the right to make certain changes if, in
its judgment, they would best serve the interests of Owners and
Annuitants or would be appropriate in carrying out the purposes of
the Contracts. Any changes will be made only to the extent and in
the manner permitted by applicable laws. Also, when required by
law, the Company will obtain your approval of the changes and
approval from any appropriate regulatory authority. Such approval
may not be required in all cases, however. Examples of the changes
the Company may make include:
- To operate the Series Account in any form permitted under
the Investment Company Act of 1940 or in any other form
permitted by law.
- To transfer any assets in any Investment Division to
another Investment Division, or to one or more separate
accounts, or to a Guarantee Period; or to add, combine or
remove Investment Divisions of the Series Account.
- To substitute, for the Eligible Fund shares in any
Investment Division, the shares of another Eligible Fund or
shares of another investment company or any other investment
permitted by law.
- To make any changes required by the Internal Revenue Code
or by any other applicable law in order to continue treatment
of the Contract as an annuity.
- To change the time or time of day at which a Valuation Date
is deemed to have ended.
- To make any other necessary technical changes in the
Contract in order to conform with any action the above
provisions permit the Company to take, including to change the
way the Company assess charges, but without increasing as to
any then outstanding Contract the aggregate amount of the
types of charges which the Company has guaranteed.
_________________________________________________________________
LEGAL PROCEEDINGS
_________________________________________________________________
There is at present no pending material legal proceedings to
which the Series Account is a party or to which the assets of the
Series Account are subject. The Company is not a party to, and its
property is not subject to, any material pending legal proceedings
other than ordinary routine litigation incidental to its business.
_________________________________________________________________
LEGAL MATTERS
_________________________________________________________________
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the Contract
has been provided by Jorden Burt Berenson & Johnson LLP. The
organization of the Company, the Company's authority to issue the
Contract, and the validity of the form of the Contract have been
passed upon by R.B. Lurie, Vice President, Counsel and Associate
Secretary of the Company.
_________________________________________________________________
EXPERTS
_________________________________________________________________
The consolidated financial statements of Great-West Life &
Annuity Insurance Company at December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995
included in this prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
_________________________________________________________________
AVAILABLE INFORMATION
_________________________________________________________________
We have filed a registration statement ("Registration
Statement") with the Commission under the 1933 Act relating to the
Contracts offered by this Prospectus. This Prospectus has been
filed as a part of the Registration Statement and does not contain
all of the information set forth in the Registration Statement and
exhibits thereto. Reference is hereby made to the Registration
Statement and exhibits for further information relating to us and
the Contracts. Statements contained in this Prospectus, as to the
content of the Contracts and other legal instruments, are
summaries. For a complete statement of the terms thereof,
reference is made to the instruments as filed as exhibits to the
Registration Statement. The Registration Statement and its
exhibits may be inspected and copied at the offices of the
Commission located at 450 Fifth Street, N.W., Washington, D.C.
<PAGE>
Appendix A
<PAGE>
Appendix B
On the following pages are four examples of Market Value
Adjustments illustrating (1) increasing interest rates, (2)
decreasing interest rates, (3) flat interest rates (i and j are
within .10% of each other), and (4) less than 6 months to maturity.
Example #1 - Increasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 7.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.071]65/12} - 1
= .952885 - 1
= .047115
MVA = (amount Transferred or surrendered) x MVAF
= $10,000 x - .047115
= - $471.15
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + - $471.15)
= $9,528.85
Example #2 - Decreasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 5.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.05]65/12} - 1
= .0055323
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x .0055323
= $553.23
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + $553.23)
= $10,553.23
Example #3 - Flat Interest Rates (i and j are within .10% of
each other)
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 6.24%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.0634]65/12} - 1
= .99036 - 1
= -.00964
However, [i-j] <.10%, so MVAF = 0
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x 0
= $0
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + $0)
= $10,000
Example #4 - N<6 (less than 6 months to maturity)
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2005
j: 7.00%
Amount Surrendered: $10,000
N: 5
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.071]5/12} - 1
= .99629 - 1
= -.00371
However, N<6, so MVAF = 0
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x 0
= $0
Surrender Value = (amount Transferred or surrendered + MVA)
= ($10,000 + $0)
= $10,000
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(A wholly-owned subsidiary of
The Great-West Life Assurance Company)
Consolidated Financial Statements for the
Years Ended December 31, 1995, 1994, and 1993
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying consolidated balance sheets of Great-
West Life & Annuity Insurance Company (a wholly-owned subsidiary of The
Great-West Life Assurance Company) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
stockholder's equity, and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Great-West Life &
Annuity Insurance Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 19, 1996
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY<PAGE>
CONSOLIDATED BALANCE SHEETS
<PAGE>
<PAGE>
DECEMBER 31, 1995 AND 1994 (Dollars in Thousands) ASSETS 1995 <PAGE>
1994<PAGE>
INVESTMENTS: Fixed Maturities: Held-to-maturity, at
amortized cost
(fair value $2,158,043 and $4,135,248)<PAGE>
$ 2,054,204 $ 4,293,985
Available for sale, at fair value
(amortized cost $6,087,969 and $2,997,087)<PAGE>
6,263,187 2,824,703 Common
stock<PAGE>
9,440 5,222 Mortgage loans on real estate 1,713,195 2,011,059
Real estate<PAGE>
60,454 43,663 Policy loans 2,237,745 1,905,013 Short-term
investments<PAGE>
134,835 706,920 Total Investments 12,473,060 <PAGE>
11,790,565<PAGE>
Cash 90,939 131,621 Reinsurance receivable 333,924 <PAGE>
295,148<PAGE>
Deferred policy acquisition costs 278,526 297,092 Investment income
due and accrued<PAGE>
211,922 195,817 Other assets 40,038 55,5
<PAGE>
<PAGE>
<PAGE>
TOTAL ASSETS $ 17,682,218 $ 15,615,543 See
notes to consolidated financial
statements.<PAGE>
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994 <PAGE>
<PAGE>
POLICY BENEFIT LIABILITIES: Policy reserves $ 10,845,935 $ 10,334,
456<PAGE>
Policy and contract claims 359,791 338,515 Policyholders' funds
<PAGE>
154,872 144,262 Experience refunds 83,562 70,359 Provision for
policyholders'
dividends<PAGE>
47,760 41,840 GENERAL
LIABILITIES:<PAGE>
Due to Parent Corporation 149,974 159,117
Repurchase agreements<PAGE>
372,965 564,160 Commercial paper 84,854 89,686<PAGE>
Other liabilities<PAGE>
453,889 420,154 Undistributed earnings on
participating business<PAGE>
136,617 120,927 Separate account liabilities<PAGE>
<PAGE>
3,998,878 2,554,836 Total Liabilities 16,689,097 14,838,312 <PAGE>
<PAGE>
STOCKHOLDER'S EQUITY: Preferred stock, $1 par valu
1500 shares authorized,<PAGE>
liquidation value of
$100,000 per share,<PAGE>
600 shares issued and
outstanding<PAGE>
60,000 60,000
Series B, cumulative,
1500 shares authorized,<PAGE>
liquidation value of
$100,000 per share,<PAGE>
200 shares issued and
outstanding<PAGE>
20,000 20,000
Series C, cumulative,
1500 shares authorized,<PAGE>
none outstanding<PAGE>
Series D, cumulative,
1500 shares authorized,<PAGE>
none outstanding<PAGE>
Se
ries E, non-cumulative,
2,000,000<PAGE>
shares authorized,
liquidation value of $20.90<PAGE>
41,800 41,800
per share, issued, and
outstanding<PAGE>
Common stock
, $1 par value;
50,000,000 shares authorized;<PAGE>
7,032,00
0 shares issued and
outstanding<PAGE>
7,032 7,032 Additional
paid-in capital<PAGE>
657,265 657,265 Net unrealized gains (losses) on
securities available-for-sale<PAGE>
58,763 (78,427) Retained
earnings<PAGE>
148,261 69,561 Total Stockholder's Equity 993,121 <PAGE>
777,231<PAGE>
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY<PAGE>
$ 17,682,218 $ 15,615,543<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY<PAGE>
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993<PAGE>
(Dollars in Thousands) 1995 1994 1993<PAGE>
REVENUES:<PAGE>
Annuity contract charges and
premiums<PAGE>
$ 79,816 $ 61,122 $ 63,210 Life
, accident, and health premiums
earned (net of<PAGE>
premiums ceded totaling $60,880,
$48,115<PAGE>
and $254,969)<PAGE>
987,611 938,947 632,961 Net investment income 835,046 <PAGE>
767,646<PAGE>
791,424 Net realized gains (losses) on
investments<PAGE>
7,465 (71,939) 25,342 <PAGE>
<PAGE>
1,909,938 1,695,776 1,512,937 BENEFITS AND EXPENSES: Life and
other policy benefits (net
of reinsurance<PAGE>
recoveries totaling $43,574,
$18,937,<PAGE>
and $151,598)<PAGE>
557,469 548,950 390,562 Increase in reserves 98,797 <PAGE>
64,834<PAGE>
59,873 Interest paid or credited to
contractholders<PAGE>
562,263 529,118 623,417
Provision for policyholders' share
of earnings (losses)<PAGE>
on
participating business<PAGE>
2,027 (725) (1,498) Dividends to policyholders <PAGE>
48,150<PAGE>
42,094 34,474 1,268,706 1,184,271 1,106,828
Commissions<PAGE>
122,926 120,058 90,472 Operating expenses 314,810 261,311<PAGE>
<PAGE>
196,820 Premium taxes 26,884 27,402 23,129 1,733,326 1,593,042 <PAGE>
1,417,249<PAGE>
INCOME BEFORE INCOME TAXES 176,612 102,734 95,688 <PAGE>
PROVISION FOR INCOME TAXES:<PAGE>
Current 88,366 65,0
127,680<PAGE>
$ 74,278 $ 64,636 <PAGE>
<PAGE>
See notes to consolidated financial
statements.<PAGE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
EQUITY
<PAGE>
YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993
<PAGE>
(Dollars in Thousands)
<PAGE>
Net Additi
onal<PAGE>
Unreal
ized<PAGE>
Retain
ed<PAGE>
Preferred Stock
<PAGE>
Common Stock
<PAGE>
Paid-
In<PAGE>
Gains Earnin
gs<PAGE>
Shares Amount Shares Amoun
t<PAGE>
Capita
l<PAGE>
(Losse
s)<PAGE>
(Defic
it)<PAGE>
Total BALANCE, JANUARY 1, 1993 2,000,800 $ 121,800 <PAGE>
7,028,217<PAGE>
$ 7,028 $ 647,199 $ 0 $<PAGE>
(7,063)<PAGE>
$
768,964<PAGE>
Issuance of common stock 3,783 4 496 <PAGE>
<PAGE>
500 Capital contributions 9,098 9,098 <PAGE>
<PAGE>
Dividends (21,852
)<PAGE>
(21,852)<PAGE>
Net income 64,636 64,636 <PAGE>
<PAGE>
BALANCE, DECEMBER 31,
1993<PAGE>
2,000,800 121,800 7,032,000 7,032 656,793 0 <PAGE>
35,721<PAGE>
821,346 Adjustment to beginning
balance for change in<PAGE>
<PAGE>
<PAGE>
accounting method
for investment<PAGE>
<PAGE>
<PAGE>
securities 6,515 6,515 <PAGE>
Change in net unrealized
gains (losses)<PAGE>
(84,942)
<PAGE>
(84,942) Capital contributions 472 <PAGE>
472<PAGE>
Dividends (40,438
)<PAGE>
(40,438)<PAGE>
Net income 74,278 74,278 <PAGE>
<PAGE>
BALANCE, DECEMBER 31,
1994<PAGE>
2,000,800 121,800 7,032,000 7,032 657,265 <PAGE>
(78,427)<PAGE>
69,561 777,231 Change in net unrealized
gains (losses)<PAGE>
137,190<PAGE>
<PAGE>
137,190 Dividends (48,980
)<PAGE>
(48,980)<PAGE>
Net income 127,680 127,680 <PAGE>
<PAGE>
BALANCE, DECEMBER 31,
1995<PAGE>
2,000,800 $ 121,800 7,032,000 $ 7,032 $ 657,265 $<PAGE>
58,763<PAGE>
$ 148,261 $ 993,121 See notes to
consolidated financial
statements.<PAGE>
<PAGE>
<PAGE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993<PAGE>
(Dollars in Thousands) 1995 1994 1993 <PAGE>
OPERATING ACTIVITIES:<PAGE>
Net income $ 127,680 $ 74,278 $ 64,636
Adjustments to reconcile net
income to<PAGE>
net
cash provided by
operating activities:<PAGE>
Gain (loss) allocated to
par policyholders<PAGE>
2,027
(725)<PAGE>
(1,498)<PAGE>
Amortization of
investments<PAGE>
26,725 36,978 36,782
Realized losses (gains) on
disposal of investments<PAGE>
and write-downs of
mortgage loans and real estate<PAGE>
(7,465) 71,939
(25,342)<PAGE>
Amortization 49,464 29,197 34,115
Deferred income taxes<PAGE>
(39,763) <PAGE>
(38,631)<PAGE>
(56,959)<PAGE>
Changes in assets and
liabilities:<PAGE>
Policy benefit
liabilities <PAGE>
346,975 93,998 438,809
Reinsurance receivable<PAGE>
(38,776) <PAGE>
(25,868)<PAGE>
352,106
Accrued interest and
other receivables<PAGE>
(17,617)
(26,032)<PAGE>
(19,817)<PAGE>
Other, net 8,834 96,950 119,284
Net cash
provided by operating activities<PAGE>
458,084 312,084 942,116 <PAGE>
INVESTING ACTIVITIES:<PAGE>
Proceeds from sales,
maturities, and<PAGE>
redemptions of
investments:<PAGE>
Fixed maturities<PAGE>
4,744,309 Held-to-maturity
Sales<PAGE>
18,821 16,014 Maturities and
redemptions<PAGE>
655,993 1,034,324
Available-for-sale<PAGE>
Sales 4,211,649 1,753,445
Maturities and
redemptions<PAGE>
253,747 141,299
Mortgage loans<PAGE>
260,960 291,102 339,406 Real estate 4,401 29,868<PAGE>
<PAGE>
22,974 Common stock 178 Purchases of investments:
Fixed maturities<PAGE>
(5,494,534
)<PAGE>
Held-to-maturity (490,228)
(6
73,567)<PAGE>
Available-for-sale<PAGE>
(4,932,566) (2,606,028
)<PAGE>
Mortgage loans<PAGE>
(683) <PAGE>
(9)<PAGE>
(52,917)<PAGE>
Real estate (5,302)
(9,253)<PAGE>
(14,303)<PAGE>
Common stock (4,218)
(2,063)<PAGE>
Net cash used in
investing activities<PAGE>
(27,426)
(24,690)<PAGE>
(455,065)<PAGE>
(Continu
ed)<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993<PAGE>
(Dollars in Thousands) 1995 1994 1993 <PAGE>
FINANCING ACTIVITIES:<PAGE>
Contract withdrawals, net of
deposits <PAGE>
$ (217,190) $ (238,166) $ (590,118)
Due to Parent Corporation<PAGE>
(9,143) (13,078) (149,510) Dividends paid <PAGE>
(48,980)<PAGE>
(40,438) (21,852) Net commercial paper (repayments)
borrowings<PAGE>
(4,832) 89,686 Net
repurchase agreements
(repayments) borrowings<PAGE>
(191,195) (39,244) 311,937
Net cash used in
financing activities<PAGE>
(471,340) (241,240) (449,543) <PAGE>
<PAGE>
NET INCREASE IN CASH (40,682) 46,154 37,508 CASH, BEGINNING OF
YEAR<PAGE>
131,621 85,467 47,959 CASH, END OF YEAR $ 90,939 $ 131,621 $<PAGE>
85,467<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION<PAGE>
<PAGE>
Cash paid during the year for: Income taxes $ 83,841<PAGE>
$<PAGE>
68,892 $ 87,778 Interest 17,016 12,229 7,438 <PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
See notes to consolidated financial
statements.<PAGE>
(Conclud
ed)<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company (the
Company) is a wholly-owned subsidiary of The Great-West Life
Assurance Company (the Parent Corporation). The Company is an
insurance company domiciled in the State of Colorado. The
Company offers a wide range of life insurance, health insurance,
and retirement and investment products to individuals,
businesses, and other private and public organizations
throughout the United States.
Basis of Presentation - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The consolidated financial
statements include the accounts of the Company and its
subsidiaries. All material intercompany transactions and
balances have been eliminated.
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform with the basis of presentation
used in 1995.
Investments - Investments are reported as follows:
1.Management determines the classification of fixed maturities
at the time of purchase. Fixed maturities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost unless fair value is
less than cost and the decline is deemed to be other than
temporary, in which case they are written down to fair value and
a new cost basis is established.
Fixed maturities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the net unrealized gains and
losses reported as a separate component of stockholder's equity.
The net unrealized gains and losses in derivative financial
instruments used to hedge available-for-sale securities is
included in the separate component of stockholders equity.
The amortized cost of fixed maturities classified as held-to-
maturity or available-for-sale is adjusted for amortization of
premiums and accretion of discounts using the effective interest
method over the life of the related bonds. Such amortization is
included in interest income from investments. Realized gains
and losses, and declines in value judged to be other-than-
temporary are included in net realized gains (losses) on
investments.
2.Mortgage loans on real estate are carried at their unpaid
balances adjusted for any unamortized premiums or discounts and
any valuation reserves. Interest income is accrued on the
unpaid principal balance. Discounts and premiums are amortized
to income using the effective interest method. Accrual of
interest is discontinued on any impaired loans where collection
of interest is doubtful.
The Company maintains an allowance for credit losses at a level
that, in managements opinion, is sufficient to absorb possible
credit losses on its impaired loans and to provide adequate
provision for any possible future losses in the portfolio.
Managements judgement is based on past loss experience, current
and projected economic conditions, and extensive situational
analysis of each individual loan.
Effective January 1, 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting
by Creditors for Impairment of a Loan-Income Recognition and
Disclosures". In accordance with these standards, a mortgage
loan is considered to be impaired when it is probable that the
Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement. The measurement of
impaired loans is based on the fair value of the collateral. As
the Company was already providing for impairment of loans
through an allowance for credit losses, the implementation of
these statements had no material effect on the Company's
financial statements.
3.Real estate is carried at the lower of cost or fair value. In
March 1995, the FASB issued SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" to be effective for fiscal years beginning after
December 15, 1995. The effect of adopting this statement is not
expected to be material.
4.Policy loans are carried at their unpaid balances.
5.Short-term investments include securities purchased with
initial maturities of one year or less and are carried at
amortized cost. The Company considers short-term investments to
be available-for-sale and amortized cost approximates fair
value.
Gains and losses realized on disposal of investments are
determined on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs,
which consist of sales commissions and other costs that vary
with and are primarily related to the production of new and
renewal business, have been deferred to the extent recoverable.
Deferred costs associated with the annuity products are being
amortized over the life of the contracts in proportion to the
emergence of gross profits. Retrospective adjustments of these
amounts are made when the Company revises its estimates of
current or future gross profits. Deferred costs associated with
traditional life insurance are amortized over the premium paying
period of the related policies in proportion to premium revenues
recognized. Amortization of deferred policy acquisition costs
totalled $48,054, $28,199, and $32,611 in 1995, 1994, and 1993,
respectively.
Separate Account - Separate account assets and related
liabilities are carried at fair value. The Companys separate
accounts invest in shares of Maxim Series Fund, Inc., a
diversified, open-end management investment company which is an
affiliate of the Company, shares of other external mutual funds,
or government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and annuity
policy reserves with life contingencies of $4,675,175, and
$3,995,927 at December 31, 1995 and 1994, respectively, are
computed on the basis of estimated mortality, investment yield,
withdrawals, future maintenance and settlement expenses, and
retrospective experience rating premium refunds. Annuity
contract reserves without life contingencies of $6,170,760, and
$6,338,529 at December 31, 1995 and 1994, respectively, are
established at the contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance companies
are carried as reinsurance receivable on the balance sheet (See
Note 3).
The cost of reinsurance related to long-duration contracts is
accounted for over the life of the underlying reinsured policies
using assumptions consistent with those used to account for the
underlying policies.
Policy and Contract Claims - Policy and contract claims include
provisions for reported claims in process of settlement, valued
in accordance with the terms of the related policies and
contracts, as well as provisions for claims incurred and
unreported based primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity
policy reserves are $3,339,316 and $2,917,273 at December 31,
1995 and 1994, respectively. Participating business
approximates 46% of the Company's ordinary life insurance in
force and 84% of ordinary life insurance premium income at
December 31, 1995.
The liability for undistributed earnings on participating
business was increased by $15,690 in 1995, which represented
$2,027 of earnings on participating business and adjustments of
$13,663 to reflect the net unrealized gains on securities
classified as available-for-sale, net of certain adjustments to
policy reserves and income taxes.
The amount of dividends to be paid from undistributed earnings
on participating business is determined annually by the Board of
Directors. Amounts allocable to participating policyholders are
consistent with established Company practice.
The Company has established a Participating Policyholder
Experience Account (PPEA) for the benefit of all participating
policyholders which is included in the accompanying consolidated
balance sheet. Earnings associated with the operation of the
PPEA are credited to the benefit of all participating
policyholders. In the event that the assets of the PPEA are
insufficient to provide contractually guaranteed benefits, the
Company must provide such benefits from its general assets.
The Company has also established a Participation Fund Account
(PFA) for the benefit of the participating policyholders
previously transferred to the Company from the Parent under an
assumption reinsurance transaction. The PFA is part of the
PPEA. The assets and liabilities associated with these policies
are segregated in the accounting records of the Company to
assure the continuation of current policyholder dividend
expectations. Earnings derived from the operation of the PFA
accrue solely for the benefit of the acquired participating
policyholders.
Recognition of Premium Income and Benefits and Expenses - Life
insurance premiums are recognized as earned. Annuity premiums
with life contingencies are recognized as received. Accident
and health premiums are earned on a monthly pro rata basis.
Revenues for annuity and other contracts without significant
life contingencies consist of contract charges for the cost of
insurance, contract administration, and surrender fees that have
been assessed against the contract account balance during the
period. Benefits and expenses on policies with life
contingencies are associated with premium income by means of the
provision for future policy benefit reserves, resulting in
recognition of profits over the life of the contracts. The
average crediting rate on annuity products was approximately
7.2% in 1995.
Income Taxes - Income taxes are recorded using the asset and
liability approach which requires, among other provisions, the
recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. In
estimating future tax consequences, all expected future events
(other than the enactments or changes in the tax laws or rules)
are considered. Deferred tax assets are recorded net of a
valuation allowance to the extent that management estimates that
recovery of the asset is not more likely than not.
Repurchase Agreements - The Company enters into repurchase
agreements with third-party broker-dealers in which the Company
sells securities and agrees to repurchase substantially similar
securities at a specified date and price. Such agreements are
accounted for as collateralized borrowings. Interest expense on
repurchase agreements is recorded at the coupon interest rate on
the underlying securities. The repurchase fee received or paid
is amortized over the term of the related agreement and
recognized as an adjustment to investment income.
Derivatives - The Company engages in hedging activities to
manage interest rate and foreign exchange risk (See Note 6).
2.RELATED-PARTY TRANSACTIONS
Reinsurance Transactions - The Company entered into a series
of reinsurance transactions with the Parent Corporation during
1993 and prior years intended to make the Company the
underwriter and administrator of all life and health insurance,
annuity products, and related services with respect to United
States policyholders.
A May 1, 1993, reinsurance transaction resulted in the Company
recapturing certain group life and health business previously
ceded to the Parent under a coinsurance agreement, as follows:
Assets<PAGE>
Liabilities and
Stockholder's Equity<PAGE>
<PAGE>
Bonds $ 217,254 Policy reserves $ 253,479 Mortgage loans 27,182 Cash
and short-term
investments<PAGE>
5,607
<PAGE>
Investment income
due & accrued<PAGE>
3,436
<PAGE>
$ 253,479 $ 253,479
In addition, effective December 31, 1993, the Company recaptured
certain participating life business also previously ceded to the
Parent Corporation, as follows:
Assets<PAGE>
Liabilities and
Stockholder's Equity<PAGE>
<PAGE>
Bonds $ 171,005 Policy reserves $ 180,000 Cash and short-term
investments<PAGE>
8,087
<PAGE>
Investment income
due & accrued<PAGE>
908
<PAGE>
$ 180,000 $ 180,000
From 1989 to 1993, the Company has assumed most of the United
States business of the Parent Corporation. During this period, the
Parent Corporation had recorded estimated tax liabilities for
certain United States federal income taxes in its financial
statements. On December 31, 1993 and December 30, 1994, the Parent
Corporation transferred assets with an estimated fair value of
$82,800 and $9,391, respectively, to the Company in exchange for
the Company agreeing to assume the estimated tax liabilities of the
Parent Corporation, and the issuance of shares of the Company's
common stock.
Fees and Expenses - The Company and the Parent Corporation have a
number of service agreements whereby the Parent Corporation
administers, distributes, and underwrites business for the Company
and administers the Company's investment portfolio. Certain
operating expenses represent allocations made by the Parent
Corporation to the Company for services provided pursuant to these
service agreements. These transactions are summarized as follows:
<PAGE>
Years Ended December 31,
<PAGE>
1995 1994 1993 Investment management expense
(included in net<PAGE>
investment income)<PAGE>
$ 15,182 $ 13,841 $ 17,767 Administrative and underwriting
payments (included<PAGE>
in
operating expenses)<PAGE>
301,529 269,020 199,947
Other - At December 31, 1995 and 1994, due to Parent Corporation
includes $27,814 and $35,388 due on demand and $122,160 and
$123,729 of notes payable which bear interest and mature at various
dates. These notes may be prepaid in whole or in part at any time
without penalty; the issuer may not demand payment before the
maturity date. The Company also has available an arrangement to
obtain advances from the Parent Corporation to fund short-term
liquidity needs. The due on demand to the Parent Corporation bears
interest at the public bond rate (6.4% and 8.5% at December 31,
1995 and 1994, respectively) while the remainder bear interest at
various rates.
3. REINSURANCE
In the normal course of business, the Company seeks to limit its
exposure to loss on any single insured and to recover a portion of
benefits paid by ceding risks to other insurance enterprises under
excess coverage and co-insurance contracts. The Company retains a
maximum of $1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company; consequently,
allowances are established for amounts deemed uncollectible. The
Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the
reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. At December 31, 1995 and 1994, reinsurance
receivables with a carrying value of $333,924, and $295,148,
respectively, were due primarily from the Parent Corporation.
Total reinsurance premiums assumed from the Parent Corporation were
$1,606 and $2,438, and $0, in 1995, 1994, and 1993, respectively.
The Company considers all accident and health policies to be short-
duration contracts. The following schedule details life insurance
in force and life and accident/health premiums:<PAGE>
<PAGE>
Assumed Ceded Primari
ly<PAGE>
Percent
age<PAGE>
Primaril
y to<PAGE>
From of
Amount<PAGE>
Gross the
Parent<PAGE>
Other Net Assumed
to<PAGE>
Amount Corporat
ion<PAGE>
Compani
es<PAGE>
Amount Net December 31,
1995:<PAGE>
Life
insurance in
force:<PAGE>
Individual<PAGE>
$ 22,388,520 $ 7,200,882 $ 3,476,784 $ 18,664,422 18.6%
Group<PAGE>
48,415,592 1,954,313 50,369,905 3.9% Total $<PAGE>
70,804,112<PAGE>
$ 7,200,882 $ 5,431,097 $ 69,034,327 Premiums: <PAGE>
<PAGE>
Life
insurance<PAGE>
$ 339,342 $ 51,688 $ 21,028 $ 308,682 6.8%
Accident/healt
h<PAGE>
623,626 9,192 64,495 678,929 9.5%
Total<PAGE>
$ 962,968 $ 60,880 $ 85,523 $ 987,611 December 31,
1994:<PAGE>
Life
insurance in
force:<PAGE>
Individual<PAGE>
$ 21,461,590 $ 7,411,811 $ 3,415,596 $ 17,465,375 19.6%
Group<PAGE>
48,948,669 2,102,228 51,050,897 4.1% Total $<PAGE>
70,410,259<PAGE>
$ 7,411,811 $ 5,517,824 $ 68,516,272 Premiums: <PAGE>
<PAGE>
Life
insurance<PAGE>
$ 322,263 $ 42,946 $ 22,009 $ 301,326 7.3%
Accident/healt
h<PAGE>
579,650 5,169 63,140 637,621 9.9%
Total<PAGE>
$ 901,913 $ 48,115 $ 85,149 $ 938,947 December 31,
1993:<PAGE>
Life
insurance in
force:<PAGE>
Individual<PAGE>
$ 17,131,994 $ 7,797,389 $ 3,142,723 $ 12,477,328 25.2%
Group<PAGE>
37,789,859 2,108,314 39,898,173 5.3% Total $<PAGE>
54,921,853<PAGE>
$ 7,797,389 $ 5,251,037 $ 52,375,501 Premiums:
<PAGE>
Life
insurance<PAGE>
$ 283,707 $ 112,798 $ 18,753 $ 189,662 9.9%
Accident/healt
h<PAGE>
524,747 142,171 60,723 443,299 13.7%
Total<PAGE>
$ 808,454 $ 254,969 $ 79,476 $ 632,961 <PAGE>
4. NET INVESTMENT INCOME<PAGE>
Net investment income is
summarized as follows:<PAGE>
Years Ended December 31,
<PAGE>
1995 1994 1993 Investment income: Bonds
and short-term
investments<PAGE>
$ 592,062 $ 555,103 $ 545,926
Mortgage loans on real
estate<PAGE>
171,008 182,544 220,477
Real estate<PAGE>
3,936 5,700 9,265 Policy loans 163,547 116,060 <PAGE>
91,529<PAGE>
930,553 859,407 867,197 Investment expenses,
including<PAGE>
interest on amounts
charged<PAGE>
by the Parent
Corporation<PAGE>
of $10,778, $11,145, and
$7,250<PAGE>
95,507 91,761 75,773
Net investment income<PAGE>
$ 835,046 $ 767,646 $ 791,424 <PAGE>
5. NET REALIZED GAINS (LOSSES) ON
INVESTMENTS<PAGE>
Net realized gains (losses) on
investments are as follows:<PAGE>
Years Ended December 31,
<PAGE>
1995 1994 1993 Net realized gains
(losses):<PAGE>
Bonds $ 28,166 $ (39,775) $ 68,884
Mortage loans on real
estate<PAGE>
1,309 2,120 (98)
Real estate<PAGE>
(10) (102) (102) Bond provisions (5,000) (3,200) <PAGE>
(4,456)<PAGE>
Mortgage loan provisions (15,877) (27,918) (38,089)
Real estate provisions<PAGE>
(1,123) (3,064) (797) Net realized gains
(losses) on investments<PAGE>
$ 7,465 $ (71,939) $ 25,342
6
.<PAGE>
SUMMARY OF INVESTMENTS
<PAGE>
Fixed maturities owned at December 31, 1995 are summarized as
follows:
<PAGE>
Gross Gross Estima
ted<PAGE>
Amortiz
ed<PAGE>
Unreali
zed<PAGE>
Unreal
ized<PAGE>
Fair Carryi
ng<PAGE>
Cost Gains Losses Value Value Held-to-Maturity: <PAGE>
<PAGE>
U.S. Treasury
Securities and
obligations<PAGE>
of U.S.
Government Agencies:<PAGE>
Collateralized
mortgage obligations<PAGE>
$ $ $ $ $
Direct
mortgage pass-through<PAGE>
certificates<PAGE>
Other<PAGE>
11,107 1,093 12,200 11,107 Collateralized
mortgage obligations<PAGE>
Public utilities<PAGE>
269,671 22,084 95 291,660 269,671 Corporate bonds <PAGE>
1,732,046<PAGE>
83,583 5,867 1,809,762 1,732,046 Foreign governments <PAGE>
18,596<PAGE>
1,087 12 19,671 18,596 State and
municipalities<PAGE>
22,784 1,966 24,750 22,784 <PAGE>
<PAGE>
$ 2,054,204 $ 109,813 $ 5,974 $ 2,158,043 $ 2,054,204 <PAGE>
<PAGE>
Available-for-Sale: U.S. Treasury
Securities and
obligations<PAGE>
of U.S.
Government Agencies:<PAGE>
Collateralized
mortgage obligations<PAGE>
$ 561,475 $ 9,983 $ 1,948 $ 569,510 $ 569,510
Direct
mortgage pass-through<PAGE>
certificates<PAGE>
794,056 11,980 2,233 803,803 803,803
Other<PAGE>
561,736 7,703 39 569,400 569,400 Collateralized
mortgage obligations<PAGE>
490,074 18,044 3,304 504,814 504,814
Public utilities<PAGE>
581,482 16,607 2,425 595,664 595,664 Corporate
bonds<PAGE>
2,943,918 121,537 26 3,065,429 3,065,429 Foreign governments <PAGE>
141,362<PAGE>
5,021 5,644 140,739 140,739 State and
municipalities<PAGE>
13,866 22 60 13,828 13,828 <PAGE>
<PAGE>
$ 6,087,969 $ 190,897 $ 15,679 $ 6,263,187 $ 6,263,187<PAGE>
6
.<PAGE>
SUMMARY OF INVESTMENTS (Continued)
<PAGE>
Fixed maturities owned at December 31, 1994 are summarized as
follows:
<PAGE>
Gross Gross Estima
ted<PAGE>
Amortiz
ed<PAGE>
Unreali
zed<PAGE>
Unreal
ized<PAGE>
Fair Carryi
ng<PAGE>
Cost Gains Losses Value Value Held-to-Maturity: <PAGE>
<PAGE>
U.S. Treasury
Securities and
obligations<PAGE>
of U.S.
Government Agencies:<PAGE>
Collateralized
mortgage obligations<PAGE>
$ 521,408 $ 389 $ 33,018 $ 488,779 $ 521,408
Direct
mortgage pass-through<PAGE>
certificates<PAGE>
69,559 617 1,001 69,175 69,559
Other<PAGE>
85,406 246 923 84,729 85,406 Collateralized
mortgage obligations<PAGE>
309,869 1,205 14,208 296,866 309,869
Public utilities<PAGE>
457,758 2,898 14,340 446,316 457,758 Corporate
bonds<PAGE>
2,757,612 14,701 111,410 2,660,903 2,757,612 Foreign
governments<PAGE>
90,690 47 3,950 86,787 90,690 State and
municipalities<PAGE>
1,683 10 1,693 1,683 <PAGE>
<PAGE>
$ 4,293,985 $ 20,113 $ 178,850 $ 4,135,248 $ 4,293,985 <PAGE>
<PAGE>
Available-for-Sale: U.S. Treasury
Securities and
obligations<PAGE>
of U.S.
Government Agencies:<PAGE>
Collateralized
mortgage obligations<PAGE>
$ 80,531 $ $ 3,798 $ 76,733 $ 76,733
Direct
mortgage pass-through<PAGE>
certificates<PAGE>
759,815 871 49,462 711,224 711,224
Other<PAGE>
198,651 9 2,654 196,006 196,006 Collateralized
mortgage obligations<PAGE>
203,036 6,379 196,657 196,657
Public utilities<PAGE>
325,383 193 26,379 299,197 299,197 Corporate bonds<PAGE>
<PAGE>
1,119,726 3,253 65,398 1,057,581 1,057,581 Foreign governments <PAGE>
298,597<PAGE>
17 21,826 276,788 276,788 State and
municipalities<PAGE>
11,348 831 10,517 10,517 <PAGE>
<PAGE>
$ 2,997,087 $ 4,343 $ 176,727 $ 2,824,703 $ 2,824,703
Most of the collateralized mortgage obligations consist of planned
amortization classes with final stated maturities of three to
thirty years and average lives of less than one to twelve years.
Prepayments on all mortgage-backed securities are monitored monthly
and amortization of the premium and/or the accretion of the
discount associated with the purchase of such securities is
adjusted by such prepayments.
The cumulative effect as of January 1, 1994 of adopting SFAS No.
115 "Accounting for Certain Investments in Debt and Equity
Securities," increased the opening balance of stockholders' equity
by $6,515 to reflect the net unrealized gains on securities
classified as available-for-sale (previously carried at the lower
of aggregate amortized cost or fair value) and the corresponding
adjustments to deferred policy acquisition costs, policy reserves,
and amounts allocable to the liability for undistributed earnings
on participating business, all net of income taxes.
<PAGE>
In November 1995, the Financial Accounting Standards Board issued
a special report entitled A Guide to Implementation of SFAS 115 on
Accounting for Certain Investments in Debt and Equity Securities.
In accordance with the adoption of this guidance, the Company
reassessed the classification of its investment portfolio in
December 1995 and reclassed securities totalling $2,119,814 from
held-to-maturity to available-for-sale. In connection with this
reclassification, an unrealized gain, net of related adjustments
(see above), of $23,449 was recognized in stockholders equity at
the date of transfer.
The estimated fair value of fixed maturities that are publicly
traded are obtained from an independent pricing service. To
determine fair value for fixed maturities not actively traded, the
Company utilized discounted cash flows at determined current market
spread rates on investments of similar quality and term.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1995, by projected maturity, are shown
below. Actual maturities will likely differ from these projections
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<PAGE>
Held-to-
Maturity<PAGE>
Available-
for-Sale<PAGE>
Amorti
zed<PAGE>
Estima
ted<PAGE>
Amorti
zed<PAGE>
Estima
ted<PAGE>
Cost Fair
Value<PAGE>
Cost Fair
Value<PAGE>
Due in one year or
less<PAGE>
$ 287,565 $ 293,666 $ 326,032 $ 337,792 Due
after one year
through five years<PAGE>
838,993 877,949 1,452,442 1,495,755 Due
after five years
through ten years<PAGE>
537,365 575,896 1,023,894 1,064,871 Due
after ten years<PAGE>
159,064 173,487 522,002 542,559 Mortgage-backed
securities<PAGE>
1,845,605 1,878,127 Asset-
backed
securities<PAGE>
231,217 237,045 917,994 944,083 $<PAGE>
2,054,204<PAGE>
$ 2,158,043 $ 6,087,969 $ 6,263,187
During the years ended December 31, 1995 and 1994, available-for-
sale securities with a fair value at the date of sale of $4,211,649
and $1,753,445 were sold. The realized gains and losses on such
sales totaled $39,755 and $15,516 for 1995 and $7,030 and $50,612
for 1994. During 1995 and 1994, held-to-maturity securities with
an amortized cost of $18,087 and $15,300 were sold due to credit
deterioration with insignificant realized gains and losses. Gains
on securities which were called for redemption by the respective
issuers prior to maturity were $2,990 and $3,093 in 1995 and 1994,
respectively.
At December 31, 1995 and 1994, pursuant to fully collateralized
securities lending arrangements, the Company had loaned $343,351
and $0 of fixed maturities, respectively.
The Company makes limited use of derivative financial instruments
to manage interest rate and foreign exchange risk. Such hedging
activity consists of interest rate swap agreements, interest rate
floors and caps, and foreign currency exchange contracts. Interest
rate floors and caps are interest rate protection instruments that
require the payment by a counter-party to the Company of an
interest differential. This differential represents the difference
between current interest rates and an agreed-upon rate, the strike
rate, applied to a notional principal amount. Interest rate swap
agreements are used to convert the interest rate on certain fixed
maturities from a floating rate to a fixed rate. Interest rate
swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of
the underlying principal amounts. Foreign currency exchange
contracts are used to hedge the foreign exchange rate risk
associated with bonds denominated in other than U.S. dollars. The
differential paid or received on interest rate and amounts received
under interest rate floor and cap agreements are recognized as an
adjustment to net investment income on the accrual method. Gains
and losses on foreign exchange contracts are deferred and
recognized in net investment income when the hedged transactions
are realized.
Although derivative financial instruments taken alone may expose
the Company to varying degrees of market and credit risk when used
solely for hedging purposes, these instruments typically reduce
overall market and interest rate risk. The Company controls the
credit risk of its financial contracts through credit approvals,
limits, and monitoring procedures. As the Company generally enters
into transactions only with high quality institutions, no losses
associated with non-performance on derivative financial instruments
have occurred or are expected to occur.
The following table summarizes the financial hedge
instruments:
<PAGE>
Notional Strike/Swap December 31, 1995<PAGE>
<PAGE>
Amount Rate Maturity Interest Rate Floor $ 100,000 4.5%
[LIBOR]<PAGE>
1999<PAGE>
Interest Rate Cap<PAGE>
100,000 11.0% [CMT] 2000 Interest Rate Swaps <PAGE>
165,000<PAGE>
6.203% to
9.35%<PAGE>
01/98 to
2/2002<PAGE>
Foreign
Currency
Exchange
Contracts<PAGE>
66,650 N/A 10/96 to
09/98
<PAGE>
Notional Strike December 31, 1994 Amount Rate Maturity I
nterest Rate Floor<PAGE>
$ 100,000 4.5%
[LIBOR]<PAGE>
1999 Interest Rate Swaps <PAGE>
150,000<PAGE>
6.275% to
10.644%<PAGE>
01/95 -
01/2000<PAGE>
Foreign Currency
Exchange Contracts<PAGE>
70,991 N/A 10/96 -
09/98
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines designed
to emphasize a diversified and geographically dispersed portfolio
of mortgages collateralized by commercial and industrial properties
located in the United States. The Company's policy is to obtain
collateral sufficient to provide loan-to-value ratios of not
greater than 75% at the inception of the mortgages. At December
31, 1995 approximately 28% and 11% of the Company's mortgage loans
were collateralized by real estate located in California and
Illinois, respectively.
At December 31, 1995, the recorded investment in loans that were
considered to be impaired under SFAS No. 114 was $23,678 including
$3,254 of loans with a related allowance for credit losses of $654.
Additionally, loans totaling $6,481 were on a non-accrual basis.
The average recorded investment in impaired loans during the year
ended December 31, 1995 was approximately $29,150. For the year
ended December 31, 1995, the Company recognized interest income on
those impaired loans of $675. Interest income received and
recorded using the cash basis method of recognition during 1995
totalled $857.
As part of an active loan management policy and in the interest of
maximizing the future return of each individual loan, the Company
may from time to time alter the original terms of certain loans.
These restructured loans, all performing in accordance with their
modified terms, aggregated $89,160 and $102,538 at December 31,
1995 and 1994, respectively.
The following table presents changes in the allowance for credit
losses since January 1, 1995 (date of the adoption of SFAS No.
114):
Balance at January 1, 1995<PAGE>
$ 57,987 Provision for loan losses <PAGE>
15,877<PAGE>
Direct chargeoffs (10,480) Recoveries 610 Balance at December 31,
1995<PAGE>
$ 63,994
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially
supported by a $50,000 standby letter-of-credit. At December 31,
1995, commercial paper outstanding has maturities ranging from 25
to 160 days and interest rates ranging from 5.7% to 5.9%. At
December 31, 1994, maturities ranged from 40 to 120 days and
interest rates ranged from 5.4% to 6.4%
<PAGE>
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all
assets and liabilities and hedge contracts considered to be
financial instruments:
<PAGE>
December 31, 1995
<PAGE>
1994
<PAGE>
Estimat
ed<PAGE>
Carryin
g<PAGE>
Estimat
ed<PAGE>
Carryi
ng<PAGE>
Fair Amount Fair
Value<PAGE>
Amount Value ASSETS: Fixed
maturities
and short-term<PAGE>
investments<PAGE>
$ 8,452,226 $ 8,556,065 $ 7,825,608 $ 7,666,871 Mortgage loans
on real estate<PAGE>
1,713,195 1,749,514 2,011,059 2,037,694 Policy
loans<PAGE>
2,237,745 2,237,745 1,905,013 1,905,013 Common stock 9,440 <PAGE>
9,440<PAGE>
5,222 5,222 LIABILITIES: Annuity contract
reserves<PAGE>
without life
contingencies<PAGE>
6,170,760 6,268,749 6,338,529 6,286,966
Policyholders'
funds<PAGE>
154,872 154,872 144,262 144,262 Due to
Parent
Corporation<PAGE>
149,974 152,347 159,117 159,334
Repurchase
agreements<PAGE>
372,965 372,965 564,160 564,160
Commercial paper<PAGE>
84,854 84,854 89,686 89,686 HEDGE CONTRACTS: <PAGE>
<PAGE>
Interest rate
floor<PAGE>
84 1,320 88 76
Interest rate
cap<PAGE>
90 90
Interest rate
swaps<PAGE>
10,052 10,052
(771)<PAGE>
(771)<PAGE>
Foreign currency
exchange contracts<PAGE>
(4,604) (4,604)
(4,345
)<PAGE>
(4,345)
The estimated fair value of financial instruments has been
determined using available market information and appropriate
valuation methodologies. However, considerable judgement is
necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented are
not necessarily indicative of the amounts the Company could realize
in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Mortgage loans fair value estimates generally are based on a
discounted cash flow basis. A discount rate "matrix" is
incorporated whereby the discount rate used in valuing a specific
mortgage generally corresponds to that mortgage's remaining term.
The rates selected for inclusion in the discount rate "matrix"
reflect rates that the Company would quote if placing loans
representative in size and quality to those currently in the
portfolio.
Policy loans accrue interest generally at variable rates with no
fixed maturity dates and, therefore, estimated fair value
approximates carrying value.
The fair value of annuity contract reserves without life
contingencies is estimated by discounting the cash flows to
maturity of the contracts, utilizing current credited rates for
similar products.
The estimated fair value of policyholder's funds is the same as the
carrying amount as the Company can change the crediting rates with
30 days notice.
The estimated fair value of due to Parent Corporation is based on
discounted cash flows at current market spread rates on high
quality investments.
The carrying value of repurchase agreements and commercial paper is
a reasonable estimate of fair value due to the short-term nature of
the liabilities.
<PAGE>
The estimated fair value of financial hedge instruments, all of
which are held for other than trading purposes, is the estimated
amount the Company would receive or pay to terminate the agreement
at each year-end, taking into consideration current interest rates
and other relevant factors. Included in the net gain (loss)
position for interest rates swaps are $0 and $2,985 of unrealized
losses in 1995 and 1994, respectively. Included in the net loss
position for foreign currencies exchange contracts are $5,497 and
$4,504 loss exposures in 1995 and 1994, respectvely.
See note 6 for additional information on policies regarding
estimated fair value of fixed maturities.
9. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income tax
rate and the Companys effective rate:
<PAGE>
1995 1994 1993 Federal tax rate 35.0 % 35.0 % 35.0 % Change in tax rate
resulting
from:<PAGE>
Investment income not
subject to federal tax<PAGE>
(0.5) (1.0
)<PAGE>
(1.2
)<PAGE>
Effect of tax rate change
on net deferred tax assets<PAGE>
(1.8
)<PAGE>
Change in valuation
allowance<PAGE>
(7.8) (6.9
)<PAGE>
1.0 State and environmental
taxes<PAGE>
0.7 0.9 Other, net 0.3 (0.3
)<PAGE>
(0.5
)<PAGE>
Total 27.7 % 27.7 % 32.5 %
Temporary differences which give rise to the deferred tax assets
and liabilities as of December 31, 1995 and 1994 are as follows:
<PAGE>
1995 1994 Deferre
d Tax
Asset<PAGE>
Deferre
d Tax
Liabili
ty<PAGE>
Deferre
d Tax
Asset<PAGE>
Deferre
d Tax
Liabili
ty<PAGE>
Policyholder
reserves<PAGE>
$ 162,073 $ $ 119,764 $
<PAGE>
Deferred policy
acquisition costs<PAGE>
55,542 62,040<PAGE>
Deferred acquisition
cost proxy tax<PAGE>
58,481 45,422 <PAGE>
Investment assets<PAGE>
16,372 97,249 Net operating loss
carryforwards<PAGE>
17,588 22,666 Tax
credits and
other<PAGE>
4,786 2,564
Subtotal<PAGE>
242,928 71,914 287,665 62,040 Valuation allowance (2,073) <PAGE>
(15,218)<PAGE>
Total Deferred
Taxes<PAGE>
$ 240,855 $ 71,914 $ 272,447 $ 62,040
Amounts related to investment assets above include $33,735 and
$(47,493) related to the unrealized gains (losses) on the Company's
fixed maturities available-for-sale at December 31, 1995 and 1994,
respectively.
The Company files a separate tax return and, therefore, losses
incurred by subsidiaries cannot be offset against operating
income of the Company. At December 31, 1995, the Companys
subsidiaries have approximately $50,251 of net operating loss
carryforwards, expiring through the year 2010. The tax benefit
of subsidiaries net operating loss carryforwards, net of a
valuation allowance of $419 are included in the deferred tax
assets.
The Company's valuation allowance was decreased in 1995 and 1994 by
$13,145 and $6,278, respectively, primarily as a result of taxable
income in subsidiaries which was greater than expected and the
resulting re-evaluation by management of future estimated taxable
income in the subsidiaries.
Under pre-1984 life insurance company income tax laws, a portion
of life insurance company gain from operations was not subject to
current income taxation but was accumulated, for tax purposes, in
a memorandum account designated as "policyholders' surplus
account." The aggregate accumulation in the account is $7,742
and the Company does not anticipate any transactions which would
cause any part of the amount to become taxable. Accordingly, no
provision has been made for possible future federal income taxes
on this accumulation.
The Internal Revenue Service is currently auditing tax years 1988
to 1991, inclusive. In the opinion of Company management, amounts
paid or accrued are adequate, however, it is possible that the
Companys estimate may change as a result of the completion of the
IRS audits.
10. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are
owned by the Parent Corporation. The dividend rate on the Series
A Stated Rate Auction Preferred Stock (STRAPS) is 7.3% through
December 30, 2002. The Series A STRAPS are redeemable at the
option of the Company on or after December 29, 2002 at a price of
$100,000 per share, plus accumulated and unpaid dividends.
Through December 30, 1995, the Series B STRAPS had a 7% dividend
rate. Thereafter, the Company will, at its option, select future
dividend periods. Future dividend rates will be fixed by a market
auction process with dividend rates dependent upon the Company. If
auctions are undersubscribed or otherwise unsuccessful, the
dividend rate is fixed by formula. The Company has the flexibility
of specifying, before each auction, the rights of redemption which
it has during the succeeding dividend period. These redemption
rights are factored into the auctions which set dividend rates.
The Series B STRAPS are redeemable at the option of the Company at
a price of $100,000 per share, plus accumulated and unpaid
dividends.
The Company's Series E 7.5% non-cumulative preferred shares are
redeemable by the Company after April 1, 1999. The shares are not
redeemable at the option of the holder at any time. The shares are
convertible into common shares at the option of the holder on or
after September 30, 1999, at a conversion price negotiated between
the holder and the Company or at a formula determined conversion
price in accordance with the share conditions.
On December 31, 1993, the Company issued 3,783 shares of common
stock to the Parent Corporation in connection with an assumption of
estimated tax liabilities. The Company also received $472 and
$9,098 of contributed capital in the form of deferred tax assets
from the Parent Corporation during 1994 and 1993, respectively, in
connection with the 1993 reinsurance transactions (see Note 2).
The Company's net income and capital and surplus, as determined in
accordance with statutory accounting principles and practices for
December 31 are as follows:
<PAGE>
1995 1994 1993 (Unaudit
ed)<PAGE>
Net Income $ 114,931 $ 70,091 $ 55,995 Capital
and Surplus<PAGE>
653,479 621,589 628,944
The maximum amount of dividends which can be paid to stockholders
by insurance companies domiciled in the State of Colorado is
subject to restrictions relating to statutory surplus and
statutory net gain from operations. Statutory surplus and net
gains from operations at December 31, 1995 were $524,647 and
$119,299 (unaudited), respectively. The Company should be able
to pay up to $119,299 (unaudited) of dividends without regulatory
approval in 1996.
Dividends of $9,217, $7,475, and $9,335, were paid on preferred
stock in 1995, 1994, and 1993, respectively. In addition,
dividends of $39,763, $32,963, and $12,517 were paid on common
stock in 1995, 1994 and 1993, respectively. Dividends are paid
as determined by the Board of Directors.
The Company is involved in various legal proceedings which arise
in the ordinary course of its business. In the opinion of
management, after consultation with counsel, the resolution of
these proceedings should not have a material adverse effect on
its financial position or results of operations.<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
Contracts Under
Flexible Premium Deferred
Combination Variable and Fixed Annuity Contracts
issued by
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
Telephone: (800) 468-8661 (Outside Colorado)
(800) 547-4957 (Colorado)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Prospectus, dated , 1996,
which is available without charge by contacting the Schwab Annuity
Service Center, P.O. Box 7785, San Francisco, California 94120-9420 or
at 1-800-838-0650.
, 1996
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .B-3
GREAT-WEST LIFE & ANNUITY
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT . . . . . . . . . . . .B-3
CALCULATION OF ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . .B-3
POSTPONEMENT OF PAYMENTS. . . . . . . . . . . . . . . . . . . . . .B-4
SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
- - Safekeeping of Series Account Assets. . . . . . . . . . . . . . .B-4
- - Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
- - Principal Underwriter . . . . . . . . . . . . . . . . . . . . . .B-5
WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-5
TERMS OF EXEMPTIVE RELIEF IN CONNECTION WITH
MORTALITY AND EXPENSE RISK CHARGE . . . . . . . . . . . . . . . .B-5
CALCULATION OF PERFORMANCE DATA . . . . . . . . . . . . . . . . . .B-5
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . .B-7
<PAGE>
GENERAL INFORMATION
In order to supplement the description in the Prospectus, the following
provides additional information about the Contracts and other matters
which may be of interest to you. Terms used in this Statement of
Additional Information have the same meanings as are defined in the
Prospectus under the heading "Definitions."
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT
Great-West Life & Annuity Insurance Company (the "Company"), the issuer
of the Contract, is a Colorado corporation qualified to sell life
insurance and annuity contracts in Puerto Rico, the District of Columbia
and all states except New York. The Company is a wholly-owned
subsidiary of The Great-West Life Assurance Company, a stock life
insurance company incorporate under the laws of Canada. The Great-West
Life Assurance Company is in turn 86.4% by Great-West Lifeco Inc., a
holding company. Great-West Lifeco Inc. is owned 68.4% by Power
Financial Corporation of Canada, a financial services company. Power
Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation of Canada. Mr. Paul Desmarais,
through a group of private holding companies, which he controls, has
voting control of Power Corporation of Canada.
The assets allocated to the Series Account are the exclusive property of
the Company. Registration of the Series Account under the Investment
Company Act of 1904 does not involve supervision of the management or
investment practices or policies of the Series Account or of the Company
by the Securities and Exchange Commission. The Company may accumulate in the
Series Account proceeds from charges under contract and other amount in
excess of the Series Account representing reserves and liabilities under the
Contract and other variable annuity contracts issued by the Company. The
Company may from time to time transfer to its general account any of such
excess amounts. Under certain remote circumstances, the assets of one
Investment Division may not be insulatead from liability associated with
another investment Division.
Best's Insurance Reports, Life-Health Edition 1995, assigned the Company it
highest financial strength and operating performance rating ofg A++. Duff &
Phelps Corporation and Standard & Poor's Corporation have also assigned
the Company their highest claims paying ability rating of AAA. Moody's
Investors Service has assigned the Company an insurance and financial
strength rating of Aa2.
CALCULATION OF ANNUITY PAYMENTS
A. Fixed Annuity Options
The amount of each annuity payment under a fixed annuity option
is fixed and guaranteed by the Company. On the Payment Commencement
Date, the Annuity Account Value held in the Fixed Sub-Account(s), with
a Market Value Adjustment, if applicable, less Premium Tax, if any, is
computed and that portion of the Annuity Account Value which will be
applied to the fixed annuity option selected is determined. The amount
of the first monthly payment under the fixed annuity option selected
will be at least as large as would result from using the annuity tables
contained in the Contract to apply to the annuity form selected. The
dollar amounts of any fixed annuity payments will not vary during the
entire period of annuity payments and are determined according to the
provisions of the annuity form selected.
B. Variable Annuity Options
To the extent a variable annuity option has been selected, the Company
converts the Accumulation Units for each of the Owner's Variable Sub-
Accounts into Annuity Units for each Variable Sub-Account at their
values determined as of the end of the Valuation Period which contains
the Payment Commencement Date. The number of Annuity Units paid for
each Variable Sub-Account is determined by dividing the amount of the
first monthly payment by the sub-account's Annuity Unit Value on the
fifth Valuation Date preceding the date the first payment is due. The
number of Annuity Units used to calculate each payment for a Variable
Sub-Account remains fixed during the annuity payment period.
The first payment under a variable annuity payment option will be based
on the value of each Variable Sub-Account on the fifth Valuation Date
preceding the Payment Commencement Date. It will be determined by
applying the appropriate rate to the amount applied under the Payment
Option. Payments after the first will vary depending upon the
investment experience of the Variable Sub-Accounts. The subsequent
amount paid from each sub-account is determined by multiplying (a) by
(b) where (a) is the number of sub-account Annuity Units to be paid and
(b) is the sub-account Annuity Unit value on the fifth Valuation Date
preceding the date the annuity payment is due. The total amount of each
Variable Annuity Payment will be the sum of the Variable Annuity
Payments for each Variable Sub-Account.
POSTPONEMENT OF PAYMENTS
With respect to amounts allocated to the Series Account, payment of any
amount due upon a total or partial surrender, death or under an annuity
option will ordinarily be made within seven days after all documents
required for such payment are received by the Schwab Annuity Service
Center. However, the determination, application or payment of any death
benefit, Transfer, full surrender, partial withdrawal or annuity payment
may be deferred to the extent dependent on Accumulation or Annuity Unit
Values, for any period during which the New York Stock Exchange is
closed (other than customary weekend and holiday closings) or trading on
the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission, for any period during which any
emergency exists as a result of which it is not reasonably practicable
for the Company to determine the investment experience, of such
Accumulation or Annuity Units or for such other periods as the
Securities and Exchange Commission may by order permit for the
protection of investors.
<PAGE>
SERVICES
A. Safekeeping of Series Account Assets
The assets of Variable Annuity-1 Series Account (the "Series Account")
are held by Great-West Life & Annuity Insurance Company ("GWL&A"). The
assets of the Series Account are kept physically segregated and held
separate and apart from the general account of GWL&A. GWL&A maintains
records of all purchases and redemptions of shares of the underlying
funds. Additional protection for the assets of the Series Account is
afforded by blanket fidelity bonds issued to The Great-West Life
Assurance Company in the amount of $25 million, which covers all
officers and employees of GWL&A.
B. Experts
The accounting firm of Deloitte & Touche LLP performs certain accounting
and auditing services for GWL&A and the Series Account. The principal
business address of Deloitte & Touche LLP is 555 Seventeenth Street,
Suite 3600, Denver, Colorado 80202.
The consolidated financial statements of GWL&A at December 31, 1995,
1994 and 1993 for each of the three years in the period ended December
31, 1995, included in the prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report appearing
therein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
C. Principal Underwriter
The offering of the Contracts is made on a continuous basis by Charles
Schwab & Co., Inc. ("Schwab"). Schwab is a California corporation and
is a member of the National Associations of Securities Dealers ("NASD").
The Company does not anticipate discontinuing the offering of the
Contract, although it reserves the right to do so. The Contract
generally will be issued for Annuitants from birth to age ninety.
WITHHOLDING
Annuity payments and other amounts received under the Contract are
subject to income tax withholding unless the recipient elects not to
have taxes withheld. The amounts withheld will vary among recipients
depending on the tax status of the individual and the type of payments
from which taxes are withheld.
Notwithstanding the recipient's election, withholding may be required
with respect to certain payments to be delivered outside the United
States and, with respect to certain distributions from certain types of
qualified retirement plans, unless the proceeds are transferred directly
to another qualified retirement plan. Moreover, special "backup
withholding" rules may require the Company to disregard the recipient's
election if the recipient fails to supply the Company with a "TIN" or
taxpayer identification number (social security number for individuals),
or if the Internal Revenue Service notifies the Company that the TIN
provided by the recipient is incorrect.
TERMS OF EXEMPTIVE RELIEF IN CONNECTION WITH
MORTALITY AND EXPENSE RISK CHARGE
The Company and Schwab have applied for exemptive relief from the
Securities and Exchange Commission in connection with deducting the
mortality and expense risk charge pursuant to the Contract. In the
application for the exemption, the Company and Schwab have represented
and undertaken, among other things, that:
(1) The level of the mortality and expense risk charge is within the
range of industry practice for comparable annuity contracts;
(2) This conclusion is based upon a review conducted of publicly-
available information regarding annuity contracts of other
companies maintained by the Company at its principal office, and
the Company will make available on request to the Securities and
Exchange Commission or its staff, a memorandum setting forth the
variable annuity products analyzed in the methodology and results
of the comparative review; and
(3) There is a reasonable likelihood that the proposed distribution
financing arrangements with respect to the Contract will benefit
the Series Account and investors in the Contract, and the basis
for this conclusion is set forth in a memorandum which will be
maintained by the Company at its principal office and will be
available to the Securities and Exchange Commission or its staff
on request.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield Quotations for the Money Market
Investment Division
The yield quotation for the Money Market Investment Division will be for
the seven-day period and is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-
existing account having a balance of one Accumulation Unit in the Money
Market Investment Division at the beginning of the period, subtracting
a hypothetical charge reflecting deductions from Participant accounts,
and dividing the difference by the value of the account at the beginning
of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield
figure carried to the nearest hundredth of one percent.
The effective yield quotation for the Money Market Investment Division
will be for the seven-day period and is carried to the nearest hundredth
of one percent, computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account
having a balance of one Accumulation Unit in the Money Market Investment
Division at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Participant accounts, and dividing the
difference by the value of the account at the beginning of the base
period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN +1 365/7]-1.
For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all
Participant accounts in proportion to the length of the base period, and
for any fees that vary with the size of the account, the account size is
assumed to be the Money Market Investment Division's mean account size.
The specific percentage applicable to a particular withdrawal would
depend on a number of factors including the length of time the Contract
Owner has participated under the Contracts. (See "Charges and
Deductions" on page 17 of the Prospectus.) No deductions or sales loads
are assessed upon annuitization under the Contracts. Realized gains and
losses from the sale of securities and unrealized appreciation and
depreciation of the Money Market Investment Division and the Fund are
excluded from the calculation of yield.
B. Total Return and Yield Quotations for All Investment Divisions
(Other than Money Market)
The total return quotations for all Investment Divisions, other than the
Money Market, will be average annual total return quotations for the
one-year period. The quotations are computed by finding the average
annual compounded rates of return over the relevant periods that would
equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where:P =a hypothetical initial payment of $1,000
T =average annual total return
N =number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the particular period at the end of the
particular period
For purposes of the total return quotations for these Investment
Divisions, the calculations take into effect all fees that are charged
to the Contract Value , and for any fees that vary with the size of the
account, the account size is assumed to be the respective Investment
Divisions' mean account size. The calculations also assume a complete
redemption as of the end of the particular period.
The yield quotations for these Investment Divisions set forth in the
Prospectus are based on the thirty-day period ended on December 31,
1994, and are computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price
per unit on the last day of the period, according to the following
formula:
YIELD = 2[((a-b)cd +1)6 -1]
Where:
a = net investment income earned during the period by the corresponding
portfolio of the Fund attributable to shares owned by the Investment
Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Accumulation Units outstanding during
the period.
d = the maximum offering price per Accumulation Unit on the last day of
the period.
For purposes of the yield quotations for these Investment Divisions, the
calculations take into effect all fees that are charged to the Contract
Value, and for any fees that vary with the size of the account, the
account size is assumed to be the respective Investment Divisions' mean
account size.
FINANCIAL STATEMENTS
The consolidated financial statements of GWL&A as contained in the
prospectus should be considered only as bearing upon GWL&A's ability to
meet its obligations under the Contracts, and they should not be
considered as bearing on the investment performance of the Series
Account. The interest of Contract Owners under the Contracts are
affected solely by the investment results of the Series Account. This
Statement of Additional Information contains no financial statements for
the Series Account because the Series Account has not yet commenced
operations, has no assets or liabilities, and have received no income
nor incurred any expenses as of the date of this Statement of Additional
Information.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements for Great-West Life & Annuity Insurance
Company for the years ended December 31, 1995, 1994 and 1993 are
included in the prospectus.
(b) Exhibits
(1) Certified copy of resolution of Board of Directors or
Depositor establishing Registrant is attached as Exhibit 1.
(2) Not applicable.
(3) Copy of distribution contract between Depositor and
Principal Underwriter to be filed by amendment.
(4) Copy of the form of the variable annuity contract to be
filed by amendment.
(5) Copy of the form of application to be used with the variable
annuity contract provided pursuant to (4) to be filed by
amendment.
(6) Copy of Articles of Incorporation and Bylaws of Depositor to
be filed by amendment.
(7) Copy of reinsurance agreement to be filed by amendment.
(8) Copies of participation agreements with underlying mutual
funds to be filed by amendment.
(9) Opinion of counsel and consent of Ruth B. Lurie, Vice
President, Counsel and Associate Secretary.
(10) (a) Written Consent of Jorden Burt Berenson & Johnson LLP
(b) Written Consent of Deloitte & Touche LLP
(c) Written Consent of Ruth B. Lurie
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule for computation of each performance quotation
provided in response to Item 21 is attached as Exhibit 13.
(14) Financial Data Schedule is attached as Exhibit 14.
Item 25. Directors and Officers of the Depositor
. . . Position and Offices
Name . . .Principal Business Address with Depositor
James Balog . . 2205 North Southwinds Boulevard Director
. . . Vero Beach, Florida 39263
James W. Burns, O.C. (4) Director
Orest T. Dackow (3) Director
Paul Desmarais, Jr. (4) Director
Robert G. Graham Inter-City Products CorporationDirector
. . . 20 Queen Street West, Box 32
. . . Toronto, Ontario M5H 3R3
Robert Gratton. (5) Chairman
N. Berne Hart . 2552 East Alameda Avenue Director
. . . Denver, Colorado 80209
Kevin P. Kavanagh (1) Director
William Mackness Faculty of Management Director
. . . University of Manitoba
. . . 3rd Floor, Drake Centre for Management
. . . Studies Building
. . . Winnipeg, Manitoba R3T 2N2
William T. McCallum (3) Director, President
and
. . . Chief Executive
Officer
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited Director
. . . P.O. Box 130
. . . 275 Commercial Street
. . . North Sydney, Nova Scotia B2A 3M2
P. Michael Pitfield, P.C., Q.C. (4) Director
Michel Plessis-Belair, F.C.A. (4) Director
Ross J. Turner. Genstar Investment Corporation Director
. . . 950 Tower Lane
. . . Metro Tower, Suite 1170
. . . Foster City, California 94404
Brian E. Walsh. Trinity L.P. Director
. . . 115 East Putnam Avenue
. . . Greenwich, Connecticut 06830
Robert D. Bond. (3) Senior Vice-President,
. . . Financial Services
John T. Hughes. (3) Senior Vice-President,
. . . Chief Investment
Officer
D. Craig Lennox (3) Senior Vice-
President,
. . . General Counsel and
. . . Secretary
Dennis Low. . . (3) Executive Vice-
President,
. . . Financial Services
Alan D. MacLennan (2) Executive Vice-
President,
. . . Employee Benefits
James D. Motz . (2) Senior Vice-President,
. . . Employee Benefits
. . . Operations
Douglas L. Wooden (3) Senior Vice-President,
. . . Chief Financial
Officer and
. . . Treasurer
______________________________________
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
Item 26. Persons controlled by or under common control with the
Depositor or Registrant
See attached organizational chart.
Item 27. Number of Contractowners
Not applicable.
Item 28. Indemnification
Provisions exist under the Colorado General Corporation Code
and the Bylaws of GWL&A whereby GWL&A may indemnify a
director, officer, or controlling person of GWL&A against
liabilities arising under the Securities Act of 1933. The
following excerpts contain the substance of these provisions:
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
ORGANIZATIONAL CHART
Power Corporation of Canada
100% - 171263 Canada Inc.
68.4% - Power Financial Corporation
86.4% - Great-West Lifeco Inc.
99.4% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - Employee Benefit Services, Inc.
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
94% - Maxim Series Fund, Inc.
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
<PAGE>
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) ."Corporation" includes any domestic or foreign entity
that is a predecessor of the corporation by reason of a
merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the
transaction.
(2) ."Director" means an individual who is or was a director
of a corporation or an individual who, while a director of a
corporation, is or was serving at the corporation's request as
a director, officer, partner, trustee, employee, fiduciary or
agent of another domestic or foreign corporation or other
person or employee benefit plan. A director is considered to
be serving an employee benefit plan at the corporation's
request if his or her duties to the corporation also impose
duties on or otherwise involve services by, the director to
the plan or to participants in or beneficiaries of the plan.
(3) "Expenses" includes counsel fees.
(4) ."Liability" means the obligation incurred with respect to
a proceeding to pay a judgment, settlement, penalty, fine,
including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses.
(5) ."Official capacity" means, when used with respect to a
director, the office of director in the corporation and, when
used with respect to a person other than a director as
contemplated in Section 7-109-107, means the office in the
corporation held by the officer or the employment, fiduciary,
or agency relationship undertaken by the employee, fiduciary,
or agent on behalf of the corporation. "Official capacity"
does not include service for any other domestic or foreign
corporation or other person or employee benefit plan.
(6) ."Party" includes a person who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(7) ."Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or
informal.
Section 7-109-102. Authority to indemnify directors.
(1) .Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to the
proceeding because the person is or was a director against
liability incurred in any proceeding if:
. . .(a) The person conducted himself or herself in good
faith;
. . .(b) The person reasonably believed:
. . . (I) In the case of conduct in an official capacity
with the corporation, that his or her conduct was
in the corporation's best interests; or
. . . (II) In all other cases, that his or her conduct
was at least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the person
had no reasonable cause to believe his or her conduct was
unlawful.
(2) .A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in
the interests of the participants in or beneficiaries of the
plan is conduct that satisfies the requirements of
subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee
benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants
in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of subparagraph (a) of subsection (1) of this
section.
(3) .The termination of any proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, is not, of itself, determinative that the
director did not meet the standard of conduct described in
this section.
(4) .A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right
of the corporation in which the director was adjudged
liable to the corporation; or
(b) In connection with any proceeding charging that the
director derived an improper personal benefit, whether or
not involving action in his official capacity, in which
proceeding the director was adjudged liable on the basis
that he or she derived an improper personal benefit.
(5) .Indemnification permitted under this section in
connection with a proceeding by or in the right of a
corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 7-109-103. Mandatory Indemnification of Directors.
. . .Unless limited by the articles of incorporation, a
corporation shall be required to indemnify a person who is or
was a director of the corporation and who was wholly
successful, on the merits or otherwise, in defense of any
proceeding to which he was a party, against reasonable
expenses incurred by him in connection with the proceeding.
Section 7-109-104. Advance of Expenses to Directors.
(1) .A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding
in advance of the final disposition of the proceeding if:
(a) The director furnishes the corporation a written
affirmation of his good-faith belief that he has met the
standard of conduct described in Section 7-109-102;
(b) The director furnishes the corporation a written
undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately
determined that he or she did not meet such standard of
conduct; and
(c) A determination is made that the facts then know to
those making the determination would not preclude
indemnification under this article.
(2) .The undertaking required by paragraph (b) of subsection
(1) of this section shall be an unlimited general obligation
of the director, but need not be secured and may be accepted
without reference to financial ability to make repayment.
(3) .Determinations and authorizations of payments under this
section shall be made in the manner specified in Section 7-
109-106.
Section 7-109-105. Court-Ordered Indemnification of Directors.
(1) .Unless otherwise provided in the articles of
incorporation, a director who is or was a party to a
proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order
indemnification in the following manner:
(a) If it determines the director is entitled to
mandatory indemnification under section 7-109-103, the
court shall order indemnification, in which case the
court shall also order the corporation to pay the
director's reasonable expenses incurred to obtain court-
ordered indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director met
the standard of conduct set forth in section 7-109-102
(1) or was adjudged liable in the circumstances described
in Section 7-109-102 (4), the court may order such
indemnification as the court deems proper; except that
the indemnification with respect to any proceeding in
which liability shall have been adjudged in the
circumstances described Section 7-109-102 (4) is limited
to reasonable expenses incurred in connection with the
proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
Section 7-109-106. Determination and Authorization of
Indemnification of Directors.
(1) .A corporation may not indemnify a director under Section
7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the
director is permissible in the circumstances because he has
met the standard of conduct set forth in Section 7-109-102.
A corporation shall not advance expenses to a director under
Section 7-109-104 unless authorized in the specific case after
the written affirmation and undertaking required by Section 7-
109-104(1)(a) and (1)(b) are received and the determination
required by Section 7-109-104(1)(c) has been made.
(2) .The determinations required to be made under subsection
(1) of this section shall be made:
(a) By the board of directors by a majority vote of
those present at a meeting at which a quorum is present,
and only those directors not parties to the proceeding
shall be counted in satisfying the quorum.
(b) If a quorum cannot be obtained, by a majority vote
of a committee of the board of directors designated by
the board of directors, which committee shall consist of
two or more directors not parties to the proceeding;
except that directors who are parties to the proceeding
may participate in the designation of directors for the
committee.
(3) .If a quorum cannot be obtained as contemplated in
paragraph (a) of subsection (2) of this section, and the
committee cannot be established under paragraph (b) of
subsection (2) of this section, or even if a quorum is
obtained or a committee designated, if a majority of the
directors constituting such quorum or such committee so
directs, the determination required to be made by subsection
(1) of this section shall be made:
(a) By independent legal counsel selected by a vote of
the board of directors or the committee in the manner
specified in paragraph (a) or (b) of subsection (2) of
this section or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of
the full board of directors; or
(b) By the shareholders.
(4) .Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible; except
that, if the determination that indemnification is permissible
is made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the
body that selected such counsel.
Section 7-109-107. Indemnification of Officers, Employees,
Fiduciaries, and Agents.
(1) .Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for
court-ordered indemnification under section 7-109-105, in
each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to
an officer, employee, fiduciary, or agent of the
corporation to the same extent as a director; and
(c) A corporation may indemnify and advance expenses to
an officer, employee, fiduciary, or agent who is not a
director to a greater extent, if not inconsistent with
public policy, and if provided for by its bylaws, general
or specific action of its board of directors or
shareholders, or contract.
Section 7-109-108. Insurance.
. . .A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation and who,
while a director, officer, employee, fiduciary, or agent of
the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of any other domestic or foreign
corporation or other person or of an employee benefit plan
against any liability asserted against or incurred by the
person in that capacity or arising out of his or her status as
a director, officer, employee, fiduciary, or agent whether or
not the corporation would have the power to indemnify the
person against such liability under the Section 7-109-102, 7-
109-103 or 7-109-107. Any such insurance may be procured from
any insurance company designated by the board of directors,
whether such insurance company is formed under the laws of
this state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock
ownership or otherwise.
Section 7-109-109. Limitation of Indemnification of Directors.
(1) .A provision concerning a corporation's indemnification
of, or advance of expenses to, directors that is contained in
its articles of incorporation or bylaws, in a resolution of
its shareholders or board of directors, or in a contract,
except for an insurance policy or otherwise, is valid only to
the extent the provision is not inconsistent with Sections 7-
109-101 to 7-109-108. If the articles of incorporation limit
indemnification or advance of expenses, indemnification or
advance of expenses are valid only to the extent not
inconsistent with the articles of incorporation.
(2) .Sections 7-109-101 to 7-109-108 do not limit a
corporation's power to pay or reimburse expenses incurred by
a director in connection with an appearance as a witness in a
proceeding at a time when he or she has not been made a named
defendant or respondent in the proceeding.
Section 7-109-110. Notice to Shareholders of Indemnification of
Director.
. . .If a corporation indemnifies or advances expenses to a
director under this article in connection with a proceeding by
or in the right of the corporation, the corporation shall give
written notice of the indemnification or advance to the
shareholders with or before the notice of the next
shareholders' meeting. If the next shareholder action is
taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at
or before the time the first shareholder signs a writing
consenting to such action.
Bylaws of GWL&A
Article II, Section 11. Indemnification of Directors.
. . .The Company may, by resolution of the Board of Directors,
indemnify and save harmless out of the funds of the Company to
the extent permitted by applicable law, any director, officer,
or employee of the Company or any member or officer of any
committee, and his heirs, executors and administrators, from
and against all claims, liabilities, costs, charges and
expenses whatsoever that any such director, officer, employee
or any such member or officer sustains or incurs in or about
any action, suit, or proceeding that is brought, commenced, or
prosecuted against him for or in respect of any act, deed,
matter or thing whatsoever made, done, or permitted by him in
or about the execution of his duties of his office or
employment with the Company, in or about the execution of his
duties as a director or officer of another company which he so
serves at the request and on behalf of the Company, or in or
about the execution of his duties as a member or officer of
any such Committee, and all other claims, liabilities, costs,
charges and expenses that he sustains or incurs, in or about
or in relation to any such duties or the affairs of the
Company, the affairs of such Committee, except such claims,
liabilities, costs, charges or expenses as are occasioned by
his own wilful neglect or default. The Company may, by
resolution of the Board of Directors, indemnify and save
harmless out of the funds of the Company to the extent
permitted by applicable law, any director, officer, or
employee of any subsidiary corporation of the Company on the
same basis, and within the same constraints as, described in
the preceding sentence.
Item 29. Principal Underwriter
(a) .Charles Schwab & Company ("Schwab") is the distributor of
securities of the Registrant.
(b) .Directors and Officers of Schwab
. . . Position and Offices
Name . . .Principal Business Address with
Underwriter
Charles R. Schwab (1) Founder, Chairman
an Director
. . .
Lawrence J. Stupski (1) Director
David S. Pottruck (1) Director,
President and
Chief Executive
Officer
Ronald W. Readmond (1) Vice Chairman and
Director
John P. Coghlan (1) Executive Vice
President,
Schwab
Institutional
A. John Gambs . (1) Director, Executive
Vice President and
Chief Financial
Officer
Dawn G. Lepore. (1) Executive Vice
President and Chief
Information Officer
Daniel O. Leemon (1) Executive Vice
President,
Business
Strategy
Timothy F. McCarthy (1) Executive Vice
President, Mutual
Funds
Tom D. Seip . . (1) Senior Executive
Vice President,
Retail Brokerage
Elizabeth G. Sawi (1) Executive Vice
President,
Electronic
Brokerage
John N. Tognino (1) Executive Vice
President,
Capital Markets
and Trading
Luis E. Valencia (1) Executive Vice
President,
Human Resources
and
Administrative
Services
Christopher V. Dodds (1) Treasurer and
Senior Vice
President
William J. Klipp (1) Senior Vice
President and
Chief Operating
Officer
Stephen B. Ward (1) Senior Vice
President and
Chief
Investment
Officer
Frances Cole. . (1) Vice President,
Chief Counsel and
Compliance Officer,
and Assistant
Corporate Secretary
Pamela E. Herlich (1) Assistant
Corporate Secretary
David J. Neuman (1) Corporate
Secretary
Mary B. Templeton (1) Assistant Corporate
Secretary
David H. Lui. . (1) Vice President and
Senior Counsel
Christina M. Perrino (1) Vice President
and Senior
Counsel
______________________________________
(1) 101 Montgomery, San Francisco, California 94104.
(c) Commissions and other compensation received by Principal
Underwriter during registrant's last fiscal year:
. . . Net
Name of . . .Underwriting Compensation
Principal . . .Discounts and on Brokerage
Underwriter . . Commissions Redemption Commissions
Compensation
Schwab . . . -0- -0- -0- -0-
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the registrant
through GWL&A, 8515 E. Orchard Road, Englewood, Colorado
80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment
to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements
in the Registration Statement are never more than 16
months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of
any application to purchase a contract offered by the
Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or
included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements
required to be made available under this form promptly
upon written or oral request.
(d) Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the
registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the registrant 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 the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement on Form N-4 to be signed on its behalf,
in the City of Englewood, State of Colorado, on this 13th day of
February , 1996.
. . VARIABLE ANNUITY-1 SERIES ACCOUNT
. . (Registrant)
. . By: /s/ W.T. McCallum
. . William T. McCallum, President
. . and Chief Executive Officer of
. . Great-West Life & Annuity
. . Insurance Company
. . GREAT-WEST LIFE & ANNUITY
. . INSURANCE COMPANY
. . (Depositor)
. . By: /s/ W.T. McCallum
. . William T. McCallum, President
. . and Chief Executive Officer
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities with Great-West Life & Annuity Insurance Company and on
the dates indicated:
Signature and Title Date
_____, 1996
Director and Chairman of the
Board (Robert Gratton)
. .
/s/ W.T. McCallum Feb. 13, 1996
Director, President and Chief Executive
Officer (William T. McCallum)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement on Form N-4 to be signed on its behalf,
in the City of Englewood, State of Colorado, on this day of
, 1996.
VARIABLE ANNUITY-1 SERIES ACCOUNT
(Registrant)
By:
William T. McCallum, President
and Chief Executive Officer of
Great-West Life & Annuity
Insurance Company
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By:
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities with Great-West Life & Annuity Insurance Company and on
the dates indicated:
Signature and Title Date
/s/ R. Gratton* Feb. 15, 1996
Director and Chairman of the
Board (Robert Gratton)
. .
, 1996
Director, President and Chief Executive
Officer (William T. McCallum)
Signature and Title Date
/s/ D.L. Wooden Feb. 13, 1996
Principal Financial Officer
(Douglas L. Wooden)
/s/ D.L. Wooden Feb. 13, 1996
Senior Vice-President and
Treasurer (Douglas L. Wooden)
, 1996
Director, (James Balog)
, 1996
Director, (James W. Burns)
, 1996
Director (Orest T. Dackow)
, 1996
Director (Paul Desmarais, Jr.)
, 1996
Director (Robert G. Graham)
, 1996
Director (N. Berne Hart)
, 1996
Director (Kevin P. Kavanagh)
<PAGE>
Signature and Title Date
_____, 1996
Principal Financial Officer
(Douglas L. Wooden)
, 1996
Senior Vice-President and
Treasurer (Douglas L. Wooden)
/s. J. Balog* Feb. 15, 1996
Director, (James Balog)
/s/ J.W. Burns* Feb. 15, 1996
Director, (James W. Burns)
/s/ O.T. Dackow* Feb. 15, 1996
Director (Orest T. Dackow)
/s/ P. Desmarais, Jr.* Feb. 15, 1996
Director (Paul Desmarais, Jr.)
, 1996
Director (Robert G. Graham)
/s/ N.B. Hart* Feb. 15, 1996
Director (N. Berne Hart)
, 1996
Director (Kevin P. Kavanagh)
<PAGE>
Signature and Title Date
/s/ W. Mackness* Feb. 15, 1996
Director (William Mackness)
/s/ J.E.A. Nickerson* Feb. 15, 1996
Director (Jerry E.A. Nickerson)
/s/ P.M. Pitfield* Feb. 15, 1996
Director (P. Michael Pitfield)
/s/ M. Plessis-Belair* Feb. 15, 1996
Director (Michel Plessis-Belair)
/s/ R.J. Turner* Feb. 15, 1996
Director (Ross J. Turner)
/s/ B.E. Walsh* Feb. 15, 1996
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox Feb. 15, 1996
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with
this Registration Statement.
<PAGE>
POWERS OF ATTORNEY<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J. Balog, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C. Lennox and G.R. Derback as my true and lawful attorney and
agent for me and in my name and on my behalf to do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things and to execute any and all instruments
which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company to
comply with the Securities Act of 1933 and any rules, regulations,
and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance Company (Registration No. ), and to any and
all amendments thereto, and I hereby ratify and confirm all that
either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of
December, 1995.
. . /s/ J. Balog
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Kelly Peace
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J.W. Burns, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C. Lennox and G.R. Derback as my true and lawful attorney and
agent for me and in my name and on my behalf to do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things and to execute any and all instruments
which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company to
comply with the Securities Act of 1933 and any rules, regulations,
and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance Company (Registration No. ), and to any and
all amendments thereto, and I hereby ratify and confirm all that
either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January, 1996.
. . /s/ J.W. Burns
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Louise Auriol
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, O.T. Dackow, a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
December, 1995.
. . /s/ O.T. Dackow
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Joan Preyer
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P. Desmarais, Jr., a Member
of the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January, 1996.
. . /s/ P. Desmarais. Jr.
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Luci Filteau
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R. Gratton, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C. Lennox and G.R. Derback as my true and lawful attorney and
agent for me and in my name and on my behalf to do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things and to execute any and all instruments
which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company to
comply with the Securities Act of 1933 and any rules, regulations,
and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance Company (Registration No. ), and to any and
all amendments thereto, and I hereby ratify and confirm all that
either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of
January, 1996.
. . /s/ R. Gratton
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Nicole Barolet
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, N.B. Hart, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C. Lennox and G.R. Derback as my true and lawful attorney and
agent for me and in my name and on my behalf to do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things and to execute any and all instruments
which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company to
comply with the Securities Act of 1933 and any rules, regulations,
and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance Company (Registration No. ), and to any and
all amendments thereto, and I hereby ratify and confirm all that
either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
December, 1995.
. . /s/ N.B. Hart
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Wilma J. Hart
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, William Mackness, a Member
of the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of
January, 1996.
. . /s/ William Mackness
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Louise Fabris
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J.E.A. Nickerson, a Member
of the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of
January, 1996.
. . /s/ J.E.A. Nickerson
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ M. Lynne Reid
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P.M. Pitfield, a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January, 1996.
. . /s/ P.M. Pitfield
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Diane Milleur
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, M. Plessis-Belair, a Member
of the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of
January, 1996.
. . /s/ M. Plessis-Belair
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Danielle Durocher
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R.J. Turner, a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, a Colorado corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful attorney
and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary
or desirable to enable Great-West Life & Annuity Insurance Company
to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of market value adjusted annuity contracts, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance
Company, to the Registration Statement (Form S-1) of Great-West
Life & Annuity Insurance Company (Registration No. ),
and to any and all amendments thereto, and I hereby ratify and
confirm all that either said attorney and agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
December, 1995.
. . /s/ R.J. Turner
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Ila Rosengarten
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, B.E. Walsh, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C. Lennox and G.R. Derback as my true and lawful attorney and
agent for me and in my name and on my behalf to do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things and to execute any and all instruments
which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company to
comply with the Securities Act of 1933 and any rules, regulations,
and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance Company (Registration No. ), and to any and
all amendments thereto, and I hereby ratify and confirm all that
either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of
January, 1996.
. . /s/ B.E. Walsh
. . Member, Board of Directors
. . Great-West Life & Annuity
. . Insurance Company
Witness:
/s/ Irene Minuck
<PAGE>
EXHIBIT 1
<PAGE>
This will certify that the following is a true and correct copy of
a resolution passed at a meeting of the Board of Directors of
Great-West Life & Annuity Insurance Company duly called and held on
the twenty-fourth day of July, 1995, at which meeting a quorum was
present and acting throughout, and that said resolution is still in
full force and effect:
That the Company hereby authorizes the establishment of a
separate account designated Schwab Variable Annuity Series
Account (hereinafter "the Account"), subject to such
conditions as hereafter set forth, said use, purposes, and
conditions to be in full compliance with C.R.S. 10-7-402 and
all rules and regulations of the Colorado Division of
Insurance;
Further, that the Account shall be established for the purpose
of allowing the Company to issue individual annuity contracts
authorized by Section 408 of the Internal Revenue Code and
such other individual variable annuity contracts ("Contracts")
as the President or a Vice-President may designate and shall
constitute a separate account into which will be allocated
amounts paid to the Company which are to be applied under the
terms of such Contracts; and
Further, that the income, gains and losses, realized or
unrealized, from assets allocated to the Account shall be
credited to or charged against such Account without regard to
other income, gains, or losses of the Company to the extent
provided in the Contracts; and
Further, that the fundamental investment policy of the Account
shall be to invest or reinvest the assets of the Account in
securities issued by investment companies registered under the
Investment Company Act of 1940; and
Further, that eleven separate investment divisions be, and
hereby are, established within the Account to which net
payments under the Contracts will be allocated in accordance
with instructions received from contractholders, and that the
President or a Vice-President each be, and hereby is,
authorized to increase or decrease the number of investment
divisions in the Account as may be necessary or appropriate;
and
Further, that each investment division may be comprised of two
subdivisions, one to hold the amounts contributed under
Contracts qualifying for favorable tax treatment under the
Internal Revenue Code, as amended, and the other to hold
amounts contributed under Contracts which do not qualify for
such tax treatment; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to deposit such amounts in the Account
or in each investment division as may be necessary or
appropriate to facilitate the commencement of the Account's
operations; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to transfer funds from time to time into
the Account in order to establish the Account or to support
the operation of the Contracts with respect to the Account or
to transfer funds from time to time out of the Account if
transfer is made by cash or securities having a readily
determined market value, if such transfer is approved by the
Commissioner of the Division of Insurance; and
Further, that the President or a Vice-President each be, and
is hereby authorized to change the designation of the Account
to such other designation as he may deem necessary or
appropriate; and
Further, that the appropriate officers of the Company, with
such assistance from the Company's auditors, legal counsel and
independent consultants or others as they may require, be, and
they hereby are, authorized and directed to take all action
necessary to: (a) register the Account as a unit investment
trust under the Investment Company Act of 1940, as amended;
(b) register the Contracts in such amounts, which may be an
indefinite amount, as the officers of the Company shall from
time to time deem appropriate, under the Securities Act of
1933; and (c) take all other actions which are necessary in
connection with the offering of said Contracts for sale and
the operation of the Account in order to comply with the
Investment Company Act of 1940, the Securities Exchange Act of
1934, the Securities Act of 1933 and other applicable federal
laws, including the filing of any amendments to registration
statements, any undertakings, and any applications for
exemptions from the Investment Company Act of 1940 or other
applicable federal laws as the officers of the Company shall
deem necessary or appropriate; and
Further, that the appropriate officers of the Company be, and
they hereby are, authorized on behalf of the Account and on
behalf of the Company to take any and all action they may deem
necessary or advisable in order to sell the Contracts,
including any registrations, filings and qualifications of the
Company, its officers, agents and employees, and the Contracts
under the insurance and securities laws of any of the states
of the United States of America or other jurisdictions, and in
connection therewith to prepare, execute, deliver and file all
such applications, reports, covenants, resolutions,
applications for exemptions, consents to service of process
and other papers and instruments as may be required under such
laws, and to take any and all further action which said
officers or counsel of the Company may deem necessary or
desirable (including entering into whatever agreements may be
necessary) in order to maintain such registrations or
qualifications for as long as said officers or counsel deem it
to be in the best interests of the Account and the Company;
and
Further, that the President, the Vice-Presidents and the
Secretary of the Company be, and they hereby are, each
authorized in the names and on behalf of the Account and the
Company to execute and file irrevocable written consents on
the part of the Account and of the Company to be used in such
states wherein such consents to service of process may be
required under the insurance or securities laws therein in
connection with said registration or qualification of the
Contracts and to appoint the appropriate state official or
such other person as may be allowed by said insurance or
securities laws, agent of the Account and of the Company for
the purpose of receiving and accepting process; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to cause the Company to institute
procedures for providing voting rights for owners of such
Contracts with respect to securities owned by the Account; and
Further, that the President or a Vice-President each be, and
is hereby authorized to execute such agreement or agreements
as deemed necessary and appropriate with underwriters and
distributors for the Contracts in connection with the
establishment and maintenance of the Account or the design,
administration and offer and sale of the Contracts; provided,
however, that the Company is directed to finalize such
agreements before effecting any registrations or filings of
the Contracts or the Account; and
Further, that the appropriate officers of the Company are
hereby authorized to execute whatever agreement or agreements
may be necessary or appropriate to enable the Account to
invest in securities issued by one or more investment
companies registered under the Investment Company Act of 1940
as may be specified in the respective Contracts; and
Further, that the appropriate officers of the Company, and
each of them, are hereby authorized to execute and deliver all
such documents and papers and to do or cause to be done all
such acts and things as they may deem necessary or desirable
to carry out the foregoing resolutions and the intent and
purposes thereof; and
Further, that the term "appropriate officers" as used herein,
shall include all of the elected and appointed officers of the
Company, either severally or individually, subject to any
applicable resolutions of the Board of Directors dealing with
signing authority for the Company.
Dated at Englewood, /s/ D.C. Lennox
Colorado this 15th D.C. Lennox
day of February, 1996. Senior Vice President,
. . General Counsel and Secretary
<PAGE>
EXHIBIT 9<PAGE>
February 15, 1996
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
Re: Opinion of Counsel
Gentlemen:
This letter is furnished as the requisite opinion of counsel
described in Form N-4, Part C, Item 24(9). Great-West Life &
Annuity Insurance Company (the "Company"), as depositor, has
registered an indefinite amount of securities under the Securities
Act of 1933, as amended, as provided in Rule 24f-2 of the
Investment Company Act of 1940.
I am the Vice President, Counsel and Associate Secretary of
the Company. In so acting, I have made such examination of the
law, records and documents as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below.
For purposes of such examination, I have assumed the genuineness of
all signatures and the conformity to the original of all copies.
I am a member of the Colorado Bar and do not purport to be an
expert on the laws of any other state. My opinion herein as to any
other law is based upon a limited inquiry thereof which I have
deemed appropriate under the circumstances.
Based on the foregoing, I am of the opinion with respect to
the securities, assuming that the securities will be issued and
sold in accordance with the provisions of the registration
statement, to which the Form N-4 registration statement is
applicable and with which this opinion accompanies, will be legally
issued, fully paid and nonassessable.
I consent to the use of this opinion as an exhibit to the
registration statement.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary<PAGE>
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
February 14, 1996
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Registration Statement on Form N-4
filed by Variable Annuity-1 Series Account
the "Registration Statement")
Dear Ladies and Gentlemen:
We have acted as counsel to Variable Annuity-1 Series Account
("Registrant") and Great-West Life & Annuity Insurance Company, a
Colorado corporation (as "Depositor"), regarding the federal
securities laws applicable to the issuance and sale of the Contract
described therein. We hereby consent to the references to us under
the heading "Legal Matters" in the prospectus.
Very truly yours,
/s/ Jorden Burt Berenson &
Johnson LLP
Jorden Burt Berenson & Johnson LLP<PAGE>
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Great-West
Life & Annuity Insurance Company on Form N-4 of our report dated
January 19, 1996, appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to
us under the headings "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
February 12, 1996<PAGE>
EXHIBIT 10 (c)
WRITTEN CONSENT OF RUTH B. LURIE
<PAGE>
February 15, 1996
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Variable Annuity-1 Series Account
Gentlemen:
I hereby consent to the use of my name under the caption
"Legal Opinions" in the Prospectus for Variable Annuity-1 Series
Account contained in the Registration Statement Form N-4 filed by
Great-West Life & Annuity Insurance Company and Variable Annuity-1
Series Account with the Securities and Exchange Commission under
the Securities Act of 1933, the Investment Company Act of 1940 and
the amendments thereto.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary
<PAGE>
EXHIBIT 13
<PAGE>
YIELD AND EFFECTIVE YIELD CALCULATIONS
Money Market Investment Division
Yield for the Money Market Investment Division is calculated on a seven
day period.
The current yield formula = base period return x (365/7)
The effective yield formula = [1 + based period return)365/7] - 1
Base period return is calculated as follows:
Ending account value
- - Beginning account value
- - Expenses accrued for the period
Net change in account value
Net change in account value/Beginning account = base period return
Attached is an example of these calculations.<PAGE>
a= Value of one accumulation unit at beginning of period = 16.23525
b= Value of one accumulation unit at end of period = 16.24946
c= Annual maintenance charges accrued in period = $3.91
d= Average number of units outstanding in period = 1000.00
e= Base period return
Yield = (b-a-c/d)
a
= $16.24946/unit - 16/23525/unit - ($3.91/1000.00 units)
16.23525/unit
= 0.000635
f= annualized yield
(e) x (365/7) = 3.31%
g = effective yield
{[1 + (e)]365/7} - 1 = 3.36%<PAGE>
Other Investment
Divisions
The yield calculation for all other investment divisions is based on a
30-day period.
FORMULA: Yield = 2[(a-b)/(cd) + 1]6 -1}
Where: a = net investment income earned during the period attributable
to the Investment Division
b = expenses accrued for the period
(net of reimbursements)
c = average daily number of
accumulation units outstanding
during the period
d = maximum offering price per
accumulation unit on the last day
of the period
Following is an example of this yield calculation:
a = $6,000
b = $2,000
c = 50,000.00
d = $13.00
Yield = 2[($6,000.00 - 2,000.00 + 1)6 - 1]
50,000.00 x $13.00
= 7.50%
<PAGE>
TOTAL RETURN CALCULATION
FORMULA: P(1+T) to the power of N = ERV
Where:
T = Average annual total return
N = The number of years including
portions of years where
applicable for which the
performance is being measured
ERV = Ending redeemable value of a
hypothetical $1,000 payment made
at the beginning of the
applicable period
P = A hypothetical $1,000 initial
payment made at the inception of
the Investment Division
(Assumed expenses = 0.85% mortality & expense risk charge and $25
contract maintenance charge)
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N] - 1
Following are examples of this calculation on a 1 year, 5 year, 10 year
and since inception basis.
<PAGE>
1 year total return:
ERV = 1,344.50
N = 1.00
P = 1,000.00
Therefore, 1 year total return is 34.55%.
5 year total return:
ERV = 1,792.44
N = 5.00
P = 1,000.00
Therefore, 5 year total return is 12.38%.
10 year total return:
ERV = 2,857.38
N = 10.00
P = 1,000.00
Therefore, 10 year total return is 11.07%.
Since inception total return:
ERV = 4,595.67
N = 13.50
P = 1,000.00
Therefore, since inception total return is 11.96%.
<PAGE>
EXHIBIT 14
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 6263187
<DEBT-CARRYING-VALUE> 2054204
<DEBT-MARKET-VALUE> 2158043
<EQUITIES> 9440
<MORTGAGE> 1713195
<REAL-ESTATE> 60
<TOTAL-INVEST> 12473060
<CASH> 90939
<RECOVER-REINSURE> 333924
<DEFERRED-ACQUISITION> 278526
<TOTAL-ASSETS> 17682218
<POLICY-LOSSES> 11205726
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 422811
<NOTES-PAYABLE> 84854
0
121800
<COMMON> 7032
<OTHER-SE> 864289
<TOTAL-LIABILITY-AND-EQUITY> 17682218
1067427
<INVESTMENT-INCOME> 835046
<INVESTMENT-GAINS> 7465
<OTHER-INCOME> 0
<BENEFITS> 1268706
<UNDERWRITING-AMORTIZATION> 48054
<UNDERWRITING-OTHER> 416566
<INCOME-PRETAX> 176612
<INCOME-TAX> 48932
<INCOME-CONTINUING> 127680
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127680
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
