As filed with the Securities and Exchange Commission on August
2 , 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. 1
(X)
POST-EFFECTIVE AMENDMENT NO. (
)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
(X)
Amendment No. 1
(X)
(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 Offices ) (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 VARIABLE 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 Variable 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 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.
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 August 2, 1996
The Contracts are not deposits of, or guaranteed or endorsed by
any
bank, nor are the Contracts 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 August 2, 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 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 48
RIGHTS RESERVED BY THE COMPANY. . . . . . . . . . . . . . . . . .
. . . . . . . . 49
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 49
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 49
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 50
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 50
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 70 1/2.
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 pay by check or
instruct us to transfer funds from your Schwab account. 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 a notice which is postmarked 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. 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 twelve 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 Divisions.
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
Annual 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%
Eligible Fund Annual Expenses (1)
(as a percentage of Eligible Fund net assets, after expenses
reimbursements)
Total
Management Other 12b-1 Eligible Fund
Fees Expenses Fees Expenses
Portfolio
Alger American Growth Portfolio
.75% .10% 0% .85%
Alger American Small
Capitalization Portfolio
.85% .07% 0% .92%
Federated Equity Growth and Income Fund
.85% 0% 0% .85%
Federated U.S. Government Bond Fund
.80% 0% 0% .80%
INVESCO VIF-High Yield Portfolio
.60% .37% 0% .97%
INVESCO VIF-Industrial Income Portfolio
.75% .28% 0% 1.03%
INVESCO VIF-Total Return Portfolio
.75% .26% 0% 1.01%
Janus Aspen Aggressive
Growth Fund Portfolio
.77% .28% 0% 1.05%
Janus Aspen Growth Portfolio
.65% .13% 0% .78%
Janus Aspen Worldwide
Growth Fund Portfolio
.69% .49% 0% .90%
Lexington Emerging Markets Fund
.85% .47% 0% 1.32%
Montgomery Growth Fund
1.00% .25% 0% 1.25%
Montgomery International
Small-Cap Fund
Schwab Money Market Portfolio
.44% .06% 0% .50%
SteinRoe Capital Appreciation Fund
.50% .27% 0% .77%
Strong Discovery Fund II
1.00% .31% 0% 1.31%
TCI Growth
1.00% 0% 0% 1.00%
TCI International
1.50% 0% 0% 1.50%
Van Eck Gold and Natural Resources Fund
.75% .22% 0% .97%
_________________________________
(1) The figures given above reflect the amounts actually
deducted from the Eligible Funds during 1995.
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 $ 8.89 $29.14
Alger American Small
Capitalization Portfolio $ 9.61 $31.51
Federated Equity Growth and Income Fund $ 8.89 $29.14
Federated U.S. Government Bond Fund $ 8.37 $27.45
INVESCO VIF-High Yield Portfolio $10.13 $33.20
INVESCO VIF-Industrial Income Portfolio $10.76 $35.22
INVESCO VIF-Total Return Portfolio $10.55 $34.55
Janus Aspen Aggressive
Growth Fund Portfolio $10.97 $35.89
Janus Aspen Growth Portfolio $ 8.16 $26.77
Janus Aspen Worldwide
Growth Fund Portfolio $ 9.41 $30.83
Lexington Emerging Markets Fund $13.77 $44.94
Montgomery Growth Fund $13.04 $42.60
Montgomery International
Small-Cap Fund $15.63 $50.93
Schwab Money Market Portfolio $ 5.24 $17.23
SteinRoe Capital Appreciation Fund $ 8.05 $26.43
Strong Discovery Fund II $13.66 $44.61
TCI Growth $10.45 $34.21
TCI International $15.63 $50.93
Van Eck Gold and Natural Resources Fund $10.13 $33.20
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 ("Great-West
Life"). Great-West Life is a subsidiary of Great-West Lifeco Inc.,
a holding company. Great-West Lifeco
Inc. is in turn a subsidiary of Power Financial Corporation, a
financial services company. Power
Corporation of Canada, a holding and management company, has voting
control of Power Financial
Corporation. 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 $20
million to $3.04 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 greater
than 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.
<PAGE>
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.
INVESCO Trust Company is the
sub-adviser for the INVESCO VIF-Industrial Income Portfolio. 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 are the
Contracts 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 GWL&A's and Schwab's 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 (AAA, 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
amount Transferred or withdrawn
from the Guarantee Period Fund. 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 the time the Guarantee Period is broken, 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.
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APPLICATION AND CONTRIBUTIONS
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Contributions
All Contributions may be paid at the Schwab Annuity
Service Center by a check payable to
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. All
Contributions can be paid to the Schwab
Annuity Service Center by check (payable to GWL&A) or by
instructing us to 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. 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.
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ANNUITY ACCOUNT VALUE
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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 (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") .
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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 twelve 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. The charge
will be deducted from the amount
transferred. All Transfers made on a single Transaction Date will
be aggregated to count as only one
Transfer toward the twelve 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 twelve free Transfer as discussed above. The
$10 charge will apply to each
Transfer made in excess of the first twelve 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 twelve
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.
Custom Transfer: 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 twelve 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.
Custom Transfer: 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 twelve 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 twelve 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.
<PAGE>
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CASH WITHDRAWALS
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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.
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TELEPHONE TRANSACTIONS
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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.
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DEATH BENEFIT
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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 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 laws,
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).
_________________________________________________________________
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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. Thus, this charge will continue to
be applicable should you choose a
variable annuity payment option or the periodic withdrawal option.
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: (1) 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, (2) 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 only on each Contract anniversary date. This charge
partially covers our costs for
administering the Contracts and the Series Account. Once you have
selected a payment option, this
charge will cease to apply other than for the Periodic Withdrawal
Option. The Contract Maintenance
Charge is deducted from your Annuity Account Value allocated to the
Schwab Money Market
Investment Division. If you do not have sufficient Annuity Account
Value allocated to 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 are 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 received from 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
twelve 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.
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.
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PAYMENT OPTIONS
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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;
3. the Owner Requests that withdrawals stop; or
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; or
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.)
<PAGE>
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.
<PAGE>
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.
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.)
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FEDERAL TAX MATTERS
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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.
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.
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 for IRS approval and
determination 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.
<PAGE>
_________________________________________________________________
___________
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 an 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.
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.
<PAGE>
_________________________________________________________________
__________
SELECTED FINANCIAL DATA
_________________________________________________________________
___________
The following is a summary of certain financial data of
the Company. This summary has been derived
in part from, and should be read in conjunction with, the financial
statements of the Company included
elsewhere in this Prospectus.
Six Months Ended Years Ended December 31,
6/30/96 6/30/95 1995 1994 1993 1992 1991
(In Millions)
INCOME STATEMENT DATA
Premiums and other income
$ 525 $ 522 $ 1,067 $ 1,000 $ 696 $ 245 $ 58
Net investment income
413 411 835 768 792 661 599
Realized investment gains (losses)
(23) 4 8 (72) 25 (4) (30)
Total Revenues
915 937 $ 1,910 $ 1,696 $ 1,513 $ 902 $ 627
Total benefits and expenses
822 856 $ 1,733 $ 1,594 $ 1,417 $ 844 $ 596
Income tax expense
24 29 49 28 31 18 7
Cumulative effect of adopting a
new accounting method for income taxes
0 0 _____ ____ ____ (23) ___
Net income
$ 69$ 52 $ 128 $ 74 $ 65 $ 63 $ 24
BALANCE SHEET DATA
Investment assets
$12,383 $12,003 $12,473 $11,791 $11,592$10,771 $8,483
Separate account assets
4,735 3,312 3,999 2,555 1,680 937 550
Total assets
18,401 16,513 17,682 15,616 14,296 12,948 9,571
Total policy liabilities
11,494 11,215 11,492 10,929 10,592 10,352 7,808
Total shareholder's equity
968 893 993 777 821 769 624
MANAGEMENT'S 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: the
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 the 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 mortgage loans
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.<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 and 1995
Results of Operations
Net income increased to $68.7 million as of June 30, 1996,
compared to $51.8 million for the
same period in 1995. The growth in earnings is being driven by
good results from operations. Increased
Employee Benefits Division earnings reflected an improvement in
group health morbidity and expense
gains associated with the large growth in 401(k). The Financial
Services Division net income increased
as a result of effective expense management and increased interest
margins on annuity products.
The Company also benefited from a $25.6 million release of
a provision on a contingent liability it
assumed from Great-West Life in 1993. This was largely offset by
capital losses of $16.7 million incurred
on the sales of bonds in the first six months of 1996. The Company
had realized capital gains on bond
sales of $13.3 million through the first half of 1995. The bond
capital gains and losses are included in the
realized investment gains [losses] in the income statement.
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
group life and health business from Confederation Life Insurance
Company.
Net investment income increased $67 million to a total of
$835 million in 1995 reflecting higher
earned 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. Provisions for asset
losses, included in realized losses, continued to decline as the
$22 million in 1995 were $12 million
better than the $34 million recorded in 1994. Interest rates
decreased in 1995, leading to bond capital
gains of $28 million which 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 $65
million in 1993. 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 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, provisions for asset losses
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 Great-West Life for part of the year.
The 1994 effective income tax rate of 27.7% is lower than the
1993 rate of 32.5% as a 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 Insurance Company 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
Company's 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 had 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)
utilizes 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 Company's actual adjusted capital. Based on current
calculations of the risk-based capital
standards, the Company's percentage to total adjusted capital is
well in excess of ratios that would
require regulatory attention.
Great-West Life owns all of the Company's $122 million of
preferred shares and all of its
common stock. The shareholder's 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 & 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.
These ratings represent the rating agency's independent
opinion of the Company's 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 (e.g., 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.
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
Great-West Life, to provide total
administrative support for all aspects of the Company's business.
Great-West Life has approximately
4,300 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
Division 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, insurance reform,
managed care regulation, 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 Officers
Set forth below is information concerning the Company's
directors and executive officers,
together with their principal occupation for the past five years.
Unless otherwise indicated, all of the
directors and executive officers have been engaged for not less
than five years in their present principal
occupations or in another executive capacity with the companies or
firms identified.
Directors Principal Occupation Last 5
Years
James Balog Company Director since March
1993; previously Chairman,
Lambert Brussels Capital
Corporation
James W. Burns, O.C. Chairman of the Boards of
Lifeco1 and Great-West Life;
Deputy
Chairman, PCC2
Orest T. Dackow President and Chief Executive
Officer, Lifeco since April
1992; previously President,
Great-West Life
Paul Desmarais, Jr. Chairman and Co-Chief Executive
Officer, PCC; Chairman, PFC3
Robert G. Graham Company Director since January
1996; previously Chairman and
Chief Executive Officer,
Inter-City Products Corporation
Robert Gratton Chairman of the Board of
Great-West Life & Annuity
Insurance
Company ("GWL&A"); President and
Chief Executive Officer, PFC
N. Berne Hart Company Director since February
1992; previously Chairman of
the Board, United Banks of
Colorado, Inc.
Kevin P. Kavanagh Company Director since April
1992; previously President and
Chief Executive Officer, Lifeco
William Mackness Company Director since July
1995; previously Dean, Faculty
of Management, University of
Manitoba
William T. McCallum President and Chief Executive
Officer, GWL&A; President and
Chief Executive Officer (U.S.
Operations), Great-West Life
Jerry E.A. Nickerson Chairman of the Board, H.B.
Nickerson & Sons Limited
The Honourable
P. Michael Pitfield, P.C., Q.C. Vice-Chairman, PCC; Member of
the Senate of Canada
Michel Plessis-Belair, F.C.A. Executive Vice-President and
Chief Financial Officer, PCC;
Senior
Vice-President, Finance, PFC
Ross J. Turner Chairman, Genstar Investment
Corporation
Brian E. Walsh Partner, Trinity L.P. since
January 1996; previously
Managing
Director and Co-head, Global
Investment Bank, Bankers Trust
Company
1 Great-West Lifeco, Inc.
2 Power Corporation of Canada
3 Power Financial Corporation
Executive Officers Principal Occupation Last 5
Years
William T. McCallum
President and Chief Executive Officer, GWL&A;
President and Chief Executive
Officer (U.S. Operations),
Great-West Life
Dennis Low
Executive Vice President, Financial Services
Executive Vice President,
Financial Services, GWL&A and
Great-West Life
Alan D. MacLennan Executive Vice President,
Employee
Benefits, GWL&A
Executive Vice President, and Great-West Life
Employee Benefits
John T. Hughes Senior Vice President, Chief
Investment Officer, GWL&A;
Senior Vice President, Senior Vice President, Chief
Investment Officer (U.S.
Chief Investment Officer Operations), Great-West Life
D. Craig Lennox Senior Vice President, General
Counsel and Secretary,
Senior Vice President, GWL&A; Senior Vice President and
General Counsel,
General Counsel and Secretary Great-West Life
James D. Motz Senior Vice President, Employee
Benefits Operations,
Senior Vice President, GWL&A and Great-West Life
Employee Benefits
Douglas L. Wooden Senior Vice President, Financial
Services, GWL&A and
Senior Vice President, Great-West Life
Financial Services
Executive Compensation
The following table sets out all compensation paid by
Great-West Life and its subsidiaries in
respect of the individuals who were, at December 31, 1995, the
Chief Executive Officer and the other four
most highly compensated executive officers of GWL&A (collectively
the "Named Executive Officers") for
services rendered to GWL&A and Great-West Life in all capacities
for fiscal years ended 1993, 1994 and
1995 respectively.
Name and
Principal Position
Year
Annual
Compensation(1)
Salary Bonus
($) ($)
Long-Term
Compensation Awards
Securities Under
Options Granted (2)
W.T. McCallum,
President and
Chief Executive
Officer
1995
1994
1993
523,958 351,000
225,000(3)
476,750 318,500
426,383 295,750
None
None
None
D. Low, Executive
Vice President,
Financial Services
1995
1994
1993
305,000 152,500
285,000 142,500
263,479 121,750
None
None
None
J.T. Hughes, Senior
Vice President, Chief
Investment Officer
1995
1994
1993
301,000 150,500
290,000 145,000
275,000 137,500
None
None
None
A.D. MacLennan,
Executive Vice
President, Employee
Benefits
1995
1994
1993
312,000 125,000
300,000 97,890
283,000 113,426
None
None
None
D.L. Wooden, Senior
Vice President,
Financial Services
1995
1994
1993
275,500 137,500
265,000 142,500
250,000 125,000
None
None
None
(1) The aggregate of perquisites and other personal benefits,
securities or property provided to each
Named Executive Officer in 1995 did not exceed the lesser of
$50,000 and 10% of the total of the
individual's annual salary and bonus.
(2) The options are for common shares of Power Financial
Corporation ("PFC Options"). PFC Options
are granted by, and in the sole discretion of, Power Financial
Corporation. (For additional information on
Power Financial Corporation, see "Ownership of Securities" in this
prospectus.)
(3) A special one-time bonus payment with respect to long-term
performance.
The following table describes all PFC Options exercised in
1995, and unexercised PFC Options
held as of December 31, 1995, by the Named Executive Officers.
Name
Securities
Acquired
on
Exercise
Aggregate
Value
Realized
($)
Unexercised Options at FY-
End
Exercisable Unexercisable
Value of Unexercised in-
the-Money Options at FY-
End ($)
Exercisable Unexercisable
W.T. McCallum
34,000
418,290
26,000 None
371,002 None
D. Low
None
None
44,000 None
627,849 None
J.T. Hughes
20,000
175,551
60,000 None
548,713 None
A.D. MacLennan
32,000
389,430
None None
None None
D.L. Wooden
None
None
44,000 None
423,621 None/R>
Pension Plan Tables
The following discussion relates to pension benefits
payable to the Named Executive Officers as
of December 31, 1995.
Great-West Life has a non-contributory pension plan
covering substantially all of its employees.
Great-West Life contributes such amounts as are necessary, on an
actuarial basis, to provide the plan
with assets sufficient to meet the benefits to be paid to plan
members. Contributions under the plan are
based on length of service and average annual compensation.
Compensation includes normal salary
and wages and does not include bonuses, overtime pay,
reimbursements or special pay.
The directors of Great-West Life or of GWL&A determine the
eligibility for, and the amount of,
supplemental executive retirement benefits.
The President and Chief Executive Officer is entitled to
the benefits shown in Table #1 and has
30 years of service. The Executive Vice President, Financial
Services; Senior Vice President, Chief
Investment Officer; Executive Vice President, Employee Benefits;
and Senior Vice President, Financial
Services, are entitled to the benefits shown in Table #1 and Table
#2, and have 31, 6, 30 and 5 years of
service respectively.
Table #1 - Employees' Pension Plan
Remuneration
($)
Years of Service
5 15 20 25
30 35 40
200,000 18,875 56,625 75,500 94,375
113,250 120,000 120,000
300,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
400,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
500,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
600,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
700,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
800,000 22,459 67,377 89,836 112,295
120,000 120,000 120,000
The benefits shown in Table #1 are payable upon the
attainment of age 65, the normal retirement
date, or age 62 with 35 years of service. Remuneration is the
average of the highest 60 consecutive
months of regular salary during the last 84 months of employment.
The determination of remuneration
and the pension amount are limited by Internal Revenue Service
maximums for qualified plans. The
normal form of pension is a life only annuity. Other optional
forms of pension payment are available on
an actuarially equivalent basis. The benefits listed in the table
are not subject to deduction for social
security or other offset amounts.
Table #2 - Supplemental Executive Retirement
Benefits
Remuneration
($) Years of Service
5 15 20 25
30 35 40
200,000 None None None None
None None None
300,000 401 15,123 22,664 30,205
52,500 52,500 52,500
400,000 10,401 45,123 62,664 80,205
112,500 112,500 112,500
500,000 20,401 75,123 102,664 130,205
172,500 172,500 172,500
600,000 30,401 105,123 142,664 180,205
232,500 232,500 232,500
700,000 40,401 135,123 182,664 230,205
292,500 292,500 292,500
800,000 50,401 165,123 222,664 280,205
352,500 352,500 352,500
The benefits shown in Table #2 are payable upon the
attainment of age 62, the normal retirement
date. Remuneration is the average of the highest 60 consecutive
months of compensation during the last
84 months of employment. Compensation includes salary and bonuses
prior to any deferrals. The
normal form of pension is a life only annuity. Other optional
forms of pension payment are available on
an actuarially equivalent basis. The benefits listed in the table
are not subject to deduction for social
security or other offset amounts.
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 99.5% by Great-West Lifeco Inc., both of which
share the same address. Great-West
Lifeco Inc. is owned 86.5% by Power Financial Corporation, 751
Victoria Square, Montreal, Quebec,
Canada H2Y 2J3. It is owned 68.3% by 171263 Canada Inc., which is
owned 100% by Power
Corporation of Canada, both of which share the same address as
Power Financial Corporation. 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 are at present no 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 currently a party to, and its
property is not currently subject to, any material legal
proceedings. The lawsuits to which the Company
is a party are, in the opinion of management, in the ordinary
course of business, and are not expected to
have a material adverse effect on the financial results, conditions
or prospects of the Company.
_________________________________________________________________
___________
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 Ruth 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
The standard nonforfeiture rate in all states, other than those
listed below is 3%.
Florida 0%
Mississippi 0%
Oklahoma 0%
<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
<PAGE>
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
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 1995, 1994 AND 1993
AND INDEPENDENT AUDITORS' REPORT
AND
UNAUDITED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED
JUNE 30, 1996 <PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 19, 1996
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
ASSETS
1995
1994
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost
(fair value $2,158,043 and $4,135,248)
$ 2,054,204
$4,293,985
Available for sale, at fair value
(amortized cost $6,087,969 and $2,997,087)
6,263,187
2,824,703
Common stock
9,440
5,222
Mortgage loans on real estate
1,713,195
2,011,059
Real estate
60,454
43,663
Policy loans
2,237,745
1,905,013
Short-term investments
134,835
706,920
Total Investments
12,473,060
11,790,565
Cash
90,939
131,621
Reinsurance receivable
333,924
295,148
Deferred policy acquisition costs
278,526
297,092
Investment income due and accrued
211,922
195,817
Other assets
40,038
55,579
Premiums in course of collection
85,990
84,478
Deferred income taxes
168,941
210,407
Separate account assets
3,998,878
2,554,836
TOTAL ASSETS
$17,682,218
$15,615,543
See notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDER'S EQUITY
1995
1994
POLICY BENEFIT LIABILITIES:
Policy reserves
$10,845,935
$10,334,456
Policy and contract claims
359,791
338,515
Policyholders' funds
154,872
144,262
Experience refunds
83,562
70,359
Provision for policyholders'dividends
47,760
41,840
GENERAL LIABILITIES:
Due to Parent Corporation
149,974
159,117
Repurchase agreements
372,965
564,160
Commercial paper
84,854
89,686
Other liabilities
453,889
420,154
Undistributed earnings on
participating business
136,617
120,927
Separate account liabilities
3,998,878
2,554,836
Total Liabilities
16,689,097
14,838,312
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 600 shares issued and
outstanding 60,000 60,000
Series B, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 200 shares issued and
outstanding 20,000 20,000
Series C, cumulative,
1500 shares authorized, none outstanding
Series D, cumulative,
1500 shares authorized, none outstanding
Series E, non-cumulative,
2,000,000 shares authorized,
liquidation value of $20.90
41,800 41,800
per share, issued, and outstanding
Common stock, $1 par value;
50,000,000 shares authorized;
7,032,000 shares issued and
outstanding 7,032 7,032
Additional paid-in capital
657,265
657,265
Net unrealized gains (losses) on
securities available-for-sale
58,763
(78,427)
Retained earnings
148,261
69,561
Total Stockholder's Equity
993,121
777,231
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY
$17,682,218
$15,615,543
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
REVENUES:
Annuity contract charges and
premiums
$79,816
$61,122
$63,210
Life, accident, and health premiums
earned (net of premiums ceded totaling
$60,880,
$48,115
and $254,969)
987,611
938,947
632,961
Net investment income
835,046
767,646
791,424
Net realized gains (losses) on
investments
7,465
(71,939)
25,342
1,909,938
1,695,776
1,512,937
BENEFITS AND EXPENSES:
Life and other policy benefits (net
of reinsurance recoveries totaling
$43,574,
$18,937,
and $151,598)
557,469
548,950
390,562
Increase in reserves
98,797
64,834
59,873
Interest paid or credited to
contractholders
562,263
529,118
623,417
Provision for policyholders' share
of earnings (losses)
on participating business
2,027
(725)
(1,498)
Dividends to policyholders
48,150
42,094
34,474
1,268,706
1,184,271
1,106,828
Commissions
122,926
120,058
90,472
Operating expenses
314,810
261,311
196,820
Premium taxes
26,884
27,402
23,129
1,733,326
1,593,042
1,417,249
INCOME BEFORE INCOME TAXES
176,612
102,734
95,688
PROVISION FOR INCOME TAXES:
Current
88,366
65,070
76,672
Deferred
(39,434)
(36,614)
(45,620)
48,932
28,456
31,052
NET INCOME
$127,680
$74,278
$64,636
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993 (Dollars in Thousands)
Net Additional
Unrealized Retained
Preferred Stock
Common Stock
Paid-In
Gains
Earnings
Shares
Amount
Shares
Amount
Capital
(Losses)
(Deficit)
Total
BALANCE, JANUARY 1, 1993
2,000,800
$121,800
7,028,217
$7,028
$647,199
$0
$(7,063)
$768,964
Issuance of common stock
3,783
4
496
500
Capital contributions
9,098
9,098
Dividends
(21,852)
(21,852)
Net income
64,636
64,636
BALANCE, DECEMBER 31, 1993
2,000,800
121,800
7,032,000
7,032
656,793
0
35,721
821,346
Adjustment to beginning
balance for change in
accounting method for investment
securities
6,515
6,515
Change in net unrealized
gains (losses)
(84,942)
(84,942)
Capital contributions
472
472
Dividends
(40,438)
(40,438)
Net income
74,278
74,278
BALANCE, DECEMBER 31, 1994
2,000,800
121,800
7,032,000
7,032
657,265
(78,427)
69,561
777,231
Change in net unrealized
gains (losses)
137,190
137,190
Dividends
(48,980)
(48,980)
Net income
127,680
127,680
BALANCE, DECEMBER 31,
1995
2,000,800
$121,800
7,032,000
$7,032
$657,265
$58,763
$148,261
$993,121
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
OPERATING ACTIVITIES:
Net income
$127,680
$74,278
$64,636
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain (loss) allocated to
par policyholders
2,027
(725)
(1,498)
Amortization of
investments
26,725
36,978
36,782
Realized losses (gains) on
disposal of investments
and write-downs of
mortgage loans and real estate
(7,465)
71,939
(25,342)
Amortization
49,464
29,197
34,115
Deferred income taxes
(39,763)
(38,631)
(56,959)
Changes in assets and
liabilities:
Policy benefit
liabilities
346,975
93,998
438,809
Reinsurance receivable
(38,776)
(25,868)
352,106
Accrued interest and
other receivables
(17,617)
(26,032)
(19,817)
Other, net
8,834
96,950
119,284
Net cash provided by operating activities
458,084
312,084
942,116
INVESTING ACTIVITIES:
Proceeds from sales,
maturities, and redemptions of
investments:
Fixed maturities
4,744,309
Held-to-maturity
Sales
18,821
16,014
Maturities and redemptions
655,993
1,034,324
Available-for-sale
Sales
4,211,649
1,753,445
Maturities and redemptions
253,747
141,299
Mortgage loans
260,960
291,102
339,406
Real estate
4,401
29,868
22,974
Common stock
178
Purchases of investments:
Fixed maturities
(5,494,534)
Held-to-maturity
(490,228)
(673,567)
Available-for-sale
(4,932,566)
(2,606,028)
Mortgage loans
(683)
(9)
(52,917)
Real estate
(5,302)
(9,253)
(14,303)
Common stock
(4,218)
(2,063)
Net cash used in
investing activities
(27,426)
(24,690)
(455,065)
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
FINANCING ACTIVITIES:
Contract withdrawals, net of
deposits
$(217,190)
$(238,166)
$(590,118)
Due to Parent Corporation
(9,143)
(13,078)
(149,510)
Dividends paid
(48,980)
(40,438)
(21,852)
Net commercial paper (repayments)
borrowings
(4,832)
89,686
Net repurchase agreements
(repayments) borrowings
(191,195)
(39,244)
311,937
Net cash used in
financing activities
(471,340)
(241,240)
(449,543)
NET INCREASE IN CASH
(40,682)
46,154
37,508
CASH, BEGINNING OF YEAR
131,621
85,467
47,959
CASH, END OF YEAR
$90,939
$131,621
$85,467
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes
$83,841
$68,892
$87,778
Interest
17,016
12,229
7,438
See notes to consolidated financial
statements.
(Concluded)
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 equires 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 stockholder's 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 management's 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.
Management's 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 Company's 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
Liabilities and
Stockholder's Equity
Bonds
$217,254
Policy reserves
$253,479
Mortgage loans
27,182
Cash and short-term
investments
5,607
Investment income
due & accrued
3,436
$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
Liabilities and
Stockholder's Equity
Bonds
$171,005
Policy reserves
$180,000
Cash and short-term
investments
8,087
Investment income
due & accrued
908
$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:
Years Ended December 31,
1995
1994
1993
Investment management expense
(included in net
investment income)
$15,182
$13,841
$17,767
Administrative and underwriting
payments (included
in operating expenses)
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:
Assumed
Ceded
Primarily
Percentage
Primarily to
From
of
Amount
Gross
the Parent
Other
Net
Assumed
to
Amount
Corporation
Companies
Amount
Net
December 31, 1995:
Life insurance in force:
Individual
$22,388,520
$7,200,882
$3,476,784
$18,664,422
18.6%
Group
48,415,592
1,954,313
50,369,905
3.9%
Total
$70,804,112
$7,200,882
$5,431,097
$69,034,327
Premiums:
Life insurance
$339,342
$51,688
$21,028
$308,682
6.8%
Accident/health
623,626
9,192
64,495
678,929
9.5%
Total
$962,968
$60,880
$85,523
$987,611
December 31, 1994:
Life insurance in force:
Individual
$21,461,590
$7,411,811
$3,415,596
$17,465,375
19.6%
Group
48,948,669
2,102,228
51,050,897
4.1%
Total
$70,410,259
$7,411,811
$5,517,824
$68,516,272
Premiums:
Life insurance
$322,263
$42,946
$22,009
$301,326
7.3%
Accident/health
579,650
5,169
63,140
637,621
9.9%
Total
$901,913
$48,115
$85,149
$938,947
December 31, 1993:
Life insurance in force:
Individual
$17,131,994
$7,797,389
$3,142,723
$12,477,328
25.2%
Group
37,789,859
2,108,314
39,898,173
5.3%
Total
$54,921,853
$7,797,389
$5,251,037
$52,375,501
Premiums:
Life insurance
$283,707
$112,798
$18,753
$189,662
9.9%
Accident/health
524,747
142,171
60,723
443,299
13.7%
Total
$808,454
$254,969
79,476
$632,961
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
1995
1994
1993
Investment income:
Bonds and short-term
investments
$592,062
$555,103
$545,926
Mortgage loans on real
estate
171,008
182,544
220,477
Real estate
3,936
5,700
9,265
Policy loans
163,547
116,060
91,529
930,553
859,407
867,197
Investment expenses,
including interest on
amounts charged by the
Parent Corporation
of $10,778, $11,145, and
$7,250
95,507
91,761
75,773
Net investment income
$835,046
$767,646
$791,424
5. NET REALIZED GAINS (LOSSES) ON
INVESTMENTS
Net realized gains (losses) on
investments are as follows:
Years Ended December 31,
1995
1994
1993
Net realized gains
(losses):
Bonds
$28,166
$(39,775)
$68,884
Mortage loans on real
estate
1,309
2,120
(98)
Real estate
(10)
(102)
(102)
Bond provisions
(5,000)
(3,200)
(4,456)
Mortgage loan provisions
(15,877)
(27,918)
(38,089)
Real estate provisions
(1,123)
(3,064)
(797)
Net realized gains
(losses) on investments
$7,465
$(71,939)
$25,342
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31,
1995 are summarized as follows:
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Carrying Cost
Gains
Losses
Value
Value
Held-to-Maturity:
U.S. Treasury
Securities and
obligations of U.S.
Government Agencies:
Collateralized
mortgage obligations
$
$
$
$
$
Direct mortgage pass-through
certificates
Other
11,107
1,093
12,200
11,107
Collateralized
mortgage obligations
Public utilities
269,671
22,084
95
291,660
269,671
Corporate bonds
1,732,046
83,583
5,867
1,809,762
1,732,046
Foreign governments
18,596
1,087
12
19,671
18,596
State and
municipalities
22,784
1,966
24,750
22,784
$2,054,204
$109,813
$5,974
$2,158,043
$2,054,204
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$561,475
$9,983
$1,948
$569,510
$569,510
Direct mortgage pass-through
certificates
794,056
11,980
2,233
803,803
803,803
Other
561,736
7,703
39
569,400
569,400
Collateralized
mortgage obligations
490,074
18,044
3,304
504,814
504,814
Public utilities
581,482
16,607
2,425
595,664
595,664
Corporate bonds
2,943,918
121,537
26
3,065,429
3,065,429
Foreign governments
141,362
5,021
5,644
140,739
140,739
State and
municipalities
13,866
22
60
13,828
13,828
$6,087,969
$190,897
$15,679
$6,263,187
$6,263,187
6.SUMMARY OF INVESTMENTS (Continued)
Fixed maturities owned at December 31, 1994 are summarized as
follows:
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair Carrying Cost
Gains
Losses
Value
Value
Held-to-Maturity:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$521,408
$389
$33,018
$488,779
$521,408
Direct
mortgage pass-through
certificates
69,559
617
1,001
69,175
69,559
Other
85,406
246
923
84,729
85,406
Collateralized
mortgage obligations
309,869
1,205
14,208
296,866
309,869
Public utilities
457,758
2,898
14,340
446,316
457,758
Corporate bonds
2,757,612
14,701
111,410
2,660,903
2,757,612
Foreign governments
90,690
47
3,950
86,787
90,690
State and
municipalities
1,683
10
1,693
1,683
$4,293,985
$20,113
$178,850
$4,135,248
$4,293,985
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$80,531
$
$3,798
$76,733
$76,733
Direct
mortgage pass-through
certificates
759,815
871
49,462
711,224
711,224
Other
198,651
9
2,654
196,006
196,006
Collateralized
mortgage obligations
203,036
6,379
196,657
196,657
Public utilities
325,383
193
26,379
299,197
299,197
Corporate bonds
1,119,726
3,253
65,398
1,057,581
1,057,581
Foreign governments
298,597
17
21,826
276,788
276,788
State and
municipalities
11,348
831
10,517
10,517
$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.
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 stockholder's
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.
Held-to-
Maturity
Available-
for-Sale
Amortized
Estimated
Amortized
Estimated
Cost
Fair Value Cost
Fair Value Due in one year or
less
$287,565
$293,666
$326,032
$337,792
Due after one year
through five years
838,993
877,949
1,452,442
1,495,755
Due after five years
through ten years
537,365
575,896
1,023,894
1,064,871
Due after ten years
159,064
173,487
522,002
542,559
Mortgage-backed
securities
1,845,605
1,878,127
Asset-backed
securities
231,217
237,045
917,994
944,083
$2,054,204
$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 nto 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:
Notional
Strike/Swap
December 31, 1995
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Cap
100,000
11.0% [CMT]
2000
Interest Rate Swaps
165,000
6.203% to
9.35%
01/98 to
2/2002
Foreign Currency
Exchange Contracts
66,650
N/A
10/96 to
09/98
Notional
Strike
December 31, 1994
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Swaps
150,000
6.275% to
10.644%
01/95 -
01/2000
Foreign Currency
Exchange Contracts
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
$57,987
Provision for loan losses
15,877
Direct chargeoffs
(10,480)
Recoveries
610
Balance at December 31, 1995
$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%
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:
December 31,
1995
1994
Estimated
Carrying
Estimated
Carrying
Fair
Amount
Fair
Value
Amount
Value
ASSETS:
Fixed maturities
and short-term
investments
$8,452,226
$8,556,065
$7,825,608
$7,666,871
Mortgage loans
on real estate
1,713,195
1,749,514
2,011,059
2,037,694
Policy loans
2,237,745
2,237,745
1,905,013
1,905,013
Common stock
9,440
9,440
5,222
5,222
LIABILITIES:
Annuity contract
reserves
without life
contingencies
6,170,760
6,268,749
6,338,529
6,286,966
Policyholders'
funds
154,872
154,872
144,262
144,262
Due to Parent
Corporation
149,974
152,347
159,117
159,334
Repurchase agreements
372,965
372,965
564,160
564,160
Commercial paper
84,854
84,854
89,686
89,686
HEDGE CONTRACTS:
Interest rate
floor
84
1,320
88
76
Interest rate cap
90
90
Interest rate swaps
10,052
10,052
(771)
(771)
Foreign currency
exchange contracts
(4,604)
(4,604)
(4,345)
(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.
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 Company's effective rate:
1995
1994
1993
Federal tax rate
35.0%
35.0%
35.0%
Change in tax rate resulting
from:
Investment income not
subject to federal tax
(0.5)
(1.0)
(1.2)
Effect of tax rate change
on net deferred tax assets
(1.8)
Change in valuation
allowance
(7.8)
(6.9)
1.0
State and environmental
taxes
0.7
0.9
Other, net
0.3
(0.3)
(0.5)
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:
1995
1994
Deferred Tax
Asset
Deferred Tax
Liability
Deferred Tax
Asset
Deferred Tax
Liability
Policyholder
reserves
$162,073
$
$119,764
$
Deferred policy
acquisition costs
55,542
62,040
Deferred acquisition
cost proxy tax
58,481<PAGE>
45,422
Investment assets
16,372
97,249
Net operating loss
carryforwards
17,588
22,666
Tax credits and
other
4,786
2,564
Subtotal
242,928
71,914
287,665
62,040
Valuation allowance
(2,073)
(15,218)
Total Deferred Taxes
$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 Company's 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 Company's 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:
1995
1994
1993
(Unaudited)
Net Income
$114,931
$70,091
$55,995
Capital and Surplus
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>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
[Unaudited] (Dollars in Thousands)
ASSETS 1996
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value $2,017,628)
$1,989,272
Available for sale, at fair value (amortized cost $5,956,330)
5,947,759
Common stock 7,795
Mortgage loans on real estate 1,590,311
Real estate 55,196
Policy loans 2,430,496
Short-term investments 362,457
Total Investments 12,383,286
Cash
101,838
Reinsurance receivable 351,769
Deferred policy acquisition costs 287,350
Investment income due and accrued 199,197
Other assets 43,944
Premiums in course of collection
77,031
Deferred income taxes
220,940
Separate account assets
4,735,338
TOTAL ASSETS
$18,400,693<PAGE>
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
[Unaudited] (Dollars in Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
1996
POLICY BENEFIT LIABILITIES:
Policy reserves
$10,840,919
Policy and contract claims
370,678
Policyholders' funds
148,833
Experience refunds
84,682
Provision for policyholders' dividends\
49,047
GENERAL LIABILITIES:
Due to Parent Corporation
132,479
Repurchase agreements
429,606
Commercial paper
74,651
Other liabilities\
434,837
Undistributed earnings on
participating business
131,647
Separate account liabilities
4,735,338
Total Liabilities
17,432,717
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
600 shares issued and outstanding
60,000
Series B, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
200 shares issued and outstanding
20,000
Series C, cumulative, 1500 shares authorized,
none outstanding
Series D, cumulative, 1500 shares authorized,
none outstanding
Series E, non-cumulative, 2,000,000
shares authorized, liquidation value of $20.90
per share, issued, and outstanding
41,800
Common stock, $1 par value; 50,000,000 shares authorized;
7,032,000 shares issued and outstanding
7,032
Additional paid-in capital
657,265
Net unrealized gains (losses) on securities available-for-sale
(8,057)
Retained earnings
189,936
Total Stockholder's Equity
967,976
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
18,400,693
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
[Unaudited] (Dollars in Thousands)
Six Months Ended
June 30,1996 1995
REVENUES:
Annuity contract charges and premiums
$43,436
$37,240
Life, accident, and health premiums earned (net of
premiums ceded totaling $30,430 and $39,280)
481,244
484,451
Net investment income
413,107
410,883
Net realized gains (losses) on investments
(22,895)
4,021
914,892
936,595
BENEFITS AND EXPENSES:
Life and other policy benefits (net of reinsurance
recoveries totaling $25,511 and $19,801)
254,382
278,966
Increase in reserves
35,293
56,658
Interest paid or credited to contractholders
285,379
275,251
Provision for policyholders' share of earnings
(losses) on participating business
270
620
Dividends to policyholders
22,766
21,486
598,090
632,981
Commissions
52,130
63,382
Operating expenses
160,397
148,100
Premium taxes
11,459
11,703
822,076
856,166
INCOME BEFORE INCOME TAXES
92,816
80,429
PROVISION FOR INCOME TAXES:
Current
37,167
37,797
Deferred
(13,014)
(9,173)
24,153
28,624
NET INCOME
$68,663
$51,805
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
[Unaudited] (Dollars in Thousands)
1996
1995
OPERATING ACTIVITIES:
Net income
$68,663
$51,805
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain (loss) allocated to par policyholders
271
620
Amortization of investments
11,595
14,405
Realized losses (gains) on disposal of investments
and write-downs of mortgage loans and real
estate
22,895
(3,808)
Amortization
17,751
18,264
Deferred income taxes
(13,197)
(9,357)
Changes in assets and liabilities:
Policy benefit liabilities
121,414
253,443
Reinsurance receivable
(17,845)
(17,427)
Accrued interest and other receivables
21,684
4,803
Other, net
(32,723)
(38,505)
Net cash provided by operating activities
200,508
274,243
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to-maturity
Sales
11,465
Maturities and redemptions
273,081
309,806
Available-for-sale
Sales
1,954,015
2,177,943
Maturities and redemptions
438,132
41,322
Mortgage loans
124,707
131,754
Real estate
2,110
2,040
Common stock
1,724
Purchases of investments:
Fixed maturities
Held-to-maturity
(210,604)
(520,285)
Available-for-sale
(2,516,333)
(2,021,737)
Mortgage loans
(3,485)
(2,682)
Real estate
(2,518)
(3,170)
Common stock
(79)
(139)
Net cash provided by investing activities
60,750
126,317
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
[Unaudited] (Dollars in Thousands)
1996
1995
FINANCING ACTIVITIES:
Contract withdrawals, net of deposits
$(252,315)
$(166,535)
Due to Parent Corporation
(17,495)
13,421
Dividends paid
(26,987)
(22,139)
Net commercial paper (repayments) borrowings
(10,203)
(5,343)
Net repurchase agreements (repayments)
borrowings
56,641
(247,863)
Net cash used in financing activities
(250,359)
(428,459)
NET INCREASE [DECREASE] IN CASH
10,899
(27,899)
CASH, BEGINNING OF YEAR
90,939
131,621
CASH, END OF PERIOD
$101,838
$103,722
See notes to consolidated financial statements.
(Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements and related notes have
been prepared in accordance
with generally accepted accounting principles for interim
financial reporting. Accordingly,
certain information and footnote disclosures normally
included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed
or omitted. In the opinion of management, all adjustments
[consisting of only normal
recurring accruals] considered necessary for fair
presentation of the Companys income tax liability for
fiscal years prior to 1994, the Company had previously
recorded a contingent liability
provision. The Companys estimate may change as a result of
the completion of the IRS audits.
2. OTHER
Pursuant to a December 31, 1993 agreement between the
Company and its Parent whereby the Company assumed
responsibility for the Parent Corporation's income tax
liability for fiscal years prior to 1994, the Company had
previously recorded a contingent liability provision.
The Company's 1996 results of operations include a
release of $25,600 from that provision, to reflect the
resolution of 1988 and 1989 tax issues with the Internal
Revenue Service. In the opinion of Company management,
the remaining amounts paid or accrued are adequate,
however, it is possible that the Company's estimate may
change as a result of the completion of the IRS audits.<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-4
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 incorporated under the laws of
Canada. The Great-West Life Assurance Company is in turn owned
99.5% by Great-West Lifeco Inc., a holding company. Great-West
Lifeco Inc. is owned 86.5% by Power Financial Corporation, a
financial services company. Power Corporation of Canada, a holding
and management company, has voting control of Power Financial
Corporation. 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 1940 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 the Contracts and other amounts
in excess of the Series Account assets 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 insulated from liability associated with another Investment
Division.
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 option 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 option 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.
SERVICES
A. Safekeeping of Series Account Assets
The assets of Variable Annuity-1 Series
Account (the
"Series Account") are held by the Company. 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 Association 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. 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
(2) 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 Division's 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 Division's 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 has 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 and unaudited financial statements
for the
period ended June 30, 1996 are included in the
prospectus.
(b) Exhibits
(1) Certified copy of resolution of Board of
Directors
or Depositor establishing Registrant is
incorporated by
reference to Registrant's Registration
Statement.
(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
is attached as Exhibit 4.
(5) Copy of the form of application to be
used with the
variable annuity contract provided pursuant to
(4) is
attached as Exhibit 5.
(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
incorporated by referenced to Registrant's
Registration
Statement.
(10)(a) Written Consent of Jorden Burt
Berenson
&
Johnson LLP incorporated by
reference to
Registrant's Registration
Statement.
(b) Written Consent of Deloitte &
Touche LLP is
attached as Exhibit 10b.
(c) Written Consent of Ruth B. Lurie
is
incorporated by reference to
Registrant's
Registration Statement.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule for computation of each
performance
quotation provided in response to Item 21 is
incorporated
by reference to Registrant's Registration
Statement.
<PAGE>
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 574 Spoonbill Drive
Director
Sarasota, Florida 34236
Robert Gratton (5)
Chairman
N. Berne Hart 2552 East Alameda Avenue,
#99 Director
Denver, Colorado 80209
Kevin P. Kavanagh (1)
Director
William Mackness 61 Waterloo Street
Director
Winnipeg, Manitoba R3N 0S3
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
Glen Derback (3) Vice President,
Financial
Control
and
Controller
<PAGE>
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,
Financial
Services
______________________________________
(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 Business Corporation
Act 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>
ORGANIZATIONAL CHART
Power Corporation of Canada
100% - 171263 Canada Inc.
68.5% - Power Financial Corporation
86.5% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado,
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.
Item 28. Indemnification
Provisions exist under the Colorado Business
Corporation Act
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:
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
known 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 & Co., Inc. ("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 and
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
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4
to be signed on its behalf, in the City of Englewood, State of
Colorado, on this 30th day of July , 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
/s/ Robert Gratton
, 1996
Director and Chairman of the
Board (Robert Gratton)
/s/ W.T. McCallum ,
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
Pre-Effective Amendment No. 1 to the 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: /s/ William 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/ William 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
/s/ Robert Gratton* ,1996
Director and Chairman of the
Board (Robert Gratton)
/s/ William T. McCallum , 1996
Director, President and Chief Executive
Officer (William T. McCallum)
Signature and Title Date
/s/ G.R. Derback , 1996
Controller
(Glen R. Derback)
/s/ James Balog , 1996
Director, (James Balog)
/s/ James W. Burns , 1996
Director, (James W. Burns)
/s/ Orest T. Dackow , 1996
Director (Orest T. Dackow)
/s/ Paul Desmarais, Jr. , 1996
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham , 1996
Director (Robert G. Graham)
/s/ N. Berne Hart , 1996
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh , 1996
Director (Kevin P. Kavanagh)
/s/ William Mackness , 1996
Director (William Mackness)
<PAGE>
Signature and Title Date
/s/ Glen R. Derback , 1996
Controller
(Glen R. Derback)
/s/ James Balog* , 1996
Director, (James Balog)
/s/ James W. Burns* , 1996
Director, (James W. Burns)
/s/ Orest T. Dackow* , 1996
Director (Orest T. Dackow)
/s/ Paul Desmarais, Jr.* , 1996
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham* , 1996
Director (Robert G. Graham)
/s/ N. Berne Hart* , 1996
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* , 1996
Director (Kevin P. Kavanagh)
/s/ William Mackness* , 1996
Director (William Mackness)
<PAGE>
Signature and Title Date
/s/ Jerry E.A. Nickerson* , 1996
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield* , 1996
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* , 1996
Director (Michel Plessis-Belair)
/s/ Ross J. Turner* , 1996
Director (Ross J. Turner)
/s/ Brian E. Walsh* , 1996
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox , 1996
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with the
Registration Statement and this Pre-Effective Amendment No. 1.
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
Know all men by these presents, that I, R.G. Graham, 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 and Schwab Variable Annuity Series
Account, a separate and distinct account of Great-West Life &
Annuity
Insurance Company governed under the provisions of the Colorado
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company Act of 1940 and any rules, regulations, and
requirements of the Securities and Exchange Commission thereunder,
in
connection with the registration under said Acts of variable
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 N-4) of
Great-
West Life & Annuity Insurance Company and Schwab Variable Annuity
Series Account (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 20th day of
February , 1996.
/s/ R.G. Graham
Member, Board of Directors
Great-West Life & Annuity
Insurance
Company
Witness:
/s/ Kathleen Watson
<PAGE>
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
Know all men by these presents, that I, K.P. Kavanagh, 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 and Schwab Variable Annuity Series
Account, a separate and distinct account of Great-West Life &
Annuity
Insurance Company governed under the provisions of the Colorado
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company Act of 1940 and any rules, regulations, and
requirements of the Securities and Exchange Commission thereunder,
in
connection with the registration under said Acts of variable
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 N-4) of
Great-
West Life & Annuity Insurance Company and Schwab Variable Annuity
Series Account (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 19th day of
January , 1996.
/s/ K.P. Kavanagh
Member, Board of Directors
Great-West Life & Annuity
Insurance
Company
Witness:
/s/ Lori I. Gould
EXHIBIT 4(a)<PAGE>
PLEASE READ THIS ANNUITY CERTIFICATE CAREFULLY.
PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT VALUE MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT,
AND MAY RESULT IN POSITIVE AND NEGATIVE ADJUSTMENTS TO AMOUNTS
PAYABLE DUE TO SURRENDERS AND
TRANSFERS, AMOUNTS APPLIED TO PURCHASE AN ANNUITY, AND
DISTRIBUTIONS RESULTING FROM DEATH OF AN
OWNER OR THE ANNUITANT. A NEGATIVE ADJUSTMENT MAY RESULT IN AN
EFFECTIVE RATE LOWER THAN THE
GUARANTEED INTEREST RATE BEING CREDITED AND THE FIXED ACCOUNT VALUE
BEING LESS THAN THE
CONTRIBUTIONS.
ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT VALUE ARE
VARIABLE, MAY INCREASE OR DECREASE ACCORDINGLY, AND ARE NOT
GUARANTEED AS TO AMOUNT.
A 10% FEDERAL TAX PENALTY MAY APPLY IF A SURRENDER, WITHDRAWAL, OR
DISTRIBUTION IS TAKEN PRIOR TO THE
TAXPAYER'S ATTAINMENT OF AGE 59 1/2.
FREE LOOK PERIOD
10 DAY RIGHT TO EXAMINE CERTIFICATE. IF NOT SATISFIED WITH THE
CERTIFICATE, RETURN
IT TO THE COMPANY OR THE SCHWAB ANNUITY SERVICE CENTER WITHIN 10
DAYS OF
RECEIVING IT. THE CERTIFICATE WILL BE VOID FROM THE START, AND THE
COMPANY WILL
REFUND THE GREATER OF: 1) CONTRIBUTIONS RECEIVED; OR 2) THE ANNUITY
ACCOUNT VALUE
LESS SURRENDERS, WITHDRAWALS, AND DISTRIBUTIONS.
Signed for Great-West Life & Annuity Insurance Company on the
issuance of this Certificate.
D.C. Lennox, W.T.
McCallum,
Secretary President
and Chief Executive Officer
J434
(96)<PAGE>
Annuity Certificate Number: 1234567
Effective Date: March 1, 1996
Status of Annuity: Non-Qualified
Initial Contribution: $5,000
Payment Commencement Date: March 1, 2006
Owner: JOHN C. DOE
Date of Birth: April 1, 1944
Tax ID Number: 111-11-1111
Joint Owner: JANE B. DOE
Date of Birth: November 12, 1948
Tax ID Number: ###-##-####
Annuitant: JOHN C. DOE
Date of Birth: March 22, 1942
Tax ID Number: ###-##-####
Contingent Annuitant: DAVID J. DOE
Date of Birth: June 6, 1964
Tax ID Number: ###-##-####
This Certificate Data Page, together with the Initial Premium
Allocation Confirmation, reflects the information with
which your Certificate has been established as of the Effective
Date. If you wish to change or correct any
information on this page, please call the Schwab Annuity Service
Center immediately at 1-800-838-0650.
GUARANTEED INTEREST RATE: [3%]
CHARGES: Charges at the time we issued this Certificate are shown
below.
Risk Charge:
Mortality: Expense:
Total:
.68% maximum .17% maximum .85% maximum
Certificate Maintenance Charge: $25.00 maximum annually
PAYMENT COMMENCEMENT DATE: The date on which annuity payments or
periodic withdrawals will start. This
Certificate Data Page indicates the date that you selected, or if
no date is specified, the latest date on which
payments can start. (You may change the Payment Commencement
Date prior to commencement of annuity
payments, or it may be changed by the Beneficiary upon the death
of an Owner.)
Schwab Annuity Service Center
P.O. Box 7785
San Francisco, California 94120-9420
1-800-838-0650
Policyholder: Charles Schwab & Co., Inc.
Beneficiary: Sally Smith
Date of Birth: January 17, 1956
Tax ID Number: ###-##-####
<PAGE>
Use this Table of Contents to locate specific topics in this
annuity Certificate.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 3
GENERAL PROVISIONS
Entire Contract . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Certificate Modification. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Non-Participating . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Misstatement of Age . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Reports . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Notice and Proof. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Tax Consequences of Payments. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Currency. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Voting Rights . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
OWNERSHIP PROVISIONS
Rights of Owner . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Beneficiary . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Designation of Beneficiary. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Change of Beneficiary . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Death of Beneficiary. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Successive Beneficiaries. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Annuitant . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Contingent Annuitant. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Change of Ownership . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Collateral Assignment . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Ownership of Series Account . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
CONTRIBUTIONS PROVISIONS
Effective Date. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Contributions . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Allocation of Contributions . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
ACCOUNT VALUE AND MARKET VALUE ADJUSTMENT PROVISIONS
Certificate Maintenance Charge. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Variable Account Value. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Accumulation Units. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Accumulation Unit Value . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Net Investment Factor . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Risk Charge . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Guarantee Period Fund . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Value of Guarantee Period . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .10
Allocation at Guarantee Period Maturity Date. . . . . .
. . . . . . . . . . . . . . . . . .10
Breaking a Guarantee Period . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .10
Market Value Adjustment . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .11<PAGE>
Use this Table of Contents to locate specific topics in this
annuity Certificate.
TRANSFER PROVISIONS
Transfers . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .11
Dollar Cost Averaging . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .12
The Rebalancer Option . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .12
DEATH BENEFIT PROVISIONS
Payment of Death Benefit. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .13
Distribution Rules. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .13
Compliance with Code Section 72(s). . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
SURRENDERS AND PARTIAL WITHDRAWALS
Surrender Benefit . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
Partial Withdrawals . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
Postponement. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
PAYMENT OPTIONS
How to Elect. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Selection of Payment Options. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Variable Annuity Payment Options. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Fixed Annuity Payment Options . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .16
Periodic Withdrawal Option. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
How to Elect Periodic Withdrawals . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
Periodic Withdrawal Options Available . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
<PAGE>
Accumulation Period - the period between the Effective
Date and the Payment Commencement Date.
Accumulation Unit - an accounting measure used to
determine the Variable Account Value before the date
annuity payments commence.
Annuitant - the person named in the application and in
the Certificate Data Page 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.
Annuity Account - an account that reflects the total
value of the Owner's Variable and Fixed Sub-Accounts.
Annuity Account Value - the sum of the Variable and
Fixed Sub-Accounts credited to the Owner under the
Annuity Account.
Annuity Payment Period - the period beginning on the
Payment Commencement Date and continuing until all
annuity payments have been made under this
Certificate.
Annuity Unit - an accounting measure used to
determine the dollar value of any variable dollar
annuity payment after the first annuity payment is
made.
Automatic Contribution Plan - a plan provided to the
Owner to allow for automatic payment of
Contributions. The Contribution amount will be
withdrawn from a pre-authorized account and
automatically credited to the Annuity Account.
Beneficiary - the person(s) designated by the Owner to
receive death proceeds which may become payable
upon the death of an Owner or the Annuitant. If the
surviving spouse of an Owner is the surviving Joint
Owner, the surviving spouse will be deemed to be the
Beneficiary upon such Owner's death and may take
the death benefit or elect to continue this Certificate in
force. The Beneficiary is shown on the Certificate
Data Page unless later changed by the Owner.
Certificate - the document issued to the Owner which
specifies the rights and obligations of the Owner.
<PAGE>
Company - Great-West Life & Annuity Insurance
Company, the underwriter for this annuity, located at
8515 East Orchard Road, Englewood, Colorado 80111.
Contingent Annuitant - the person named in the
application who will become the Annuitant upon the
death of the Primary Annuitant. The Contingent
Annuitant is the person named in the Certificate Data
Page, unless later changed by Request while the
Primary Annuitant is alive and before annuity
payments have commenced.
Contract - the document issued to the Policyholder
which specifies the rights and obligations of the
Policyholder.
Contributions - purchase amounts received and allocated
to the Variable or Fixed 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 in which the assets of the Series Account may
be invested.
Fixed Account Value - the sum of the values of the
Fixed Sub-Accounts credited to the Owner under the
Annuity Account.
Fixed Sub-Accounts - the sub-division(s) of the Annuity
Account described in the Certificate and in the
attached Fixed Sub-Account Riders, if any.
Guarantee Period - one of the terms of the Guarantee
Period Fund available under this Certificate. The
Company will specify the Guarantee Period terms that
are available and the predetermined rate of interest
that will apply to each of the Guarantee Period terms.
This rate of interest will be equal to the annual
effective rate in effect at the time the Contribution is
made and as reflected in written confirmation of the
Contribution. The Company may stop offering any
term at any time for new Contributions. Amounts
allocated to one or more Guarantee Periods may be
subject to a Market Value Adjustment.
Guarantee Period Fund - A type of Fixed Sub-Account.
Guarantee Period Maturity Date - the last day of any
Guarantee Period.
Guaranteed Interest Rate - the minimum interest rate
applicable to each Fixed Sub-Account in effect at the
time the Contribution is made. This is the minimum
interest rate allowed by law and is subject to change in
accordance with changes in applicable law.
Individual Retirement Annuity (IRA) - an annuity
Certificate used for 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 a specific portfolio of the
Eligible Fund. There is an Investment Division for each
portfolio of the 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 a periodic withdrawal or to
purchase an annuity, and distributions resulting from the
death of an Owner or the 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 Guaranteed Interest
Rate applicable to this Certificate and the value of the
Contribution(s) allocated to the Guarantee Period being
less than the Contribution(s) made.
Non-qualified Annuity Certificate - an annuity Certificate
which is not intended to be a 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 Owners) - the person or persons named in
the Certificate Data Page. The Owner is entitled to
exercise all rights and privileges under the Certificate,
while the Annuitant is living, except as reserved by the
Policyholder. Joint Owners must be husband and wife as
of the Effective Date. The Annuitant will be the Owner
unless otherwise indicated in the application. If a
Certificate is purchased as an Individual Retirement
Annuity under Section 408 of the Code, the Annuitant
must be the sole Owner; no Joint Owner may be named.
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 this Certificate's Effective
Date. If a Payment Commencement Date is not shown
on the Certificate Data Page, annuity payments will begin
on the first day of the month of the Annuitant's 91st
birthday. The Payment Commencement Date may be
changed by the Owner prior to commencement of
annuity payments or it may be changed by the Beneficiary
upon the death of an Owner. If this is an IRA
Certificate, payments which satisfy the minimum
distribution requirements of the Code must begin no
later than the Owner/Annuitant's attainment of age 70
1/2.
Policyholder - Charles Schwab & Co., Inc., the
organization entering into the contract and whose name
appears on the Certificate Data Page as the Policyholder.
Premium Tax - the amount of tax, if any, charged by a
state or other governmental authority.
Request - any instruction in a form, written, telephoned or
computerized, 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 this Certificate or as
required by the Company. The Request is subject to any
action taken or payment made by the Company before it
was processed.
Schwab Annuity Service Center - Post Office Box 7785, San
Francisco, California 94120-9420. The toll-free telephone
number is 1-800-838-0650.
Simplified Employee Pension (SEP) - 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.
Series Account - the segregated investment account
established by the Company under Colorado law and
registered as a unit investment trust under the
Investment Company Act of 1940, as amended.
Surrender Value - will be equal to:
(a)Annuity Account Value with a Market Value
Adjustment, if applicable, on the effective date of the
surrender; less (b) 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 valued on each date that
the New York Stock Exchange is open for trading.
Transfer - the moving of money from one sub-account to
one or more sub-account(s).
Valuation Date - the date on which the net asset value of
each Eligible Fund is determined.
Valuation Period - the period between two successive
Valuation Dates.
Variable Account Value - the sum of the values of the
Variable Sub-Accounts credited to the Owner under the
Annuity Account. The Variable Account Value is
credited with a return based upon the investment
experience of the Investment Division(s) selected by the
Owner and will increase or decrease accordingly.
Variable Sub-Accounts - sub-division(s) of the Owner's
Annuity Account containing the value credited to the
Owner from an Investment Division.
<PAGE>
What is your agreement with us?
ENTIRE CONTRACT
This Certificate, Certificate Data Page, tables, riders and
amendments, if any, form the Entire Contract between
the Owner and the Company. This Entire Contract
supersedes all prior representations, statements,
warranties, promises and agreements of any kind, whether
oral or written, relating to the subject matter of this
Certificate. All statements in the application, made by an
Owner or the Annuitant, in the absence of fraud, will be
considered representations and not warranties.
How can this Certificate be modified?
CERTIFICATE MODIFICATION
This Certificate may be modified only by written
agreement between the Company and the Policyholder,
except that upon 30 days notice to the Policyholder, the
Company may at any time and without the consent of the
Policyholder or any other person, modify this Certificate
as needed to conform to changes in tax or other law.
Such modifications will become part of this Certificate.
If this Certificate is purchased as an IRA, the Company
reserves the right to modify this Certificate to the extent
necessary to qualify it as an Individual Retirement
Annuity as described in Section 408 of the Internal
Revenue Code of 1986, as amended, and all related
sections and regulations which are in effect during the
term of this Certificate.
The Company may terminate certain Variable and Fixed
Sub-Accounts. In that event, the Owner, by Request,
may change the allocation of the Contributions and
maturing Guarantee Periods. If no Request is made by
the date the sub-account is terminated, future
Contributions and maturing Guarantee Periods will be
allocated to the Money Market Sub-Account. Any
modification will not affect the terms, provisions or
conditions which are, or may be, applicable to
Contributions previously made to any such Variable Sub-
Account. Any modification will not affect the terms of
any unmatured Guarantee Period or other Fixed Sub-
Account, except as may be described in the attached
Fixed Sub-Account riders, if any.
The Company may cease offering existing variable or
fixed annuity payment options.
ONLY THE PRESIDENT, A VICE-PRESIDENT, OR
THE SECRETARY OF THE COMPANY CAN MODIFY
OR WAIVE ANY PROVISION OF THIS CERTIFICATE.
NON-PARTICIPATING
This Certificate is non-participating. It is not eligible to
share in the Company's divisible surplus.
What if the Annuitant's age is misstated?
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, the
annuity 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.
How will the Contract values be reported?
REPORTS
The Company will furnish the Owner, at least annually,
a statement of the Annuity Account Value and the
Surrender Value. The Company will furnish the Owner
copies of any other notices, reports or documents
required by law.
What are the notice and proof requirements?
NOTICE AND PROOF
Any notice or demand by the Company to or upon the
Owner, or any other person may be given by mailing it to
that person's last known address as stated in the
Company's file. In the event of the death of an Owner
or the Annuitant, the Company will require proof of
death.
Any application, report, Request, election, direction,
notice or demand by the Owner, or any other person,
must be made in a form satisfactory to the Company.
What are the tax consequences?
TAX CONSEQUENCES OF PAYMENTS
The Owner or Beneficiary, as the case may be, must
determine the timing and amount of any benefit payable.
Payments elected by the Owner in the form of periodic
withdrawals, surrenders or partial withdrawals will be tax
reported to the Owner. Annuity payments are payable to
the Annuitant and will be tax reported to the Annuitant.
Payments made to a Beneficiary will be tax reported to
the Beneficiary.
It is recommended that a competent tax adviser be
consulted prior to obtaining any distribution from, or
changing the ownership of, this Certificate. A 10%
federal tax penalty may apply if a surrender, withdrawal,
or distribution is taken prior to the taxpayer's
attainment of age 59 1/2.
Nothing contained herein will be construed to be tax or
legal advice. Neither the Policyholder nor the Company
assumes no responsibility or liability for any damages or
costs, including but not limited to taxes, penalties,
interest or attorney's fees incurred by the Owner, the
Annuitant, the Beneficiary, or any other person arising
out of any such determination.
CURRENCY
All Contributions and all transactions will be in the
currency of the United States of America.
What are the voting rights?
VOTING RIGHTS
The Company will vote the shares of an Eligible Fund.
To the extent required by law, the Company will vote
according to the instructions of the Owner in proportion
to the interest in the Variable Sub-Account. In such
event, the Company will send proxy materials and form(s)
to the Owner for a reply. If no reply is received by the
date specified in the proxy materials, the Company will
vote shares of the appropriate Eligible Fund in the same
proportion as shares of the Eligible Fund for which
replies have been received.
During the Annuity Payment Period, the number of
votes will decrease as the assets held to fund annuity
payments decrease. The Owner will be entitled to
receive the proxy materials and form(s).
What are the Owner's rights?
RIGHTS OF OWNER
While the Annuitant is living, the Owner has the sole
and absolute power to exercise all rights and privileges in
this Certificate. Upon the death of an Owner or the
Annuitant, the Death Benefit Provisions section will
apply.
How is the Beneficiary determined?
BENEFICIARY
The Owner may, while the Annuitant is living, designate
or change a Beneficiary by Request from time to time as
provided below. If an Owner dies and the surviving Joint
Owner is the surviving spouse of the deceased Owner,
such surviving spouse will become the Beneficiary and
may take the death benefit or elect to continue this
Certificate in force.
DESIGNATION OF BENEFICIARY
Unless changed as provided below, or as otherwise
required by law, the Beneficiary will be as shown on the
Certificate Data Page. Unless otherwise indicated, if
more than one Beneficiary is designated, then each such
Beneficiary so designated will share equally in any
benefits and or rights granted by the Contract to such
Beneficiary or allowed by the Company. If the
Beneficiary is a partnership, any benefits will be paid to
the partnership as it existed at the time of an Owner's
or the Annuitant's death. The Company may rely on an
affidavit by any responsible person to identify a
Beneficiary or verify the non-existence of a Beneficiary
not identified by name.
CHANGE OF BENEFICIARY
The Owner may, while the Annuitant is living, change the
Beneficiary by Request. The Company shall not be
bound by any change of Beneficiary unless it is made in
writing and recorded at the Schwab Annuity Service
Center. A change of Beneficiary 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.
If an Owner dies before the date the Request was
processed, the change will take effect as of the date of
the Request, unless the Company has already made a
payment or has 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 to
the extent required by law.
DEATH OF BENEFICIARY
The interest of any Beneficiary who dies before an Owner
or the Annuitant will terminate at the death of such
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 has
indicated otherwise by Request. The benefits will then
be paid as though the Beneficiary had died before the
deceased Owner or Annuitant.
SUCCESSIVE BENEFICIARIES
If an Owner dies, and the surviving Joint Owner is the
surviving spouse of the deceased Owner, the surviving
spouse will become the Beneficiary and may take the
death benefit or elect to continue this Certificate in
force. If there is no surviving Joint Owner, and no named
Beneficiary is alive at the time of an Owner's death, any
benefits payable will be paid to the Owners estate.
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. A change of Annuitant
will take effect as of the date the Request is processed at
the Schwab Annuity Service Center.
How is the Contingent Annuitant determined?
CONTINGENT ANNUITANT
While the Annuitant is alive, the Owner 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.
Can the ownership of this Certificate be changed?
CHANGE OF OWNERSHIP
If this is an IRA Certificate, the Owners right to change
the ownership is restricted. An IRA Certificate may not
be sold, assigned, transferred, discounted or pledged as
collateral for a loan or as security for the performance of
an obligation or for any other purpose to any person
other than as may be required or permitted under
Section 408 of the Internal Revenue Code of 1986, or
under any other applicable section of the Code, as
amended.
If this is a non-qualified Certificate, the Owner may
change the ownership while the Annuitant is living. Any
change of ownership must be made by Request on a form
satisfactory to the Company. The change 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, and is subject to any action taken or
payment made by the Company before it was processed.
Can this Certificate be assigned?
COLLATERAL ASSIGNMENT
If this is an IRA Certificate, the Owner may not assign
this Certificate as collateral.
If this is a non-qualified Certificate, the Owner can assign
this Certificate as collateral while the Annuitant is living.
The interest of the assignee has priority over the interest
of the Owner and the interest of any Beneficiary. Any
amounts 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 of any assignment. An assignment, pledge or
agreement to assign or pledge any portion of the Annuity
Account Value generally will be treated as a distribution.
It is recommended that a competent tax adviser be
consulted prior to making such a change to this
Certificate.
Who owns the Series Account?
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the
Series Account. The portion of the assets of the Series
Account equal to the reserves and other Certificate
liabilities with respect to the Series Account are not
chargeable with liabilities arising out of any other
business the Company may conduct.
What is the Effective Date?
EFFECTIVE DATE
The Effective Date, shown on the Certificate Data Page,
is the date the initial Contribution is credited to the
Annuity Account.
How may Contributions be made?
CONTRIBUTIONS
Contributions should be payable to Great-West Life &
Annuity Insurance Company (the Company) at the
Schwab Annuity Service Center at any time during the
Accumulation Period. All Contributions must be paid in
a form acceptable to the Company, during the lifetime of
the Annuitant and before the Payment Commencement
Date. Coverage will begin on the Effective Date.
At any time after the Effective Date, the Owner may
make additional Contributions. The minimum amount
accepted after the initial Contribution is $500 except
subsequent payments made via an Automatic
Contribution Plan have a minimum of $100 per month.
Total Contributions while this Certificate is in force may
exceed $1,000,000 with prior approval from the Company.
The Company may modify these limitations.
How are Contributions allocated?
ALLOCATION OF CONTRIBUTIONS
During the Free Look Period, all Contributions will be
processed as follows:
Amounts to be allocated to one or more of the Fixed
Sub-Accounts will be allocated as directed,
effective upon the Transaction Date. (Allocation
will not be delayed until the end of the Free
Look Period.)
Amounts to be allocated to one or more of the Variable
Sub-Accounts will first be allocated to the
Money Market Sub-Account and will remain
there until the next Transaction Date following
end of the Free Look Period plus five calendar
days. On that date, the Variable Account Value
held in the Money Market Sub-Account will be
allocated to the Variable Sub-Accounts selected
by the Owner. During the Free Look Period, the
Owner may re-allocate among the Variable Sub-
Accounts.
If the Certificate is returned during the Free Look
Period, it will be void from the start, and the Company
will refund the greater of: 1) Contributions received; or
2) the Annuity Account Value less surrenders,
withdrawals, and distributions.
After the Free Look Period, subsequent Contributions
will be allocated in the Annuity Account as Requested by
the Owner. If there are no accompanying instructions,
then allocations will be made in accordance with standing
instructions. Allocations will be effective upon the
Transaction Date.
What is the annual Certificate Maintenance Charge?
CERTIFICATE MAINTENANCE CHARGE
The following charge is applicable to the Annuity
Account Value. Each year, beginning on the first
anniversary of the Certificate Effective Date, a Certificate
Maintenance Charge of not more than $25 will be
deducted from the Annuity Account. This charge will be
deducted from the Money Market Fund Sub-Account. If
there is not sufficient value in the Money Market Sub-
Account to cover all of the Certificate Maintenance
Charge, the remainder will be deducted proportionately
from the other Variable Sub-Accounts based on their
relative values. If there is not sufficient value in the
Variable Sub-Accounts, then the remainder will be
deducted from the Fixed Sub-Accounts. There is no
Market Value Adjustment on amounts taken from Fixed
Sub-Accounts for a Certificate Maintenance Charge.
VARIABLE ACCOUNT PROVISIONS
How is the Variable Account Value determined?
VARIABLE ACCOUNT VALUE
The Variable Account Value for the Owner on any date
during the Accumulation Period will be the sum of the
values of the Variable Sub-Accounts.
The value of the Owners interest in a Variable Sub-
Account will be determined by multiplying the number of
the Owner's Accumulation Units by the accumulation
unit value for that Variable Sub-Account.
ACCUMULATION UNITS
For each Contribution, the number of Accumulation
Units credited for the Owner to a Variable Sub-Account
will be determined by dividing the amount of the
Contribution, less Premium Tax, if any, by the
accumulation unit value for that Variable Sub-Account
on the applicable Transaction Date.
ACCUMULATION UNIT VALUE
The initial accumulation unit value of each Variable Sub-
Account was established at $10. The accumulation unit
value of a Variable Sub-Account on a Valuation Date is
calculated by multiplying the accumulation unit value as
of the immediately preceding Valuation Date by the net
investment factor as described in the Net Investment
Factor provision below.
The dollar value of an Accumulation Unit will vary in
amount depending on the investment experience of the
Eligible Fund and charges taken from the Sub-Account.
NET INVESTMENT FACTOR
The net investment factor for any Variable Sub-Account
for any Valuation Period is determined by dividing (a) by
(b), and subtracting (c) from the result where:
(a) is the net result of:
(i) the net asset value per share of the Eligible
Fund shares held in the Variable Sub-Account
determined as of the end of the current
Valuation Period; plus
(ii) the per share amount of any dividend (or, if
applicable, capital gain distributions) made by
the applicable Eligible Fund on shares held in
the Variable Sub-Account if the "ex-dividend"
date occurs during the current Valuation
Period; minus or plus
(iii) a per unit charge or credit for any taxes
incurred by or reserved for in the Variable
Sub-Account, which is determined by the
Company to have resulted from the investment
operations of the Variable Sub-Account.<PAGE>
(b) is the net result of:
(i) the net asset value per share of the Eligible
Fund shares held in the Variable Sub-Account
determined as of the end of the immediately
preceding Valuation Period; minus or plus
(ii)the per unit charge or credit for any taxes
incurred by or reserved for in the Variable
Sub-Account for the immediately preceding
Valuation Period.
(c) is an amount representing the risk charge deducted
from each Variable Sub-Account on a daily basis,
equal to an annual rate as shown in the table below
as a percentage of the daily net asset value of each
Variable Sub-Account. This charge will not exceed:
Mortality: Expense: Total:
.68% maximum .17% maximum .85% maximum
The net investment factor may be greater than, less than,
or equal to one. Therefore, the accumulation unit value
may increase, decrease or remain unchanged.
The per share amount of any dividend referred to in
paragraph (a)(ii) includes a deduction for an investment
advisory fee. This fee compensates the investment
adviser for services provided to the Eligible Fund. The
fee may differ between Eligible Funds and may be
renegotiated each year.
RISK CHARGE
The risk charge compensates the Company for its
assumption of certain mortality and expense risks. This
charge is set forth above in the Net Investment Factor
provision.
FIXED ACCOUNT PROVISIONS
How is the Fixed Account Value determined?
GUARANTEE PERIOD FUND
The Guarantee Period Fund is a type of Fixed Sub-
Account. The Owner, by Request, may allocate all or a
portion of a Contribution to any of the several
Guarantee Periods then offered by the Company. The
sum of the values of the Owner's Guarantee Periods is
the value of the Owner's interest in the Guarantee Period
Fund.
What is the value of each Guarantee Period?
VALUE OF GUARANTEE PERIOD
All Contributions allocated to a Guarantee Period will
earn an annual effective rate of interest equal to the rate
stated by the Company for the applicable Guarantee
Period from the Transaction Date to the end of the
Guarantee Period. The account will be credited daily
with interest earned.
If the Owner does not break a Guarantee Period, the
annual effective rate will be at least the Guaranteed
Interest Rate. If the Owner breaks a Guarantee Period,
a Market Value Adjustment may apply. A negative
adjustment may result in an effective rate lower than the
Guaranteed Interest Rate and the Fixed Account Value
being less than the Contributions.
Each Guarantee Period has its own value, which is
calculated as follows:
the Owner's Contributions, less Premium Tax, if any, in
that Guarantee Period; plus
interest earned; less
amounts Transferred, distributed, surrendered (in whole
or in part), or applied to an annuitization
option; less
periodic withdrawals; less
Certificate Maintenance Charges.
ALLOCATION AT GUARANTEE PERIOD
MATURITY DATE
At any time prior to the Guarantee Period Maturity
Date, the Owner may Request to allocate the maturity
value of that Guarantee Period among any of the
Variable and Fixed Sub-Accounts then offered by the
Company under this Certificate. The election is effective
on its Guarantee Period Maturity Date.
If the election is not received at the Schwab Annuity
Service Center prior to the Guarantee Period Maturity
Date, the value of the matured Guarantee Period will be
allocated to a new Guarantee Period with the same
Guarantee Period as the matured Guarantee Period.
If the new Guarantee Period would mature later than the
Payment Commencement Date, the value will be
allocated to the Guarantee Period that matures closest to
the Payment Commencement Date.
If the Company is not then offering the same Guarantee
Period under the Certificate, the value of the matured
Guarantee Period will be allocated to a new Guarantee
Period with the closest shorter Guarantee Period then
available.
If none of the above is available, the value of the
matured Guarantee Period will be allocated to the
Money Market Sub-Account.
If held to maturity, amounts from a matured Guarantee
Period allocated to a new Guarantee Period or other
Fixed Sub-Account will earn the annual effective rate
applicable to that Guarantee Period or Fixed Sub-
Account. This annual effective rate may differ from the
annual effective rate applicable to the matured
Guarantee Period.
What if the Guarantee Period is broken prior to maturity?
BREAKING A GUARANTEE PERIOD
Any Transfer, surrender (in whole or in part),
distribution due to death, 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
amount being Transferred or withdrawn from the
Guarantee Period. The Market Value Adjustment is
described below.
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 an Owner or the
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. The Amount Available for a full surrender,
partial withdrawal, or Transfer is the Amount Requested
plus the MVA.
Amount Available = Amount Requested + MVA
The MVA is calculated by multiplying the amount
Requested by the Market Value Adjustment Factor
("MVAF"). The formula used to determine the MVA
is:
MVA = (Amount Requested) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
- -1
where:
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; and
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
N is the number of complete months remaining until
maturity.
The Market Value Adjustment will equal 0 if:
i and j differ by less than .10%; or
N is less than 6.
If The Wall Street Journal ceases to publish the U.S.
Treasury Strip ask side yield, an alternate source will be
used.
The Market Value Adjustment will apply to any
Guarantee Period broken six or more months prior to
the Guarantee Period Maturity Date in each of the
following situations:
Transfers to another Guarantee Period, Fixed Sub-
Account or to an Investment Division offered
under this Certificate; or
Surrenders, partial withdrawals, annuitization or periodic
withdrawals; or
A single sum payment upon death of the Owner or
Annuitant.
The Market Value Adjustment will not apply to any
Guarantee Period having fewer than 6 months prior to
the Guarantee Period Maturity Date in each of the
following situations:
Transfer to another Guarantee Period, Fixed Sub-
Account or to a Variable Sub-Account offered
under this Certificate; or
Surrenders, partial withdrawals, annuitization or periodic
withdrawals;
A single sum payment upon death of an Owner or the
Annuitant.
Can Transfers be made between the Fixed and Variable Sub-Accounts?
TRANSFERS
The Owner may make Transfers by Request. The
following provisions apply:
(a) At any time prior to the date annuity payments
begin, the Owner, by Request, may Transfer all or
a portion of the Annuity Account Value among the
Variable and Fixed Sub-Accounts currently offered
by the Company. No Transfers are permitted after
the election of a fixed annuity payment option;
however, if a variable annuity payment option is
elected, Transfers may be made from one Variable
Sub-Account to another.
(b) A Transfer will be effective upon the Transaction
Date.
(c) A Transfer from Fixed Sub-Accounts will be
subject to the terms of the Fixed Account
Provisions and the attached Fixed Sub-Account
Rider(s), if any. The Annuity Account Value may
be Transferred prior to the Guarantee Period
Maturity Date. The Market Value Adjustment will
be assessed except in the situations described in
the Market Value Adjustment Provision.
(d) There is no administrative charge for the first
twelve Transfers made in a calendar year. There is
a $10 administrative fee for each subsequent
Transfer. All Transfers made on a single
Transaction Date will be aggregated to count as
only one Transfer toward the twelve 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.
Is Dollar Cost Averaging offered?
DOLLAR COST AVERAGING
By Request, the Owner may elect Dollar Cost Averaging
in order to purchase units of the Variable Sub-Accounts
over a period of time.
The Owner may Request to automatically Transfer a
predetermined dollar amount, subject to the Companys
minimum, at regular intervals from any one or more
designated Variable Sub-Accounts to one or more of the
remaining, then available, Variable Sub-Accounts. The
unit value will be determined on the dates of the
Transfers. The Owner must specify the percentage to be
Transferred into each designated Variable Sub-Account.
Transfers may be set up on any one of the following
frequency periods: monthly, quarterly, semiannually, or
annually. The Transfer will be initiated on the
Transaction Date one frequency period following the date
of the Request. The Company will provide a list of
Variable Sub-Accounts eligible for Dollar Cost Averaging
which may be modified from time to time. Amounts
Transferred through Dollar Cost Averaging are not
counted against the twelve free Transfers allowed in a
calendar year.
The Owner may terminate Dollar Cost Averaging at any
time by Request. Dollar Cost Averaging will terminate
automatically upon the annuity commencement date.
Participation in Dollar Cost Averaging and the
Rebalancer Option at the same time is not allowed.
Participation in Dollar Cost Averaging does not assure a
greater profit, or any 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.
Is rebalancing available?
THE REBALANCER OPTION
By Request, the Owner may elect the Rebalancer Option
in order to automatically Transfer among the Variable
Sub-Accounts on a periodic basis. This type of automatic
Transfer program automatically reallocates the Variable
Account Value to maintain a particular percentage
allocation among Variable Sub-Accounts selected by the
Owner. The amount allocated to each Variable
Sub-Account will grow or decline at different rates
depending on the investment experience of the Variable
Sub-Account.
The Owner may Request that 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 twelve free Transfers
allowed in a calendar year.
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 funds.
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 twelve free
Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable
Account Value to be allocated to each Variable
Sub-Account and the frequency of rebalancing. The
Owner may terminate the Rebalancer Option at any time
by Request. 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.
How is the death benefit paid?
PAYMENT OF DEATH BENEFIT
Upon the death of an Owner or the Annuitant, the death
benefit will become payable in accordance with these
death benefit provisions following the Companys receipt
of a Request, while this Certificate is in force.
The amount of the death benefit will be as follows:
If the Owner or Annuitant dies after the date annuity
payments commence and before the entire interest has
been distributed, the remaining annuity payments will be
paid to the Beneficiary under the payment option
applicable on the date of death. The Beneficiary will not
be allowed to change the method of distribution in effect
on the date of the Owners or Annuitants death or to
elect a new payment option; or
If the Owner or Annuitant dies before the date annuity
payments commence, the Company will pay proceeds to
the Beneficiary the greater of:
the Annuity Account Value with the Market Value
Adjustment, if applicable, as of the date the Request
for payment is received, less Premium Tax, if any; or
the sum of Contributions paid, less partial surrenders and
Periodic Withdrawals, less Premium Tax, if any.
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 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. Distribution of
the death benefit may be Requested to be made as
follows (subject to the distribution rules set forth below):
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 the Certificate.
B. Proceeds from the Fixed Sub-Account(s)
1. payment in a single sum (a Market Value Adjustment
may apply); or
2. payment under any of the annuity options provided
under this Certificate (a Market Value Adjustment may
apply); or
3. payment on the Guarantee Period Maturity Date
(a Market Value Adjustment will not apply).
DISTRIBUTION RULES
If Annuitant Dies Before Annuity Commencement Date
Upon the death of the Annuitant while the Owner is
living, and before the annuity commencement date, the
death benefit provided under the Certificate will be paid
to the Beneficiary unless there is a surviving Contingent
Annuitant.
If a Contingent Annuitant was named by the Owner prior
to the Annuitants 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 Annuitants death and the
Contingent Annuitant will become the Annuitant.
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 Certificate will be subject to the death of an Owner
provisions described below.
If an Owner Dies Before Annuity Commencement Date
If an Owner dies before the annuity commencement date,
and such Owner was the Annuitant, the following
provisions shall apply:
(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 Certificate 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,
the Annuitant and the Beneficiary, and may take the
death benefit or elect to continue this Certificate in
force;
(3) In all other cases, the Company will pay the
death benefit to the Beneficiary even if a former
spouse Joint Owner, the Annuitant and/or the
Contingent Annuitant are alive at the time of an
Owners death, unless the sole Beneficiary is the
deceased Owners surviving spouse and the
Beneficiary Requests to become the Owner and the
Annuitant, and to continue the Certificate in force.
If an Owner dies before the annuity commencement date,
and such Owner was not the Annuitant, the following
provisions shall apply:
(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 take the
death benefit or elect to continue this Certificate in
force.
(2) In all other cases, the Company will pay the
death benefit to the Beneficiary even if a former
spouse Joint Owner, the Annuitant and/or the
Contingent Annuitant are alive at the time of the
Owner's death, unless the sole Beneficiary is the
deceased Owners surviving spouse and such
Beneficiary Requests to become the Owner and the
Annuitant and to continue the Certificate in force.
To whom and when is the death benefit payable?
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 Owners death,
the surviving spouse will be treated as the Owner and
will be allowed to take the death benefit or continue
the Certificate in force.
(2) If a non-spouse individual is the person entitled
to receive benefits upon the Owner's death, such
individual may elect, not later than one year after the
Owners 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
Certificate, provided that: (a) such annuity is
distributed in substantially equal installments over
the life or life expectancy of such Beneficiary; and (b)
such distributions begin not later than one year after
the Owners date of death. If no election is
received by the Company from an individual non-
spouse Beneficiary such that substantially equal
installments have begun no later than one year after
the Owners date of death, then the entire amount
must be distributed within five years of the Owners
date of death; or
<PAGE>
(3) If a corporation or other non-individual entity is
entitled to receive benefits upon the Owners death,
the
death benefit must be completely distributed
within five years of the Owners date of
death.
The death benefit will be determined as of the date the
payments commence.
If Annuitant Dies After Annuity Commencement Date
Upon the death of the Annuitant (or any
Owner/Annuitant) after the annuity commencement date,
any benefit payable must be distributed to the Beneficiary
in accordance with and at least as rapidly as under the
annuity option then in effect.
If an Owner Dies After Annuity Commencement Date
and While the Annuitant is Living
Upon the death of an Owner after the annuity
commencement date and while the Annuitant is living,
any benefit payable will continue to be distributed to the
Annuitant at least as rapidly as under the annuity option
then in effect. All of the Owners rights granted under
the Certificate or allowed by the Company will pass to
any surviving Joint Owner and, if none, to the Annuitant.
COMPLIANCE WITH CODE SECTION 72(s)
In any event, no payment of benefits provided under the
Certificate will be allowed that does not satisfy the
requirements of Code Section 72(s), as amended from
time to time, and any other applicable federal or state
law, rules or regulations. These death benefit provisions
will be interpreted and administered in accordance with
such requirements.
Can withdrawals be made from this Certificate?
SURRENDER BENEFIT
At any time prior to the date annuity payments
commence and subject to the provisions of this
Certificate, the Owner may surrender this Certificate for
the Surrender Value which will be computed as of the
Transaction Date. The Company will make the
distribution, paid in a single sum, as soon as practical
after receipt of the Request.
PARTIAL WITHDRAWALS
The Owner may make a partial withdrawal from the
Annuity Account Value at any time, by Request, prior to
the date annuity payments commence and subject to the
terms of this Certificate. A Market Value Adjustment
may apply. The minimum partial withdrawal amount is
$500. After any partial withdrawal, if the remaining
Annuity Account Value is less than $2,000, then a full
surrender may be required.
By Request, the Owner must elect the Variable or Fixed
Sub-Account(s), or a combination of them, from which
a partial withdrawal is to be made and the amount to be
withdrawn from each sub-account.
The Annuity Account Value will be reduced by the
partial withdrawal amount. The partial withdrawal
proceeds may be greater than or less than the amount
requested, depending on the effect of the Market Value
Adjustment.
The following terms apply:
(a) No partial withdrawals are permitted after the date
annuity payments commence.
(b) If a partial withdrawal is made within 30 days of the
date annuity payments are scheduled to commence,
the Company may delay the Payment
Commencement Date by 30 days.
(c) A partial withdrawal will be effective upon the
Transaction Date.
(d) A partial withdrawal from a Fixed Sub-Account may
be subject to the Market Value Adjustment
Provisions, the Fixed Account Provisions of this
Certificate, and the terms of the attached Fixed
Sub-Account Rider(s), if any.
POSTPONEMENT
In accordance with state law, if the Company receives a
Request for surrender or partial withdrawal, the
Company may postpone any cash payment as follows:
from the Fixed Account Value, for no more than 6
months (30 days in West Virginia); and
from the Variable Account Value, for no more
than 7 business days.
During the postponement period:
the Fixed Sub-Account(s) will continue to earn interest
at the annual effective rate applicable to the
Guarantee Period or at the rate applicable to the
attached Fixed Sub-Account Riders, if any) that
was in effect at the time the Request for surrender
or partial withdrawal was made; and
the Variable Account Value will continue to be
subject to the investment experience (gains or
losses) of the underlying Eligible Fund(s) and all
applicable charges.
How are annuity payment options and the Periodic Withdrawal Option
elected?
HOW TO ELECT
The Request of the Owner is required to elect, or
change the election of, a payment option and must be
received by the Company at least 30 days prior to the
Payment Commencement Date.
At any time prior to the Payment Commencement
Date, the Owner may Transfer between Fixed and
Variable Sub-Account options, subject to the Transfer
provisions of this Certificate.
However, on the Payment Commencement Date, the
following restrictions apply:
the Variable Account Value may be applied only to
any of the variable annuity payment options
available; and
the Fixed Account Value may be applied only to any of
the fixed annuity payment options available.
If an option has not been elected within 30 days of the
Payment Commencement Date, the Variable Account
Value will be applied under Variable Annuity Payment
Option 1 to provide payments for life with a
guaranteed period of 20 years. The Fixed Account
Value will be applied under Fixed Annuity Payment
Option 3 to provide payments for life with a
guaranteed period of 20 years.
What guidelines apply to annuity payment options?
SELECTION OF PAYMENT OPTIONS
(a) A
single sum payment may be elected. If so, the
amount to be paid is the Surrender Value.
(b) If
a fixed annuity payment option is elected, the
amount to be applied is the Fixed Account Value,
as
of the Payment Commencement Date, plus a
Market Value Adjustment, if applicable, less
Premium Tax, if any.
(c) If
a variable annuity payment option is elected,
the amount to be applied is the Variable
Account Value, as of the Payment
Commencement Date, less Premium Tax, if any.<PAGE>
(d) The minimum amount that
may be withdrawn
from the Annuity Account Value to purchase an
annuity payment option is $2,000. If the amount
is less than $2,000, the Company may pay the
amount in a single sum subject to the Partial
Withdrawals Provision. Payments may be elected
to be received on any of the following frequency
periods: monthly, quarterly, semiannually, or
annually.
(e) Payments to be made under the annuity payment
option selected must be at least $50. The
Company reserves the right to make the
payments using the most frequent payment
interval which produces a payment of not less
than $50.
(f) The maximum amount that may be applied under
any annuity payment option is $1,000,000, unless
prior approval is obtained from the Company.
(g) For information on electing periodic withdrawals,
refer to the Periodic Withdrawal Option section
on Page 17.
What variable annuity payment options are
available?
VARIABLE ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality
from the 1983 Table (a) for Individual Annuity
Valuation and a guaranteed interest rate of 5% per
year. The Company may offer a better rate than the
guaranteed rate shown.
The following variable annuity payment options are
available:
(a) Option 1: Variable Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment
Period elected or the lifetime of the Annuitant
whichever is longer. The guaranteed Annuity
Payment Period elected may be 5, 10, 15, or 20
years. Upon death of the Annuitant, the
Beneficiary will begin to receive the remaining
payments at the same interval elected by the
Owner. See Table A.
(d) The minimum amount that may be withdrawn
from the Annuity Account Value to purchase
an annuity payment option is $2,000. If the
amount is less than $2,000, the Company
may pay the amount in a single sum subject
to the Partial Withdrawals Provision.
Payments may be elected to be received on
any of the following frequency periods:
monthly, quarterly, semiannually, or annually.
(e) Payments to be made under the annuity
payment option selected must be at least
$50. The Company reserves the right to
make the payments using the most frequent
payment interval which produces a payment
of not less than $50.
(f) The maximum amount that may be applied
under any annuity payment option is
$1,000,000, unless prior approval is obtained
from the Company.
(g) For information on electing periodic
withdrawals, refer to the Periodic Withdrawal
Option section on Page 17.
What variable annuity payment options are
available?
VARIABLE ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality
from the 1983 Table (a) for Individual Annuity
Valuation and a guaranteed interest rate of 5% per
year. The Company may offer a better rate than the
guaranteed rate shown.
The following variable annuity payment options are
available:
(a) Option 1: Variable Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment
Period elected or the lifetime of the Annuitant
whichever is longer. The guaranteed Annuity
Payment Period elected may be 5, 10, 15, or 20
years. Upon death of the Annuitant, the
Beneficiary will begin to receive the remaining
payments at the same interval elected by the
Owner. See Table A.
(b) Option 2: Variable Life Annuity
Payments for the Annuitant's lifetime, without a
guaranteed period. See Table A.
(c) Option 3: Any Other Form
Any other form of variable annuity which is
acceptable to the Company.
These variable annuity payment options are subject to
the following provisions:
(1) Amount of First Payment
The first payment under a variable annuity
payment option will be based on the value of each
Variable Sub-Account on the 5th Valuation Date
preceding the date annuity payments commence.
It will be determined by applying the appropriate
rate from Table A to the amount applied under
the payment option.
(2) 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
payment by the sub-account's annuity 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.
(3) Amount of Payments after the First
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 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.
(4) Transfers After the Payment Commencement Date
Once variable annuity payments have begun, the
Owner may Transfer all or part of the Variable
Account Value from one Variable Sub-Account
to another. Transfers after the Payment
Commencement Date will be made by converting
the number of Annuity Units being Transferred to
the number of Annuity Units of the 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. Once annuity payments have
begun, no Transfers may be made from a fixed
annuity payment option to a variable annuity
payment option, or from a variable annuity payment
option to a fixed annuity payment option. The
Certificates Transfer provisions will apply.
What fixed annuity payment options are available?
FIXED ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality
from the 1983 Table (a) for Individual Annuity
Valuation and a guaranteed interest rate of 2 1/2% per
year. The Company may offer a better rate than the
guaranteed rate shown.
The following fixed annuity payment options are
available:
(a)
Option 1: Income of Specified Amount
An
annuity payment at 12-, 6-, 3-, or 1-month
intervals, of an amount elected by the Owner for
an
Annuity Payment Period of 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. See Table C.
(b) Option
2: Income for a Specified Period
An
annuity payment at 12-, 6-, 3-, or 1-month intervals,
for the number of months elected, for an
Annuity Payment Period of 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. See Table C.
(c)
Option 3: Fixed Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment
Period elected which may be 5, 10, 15, or 20
years or the lifetime of the Annuitant whichever
is
longer. Upon death of the Annuitant, any
amounts remaining payable under this payment
option will be paid to the Beneficiary. See Table
B.
(d) Option 4: Fixed Life Annuity
Monthly payments for the Annuitant's lifetime,
without a guaranteed period. See Table B.
(e) Option 5: Any Other Form
Any other form of annuity which is acceptable to the
Company.
What guidelines apply to periodic withdrawals?
PERIODIC WITHDRAWAL OPTION
The Owner must Request that all or part of the Annuity
Account Value be applied to a Periodic Withdrawal
Option. Premium Tax, if applicable, will be deducted
before applying the amount Requested. While periodic
withdrawals are being received:
a Market Value Adjustment applies to periodic
withdrawals from Guarantee Periods 6 or more
months prior to maturity;
the Owner may keep the same Fixed and Variable
Sub-Accounts as were in force before periodic
withdrawals began;
Charges and fees under this Certificate continue to
apply;
the Owner may continue to exercise all contractual
rights that are available prior to electing a payment
option, except that no Contributions may be made;
if a partial withdrawal is made from a Fixed Sub-
Account, the Market Value Adjustment, if
applicable, will be applied;
Guarantee Periods renew into the shortest Guarantee
Period then available.
HOW TO ELECT PERIODIC WITHDRAWALS
The Request of the Owner is required to elect, or change
the election of, the Periodic Withdrawal Option. The
Owner must Request:
the withdrawal frequency of either 12-, 6-, 3-, or 1-
month intervals;
a withdrawal amount; a minimum of $100 is
required;
the calendar month, day, and year on which
withdrawals are to begin;
one Periodic Withdrawal Option; and
the allocation of withdrawals from the 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(s) have been depleted, the Company
will automatically prorate the remaining
withdrawals against all remaining available
Sub-Accounts, unless the Owner Requests the
selection of another Variable Sub-Account.
The Owner may elect to change the withdrawal option
and/or frequency once each calendar year.
Periodic Withdrawals will cease on the earlier of the
date:
the amount elected to be paid under the option selected
has been reduced to zero;
the Annuity Account Value is zero;
the Owner Requests that withdrawals stop;
the Owner purchases an annuity option; or
of death of an Owner or the Annuitant.
PERIODIC WITHDRAWAL OPTIONS
AVAILABLE
The Owner must elect one of these 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; or
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 Fixed Sub-
Account(s) between each withdrawal. Available
only if 100% of the account value is invested in the
Fixed Sub-Account; or
4) Minimum Distribution - If this is an IRA
Certificate, the Owner may Request minimum
distributions as specified under Internal Revenue
Code 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.
<PAGE>
TABLE A - Variable Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.29 4.29 4.29 4.29 4.29
21 4.31 4.31 4.30 4.30 4.30
22 4.32 4.32 4.32 4.31 4.31
23 4.33 4.33 4.33 4.32 4.32
24 4.34 4.34 4.34 4.34 4.33
25 4.36 4.36 4.35 4.35 4.35
26 4.37 4.37 4.37 4.37 4.36
27 4.39 4.39 4.38 4.38 4.38
28 4.40 4.40 4.40 4.40 4.39
29 4.42 4.42 4.42 4.41 4.41
30 4.44 4.44 4.44 4.43 4.42
31 4.46 4.46 4.45 4.45 4.44
32 4.48 4.48 4.47 4.47 4.46
33 4.50 4.50 4.49 4.49 4.48
34 4.52 4.52 4.52 4.51 4.50
35 4.55 4.54 4.54 4.53 4.52
36 4.57 4.57 4.56 4.56 4.55
37 4.60 4.60 4.59 4.58 4.57
38 4.63 4.62 4.62 4.61 4.59
39 4.65 4.65 4.65 4.64 4.62
40 4.69 4.68 4.68 4.67 4.65
41 4.72 4.72 4.71 4.70 4.68
42 4.75 4.75 4.74 4.73 4.71
43 4.79 4.79 4.78 4.76 4.74
44 4.83 4.83 4.82 4.80 4.77
45 4.87 4.87 4.86 4.84 4.81
46 4.91 4.91 4.90 4.88 4.85
47 4.96 4.96 4.94 4.92 4.88
48 5.01 5.00 4.99 4.96 4.92
49 5.06 5.06 5.04 5.01 4.97
50 5.12 5.11 5.08 5.06 5.01 <PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 5.17 5.17 5.14 5.11 5.05
52 5.23 5.23 5.20 5.16 5.10
53 5.30 5.29 5.26 5.22 5.15
54 5.37 5.36 5.33 5.27 5.20
55 5.44 5.43 5.40 5.34 5.25
56 5.52 5.51 5.47 5.40 5.31
57 5.60 5.59 5.54 5.47 5.37
58 5.69 5.68 5.62 5.54 5.43
59 5.79 5.77 5.71 5.62 5.49
60 5.89 5.87 5.80 5.69 5.55
61 6.00 5.97 5.90 5.78 5.61
62 6.11 6.08 6.00 5.86 5.67
63 6.24 6.20 6.11 5.95 5.74
64 6.37 6.33 6.22 6.04 5.80
65 6.51 6.47 6.34 6.14 5.87
66 6.66 6.61 6.47 6.24 5.93
67 6.82 6.77 6.60 6.34 5.99
68 7.00 6.93 6.74 6.44 6.05
69 7.19 7.11 6.89 6.54 6.11
70 7.39 7.31 7.05 6.65 6.16
71 7.62 7.51 7.21 6.75 6.21
72 7.86 7.74 7.38 6.85 6.26
73 8.12 7.98 7.56 6.96 6.30
74 8.41 8.23 7.74 7.05 6.34
75 8.72 8.51 7.93 7.15 6.37
76 9.06 8.80 8.12 7.24 6.40
77 9.42 9.11 8.31 7.32 6.42
78 9.81 9.44 8.51 7.39 6.44
79 10.24 9.80 8.70 7.46 6.46
80 10.71 10.16 8.88 7.52 6.47
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE A - Variable Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.38 4.38 4.37 4.37 4.36
21 4.39 4.39 4.39 4.38 4.38
22 4.41 4.41 4.40 4.40 4.39
23 4.43 4.42 4.42 4.42 4.41
24 4.44 4.44 4.44 4.43 4.42
25 4.46 4.46 4.46 4.45 4.44
26 4.48 4.48 4.48 4.47 4.46
27 4.50 4.50 4.50 4.49 4.48
28 4.52 4.52 4.52 4.51 4.50
29 4.55 4.55 4.54 4.53 4.52
30 4.57 4.57 4.56 4.55 4.54
31 4.60 4.59 4.59 4.58 4.57
32 4.62 4.62 4.62 4.60 4.59
33 4.65 4.65 4.64 4.63 4.61
34 4.68 4.68 4.67 4.66 4.64
35 4.72 4.71 4.70 4.69 4.67
36 4.75 4.75 4.74 4.72 4.70
37 4.79 4.78 4.77 4.75 4.73
38 4.82 4.82 4.81 4.79 4.76
39 4.86 4.86 4.85 4.82 4.79
40 4.91 4.90 4.89 4.86 4.82
41 4.95 4.95 4.93 4.90 4.86
42 5.00 4.99 4.97 4.94 4.90
43 5.05 5.04 5.02 4.98 4.93
44 5.10 5.09 5.07 5.03 4.97
45 5.16 5.15 5.12 5.07 5.02
46 5.21 5.20 5.17 5.12 5.06
47 5.28 5.26 5.23 5.17 5.10
48 5.34 5.33 5.29 5.23 5.15
49 5.41 5.39 5.35 5.28 5.20
50 5.48 5.46 5.41 5.34 5.24 <PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 5.55 5.53 5.48 5.40 5.29
52 5.63 5.61 5.55 5.46 5.35
53 5.71 5.69 5.63 5.53 5.40
54 5.80 5.77 5.70 5.60 5.45
55 5.89 5.87 5.79 5.67 5.51
56 5.99 5.96 5.88 5.74 5.57
57 6.10 6.06 5.97 5.82 5.62
58 6.21 6.17 6.07 5.90 5.68
59 6.33 6.29 6.17 5.98 5.74
60 6.46 6.42 6.28 6.07 5.80
61 6.60 6.55 6.40 6.16 5.86
62 6.75 6.69 6.52 6.26 5.91
63 6.91 6.84 6.64 6.34 5.97
64 7.09 7.01 6.78 6.43 6.02
65 7.27 7.18 6.91 6.52 6.07
66 7.47 7.36 7.06 6.62 6.12
67 7.68 7.56 7.21 6.71 6.17
68 7.91 7.76 7.36 6.80 6.21
69 8.15 7.98 7.52 6.90 6.26
70 8.42 8.21 7.68 6.98 6.29
71 8.69 8.46 7.84 7.07 6.33
72 8.99 8.71 8.01 7.15 6.36
73 9.31 8.98 8.18 7.23 6.38
74 9.65 9.27 8.35 7.30 6.41
75 10.02 9.57 8.52 7.37 6.43
76 10.41 9.88 8.68 7.43 6.44
77 10.84 10.21 8.84 7.49 6.46
78 11.29 10.55 9.00 7.54 6.47
79 11.78 10.93 9.15 7.59 6.48
80 12.29 11.27 9.30 7.63 6.49
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE B - Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.61 2.61 2.61 2.61 2.61
21 2.63 2.63 2.63 2.63 2.63
22 2.65 2.65 2.65 2.64 2.64
23 2.67 2.67 2.66 2.66 2.66
24 2.69 2.69 2.68 2.68 2.68
25 2.71 2.71 2.70 2.70 2.70
26 2.73 2.73 2.72 2.72 2.72
27 2.75 2.75 2.75 2.74 2.74
28 2.77 2.77 2.77 2.77 2.76
29 2.79 2.79 2.79 2.79 2.79
30 2.82 2.82 2.82 2.81 2.81
31 2.84 2.84 2.84 2.84 2.83
32 2.87 2.87 2.87 2.86 2.86
33 2.90 2.90 2.89 2.89 2.89
34 2.93 2.93 2.92 2.92 2.91
35 2.96 2.96 2.95 2.95 2.94
36 2.99 2.96 2.98 2.98 2.97
37 3.02 3.02 3.02 3.01 3.00
38 3.05 3.05 3.05 3.04 3.04
39 3.09 3.09 3.09 3.08 3.07
40 3.13 3.13 3.12 3.12 3.10
41 3.17 3.16 3.16 3.15 3.14
42 3.21 3.21 3.20 3.19 3.18
43 3.25 3.25 3.24 3.23 3.22
44 3.30 3.29 3.29 3.28 3.26
45 3.34 3.34 3.33 3.32 3.30
46 3.39 3.39 3.38 3.37 3.35
47 3.44 3.44 3.43 3.42 3.39
48 3.50 3.50 3.49 3.47 3.44
49 3.56 3.55 3.54 3.52 3.49
50 3.62 3.61 3.60 3.58 3.54<PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 3.68 3.68 3.66 3.64 3.59
52 3.75 3.74 3.73 3.70 3.65
53 3.82 3.81 3.79 3.76 3.71
54 3.89 3.88 3.86 3.83 3.77
55 3.97 3.96 3.94 3.90 3.83
56 4.05 4.04 4.02 3.97 3.89
57 4.14 4.13 4.10 4.05 3.96
58 4.23 4.22 4.19 4.13 4.03
59 4.33 4.32 4.28 4.21 4.10
60 4.44 4.42 4.38 4.30 4.17
61 4.55 4.53 4.48 4.39 4.24
62 4.67 4.65 4.59 4.48 4.31
63 4.79 4.77 4.70 4.58 4.39
64 4.93 4.90 4.82 4.68 4.46
65 5.07 5.04 4.95 4.78 4.53
66 5.23 5.19 5.09 4.89 4.61
67 5.39 5.35 5.23 5.00 4.68
68 5.57 5.52 5.38 5.11 4.74
69 5.76 5.71 5.53 5.23 4.81
70 5.96 5.90 5.70 5.34 4.87
71 6.19 6.11 5.87 5.46 4.93
72 6.43 6.34 6.05 5.57 4.98
73 6.69 6.58 6.24 5.68 5.03
74 6.97 6.84 6.43 5.79 5.07
75 7.28 7.12 6.63 5.90 5.11
76 7.61 7.41 6.83 5.99 5.14
77 7.97 7.73 7.04 6.09 5.17
78 8.36 8.06 7.24 6.17 5.19
79 8.78 8.42 7.44 6.24 5.21
80 9.24 8.79 7.64 6.31 5.22
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE B - Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.72 2.72 2.72 2.72 2.71
21 2.74 2.74 2.74 2.74 2.73
22 2.76 2.76 2.76 2.76 2.75
23 2.79 2.78 2.78 2.78 2.78
24 2.81 2.81 2.81 2.80 2.80
25 2.83 2.83 2.83 2.83 2.82
26 2.86 2.86 2.86 2.85 2.85
27 2.89 2.88 2.88 2.88 2.87
28 2.91 2.91 2.91 2.91 2.90
29 2.94 2.94 2.94 2.93 2.93
30 2.97 2.97 2.97 2.96 2.95
31 3.00 3.00 3.00 2.99 2.98
32 3.04 3.03 3.03 3.03 3.01
33 3.07 3.07 3.07 3.06 3.05
34 3.11 3.10 3.10 3.09 3.08
35 3.14 3.14 3.14 3.13 3.11
36 3.18 3.18 3.18 3.17 3.15
37 3.22 3.22 3.22 3.21 3.19
38 3.27 3.28 3.26 3.25 3.23
39 3.31 3.31 3.30 3.29 3.27
40 3.36 3.36 3.35 3.33 3.31
41 3.41 3.41 3.40 3.38 3.35
42 3.46 3.46 3.45 3.43 3.39
43 3.52 3.51 3.50 3.48 3.44
44 3.57 3.57 3.56 3.53 3.49
45 3.63 3.63 3.61 3.58 3.54
46 3.70 3.69 3.67 3.64 3.59
47 3.76 3.75 3.73 3.69 3.64
48 3.83 3.82 3.80 3.76 3.69
49 3.90 3.89 3.87 3.82 3.75
50 3.98 3.97 3.94 3.88 3.81<PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 4.05 4.04 4.01 3.95 3.86
52 4.14 4.12 4.09 4.02 3.93
53 4.22 4.21 4.17 4.10 3.99
54 4.32 4.30 4.25 4.17 4.05
55 4.41 4.39 4.34 4.25 4.11
56 4.51 4.50 4.44 4.33 4.18
57 4.62 4.60 4.54 4.42 4.25
58 4.74 4.72 4.64 4.51 4.31
59 4.86 4.84 4.75 4.60 4.38
60 5.00 4.96 4.87 4.69 4.45
61 5.14 5.10 4.99 4.79 4.51
62 5.29 5.25 5.12 4.89 4.58
63 5.45 5.40 5.25 4.99 4.65
64 5.62 5.57 5.39 5.09 4.71
65 5.81 5.74 5.54 5.20 4.77
66 6.00 5.93 5.69 5.30 4.83
67 6.21 6.12 5.85 5.41 4.88
68 6.44 6.33 6.01 5.51 4.93
69 6.68 6.55 6.18 5.61 4.98
70 6.94 6.79 6.35 5.71 5.02
71 7.21 7.03 6.52 5.80 5.06
72 7.51 7.29 6.70 5.90 5.09
73 7.82 7.57 6.88 5.98 5.12
74 8.16 7.86 7.06 6.08 5.15
75 8.52 8.16 7.24 6.14 5.17
76 8.90 8.48 7.42 6.21 5.19
77 9.32 8.81 7.59 6.27 5.21
78 9.77 9.16 7.76 6.33 5.22
79 10.24 9.52 7.93 6.38 5.24
80 10.75 9.90 8.09 6.43 5.24
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE C -Income of Specified Amount
- -Income for a Specified Period
Payment for Each $1,000
of Annuity Account Value
Years Monthly Quarterly Semiannually Annually
1 84.28 252.32 503.09 1,000.00
2 42.66 127.72 254.65 506.17
3 28.79 86.19 171.85 341.60
4 21.86 65.44 130.47 259.33
5 17.70 52.99 105.65 210.00
6 14.93 44.69 89.11 177.12
7 12.95 38.77 77.30 153.65
8 11.47 34.33 68.45 136.07
9 10.32 30.88 61.58 122.40
10 9.39 28.13 56.08 111.47
11 8.64 25.87 51.59 102.54
12 8.02 24.00 47.85 95.11
13 7.49 22.41 44.69 88.83
14 7.03 21.06 41.98 83.45
15 6.64 19.88 39.64 78.80
16 6.30 18.86 37.60 74.73
17 6.00 17.95 35.79 71.15
18 5.73 17.15 34.20 67.97
19 5.49 16.43 32.77 65.13
20 5.27 15.79 31.48 62.58
If payments are for an amount or duration different than
that outlined above, the Company will
determine the proper amount or duration using the
actuarial basis used to determine the above
amounts.
<PAGE>
CORPORATE HEADQUARTERS - Englewood, Colorado
J434<PAGE>
ENDORSEMENT ISSUED BY GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AS
PART OF THE CONTRACT TO WHICH IT IS ATTACHED.
To qualify as an Individual Retirement Annuity under section 408 of
the Internal Revenue Code of
1986, as amended, (Code) the contract is amended as follows:
(1) The Annuitant will at all times be the Owner of the contract.
(2) The entire interest of the Owner is nonforfeitable.
(3) The contract is established for the exclusive benefit of the
Owner and the Beneficiary.
(4) No joint owner may be named, and no one other than the Owner's
spouse may be named as the
contingent owner. Any provision of the policy that would
allow joint ownership, or that
would allow more than one person to share distributions, is
deleted.
(5) This contract is nontransferable. The Owner may not borrow any
money under the contract or
pledge the account or any portion of it as security for a
loan. Additionally, the Owner may
not sell, assign or Transfer this contract, except that the
contract may be transferred to a
former spouse of the Owner under a divorce decree or
written instrument incident to such
divorce. In the event of such Transfer, the transferee
shall for all purposes be treated as the
Owner under the contract.
(6) Except in the case of a "rollover contribution" as permitted by
sections 402(c), 403(a)(4),
403(b)(8) or 408(d)(3) of the Code or a contribution made
in accordance with the terms of
a Simplified Employee Pension (SEP), as described in
section
408(k), no contributions will be
accepted unless they are in cash, and the total of such
contributions shall not exceed $2,000,
or such other maximum as the Code may allow, for any
taxable year.
The Owner shall have the sole responsibility for determining
whether any premium payment
meets applicable income tax requirements.
This policy does not require fixed premium payments. Any
refund of premiums (other than those
attributable to excess Contributions) will be applied
before the close of the calendar year
following the year of the refund toward the payment of
additional premiums or the purchase
of additional benefits.
(7) Distributions Before Death
The Owner's entire interest in the policy must be distributed,
or begin to be distributed, by the
Owner's required beginning date, which is the April 1
following the calendar year in which
the Owner reaches age 70 1/2. For each succeeding year, a
distribution must be made on or
before December 31. By the required beginning date, the
Owner may elect to have the
balance in the policy distributed in one of the following
forms:
(a) a single sum payment;
(b) equal or substantially equal payments no less
frequently than annually over the life of
the Owner;
(c) equal or substantially equal payments no less
frequently than annually over the lives
of the Owner and his or her designated beneficiary;
(d) equal or substantially equal payments no less
frequently than annually over a specified
period that may not be longer than the Owner's life
expectancy;
(e) equal or substantially equal payments no less
frequently than annually over a specified
period that may not be longer than the joint life and
last survivor expectancy of the
Owner and his or her designated beneficiary.
All distributions made hereunder shall be made in accordance with
section 401(a)(9) of the Code,
including the incidental death benefit requirements of section
401(a)(9)(G) of the Code, and the
regulations thereunder, including the minimum distribution
incidental benefit requirement of section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
If payment is not to be made in the form of annual level payments,
the amount to be distributed each year, beginning with
the first calendar year for which distributions are required and
then for each succeeding calendar year, shall not be less than
the quotient obtained by dividing the individual's benefit by the
lesser of (1) the applicable life expectancy or (2) if the
individual's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
or Q&A-5 of section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations. Distributions after the death of the individual
shall be distributed using the applicable life expectancy as the
relevant divisor without regard to proposed regulations
section 1.401(a)(9)-2.
Life expectancy is computed by use of the expected return multiples
in Tables V and VI of section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the Owner by the time
distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable
by the individual and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be
recalculated. Instead, life expectancy will be calculated using
the attained age of such Beneficiary during the calendar year in
which the Beneficiary attains age 70 1/2, and payments for
subsequent years shall be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
(8) Distribution Upon Death
(a) Distributions beginning before death. If the Owner
dies after distribution of his or her interest has begun,
the remaining portion of such interest will continue
to be distributed at least as rapidly as under the method
of distribution being used prior to the individual's
death.
(b) Distributions beginning after death. If the Owner
dies before distribution of his or her interest begins,
distribution of the individual's entire interest
shall be completed by December 31 of the calendar year
containing the fifth anniversary of the individual's
death except to the extent that an election is made to
receive distribution in accordance with (1) or (2)
below:
(1) If the Owner's interest is payable to a
designated beneficiary, then the entire interest of the individual
may be distributed in equal or substantially
equal payments over the life or over a period certain not
greater than the life expectancy of the
designated beneficiary commencing on or before December 31
of the calendar year immediately following the
calendar year in which the Owner died.
(2) If the Owner's spouse is not the named
Beneficiary, the method of distribution selected will assure that
at least 50% of the present value of the amount
available for distribution is paid within the Owner's
life expectancy and that such method of
distribution complies with the requirements of Code section
408(b)(3) and the regulations thereunder.
(3) If the designated beneficiary is the Owner's
surviving spouse, the date distributions are required to
begin in accordance with (1) above shall not be
earlier than the later of (A) December 31 of the
calendar year immediately following the calendar
year in which the individual died or (B) December
31 of the calendar year in which the individual
would have attained age 70 1/2.
(4) If the designated beneficiary is the Owner's
surviving spouse, the spouse may treat the contract as his
or her own IRA. This election will be deemed to
have been made if such surviving spouse makes a
regular IRA contribution to the contract, makes
a rollover to or from such contract, or fails to elect
any of the above provisions.
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
(continued)
(c) Life expectancy is computed by use of the expected
return multiples in Tables V and VI of section 1.72-9
of the
Income Tax Regulations. For purposes of distributions beginning
after the Owner's death, unless otherwise
elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
surviving spouse and shall apply to all
subsequent years. In the case of any other designated beneficiary,
life expectancies shall be calculated using the
attained age of such Beneficiary during the calendar year in which
distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year shall
be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first
calculated.
(d) Distributions under this section are considered to
have begun if distributions are made on account of the
Owner
reaching his or her required beginning date or if prior to the
required beginning date distributions irrevocably
commence to an individual over a period permitted and in an annuity
form acceptable under section 1.401(a)(9)
of the Regulations.
(9) An individual may satisfy the minimum distribution
requirements under section 408(b)(3) of the Code by receiving
a
distribution from one IRA that is equal to the amount required to
satisfy the minimum distribution requirements for two
or more IRAs. For this purpose, the Owner of two or more IRAs may
use the alternative method described in Notice
88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements.
(10) The provisions of this endorsement will override any
provisions contained in or forming part of the contract which
are
inconsistent with this endorsement. The Company reserves the right
to amend this endorsement to comply with future
changes in the Internal Revenue Code of 1986, as amended and to any
regulations or rulings issued under the
provisions of the Internal Revenue Code. The Company shall provide
the Owner of the contract with a copy of any
such amendment.
Signed for Great-West Life & Annuity Insurance Company on the
issuance of the contract (unless a different date is shown
here).
W.T. McCallum,
President and Chief Executive Officer
PLEASE READ THIS ANNUITY CONTRACT CAREFULLY.
PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT VALUE MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT, AND MAY
RESULT IN POSITIVE AND NEGATIVE ADJUSTMENTS TO AMOUNTS PAYABLE DUE
TO SURRENDERS AND TRANSFERS, AMOUNTS
APPLIED TO PURCHASE AN ANNUITY, AND DISTRIBUTIONS RESULTING FROM
DEATH OF AN OWNER OR THE ANNUITANT. A
NEGATIVE ADJUSTMENT MAY RESULT IN AN EFFECTIVE RATE LOWER THAN THE
GUARANTEED INTEREST RATE BEING CREDITED
AND THE FIXED ACCOUNT VALUE BEING LESS THAN THE CONTRIBUTIONS.
ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT VALUE ARE VARIABLE, MAY
INCREASE OR DECREASE ACCORDINGLY, AND ARE NOT GUARANTEED AS TO
AMOUNT.
A 10% FEDERAL TAX PENALTY MAY APPLY IF A SURRENDER, WITHDRAWAL, OR
DISTRIBUTION IS TAKEN PRIOR TO THE
TAXPAYERS ATTAINMENT OF AGE 59 1/2.
FREE LOOK PERIOD
10 DAY RIGHT TO EXAMINE CONTRACT. IF NOT SATISFIED WITH THE
CONTRACT, RETURN IT TO THE
COMPANY OR THE SCHWAB ANNUITY SERVICE CENTER WITHIN 10 DAYS OF
RECEIVING IT. THE
CONTRACT WILL BE VOID FROM THE START, AND THE COMPANY WILL REFUND
THE GREATER OF: 1)
CONTRIBUTIONS RECEIVED; OR 2) THE ANNUITY ACCOUNT VALUE LESS
SURRENDERS, WITHDRAWALS,
AND DISTRIBUTIONS.
Signed for Great-West Life & Annuity Insurance Company on the
issuance of this Contract.
D.C. Lennox, W.T.
McCallum,
Secretary President
and Chief Executive Officer
J434IND
(96)<PAGE>
Annuity Contract Number: 1234567
Effective Date: March 1, 1996
Status of Annuity: Non-Qualified
Initial Contribution: $5,000
Payment Commencement Date: March 1, 2006
Owner: JOHN C. DOE
Date of Birth: April 1, 1944
Tax ID Number: 111-11-1111
Joint Owner: JANE B. DOE
Date of Birth: November 12, 1948
Tax ID Number: ###-##-####
Annuitant: JOHN C. DOE
Date of Birth: March 22, 1942
Tax ID Number: ###-##-####
Contingent Annuitant: DAVID J. DOE
Date of Birth: June 6, 1964
Tax ID Number: ###-##-####
This Contract Data Page, together with the Initial Premium
Allocation Confirmation, reflects the information with
which your Contract has been established as of the Effective Date.
If you wish to change or correct any
information on this page, please call the Schwab Annuity Service
Center immediately at 1-800-838-0650.
GUARANTEED INTEREST RATE: [3%]
CHARGES: Charges at the time we issued this Contract are shown
below.
Risk Charge:
Mortality: Expense:
Total:
.68% maximum .17% maximum .85% maximum
Contract Maintenance Charge: $25.00 maximum annually
PAYMENT COMMENCEMENT DATE: The date on which annuity payments or
periodic withdrawals will start. This Contract Data Page indicates
the date that you selected, or if no date is specified, the latest
date on which payments can start. (You may change the Payment
Commencement Date prior to commencement of annuity payments, or
it may be changed by the Beneficiary upon the death of an Owner.)
Schwab Annuity Service Center
P.O. Box 7785
San Francisco, California 94120-9420
1-800-838-0650
<PAGE>
Beneficiary: Sally Smith
Date of Birth: January 17, 1956
Tax ID Number: ###-##-####
<PAGE>
Use this Table of Contents to locate specific topics in this
annuity Contract.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 3
GENERAL PROVISIONS
Entire Contract . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Contract Modification . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Non-Participating . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Misstatement of Age . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 5
Reports . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Notice and Proof. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Tax Consequences of Payments. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Currency. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Voting Rights . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
OWNERSHIP PROVISIONS
Rights of Owner . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Beneficiary . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Designation of Beneficiary. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6
Change of Beneficiary . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Death of Beneficiary. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Successive Beneficiaries. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Annuitant . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Contingent Annuitant. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Change of Ownership . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Collateral Assignment . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
Ownership of Series Account . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 7
CONTRIBUTIONS PROVISIONS
Effective Date. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Contributions . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Allocation of Contributions . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
ACCOUNT VALUE AND MARKET VALUE ADJUSTMENT PROVISIONS
Contract Maintenance Charge . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Variable Account Value. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 8
Accumulation Units. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Accumulation Unit Value . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Net Investment Factor . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Risk Charge . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Guarantee Period Fund . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9
Value of Guarantee Period . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .10
Allocation at Guarantee Period Maturity Date. . . . . .
. . . . . . . . . . . . . . . . . .10
Breaking a Guarantee Period . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .10
Market Value Adjustment . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .11
<PAGE>
Use this Table of Contents to locate specific topics in this
annuity Contract.
TRANSFER PROVISIONS
Transfers . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .11
Dollar Cost Averaging . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .12
The Rebalancer Option . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .12
DEATH BENEFIT PROVISIONS
Payment of Death Benefit. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .13
Distribution Rules. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .13
Compliance with Code Section 72(s). . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
SURRENDERS AND PARTIAL WITHDRAWALS
Surrender Benefit . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
Partial Withdrawals . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .14
Postponement. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
PAYMENT OPTIONS
How to Elect. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Selection of Payment Options. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Variable Annuity Payment Options. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .15
Fixed Annuity Payment Options . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .16
Periodic Withdrawal Option. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
How to Elect Periodic Withdrawals . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
Periodic Withdrawal Options Available . . . . . . . . .
. . . . . . . . . . . . . . . . . .17
<PAGE>
Accumulation Period - the period between the Effective
Date and the Payment Commencement Date.
Accumulation Unit - an accounting measure used to
determine the Variable Account Value before the date
annuity payments commence.
Annuitant - the person named in the application and in
the Contract Data Page 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.
Annuity Account - an account that reflects the total
value of the Owner's Variable and Fixed Sub-Accounts.
Annuity Account Value - the sum of the Variable and
Fixed Sub-Accounts credited to the Owner under the
Annuity Account.
Annuity Payment Period - the period beginning on the
Payment Commencement Date and continuing until all
annuity payments have been made under this Contract.
Annuity Unit - an accounting measure used to
determine the dollar value of any variable dollar
annuity payment after the first annuity payment is
made.
Automatic Contribution Plan - a plan provided to the
Owner to allow for automatic payment of
Contributions. The Contribution amount will be
withdrawn from a pre-authorized account and
automatically credited to the Annuity Account.
Beneficiary - the person(s) designated by the Owner to
receive death proceeds which may become payable
upon the death of an Owner or the Annuitant. If the
surviving spouse of an Owner is the surviving Joint
Owner, the surviving spouse will be deemed to be the
Beneficiary upon such Owners death and may take
the death benefit or elect to continue this Contract in
force. The Beneficiary is shown on the Contract Data
Page unless later changed by the Owner.
Company - Great-West Life & Annuity Insurance
Company, the underwriter for this annuity, located at
8515 East Orchard Road, Englewood, Colorado 80111.
Contingent Annuitant - the person named in the
application who will become the Annuitant upon the
death of the Primary Annuitant. The Contingent
Annuitant is the person named in the Contract Data
Page, unless later changed by Request while the
Primary Annuitant is alive and before annuity
payments have commenced.
Contract - the document issued to the Owner which
specifies the rights and obligations of the Owner.
Contributions - purchase amounts received and allocated
to the Variable or Fixed 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 in which the assets of the Series Account may
be invested.
Fixed Account Value - the sum of the values of the
Fixed Sub-Accounts credited to the Owner under the
Annuity Account.
Fixed Sub-Accounts - the sub-division(s) of the Annuity
Account described in the Contract and in the attached
Fixed Sub-Account Riders, if any.
Guarantee Period - one of the terms of the Guarantee
Period Fund available under this Contract. The
Company will specify the Guarantee Period terms that
are available and the predetermined rate of interest
that will apply to each of the Guarantee Period terms.
This rate of interest will be equal to the annual
effective rate in effect at the time the Contribution is
made and as reflected in written confirmation of the
Contribution. The Company may stop offering any
term at any time for new Contributions. Amounts
allocated to one or more Guarantee Periods may be
subject to a Market Value Adjustment.
Guarantee Period Fund - A type of Fixed Sub-Account.
Guarantee Period Maturity Date - the last day of any
Guarantee Period.
Guaranteed Interest Rate - the minimum interest rate
applicable to each Fixed Sub-Account in effect at the
time the Contribution is made. This is the minimum
interest rate allowed by law and is subject to change in
accordance with changes in applicable law.
Individual Retirement Annuity (IRA) - an annuity Contract
used for 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 a specific portfolio of the
Eligible Fund. There is an Investment Division for each
portfolio of the 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 a periodic withdrawal or to
purchase an annuity, and distributions resulting from the
death of an Owner or the 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 Guaranteed Interest
Rate applicable to this Contract and the value of the
Contribution(s) allocated to the Guarantee Period being
less than the Contribution(s) made.
Non-qualified Annuity Contract - an annuity Contract
which is not intended to be a 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 Owners) - the person or persons named in
the Contract Data Page. The Owner is entitled to
exercise all rights and privileges under the Contract,
while the Annuitant is living. Joint Owners must be
husband and wife as of the Effective Date. The
Annuitant will be the Owner unless otherwise indicated
in the application. If a Contract is purchased as an
Individual Retirement Annuity under Section 408 of the
Code, the Annuitant must be the sole Owner; no Joint
Owner may be named.
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 this Contracts Effective
Date. If a Payment Commencement Date is not shown
on the Contract Data Page, annuity payments will begin
on the first day of the month of the Annuitants 91st
birthday. The Payment Commencement Date may be
changed by the Owner prior to commencement of
annuity payments or it may be changed by the Beneficiary
upon the death of an Owner. If this is an IRA Contract,
payments which satisfy the minimum distribution
requirements of the Code must begin no later than the
Owner/Annuitants attainment of age 70 1/2.
Premium Tax - the amount of tax, if any, charged by a
state or other governmental authority.
Request - any instruction in a form, written, telephoned or
computerized, 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 this Contract or as required
by the Company. The Request is subject to any action
taken or payment made by the Company before it was
processed.
Schwab Annuity Service Center - Post Office Box 7785, San
Francisco, California 94120-9420. The toll-free telephone
number is 1-800-838-0650.
Simplified Employee Pension (SEP) - 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.
Series Account - the segregated investment account
established by the Company under Colorado law and
registered as a unit investment trust under the
Investment Company Act of 1940, as amended.
Surrender Value - will be equal to:
(a)Annuity Account Value with a Market Value
Adjustment, if applicable, on the effective date
of the surrender; less
(b)
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 valued on each date that
the New York Stock Exchange is open for trading.
Transfer - the moving of money from one sub-account to
one or more sub-account(s).
Valuation Date - the date on which the net asset value of
each Eligible Fund is determined.
Valuation Period - the period between two successive
Valuation Dates.
Variable Account Value - the sum of the values of the
Variable Sub-Accounts credited to the Owner under the
Annuity Account. The Variable Account Value is
credited with a return based upon the investment
experience of the Investment Division(s) selected by the
Owner and will increase or decrease accordingly.
Variable Sub-Accounts - sub-division(s) of the Owners
Annuity Account containing the value credited to the
Owner from an Investment Division.
<PAGE>
What is your agreement with us?
ENTIRE CONTRACT
This Contract, Contract Data Page, tables, riders and
amendments, if any, form the Entire Contract between
the Owner and the Company. This Entire Contract
supersedes all prior representations, statements,
warranties, promises and agreements of any kind, whether
oral or written, relating to the subject matter of this
Contract. All statements in the application, made by an
Owner or the Annuitant, in the absence of fraud, will be
considered representations and not warranties.
How can this Contract be modified?
CONTRACT MODIFICATION
This Contract may be modified only by written agreement
between the Company and the Owner, except that upon
30 days notice to the Owner, the Company may at any
time and without the consent of the Owner or any other
person, modify this Contract as needed to conform to
changes in tax or other law. Such modifications will
become part of this Contract.
If this Contract is purchased as an IRA, the Company
reserves the right to modify this Contract to the extent
necessary to qualify it as an Individual Retirement
Annuity as described in Section 408 of the Internal
Revenue Code of 1986, as amended, and all related
sections and regulations which are in effect during the
term of this Contract.
The Company may terminate certain Variable and Fixed
Sub-Accounts. In that event, the Owner, by Request,
may change the allocation of the Contributions and
maturing Guarantee Periods. If no Request is made by
the date the sub-account is terminated, future
Contributions and maturing Guarantee Periods will be
allocated to the Money Market Sub-Account. Any
modification will not affect the terms, provisions or
conditions which are, or may be, applicable to
Contributions previously made to any such Variable Sub-
Account. Any modification will not affect the terms of
any unmatured Guarantee Period or other Fixed Sub-
Account, except as may be described in the attached
Fixed Sub-Account riders, if any.
The Company may cease offering existing variable or
fixed annuity payment options.
ONLY THE PRESIDENT, A VICE-PRESIDENT, OR
THE SECRETARY OF THE COMPANY CAN MODIFY
OR WAIVE ANY PROVISION OF THIS CONTRACT.
NON-PARTICIPATING
This Contract is non-participating. It is not eligible to
share in the Company's divisible surplus.
What if the Annuitant's age is misstated?
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, the
annuity 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.
How will the Contract values be reported?
REPORTS
The Company will furnish the Owner, at least annually,
a statement of the Annuity Account Value and the
Surrender Value. The Company will furnish the Owner
copies of any other notices, reports or documents
required by law.
What are the notice and proof requirements?
NOTICE AND PROOF
Any notice or demand by the Company to or upon the
Owner, or any other person may be given by mailing it to
that person's last known address as stated in the
Company's file. In the event of the death of an Owner
or the Annuitant, the Company will require proof of
death.
Any application, report, Request, election, direction,
notice or demand by the Owner, or any other person,
must be made in a form satisfactory to the Company.
What are the tax consequences?
TAX CONSEQUENCES OF PAYMENTS
The Owner or Beneficiary, as the case may be, must
determine the timing and amount of any benefit payable.
Payments elected by the Owner in the form of periodic
withdrawals, surrenders or partial withdrawals will be tax
reported to the Owner. Annuity payments are payable to
the Annuitant and will be tax reported to the Annuitant.
Payments made to a Beneficiary will be tax reported to
the Beneficiary.
It is recommended that a competent tax adviser be
consulted prior to obtaining any distribution from, or
changing the ownership of, this Contract. A 10% federal
tax penalty may apply if a surrender, withdrawal, or
distribution is taken prior to the taxpayers attainment
of age 59 1/2.
Nothing contained herein will be construed to be tax or
legal advice. The Company assumes no responsibility or
liability for any damages or costs, including but not
limited to taxes, penalties, interest or attorney's fees
incurred by the Owner, the Annuitant, the Beneficiary, or
any other person arising out of any such determination.
CURRENCY
All Contributions and all transactions will be in the
currency of the United States of America.
What are the voting rights?
VOTING RIGHTS
The Company will vote the shares of an Eligible Fund.
To the extent required by law, the Company will vote
according to the instructions of the Owner in proportion
to the interest in the Variable Sub-Account. In such
event, the Company will send proxy materials and form(s)
to the Owner for a reply. If no reply is received by the
date specified in the proxy materials, the Company will
vote shares of the appropriate Eligible Fund in the same
proportion as shares of the Eligible Fund for which
replies have been received.
During the Annuity Payment Period, the number of
votes will decrease as the assets held to fund annuity
payments decrease. The Owner will be entitled to
receive the proxy materials and form(s).
What are the Owner's rights?
RIGHTS OF OWNER
While the Annuitant is living, the Owner has the sole
and absolute power to exercise all rights and privileges in
this Contract. Upon the death of an Owner or the
Annuitant, the Death Benefit Provisions section will
apply.
How is the Beneficiary determined?
BENEFICIARY
The Owner may, while the Annuitant is living, designate
or change a Beneficiary by Request from time to time as
provided below. If an Owner dies and the surviving Joint
Owner is the surviving spouse of the deceased Owner,
such surviving spouse will become the Beneficiary and
may take the death benefit or elect to continue this
Contract in force.
DESIGNATION OF BENEFICIARY
Unless changed as provided below, or as otherwise
required by law, the Beneficiary will be as shown on the
Contract Data Page. Unless otherwise indicated, if more
than one Beneficiary is designated, then each such
Beneficiary so designated will share equally in any
benefits and or rights granted by the Contract to such
Beneficiary or allowed by the Company. If the
Beneficiary is a partnership, any benefits will be paid to
the partnership as it existed at the time of an Owners
or the Annuitants death. The Company may rely on an
affidavit by any responsible person to identify a
Beneficiary or verify the non-existence of a Beneficiary
not identified by name.
CHANGE OF BENEFICIARY
The Owner may, while the Annuitant is living, change the
Beneficiary by Request. The Company shall not be
bound by any change of Beneficiary unless it is made in
writing and recorded at the Schwab Annuity Service
Center. A change of Beneficiary 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.
If an Owner dies before the date the Request was
processed, the change will take effect as of the date of
the Request, unless the Company has already made a
payment or has 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 to
the extent required by law.
DEATH OF BENEFICIARY
The interest of any Beneficiary who dies before an Owner
or the Annuitant will terminate at the death of such
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 has
indicated otherwise by Request. The benefits will then
be paid as though the Beneficiary had died before the
deceased Owner or Annuitant.
SUCCESSIVE BENEFICIARIES
If an Owner dies, and the surviving Joint Owner is the
surviving spouse of the deceased Owner, the surviving
spouse will become the Beneficiary and may take the
death benefit or elect to continue this Contract in force.
If there is no surviving Joint Owner, and no named
Beneficiary is alive at the time of an Owners death, any
benefits payable will be paid to the Owners estate.
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. A change of Annuitant
will take effect as of the date the Request is processed at
the Schwab Annuity Service Center.
How is the Contingent Annuitant determined?
CONTINGENT ANNUITANT
While the Annuitant is alive, the Owner 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.
Can the ownership of this Contract be changed?
CHANGE OF OWNERSHIP
If this is an IRA Contract, the Owners right to change
the ownership is restricted. An IRA Contract may not be
sold, assigned, transferred, discounted or pledged as
collateral for a loan or as security for the performance of
an obligation or for any other purpose to any person
other than as may be required or permitted under
Section 408 of the Internal Revenue Code of 1986, or
under any other applicable section of the Code, as
amended.
If this is a non-qualified Contract, the Owner may change
the ownership while the Annuitant is living. Any change
of ownership must be made by Request on a form
satisfactory to the Company. The change 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, and is subject to any action taken or
payment made by the Company before it was processed.
Can this Contract be assigned?
COLLATERAL ASSIGNMENT
If this is an IRA Contract, the Owner may not assign this
Contract as collateral.
If this is a non-qualified Contract, the Owner can assign
this Contract as collateral while the Annuitant is living.
The interest of the assignee has priority over the interest
of the Owner and the interest of any Beneficiary. Any
amounts 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 of any assignment. An assignment, pledge or
agreement to assign or pledge any portion of the Annuity
Account Value generally will be treated as a distribution.
It is recommended that a competent tax adviser be
consulted prior to making such a change to this Contract.
Who owns the Series Account?
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the
Series Account. The portion of the assets of the Series
Account equal to the reserves and other Contract
liabilities with respect to the Series Account are not
chargeable with liabilities arising out of any other
business the Company may conduct.
What is the Effective Date?
EFFECTIVE DATE
The Effective Date, shown on the Contract Data Page, is
the date the initial Contribution is credited to the
Annuity Account.
How may Contributions be made?
CONTRIBUTIONS
Contributions should be payable to Great-West Life &
Annuity Insurance Company (the Company) at the
Schwab Annuity Service Center at any time during the
Accumulation Period. All Contributions must be paid in
a form acceptable to the Company, during the lifetime of
the Annuitant and before the Payment Commencement
Date. Coverage will begin on the Effective Date.
At any time after the Effective Date, the Owner may
make additional Contributions. The minimum amount
accepted after the initial Contribution is $500 except
subsequent payments made via an Automatic
Contribution Plan have a minimum of $100 per month.
Total Contributions while this Contract is in force may
exceed $1,000,000 with prior approval from the Company.
The Company may modify these limitations.
How are Contributions allocated?
ALLOCATION OF CONTRIBUTIONS
During the Free Look Period, all Contributions will be
processed as follows:
Amounts to be allocated to one or more of the Fixed
Sub-Accounts will be allocated as directed,
effective upon the Transaction Date. (Allocation
will not be delayed until the end of the Free
Look Period.)
Amounts to be allocated to one or more of the Variable
Sub-Accounts will first be allocated to the
Money Market Sub-Account and will remain
there until the next Transaction Date following
end of the Free Look Period plus five calendar
days. On that date, the Variable Account Value
held in the Money Market Sub-Account will be
allocated to the Variable Sub-Accounts selected
by the Owner. During the Free Look Period, the
Owner may re-allocate among the Variable Sub-
Accounts.
If the Contract is returned during the Free Look Period,
it will be void from the start, and the Company will
refund the greater of: 1) Contributions received; or 2) the
Annuity Account Value less surrenders, withdrawals, and
distributions.
After the Free Look Period, subsequent Contributions
will be allocated in the Annuity Account as Requested by
the Owner. If there are no accompanying instructions,
then allocations will be made in accordance with standing
instructions. Allocations will be effective upon the
Transaction Date.
What is the annual Contract Maintenance Charge?
CONTRACT MAINTENANCE CHARGE
The following charge is applicable to the Annuity
Account Value. Each year, beginning on the first
anniversary of the Contract Effective Date, a Contract
Maintenance Charge of not more than $25 will be
deducted from the Annuity Account. This charge will be
deducted from the Money Market Fund Sub-Account. If
there is not sufficient value in the Money Market Sub-
Account to cover all of the Contract Maintenance
Charge, the remainder will be deducted proportionately
from the other Variable Sub-Accounts based on their
relative values. If there is not sufficient value in the
Variable Sub-Accounts, then the remainder will be
deducted from the Fixed Sub-Accounts. There is no
Market Value Adjustment on amounts taken from Fixed
Sub-Accounts for a Contract Maintenance Charge.
VARIABLE ACCOUNT PROVISIONS
How is the Variable Account Value determined?
VARIABLE ACCOUNT VALUE
The Variable Account Value for the Owner on any date
during the Accumulation Period will be the sum of the
values of the Variable Sub-Accounts.
The value of the Owners interest in a Variable Sub-
Account will be determined by multiplying the number of
the Owner's Accumulation Units by the accumulation
unit value for that Variable Sub-Account.
ACCUMULATION UNITS
For each Contribution, the number of Accumulation
Units credited for the Owner to a Variable Sub-Account
will be determined by dividing the amount of the
Contribution, less Premium Tax, if any, by the
accumulation unit value for that Variable Sub-Account
on the applicable Transaction Date.
ACCUMULATION UNIT VALUE
The initial accumulation unit value of each Variable Sub-
Account was established at $10. The accumulation unit
value of a Variable Sub-Account on a Valuation Date is
calculated by multiplying the accumulation unit value as
of the immediately preceding Valuation Date by the net
investment factor as described in the Net Investment
Factor provision below.
The dollar value of an Accumulation Unit will vary in
amount depending on the investment experience of the
Eligible Fund and charges taken from the Sub-Account.
NET INVESTMENT FACTOR
The net investment factor for any Variable Sub-Account
for any Valuation Period is determined by dividing (a) by
(b), and subtracting (c) from the result where:
(a) is the net result of:
(i) the net asset value per share of the Eligible
Fund shares held in the Variable Sub-Account
determined as of the end of the current
Valuation Period; plus
(ii) the per share amount of any dividend (or, if
applicable, capital gain distributions) made by
the applicable Eligible Fund on shares held in
the Variable Sub-Account if the "ex-dividend"
date occurs during the current Valuation
Period; minus or plus
(iii) a per unit charge or credit for any taxes
incurred by or reserved for in the Variable
Sub-Account, which is determined by the
Company to have resulted from the investment
operations of the Variable Sub-Account.
(b) is the net result of:
(i) the net asset value per share of the Eligible
Fund shares held in the Variable Sub-Account
determined as of the end of the immediately
preceding Valuation Period; minus or plus
(ii) the per unit charge or credit for any taxes
incurred by or reserved for in the Variable Sub-
Account for the immediately preceding Valuation
Period.
(c) is an amount representing the risk charge deducted
from each Variable Sub-Account on a daily basis,
equal to an annual rate as shown in the table below
as a percentage of the daily net asset value of each
Variable Sub-Account. This charge will not exceed:
Mortality: Expense: Total:
.68% maximum .17% maximum .85% maximum
The net investment factor may be greater than, less than,
or equal to one. Therefore, the accumulation unit value
may increase, decrease or remain unchanged.
The per share amount of any dividend referred to in
paragraph (a)(ii) includes a deduction for an investment
advisory fee. This fee compensates the investment
adviser for services provided to the Eligible Fund. The
fee may differ between Eligible Funds and may be
renegotiated each year.
RISK CHARGE
The risk charge compensates the Company for its
assumption of certain mortality and expense risks. This
charge is set forth above in the Net Investment Factor
provision.
FIXED ACCOUNT PROVISIONS
How is the Fixed Account Value determined?
GUARANTEE PERIOD FUND
The Guarantee Period Fund is a type of Fixed Sub-
Account. The Owner, by Request, may allocate all or a
portion of a Contribution to any of the several
Guarantee Periods then offered by the Company. The
sum of the values of the Owner's Guarantee Periods is
the value of the Owner's interest in the Guarantee Period
Fund.
What is the value of each Guarantee Period?
VALUE OF GUARANTEE PERIOD
All Contributions allocated to a Guarantee Period will
earn an annual effective rate of interest equal to the rate
stated by the Company for the applicable Guarantee
Period from the Transaction Date to the end of the
Guarantee Period. The account will be credited daily
with interest earned.
If the Owner does not break a Guarantee Period, the
annual effective rate will be at least the Guaranteed
Interest Rate. If the Owner breaks a Guarantee Period,
a Market Value Adjustment may apply. A negative
adjustment may result in an effective rate lower than the
Guaranteed Interest Rate and the Fixed Account Value
being less than the Contributions.
Each Guarantee Period has its own value, which is
calculated as follows:
the Owner's Contributions, less Premium Tax, if any, in
that Guarantee Period; plus
interest earned; less
amounts Transferred, distributed, surrendered (in whole
or in part), or applied to an annuitization
option; less
periodic withdrawals; less
Contract Maintenance Charges.
ALLOCATION AT GUARANTEE PERIOD
MATURITY DATE
At any time prior to the Guarantee Period Maturity
Date, the Owner may Request to allocate the maturity
value of that Guarantee Period among any of the
Variable and Fixed Sub-Accounts then offered by the
Company under this Contract. The election is effective
on its Guarantee Period Maturity Date.
If the election is not received at the Schwab Annuity
Service Center prior to the Guarantee Period Maturity
Date, the value of the matured Guarantee Period will be
allocated to a new Guarantee Period with the same
Guarantee Period as the matured Guarantee Period.
If the new Guarantee Period would mature later than the
Payment Commencement Date, the value will be
allocated to the Guarantee Period that matures closest to
the Payment Commencement Date.
If the Company is not then offering the same Guarantee
Period under the Contract, the value of the matured
Guarantee Period will be allocated to a new Guarantee
Period with the closest shorter Guarantee Period then
available.
If none of the above is available, the value of the
matured Guarantee Period will be allocated to the
Money Market Sub-Account.
If held to maturity, amounts from a matured Guarantee
Period allocated to a new Guarantee Period or other
Fixed Sub-Account will earn the annual effective rate
applicable to that Guarantee Period or Fixed Sub-
Account. This annual effective rate may differ from the
annual effective rate applicable to the matured
Guarantee Period.
What if the Guarantee Period is broken prior to maturity?
BREAKING A GUARANTEE PERIOD
Any Transfer, surrender (in whole or in part),
distribution due to death, 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
amount being Transferred or withdrawn from the
Guarantee Period. The Market Value Adjustment is
described below.
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 an Owner or the
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. The Amount Available for a full surrender,
partial withdrawal, or Transfer is the Amount Requested
plus the MVA.
Amount Available = Amount Requested + MVA
The MVA is calculated by multiplying the amount
Requested by the Market Value Adjustment Factor
(MVAF). The formula used to determine the MVA
is:
MVA = (Amount Requested) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
- -1
where:
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; and
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
n is the number of complete months remaining until
maturity.
The Market Value Adjustment will equal 0 if:
i and j differ by less than .10%; or
N is less than 6.
If The Wall Street Journal ceases to publish the U.S.
Treasury Strip ask side yield, an alternate source will be
used.
The Market Value Adjustment will apply to any
Guarantee Period broken six or more months prior to
the Guarantee Period Maturity Date in each of the
following situations:
Transfers to another Guarantee Period, Fixed Sub-
Account or to an Investment Division offered
under this Contract; or
Surrenders, partial withdrawals, annuitization or periodic
withdrawals; or
A single sum payment upon death of the Owner or
Annuitant.
The Market Value Adjustment will not apply to any
Guarantee Period having fewer than 6 months prior to
the Guarantee Period Maturity Date in each of the
following situations:
Transfer to another Guarantee Period, Fixed Sub-
Account or to a Variable Sub-Account offered
under this Contract; or
Surrenders, partial withdrawals, annuitization or periodic
withdrawals;
A
single sum payment upon death of an Owner or the
Annuitant.
Can Transfers be made between the Fixed and Variable Sub-Accounts?
TRANSFERS
The Owner may make Transfers by Request. The
following provisions apply:
(a) At any time prior to the date annuity payments
begin, the Owner, by Request, may Transfer all or
a portion of the Annuity Account Value among the
Variable and Fixed Sub-Accounts currently offered
by the Company. No Transfers are permitted after
the election of a fixed annuity payment option;
however, if a variable annuity payment option is
elected, Transfers may be made from one Variable
Sub-Account to another.
(b) A Transfer will be effective upon the Transaction
Date.
(c) A Transfer from Fixed Sub-Accounts will be
subject to the terms of the Fixed Account
Provisions and the attached Fixed Sub-Account
Rider(s), if any. The Annuity Account Value may
be Transferred prior to the Guarantee Period
Maturity Date. The Market Value Adjustment will
be assessed except in the situations described in
the Market Value Adjustment Provision.
(d) There is no administrative charge for the first
twelve Transfers made in a calendar year. There is
a $10 administrative fee for each subsequent
Transfer. All Transfers made on a single
Transaction Date will be aggregated to count as
only one Transfer toward the twelve 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.
Is Dollar Cost Averaging offered?
DOLLAR COST AVERAGING
By Request, the Owner may elect Dollar Cost Averaging
in order to purchase units of the Variable Sub-Accounts
over a period of time.
The Owner may Request to automatically Transfer a
predetermined dollar amount, subject to the Companys
minimum, at regular intervals from any one or more
designated Variable Sub-Accounts to one or more of the
remaining, then available, Variable Sub-Accounts. The
unit value will be determined on the dates of the
Transfers. The Owner must specify the percentage to be
Transferred into each designated Variable Sub-Account.
Transfers may be set up on any one of the following
frequency periods: monthly, quarterly, semiannually, or
annually. The Transfer will be initiated on the
Transaction Date one frequency period following the date
of the Request. The Company will provide a list of
Variable Sub-Accounts eligible for Dollar Cost Averaging
which may be modified from time to time. Amounts
Transferred through Dollar Cost Averaging are not
counted against the twelve free Transfers allowed in a
calendar year.
The Owner may terminate Dollar Cost Averaging at any
time by Request. Dollar Cost Averaging will terminate
automatically upon the annuity commencement date.
Participation in Dollar Cost Averaging and the
Rebalancer Option at the same time is not allowed.
Participation in Dollar Cost Averaging does not assure a
greater profit, or any 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.
Is rebalancing available?
THE REBALANCER OPTION
By Request, the Owner may elect the Rebalancer Option
in order to automatically Transfer among the Variable
Sub-Accounts on a periodic basis. This type of automatic
Transfer program automatically reallocates the Variable
Account Value to maintain a particular percentage
allocation among Variable Sub-Accounts selected by the
Owner. The amount allocated to each Variable
Sub-Account will grow or decline at different rates
depending on the investment experience of the Variable
Sub-Account.
The Owner may Request that 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 twelve free Transfers
allowed in a calendar year.
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 funds.
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 twelve free
Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable
Account Value to be allocated to each Variable
Sub-Account and the frequency of rebalancing. The
Owner may terminate the Rebalancer Option at any time
by Request. 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.
How is the death benefit paid?
PAYMENT OF DEATH BENEFIT
Upon the death of an Owner or the Annuitant, the death
benefit will become payable in accordance with these
death benefit provisions following the Companys receipt
of a Request, while this Contract is in force.
The amount of the death benefit will be as follows:
If the Owner or Annuitant dies after the date annuity
payments commence and before the entire interest has
been distributed, the remaining annuity payments will be
paid to the Beneficiary under the payment option
applicable on the date of death. The Beneficiary will not
be allowed to change the method of distribution in effect
on the date of the Owners or Annuitants death or to
elect a new payment option; or
If the Owner or Annuitant dies before the date annuity
payments commence, the Company will pay proceeds to
the Beneficiary the greater of:
the Annuity Account Value with the Market Value
Adjustment, if applicable, as of the date the
Request for payment is received, less Premium
Tax, if any; or
the sum of Contributions paid, less partial surrenders
and Periodic Withdrawals, less Premium Tax, if
any.
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 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. Distribution of
the death benefit may be Requested to be made as
follows (subject to the distribution rules set forth below):
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 the Contract.
B. Proceeds from the Fixed Sub-Account(s)
1. payment in a single sum (a Market Value Adjustment
may apply); or
2. payment under any of the annuity options provided
under this Contract (a Market Value Adjustment may
apply); or
3. payment on the Guarantee Period Maturity Date (a
Market Value Adjustment will not apply).
DISTRIBUTION RULES
If Annuitant Dies Before Annuity Commencement Date
Upon the death of the Annuitant while the Owner is
living, and before the annuity commencement date, the
death benefit provided under the Contract will be paid to
the Beneficiary unless there is a surviving Contingent
Annuitant.
If a Contingent Annuitant was named by the Owner prior
to the Annuitants 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 Annuitants death and the
Contingent Annuitant will become the Annuitant.
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 an Owner
provisions described below.
If an Owner Dies Before Annuity Commencement Date
If an Owner dies before the annuity commencement date,
and such Owner was the Annuitant, the following
provisions shall apply:
(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,
the Annuitant and the Beneficiary, and may take the
death benefit or elect to continue this Contract in
force;
(3) In all other cases, the Company will pay the
death benefit to the Beneficiary even if a former
spouse Joint Owner, the Annuitant and/or the
Contingent Annuitant are alive at the time of an
Owners death, unless the sole Beneficiary is the
deceased Owners surviving spouse and the
Beneficiary Requests to become the Owner and the
Annuitant, and to continue the Contract in force.
If an Owner dies before the annuity commencement date,
and such Owner was not the Annuitant, the following
provisions shall apply:
(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 take the
death benefit or elect to continue this Contract in
force.
(2) In all other cases, the Company will pay the
death benefit to the Beneficiary even if a former
spouse Joint Owner, the Annuitant and/or the
Contingent Annuitant are alive at the time of the
Owner's death, unless the sole Beneficiary is the
How is the death benefit paid?
PAYMENT OF DEATH BENEFIT
Upon the death of an Owner or the Annuitant, the death
benefit will become payable in accordance with these
death benefit provisions following the Companys receipt
of a Request, while this Contract is in force.
The amount of the death benefit will be as follows:
If the Owner or Annuitant dies after the date annuity
payments commence and before the entire interest has
been distributed, the remaining annuity payments will be
paid to the Beneficiary under the payment option
applicable on the date of death. The Beneficiary will not
be allowed to change the method of distribution in effect
on the date of the Owners or Annuitants death or to
elect a new payment option; or
If the Owner or Annuitant dies before the date annuity
payments commence, the Company will pay proceeds to
the Beneficiary the greater of:
the Annuity Account Value with the Market Value
Adjustment, if applicable, as of the date the Request
for payment is received, less Premium Tax, if any; or
the sum of Contributions paid, less partial surrenders and
Periodic Withdrawals, less Premium Tax, if any.
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 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. Distribution of
the death benefit may be Requested to be made as
follows (subject to the distribution rules set forth below):
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 the Contract.
B. Proceeds from the Fixed Sub-Account(s)
1. payment in a single sum (a Market Value Adjustment
may apply); or
2. payment under any of the annuity options provided
under this Contract (a Market Value Adjustment may
apply); or
3. payment on the Guarantee Period Maturity Date (a
Market Value Adjustment will not apply).
DISTRIBUTION RULES
If Annuitant Dies Before Annuity Commencement Date
Upon the death of the Annuitant while the Owner is
living, and before the annuity commencement date, the
death benefit provided under the Contract will be paid to
the Beneficiary unless there is a surviving Contingent
Annuitant.
If a Contingent Annuitant was named by the Owner prior
to the Annuitants 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 Annuitants death and the
Contingent Annuitant will become the Annuitant.
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 an Owner
provisions described below.
If an Owner Dies Before Annuity Commencement Date
If an Owner dies before the annuity commencement date,
and such Owner was the Annuitant, the following
provisions shall apply:
(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,
the Annuitant and the Beneficiary, and may take the
death benefit or elect to continue this Contract in
force;
(3) In all other cases, the Company will pay the
death benefit to the Beneficiary even if a former
spouse Joint Owner, the Annuitant and/or the
Contingent Annuitant are alive at the time of an
Owners death, unless the sole Beneficiary is the
deceased Owners surviving spouse and the
Beneficiary Requests to become the Owner and the
Annuitant, and to continue the Contract in force.
If an Owner dies before the annuity commencement date,
and such Owner was not the Annuitant, the following
provisions shall apply:
(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 take the
death benefit or elect to continue this Contract in
force.
(2) In all other cases, the Company will pay the death
benefit to the Beneficiary even if a former spouse
Joint Owner, the Annuitant and/or the Contingent
Annuitant are alive at the time of the Owner's
death, unless the sole Beneficiary is the
deceased Owners surviving spouse and such
Beneficiary Requests to become the Owner and the
Annuitant and to continue the Contract in force.
To whom and when is the death benefit payable?
Any death benefit payable to the Beneficiary upon an
Owners death will be distributed as follows:
(1) If the Owner's surviving spouse is the person
entitled to receive benefits upon the Owners 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.
(2) If a non-spouse individual is the person
entitled to receive benefits upon the Owners
death, such individual may elect, not later than
one year after the Owners 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 such Beneficiary; and (b)
such distributions begin not later than one year
after the Owners date of death. If no
election is received by the Company from an
individual non-spouse Beneficiary such that
substantially equal installments have begun no
later than one year after the Owners date of
death, then the entire amount must be
distributed within five years of the Owners
date of death; or
(3) If a corporation or other non-individual
entity is entitled to receive benefits upon the
Owners death, the death benefit must be
completely distributed within five years of
the Owner's date of death.
The death benefit will be determined as of the date the
payments commence.
If Annuitant Dies After Annuity Commencement Date
Upon the death of the Annuitant (or any
Owner/Annuitant) after the annuity commencement date,
any benefit payable must be distributed to the Beneficiary
in accordance with and at least as rapidly as under the
annuity option then in effect.
If an Owner Dies After Annuity Commencement Date
and While the Annuitant is Living
Upon the death of an Owner after the annuity
commencement date and while the Annuitant is living,
any benefit payable will continue to be distributed to the
Annuitant at least as rapidly as under the annuity option
then in effect. All of the Owners rights granted under
the Contract or allowed by the Company will pass to any
surviving Joint Owner and, if none, to the Annuitant.
COMPLIANCE WITH CODE SECTION 72(s)
In any event, no payment of benefits provided under the
Contract will be allowed that does not satisfy the
requirements of Code Section 72(s), as amended from
time to time, and any other applicable federal or state
law, rules or regulations. These death benefit provisions
will be interpreted and administered in accordance with
such requirements.
Can withdrawals be made from this Contract?
SURRENDER BENEFIT
At any time prior to the date annuity payments
commence and subject to the provisions of this Contract,
the Owner may surrender this Contract for the Surrender
Value which will be computed as of the Transaction
Date. The Company will make the distribution, paid in
a single sum, as soon as practical after receipt of the
Request.
PARTIAL WITHDRAWALS
The Owner may make a partial withdrawal from the
Annuity Account Value at any time, by Request, prior to
the date annuity payments commence and subject to the
terms of this Contract. A Market Value Adjustment may
apply. The minimum partial withdrawal amount is $500.
After any partial withdrawal, if the remaining Annuity
Account Value is less than $2,000, then a full surrender
may be required.
By Request, the Owner must elect the Variable or Fixed
Sub-Account(s), or a combination of them, from which
a partial withdrawal is to be made and the amount to be
withdrawn from each sub-account.
The Annuity Account Value will be reduced by the
partial withdrawal amount. The partial withdrawal
proceeds may be greater than or less than the amount
requested, depending on the effect of the Market Value
Adjustment.
The following terms apply:
(a)
No partial withdrawals are permitted after the
date annuity payments commence.
(b) If a partial withdrawal is made within 30 days of
the date annuity payments are scheduled to
commence, the Company may delay the Payment
Commencement Date by 30 days.
(c) A partial withdrawal will be effective upon the
Transaction Date.
(d) A partial withdrawal from a Fixed Sub-Account
may be subject to the Market Value Adjustment
Provisions, the Fixed Account Provisions of this
Contract, and the terms of the attached Fixed Sub-
Account Rider(s), if any.
POSTPONEMENT
In accordance with state law, if the Company receives a
Request for surrender or partial withdrawal, the
Company may postpone any cash payment as follows:
from the Fixed Account Value, for no more than 6
months (30 days in West Virginia); and
from the Variable Account Value, for no more than
7 business days.
During the postponement period:
the
Fixed Sub-Account(s) will continue to earn interest
at
the annual effective rate applicable to the
Guarantee Period (or at the rate applicable to the
attached Fixed Sub-Account Riders, if any) that was
in
effect at the time the Request for surrender or
partial withdrawal was made; and
the
Variable Account Value will continue to be subject
to
the investment experience (gains or losses) of the
underlying Eligible Fund(s) and all applicable
charges.
How are annuity payment options and the Periodic Withdrawal Option
elected?
HOW TO ELECT
The Request of the Owner is required to elect, or
change the election of, a payment option and must be
received by the Company at least 30 days prior to the
Payment Commencement Date.
At any time prior to the Payment Commencement
Date, the Owner may Transfer between Fixed and
Variable Sub-Account options, subject to the Transfer
provisions of this Contract.
However, on the Payment Commencement Date, the
following restrictions apply:
the Variable Account Value may be applied only to
any of the variable annuity payment options
available; and
the Fixed Account Value may be applied only to any
of the fixed annuity payment options available.
If an option has not been elected within 30 days of the
Payment Commencement Date, the Variable Account
Value will be applied under Variable Annuity Payment
Option 1 to provide payments for life with a
guaranteed period of 20 years. The Fixed Account
Value will be applied under Fixed Annuity Payment
Option 3 to provide payments for life with a
guaranteed period of 20 years.
What guidelines apply to annuity payment options?
SELECTION OF PAYMENT OPTIONS
(a) A single sum payment may be elected. If so,
the amount to be paid is the Surrender Value.
(b) If a fixed annuity payment option is elected, the
amount to be applied is the Fixed Account Value,
as of the Payment Commencement Date, plus a
Market Value Adjustment, if applicable, less
Premium Tax, if any.
c) If a variable annuity payment option is elected, the
amount to be applied is the Variable Account
Value, as of the Payment Commencement Date,
less Premium Tax, if any.
(d) The minimum amount that may be withdrawn
from the Annuity Account Value to purchase
an annuity payment option is $2,000. If the
amount is less than $2,000, the Company may
pay the amount in a single sum subject to the
Partial Withdrawals Provision. Payments may
be elected to be received on any of the
following frequency periods: monthly, quarterly,
semiannually, or annually.
(e) Payments to be made under the annuity payment
option selected must be at least $50. The
Company reserves the right to make the
payments using the most frequent payment
interval which produces a payment of not less
than $50.
(f) The maximum amount that may be applied under
any annuity payment option is $1,000,000,
unless prior approval is obtained from the
Company.
(g) For information on electing periodic withdrawals,
refer to the Periodic Withdrawal Option section
on Page 17.
What variable annuity payment options are
available?
VARIABLE ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality
from the 1983 Table (a) for Individual Annuity
Valuation and a guaranteed interest rate of 5% per
year. The Company may offer a better rate than the
guaranteed rate shown.
The following variable annuity payment options are
available:
(a) Option 1: Variable Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment
Period elected or the lifetime of the Annuitant
whichever is longer. The guaranteed Annuity
Payment Period elected may be 5, 10, 15, or 20
years. Upon death of the Annuitant, the
Beneficiary will begin to receive the remaining
payments at the same interval elected by the
Owner. See Table A.
(b) Option 2: Variable Life Annuity
Payments for the Annuitant's lifetime, without a
guaranteed period. See Table A.
(c) Option 3: Any Other Form
Any other form of variable annuity which is
acceptable to the Company.
These variable annuity payment options are subject to
the following provisions:
(1) Amount of First Payment
The first payment under a variable annuity
payment option will be based on the value of each
Variable Sub-Account on the 5th Valuation Date
preceding the date annuity payments commence.
It will be determined by applying the appropriate
rate from Table A to the amount applied under
the payment option.
(2) 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
payment by the sub-account's annuity 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.
(3) Amount of Payments after the First
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 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.
(4) Transfers After the Payment Commencement Date
Once variable annuity payments have begun, the
Owner may Transfer all or part of the Variable
Account Value from one Variable Sub-Account
to another. Transfers after the Payment
Commencement Date will be made by converting
the number of Annuity Units being Transferred to
the number of Annuity Units of the 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. Once
annuity payments have
begun, no Transfers may be made from a fixed
annuity payment option to a variable annuity
payment option, or from a variable annuity
payment option to a fixed annuity payment
option. The Contracts Transfer provisions will
apply.
What fixed annuity payment options are available?
FIXED ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality
from the 1983 Table (a) for Individual Annuity
Valuation and a guaranteed interest rate of 2 1/2% per
year. The Company may offer a better rate than the
guaranteed rate shown.
The following fixed annuity payment options are
available:
(a) Option 1: Income of Specified Amount
An annuity payment at 12-, 6-, 3-, or 1-month
intervals, of an amount elected by the Owner for
an Annuity Payment Period of 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. See Table C.
(b) Option 2: Income for a Specified Period
An annuity payment at 12-, 6-, 3-, or 1-month
intervals, for the number of months elected, for
an Annuity Payment Period of 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. See Table C.
(c) Option 3: Fixed Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment
Period elected which may be 5, 10, 15, or 20
years or the lifetime of the Annuitant whichever
is longer. Upon death of the Annuitant, any
amounts remaining payable under this payment
option will be paid to the Beneficiary. See Table
B.
(d) Option 4: Fixed Life Annuity
Monthly payments for the Annuitant's lifetime,
without a guaranteed period. See Table B.
(e) Option 5: Any Other Form
Any other form of annuity which is acceptable to the
Company.
What guidelines apply to periodic withdrawals?
PERIODIC WITHDRAWAL OPTION
The Owner must Request that all or part of the Annuity
Account Value be applied to a Periodic Withdrawal
Option. Premium Tax, if applicable, will be deducted
before applying the amount Requested. While periodic
withdrawals are being received:
a Market Value Adjustment applies to periodic
withdrawals from Guarantee Periods 6 or more
months prior to maturity;
the Owner may keep the same Fixed and Variable
Sub-Accounts as were in force before periodic
withdrawals began;
Charges and fees under this Contract continue to apply;
the Owner may continue to exercise all contractual
rights that are available prior to electing a payment
option, except that no Contributions may be made;
if a partial withdrawal is made from a Fixed Sub-
Account, the Market Value Adjustment, if
applicable, will be applied;
Guarantee Periods renew into the shortest Guarantee
Period then available.
HOW TO ELECT PERIODIC WITHDRAWALS
The Request of the Owner is required to elect, or change
the election of, the Periodic Withdrawal Option. The
Owner must Request:
the withdrawal frequency of either 12-, 6-, 3-, or 1-
month intervals;
a withdrawal amount; a minimum of $100 is
required;
the calendar month, day, and year on which
withdrawals are to begin;
one Periodic Withdrawal Option; and
the allocation of withdrawals from the 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(s) have been depleted, the Company
will automatically prorate the remaining
withdrawals against all remaining available
Sub-Accounts, unless the Owner Requests the
selection of another Variable Sub-Account.<PAGE>
The Owner may elect to
change the withdrawal option
and/or frequency once each calendar year.
Periodic Withdrawals will cease on the earlier of the
date:
the amount elected to be paid under the option selected
has been reduced to zero;
the Annuity Account Value is zero;
the Owner Requests that withdrawals stop;
the Owner purchases an annuity option; or
of death of an Owner or the Annuitant.
PERIODIC WITHDRAWAL OPTIONS
AVAILABLE
The Owner must elect one of these 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; or
2) Income of a Specified Amount for at least thirty-six (36)
months - The Owner elects the dollaramount 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 Fixed Sub-Account(s) between each
withdrawal. Available only if 100% of the account value is
invested in the Fixed Sub-Account; or
4) Minimum Distribution - If this is an IRA Contract, the Owner
may Request minimum distributions ast specified under Internal
Revenue Code 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.
<PAGE>
TABLE A - Variable Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.29 4.29 4.29 4.29 4.29
21 4.31 4.31 4.30 4.30 4.30
22 4.32 4.32 4.32 4.31 4.31
23 4.33 4.33 4.33 4.32 4.32
24 4.34 4.34 4.34 4.34 4.33
25 4.36 4.36 4.35 4.35 4.35
26 4.37 4.37 4.37 4.37 4.36
27 4.39 4.39 4.38 4.38 4.38
28 4.40 4.40 4.40 4.40 4.39
29 4.42 4.42 4.42 4.41 4.41
30 4.44 4.44 4.44 4.43 4.42
31 4.46 4.46 4.45 4.45 4.44
32 4.48 4.48 4.47 4.47 4.46
33 4.50 4.50 4.49 4.49 4.48
34 4.52 4.52 4.52 4.51 4.50
35 4.55 4.54 4.54 4.53 4.52
36 4.57 4.57 4.56 4.56 4.55
37 4.60 4.60 4.59 4.58 4.57
38 4.63 4.62 4.62 4.61 4.59
39 4.65 4.65 4.65 4.64 4.62
40 4.69 4.68 4.68 4.67 4.65
41 4.72 4.72 4.71 4.70 4.68
42 4.75 4.75 4.74 4.73 4.71
43 4.79 4.79 4.78 4.76 4.74
44 4.83 4.83 4.82 4.80 4.77
45 4.87 4.87 4.86 4.84 4.81
46 4.91 4.91 4.90 4.88 4.85
47 4.96 4.96 4.94 4.92 4.88
48 5.01 5.00 4.99 4.96 4.92
49 5.06 5.06 5.04 5.01 4.97
50 5.12 5.11 5.08 5.06 5.01 <PAGE>
Without With Guaranteed Period
Guaranteed
Age of Period 5 10 15 20
Annuitant Years Years Years Years
51 5.17 5.17 5.14 5.11 5.05
52 5.23 5.23 5.20 5.16 5.10
53 5.30 5.29 5.26 5.22 5.15
54 5.37 5.36 5.33 5.27 5.20
55 5.44 5.43 5.40 5.34 5.25
56 5.52 5.51 5.47 5.40 5.31
57 5.60 5.59 5.54 5.47 5.37
58 5.69 5.68 5.62 5.54 5.43
59 5.79 5.77 5.71 5.62 5.49
60 5.89 5.87 5.80 5.69 5.55
61 6.00 5.97 5.90 5.78 5.61
62 6.11 6.08 6.00 5.86 5.67
63 6.24 6.20 6.11 5.95 5.74
64 6.37 6.33 6.22 6.04 5.80
65 6.51 6.47 6.34 6.14 5.87
66 6.66 6.61 6.47 6.24 5.93
67 6.82 6.77 6.60 6.34 5.99
68 7.00 6.93 6.74 6.44 6.05
69 7.19 7.11 6.89 6.54 6.11
70 7.39 7.31 7.05 6.65 6.16
71 7.62 7.51 7.21 6.75 6.21
72 7.86 7.74 7.38 6.85 6.26
73 8.12 7.98 7.56 6.96 6.30
74 8.41 8.23 7.74 7.05 6.34
75 8.72 8.51 7.93 7.15 6.37
76 9.06 8.80 8.12 7.24 6.40
77 9.42 9.11 8.31 7.32 6.42
78 9.81 9.44 8.51 7.39 6.44
79 10.24 9.80 8.70 7.46 6.46
80 10.71 10.16 8.88 7.52 6.47
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE A - Variable Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.38 4.38 4.37 4.37 4.36
21 4.39 4.39 4.39 4.38 4.38
22 4.41 4.41 4.40 4.40 4.39
23 4.43 4.42 4.42 4.42 4.41
24 4.44 4.44 4.44 4.43 4.42
25 4.46 4.46 4.46 4.45 4.44
26 4.48 4.48 4.48 4.47 4.46
27 4.50 4.50 4.50 4.49 4.48
28 4.52 4.52 4.52 4.51 4.50
29 4.55 4.55 4.54 4.53 4.52
30 4.57 4.57 4.56 4.55 4.54
31 4.60 4.59 4.59 4.58 4.57
32 4.62 4.62 4.62 4.60 4.59
33 4.65 4.65 4.64 4.63 4.61
34 4.68 4.68 4.67 4.66 4.64
35 4.72 4.71 4.70 4.69 4.67
36 4.75 4.75 4.74 4.72 4.70
37 4.79 4.78 4.77 4.75 4.73
38 4.82 4.82 4.81 4.79 4.76
39 4.86 4.86 4.85 4.82 4.79
40 4.91 4.90 4.89 4.86 4.82
41 4.95 4.95 4.93 4.90 4.86
42 5.00 4.99 4.97 4.94 4.90
43 5.05 5.04 5.02 4.98 4.93
44 5.10 5.09 5.07 5.03 4.97
45 5.16 5.15 5.12 5.07 5.02
46 5.21 5.20 5.17 5.12 5.06
47 5.28 5.26 5.23 5.17 5.10
48 5.34 5.33 5.29 5.23 5.15
49 5.41 5.39 5.35 5.28 5.20
50 5.48 5.46 5.41 5.34 5.24 <PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 5.55 5.53 5.48 5.40 5.29
52 5.63 5.61 5.55 5.46 5.35
53 5.71 5.69 5.63 5.53 5.40
54 5.80 5.77 5.70 5.60 5.45
55 5.89 5.87 5.79 5.67 5.51
56 5.99 5.96 5.88 5.74 5.57
57 6.10 6.06 5.97 5.82 5.62
58 6.21 6.17 6.07 5.90 5.68
59 6.33 6.29 6.17 5.98 5.74
60 6.46 6.42 6.28 6.07 5.80
61 6.60 6.55 6.40 6.16 5.86
62 6.75 6.69 6.52 6.26 5.91
63 6.91 6.84 6.64 6.34 5.97
64 7.09 7.01 6.78 6.43 6.02
65 7.27 7.18 6.91 6.52 6.07
66 7.47 7.36 7.06 6.62 6.12
67 7.68 7.56 7.21 6.71 6.17
68 7.91 7.76 7.36 6.80 6.21
69 8.15 7.98 7.52 6.90 6.26
70 8.42 8.21 7.68 6.98 6.29
71 8.69 8.46 7.84 7.07 6.33
72 8.99 8.71 8.01 7.15 6.36
73 9.31 8.98 8.18 7.23 6.38
74 9.65 9.27 8.35 7.30 6.41
75 10.02 9.57 8.52 7.37 6.43
76 10.41 9.88 8.68 7.43 6.44
77 10.84 10.21 8.84 7.49 6.46
78 11.29 10.55 9.00 7.54 6.47
79 11.78 10.93 9.15 7.59 6.48
80 12.29 11.27 9.30 7.63 6.49
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE B - Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.61 2.61 2.61 2.61 2.61
21 2.63 2.63 2.63 2.63 2.63
22 2.65 2.65 2.65 2.64 2.64
23 2.67 2.67 2.66 2.66 2.66
24 2.69 2.69 2.68 2.68 2.68
25 2.71 2.71 2.70 2.70 2.70
26 2.73 2.73 2.72 2.72 2.72
27 2.75 2.75 2.75 2.74 2.74
28 2.77 2.77 2.77 2.77 2.76
29 2.79 2.79 2.79 2.79 2.79
30 2.82 2.82 2.82 2.81 2.81
31 2.84 2.84 2.84 2.84 2.83
32 2.87 2.87 2.87 2.86 2.86
33 2.90 2.90 2.89 2.89 2.89
34 2.93 2.93 2.92 2.92 2.91
35 2.96 2.96 2.95 2.95 2.94
36 2.99 2.96 2.98 2.98 2.97
37 3.02 3.02 3.02 3.01 3.00
38 3.05 3.05 3.05 3.04 3.04
39 3.09 3.09 3.09 3.08 3.07
40 3.13 3.13 3.12 3.12 3.10
41 3.17 3.16 3.16 3.15 3.14
42 3.21 3.21 3.20 3.19 3.18
43 3.25 3.25 3.24 3.23 3.22
44 3.30 3.29 3.29 3.28 3.26
45 3.34 3.34 3.33 3.32 3.30
46 3.39 3.39 3.38 3.37 3.35
47 3.44 3.44 3.43 3.42 3.39
48 3.50 3.50 3.49 3.47 3.44
49 3.56 3.55 3.54 3.52 3.49
50 3.62 3.61 3.60 3.58 3.54<PAGE>
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 3.68 3.68 3.66 3.64 3.59
52 3.75 3.74 3.73 3.70 3.65
53 3.82 3.81 3.79 3.76 3.71
54 3.89 3.88 3.86 3.83 3.77
55 3.97 3.96 3.94 3.90 3.83
56 4.05 4.04 4.02 3.97 3.89
57 4.14 4.13 4.10 4.05 3.96
58 4.23 4.22 4.19 4.13 4.03
59 4.33 4.32 4.28 4.21 4.10
60 4.44 4.42 4.38 4.30 4.17
61 4.55 4.53 4.48 4.39 4.24
62 4.67 4.65 4.59 4.48 4.31
63 4.79 4.77 4.70 4.58 4.39
64 4.93 4.90 4.82 4.68 4.46
65 5.07 5.04 4.95 4.78 4.53
66 5.23 5.19 5.09 4.89 4.61
67 5.39 5.35 5.23 5.00 4.68
68 5.57 5.52 5.38 5.11 4.74
69 5.76 5.71 5.53 5.23 4.81
70 5.96 5.90 5.70 5.34 4.87
71 6.19 6.11 5.87 5.46 4.93
72 6.43 6.34 6.05 5.57 4.98
73 6.69 6.58 6.24 5.68 5.03
74 6.97 6.84 6.43 5.79 5.07
75 7.28 7.12 6.63 5.90 5.11
76 7.61 7.41 6.83 5.99 5.14
77 7.97 7.73 7.04 6.09 5.17
78 8.36 8.06 7.24 6.17 5.19
79 8.78 8.42 7.44 6.24 5.21
80 9.24 8.79 7.64 6.31 5.22
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE B - Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.72 2.72 2.72 2.72 2.71
21 2.74 2.74 2.74 2.74 2.73
22 2.76 2.76 2.76 2.76 2.75
23 2.79 2.78 2.78 2.78 2.78
24 2.81 2.81 2.81 2.80 2.80
25 2.83 2.83 2.83 2.83 2.82
26 2.86 2.86 2.86 2.85 2.85
27 2.89 2.88 2.88 2.88 2.87
28 2.91 2.91 2.91 2.91 2.90
29 2.94 2.94 2.94 2.93 2.93
30 2.97 2.97 2.97 2.96 2.95
31 3.00 3.00 3.00 2.99 2.98
32 3.04 3.03 3.03 3.03 3.01
33 3.07 3.07 3.07 3.06 3.05
34 3.11 3.10 3.10 3.09 3.08
35 3.14 3.14 3.14 3.13 3.11
36 3.18 3.18 3.18 3.17 3.15
37 3.22 3.22 3.22 3.21 3.19
38 3.27 3.28 3.26 3.25 3.23
39 3.31 3.31 3.30 3.29 3.27
40 3.36 3.36 3.35 3.33 3.31
41 3.41 3.41 3.40 3.38 3.35
42 3.46 3.46 3.45 3.43 3.39
43 3.52 3.51 3.50 3.48 3.44
44 3.57 3.57 3.56 3.53 3.49
45 3.63 3.63 3.61 3.58 3.54
46 3.70 3.69 3.67 3.64 3.59
47 3.76 3.75 3.73 3.69 3.64
48 3.83 3.82 3.80 3.76 3.69
49 3.90 3.89 3.87 3.82 3.75
50 3.98 3.97 3.94 3.88 3.81<PAGE>
Age of Without With Guaranteed Period
Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 4.05 4.04 4.01 3.95 3.86
52 4.14 4.12 4.09 4.02 3.93
53 4.22 4.21 4.17 4.10 3.99
54 4.32 4.30 4.25 4.17 4.05
55 4.41 4.39 4.34 4.25 4.11
56 4.51 4.50 4.44 4.33 4.18
57 4.62 4.60 4.54 4.42 4.25
58 4.74 4.72 4.64 4.51 4.31
59 4.86 4.84 4.75 4.60 4.38
60 5.00 4.96 4.87 4.69 4.45
61 5.14 5.10 4.99 4.79 4.51
62 5.29 5.25 5.12 4.89 4.58
63 5.45 5.40 5.25 4.99 4.65
64 5.62 5.57 5.39 5.09 4.71
65 5.81 5.74 5.54 5.20 4.77
66 6.00 5.93 5.69 5.30 4.83
67 6.21 6.12 5.85 5.41 4.88
68 6.44 6.33 6.01 5.51 4.93
69 6.68 6.55 6.18 5.61 4.98
70 6.94 6.79 6.35 5.71 5.02
71 7.21 7.03 6.52 5.80 5.06
72 7.51 7.29 6.70 5.90 5.09
73 7.82 7.57 6.88 5.98 5.12
74 8.16 7.86 7.06 6.08 5.15
75 8.52 8.16 7.24 6.14 5.17
76 8.90 8.48 7.42 6.21 5.19
77 9.32 8.81 7.59 6.27 5.21
78 9.77 9.16 7.76 6.33 5.22
79 10.24 9.52 7.93 6.38 5.24
80 10.75 9.90 8.09 6.43 5.24
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly
payment shall be determined by the Company on the actuarial basis
used in determining the above amounts.
<PAGE>
TABLE C -Income of Specified Amount
- -Income for a Specified Period
Payment for Each $1,000
of Annuity Account Value
Years Monthly Quarterly Semiannually Annually
1 84.28 252.32 503.09 1,000.00
2 42.66 127.72 254.65 506.17
3 28.79 86.19 171.85 341.60
4 21.86 65.44 130.47 259.33
5 17.70 52.99 105.65 210.00
6 14.93 44.69 89.11 177.12
7 12.95 38.77 77.30 153.65
8 11.47 34.33 68.45 136.07
9 10.32 30.88 61.58 122.40
10 9.39 28.13 56.08 111.47
11 8.64 25.87 51.59 102.54
12 8.02 24.00 47.85 95.11
13 7.49 22.41 44.69 88.83
14 7.03 21.06 41.98 83.45
15 6.64 19.88 39.64 78.80
16 6.30 18.86 37.60 74.73
17 6.00 17.95 35.79 71.15
18 5.73 17.15 34.20 67.97
19 5.49 16.43 32.77 65.13
20 5.27 15.79 31.48 62.58
If payments are for an amount or duration different than that
outlined above, the Company will determine the proper amount or
duration using the actuarial basis used to determine the above
amounts.
<PAGE>
CORPORATE HEADQUARTERS - Englewood, Colorado
J434IND<PAGE>
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
ENDORSEMENT ISSUED BY GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY AS PART OF THE CONTRACT TO WHICH IT IS ATTACHED.
To qualify as an Individual Retirement Annuity under section
408 of the Internal Revenue Code of 1986, as amended, (Code)
the contract is amended as follows:
(1) The Annuitant will at all times be the Owner of the
contract.
(2) The entire interest of the Owner is nonforfeitable.
(3) The contract is established for the exclusive benefit of
the Owner and the Beneficiary.
(4) No joint owner may be named, and no one other than the
Owner's spouse may be named as the contingent owner.
Any provision of the policy that would allow joint
ownership, or that would allow more than one person to
share distributions, is deleted.
(5) This contract is nontransferable. The Owner may not
borrow any money under the contract or pledge the
account or any portion of it as security for a loan.
Additionally, the Owner may not sell, assign or Transfer
this contract, except that the contract may be
transferred to a former spouse of the Owner under a
divorce decree or written instrument incident to such
divorce. In the event of such Transfer, the transferee
shall for all purposes be treated as the Owner under the
contract.
(6) Except in the case of a "rollover contribution" as
permitted by sections 402(c), 403(a)(4), 403(b)(8) or
408(d)(3) of the Code or a contribution made in
accordance with the terms of a Simplified Employee
Pension (SEP), as described in section 408(k), no
contributions will be accepted unless they are in cash,
and the total of such contributions shall not exceed
$2,000, or such other maximum as the Code may allow, for
any taxable year.
The Owner shall have the sole responsibility for
determining whether any premium payment meets applicable
income tax requirements.
This policy does not require fixed premium payments. Any
refund of premiums (other than those attributable to
excess Contributions) will be applied before the close
of the calendar year following the year of the refund
toward the payment of additional premiums or the
purchase of additional benefits.
(7) Distributions Before Death
The Owner's entire interest in the policy must be
distributed, or begin to be distributed, by the Owner's
required beginning date, which is the April 1 following
the calendar year in which the Owner reaches age 70 1/2.
For each succeeding year, a distribution must be made on
or before December 31. By the required beginning date,
the Owner may elect to have the balance in the policy
distributed in one of the following forms:
(a) a single sum payment;
(b) equal or substantially equal payments no less
frequently than annually over the life of the Owner;
(c) equal or substantially equal payments no less
frequently than annually over the lives of the Owner
and his or her designated beneficiary;
(d) equal or substantially equal payments no less
frequently than annually over a specified period that
may not be longer than the Owner's life expectancy;
(e) equal or substantially equal payments no less
frequently than annually over a specified period that
may not be longer than the joint life and last
survivor expectancy of the Owner and his or her
designated beneficiary.
All distributions made hereunder shall be made in accordance
with section 401(a)(9) of the Code, including the incidental
death benefit requirements of section 401(a)(9)(G) of the
Code, and the regulations thereunder, including the minimum
distribution incidental benefit requirement of section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
(continued)
If payment is not to be made in the form of annual level
payments, the amount to be distributed each year, beginning
with the first calendar year for which distributions are
required and then for each succeeding calendar year, shall not
be less than the quotient obtained by dividing the
individual's benefit by the lesser of (1) the applicable life
expectancy or (2) if the individual's spouse is not the
designated beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 or Q&A-5 of section 1.401(a)(9)-2
of the Proposed Income Tax Regulations. Distributions after
the death of the individual shall be distributed using the
applicable life expectancy as the relevant divisor without
regard to proposed regulations section 1.401(a)(9)-2.
Life expectancy is computed by use of the expected return
multiples in Tables V and VI of section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the Owner by the
time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be
irrevocable by the individual and shall apply to all
subsequent years. The life expectancy of a non-spouse
beneficiary may not be recalculated. Instead, life expectancy
will be calculated using the attained age of such Beneficiary
during the calendar year in which the Beneficiary attains age
70 1/2, and payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy
was first calculated.
(8) Distribution Upon Death
(a) Distributions beginning before death. If the
Owner dies after distribution of his or her interest
has begun, the remaining portion of such interest
will continue to be distributed at least as rapidly
as under the method of distribution being used prior
to the individual's death.
(b) Distributions beginning after death. If the
Owner dies before distribution of his or her interest
begins, distribution of the individual's entire
interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the
individual's death except to the extent that an
election is made to receive distribution in
accordance with (1) or (2) below:
(1) If the Owner's interest is payable to a
designated beneficiary, then the entire interest
of the individual may be distributed in equal or
substantially equal payments over the life or
over a period certain not greater than the life
expectancy of the designated beneficiary
commencing on or before December 31 of the
calendar year immediately following the calendar
year in which the Owner died.
(2) If the Owner's spouse is not the named
Beneficiary, the method of distribution selected
will assure that at least 50% of the present
value of the amount available for distribution
is paid within the Owner's life expectancy and
that
such method of distribution complies with the
requirements of Code section 408(b)(3) and the
regulations thereunder.
(3) If the designated beneficiary is the
Owner's surviving spouse, the date distributions
are required to begin in accordance with (1)
above shall not be earlier than the later of (A)
December 31 of the calendar year immediately
following the calendar year in which the
individual died or (B) December 31 of the
calendar year in which the individual would have
attained age 70 1/2.
(4) If the designated beneficiary is the
Owner's surviving spouse, the spouse may treat
the contract as his or her own IRA. This
election will be deemed to have been made if
such
surviving spouse makes a regular IRA
contribution
to the contract, makes a rollover to or from
such
contract, or fails to elect any of the above
provisions.
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
(continued)
(c) Life expectancy is computed by use of the
expected
return multiples in Tables V and VI of section 1.72-9 of the
Income Tax Regulations. For purposes of distributions
beginning after the Owner's death, unless otherwise
elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by
the surviving spouse and shall apply to all
subsequent years. In the case of any other designated
beneficiary, life expectancies shall be calculated using the
attained age of such Beneficiary during the calendar year in
which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year
shall be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed since
the calendar year life expectancy was first
calculated.
(d) Distributions under this section are considered
to have begun if distributions are made on account of the
Owner
reaching his or her required beginning date or if prior to the
required beginning date distributions irrevocably
commence to an individual over a period permitted and in an
annuity form acceptable under section 1.401(a)(9)
of the Regulations.
(9) An individual may satisfy the minimum distribution
requirements under section 408(b)(3) of the Code by receiving
a
distribution from one IRA that is equal to the amount required
to satisfy the minimum distribution requirements for two
or more IRAs. For this purpose, the Owner of two or more IRAs
may use the alternative method described in Notice
88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements.
(10) The provisions of this endorsement will override any
provisions contained in or forming part of the contract which
are
inconsistent with this endorsement. The Company reserves the
right to amend this endorsement to comply with future
changes in the Internal Revenue Code of 1986, as amended and
to any regulations or rulings issued under the
provisions of the Internal Revenue Code. The Company shall
provide the Owner of the contract with a copy of any
such amendment.
Signed for Great-West Life & Annuity Insurance Company on the
issuance of the contract (unless a different date is shown
here).
W.T. McCallum,
President and Chief Executive Officer
EXHIBIT 10b
<PAGE>
Independent Auditors' Consent
We consent to the use in this Pre-Effective Amendment No. 1 to
the
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
July 31, 1996
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 5,947,759
<DEBT-CARRYING-VALUE> 1,989,272
<DEBT-MARKET-VALUE> 2,017,628
<EQUITIES> 7,795
<MORTGAGE> 1,590,311
<REAL-ESTATE> 0
<TOTAL-INVEST> 12,383,286
<CASH> 101,838
<RECOVER-REINSURE> 351,769
<DEFERRED-ACQUISITION> 287,350
<TOTAL-ASSETS> 18,400,693
<POLICY-LOSSES> 11,211,597
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 414,209
<NOTES-PAYABLE> 74,651
0
121,800
<COMMON> 7,032
<OTHER-SE> 839,144
<TOTAL-LIABILITY-AND-EQUITY> 18,400,693
524,680
<INVESTMENT-INCOME> 413,107
<INVESTMENT-GAINS> (22,895)
<OTHER-INCOME> 0
<BENEFITS> 598,090
<UNDERWRITING-AMORTIZATION> 16,767
<UNDERWRITING-OTHER> 207,219
<INCOME-PRETAX> 92,816
<INCOME-TAX> 24,153
<INCOME-CONTINUING> 68,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,663
<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>
EXHIBIT 5<PAGE>
The Schwab Variable Annuity
Distributed by:
Charles Schwab & Co., Inc.
PO Box 7785
San Francisco, CA 94120-9420
<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY APPLICATION
Please complete and sign this application (including the
Arbitration Agreement) and return it in the enclosed postage paid
envelope.
Please take a moment to review the application to make sure all
sections are completed and you have signed where indicated.
Thank You!
Have Questions?
Call Us!
Schwab Annuity Service Center
1-800-838-0650
6:30am - 4:00 pm, Monday-Friday Pacific Time
<PAGE>
The Schwab Variable Annuity
Distributed by:
Charles Schwab & Co., Inc.
PO Box 7785
San Francisco, CA 94120-9420
<PAGE>
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
Daytime Telephone Number
Evening Telephone Number
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
Daytime Telephone Number
Evening Telephone Number
Same as Owner or The person listed below
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
Daytime Telephone Number
Evening Telephone Number
Same as Owner or The person listed below
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
Daytime Telephone Number
Evening Telephone Number
<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY APPLICATION
(continued)
Name (First/Middle/Last) Social Security No.
Birth Date
Percentage
Name (First/Middle/Last) Social Security No.
Birth Date
Percentage
Name (First/Middle/Last) Social Security No.
Birth Date
Percentage
Must = 100%
YES NO If No give details below.
Name(s) Country of Legal Residence
Country of Citizenship
YES, this will replace the life insurance policy or annuity listed
below. NO, this will NOT replace another life insurance policy
or
annuity.
Name of Insurance Company Being Replaced
Policy Number
I would like the payments to begin on (month) (year)
. Periodic Withdrawals OR
Annuity Payments
YES, My account number is . NO, I am not currently a Schwab
customer.
For non-IRAs:
Check is attached. (Make check payable to Great-West Life &
Annuity Insurance Company)
Transfer $ from my Schwab brokerage account as listed in
#9 above.
Transfer the entire balance from my existing annuity or life
insurance policy. (Complete enclosed Absolute
Assignment/Replacement forms.)
For IRAs:
Check is attached for a new IRA for tax year(s): . (Make check
payable to Great-West Life & Annuity Insurance Company.)
Transfer funds from my existing IRA annuity or other qualified
plan. (Complete enclosed IRA rollover/transfer form.)
Overall Investment Objective
Capital Preservation
Income
Growth
Speculation
Federal Income Tax Bracket
15%
28%
31% or more
Annual Income
Under $15,000
$15,000 to $24,999
$25,000 to $49,999
$50,000 to $99,999
$100,000 or more
Liquid Net Worth
Under $15,000
$15,000 to $49,999
$50,000 to $99,999
$100,000 or more
<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY APPLICATION
(continued)
Name of Investment Option
Allocation % or Dollar Amount
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
%
OR
$
TOTAL
=100%
OR
$
I understand that I am applying for a Flexible Premium Variable and
Fixed Deferred Annuity, Contract Form J434, issued by Great-
West Life & Annuity Insurance Company. I declare that all
statements made on this application are true to the best of my
knowledge and belief.
I acknowledge receipt of the prospectus for the variable and
fixed annuity contract. I believe the contract is suitable for my
retirement and
insurance needs. I understand that amounts allocated to a
Variable Sub-Account are variable and are not guaranteed as to
dollar amount.
I further understand that amounts allocated to a Fixed
Sub-Account may be subject to a Market Value Adjustment which may
result in
positive or negative adjustments to amounts payable under the
contract.
I hereby direct that my telephone instructions to the Schwab
Annuity Service Center be honored for transactions unless otherwise
notified by
me in writing. I understand that telephone calls may be
recorded to monitor the quality of service I receive and to verify
contract transaction
information. If a transfer from my Schwab brokerage account
is indicated in Section 10, I authorize Schwab to transfer the
amount specified.
I certify under penalty of perjury that the taxpayer
identification numbers listed on this application are correct. The
Internal Revenue
Service does not require your consent to any provision of
this document other than the certifications required to avoid
backup
withholding.
Owner's Signature Date
Joint Owner's Signature (if applicable) Date
Do you have reason to believe the annuity applied for will
replace any insurance or annuity with us or any other company?
yes no
Signature (if required)
Rep Code Source Code Date
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY APPLICATION
(continued)
VARIABLE SUB-ACCOUNTS
Investment Objective
Eligible Investment Options
Fixed Sub-Accounts
Fixed Sub-Account chosen for specified term, subject to Market
Value Adjustment
Guarantee Period Fund - 1 Year
Guarantee Period Fund - 2 Years
Guarantee Period Fund - 3 Years
Guarantee Period Fund - 4 Years
Guarantee Period Fund - 5 Years
Guarantee Period Fund - 6 Years
Guarantee Period Fund - 7 Years
Guarantee Period Fund - 8 Years
Guarantee Period Fund - 9 Years
Guarantee Period Fund - 10 Years
