As filed with the Securities and Exchange Commission on April 17, 2000
Registration
No. 333-01153
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. 6
---
(X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
(X)
Amendment No. 8
---
(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 Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Title of securities being registered:
Flexible Premium Deferred Variable Annuity
It is proposed that this filing will become effective (check appropriate
space) Immediately upon filing pursuant to paragraph (b) of Rule 485. On
May 1, 2000, pursuant to paragraph (b) of Rule 485. 60 days after filing
pursuant to paragraph (a) of Rule 485. X On May 1, 2000, 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.
If appropriate, check the following:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
VARIABLE ANNUITY-1 SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
<TABLE>
<S> <C>
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page.......................... Cover Page
2. Definitions......................... Definitions
3. Synopsis............................ Variable
Annuity Fee Table; Summary
4. Condensed Financial Information..... Condensed Financial
Information;
Performance Data
5. General Description of
Registrant, Depositor and
Portfolio Companies............... Great-West Life & Annuity
Insurance Company and the
Series Account;
Portfolios; Voting Rights
6. Deductions and Expenses............ Charges and
Deductions; Appendix A; Distribution
of the Contracts
7. General Description of
Variable Annuity Contracts........ Summary; The
Portfolios; The Guarantee Period
Fund; Application and
Contributions; Transfers
Death Benefits, Payout
Options; Rights
Benefit; Payment Options;
Rights
Reserved by the Company;
Statement of
Additional Information
8. Annuity Period...................... Payout Options
9. Death Benefit....................... Death Benefit
10. Purchases and Contract Value........ Application and Contributions; Annuity
Account Value
11. Redemptions......................... Cash
Withdrawals; Payout Options;
Summary
12. Taxes............................... Federal Tax
Matters
13. Legal Proceedings................... Legal
Proceedings
14. Table of Contents of
Statement of Additional
Information....................... Available
Information
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...........................
General Information; Great-West
Life & Annuity Insurance Company and Variable Annuity-1
Series Account
18. Services............................ Services
19. Purchase of Securities
Being Offered..................... Not Applicable
20. Underwriters........................ Services -
Principal Underwriter
21. Calculation of
Performance Data.................. Calculation
of Performance Data
22. Annuity Payments.................... Calculation
of Annuity Payments
23. Financial Statements................ Financial
Statements
</TABLE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Schwab Select Annuity(TM)
A flexible premium deferred variable and fixed annuity
Distributed by
Charles Schwab & Co., Inc.
Issued by
Great-West Life & Annuity Insurance
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Overview
This Prospectus describes the Schwab Select Annuity--a flexible premium deferred
annuity contract which allows you to accumulate assets on a tax-deferred basis
for retirement or other long-term purposes. This Contract is issued either on a
group basis or as individual contracts by Great-West Life & Annuity Insurance
Company (we, us, Great-West or GWL&A). Both will be referred to as the
"Contract" throughout this Prospectus.
How to Invest
The minimum initial investment (a "Contribution") is:
o $5,000
o $2,000 if an IRA
o $1,000 if subsequent Contributions are made via Automatic Contribution Plan
The minimum subsequent Contribution is:
o $500 per Contribution
o $100 per Contribution if made via Automatic Contribution Plan
Allocating Your Money
When you contribute money to the Schwab Select Annuity, you can allocate it
among the Sub-Accounts of the Variable Annuity-1 Series Account which invest in
the following Portfolios: o Alger American Growth Portfolio o American Century
VP International Portfolio o Baron Capital Asset Fund: Insurance Shares o Berger
IPT-Small Company Growth Fund o Deutsche Asset Management VIT EAFE(R) Equity
Index Fund (formerly, BT Insurance Funds Trust EAFE
Equity Index Fund)
o Deutsche Asset Management VIT Small Cap Index Fund (formerly, BT Insurance
Funds Trust Small Cap Index Fund)
o Dreyfus Variable Investment Fund Appreciation Portfolio
o Dreyfus Variable Investment Fund Growth and Income Portfolio
o Federated American Leaders Fund II
o Federated Fund for U.S. Government Securities II
o Federated Utility Fund II
o INVESCO VIF-High Yield Fund
o INVESCO VIF-Equity Income Fund
o INVESCO VIF-Technology Fund
o Janus Aspen Series Growth Portfolio
o Janus Aspen Series Worldwide Growth Portfolio
o Janus Aspen Series Flexible Income Portfolio
o Janus Aspen Series International Growth Portfolio
o Montgomery Variable Series: Growth Fund
o Prudential Series Fund Equity Class II Portfolio
o SAFECO Resource Series Trust Equity Portfolio
o SAFECO Resource Series Trust Growth Opportunities Portfolio
o Schwab MarketTrack Growth Portfolio II
o Schwab Money Market Portfolio
o Schwab S&P 500 Portfolio
o Scudder Variable Life Investment Fund
Capital Growth Portfolio
o Scudder Variable Life Investment Fund
Growth and Income Portfolio
o Strong Schafer Value Fund II
o Van Kampen Life Investment Trust Morgan Stanley Real Estate Securities
o Portfolio
The Securities and Exchange Commission has not approve or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense. No person is authorized by
Great-West 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.The date of this
Prospectus is May 1, 2000.
<PAGE>
You can also allocate some or all of the money you contribute to the Guarantee
Period Fund. The Guarantee Period Fund allows you to select one or more
Guarantee Periods that offer specific interest rates for a specific period.
Please note that the Guarantee Period Fund may not be available in all states.
Sales and Surrender Charges
There are no sales, redemption, surrender or withdrawal charges under the Schwab
Select Annuity.
Free Look Period
After you receive your Contract, you can look it over free of obligation for at
least 10 days or longer if required by your state law (up to 35 days for
replacement policies), during which you may cancel your Contract.
Payout Options
The Schwab Select Annuity offers a variety of annuity payout and periodic
withdrawal options. Depending on the option you select, income can be guaranteed
for your lifetime, your spouse's and/or beneficiaries' lifetime or for a
specified period of time.
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.
For account information, please contact:
Annuity Administration Department
P.O. Box 173920
Denver, Colorado 80217-3920
800-838-0650
This Prospectus presents important information you should review before
purchasing the Schwab Select Annuity. Please read it carefully and keep it for
future reference. You can find more detailed information pertaining to the
Contract in the Statement of Additional Information dated May 1, 2000 (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 is legally a part of this Prospectus. The table of
contents for the Statement of Additional Information may be found on page 51 of
this Prospectus. You may obtain a copy without charge by contacting the Annuity
Administration Department at the above address or phone number. Or, you can
obtain it by visiting the Securities and Exchange Commission's web site at
www.sec.gov. This web site also contains other information about us that has
been filed electronically.
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.
2
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Table of Contents
3
Definitions....................................4
Summary........................................6
How to contact Schwab........................6
Variable Annuity Fee Table.....................7
Portfolio Annual Expenses......................8
Fee Examples...................................9
Condensed Financial Information...............10
Great-West Life & Annuity Insurance
Company.......................................10
The Series Account............................10
The Portfolios................................10
Meeting Investment Objectives...............13
Where to Find More Information About the Portfolios 13
Addition, Deletion or Substitution..........13
The Guarantee Period Fund.....................14
Investments of the Guarantee Period Fund....14
Subsequent Guarantee Periods................14
Breaking a Guarantee Period.................15
Interest Rates..............................15
Market Value Adjustment.....................15
Application and Initial Contributions.........15
Free Look Period..............................16
Subsequent Contributions......................16
Annuity Account Value.........................16
Transfers.....................................17
Possible Restrictions.......................17
Automatic Custom Transfers..................17
Cash Withdrawals..............................19
Withdrawals to Pay Investment Manager or
Financial Advisor Fees......................19
Tax Consequences of Withdrawals.............19
Telephone Transactions........................19
Death Benefit.................................20
Beneficiary.................................20
Distribution of Death Benefit...............21
Charges and Deductions........................21
Mortality and Expense Risk Charge...........21
Contract Maintenance Charge.................22
Transfer Fees...............................22
Expenses of the Portfolios..................22
Premium Tax.................................22
Other Taxes.................................22
Payout Options................................22
Periodic Withdrawals........................23
Annuity Payouts.............................23
Seek Tax Advice...............................25
Federal Tax Matters...........................25
Taxation of Annuities.......................26
Individual Retirement Annuities.............27
Assignments or Pledges........................28
Performance Data..............................28
Money Market Yield..........................28
Average Annual Total Return.................28
Distribution of the Contracts.................30
Voting Rights.................................50
Rights Reserved by Great-West.................50
Legal Proceedings.............................50
Legal Matters.................................50
Experts.......................................51
Incorporation of Certain Documents by Reference
and Available Information.....................51
Appendix A--Condensed Financial
Information...................................52
Appendix B--Market Value Adjustments...........54
Appendix C--Net Investment Factor..............56
<PAGE>
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Definitions
1035 Exchange--A provision of the Internal Revenue Code of 1986, as amended (the
"Code") that allows for the tax-free exchange of certain types of insurance
contracts.
Accumulation Period--The time period between the Effective Date and the Annuity
Commencement Date. During this period, you're contributing to the annuity.
Annuitant--The person named in the application upon whose life the payout of an
annuity is based and who will receive annuity payouts. If a Contingent Annuitant
is named, the Annuitant will be considered the Primary Annuitant.
Annuity Account--An account established by us in your name that reflects all
account activity under your Contract. Annuity Account Value--The sum of all the
investment options credited to your Annuity Account--less partial withdrawals,
amounts applied to an annuity payout option, periodic withdrawals, charges
deducted under the Contract, and Premium Tax, if any.
Annuity Commencement Date--The date annuity payouts begin.
Annuity Individual Retirement Account (or Annuity IRA)--An annuity contract used
in a retirement savings program that is intended to satisfy the requirements of
Section 408 of the Code.
Annuity Payout Period--The period beginning on the Annuity Commencement Date and
continuing until all annuity payouts have been made under the Contract. During
this period, the Annuitant receives payouts from the annuity.
Annuity Unit--An accounting measure we use to determine the amount of any
variable annuity payout after the first annuity payout is made.
Automatic Contribution Plan--A feature which allows you to make automatic
periodic Contributions. Contributions will be withdrawn from an account you
specify and automatically credited to your Annuity Account.
Beneficiary--The person(s) designated to receive any Death Benefit under the
terms of the Contract.
Contingent Annuitant--The person you may name in the application who becomes the
Annuitant when the Primary Annuitant dies. The Contingent Annuitant must be
designated before the death of the Primary Annuitant.
Contributions--The amount of money you invest or deposit into your annuity.
Death Benefit--The amount payable to the Beneficiary when the Owner or the
Annuitant dies.
Distribution Period--The period starting with your Payout Commencement Date.
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Schwab Select Annuity Structure
Your total Annuity Account can be made up of a variable and a fixed account.
Your Annuity Account
Variable Account Fixed Account
Contains the money you contribute Contains the money you contribute
to variable investment options fixed investment options
(the Sub-Accounts). (the Guarantee Period Fund).
Sub-Accounts Guarantee Period Fund
Shares of the Portfolios are held You can choose a guarantee period
in Sub-Accounts. There is one of one to ten years.
Sub-Account for each Portfolio
Portfolios
- --------------------------------------------------------------------------------
Effective Date--The date on which the first Contribution is credited to your
Annuity Account.
Fixed Account Value--The value of the fixed investment option credited to you
under the Annuity Account.
Guarantee Period--The number of years available in the Guarantee Period Fund
during which Great-West will credit a stated rate of interest. Great-West may
discontinue offering a period 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 investment option which pays a stated rate of
interest for a specified time period.
Guarantee Period Maturity Date--The last day of any Guarantee Period.
Guaranteed Interest Rate--The minimum annual interest rate in effect that
applies to each Guarantee Period at the time the Contribution is made.
Market Value Adjustment (or MVA)--An amount added to or subtracted from certain
transactions involving the Guarantee Period Fund to reflect the impact of
changing interest rates.
Non-Qualified Annuity Contract--An annuity contract funded with money outside a
tax qualified retirement plan.
Owner (Joint Owner) or You--The person(s) named in the application who 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 date the
Contract is issued. The Annuitant will be the Owner unless otherwise indicated
in the application. If a Contract is purchased in connection with an IRA, the
Owner and the Annuitant must be the same individual and a Joint Owner is not
allowed.
Payout Commencement Date--The date on which annuity payouts or periodic
withdrawals begin under a payout option. The Payout Commencement Date must be at
least one year after the Effective Date of the Contract. If you do not indicate
a Payout Commencement Date on your application, annuity payouts will begin on
the first day of the month of the Annuitant's 91st birthday.
Portfolio--A registered management investment company, or portfolio thereof, in
which the assets of the Annuity Account may be invested.
Premium Tax--A tax charged by a state or other governmental authority. Varying
by state, the current range of Premium Taxes is 0% to 3.5% and may be assessed
at the time you make a Contribution or when annuity payments begin.
Request--Any written, telephoned, or computerized instruction in a form
satisfactory to Great-West and Schwab received at the Annuity Administration
Department at Great-West (or other annuity service center subsequently named)
from you, your designee (as specified in a form acceptable to Great-West and
Schwab) or the Beneficiary (as applicable) as required by any provision of the
Contract.
Series Account--The segregated asset account established by Great-West under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
Sub-Account--A division of the Series Account containing the shares of a
Portfolio. There is a Sub-Account for each Portfolio.
Surrender Value--The value of your annuity account with any applicable Market
Value Adjustment on the Effective Date of the surrender, less Premium Tax, if
any.
Transaction Date--The date on which any Contribution or Request from you will be
processed. 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--Moving money from and among the Sub-Account(s) and the Guarantee
Period Fund.
Variable Account Value--The value of the Sub-Accounts credited to you under the
Annuity Account.
6
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Summary
The Schwab Select Annuity allows you to accumulate assets on a tax-deferred
basis by investing in a variety of variable investment options (the
Sub-Accounts) and a fixed investment option (the Guarantee Period Fund). The
performance of your Annuity Account Value will vary with the investment
performance of the Portfolios corresponding to the Sub-Accounts you select. You
bear the entire investment risk for all amounts invested in them. Depending on
the performance of the Sub-Accounts you select, your Annuity Account Value could
be less than the total amount of your Contributions.
The Schwab Select Annuity can be purchased on a non-qualified basis or purchased
and used in connection with an IRA. You can also purchase it through a 1035
Exchange from another insurance contract.
Tax deferral under IRAs arises under the Code. Tax deferral under non-qualified
contracts arises under the Contract.
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How to contact Schwab:
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Schwab Insurance & Annuity Service Center
- ------------------------------------------------------------------------
101 Montgomery Street
San Francisco, CA 94120-7666
Attention: Insurance & Annuities Department
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800-838-0650
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Your initial Contribution must be at least $5,000; $2,000 if an IRA; $1,000 if
you are setting up an Automatic Contribution Plan. Subsequent Contributions must
be either $500; or $100 if made through an Automatic Contribution Plan.
The money you contribute to the Contract will be invested at your direction,
except that in some states during your "free look period" your payment will be
allocated to the Schwab Money Market Sub-Account. The duration of your free look
period depends on your state law and is generally 10 days after you receive your
Contract. Free look allocations are described in more detail on page xx of this
Prospectus.
Prior to the Payout Commencement Date, you can withdraw all or a part of your
Annuity Account Value. There are no surrender or withdrawal charges. Certain
withdrawals may be subject to federal income tax as well as a federal penalty
tax.
When you're ready to start taking money out of your Contract, you can select
from a variety of payout options, including variable and fixed annuity payouts
as well as periodic payouts.
If the Annuitant dies before the Annuity Commencement Date, we will pay the
Death Benefit to the Beneficiary you select. If the Owner dies before the entire
value of the Contract is distributed, the remaining value will be distributed
according to the rules outlined in the "Death Benefit" section on page 20.
For accounts under $50,000, we deduct a $25 annual Contract Maintenance Charge
from the Annuity Account Value on each Contract anniversary date. There is no
annual Contract Maintenance Charge for accounts of $50,000 or more. We also
deduct a Mortality and Expense Risk Charge from your Sub-Accounts at the end of
each daily valuation period equal to an effective annual rate of 0.85% of the
value of the net assets in your Sub-Accounts. Each Portfolio assesses a charge
for management fees and other expenses. These fees and expenses are detailed in
this Prospectus.
You may cancel your Contract during the free look period by sending it to the
Annuity Administration Department at Great-West. If you are replacing an
existing insurance contract with the Contract, the free look period may be
extended based on your state of residence. Free look allocations are described
in more detail on page xx of this Prospectus.
This summary highlights some of the more significant aspects of the Schwab
Select Annuity. You'll find more detailed information about these topics
throughout the Prospectus and in your Contract. Please keep them both for future
reference.
11
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Variable Annuity Fee Table
The purpose of the tables and the examples that follow is to help you understand
the various costs and expenses that you will bear directly or indirectly when
investing in the Contract. The tables and examples reflect expenses related to
the Sub-Accounts as well as of the Portfolios. In addition to the expenses
listed below, Premium Tax, if applicable, may be imposed.
Contract Owner Transaction Expenses1
Sales load None
Surrender fee None
Annual Contract Maintenance Charge2 $25.00
Transfer fee $10.00
(no transfer fee is charged for the first
12 transfers in any calendar year)
Separate Account Annual expenses1 (as a percentage of average Variable Account
Value) Mortality and expense risk charge 0.85% Administrative expense charge
0.00% Other fees and expenses of the Variable Account 0.00% Total Separate
Account Annual Expenses 0.85%
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Portfolio Annual Expenses
Portfolio Annual Expenses
(as a percentage of Portfolio average net assets, before and after fee
waivers and expense reimbursements as of December 31, 1999)
<TABLE>
<S> <C> <C>
Portfolio Management Other 12b-1 fees Total Total Fee Total
fees expenses Portfolio Waivers Portfolio
Expenses expenses
before after
fee fee
waivers waivers
Alger American Growth 0.75% 0.04% None 0.79% N/A 0.79%
American Century VP International* 1.34% N/A None 1.34% N/A 1.34%
Baron Capital Asset* 1.00% 0.63% 0.25% 1.88% 0.38% 1.50%
Berger IPT-Small Company Growth 0.85% 0.64% None 1.49% 0.34% 1.15%
Deutsche Asset Management VIT EAFE(R) 0.45% 0.69% None 1.15% 0.50% 0.65%
Equity Index (formerly, BT
Insurance Funds Trust EAFE Equity
Index)
Deutsche Asset Management VIT 0.35% 0.83% None 1.18% 0.73% 0.45%
Small Cap Index (formerly, BT
Insurance Funds Trust Small Cap
Index)
Dreyfus Variable Investment Fund: 0.75% 0.03% None 0.78% N/A 0.78%
Appreciation Portfolio
Dreyfus Variable Investment Fund: 0.75% 0.04% None 0.79% N/A 0.79%
Growth and Income Portfolio
Federated American Leaders II* 0.75% 0.13% None 0.88% N/A 0.88%
Federated U.S. Government 0.60% 0.24% None 0.84% N/A 0.84%
Securities II*
Federated Utility II* 0.75% 0.19% None 0.94% N/A 0.94%
INVESCO VIF-High Yield* 0.60% 0.48% None 1.08% N/A 1.08%
INVESCO VIF-Equity Income* 0.75% 0.44% None 1.19% N/A 1.19%
INVESCO VIF- Technology* 0.75% 0.78% None 1.53% 0.21% 1.32%
Janus Aspen Growth 0.65% 0.02% None 0.67% N/A 0.67%
Janus Aspen Worldwide Growth 0.65% 0.05% None 0.70% N/A 0.70%
Janus Aspen Flexible Income 0.65% 0.07% None 0.72% N/A 0.72%
Janus Aspen International Growth 0.65% 0.11% None 0.76% N/A 0.76%
Montgomery Variable Series: Growth 1.52% 0.40% None 1.92% 0.67% 1.25%
Prudential Series Fund Equity Class 0.45% 0.17% 0.25% 0.87% N/A 0.87%
II
SAFECO RST Equity 0.74% 0.02% None 0.76% N/A 0.76%
SAFECO RST Growth Opportunities 0.74% 0.04% None 0.78% N/A 0.78%
Schwab MarketTrack Growth II* 0.54% 0.59% None 1.13% 0.53% 0.60%
Schwab Money Market* 0.38% 0.15% None 0.53% 0.03% 0.50%
Schwab S&P 500* 0.20% 0.14% None 0.34% 0.06% 0.28%
Scudder Variable Life Investment 0.46% 0.03% None 0.49% N/A 0.49%
Fund Capital Growth
Scudder Variable Life Investment 0.47% 0.08% None 0.55% N/A 0.55%
Fund
Growth and Income
Strong Schafer Value II 1.00% 0.57% None 1.57% 0.37% 1.20%
Van Kampen Life Investment 1.00% 0.13% None 1.13% 0.03% 1.10%
Trust--Morgan Stanley Real Estate
Securities
</TABLE>
* For the American Century VP International Fund, there is a stepped fee
schedule. As a result, the Fund's management fee rate generally decreases as the
Fund assets increase. For the Baron Capital Asset Fund, the Fund's advisor is
contractually obligated to reduce its fee to the extent required to limit the
Fund's total operating expenses to 1.50% for the first $250 million of assets in
the Fund, 1.35% for Fund assets over $250 million and 1.25% for fund assets over
$500 million. Without expense limitations, total operating expenses for the Fund
for the period January 1, 1999 through December 31, 1999, would have been 1.88%.
For the Federated American Leaders Fund II, Federated U.S. Government Securities
Fund II and the Federated Utility Fund II, .25% of Other Expenses are
Shareholder Services Fees. The Funds did not pay or accrue the shareholder
services fee during the fiscal year ended December 31, 1999. The Funds have no
present intention of paying or accruing the shareholder services fee during the
fiscal year ending December 31, 2000. For the INVESCO VIF-High Yield, INVESCO
VIF-Equity Income and INVESCO VIF-Technology Funds, Other Expenses were lower
than the figures shown, because their custodian fees were reduced under an
expense offset arrangement. For the INVESCO VIF-High Yield and INVESCO
VIF-Equity Income Funds, the Other Expenses information presented in this table
has been restated from the financials for these Funds to reflect a change in the
administrative services fee. For the INVESCO VIF-Technology Fund, certain
expenses were absorbed voluntarily by INVESCO in order to ensure that expenses
for the Fund did not exceed 1.25% of the Fund's average net assets pursuant to
an agreement between the Fund and INVESCO. This commitment may be changed at any
time following consultation with the board of directors. After absorption, the
INVESCO VIF-Technology Fund's Other Expenses for the fiscal year ended December
31, 1999 were 0.57% of the Fund's average net assets. For the Janus Aspen
Growth, Janus Aspen Worldwide Growth and Janus Aspen International Portfolios,
the data shown is for the fiscal year ended December 31, 1999, restated to
reflect a reduction in the management fee for these Portfolios. For the Schwab
MarketTrack Growth II, Schwab Money Market and Schwab S&P 500 Portfolios, the
Total Portfolio expenses after fee waivers is guaranteed by Schwab and the
investment adviser through April 30, 2001.
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Fee Examples3
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. These examples assume that no
Premium Taxes have been assessed and are based on total Portfolio expenses after
taking fee waivers and reimbursements into account.
<TABLE>
<S> <C> <C> <C> <C>
PORTFOLIO 1 year 3 years 5 years 10 years
Alger American Growth $17 $56 $101 $248
American Century VP International $23 $74 $133 $322
Baron Capital Asset $24 $79 $142 $342
Berger IPT-Small Company Growth $21 $68 $122 $297
Deutsche Asset Management VIT EAFE(R)Equity Index $16 $51 $93 $228
Deutsche Asset Management VIT Small Cap Index $14 $45 $81 $200
Dreyfus Variable Investment Fund Appreciation $17 $56 $100 $246
Dreyfus Variable Investment Fund Growth and $17 $56 $101 $248
Income
Federated American Leaders II $18 $59 $106 $260
Federated U.S. Government Securities II $18 $58 $104 $255
Federated Utility II $19 $61 $110 $268
INVESCO VIF-High Yield $20 $65 $118 $287
INVESCO VIF-Equity Income $21 $69 $124 $302
INVESCO VIF-Technology $23 $73 $132 $318
Janus Aspen Growth $16 $52 $94 $231
Janus Aspen Worldwide Growth $16 $53 $96 $235
Janus Aspen Flexible Income $16 $54 $97 $238
Janus Aspen International Growth $17 $55 $99 $244
Montgomery Variable Series: Growth $22 $71 $128 $310
Prudential Series Fund Equity Class II $18 $59 $106 $259
SAFECO RST Equity $17 $55 $99 $244
SAFECO RST Growth Opportunities $17 $56 $100 $246
Schwab MarketTrack Growth II $15 $50 $90 $221
Schwab Money Market $14 $46 $84 $207
Schwab S&P 500 $12 $39 $71 $175
Scudder Variable Life Investment Fund Capital $14 $46 $83 $206
Growth
Scudder Variable Life Investment Fund Growth $15 $48 $87 $214
and Income
Strong Schafer Value II $21 $69 $125 $303
Van Kampen Life Investment Trust-Morgan Stanley $20 $66 $119 $290
Real Estate Securities
</TABLE>
These examples, including the assumed rate of return, should not be considered
representations of future performance or past or future expenses. Actual
expenses paid or performance achieved may be greater or less than those shown,
subject to the guarantees in the Contract.
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Condensed Financial Information
Attached as Appendix A is a table showing selected information concerning
accumulation units for each Sub-Account for 1996, 1997, 1998 and 1999. An
accumulation unit is the unit of measure that we use to calculate the value of
your interest in a Sub-Account. The accumulation unit values do not reflect the
deduction of certain charges that are subtracted from your Annuity Account
Value, such as the Contract Maintenance Charge. The information in the table is
included in the Series Account's financial statements, which have been audited
by Deloitte & Touche LLP, independent auditors. To obtain a more complete
picture of each Sub-Account's finances and performance, you should also review
the Series Account's financial statements, which are in the Series Account's
Annual Report dated December 31,1999 and contained in the Statement of
Additional Information.
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Great-West Life & Annuity Insurance Company
Great-West is a stock life insurance company that was originally organized under
the laws of the state of Kansas as the National Interment Association. Our name
was changed to Ranger National Life Insurance Company in 1963 and to
Insuramerica Corporation prior to changing to our current name in 1982. In
September of 1990, we re-domesticated under the laws of the state of Colorado.
We are authorized to do business in 49 states, the District of Columbia, Puerto
Rico, U.S. Virgin Islands and Guam.
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The Series Account
We established the Variable Annuity-1 Series Account in accordance with Colorado
laws on July 24, 1995.
The Series Account is registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940 (the "1940 Act"), as a unit
investment trust. Registration under the 1940 Act does not involve supervision
by the SEC of the management or investment practices or policies of the Series
Account.
We own the assets of the Series Account. The income, gains or losses, realized
or unrealized, from assets allocated to the Series Account are credited to or
charged against the Series Account without regard to our other income gains or
losses.
We will at all times maintain assets in the Series Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all Contracts participating in the Series Account. Those
assets may not be charged with our liabilities from our other business. Our
obligations under those Contracts are, however, our general corporate
obligations.
The Series Account is divided into 29 Sub-Accounts. Each Sub-Account invests
exclusively in shares of a corresponding investment Portfolio of a registered
investment company (commonly known as a mutual fund). We may in the future add
new or delete existing Sub-Accounts. The income, gains or losses, realized or
unrealized, from assets allocated to each Sub-Account are credited to or charged
against that Sub-Account without regard to the other income, gains or losses of
the other Sub-Accounts. All amounts allocated to a Sub-Account will be fully
invested in Portfolio shares.
We hold the assets of the Series Account. We keep those assets physically
segregated and held separate and apart from our general account assets. We
maintain records of all purchases and redemptions of shares of the Portfolios.
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The Portfolios
The Contract offers a number of Portfolios, corresponding to the Sub-Accounts.
Each Sub-Account invests in a single Portfolio. Each Portfolio is a separate
mutual fund registered under the 1940 Act. More comprehensive information,
including a discussion of potential risks, is found in the current Prospectuses
for the Portfolios (the "Portfolio Prospectuses"). The Portfolio Prospectuses
should be read in connection with this Prospectus. You may obtain a copy of the
Portfolio Prospectuses without charge by request.
Each Portfolio:
o holds its assets separate from the assets of the other Portfolios,
o has its own distinct investment objective and policy, and
o operates as a separate investment fund
The income, gains and losses of one Portfolio generally have no effect on the
investment performance of any other Portfolio.
The Portfolios are not available to the general public directly. The Portfolios
are only available as investment options in variable annuity contracts or
variable life insurance policies issued by life insurance companies or, in some
cases, through participation in certain qualified pension or retirement plans.
Some of the Portfolios have been established by investment advisers which manage
publicly available mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be modeled after
publicly available mutual funds, you should understand that the Portfolios are
not otherwise directly related to any publicly available mutual fund.
Consequently, the investment performance of publicly available mutual funds and
any corresponding Portfolios may differ substantially.
The investment objectives of the Portfolios are briefly described below:
The Alger American Fund--advised by Fred Alger Management, Inc. of New York, New
York.
Alger American Growth Portfolio seeks long-term capital appreciation. It focuses
on growing companies that generally have broad product lines, markets, financial
resources and depth of management. Under normal circumstances, the Portfolio
invests primarily in the equity securities of large companies. The Portfolio
considers a large company to have a market capitalization of $1 billion or
greater.
American Century Variable Portfolios, Inc.--advised by American Century
Investment Management, Inc. of Kansas City, Missouri, advisers to the American
Century family of mutual funds.
American Century VP International seeks capital growth by investing primarily in
equity securities of foreign companies. The Fund invests primarily in securities
of issuers in developed countries.
The Deutsche Asset Management VIT Funds (formerly, BT Insurance Funds Trust) -
advised by Bankers Trust Company of New York, New York.
Deutsche Asset Management VIT Small Cap Index Fund (formerly, BT Insurance Funds
Trust Small Cap Index Fund) seeks to match, as closely as possible, before
expenses, the performance of the Russell 2000 Small Stock Index. The Russell
2000 Index emphasizes stocks of small U.S. companies and is a widely accepted
benchmark of small-company stock performance.
Deutsche Asset Management VIT EAFE(R) Equity Index Fund (formerly, BT Insurance
Funds Trust EAFE(R) Index Fund) seeks to match, as closely as possible, before
expenses, the performance of the Morgan Stanley Capital International EAFE(R)
Index. The EAFE Index emphasizes stocks of companies in major markets in Europe,
Australia, and the Far East and is a widely accepted benchmark of international
stock performance.
Baron Capital Asset Fund--advised by BAMCO, Inc. of New York, New York.
Baron Capital Asset Fund: Insurance Shares seeks capital appreciation through
investments in small and medium sized companies with undervalued assets or
favorable growth prospects. The Fund invests primarily in small sized companies
with market capitalizations of approximately $100 million to $1.5 billion and
medium sized companies with market values of $1.5 billion to $5 billion.
Berger Institutional Products Trust--advised by Berger LLC of Denver, Colorado.
Berger IPT-Small Company Growth Fund seeks capital appreciation by investing
primarily in the common stocks of small companies with the potential for rapid
earnings growth. Under normal circumstances, the Fund invests at least 65% of
its assets in equity securities whose market capitalization, at the time of
initial purchase, is less than the 12-month average of the maximum market
capitalization for companies included in the Russell 2000 Index. This average is
updated monthly.
Dreyfus Variable Investment Fund--advised by The Dreyfus Corporation of New
York, New York.
Dreyfus Variable Investment Fund Appreciation Portfolio seeks long-term capital
growth consistent with the preservation of capital; current income is its
secondary goal. To pursue these goals, the portfolio invests in common stocks
focusing on "blue-chip" companies with total market values of more than $5
billion at the time of purchase.
Dreyfus Variable Investment Fund Growth and Income Portfolio seeks long-term
capital growth, current income and growth of income consistent with reasonable
investment risk. To pursue this goal, it invests in stocks, bonds and money
market instruments of domestic and foreign issuers.
Federated Insurance Series--advised by Federated Advisers of Pittsburgh,
Pennsylvania.
Federated American Leaders Fund II 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 Fund for U.S. Government Securities II 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.
Federated Utility Fund II seeks to provide high current income and moderate
capital appreciation by investing in a professionally-managed, diversified
portfolio of utility company equity and debt securities.
INVESCO Variable Investment Funds, Inc.--advised by INVESCO Funds Group, Denver,
Colorado. INVESCO Trust Company is the sub-adviser for the INVESCO VIF-Equity
Income Portfolio.
INVESCO VIF-Equity Income Fund is a diversified fund that seeks the highest
possible current income, with the added potential for capital appreciation. The
Fund normally invests at least 65% of its total assets in dividend paying common
stocks. The Fund's equity investments are limited to stocks that can be easily
traded in the U.S.; it may, however, invest in foreign securities in the form of
American Depository Receipts. The rest of the Fund's assets are invested in debt
securities, generally corporate bonds that are rated investment grade or better.
The Fund may also invest up to 15% of its assets in lower-grade debt securities
commonly known as "junk bonds," which generally offer higher interest rates, but
are riskier investments than investment grade securities.
INVESCO VIF-High Yield Fund seeks a high level of current income. It invests
substantially all of its assets in lower-rated debt securities, commonly called
"junk bonds," and preferred stock, including securities issued by foreign
companies. Although these securities carry with them higher risks, they
generally provide higher yields - and therefore higher income - than
higher-rated debt securities.
INVESCO VIF-Technology Fund seeks capital appreciation and normally invests at
least 80% of its total assets in equity securities of companies engaged in
technology-related industries. These include, but are not limited to,
communications, computers, video, electronics, oceanography, office and factory
automation, and robotics. Many of these products and services are subject to
rapid obsolescence, which may lower the market value of the securities of the
companies in this sector. The Fund's investments are diversified across the
technology sector. However, because the investments are limited to a
comparatively narrow segment of the economy, the Fund's investments are not as
diversified as most mutual funds, and far less diversified than the broad
securities markets. This means that the Fund tends to be more volatile than
other mutual funds, and the value of its portfolio investments tends to go up
and down more rapidly. As a result, the value of a Fund share may rise or fall
rapidly.
Janus Aspen Series--advised by Janus Capital Corporation of Denver, Colorado.
Janus Aspen Growth Portfolio seeks long-term growth of capital in a manner
consistent with the preservation of capital. The Portfolio invests primarily in
common stocks selected for their growth potential.
Janus Aspen Worldwide Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio invests
primarily in common stocks of any size throughout the world. The Portfolio
normally invests in issuers from at least five different countries, including
the U.S.
Janus Aspen International Growth Portfolio seeks long-term growth of capital.
The Portfolio normally invests at least 65% of its total assets in securities of
issuers from at least five different countries, excluding the U.S.
Janus Aspen Flexible Income Portfolio seeks to obtain maximum total return,
consistent with preservation of capital. The Portfolio invests in a wide variety
of income-producing securities such as corporate bonds and notes, government
securities and preferred stock. The Portfolio will invest at least 80% of its
assets in income-producing securities and may own an unlimited amount of
high-yield/high-risk fixed income securities and these securities may be a big
part of the Portfolio.
Montgomery Variable Series--advised by Montgomery Asset Management, LLC of San
Francisco, California.
Montgomery Variable Series: Growth Fund seeks long-term capital appreciation by
investing in growth-oriented U.S. companies. The Fund may invest in U.S.
companies of any size, but invests at least 65% of its total assets in those
companies whose shares have a total stock market value (market capitalization)
of at least $1 billion. The Fund's strategy is to identify well-managed U.S.
companies whose share prices appear to be undervalued relative to the firm's
growth potential.
Prudential Series Fund--advised by the Prudential Insurance Company of America
of Newark, New Jersey.
Prudential Series Fund Equity Class II Portfolio seeks capital appreciation
through investment primarily in common stocks of companies, including major
established corporations as well as smaller capitalization companies, that
appear to offer attractive prospects of price appreciation that is superior to
broadly-based stock indexes. Current income, if any, is incidental.
SAFECO Resource Series Trust--advised by SAFECO Asset Management Company of
Seattle, Washington.
SAFECO RST Equity Portfolio seeks growth of capital and the increased income
that ordinarily follows from such growth. The Portfolio invests primarily in
common stocks selected for appreciation potential.
SAFECO RST Growth Opportunities Portfolio seeks growth of capital and the
increased income that ordinarily follows from such growth. The Portfolio invests
primarily in common stocks selected for appreciation potential.
Schwab Annuity Portfolios--advised by Charles Schwab Investment Management, Inc.
of San Francisco, California.
Schwab Money Market Portfolio seeks the highest current income consistent with
liquidity and stability of capital. This Portfolio is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There can be no assurance that it will be able to maintain a stable net
asset value of $1.00 per share.
Schwab MarketTrack Growth Portfolio II seeks to provide high capital growth with
less volatility than an all stock portfolio by investing in a mix of stocks,
bonds, and cash equivalents either directly or through investment in other
mutual funds.
Schwab S&P 500 Portfolio seeks to track the price and dividend performance
(total return) of common stocks of U.S. companies, as represented in the
Standard & Poor's Composite Index of 500 stocks.
Scudder Variable Life Investment Fund--advised by Scudder Kemper Investments,
Inc. of New York, New York.
Scudder Variable Life Investment Fund Capital Growth Portfolio seeks to maximize
long-term capital growth through a broad and flexible investment program. The
Portfolio invests principally in common stocks and preferred stocks in all
sectors of the market, including companies that generate or apply new
technologies, companies that own or develop natural resources, companies that
may benefit from changing consumer demands and lifestyles and foreign companies.
Scudder Variable Life Investment Fund Growth and Income Portfolio seeks
long-term growth of capital, current income and growth of income. The Portfolio
pursues its goal by investing primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying higher than average current dividends. The
Portfolio may also purchase such securities which do not pay current dividends
but which offer prospects for growth of capital and future income.
The Strong Schafer Value Fund II--advised by Strong Schafer Capital Management,
L.L.C. (SSCM) of Princeton, New Jersey.
The Strong Schafer Value Fund II seeks long-term capital appreciation. Current
income is a secondary objective. The Fund invests primarily in common stocks of
medium- and large-size companies.
Van Kampen Life Investment Trust--advised by Van Kampen Asset Management Inc. of
Oakbrook Terrace, Illinois.
Van Kampen LIT Morgan Stanley Real Estate Securities Portfolio seeks as a
primary objective, long-term growth of capital by investing in securities of
companies operating in the real estate industry, primarily equity securities of
real estate investment trusts. Current income is a secondary investment
objective.
Meeting Investment Objectives
Meeting investment objectives depends on various factors, including, but not
limited to, how well the Portfolio managers anticipate changing economic and
market conditions. There is no guarantee that any of these Portfolios will
achieve their stated objectives.
Where to Find More Information About the Portfolios
Additional information about the investment objectives and policies of all the
Portfolios and the investment advisory and administrative services and charges
can be found in the current Portfolio Prospectuses, which can be obtained from
the Schwab Insurance & Annuity Service Center.
The Portfolios' Prospectuses should be read carefully before any decision is
made concerning the allocation of Contributions to, or Transfers among, the
Sub-Accounts.
Addition, Deletion or Substitution
Great-West does not control the Portfolios and cannot guarantee that any of the
Portfolios will always be available for allocation of Contributions or
Transfers. We retain the right to make changes in the Series Account and in its
investments. Currently, Schwab must approve certain changes.
Great-West and Schwab reserve the right to discontinue the offering of any
Portfolio. If a Portfolio is discontinued, we may substitute shares of another
Portfolio or shares of another investment company for the discontinued
Portfolio's shares. Any share substitution will comply with the requirements of
the 1940 Act.
If you are contributing to a Sub-Account corresponding to a Portfolio that is
being discontinued, you will be given notice prior to the Portfolio's
elimination.
Based on marketing, tax, investment and other conditions, we may establish new
Sub-Accounts and make them available to Owners at our discretion. Each
additional Sub-Account will purchase shares in a Portfolio or in another mutual
fund or investment vehicle.
If, in our sole discretion, marketing, tax, investment or other conditions
warrant, we may also eliminate one or more Sub-Accounts. If a Sub-Account is
eliminated, we will notify you and request that you to re-allocate the amounts
invested in the eliminated Sub-Account.
- -----------------------------------------------------------------------------
The Guarantee Period Fund
The Guarantee Period Fund is not part of the Series Account. Amounts allocated
to the Guarantee Period Fund will be deposited to, and accounted for, in a
non-unitized market value separate account. As a result, you do not participate
in the performance of the assets through unit values.
Because your Contributions do not receive a unit ownership of assets accounted
for in the separate account, the assets accrue solely to the benefit of
Great-West and any gain or loss in the separate account is borne entirely by
Great-West. You will receive the Contract guarantees made by Great-West for
amounts you contribute to the Guarantee Period Fund.
When you contribute or Transfer amounts to the Guarantee Period Fund, you select
a new Guarantee Period from those available. All Guarantee Periods will have a
term of at least one year. Contributions allocated to the Guarantee Period Fund
will be credited on the Transaction Date we receive them.
Each Guarantee Period will have its own stated rate of interest and maturity
date determined by the date the Guarantee Period is established and the term you
choose.
Currently, Guarantee Periods with annual terms of 1 to 10 years are offered only
in those states where the Guarantee Period Fund is available. The Guarantee
Periods may change in the future, but this will not have an impact on any
Guarantee Period already in effect.
The value of amounts in each Guarantee Period equals Contributions plus interest
earned, less any Premium Tax, amounts distributed, withdrawn (in whole or in
part), amounts 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 (please see "Breaking a Guarantee
Period" on page 15). Any amount withdrawn or Transferred prior to the Guarantee
Period Maturity Date will be paid in accordance with the Market Value Adjustment
formula. You can read more about Market Value Adjustments on page 15.
Investments of the Guarantee
Period Fund
We use various techniques to invest in assets that have similar characteristics
to our general account assets--especially cash flow patterns. We will primarily
invest in investment-grade fixed income securities including:
o Securities issued by the U.S. Government or its agencies or
instrumentalities, which may or may not be guaranteed by the U.S.
Government.
o 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.
o 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 us to have an investment quality comparable to
securities which may be purchased as stated above.
o Commercial paper, cash or cash equivalents and other short-term investments
having a maturity of less than one year which are considered by us to have
investment quality comparable to securities which may be purchased as stated
above.
In addition, we may invest in futures and options solely for non-speculative
hedging purposes. We 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 if the securities
prices are anticipated to decline. Similarly, if securities prices are expected
to rise, we may purchase a futures contract or a call option against anticipated
positive cash flow or may purchase options on securities.
The above information generally describes the investment strategy for the
Guarantee Period Fund. However, we are not obligated to invest the assets in the
Guarantee Period Fund according to any particular strategy, except as may be
required by Colorado and other state insurance laws. And, the stated rate of
interest that we establish will not necessarily relate to the performance of the
non-unitized market value separate account.
Subsequent Guarantee Periods
Before annuity payouts begin, you may reinvest the value of amounts in a
maturing Guarantee Period in a new Guarantee Period of any length we offer at
that time. On the quarterly statement you receive 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 we notify you of a maturing Guarantee
Period and the date a new Guarantee Period begins.
If you do not tell us where you would like the amounts in a maturing Guarantee
Period allocated by the maturity date, we will automatically allocate the amount
to a Guarantee Period of the same length as the maturing period. If the term
previously chosen is no longer available, the amount will be allocated to the
next shortest available Guarantee Period term. If none of the above are
available, the value of matured Guarantee Periods will be allocated to the
Schwab Money Market Sub-Account.
No Guarantee Period may mature later than six months after your Payout
Commencement Date. For example, if a 3-year Guarantee Period matures and the
Payout 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
If you begin annuity payouts, Transfer or withdraw prior to the Guarantee Period
maturity date, you are breaking a Guarantee Period. When we receive a request to
break a Guarantee Period and you have another Guarantee Period that is closer to
its maturity date, we will break that Guarantee Period first.
If you break a Guarantee Period, you may be assessed an interest rate adjustment
called a Market Value Adjustment.
Interest Rates
The declared annual rates of interest are guaranteed throughout the Guarantee
Period. For Guarantee Periods not yet in effect, Great-West may declare interest
rates different than those currently in effect. When a subsequent Guarantee
Period begins, the rate applied will be equal to or more than the rate currently
in effect for new Contracts with the same Guarantee Period.
The stated rate of interest must be at least equal to the Guaranteed Interest
Rate, but Great-West may declare higher rates. The Guaranteed Interest Rate is
based on the applicable state standard non-forfeiture law. The standard
non-forfeiture rate in all states is 3%, except in Florida, Mississippi and
Oklahoma, it's 0%.
The determination of the stated interest rate is influenced by, but does not
necessarily correspond to, interest rates available on fixed income investments
which Great-West may acquire using funds deposited into the Guarantee Period
Fund. In addition, Great-West considers regulatory and tax requirements, sales
and administrative expenses, general economic trends and competitive factors in
determining the stated interest rate.
Market Value Adjustment
Amounts you allocate to the Guarantee Period Fund may be subject to an interest
rate adjustment called a Market Value Adjustment if, six months or more before
the Guarantee Period Fund's maturity date, you: o surrender your investment in
the Guarantee Period Fund, o transfer money from the Guarantee Period Fund, o
partially withdraw money from the Guarantee Period Fund, o apply amounts from
the Guarantee Period Fund to purchase an annuity to receive payouts from your
account, or
o take a distribution from the Guarantee Period Fund upon the death of the Owner
or the Annuitant.
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: o Transfer to a Sub-Account offered under this Contract o
Surrenders, partial withdrawals, annuitization or periodic withdrawals o A
single sum payout upon death of the Owner or Annuitant
A Market Value Adjustment may increase or decrease the amount payable on the
above-described distributions. The formula for calculating Market Value
Adjustments is detailed in Appendix B. Appendix B also includes examples of how
Market Value Adjustments work.
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Application and Initial Contributions
The first step to purchasing the Schwab Select Annuity is to complete your
Contract application and submit it with your initial minimum Contribution of
$5,000; $2,000 if an IRA; or $1,000 if you are setting up an Automatic
Contribution Plan. Initial Contributions can be made by check (payable to GWL&A)
or transferred from a Schwab brokerage account.
If your application is complete, your Contract will be issued and your
Contribution will be credited within two business days after receipt at the
Annuity Administration Department at Great-West. Acceptance is subject to
sufficient information in a form acceptable to us. We reserve the right to
reject any application or Contribution.
If your application is incomplete, the Annuity Administration Department will
complete the application from information Schwab has on file or contact you by
telephone to obtain the required information. If the information necessary to
complete your application is not received within five business days, we will
return to you both your check and the application. If you provide consent we
will retain the initial Contribution and credit it as soon as we have completed
your application.
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Free Look Period
During the free look period (ten-days or longer where required by law), you may
cancel your Contract. If you exercise the free look privilege, you must return
the Contract to the Annuity Administration Department at Great-West.
Generally, Contributions will be allocated to the Sub-Accounts you selected on
the application, effective upon the Transaction Date. During the free look
period, you may change your Sub-Account allocations as well as your allocation
percentages.
Contracts returned during the free look period will be void from the date we
issued the Contract. In most states, we will refund your current Annuity Account
Value. This amount may be higher or lower than your Contributions, which means
you bear the investment risk during the free look period.
Certain states require that we return the greater of your Annuity Account Value
(less any surrenders, withdrawals, and distributions already received) or the
amount of Contributions received. In those states, all Contributions will be
processed as follows:
o Amounts you specify to be allocated to one or more of the available
Guarantee Periods will be allocated as directed, effective upon the
Transaction Date.
o Amounts you specify to be allocated to one or more of the Sub-Accounts will
first be allocated to the Schwab Money Market Sub-Account until the end of
the free look period. After the free look period is over, the Variable
Account Value held in the Schwab Money Market Sub-Account will be allocated
to the Sub-Accounts you selected on the application.
- -------------------------------------------------------------------------------
Subsequent Contributions
Once your application is complete and we have received your initial
Contribution, you can make subsequent Contributions at any time prior to the
Payout Commencement Date, as long as the Annuitant is living. Additional
Contributions must be at least $500; or $100 if made via an Automatic
Contribution Plan. Total Contributions may exceed $1,000,000 with our prior
approval.
Subsequent Contributions can be made by check or via an Automatic Contribution
plan directly from your bank or savings account. You can designate the date
you'd like your subsequent Contributions deducted from your account each month.
If you make subsequent Contributions by check, your check should be payable to
GWL&A.
You'll receive a confirmation of each Contribution you make upon its acceptance.
Great-West reserves the right to modify the limitations set forth in this
section.
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Annuity Account Value
Before the date annuity payouts begin, your Annuity Account Value is the sum of
your Variable and Fixed Accounts established under your Contract.
Before your Annuity Commencement Date, the Variable Account Value is the total
dollar amount of all accumulation units credited to you for each Sub-Account.
Initially, the value of each accumulation unit was set at $10.00. Each
Sub-Account's value prior to the Payout Commencement Date is equal to: o net
Contributions allocated to the corresponding Sub-Account, o plus or minus any
increase or decrease in the value of the assets of the Sub-Account due to
investment results,
o minus the daily mortality and expense risk charge,
o minus reductions for the Contract Maintenance Charge deducted on the contract
anniversary o minus any applicable Transfer fees and o minus any withdrawals or
Transfers from the Sub-Account.
The value of a Sub-Account's assets is determined at the end of each day that
the New York Stock Exchange is open for regular business (a valuation date). 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. Eastern time) on
each valuation date and ends at the close of the New York Stock Exchange on the
next succeeding valuation date.
The Variable Account Value is expected to change from valuation period to
valuation period, reflecting the investment experience of the selected
Sub-Account(s), as well as the deductions for applicable charges.
Upon allocating Variable Account Values to a Sub-Account you will be credited
with variable accumulation units in that Sub-Account. The number of accumulation
units you will be credited is determined by dividing the portion of each
Contribution allocated to the Sub-Account by the value of an accumulation unit.
The value of the accumulation unit is determined and credited at the end of the
valuation period during which the Contribution was received.
Each Sub-Account's accumulation unit value is established at the end of each
valuation period. It is calculated by multiplying the value of that unit at the
end of the prior valuation period by the Sub-Account's Net Investment Factor for
the valuation period. The formula used to calculate the Net Investment Factor is
discussed in Appendix C.
Unlike a brokerage account, amounts held under a Contract are not covered by the
Securities Investor Protection Corporation ("SIPC").
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Transfers
Prior to the Annuity Commencement Date you may Transfer all or part of your
Annuity Account Value among and between the Sub-Accounts and the available
Guarantee Periods by telephone, by sending a Request to the Annuity
Administration Department at Great-West or by calling our touch-tone account and
trading service.
Your Request must specify:
o the amounts being Transferred,
o the Sub-Account(s) and/or Guarantee Period(s) from which the Transfer is to be
made, and o the Sub-Account(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
Sub-Accounts and the Guarantee Period Fund during any calendar year. However, we
reserve the right to limit the number of Transfers you make.
There is no charge for the first twelve Transfers each calendar year, but there
will be a charge of $10 for each additional Transfer made. The charge will be
deducted from the amount Transferred. All Transfers made on a single Transaction
Date will 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.
A Transfer generally will be effective on the date the Request for Transfer is
received by the Annuity Administration Department at Great-West if received
before 4:00 p.m. Eastern time. Under current tax law, there will not be any tax
liability to you if you make a Transfer.
Transfers involving the Sub-Accounts will result in the purchase and/or
cancellation of accumulation units having a total value equal to the dollar
amount being Transferred. The purchase and/or cancellation of such units is made
using the Variable Account Value as of the end of the valuation date on which
the Transfer is effective.
When you make a Transfer from amounts in a Guarantee Period before the Guarantee
Period maturity date, the amount Transferred may be subject to a Market Value
Adjustment as discussed on page 15. If you request in advance to Transfer
amounts from a maturing Guarantee Period upon maturity, your Transfer will not
count toward the 12 free Transfers and no Transfer fees will be charged.
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, Transfer restrictions may be necessary to protect you from the
negative effect large and/or numerous Transfers can have on portfolio
management. Moving significant amounts from one Sub-Account to another may
prevent the underlying Portfolio from taking advantage of long-term investment
opportunities because the Portfolio must maintain enough cash to cover the
cancellation of accumulation units that results from a Transfer out of a
Sub-Account. Moving large amounts of money may also cause a substantial increase
in Portfolio transaction costs which must be indirectly borne by you.
As a result, we reserve the right to require that all Transfer requests be made
by you and not by your designee and to require that each Transfer request be
made by a separate communication to us. We also reserve the right to require
that each Transfer request be submitted in writing and be signed by you.
Transfers among the Sub-Accounts may also be subject to such terms and
conditions as may be imposed by the Portfolios.
Automatic Custom Transfers
Dollar Cost Averaging
Dollar cost averaging allows you to make systematic Transfers from one
Sub-Account to any other of the Sub-Accounts. Dollar cost averaging allows you
to buy more units when the price is low and fewer units when the price is high.
Over time, your average cost per unit may be more or less than if you invested
all your money at one time. However, dollar cost averaging does not assure a
greater profit, or any profit, and will not prevent or necessarily alleviate
losses in a declining market.
You can set up automatic dollar cost averaging on a monthly, quarterly,
semi-annual or annual basis. Your Transfer will be initiated on the Transaction
Date one frequency period following the date of the request. For example, if you
request quarterly Transfers on January 9, your first Transfer will be made on
April 9 and every three months on the 9th thereafter. 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 Sub-Account on the date your
Transfer is scheduled, your Transfer will not be made. However, your dollar cost
averaging Transfers will resume once there are sufficient funds in the
applicable Sub-Account. Dollar cost averaging will terminate automatically when
you start taking payouts from the Contract. Dollar cost averaging Transfers are
not included in the twelve free Transfers allowed in a calendar year.
Dollar cost averaging Transfers must meet the following conditions:
o The minimum amount that can be Transferred out of the selected Sub-Account
is $100.
o You must: (1) specify the dollar amount to be Transferred, (2) designate
the Sub-Account(s) to which the Transfer will be made, and (3) designate
the percent of the dollar amount to be allocated to each Sub-Account into
which you are Transferring money. The accumulation unit values will be
determined on the Transfer date.
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How dollar cost averaging works:
-------- --------- -------- --------
------- Contribution Units Price
Month Purchased per
unit
-------- --------- -------- --------
-------- --------- -------- --------
Jan. $250 10 $25.00
-------- --------- -------- --------
-------- --------- -------- --------
Feb. 250 12 20.83
-------- --------- -------- --------
-------- --------- -------- --------
Mar. 250 20 12.50
-------- --------- -------- --------
-------- --------- -------- --------
Apr. 250 20 12.50
-------- --------- -------- --------
-------- --------- -------- --------
May 250 15 16.67
-------- --------- -------- --------
-------- --------- -------- --------
June 250 12 20.83
-------- --------- -------- --------
Average market value per unit
$18.06
Investor's average cost per unit
$16.85
In the chart above, if all units had been purchased at one time at the highest
unit value of $25.00, only 60 units could have been purchased with $1500. By
contributing smaller amounts over time, dollar cost averaging allowed 89 units
to be purchased with $1500 at an average unit price of $16.85. This investor
purchased 29 more units at $1.21 less per unit than the average market value per
unit of $18.06.
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You may not participate in dollar cost averaging and rebalancer at the same
time.
Great-West reserves the right to modify, suspend or terminate dollar cost
averaging at any time.
Rebalancer
Over time, variations in each Sub-Account's investment results will change your
asset allocation plan percentages. Rebalancer allows you to automatically
reallocate your Variable Account Value to maintain your desired asset
allocation. Participation in Rebalancer does not assure a greater profit, or any
profit, nor will it prevent or necessarily alleviate losses in a declining
market.
You can set up rebalancer as a one-time Transfer or on a quarterly, semi-annual
or annual basis. If you select to rebalance only once, the Transfer will take
place on the Transaction Date of the request. One-time Rebalancer Transfers
count toward the twelve free Transfers allowed in a calendar year.
If you select to rebalance on a quarterly, semi-annual or annual basis, the
first Transfer will be initiated on the Transaction Date one frequency period
following the date of the request. For example, if you request quarterly
Transfers on January 9, your first Transfer will be made on April 9 and every
three months on the 9th thereafter. Transfers will continue on that same day
each interval unless terminated by you or for other reasons as set forth in the
Contract. Quarterly, semi-annual and annual Transfers will not count toward the
12 free Transfers.
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How rebalancer works:
- -----------------------------------------------------------------------------
Suppose you purchased your annuity and you decided to allocate 60% of your
initial contribution to stocks; 30% to bonds and 10% to cash equivalents as in
this pie chart:
Stocks - 60%
Large Company - 30%
Small Company - 15%
International - 15%
Bonds - 30%
Cash - 10%
Now assume that stock portfolios outperform bond portfolios and cash equivalents
over a certain period of time. Over this period, the unequal performance may
alter the asset allocation of the above hypothetical plan to look like this:
Stocks - 75%
Large Company - 35%
Small Company - 20%
International - 20%
Bonds - 20%
Cash - 5%
Rebalancer automatically reallocates your Variable Account Value to maintain
your desired asset allocation. In this example, the portfolio would be
re-allocated back to 60% in stocks; 30% in bonds; 10% in cash equivalents.
- --------------------------------------------------------------------------------
On the Transaction Date for the specified request, assets will be automatically
reallocated to the Sub-Accounts you selected. The rebalancer option will
terminate automatically when you start taking payouts from the Contract.
Rebalancer Transfers must meet the following conditions: o Your entire Variable
Account Value must be included.
o You must specify the percentage of your Variable Account Value you'd like
allocated to each Sub-Account and the frequency of rebalancing. You may
modify the allocations or stop the rebalancer option at any time.
o You may not participate in dollar cost averaging and rebalancer at the same
time.
Great-West reserves the right to modify, suspend, or terminate the rebalancer
option at any time.
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Cash Withdrawals
You may withdraw all or part of your Annuity Account Value at any time during
the life of the Annuitant and prior to the date annuity payouts begin by
submitting a written withdrawal request to the Annuity Administration Department
at Great-West. Withdrawals are subject to the rules below and federal or state
laws, rules or regulations may also apply. The amount payable to you if you
surrender your Contract is your Annuity Account Value, with any applicable
Market Value Adjustment on the Effective Date of the surrender, less any
applicable Premium Tax. No withdrawals may be made after the date annuity
payouts begin.
If you request a partial withdrawal, your Annuity Account Value will be reduced
by the dollar amount withdrawn. A Market Value Adjustment may apply. Market
Value Adjustments are discussed on page 15.
Partial withdrawals are unlimited. However, you must specify the Sub-Account(s)
or Guarantee Period(s) from which the withdrawal is to be made. After any
partial withdrawal, if your remaining Annuity Account Value is less than $2,000,
then a full surrender may be required. The minimum partial withdrawal (before
application of the MVA) is $500.
The following terms apply to withdrawals:
o Partial withdrawals or surrenders are not permitted after the date annuity
payouts begin. o A partial withdrawal or a surrender will be effective upon the
Transaction Date. o A partial withdrawal or a surrender from amounts in a
Guarantee Period may be subject to the Market
Value Adjustment provisions, and the Guarantee Period Fund provisions of the
Contract.
Withdrawal requests must be in writing with your original signature. If your
instructions are not clear, your request will be denied and no withdrawal or
partial withdrawal will be processed.
After a withdrawal of all of your Annuity Account Value, or at any time that
your Annuity Account Value is zero, all your rights under the Contract will
terminate.
Withdrawals to Pay Investment Manager or Financial Advisor Fees
You may request partial withdrawals from your Annuity Account Value and direct
us to remit the amount withdrawn directly to your designated Investment Manager
or Financial Advisor (collectively "Consultant"). A withdrawal request for this
purpose must meet the $500 minimum withdrawal requirements and comply with all
terms and conditions applicable to partial withdrawals, as described above. Tax
consequences of withdrawals are detailed below, but you should consult a
competent tax advisor prior to authorizing a withdrawal from your Annuity
Account to pay Consultant fees.
Tax Consequences of Withdrawals
Withdrawals made for any purpose may be taxable--including payments made by us
directly to your Consultant.
In addition, the Code may require us to withhold federal income taxes from
withdrawals and report such withdrawals to the IRS. If you request partial
withdrawals to pay Consultant fees, your Annuity Account Value will be reduced
by the sum of the fees paid to the Consultant and the related withholding.
You may elect, in writing, to have us not withhold federal income tax from
withdrawals, unless withholding is mandatory for your Contract. If you are
younger than 59 1/2, the taxable portion of any withdrawal is generally
considered to be an early withdrawal and is subject to an additional federal
penalty tax of 10%.
Some states also require withholding for state income taxes. For details about
withholding, please see "Federal Tax Matters" on page 25.
If you are interested in this Contract as an IRA, please refer to Section 408 of
the Code for limitations and restrictions on cash withdrawals.
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Telephone Transactions
You may make Transfer requests by telephone. Telephone Transfer requests
received before 4:00 p.m. Eastern time will be made on that day at that day's
unit value. Calls completed after 4:00 p.m. Eastern time will be made on the
next business day we and the NYSE are open for business, at that day's unit
value.
We will use reasonable procedures to confirm that instructions communicated by
telephone are genuine, such as: o requiring some form of personal identification
prior to acting on instructions, o providing written confirmation of the
transaction and/or o tape recording the instructions given by telephone.
If we follow such procedures we will not be liable for any losses due to
unauthorized or fraudulent instructions.
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
Before the date when annuity payouts begin, the Death Benefit, if any, will be
equal to the greater of:
o the Annuity Account Value with an MVA, if applicable, as of the date the
request for payout is received, less any Premium Tax, or
o the sum of Contributions, less partial withdrawals and/or periodic
withdrawals, less any Premium Tax.
The Death Benefit will become payable following our receipt of the Beneficiary's
claim in good order. 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 according to 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 amount of the Death Benefit will be determined as of the date payouts begin.
However, on the date a payout option is processed, the Variable Account Value
will be Transferred to the Schwab Money Market Sub-Account unless the
Beneficiary elects otherwise.
Subject to the distribution rules below, payout of the Death Benefit may be made
as follows:
Variable Account Value
o payout in a single sum, or
o payout under any of the variable annuity options provided under this
Contract.
Fixed Account Value
o payout in a single sum that may be subject to a Market Value Adjustment, or
o payout under any of the annuity options provided under this Contract that
may be subject to a Market Value Adjustment
Any payment within 6 months of the Guarantee Period Maturity Date will not be
subject to a Market Value Adjustment.
In any event, no payout of benefits provided under the Contract will be allowed
that does not satisfy the requirements of the Code and any other applicable
federal or state laws, rules or regulations.
Beneficiary
You may select one or more Beneficiaries. If more than one Beneficiary is
selected, they will share equally in any Death Benefit payable unless you
indicate otherwise. You may change the Beneficiary any time before the
Annuitant's death.
A change of Beneficiary will take effect as of the date the request is processed
by the Annuity Administration Department , unless a certain date is specified by
the Owner. If the Owner dies before the request is processed, the change will
take effect as of the date the request was made, unless we have already made a
payout 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, we will pay the
Death Benefit proceeds to the Owner's estate.
If the Beneficiary is not the Owner's surviving spouse, 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 payout under any of the variable or fixed
annuity options available under the Contract, provided that: o 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 o such distributions begin not later than one year after the
Owner's date of death. If an election is not received by Great-West from a
non-spouse Beneficiary and substantially equal installments begin no 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 payouts begin.
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.
Distribution of Death Benefit
Death of Annuitant
Upon the death of the Annuitant while the Owner is living, and before the
Annuity Commencement Date, we 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 and
the Contingent Annuitant will become the Annuitant.
If the Annuitant dies after the date annuity payouts begin and before the entire
interest has been distributed, any benefit payable must be distributed to the
Beneficiary according to and as rapidly as under the payout option which was in
effect on the Annuitant's date of death.
If the deceased Annuitant is an Owner, or if a corporation or other
non-individual 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.
- --------------------------------------------------------------------------------
Contingent Annuitant
While the Annuitant is living, you 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 Annuity
Administration Department at Great-West, unless a certain date is specified by
the Owner(s). Please note, you are not required to designate a Contingent
Annuitant.
- --------------------------------------------------------------------------------
Death of Owner Who Is Not the Annuitant
If there is a Joint Owner who is the surviving spouse and the Beneficiary of the
deceased Owner, the Joint Owner becomes the Owner and Beneficiary and the Death
Benefit will be paid to the Joint Owner or the Joint Owner may elect to take the
Death Benefit or to continue the Contract in force.
If the Owner dies after annuity payouts 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 as rapidly as under the payout
option applicable on the Owner's date of death. All rights granted the Owner
under the Contract will pass to any surviving Joint Owner and, if none, to the
Annuitant.
In all other cases, we 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 who may elect to become the Owner and Annuitant and to continue the
Contract in force.
Death of Owner Who Is the Annuitant
If there is a Joint Owner who is the surviving spouse of the deceased Owner and
a Contingent Annuitant, the Joint Owner becomes the Owner and the Beneficiary,
the Contingent Annuitant will become the Annuitant, and the Contract will
continue in force.
If there is a Joint Owner who is the surviving spouse and the Beneficiary 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.
In all other cases, we 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 who
may elect to become the Owner and Annuitant and to continue the Contract in
force.
- -----------------------------------------------------------------------------
Charges and Deductions
No amounts will be deducted from your Contributions except for any applicable
Premium Tax. As a result, the full amount of your 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:
o Premium Tax, if applicable,
o Certain Transfers,
o a Contract Maintenance Charge, and
o charges against your Variable Account Value for our assumption of mortality
and expense risks.
Mortality and Expense Risk Charge
We deduct a Mortality and Expense Risk Charge from your Variable Account Value
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%. 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%. We guarantee that this
charge will never increase beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the unit values of each of
the Sub-Accounts you have selected. Thus, this charge will continue to be
applicable should you choose a variable annuity payout option or the periodic
withdrawal option.
Annuity Account Values and annuity payouts 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 payouts determined in
accordance with the annuity tables and other provisions contained in the
Contract. This means that you can be sure that neither the Annuitant's longevity
nor an unanticipated improvement in general life expectancy will adversely
affect the annuity payouts under the Contract.
We bear substantial risk in connection with the Death Benefit before the Annuity
Commencement Date.
The expense risk assumed is the risk that our actual expenses in administering
the Contracts and the Series Account will be greater than we anticipated.
If the Mortality and Expense Risk Charge is insufficient to cover actual costs
and risks assumed, the loss will fall on us. If this charge is more than
sufficient, any excess will be profit to us. Currently, we expect a profit from
this charge. Our expenses for distributing the Contracts will be borne by our
general assets, including any profits from this charge.
Contract Maintenance Charge
We currently deduct a $25 annual Contract Maintenance Charge from the Annuity
Account Value on each Contract anniversary date for accounts under $50,000. This
charge partially covers our costs for administering the Contracts and the Series
Account. Once you have started receiving payouts from the Contract, this charge
will stop unless you choose the periodic withdrawal option.
The Contract Maintenance Charge is deducted from the portion of your Annuity
Account Value allocated to the Schwab Money Market Sub-Account. If the portion
of your Annuity Account Value in this Sub-Account is not sufficient to cover the
Contract Maintenance Charge, then the charge or any portion of it will be
deducted on a pro rata basis from all your 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 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.
The Contract Maintenance Charge is currently waived for Contracts with an
Annuity Account Value of at least $50,000. If your Annuity Account Value falls
below $50,000, the Contract Maintenance Charge will be reinstated until such
time as your Annuity Account Value is equal to or greater than $50,000. We do
not expect a profit from amounts received from the Contract Maintenance Charge.
Transfer Fees
There will be a $10 charge for each Transfer in excess of 12 Transfers in any
calendar year. We do not expect a profit from the Transfer fees.
Expenses of the Portfolios
The value of the assets in the Sub-Accounts reflect the value of Portfolio
shares and therefore the fees and expenses paid by each Portfolio. A complete
description of the fees, expenses, and deductions from the Portfolios is
included in this Prospectus under the Variable Annuity Fee Table and Portfolio
Annual Expenses on page 7 and 8.
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 your Contributions, from amounts
withdrawn, or from amounts applied on the Payout 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.
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 Contract.
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Payout Options
During the Distribution Period, you can choose to receive payouts in four
ways--through periodic withdrawals, variable annuity payouts, fixed annuity
payouts or in a single, lump-sum payment.
You may change the Payout Commencement Date within 60 days prior to commencement
of payouts or your Beneficiary may change it upon the death of the Owner.
If this is an IRA, payouts which satisfy the minimum distribution requirements
of the Code must begin no later than April 1 of the calendar year following the
calendar year in which you become age 70 1/2.
Periodic Withdrawals
You 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 any applicable MVA, less Premium Tax, if any.
In requesting periodic withdrawals, you must elect:
o The withdrawal frequency of either 1-, 3-, 6- or 12-month intervals o A
minimum withdrawal amount of at least $100 o The calendar day of the month on
which withdrawals will be made
o One of the periodic withdrawal payout options discussed below-- you may
change the withdrawal option and/or the frequency once each calendar year
Your withdrawals may be prorated across the Guarantee Period Fund (if
applicable) and the Sub-Accounts in proportion to their assets. Or, they can be
made specifically from the Guarantee Period Fund and specific Sub-Account(s)
until they are depleted. Then, we will automatically prorate the remaining
withdrawals against any remaining Guarantee Period Fund and Sub-Account assets
unless you request otherwise.
While periodic withdrawals are being received:
o You may continue to exercise all contractual rights, except that no
Contributions may be made. o A Market Value Adjustment, if applicable, will be
assessed for periodic withdrawals from Guarantee
Periods six or more months prior to its Guarantee Period maturity date.
o You may keep the same Sub-Accounts as you had selected before periodic
withdrawals began. o Charges and fees under the Contract continue to apply. o
Maturing Guarantee Periods renew into the shortest Guarantee Period then
available.
Periodic withdrawals will cease on the earlier of the date:
o The amount elected to be paid under the option selected has been reduced to
zero.
o The Annuity Account Value is zero.
o You request that withdrawals stop.
o The Owner or the Annuitant dies.
If periodic withdrawals stop, you may resume making Contributions. However, we
may limit the number of times you may restart a periodic withdrawal program.
Periodic withdrawals made for any purpose may be taxable, subject to withholding
and to the 10% federal penalty tax if you are younger than age 59 1/2. IRAs are
subject to complex rules with respect to restrictions on and taxation of
distributions, including penalty taxes.
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If you choose to receive payouts from your Contract through periodic
withdrawals, you may select from the following payout options: Income for a
specified period (at least 36 months)--You elect the length of time over which
withdrawals will be made. The amount paid will vary based on the duration you
choose.
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Income of a specified amount (at least 36 months)--You elect the dollar amount
of the withdrawals. Based on the amount elected, the duration may vary. Interest
only--Your withdrawals will be based on the amount of interest credited to the
Guarantee Period Fund between withdrawals. Available only if 100% of your
Account Value is invested in the Guarantee Period Fund.
Minimum distribution--If you are using this Contract as an IRA, you may request
minimum distributions as specified under Code Section 401(a)(9). Any other form
of periodic withdrawal acceptable to Great-West which is for a period of at
least 36 months.
In accordance with the provisions outlined in this section, you may request a
periodic withdrawal to remit fees paid to your Investment Manager or Financial
Advisor. There may be income tax consequences to any periodic withdrawal made
for this purpose. Please see "Cash Withdrawals" on page 19.
Annuity Payouts
You can choose the date you'd like annuity payouts to start either when you
purchase the Contract or at a later date. The date you choose must be at least
one year after your initial Contribution. If you do not select a payout start
date, payouts will begin on the first day of the month of the Annuitant's 91st
birthday. You can change your selection at any time up to 30 days before the
annuity date you selected.
If you have not elected a payout option within 30 days of the Annuity
Commencement Date, the portion of your Annuity Account Value held in your Fixed
Account will be paid out as a fixed life annuity with a guarantee period of 20
years. The Annuity Account Value held in the Sub-Account(s) will be paid out as
a variable life annuity with a guarantee period of 20 years.
The amount to be paid out is the Annuity Account Value on the Annuity
Commencement Date. The minimum amount that may be withdrawn from the Annuity
Account Value to purchase an annuity payout option is $2,000 with a Market Value
Adjustment, if applicable. If after the Market Value Adjustment, your Annuity
Account Value is less than $2,000, we may pay the amount in a single sum subject
to the Contract provisions applicable to a partial withdrawal.
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If you choose to receive variable annuity payouts from your Contract, you may
select from the following payout options: Variable life annuity with guaranteed
period--This option provides for monthly payouts during a guaranteed period or
for the lifetime of the Annuitant, whichever is longer. The guaranteed period
may be 5, 10, 15 or 20 years.
Variable life annuity--This option provides for monthly payouts during the
lifetime of the Annuitant. The annuity terminates with the last payout due prior
to the death of the Annuitant. Since no minimum number of payouts is guaranteed,
this option may offer the maximum level of monthly payouts. It is possible that
only one payout may be made if the Annuitant died before the date on which the
second payout is due.
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Under an annuity payout option, you can receive payouts monthly, quarterly,
semi-annually or annually in payments which must be at least $50. We reserve the
right to make payouts using the most frequent payout interval which produces a
payout of at least $50.
If you elect to receive a single sum payment, the amount paid is the Surrender
Value.
Amount of First Variable Payout
The first payout under a variable annuity payout option will be based on the
value of the amounts held in each Sub-Account you have selected 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 payout option.
For annuity options involving life income, the actual age and/or gender of the
Annuitant will affect the amount of each payout. We reserve the right to ask for
satisfactory proof of the Annuitant's age. We may delay annuity payouts until
satisfactory proof is received. Since payouts to older Annuitants are expected
to be fewer in number, the amount of each annuity payout 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 payouts established will be
made on the basis of the correct age. If payouts were too large because of
misstatement, the difference with interest may be deducted by us from the next
payout or payouts. If payouts were too small, the difference with interest may
be added by us to the next payout. This interest is at an annual effective rate
which will not be less than the Guaranteed Interest Rate.
Variable Annuity Units
The number of Annuity Units paid for each Sub-Account is determined by dividing
the amount of the first monthly payout by its Annuity Unit value on the 5th
valuation date preceding the date the first payout is due. The number of Annuity
Units used to calculate each payout for a Sub-Account remains fixed during the
Annuity Payout Period.
Amount of Variable Payouts After the
First Payout
Payouts after the first will vary depending upon the investment performance of
the 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 payout is due. The total amount of each
variable annuity payout will be the sum of the variable annuity payouts for each
Sub-Account you have selected. We guarantee that the dollar amount of each
payout after the first will not be affected by variations in expenses or
mortality experience.
Transfers After the Variable Annuity Commencement Date
Once annuity payouts have begun, no Transfers may be made from a fixed annuity
payout option to a variable annuity payout option, or vice versa. However, for
variable annuity payout options, Transfers may be made within the variable
annuity payout option among the available Sub-Accounts. Transfers after the
Annuity 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 payout, if it were
made at that time, would be the same amount that it would have been without the
Transfer. Thereafter, annuity payouts will reflect changes in the value of the
new Annuity Units.
Other Restrictions
Once payouts start under the annuity payout option you select:
o no changes can be made in the payout option,
o no additional Contributions will be accepted under the Contract and
o no further withdrawals, other than withdrawals made to provide annuity
benefits, will be allowed.
A portion or the entire amount of the annuity payouts may be taxable as ordinary
income. If, at the time the annuity payouts 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 payouts 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. Please see "Federal Tax Matters" below for details.
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If you choose to receive fixed annuity payouts from your Contract, you may
select from the following payout options: Income of specified amount--The amount
applied under this option may be paid in equal annual, semi-annual, quarterly or
monthly installments in the dollar amount elected for not more than 240 months.
Income for a specified period--Payouts are paid annually, semi-annually,
quarterly or monthly, as elected, for a selected number of years not to exceed
240 months.
Fixed life annuity with guaranteed period--This option provides monthly payouts
during a guaranteed period or for the lifetime of the Annuitant, whichever is
longer. The guaranteed period may be 5, 10, 15 or 20 years.
Fixed life annuity--This option provides for monthly payouts during the lifetime
of the Annuitant. The annuity ends with the last payout due prior to the death
of the Annuitant. Since no minimum number of payouts is guaranteed, this option
may offer the maximum level of monthly payouts. It is possible that only one
payout may be made if the Annuitant died before the date on which the second
payout is due. Any other form of a fixed annuity acceptable to us.
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Annuity IRAs
The annuity date and options available for IRAs may be controlled by
endorsements, the plan documents, or applicable law.
Under the Code, a Contract 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.
Under a minimum distribution plan, distributions must begin by a specific date
and the entire interest of the plan participant must be distributed within a
certain specified period of time. The application of the minimum distribution
requirements vary according to your age and other circumstances.
Seek Tax Advice
The following discussion of the federal income tax consequences is only a brief
summary and is not intended as tax advice. The federal income tax consequences
discussed here 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 your individual circumstances or the circumstances of the person who
receives the distribution. A tax adviser should be consulted for further
information.
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Federal Tax Matters
The following discussion is a general description of federal income tax
considerations relating to the Contracts and is not intended as tax advice. This
discussion assumes 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 situations. If you are concerned about these tax
implications relating to the ownership or use of the Contract, you 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 payouts,
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.
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Because tax laws, rules and regulations are constantly changing, we do not make
any guarantees about the Contract's tax status.
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Certain requirements must be satisfied in purchasing an Annuity IRA and
receiving distributions from an Annuity IRA in order to continue receiving
favorable tax treatment. As a result, purchasers of Annuity 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
Annuity IRA is purchased with proceeds and/or Contributions that qualify for the
intended special federal income tax treatment.
Taxation of Annuities
Section 72 of the Code governs taxation of annuities. You, as a "natural person"
will not generally be taxed on increases, if any, in the value of your Annuity
Account Value until a distribution occurs by withdrawing all or part of the
Annuity Account Value (for example, withdrawals or annuity payouts under the
annuity payout option elected). However, under certain circumstances, you
currently may be subject to taxation. 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 payout or an annuity) is taxable as ordinary income. An IRA
Contract may not be assigned as collateral.
If the Contract is not owned by a natural person (for example, a corporation or
certain trusts), you 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 stated Owner of a Contract and the beneficial Owner is a natural
person.
The rule also does not apply where:
o The annuity Contract is acquired by the estate of a decedent. o The Contract
is held under an IRA. o The Contract is a qualified funding asset for a
structured settlement.
o The Contract is purchased on behalf of an employee upon termination of a
qualified plan.
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 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 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 payout is taxed at ordinary income tax rates.
Annuity Payouts
Although the tax consequences may vary depending on the annuity form elected
under the Contract, in general, only the portion of the annuity payout 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 payouts is taxable. For
fixed annuity payouts, in general there is no tax on the portion of each payout
which represents the same ratio that the investment in the Contract bears to the
total expected value of the annuity payouts for the term of the payouts.
However, the remainder of each annuity payout is taxable. Once the investment in
the Contract has been fully recovered, the full amount of any additional annuity
payouts is taxable.
Penalty Tax
For distributions from a Non-Qualified Contract, there may be a federal income
tax penalty imposed equal to 10% of the amount treated as taxable income. In
general, however, there is no penalty tax on distributions: o Made on or after
the date on which the Owner reaches age 59 1/2.
o Made as a result of death or disability of the Owner.
o Received in substantially equal periodic payouts (at least annually) for
your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and the Beneficiary.
Other exemptions or tax penalties may apply to distributions from a
Non-Qualified Contract or certain distributions from 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 included in the income of the
recipient as follows: o If distributed in a lump sum, they are taxed in the same
manner as a full surrender, as described
above.
o If distributed under an annuity form, they are taxed in the same manner as
annuity payouts, as described above.
Distribution at Death
In order to be treated as an annuity contract, the terms of the Contract must
provide the following two distribution rules: o If the Owner dies before the
date annuity payouts start, your entire interest must generally be
distributed within five years after the date of your death. If payable to a
designated Beneficiary, the distributions may be paid over the life of that
designated Beneficiary or over a period not extending beyond the life
expectancy of that Beneficiary, so long as payouts start within one year of
your death. If the sole designated Beneficiary is your spouse, the Contract
may be continued in the name of the spouse as Owner.
o If the Owner dies on or after the date annuity payouts start, and before the
entire interest in the Contract has been distributed, the remainder of your
interest will be distributed on the same or on a more rapid schedule than
that provided for in the method in effect on the date of death.
If the Owner is not an individual, then for purposes of the distribution at
death rules, the Primary Annuitant is considered the Owner. In addition, when
the Owner is not an individual, a change in the Primary Annuitant is treated as
the death of the Owner.
Distributions made to a Beneficiary upon the Owner's death from an IRA must be
made pursuant to the rules in Section 401(a)(9) of the Code.
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 that are not discussed in this Prospectus.
Multiple Contracts
All deferred, Non-Qualified Annuity Contracts that are issued by Great-West (or
our affiliates) to the same Owner during any calendar year will be treated as
one annuity contract for purposes of determining the taxable amount.
Withholding
Annuity distributions generally are subject to withholding 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.
Section 1035 Exchanges
Code Section 1035 provides that no gain or loss shall be recognized on the
exchange of one insurance contract for another. Generally, contracts issued in
an exchange for another annuity contract are treated as new for purposes of the
penalty and distribution at death rules.
Individual Retirement Annuities
The Contract may be used with IRAs as described in Section 408 of the Code which
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. If you purchase this
Contract for use with an IRA, you will be provided with supplemental
information. And, you have the right to revoke your purchase within seven days
of purchase of the IRA 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.
Various tax penalties may apply to Contributions in excess of specified limits,
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 if there is a change in the law. Purchasers should seek
competent advice as to the suitability of the Contract for use with IRAs.
When you make your initial Contribution, you must specify whether you are
purchasing a Non-Qualified Contract or an IRA. If the initial Contribution is
made as a result of an exchange or surrender of another annuity contract, we may
require that you provide information with regard to the federal income tax
status of the previous annuity contract.
We will require that you purchase separate Contracts if you want to invest money
qualifying for different annuity tax treatment under the Code. For each separate
Contract you will need to make the required minimum initial Contribution.
Additional Contributions under the 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 the Contribution would be different from the initial Contribution.
If a Contract is issued in connection with an employer's Simplified Employee
Pension plan, Owners, Annuitants and Beneficiaries are cautioned that the rights
of any person to any of the benefits under the Contract will be subject to the
terms and conditions of the plan itself, regardless of the terms and conditions
of the Contract.
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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, you
may not assign the Contract as collateral.
If a non-IRA Contract is assigned, the interest of the assignee has priority
over your interest 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 Annuity Administration
Department at Great-West. All assignments are subject to any action taken or
payout made by Great-West before the assignment was processed. We are 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. Please consult a competent tax adviser for
further information.
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Performance Data
From time to time, we may advertise yields and average annual total returns for
the Sub-Accounts. In addition, we may advertise the effective yield of the
Schwab Money Market Sub-Account. These figures will be based on historical
information and are not intended to indicate future performance.
Money Market Yield
The yield of the Schwab Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified 7-day period. It
is calculated by assuming that the income generated for that seven-day period is
generated each 7-day period over a period of 52 weeks 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 Sub-Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of the assumed reinvestment.
Average Annual Total Return
The table on the following page illustrates standardized and non-standardized
average annual total return for one-, three-, five- and ten-year periods (or
since inception, if less than ten years) ended December 31, 1999. Average annual
total return quotations represent the average annual compounded rate of return
that would equate an initial investment of $1,000 to the redemption value of
that investment (excluding Premium Taxes, if any) as of the last day of each of
the periods for which total return quotations are provided.
Both the standardized and non-standardized data reflect the deduction of all
fees and charges under the Contract. The standardized data is calculated from
the inception date of the Sub-Account and the non-standardized data is
calculated for periods preceding the inception date of the Sub-Account. Some of
the Sub-Accounts do not have standardized performance information. For
additional information regarding yields and total returns calculated using the
standard methodologies briefly described herein, please refer to the Statement
of Additional Information.
31
Performance Data
<TABLE>
<S> <C> <C> <C> <C>
Account 1 year 3 years 5 years 10 years Since Inception Since Inception
Inception Date of Inception Date of
of Sub-Account of Underlying Underlying
Sub-Account Portfolio Portfolio
(if less than
10 years)
Alger American Growth 32.54% 34.37% 29.81%* 21.84%* 33.28% 11/1/96 N/A 1/9/89
American Century VP International 62.67% 31.16% 23.17%* N/A 31.24% 11/1/96 18.98% 5/1/94
Baron Capital Asset 34.55%* N/A N/A N/A 13.98% 5/3/99 58.67% 10/1/98
Berger IPT-Small Company Growth 89.84% 32.12%* N/A N/A 43.78% 5/1/97 25.21% 5/1/96
Deutsche Asset Management VIT EAFE(R) 26.52%* N/A N/A N/A 20.02% 5/3/99 16.05% 8/22/97
Equity Index
Deutsche Asset Management VIT Small Cap 19.14%* N/A N/A N/A 16.48% 5/3/99 8.47% 8/25/97
Index
Dreyfus Variable Investment Fund 10.50%* 21.89%* 24.45%* N/A 2.42% 5/3/99 19.03% 4/5/93
Appreciation
Dreyfus Variable Investment Fund Growth 15.89%* 13.97%* 23.26%* N/A 7.32% 5/3/99 19.82% 5/2/94
and Income
Federated American Leaders II 5.77% 17.42% 20.86%* N/A 17.93% 11/1/96 17.09% 2/10/94
Federated U.S. Government Securities II -1.45% 4.17% 4.62%* N/A 3.81% 11/1/96 4.35% 3/28/94
Federated Utility II 0.83% 12.67%* 14.27%* N/A 13.97% 5/1/97 12.40% 2/10/94
INVESCO VIF-High Yield 8.32% 8.12% 11.65%* N/A 8.89% 11/1/96 10.36% 5/27/94
INVESCO VIF-Equity Income 13.87% 18.29% 20.79%* N/A 18.84% 11/1/96 19.34% 8/10/94
INVESCO VIF-Technology 156.79%* N/A N/A N/A N/A 3/1/00 64.13% 5/21/97
Janus Aspen Growth 42.78% 32.71% 28.73%* N/A 31.80% 11/1/96 23.18% 9/13/93
Janus Aspen Worldwide Growth 63.07% 36.17% 32.45%* N/A 35.71% 11/1/96 28.59% 9/13/93
Janus Aspen Flexible Income 0.74%* 6.49%* 9.93%* N/A -0.45% 5/3/99 7.58% 9/13/93
Janus Aspen International Growth 80.73%* 35.15%* 32.12%* N/A 70.44% 5/3/99 27.10% 5/2/94
Montgomery Variable Series: Growth 19.78% 15.93% N/A N/A 16.28% 11/1/96 19.00% 2/9/96
Prudential Series Fund Equity Class II N/A N/A N/A N/A -1.47% 5/3/99 -1.47% 5/4/99
SAFECO RST Equity 8.38% 18.44%* 21.26%* 16.36%* 18.88% 4/30/97 N/A 4/3/87
SAFECO RST Growth Opportunities 4.74%* 14.86%* 22.64%* N/A 14.39% 5/3/99 22.46% 1/7/93
Schwab MarketTrack Growth II 18.62% 17.98% N/A N/A 18.23% 11/1/96 18.23% 11/1/96
Schwab S&P 500 19.45% 25.83% N/A N/A 26.29% 11/1/96 26.29% 11/1/96
Scudder Variable Life Investment Fund 34.08%* 30.16%* 27.36%* 17.03%* 26.44% 5/3/99 N/A 7/16/85
Capital Growth
Scudder Variable Life Investment Fund 4.95%* 13.00%* 17.95%* N/A -6.38% 5/3/99 16.55% 5/2/94
Growth and Income
Strong Schafer Value II -3.70%* N/A N/A N/A -13.58% 5/3/99 -1.48% 10/10/97
Van Kampen LIT-Morgan Stanley Real -4.22% 0.36%* N/A N/A -5.15% 9/15/97 9.94% 7/3/95
Estate Securities
</TABLE>
* Indicates non-standardized performance because data is calculated for periods
preceding the inception date of the Sub-Account.
34
Performance information and calculations for any Sub-Account are based only on
the performance of a hypothetical Contract under which the Annuity Account Value
is allocated to a Sub-Account during a particular time period. Performance
information should be considered in light of the investment objectives and
policies and characteristics of the Portfolios in which the Sub-Account invests
and the market conditions during the given time period. It 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:
o the ranking of or asset allocation/investment strategy of any Sub-Account
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 people who rank separate accounts or other investment
products on overall performance or other criteria, and
o 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 advertise cumulative (non-annualized) total
returns, yield and standard total returns for the Sub-Accounts.
We may also advertise performance figures for the Sub-Accounts based on the
performance of a Portfolio 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.
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Distribution of the Contracts
Charles Schwab & Co., Inc. (Schwab) is the principal underwriter and 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 Great-West in
processing the Contracts. These services are described in written agreements
between Schwab and Great-West. Great-West 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.
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Voting Rights
In general, you do not have a direct right to vote the Portfolio shares held in
the Series Account. However, under current law, you are entitled to give us
instructions on how to vote the shares. We will vote the shares according to
those instructions at regular and special shareholder meetings. If the law
changes and we can vote the shares in our own right, we may elect to do so.
Before the Annuity Commencement Date, you have the voting interest. The number
of votes available to you will be calculated separately for each of your
Sub-Accounts. That number will be determined by applying your percentage
interest, if any, in a particular Sub-Account to the total number of votes
attributable to that Sub-Account. You hold a voting interest in each Sub-Account
to which your Annuity Account Value is allocated. If you select a variable
annuity option, the votes attributable to your Contract will decrease as annuity
payouts are made.
The number of votes of a Portfolio will be determined as of the date established
by that Portfolio for determining shareholders eligible to vote at the meeting
of the Portfolios. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established by
the respective Portfolios.
If we do not receive timely instructions and Owners have no beneficial interest
in shares held by us, we will vote according to the voting instructions as a
proportion of all Contracts participating in the Sub-Account. If you indicate in
your instructions that you do not wish to vote an item, we will apply your
instructions on a pro rata basis to reduce the votes eligible to be cast.
Each person or entity having a voting interest in a Sub-Account will receive
proxy material, reports and other material relating to the appropriate
Portfolio.
Please note, generally the Portfolios are not required to, and do not intend to,
hold annual or other regular meetings of shareholders.
Contract Owners have no voting rights in Great-West.
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Rights Reserved by Great-West
We reserve the right to make certain changes we believe 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, we will
obtain your approval of the changes and approval from any appropriate regulatory
authority. Approval may not be required in all cases, however. Examples of the
changes we may make include: o To operate the Series Account in any form
permitted under the Investment Company Act of 1940 or in
any other form permitted by law.
o To Transfer any assets in any Sub-Account to another Sub-Account, or to one
or more separate accounts, or to a Guarantee Period; or to add, combine or
remove Sub-Accounts of the Series Account.
o To substitute, for the Portfolio shares in any Sub-Account, the shares of
another Portfolio or shares of another investment company or any other
investment permitted by law.
o To make any changes required by the Code or by any other applicable law in
order to continue treatment of the Contract as an annuity.
o To change the time or time of day at which a valuation date is deemed to have
ended. o To make any other necessary technical changes in the Contract in order
to conform with any action
the above provisions permit us to take, including changing the way we assess
charges, without increasing them for any outstanding Contract beyond the
aggregate amount guaranteed.
- --------------------------------------------------------------------------------
Legal Proceedings
Currently, the Series Account is not a party to, and its assets are not subject
to any material legal proceedings. And, Great-West is not currently a party to,
and its property is not currently subject to, any material legal proceedings.
The lawsuits to which Great-West 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 Great-West.
- --------------------------------------------------------------------------------
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 Boros Cicchetti Berenson & Johnson LLP.
- --------------------------------------------------------------------------------
Experts
The consolidated financial statements incorporated by reference from Great-West
Life & Annuity Insurance Company's Annual Report on Form 10-K for the year ended
December 31, 1999, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
- -----------------------------------------------------------------------------
Incorporation of Certain Documents by Reference and Available Information
Great-West's Annual Report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference, which means that it is legally a part of this
Prospectus. All documents or reports filed by Great-West under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
after the effective date of this Prospectus are also incorporated by reference.
Such documents or reports will be part of this Prospectus from the date such
documents are filed.
Great-West files its Exchange Act documents and reports, including its annual
and quarterly annual reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000744455.
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 contained in the
Registration Statement and its exhibits. Please refer to the registration
statement and its exhibits for further information.
You may request a free copy of any or all of the information incorporated by
reference into the Prospectus (other than exhibits not specifically incorporated
by reference into the text of such documents). Please direct any oral or written
request for such documents to:
Annuity Administration Department
P. O. Box 173920
Denver, Colorado 80217-3920
1-800-838-0650
The SEC maintains an Internet web site (http://www.sec.gov) that contains the
Statement of Additional Information, information incorporated by reference and
other information filed electronically by Great-West concerning the Contract and
the Series Account.
You also can review and copy any materials filed with the SEC at its Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference room by calling the SEC at
1-800-SEC-0330.
The Statement of Additional Information contains more specific information
relating to the Series Account and Great-West, such as:
o general information
o information about Great-West Life & Annuity Insurance Company and the
Variable Annuity-1 Series Account
o the calculation of annuity payouts
o postponement of payouts
o services
o withholding
o calculation of performance data
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Appendix A--Condensed Financial Information
- --------------------------------------------------------------------------------
Appendix A--Condensed Financial Information
Selected data for accumulation units
Outstanding through each period ending December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Alger Alger American Berger Dreyfus
American American Century American Bankers Bankers IPT Small VIF
Growth Small-Cap VP Century Trust Trust Baron Company Capital
Portfolio Portfolio Capital VP EAFE Small Cap Capital Growth Appreciation
AppreciatiInternationEquity Index Fund Asset Fund Fund
Index Fund
Fund
-----------------------------------------------------------------------------------------------
Date Commenced 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99 05/03/99 05/03/99 05/01/97 05/03/99
Operations
1999
Beginning Unit $18.74 $12.76 $8.94 $14.54 $10.00 $10.00 $10.00 $13.89 $10.00
Value
========= ======== ========= ========= ========= ========= ========= ========= =========
Ending Unit Value $24.84 $18.15 $14.59 $23.66 $12.00 $11.65 $11.40 $26.37 $10.24
========= ======== ========= ========= ========= ========= ========= ========= =========
Number of Units 2,200,774.98 201,220.60 88,278.89 602,866.81 161,395.99 203,338.02 502,097.27 1,072,037.44 245,395.21
Outstanding
========= ======== ========= ========= ========= ========= ========= ========= =========
Net Assets (000's) $54,671 $3,652 $1,288 $14,264 $1,937 $2,369 $5,723 $28,268 $2,513
========= ======== ========= ========= ========= ========= ========= ========= =========
1998
Beginning Unit $12.76 $11.14 $9.22 $12.35 $13.75
Value
========= ======== ========= ========= =========
Ending Unit Value $18.74 $12.76 $8.94 $14.54 $13.89
========= ======== ========= ========= =========
Number of Units 1,306,503.46 643,786.69 99,034.37 560,116.89 428,982.88
Outstanding
========= ======== ========= ========= =========
Net Assets (000's) $8,217 $886 $8,147 $5,959
$24,487
========= ======== ========= ========= =========
========= ======== ========= ========= =========
1997
Beginning Unit $10.24 $10.09 $9.61 $10.49 $10.00
Value
========= ======== ========= ========= =========
========= ======== ========= ========= =========
Ending Unit Value $12.76 $11.14 $9.22 $12.35 $13.75
========= ======== ========= ========= =========
========= ======== ========= ========= =========
Number of Units 417,162.09 337,576.93 82,255.58 298,156.62 124,653.31
Outstanding
========= ======== ========= ========= =========
Net Assets (000's) $5,325 $3,761 $758 $3,683 $1,714
========= ======== ========= ========= =========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00
Value
========= ======== ========= =========
========= ========
Ending Unit Value $10.24 $10.09 $9.61 $10.49
========= ======== ========= =========
========= ======== ========= =========
Number of Units 1,166.64 4,080.46 30,139.13 13,399.99
Outstanding
========= ======== ========= =========
Net Assets (000's) $12 $41 $290 $141
========= ======== ========= =========
<PAGE>
Federated INVESCO Janus
Dreyfus Federated Fund for INVESCO VIF INVESCO Aspen Janus
VIF American U.S. Federated VIF High IndustrialVIF Total AggressiveAspen
Growth & Leaders GovernmentUtility Yield Income Return Growth Flexible
Income Fund II Securities Fund II Portfolio Portfolio Portfolio Portfolio Income
Fund II Fund
-----------------------------------------------------------------------------------------------
Date Commenced 05/03/99 11/01/96 11/01/96 05/01/97 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99
Operations
1999
Beginning Unit $10.00 $15.95 $11.43 $14.07 $12.13 $13.61 $14.71 $10.00
Value $15.18
======== ========= ========= ======== ========= ======== ========= ======== =========
Ending Unit Value $10.73 $16.87 $11.27 $14.18 $13.14 $17.28 $13.03 $32.87 $ 9.95
======== ========= ========= ======== ========= ======== ========= ======== =========
Number of Unit 49,768.32 1,443,381.49 2,809,026.83 280,956.86 2,003,862.84
1,753,290.18 573,788.59 458,029.90 838,444.84
Outstanding
======== ========= ========= ======== ========= ======== ========= ======== =========
Net Assets (000's) $534 $24,346 $31,648 $3,985 $26,326 $30,299 $7,477 $15,057 $8,347
======== ========= ========= ======== ========= ======== ========= ======== =========
1998
Beginning Unit $13.67 $10.71 $12.45 $12.09 $13.27 $12.52 $11.05
Value
========= ========= ======== ========= ======== ========= ========
Ending Unit Value $15.95 $11.43 $14.07 $12.13 $15.18 $13.61 $14.71
========= ========= ======== ========= ======== ========= ========
Number of Units 1,763,028.09 2,136,709.11 416,024.23 1,867,861.60
1,639,584.27 1,269,709.44 759,487.48
Outstanding
========= ========= ======== ========= ======== ========= ========
Net Assets (000's) $28,117 $24,427 $5,852 $22,654 $24,882 $17,275 $11,169
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
1997
Beginning Unit $10.42 $9.97 $10.00 $10.39 $10.44 $10.27 $9.89
Value
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
Ending Unit Value $13.67 $10.71 $12.45 $12.09 $13.27 $12.52 $11.05
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
Number of Units 1,426,437.13 815,966.27 168,289.28 1,360,680.67 1,271,028.35
996,949.40 331,141.90
Outstanding
========= ========= ======== ========= ======== ========= ========
Net Assets (000's) $19,505 $8,737 $2,095 $16,450 $16,867 $12,482 $
3,658
========= ========= ======== ========= ======== ========= ========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Value
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Ending Unit Value $10.42 $9.97 $10.39 $10.44 $10.27 $ 9.89
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Number of Units 65,888.88 9,330.15 52,043.52 68,873.87 3,927.31 6,698.73
Outstanding
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Net Assets (000's) $686 $93 $541 $719 $40 $66
========= ========= ======== ======== ========= ========
<PAGE>
Montgomery
Janus Janus Janus Lexington Montgomery Variable Safeco
Aspen Aspen Aspen Emerging Variable Series: Prudential Safeco RST
Growth InternationWorldwide Markets Series: InternatioEquity RST Growth
Portfolio Growth Growth Fund Growth Small-Cap Portfolio Equity Portfolio
Fund Portfolo Fund Fund Portfolio
----------------------------------------------------------------------------------------------
Date Commenced 11/01/96 05/03/99 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99 05/01/97 05/03/99
Operations
1999
Beginning Unit $16.79 $10.00 $16.13 $6.40 $13.47 $9.56 $10.00 $14.65 $10.00
Value
========= ========= ========= ========= ========= ========= ========= ========= =========
Ending Unit Value $23.98 $17.04 $26.30 $14.48 $16.13 $9.87 $9.85 $15.88 $11.44
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of Units 3,396,880.63 772,937.37 4,259,932.25 133,859.68 410,660.04 0.00 32,427.58 1,065,918.62 155,642.93
Outstanding
========= ========= ========= ========= ========= ========= ========= ========= =========
Net Assets (000's) $81,453 $13,174 $112,048 $1,938 $6,625 $320 $16,928 $1,780
-
========= ========= ========= ========= ========= ========= ========= ========= =========
1998
Beginning Unit $12.49 $12.62 $9.00 $13.20 $9.89 $11.83
Value
========= ========= ========= ========= ========= =========
Ending Unit Value $16.79 $16.13 $6.40 $13.47 $9.56 $14.65
========= ========= ========= ========= ========= =========
Number of Units 1,979,274.19 3,616,796.56 260,704.11 601,168.28 8.53 1,168,093.71
Outstanding
========= ========= ========= ========= ========= =========
Net Assets (000's) $33,242 $58,337 $1,670 $8,097 $0 $17,116
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
1997
Beginning Unit $10.26 $10.42 $10.26 $10.35 $10.51 $10.00
Value
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
Ending Unit Value $12.49 $12.62 $9.00 $13.20 $9.89 $11.83
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
Number of Units 1,335,813.25 2,208,663.79 309,521.91 643,624.38 208,496.59 357,176.26
Outstanding
========= ========= ========= ========= ========= =========
Net Assets (000's) $16,678 $27,868 $2,785 $8,495 $2,061 $4,226
========= ========= ========= ========= ========= =========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00
Value
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Ending Unit Value $10.26 $10.42 $10.26 $10.35 $10.51
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Number of Units 93,598.79 51,982.38 18,281.42 11,226.77 3,230.28
Outstanding
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Net Assets (000's) $960 $541 $188 $116 $34
========= ========= ======== ========= =========
<PAGE>
Schwab Van Eck
MarketTraSchwab Scudder Strong Strong Worldwide
Growth Money Schwab Scudder Growth & SteinRoe Discovery VF Hard
PortfolioMarket S&P 500 Capital Income Special Fund II Schafer Assets
II Portfolio Portfolio Growth Fund A Venture Value Fund
Fund A Fund Fund
---------------------------------------------------------------------------------------------
Date Commenced 11/01/96 11/01/96 11/01/96 05/03/99 05/03/99 11/01/96 11/01/96 05/03/99 11/01/96
Operations
1999
Beginning Unit $14.34 $10.93 $17.54 $10.00 $10.00 $ $12.26 $10.00 $
Value 9.00 6.88
======= ========= ========= ======== ======= ======= ======== ====== =======
Ending Unit Value $17.01 $11.35 $20.95 $12.64 $ $13.22 $12.78 $8.64 $
9.36 8.25
======= ========= ========= ======== ======= ======= ======== ====== =======
Number of Units 560,532.64 9,861,519.25 5,457,967.10 186,640.12 61,409.25 246,948.62 57,792.53 94,499.34 29,113.72
Outstanding
======= ========= ========= ======== ======= ======= ======== ====== =======
Net Assets (000's) $9,532 $111,967 $114,346 $2,360 $575 $3,265 $739 $817 $240
======= ========= ========= ======== ======= ======= ======== ====== =======
1998
Beginning Unit $12.79 $10.49 $13.81 $10.98 $11.53 $10.04
Value
======= ========= ========= ======= ======== =======
Ending Unit Value $14.34 $10.93 $17.54 $ $12.26 $
9.00 6.88
======= ========= ========= ======= ======== =======
Number of Units 447,514.11 6,649,980.31 4,084,834.46 769,185.90 199,701.97 80,398.85
Outstanding
======= ========= ========= ======= ======== =======
Net Assets (000's) $6,416 $72,692 $71,644 $6,926 $2,449 $553
======= ========= ========= ======= ======== =======
======= ========= =======
1997
Beginning Unit $10.35 $10.07 $10.52 $10.27 $10.44 $10.31
Value
======= ========= =======
======= ========= ========= ======= ======== =======
Ending Unit Value $12.79 $10.49 $13.81 $10.98 $11.53 $10.04
======= ========= =======
======= ========= ========= ======= ======== =======
Number of Units 284,530.36 4,114,002.58 2,115,859.53 952,879.99 211,488.12 132,622.35
Outstanding
========
======= ========= ========= ======= =======
Net Assets (000's) $3,638 $43,163 $29,224 $10,465 $2,439 $1,332
======= ========= ========= ======= ======== =======
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Value
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Ending Unit Value $10.35 $10.07 $10.52 $10.27 $10.44 $10.31
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Number of Units 16,525.39 297,045.95 62,674.08 70,715.11 24,613.07 2,220.85
Outstanding
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Net Assets (000's) $171 $2,991 $ 659 $727 $257 $23
======= ========= ========= ======= ======== =======
<PAGE>
Van Kampen
American
Capital L.I.T.
- Morgan
Stanley Real
Estate
Securities
Portfolio
----------------
Date Commenced 09/17/97
Operations
1999
Beginning Unit $9.25
Value
=========
Ending Unit Value $8.86
=========
Number of Units 347,935.46
Outstanding
=========
Net Assets (000's) $3,083
=========
1998
Beginning Unit $10.56
Value
=========
=========
Ending Unit Value $9.25
=========
=========
Number of Units 308,475.29
Outstanding
=========
=========
Net Assets (000's) $2,854
=========
1997
=========
Beginning Unit $10.00
Value
=========
=========
Ending Unit Value $10.56
=========
=========
Number of Units 176,075.27
Outstanding
=========
=========
Net Assets (000's) $1,859
=========
</TABLE>
- -----------------------------------------------------------------------------
Appendix B--Market Value Adjustments
The amount available for a full surrender, partial withdrawal or Transfer equals
the amount requested plus the Market Value Adjustment (MVA). The MVA is
calculated by multiplying the amount requested by the Market Value Adjustment
Factor (MVAF).
The MVA formula
The MVA is determined using the following formula:
MVA = (amount applied) X (Market Value Adjustment Factor) The Market Value
Adjustment Factor is:
{[(1 + i)/(1 + j +.10%)] N/12} - 1
Where:
o 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.
o 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.
o N is the number of complete months remaining until maturity.
The MVA will equal 0 if:
o i and j differ by less than .10%
o N is less than 6
Examples
Following 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
- -------------------------- -------------------------
- ------------------------- $25,000 on November 1,
Deposit 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
= {[1.0615/1.051]65/12} - 1
= .055323
MVA = (amount transferred or surrendered) x MVAF = $10,000 x .0055323 =
$553.23
Surrender Value = (amount transferred or surrendered + MVA)
= ($10,000 + $553.23)
= $10,553.23
Example 3--Flat Interest Rates (i and j are within .10% of each other)
- -------------------------- -------------------------
Deposit $25,000 on November 1,
1996
- -------------------------- -------------------------
- -------------------------- -------------------------
Maturity date December 31, 2005
- -------------------------- -------------------------
- -------------------------- -------------------------
Interest Guarantee Period 10 years
- -------------------------- -------------------------
- -------------------------- -------------------------
i assumed to be 6.15%
- -------------------------- -------------------------
- -------------------------- -------------------------
Surrender date July 1, 2000
- -------------------------- -------------------------
- -------------------------- -------------------------
j 6.24%
- -------------------------- -------------------------
- -------------------------- -------------------------
Amount surrendered $10,000
- -------------------------- -------------------------
- -------------------------- -------------------------
N 65
- -------------------------- -------------------------
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.0634]65/12} - 1
= .99036 - 1
= -.00964
However, [i-j] <.10%, so MVAF = 0
MVA = (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 equals 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
MVA = (amount transferred or surrendered) x MVAF = $10,000 x 0 = $0
Surrender Value = (amount transferred or surrendered + MVA)
= ($10,000 + $0)
= $10,000
- -------------------------------------------------------------------------------
Appendix C--Net Investment Factor
The Net Investment Factor is determined by dividing (a) by (b), and subtracting
(c) from the result where:
(a) is the net result of:
1) the net asset value per share of the Portfolio shares determined as of the
end of the current Valuation Period, plus
2) the per share amount of any dividend (or, if applicable, capital gain
distributions) made by the Portfolio on shares if the "ex-dividend" date
occurs during the current Valuation Period, minus or plus
3) a per unit charge or credit for any taxes incurred by or provided for in
the Sub-Account, which is determined by GWL&A to have resulted from the
investment operations of the Sub-Account, and
(b) is the net asset value per share of the Portfolio shares determined as of
the end of the immediately preceding Valuation Period, and
(c) is an amount representing the Mortality and Expense Risk Charge deducted
from each Sub-Account on a daily basis. Such amount is equal to 0.85%.
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 net asset value per share referred to in paragraphs (a)(1) and (b) above,
reflect the investment performance of the Portfolio as well as the payment of
Portfolio expenses.
- --------
1 The Contract Owner Transaction Expenses apply to each Contract, regardless
of how the Annuity Account Value is allocated. The Annual Expenses do not
apply to the Guarantee Period Fund.
2The Contract Maintenance Charge is currently waived for Contracts with an
Annuity Account Value of at least $50,000. If your Annuity Account Value falls
below $50,000 due to a withdrawal, the Contract Maintenance Charge will be
reinstated until such time as your Annuity Account Value is equal to or greater
than $50,000.
3The Portfolio Annual Expenses and these examples are based on data provided by
the Portfolios. Great-West has no reason to doubt the accuracy or completeness
of that data, but Great-West has not verified the Portfolios' figures. In
preparing the Portfolio Expense table and the Examples above, Great-West has
relied on the figures provided by the Portfolios.
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY-1 SERIES ACCOUNT
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 May 1, 2000, which is
available without charge by contacting the Annuity Administration Department,
P.O. Box 173920 Denver, Colorado 80217-3920 or at 1-800-838-0650.
May 1, 2000
TABLE OF CONTENTS
Page
GENERAL INFORMATION....................................................B-3
GREAT-WEST LIFE & ANNUITY
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT............................B-3
CALCULATION OF ANNUITY PAYMENTS........................................B-3
POSTPONEMENT OF PAYMENTS...............................................B-4
SERVICES...............................................................B-4
- Safekeeping of Series Account Assets.........................B-4
- Experts......................................................B-4
- Principal Underwriter........................................B-5
WITHHOLDING............................................................B-5
CALCULATION OF PERFORMANCE DATA........................................B-6
FINANCIAL STATEMENTS...................................................B-7
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, U.S. Virgin Islands, Guam, the District of Columbia
and all states except New York. The Company is an indirect 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 100% by Great-West Lifeco Inc., a holding company.
Great-West Lifeco Inc. is owned 80.9% by Power Financial Corporation of Canada,
a financial services company. Power Corporation of Canada, a holding and
management company, has voting control of Power Financial Corporation of Canada.
Mr. Paul Desmarais, through a group of private holding companies, which he
controls, has voting control of Power Corporation of Canada.
The assets allocated to the Series Account are the exclusive property of
the Company. Registration of the Series Account under the Investment Company Act
of 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 Sub-Account may not be insulated
from liability associated with another Sub-Account
Best's Insurance Reports has assigned the Company its highest financial
strength and operating performance rating of A++. Duff & Phelps Corporation has
assigned the Company their highest claims paying ability rating of AAA. Standard
& Poor's Corporation has assigned the Company its second highest rating of AA+
for claims paying ability. Moody's Investors Service has assigned the Company an
insurance and financial strength rating of Aa2.
CALCULATION OF ANNUITY PAYMENTS
A. Fixed Annuity Options
The amount of each annuity payment under a fixed annuity option
is fixed and guaranteed by the Company. On the Payment Commencement Date, the
Annuity Account Value held in the Fixed Sub-Account(s), with a Market Value
Adjustment, if applicable, less Premium Tax, if any, is computed and that
portion of the Annuity Account Value which will be applied to the fixed annuity
option selected is determined. The amount of the first monthly payment under the
fixed annuity option selected will be at least as large as would result from
using the annuity tables contained in the Contract to apply to the annuity
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 Sub-Account held by you into
Annuity Units 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 Sub-Account is determined by dividing the amount of the first monthly
payment by the 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 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 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 Sub-Accounts. The
subsequent amount paid is determined by multiplying (a) by (b) where (a) is the
number of Annuity Units to be paid and (b) is the 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 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 Insurance & 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 Great-West Life & Annuity Insurance Company ("GWL&A"). The
assets of the Series Account are kept physically segregated and held separate
and apart from the general account of GWL&A. GWL&A maintains records of all
purchases and redemptions of shares of the underlying funds. Additional
protection for the assets of the Series Account is afforded by blanket fidelity
bonds issued to The Great-West Life Assurance Company in the amount of $50
million (Canadian), 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,
1999 and 1998 and for each of the three years in the period ended December 31,
1999, incorporated by reference into the prospectus and included in this
Statement of Additional Information and the financial statements of Variable
Annuity-1 Series Account for the years ended December 31, 1999 and 1998 included
in this Statement of Additional Information have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their reports appearing
therein and are included in reliance upon such reports 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.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield Quotations for the Money Market Sub-Account
---------------------------------------------------------------------
The yield quotation for the Money Market Sub-Account 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 Sub-Account 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 Sub-Account 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 Sub-Account 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 Sub-Account'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" in 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
Sub-Account and the Fund are excluded from the calculation of yield.
B. Total Return and Yield Quotations for All Sub-Accounts (Other than Money
Market)
- --------------------------------------------------------------------------------
The total return quotations for all Sub-Accounts, 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 Sub-Accounts, 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 Sub-Accounts' mean account size. The calculations
also assume a complete redemption as of the end of the particular period.
The yield quotations for these Sub-Accounts set forth in the Prospectus
are based on the thirty-day period ended on December 31, 1999, 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]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Where: a = net investment income earned during the period by the corresponding portfolio
of the Fund attributable to shares owned by the Sub-Account.
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.
</TABLE>
For purposes of the yield quotations for these Sub-Accounts, 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 Sub-Accounts' mean account size.
FINANCIAL STATEMENTS
The consolidated financial statements of GWL&A incorporated by reference
into 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 variable
interest of Contract Owners under the Contracts are affected solely by the
investment results of the Series Account.
VARIABLE ANNUITY-1 SERIES ACCOUNT
Financial Statements
VARIABLE ANNUITY - 1 SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in underlying funds: Shares Cost Value
------ ----- -----
Alger American Fund American Growth Portfolio $ 47,438,012 $ 54,500,967
846,551
Alger American Fund American Small-Cap Portfolio 2,826,886
66,252 3,653,819
American Century VP Funds VP Capital Appreciation
86,823 826,998 1,288,455
American Century VP Funds VP International 11,209,677 14,258,934
1,140,715
Bankers Trust Funds EAFE Equity Index Fund 1,819,919
142,273 1,934,910
Bankers Trust Funds Small Cap Index Fund 2,191,587
205,366 2,384,304
Baron Funds Capital Asset Fund 4,952,692
321,681 5,717,169
Berger Funds IPT Small Company Growth Fund 20,106,547 27,998,388
1,190,914
Dreyfus Family of Funds VIF Capital Appreciation Fund 2,358,704
61,933 2,469,275
Dreyfus Family of Funds VIF Growth & Income Fund
20,541 504,623 523,373
Federated Services Company American Leaders Fund II 23,812,258 24,373,694
1,170,687
Federated Services Company Fund for U.S. Government Securities II 32,554,126 31,642,758
2,996,473
Federated Services Company Utility Fund II 3,946,370
275,828 3,958,129
INVESCO Variable Investment Funds High Yield Portfolio 27,089,040 26,397,830
2,292,575
INVESCO Variable Investment Funds Industrial Income Portfolio 27,356,788 30,339,113
1,444,032
INVESCO Variable Investment Funds Total Return Portfolio 7,918,033
480,137 7,480,360
Janus Aspen Funds Aggressive Growth Portfolio 8,494,000 15,063,430
252,361
Janus Aspen Funds Flexible Income Portfolio 8,461,381
728,554 8,320,085
Janus Aspen Funds Growth Portfolio 59,816,823 81,114,507
2,410,534
Janus Aspen Funds International Growth Portfolio 11,115,873 13,044,467
337,328
Janus Aspen Funds Worldwide Growth Portfolio 76,007,239 110,628,877
2,316,835
Lexington Management Corp Emerging Markets Fund 1,134,392
151,338 1,938,636
Montgomery Funds Variable Series Growth Fund 6,183,880
361,210 6,642,648
Prudential Series Fund Inc. Equity Portfolio
10,942 347,326 316,433
Safeco RST Equity Portfolio 17,155,416 16,950,321
546,432
Safeco RST Growth Portfolio 1,543,123
78,787 1,772,719
Schwab MarketTrack Growth Portfolio II 8,615,375
601,980 9,529,346
Schwab Money Market Portfolio 113,840,114 113,840,114 113,840,114
Schwab S&P 500 Portfolio 92,408,695 114,298,569
5,376,226
Scudder Funds Capital Growth Fund A 2,131,776
80,665 2,349,768
Scudder Funds Growth & Income Fund A
52,480 567,236 575,181
SteinRoe Funds Special Venture Fund 2,217,654
161,918 3,265,877
Strong Capital Mgmt Inc. Discovery Fund II
64,923 658,965 738,825
Strong Capital Mgmt Inc. VF Schafer Value Fund
89,183 872,714 813,353
Van Eck Investment Trust Worldwide Hard Assets Fund 21936
234,259 240,421
Van Kampen American Capital L.I.T. Morgan Stanley Real Estate Securities 3,283,517
---------------
Portfolio 249,192 3,082,511
---------
Total Investments $632,002,018 743,447,566
</TABLE>
Other assets and liabilities:
Premiums Due and Accrued
<TABLE>
<S> <C>
746,319
Due to First Great-West Life & Annuity Insurance Company
(300,607)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 4) $743,893,278
=============
</TABLE>
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
American
Alger Alger Century VP American Bankers Bankers
American American Capital Century VP Trust EAFE Trust Small Baron
Growth Small-Cap Appreciation International Equity Cap Index Capital
Portfolio Portfolio Index Fund Fund Asset Fund
Investment Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division Division
--------------------------------------------------------------------------------------
INVESTMENT INCOME $ $ $ $ 87,081 $100,769 $ 48,426
3,245,892 735,785 - $
-
EXPENSES - mortality and expense 8,462 8,727 23,511
------ -------- ------------ ------ ------ ------------ ---------
risks: (Note 3) 337,801 38,799 82,946 6,448
-------- ------- ------- -----
NET INVESTMENT INCOME (LOSS) (8,462) 80,633 92,042 24,915
--- ------ ----------- ----- ----------- ----------- ---------
2,908,091 696,986 (82,946)
---------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 4,703,329 683,422 138,330 3,225,176 169,851 24,251 (47,187)
Net change in unrealized
appreciation
(depreciation) on investments 381,250 114,991 192,717 764,477
--- ---- ----------- -- ----------- ---------- ---------
3,879,533 (124,124) 2,699,939
---------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 519,580 284,842 216,968 717,290
--- ----- ----------- -- ----------- ---------- ---------
8,582,862 559,298 5,925,115
---------- -------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $11,490,953 $1,256,284 $511,118 $5,842,169 $365,475 $309,010 $742,205
============ =========== ========== =========== ========= ========= =========
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Federated Federated
Berger VIF Dreyfus American Fund for INVESCO
IPT Small Capital VIF Growth Leaders U.S. Federated VIF High
Company Appreciation & Income Fund II Government Utility Yield
Growth Fund Fund Securities Fund II Portfolio
Fund II
Investment Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division Division
------------------------------------------------------------------------------------
INVESTMENT INCOME $ 22,486 $17,062 $2,669,483 $1,333,324 $ 392,670
$ $1,744,677
-
EXPENSES - mortality and expense 11,101 1,874 43,328
-------- ---------- -------------- ----- ----------
risks: (Note 3) 79,055 224,140 248,378 204,498
------- -------- -------- -------
NET INVESTMENT INCOME (LOSS) 11,385 15,188 349,342
------- ---------- ---------- -- ---------
(79,055) 2,445,343 1,084,946 1,540,179
-------- ---------- ---------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 2,440,028 (7,535) 517 1,843,925 (127,836) (7,804) (1,461,371)
Net change in unrealized
appreciation
(depreciation) on investments 110,571 18,750 (384,504)
--- ---------- ----------- -- -----------
7,015,363 (2,845,838)(1,350,525) 1,697,681
---------- ---------------------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 103,036 19,267 (392,308)
--- ---------- ----------- - -----------
9,455,391 (1,001,913)(1,478,361) 236,310
---------- ---------------------- -------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $114,421 $34,455 $ (393,415) $ (42,966)
= ========= ========== =========== ===========
$9,376,336 $1,443,430 $1,776,489
=========== =========== ==========
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
INVESCO Janus Janus Janus Janus
VIF INVESCO Aspen Aspen Janus Aspen Aspen
Industrial VIF Total Aggressive Flexible Aspen InternationalWorldwide
Income Return Growth Income Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Investment Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division Division
------------------------------------------------------------------------------------
INVESTMENT INCOME $ $207,041 $ 510,769 $324,330 $ $ $
518,266 380,817 5,198 121,343
EXPENSES - mortality and expense 109,480 28,291
----- ----------- ----- ---------
risks: (Note 3) 237,684 114,508 422,861 27,685 584,266
-------- -------- -------- ------- -------
NET INVESTMENT INCOME (LOSS) 296,039
----- ------ ------ --------
280,582 97,561 396,261 (42,044) (22,487) (462,923)
-------- ------- -------- -------- -------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 2,196,382 1,064,606 5,455,243 (28,763) 4,896,811 2,712,325 10,089,158
Net change in unrealized
appreciation
(depreciation) on investments
1,049,479 (1,145,466) 4,373,621 (141,296)14,809,266 1,928,594 30,998,850
--------------------- ---------- -------------------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 4,640,919
-- ----- --- --- -- -----------
3,245,861 (80,860) 9,828,864 (170,059)19,706,077 41,088,008
---------- -------- ---------- -------------------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $3,526,443 $16,701 $ 125,980 $19,664,033 $4,618,432 $40,625,085
=========== ========= = =================================== ===========
$10,225,125
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Montgomery Schwab
Lexington Variable Safeco RST MarketTrack
Emerging Montgomery Series: Safeco Growth Growth
Markets Variable InternationalPrudential RST Equity Portfolio Portfolio
Fund Series: Small-Cap Equity Portfolio II
Growth Fund Portfolio
Fund
Investment Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division Division
--------------------------------------------------------------------------------------
INVESTMENT INCOME $ $ $ $ $ $
8,502 74,452 $ 33,511 899,802 - 665,509
-
EXPENSES - mortality and expense 1,229 6,255
------- ------- ------------------------------ ----------
risks: (Note 3) 18,160 58,210 - 152,578 61,458
------- ------- -- -------- ------
NET INVESTMENT INCOME (LOSS) 32,282 (6,255)
------- -------- ------------------------------ -----------
(9,658) 16,242 - 747,224 604,051
------- ------- -- -------- -------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 799,002 627,588 47 (5,125) 1,789,023 (9,390) 268,428
Net change in unrealized
appreciation
(depreciation) on investments (30,893) 229,596
----- ------ ------------- ------------- ----------
786,926 499,957 (24) (1,131,989) 513,029
-------- -------- ---- ----------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (36,018) 220,206
-- --- -------------------------------- ----------
1,585,928 1,127,545 23 657,034 781,457
---------- ---------- --- -------- -------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (3,736) $213,951 $1,385,508
= = = ============ ========== ==========
$1,576,270 $1,143,787 $ 23 $1,404,258
========== =========== ============= ==========
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Schwab Scudder SteinRoe Strong Strong VF
Money Schwab Scudder Growth & Special Discovery Schafer
Market S&P 500 Capital Income Fund Venture Fund II Value Fund
Portfolio Portfolio Growth Fund A Fund
A
Investment Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division Division
--------------------------------------------------------------------------------------
INVESTMENT INCOME $ $ $
$4,711,697 838,785 $ $ $ 288,532 31,776
- - -
EXPENSES - mortality and expense 2,097
----- ------ -------- -----------
risks: (Note 3) 858,820 810,298 5,157 33,099 11,227 3,824
-------- -------- ------ ------- ------- -----
NET INVESTMENT INCOME (LOSS) (2,097)
-- -------- ------- ------------
3,852,877 28,487 (5,157) (33,099) 277,305 27,952
---------- ------- ------- -------- -------- ------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on (58,886)
investments - 5,596,306 80,725 (6,473) (1,464,596) (228,015)
Net change in unrealized
appreciation
(depreciation) on investments 217,992 7,945 (59,361)
---------------- ------------- ------------ --- -- -----------
- 11,160,045 2,536,469 (133,237)
-- ----------- ---------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 298,717 1,472 (118,247)
---------------- ------------ ------------ --- -- -----------
- 16,756,351 1,071,873 (361,252)
-- ----------- ---------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ $293,560 $ (625) $ $ (90,295)
= === ========== =========== = ==== ===========
$3,852,877 16,784,838 $1,038,774 (83,947)
====================== =========== ========
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen
American Capital
Van Eck L.I.T. - Morgan Total
Worldwide Hard Stanley Real Variable
Assets Fund Estate Securities Annuity - 1
Portfolio
Investment Investment Series Account
Division Division
--------------------------------------------------------------------------------------
INVESTMENT INCOME $ 19,332 $ 152,191 $ 20,189,508
EXPENSES - mortality and expense 7,139 23,711 4,897,105
--------------- -------------- --------------
risks: (Note 3)
NET INVESTMENT INCOME (LOSS) 12,193 128,480 15,292,403
------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on 45,416,515
investments 48,183 16,840
Net change in unrealized
appreciation
(depreciation) on investments 159,698 (293,979) 78,505,503
------------- ------------- --------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 207,881 (277,139) 123,922,018
------------ ------------ -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 220,074 $ (148,659) $139,214,421
=========== ============ ============
See notes to financial statements. (Continued)
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ---------------------------------------------------------------------------------------------------------------------------
Alger American Alger American American Century American Century Bankers Trust
Growth Portfolio Small-Cap VP Capital VP International EAFE Equity
Portfolio Appreciation Index Fund
Investment Division Investment Investment Division Investment Investment
Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1)
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $ $ $
(loss) 2,908,091 1,515,263 696,986 534,220 (8,462) 24,459 (82,946) 249,519 80,633$
-
Net realized gain (loss) 4,703,329 452,276 683,422 (633,481) 138,330 3,225,176 687,898 -
on investments (124,250) 169,851
Net change in unrealized
appreciation (depreciation) ___271,825___114,99_____-
--- ----- ---- -- ------ -- --- -------------------------
in investments 3,879,533 3,017,504 (124,124) 1,014,178 381,250 127,955 2,699,939
-------------------- ------------------ -------- -----------------
Increase (decrease) in net
assets resulting from 28,164 ___365,47_____-
-- ----- --- ----- ------ ---------- ---- ---------------
operations 11,490,953 4,985,043 1,256,284 914,917 511,118 5,842,169 1,209,242
------------------------------ -------- -------- ------------------
FROM UNIT TRANSACTIONS:
Purchase payments 1,791,766 1,283,536 135,079 367,459 7 22,713 161,631 388,646 64,759
-
Redemptions (1,930,065)(420,846) (312,121)(146,722) (6,516) (544,982)(145,924) (3,240) -
(109,227)
Net transfers _1,510,014-
-- -- -- --- -------------- ------- ---- ---------------
18,831,036 13,314,636 (5,643,723) 3,319,767 435 83,020 658,360 3,011,895
--------------------------------------- ---- ------- ----------------
Increase (decrease) in net
assets resulting from unit _1,571,533_____-
-- -- -- --- ----- ---- ------- ---- ---------------
transactions 18,692,737 14,177,326 (5,820,765) 3,540,504 (108,785) 99,217 275,009 3,254,617
--------------------------------------- --------- ------- ----------------
INCREASE (DECREASE) IN NET 30,183,690 19,162,369 4,455,421 402,333 127,381 6,117,178 1,937,008_____-
ASSETS (4,564,481) 4,463,859
NET ASSETS:
Beginning of period
24,487,380 5,325,011 8,216,845 3,761,424 885,624 758,243 8,146,750 3,682,891 - -
--------------------------------------- -------- --------------------------- -- -
End of period $1,937,008
= = = = = = = = ==========
$54,671,070 $24,487,380 $3,652,364 $8,216,845 $1,287,957 $885,624 $14,263,928 $8,146,750 -
=============================================================================== =
(1) The Investment Division commenced operations on May 3, 1999.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------------------------------------------------
Bankers Trust Berger IPT Small Dreyfus VIF Dreyfus VIF
Small-Cap Index Baron Capital Company Growth Capital Growth & Income
Fund Asset Fund Fund Appreciation Fund Fund
Investment Investment Investment Investment Investment
Division Division Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1) (1) (1) (1)
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ $ $
92,042 $ 24,915 $ (79,055) (27,774) 11,385 $ 15,188 $
- - - -
Net realized gain (loss) on 24,251 - (47,187) - 2,440,028 (7,535) - 517 -
investments (592,795)
Net change in unrealized
appreciation (depreciation) 192,717 _ ___- _ ___- __7,015,363___887,877___110,571_ ___- __18,750 _ ___-
-------------------- -------- -----------------------------------------------------
in investments 764,477
-------
Increase (decrease) in net
assets resulting 309,010 __ __- __ __- __9,376,336___267,308___114,421__ __- __34,455 __ __-
-------------------- -------- -----------------------------------------------------
From operations 742,205
-------
FROM UNIT TRANSACTIONS:
Purchase payments 32,174 - - 231,517 285,076 105,558 - 4,181 -
42,286
Redemptions - - (26,714) - (496) -
(8,271) (142,057) (354,145) (74,936)
Net transfers 2,035,607_ ___- _ ___- _13,055,611 __2,320,10_ ___- __495,976_ ___-
------------------- -------- -----------------------------------------------------
5,080,223 3,766,758
---------- ---------
Increase (decrease) in net
assets resulting from unit 2,059,510_ ___- _ ___- _12,932,983 3,976,898 __2,398,947_ ___- __499,661_ ___-
------------------- -------- -----------------------------------------------------
transactions 4,980,452
---------
INCREASE (DECREASE) IN NET 2,368,520 - 5,722,657 - 22,309,319 4,244,206 2,513,368 - 534,116 -
ASSETS
NET ASSETS:
Beginning of period ________-__ __- __ __- ________- __ __- _______- __ __-
----------------------------------- ----- - ----------------------------------
- 5,958,657 _1,714,451
-- --------------------
End of period $ $ $ $
= ========== ========== = = ========== =
$2,368,520 - $5,722,657 - $28,267,976 $5,958,657 $2,513,368 - $534,116 -
=========== == =========== == ============================== == ========= =
(1) The Investment Division commenced
operations on May 3, 1999.
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
Federated Federated Fund for INVESCO VIF High INVESCO VIF
American Leaders U.S. Government Federated Yield Portfolio Industrial Income
Fund II Securities II Utility Fund II Portfolio
Investment Investment Division Investment Investment Division Investment
Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $ $ $ $
(loss) 2,445,343 1,275,149 1,084,946 59,400 349,342 129,830 1,540,179 2,430,121 280,582 1,059,173
Net realized gain (loss) 1,843,925 1,095,645 702,635 (7,804) 107,360 2,196,382
on investments (127,836) (1,461,371)(428,438) 772,045
Net change in unrealized
appreciation (depreciation) (2,845,838) 1,061,906 (1,350,525) 180,590 (384,504) 217,393 1,697,681 (1,804,052) 1,049,052 963,841
------------------------------------------------------------------------------------------------
in investments
Increase (decrease) in
net assets
resulting from operations 1,443,430 3,432,700 (393,415) 942,625 (42,966) 454,583 1,776,489 197,631 3,526,443 2,795,059
- ---------------------------- --------------------------------- ---------------------- ----------------------
FROM UNIT TRANSACTIONS:
Purchase payments 369,617 1,512,001 584,681 928,399 78,981 153,017 530,886 1,461,264 497,978 1,006,911
Redemptions (576,318)
(1,323,824)(1,042,797)(2,040,836((700,215)(425,974)(146,119) (741,035) (1,238,202)(545,102)
Net transfers (4,259,742) 4,709,549__9,070,226 _14,518,744 __3,295,579 __2,105,390__5,121,598 __2,630,329__4,758,483
---------------------------------------------- --------------------------------------------------------
(1,477,377)
Increase (decrease)
in net assets
resulting from unit
transactions (5,213,949) 5,178,753 7,614,071 14,746,928 (1,824,370) 3,302,477 1,895,241 6,006,544 1,890,105
5,220,292
----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS 8,611,453 7,220,656 15,689,553 3,757,060 3,671,730 6,204,175 5,416,548 8,015,351
(3,770,519) (1,867,336)
NET ASSETS:
Beginning of period 28,116,787 19,505,334 24,427,011 5,852,194 2,095,134 22,654,325 16,450,150 24,882,317 16,866,966
--------------------------------------- ---------------------------------------------------------------
8,737,458
End of period $24,346,268 $28,116,787 $31,647,667 $24,427,011
$3,984,858 $5,852,194 $26,326,055 $22,654,325 $30,298,865
$24,882,317
=================================================================== =============================================
(1) The Investment Division commenced operations on
May 3, 1999.
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
INVESCO VIF Total Janus Aspen Janus Aspen Janus Aspen Janus Aspen
Return Portfolio Aggressive Growth Flexible Income Growth International
Portfolio Portfolio Portfolio Growth Portfolio
Investment Investment Investment Investment Investment Division
Division Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1) (1)
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $1,194,672 $ $
(loss) 97,561 590,299 396,261 (46,879) 296,039 $ (42,044) (22,487)
-
Net realized gain (loss) 650,577 5,455,243 746,122 - 4,896,811 973,919 2,712,325 -
on investments 1,064,606 (28,763)
Net change in unrealized
appreciation (depreciation) (1,145,466)(57,794) 4,373,621 1,845,886
(141,296) 14,809,266 5,062,134 1,928,594
------------------------------------------------------ ----------------------------------
in investments
Increase (decrease)
in net assets
resulting from operations 16,701 1,183,082 10,225,125 2,545,129 25,980 19,664,033 7,230,725 4,618,432 -
-------------------------------------------------------- ------- ------------------------- ------
FROM UNIT TRANSACTIONS:
Purchase payments 432,283 923,656 271,439 261,023 113,050 - 1,737,688 1,557,984 35,060 -
Redemptions (302,488) -
(710,138) (1,430,381)(196,273)(45,177) (2,425,577)(581,338) (23,134) -
Net transfers (9,536,115) 2,988,454 (5,178,011) 4,901,198 8,152,717 _29,235,580 8,356,386 8,543,662 _____-
----------------------------------------------------- ------- ---------------------------------- ------
Increase (decrease)
in net assets
resulting from unit
transactions (9,813,970) 3,609,622 (6,336,953) 4,965,948 8,220,590 - 28,547,691 9,333,032 8,555,588 _____-
-------------------------------------------------- ------- ---------------------------------- ------
INCREASE (DECREASE)
IN NET ASSETS (9,797,269) 3,888,172 - 16,563,757 13,174,020 -
4,792,704 7,511,077 8,346,570 48,211,724
NET ASSETS:
Beginning of period 17,274,519 12,481,815 11,169,275 3,658,198 33,241,649 16,677,892
------------------------------------------------------- ------- --------------------------- ------
End of period $7,477,250 $17,274,519 15,057,447 $11,169,275 $8,346,570 $ - $81,453,373 $33,241,649 $3,174,020 $ -
=================================================================== ===================================
(1) The Investment Division commenced operations on May 3,
1999.
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Lexington Emerging Montgomery Montgomery Prudential Equity
Worldwide Growth Markets Fund Variable Series: Variable Series: Portfolio
Portfolio Growth Fund International
Small-Cap Fund
Investment Investment Division Investment Investment Division Investment
Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1)
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $ $ $ $
(loss) (462,923) 1,404,095 (9,658) 155,915 16,242 (4,010) - 7,387 32,282 -
Net realized gain (loss) 10,089,155 5,319,970 799,002 128,427 47 (669,136) -
on investments (1,292,668)627,588 (5,125)
Net change in unrealized
appreciation (depreciation) 30,998,850 2,538,860 786,926 436,953 (114,193) (24) 639,595 (30,893) -
----------------------------------------- ----------- ---------------- --------------
in investments 499,957
-------
Increase (decrease) in net
assets resulting from __9,262,925__1,576,270_(699,800) 10,224 __23 __(22,154) __(3,736)_____-
---- ------------------------------- ---------- --------------- --------------
operations 40,625,085 1,143,787
----------- ---------
FROM UNIT TRANSACTIONS:
Purchase payments 3,374,712 35,968 123,730 722,954 - 84,813 572 -
1,906,431 296,960
Redemptions (1,790,811) (126) (102,208) -
(3,123,656) (539,900)(107,025) (297,599)(487,587) (1,098)
Net transfers _19,622,729 (804,133)(432,184) __(643,413) _ __- __323,764_____-
------------------------------ ----------- ------ - --------------
_14,303,510 (2,615,141) (2,021,840)
------------ ----------- -----------
Increase (decrease) in net
assets resulting from unit _13,086,285 21,206,630 (1,308,065)(415,479) __(408,046) _(126) __323,238___-
---------------------------------------- ----------- -------- --------------
transactions (2,615,780) (2,039,235)
----------- -----------
INCREASE (DECREASE) IN NET 53,711,370 268,205 (103) 319,502 -
ASSETS 30,469,555 (1,115,279)(1,471,993)(397,822) (2,061,389)
NET ASSETS:
Beginning of period _27,867,556 _____-
-- -------------
_58,337,111 1,669,660 2,784,939 8,097,350 8,495,172 103 2,061,492 -
------------ -------------------------------------- -------------- -
End of period $112,0481 $58,337,111 $1,937,865 $1,669,660 $6,625,357 $8,097,350
=================================================================
103 319,502 -
== ====
(1) The Investment Division commenced operations on May
3, 1999.
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
Safeco RST Equity Safeco RST Schwab MarketTrack Schwab Money Market Schwab S&P 500
Portfolio Growth Growth Portfolio II Portfolio Portfolio
Portfolio
Investment Investment Investment Division Investment Division Investment Division
Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1)
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $ $ $ $
(loss) 747,224 716,593 (6,255) - 604,051 129,202 3,852,877 2,615,255 28,487 (116,657)
Net realized gain (loss) 1,789,023 132,269 (9,390) - 268,428 308,226 - 5,596,306 3,270,918
on investments
Net change in unrealized
appreciation (depreciation) (1,131,989) 1,171,030 229,596 - 114,738 ________- _________ 11,160,04 8,167,700
------------------------------------ -------------------------------------------------
in investments __513,029
---------
Increase (decrease) in net
assets resulting from _1,404,258__2,019,892___213,951_____- __2,615,255 _11,321,961
------------------------------------- ----- ----- --------------- -----------
operations 1,385,508 552,166 3,852,877 16,784,838
---------- ------------------ ----------
FROM UNIT TRANSACTIONS:
Purchase payments 24,551 - 205,797 265,743 188,630,192 172,028,684 3,669,430
526,588 844,486 3,599,256
Redemptions - (354,823)
(1,960,507)(350,149) (14,790) (108,929)(34,687,797)(15,631,612)(6,206,767)(2,516,402)
Net transfers __(158,436)_10,375,678 _1,556,658 _____- _1,879,981 2,068,270 28,454,339 _30,015,102
---------------------------------- ------- --------- ---------- ----------------------
(118,520,305)(129,483,500)
Increase (decrease)
in net assets
resulting from unit _(1,592,355)_10,870,015 _1,566,419 _____- _25,917,002 _31,097,956
---------------------------------- ------- --- -------- --- -----------------------
transactions 1,730,955 2,225,084 35,422,090 26,913,572
---------- --------------------- ----------
INCREASE (DECREASE)
IN NET (188,097)12,889,907 1,780,370 - 3,116,463 2,777,250 39,274,967 29,528,827 42,701,840 42,419,917
ASSETS
NET ASSETS:
Beginning of period 17,116,046 4,226,139 ______- _____- 6,415,509 3,638,259 72,691,549 43,162,722 71,643,854
--------------------------------- ------- ----------- ----------------------------------------------
29,223,937
End of period $16,927,949 $17,116,046 $1,780,370 $ $9,531,972 $6,415,509
$111,966,516 $72,691,549 $114,345,694 $71,643,854
=========================================== =========== ==============================================
-
(1) The Investment Division commenced
operations on May 3, 1999.
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
Scudder Capital Scudder Growth & SteinRoe Special Strong Discovery Strong VF Schafer
Growth Income Fund A Venture Fund II Value Fund
Fund A Fund
Investment Investment Investment Investment Division Investment
Division Division Division Division
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1) (1) (1)
FROM OPERATIONS:
Net investment income $ $ $ $ $ $ $ $
(loss) (5,157)$ (2,097)$ (33,099) 820,757 277,305 14,317 27,952 -
- -
Net realized gain (loss) 80,725 - (6,473) - (1,156,854) 60,416 (58,886) -
on investments (1,464,596) (228,015)
Net change in unrealized
appreciation (depreciation) ___217,992_____- __7,945 _____- (1,246,798)(133,237)___116,065(59,361) _____-
----------------- --------------- -- ------------------------------------- ------
in investments 2,536,469
---------
Increase (decrease) in net
assets resulting from ___293,560_____- ___(625)_____- _1,038,774(1,582,895)(83,947) _(90,295) _____-
----------------- --------------- ----------------------------------- --------- ------
operations 190,798
-------
FROM UNIT TRANSACTIONS:
Purchase payments - 15,816 - 5,400 122,675 42,395 -
30,246 66,281 423,896
Redemptions - (439) - (1,020) -
(859) (641,466) (292,366) (175,976) (81,385)
Net transfers _2,036,935_____- _560,191 _____- _(221,738)865,597 _____-
----------------- ---------------- -- -- - ------------------ ------
(4,125,424)(2,087,176)(1,456,074)
Increase (decrease) in net
assets resulting from unit _____- _575,568 _____- (1,626,650)(180,448)_906,972 _____-
-- ------- ---------------- -- - ---------------------------- ------
transactions 2,066,322 (4,700,609)(1,955,646)
---------- ---------------------
INCREASE (DECREASE) IN NET 2,359,882 - 574,943 - 10,350 816,677 -
ASSETS (3,661,835)(3,538,541)(1,710,597)
NET ASSETS:
Beginning of period ________- _____- _______- _____- _6,926,430 10,464,971 _2,438,778______- _____-
----------------- ---------------- ---------------------- ----------------- ------
2,449,128
End of period $2,359,882$ $ $ $3,264,595$ $ $ $
===================== ========= ============ ==== == = =
- 574,943 - 6,926,430 738,531 2,449,128 $816,677 -
== ======== == ========== ========================== =
(1) The Investment Division commenced operations on May
3, 1999.
</TABLE>
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Hard Van Kampen American Capital Total Variable Annuity - 1
Assets Fund L.I.T. - Morgan Stanley Series Account
Real Estate Securities
Portfolio
Investment Division Investment Division Investment Division
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
FROM OPERATIONS:
Net investment income (loss) $ 12,193 $ 172,811 $ 128,480 $ 15,853 $ 15,292,403 $ 14,918,970
Net realized gain (loss) on investments 48,183 (500,578) 16,840 45,416,515 9,521,275
(489,228)
Net change in unrealized appreciation
(depreciation) in investments _159,698 __(20,836) __(293,979) 205,297 __78,505,503 __24,797,654
--------- ---------- ----------- -------------- ------------- ------------
Increase (decrease) in net assets
resulting from operations _220,074 _(348,603) __(148,659) (268,078) _139,214,421 __49,237,899
--------- ---------- ----------- -------------- ------------- ------------
FROM UNIT TRANSACTIONS:
Purchase payments 10,411 103,320 56,972 100,477 202,744,631 191,946,431
Redemptions (28,243) (20,338) (124,009) (109,723) (61,994,671) (26,484,129)
Net transfers (515,113) _(513,068) 444,897 _1,272,829 _ __(138,453) ______97,756
--------- ---------- ------------- ----------- ------------- ------------
Increase (decrease) in net assets
resulting from unit transactions (532,945) _(430,086) __377,860 _1,263,583 140,611,507 165,560,058
--------- ---------- ---------- ----------- --------------- -------------
INCREASE (DECREASE) IN NET ASSETS (312,871) (778,689) 229,201 995,505 279,825,928 214,797,957
NET ASSETS:
Beginning of period 553,195 1,331,884 _2,854,082 1,858,577 464,067,350 _249,269,393
-------- ---------- ----------- ------------ --------------- ------------
End of period $240,324 $ 553,195 $3,083,283 $2,854,082 $ 743,893,278 $464,067,350
========= =========== =========== =========== ============== =============
(1) The Investment Division commenced operations on May 3,
1999.
</TABLE>
See notes to financial statements.
<PAGE>
VARIABLE ANNUITY - 1 SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1. HISTORY OF THE SERIES ACCOUNT
The Variable Annuity - 1 Series Account of Great-West Life & Annuity
Insurance Company (the Series Account) is a separate account of Great-West
Life & Annuity Insurance Company (the Company) established under Colorado
law. The Series Account commenced operations on November 1, 1996. The
Series Account is registered with the Securities and Exchange Commission
as a unit investment trust under the provisions of the Investment Company
Act of 1940, as amended.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the
Series Account, which are in accordance with the accounting principles
generally accepted in the investment company industry.
Security Transactions - Security transactions are recorded on the trade
date. Cost of investments sold is determined on the basis of identified
cost.
Dividend income is accrued as of the ex-dividend date and expenses are
accrued on a daily basis.
Security Valuation - The investments in shares of the underlying funds are
valued at the closing net asset value per share as determined by the
appropriate fund/portfolio at the end of each day.
The cost of investments represents shares of the underlying funds, which
were purchased by the Series Account. Purchases are made at the net asset
value from net purchase payments or through reinvestment of all
distributions from the Fund.
Federal Income Taxes - The Series Account income is automatically applied
to increase contract reserves. Under the existing federal income tax law,
this income is not taxed to the extent that it is applied to increase
reserves under a contract. The Company reserves the right to charge the
Series Account for federal income taxes attributable to the Series Account
if such taxes are imposed in the future.
Net Transfers - Net transfers include transfers between investment
divisions of the Series Account as well as transfers between other
investment options of the Company.
3. CHARGES UNDER THE CONTRACT
Contract Maintenance Charge - On the last day of each contract year before
the retirement date, the Company deducts from each participant account a
maintenance charge of $25.
Deductions for Variable Asset Charge - The Company deducts an amount,
computed daily, from the net asset value of the Series Account
investments, equal to annual rate of .85%. This charge is designed to
compensate the Company for its assumption of certain mortality, death
benefit and expense risks.
Premium Taxes - The Company presently intends to pay any premium tax
levied by any governmental entity as a result of the existence of the
participant accounts or the Series Account.
If the above charges prove insufficient to cover actual costs and assumed
risks, the loss will be borne by the Company; conversely, if the amounts
deducted prove more than sufficient, the excess will be a profit to the
Company.
<PAGE>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
Alger Alger American Berger Dreyfus
American American Century American Bankers Bankers IPT Small VIF
Growth Small-Cap VP Century Trust Trust Baron Company Capital
Portfolio Portfolio Capital VP EAFE Small Cap Capital Growth Appreciation
AppreciatiInternationEquity Index Fund Asset Fund Fund
Index Fund
Fund
-----------------------------------------------------------------------------------------------
Date Commenced 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99 05/03/99 05/03/99 05/01/97 05/03/99
Operations
1999
Beginning Unit $18.74 $12.76 $8.94 $14.54 $10.00 $10.00 $10.00 $13.89 $10.00
Value
========= ======== ========= ========= ========= ========= ========= ========= =========
Ending Unit Value $24.84 $18.15 $14.59 $23.66 $12.00 $11.65 $11.40 $26.37 $10.24
========= ======== ========= ========= ========= ========= ========= ========= =========
Number of Units 2,200,774.98 201,220.60 88,278.89 602,866.81 161,395.99 203,338.02 502,097.27 1,072,037.44 245,395.21
Outstanding
========= ======== ========= ========= ========= ========= ========= ========= =========
Net Assets (000's) $54,671 $3,652 $1,288 $14,264 $1,937 $2,369 $5,723 $28,268 $2,513
========= ======== ========= ========= ========= ========= ========= ========= =========
1998
Beginning Unit $12.76 $11.14 $9.22 $12.35 $13.75
Value
========= ======== ========= ========= =========
Ending Unit Value $18.74 $12.76 $8.94 $14.54 $13.89
========= ======== ========= ========= =========
Number of Units 1,306,503.46 643,786.69 99,034.37 560,116.89 428,982.88
Outstanding
========= ======== ========= ========= =========
Net Assets (000's) $8,217 $886 $8,147 $5,959
$24,487
========= ======== ========= ========= =========
========= ======== ========= ========= =========
1997
Beginning Unit $10.24 $10.09 $9.61 $10.49 $10.00
Value
========= ======== ========= ========= =========
========= ======== ========= ========= =========
Ending Unit Value $12.76 $11.14 $9.22 $12.35 $13.75
========= ======== ========= ========= =========
========= ======== ========= ========= =========
Number of Units 417,162.09 337,576.93 82,255.58 298,156.62 124,653.31
Outstanding
========= ======== ========= ========= =========
Net Assets (000's) $5,325 $3,761 $758 $3,683 $1,714
========= ======== ========= ========= =========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00
Value
========= ======== ========= =========
========= ========
Ending Unit Value $10.24 $10.09 $9.61 $10.49
========= ======== ========= =========
========= ======== ========= =========
Number of Units 1,166.64 4,080.46 30,139.13 13,399.99
Outstanding
========= ======== ========= =========
Net Assets (000's) $12 $41 $290 $141
========= ======== ========= =========
<PAGE>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
Federated INVESCO Janus
Dreyfus Federated Fund for INVESCO VIF INVESCO Aspen Janus
VIF American U.S. Federated VIF High IndustrialVIF Total AggressiveAspen
Growth & Leaders GovernmentUtility Yield Income Return Growth Flexible
Income Fund II Securities Fund II Portfolio Portfolio Portfolio Portfolio Income
Fund II Fund
-----------------------------------------------------------------------------------------------
Date Commenced 05/03/99 11/01/96 11/01/96 05/01/97 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99
Operations
1999
Beginning Unit $10.00 $15.95 $11.43 $14.07 $12.13 $13.61 $14.71 $10.00
Value $15.18
======== ========= ========= ======== ========= ======== ========= ======== =========
Ending Unit Value $10.73 $16.87 $11.27 $14.18 $13.14 $17.28 $13.03 $32.87 $ 9.95
======== ========= ========= ======== ========= ======== ========= ======== =========
Number of Unit 49,768.32 1,443,381.49 2,809,026.83 280,956.86 2,003,862.84
1,753,290.18 573,788.59 458,029.90 838,444.84
Outstanding
======== ========= ========= ======== ========= ======== ========= ======== =========
Net Assets (000's) $534 $24,346 $31,648 $3,985 $26,326 $30,299 $7,477 $15,057 $8,347
======== ========= ========= ======== ========= ======== ========= ======== =========
1998
Beginning Unit $13.67 $10.71 $12.45 $12.09 $13.27 $12.52 $11.05
Value
========= ========= ======== ========= ======== ========= ========
Ending Unit Value $15.95 $11.43 $14.07 $12.13 $15.18 $13.61 $14.71
========= ========= ======== ========= ======== ========= ========
Number of Units 1,763,028.09 2,136,709.11 416,024.23 1,867,861.60
1,639,584.27 1,269,709.44 759,487.48
Outstanding
========= ========= ======== ========= ======== ========= ========
Net Assets (000's) $28,117 $24,427 $5,852 $22,654 $24,882 $17,275 $11,169
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
1997
Beginning Unit $10.42 $9.97 $10.00 $10.39 $10.44 $10.27 $9.89
Value
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
Ending Unit Value $13.67 $10.71 $12.45 $12.09 $13.27 $12.52 $11.05
========= ========= ======== ========= ======== ========= ========
========= ========= ======== ========= ======== ========= ========
Number of Units 1,426,437.13 815,966.27 168,289.28 1,360,680.67 1,271,028.35
996,949.40 331,141.90
Outstanding
========= ========= ======== ========= ======== ========= ========
Net Assets (000's) $19,505 $8,737 $2,095 $16,450 $16,867 $12,482 $
3,658
========= ========= ======== ========= ======== ========= ========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Value
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Ending Unit Value $10.42 $9.97 $10.39 $10.44 $10.27 $ 9.89
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Number of Units 65,888.88 9,330.15 52,043.52 68,873.87 3,927.31 6,698.73
Outstanding
========= ========= ======== ======== ========= ========
========= ========= ======== ======== ========= ========
Net Assets (000's) $686 $93 $541 $719 $40 $66
========= ========= ======== ======== ========= ========
<PAGE>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
Montgomery
Janus Janus Janus Lexington Montgomery Variable Safeco
Aspen Aspen Aspen Emerging Variable Series: Prudential Safeco RST
Growth InternationWorldwide Markets Series: InternatioEquity RST Growth
Portfolio Growth Growth Fund Growth Small-Cap Portfolio Equity Portfolio
Fund Portfolo Fund Fund Portfolio
----------------------------------------------------------------------------------------------
Date Commenced 11/01/96 05/03/99 11/01/96 11/01/96 11/01/96 11/01/96 05/03/99 05/01/97 05/03/99
Operations
1999
Beginning Unit $16.79 $10.00 $16.13 $6.40 $13.47 $9.56 $10.00 $14.65 $10.00
Value
========= ========= ========= ========= ========= ========= ========= ========= =========
Ending Unit Value $23.98 $17.04 $26.30 $14.48 $16.13 $9.87 $9.85 $15.88 $11.44
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of Units 3,396,880.63 772,937.37 4,259,932.25 133,859.68 410,660.04 0.00 32,427.58 1,065,918.62 155,642.93
Outstanding
========= ========= ========= ========= ========= ========= ========= ========= =========
Net Assets (000's) $81,453 $13,174 $112,048 $1,938 $6,625 $320 $16,928 $1,780
-
========= ========= ========= ========= ========= ========= ========= ========= =========
1998
Beginning Unit $12.49 $12.62 $9.00 $13.20 $9.89 $11.83
Value
========= ========= ========= ========= ========= =========
Ending Unit Value $16.79 $16.13 $6.40 $13.47 $9.56 $14.65
========= ========= ========= ========= ========= =========
Number of Units 1,979,274.19 3,616,796.56 260,704.11 601,168.28 8.53 1,168,093.71
Outstanding
========= ========= ========= ========= ========= =========
Net Assets (000's) $33,242 $58,337 $1,670 $8,097 $0 $17,116
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
1997
Beginning Unit $10.26 $10.42 $10.26 $10.35 $10.51 $10.00
Value
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
Ending Unit Value $12.49 $12.62 $9.00 $13.20 $9.89 $11.83
========= ========= ========= ========= ========= =========
========= ========= ========= ========= ========= =========
Number of Units 1,335,813.25 2,208,663.79 309,521.91 643,624.38 208,496.59 357,176.26
Outstanding
========= ========= ========= ========= ========= =========
Net Assets (000's) $16,678 $27,868 $2,785 $8,495 $2,061 $4,226
========= ========= ========= ========= ========= =========
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00
Value
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Ending Unit Value $10.26 $10.42 $10.26 $10.35 $10.51
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Number of Units 93,598.79 51,982.38 18,281.42 11,226.77 3,230.28
Outstanding
========= ========= ======== ========= =========
========= ========= ======== ========= =========
Net Assets (000's) $960 $541 $188 $116 $34
========= ========= ======== ========= =========
<PAGE>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
Schwab Van Eck
MarketTraSchwab Scudder Strong Strong Worldwide
Growth Money Schwab Scudder Growth & SteinRoe Discovery VF Hard
PortfolioMarket S&P 500 Capital Income Special Fund II Schafer Assets
II Portfolio Portfolio Growth Fund A Venture Value Fund
Fund A Fund Fund
---------------------------------------------------------------------------------------------
Date Commenced 11/01/96 11/01/96 11/01/96 05/03/99 05/03/99 11/01/96 11/01/96 05/03/99 11/01/96
Operations
1999
Beginning Unit $14.34 $10.93 $17.54 $10.00 $10.00 $ $12.26 $10.00 $
Value 9.00 6.88
======= ========= ========= ======== ======= ======= ======== ====== =======
Ending Unit Value $17.01 $11.35 $20.95 $12.64 $ $13.22 $12.78 $8.64 $
9.36 8.25
======= ========= ========= ======== ======= ======= ======== ====== =======
Number of Units 560,532.64 9,861,519.25 5,457,967.10 186,640.12 61,409.25 246,948.62 57,792.53 94,499.34 29,113.72
Outstanding
======= ========= ========= ======== ======= ======= ======== ====== =======
Net Assets (000's) $9,532 $111,967 $114,346 $2,360 $575 $3,265 $739 $817 $240
======= ========= ========= ======== ======= ======= ======== ====== =======
1998
Beginning Unit $12.79 $10.49 $13.81 $10.98 $11.53 $10.04
Value
======= ========= ========= ======= ======== =======
Ending Unit Value $14.34 $10.93 $17.54 $ $12.26 $
9.00 6.88
======= ========= ========= ======= ======== =======
Number of Units 447,514.11 6,649,980.31 4,084,834.46 769,185.90 199,701.97 80,398.85
Outstanding
======= ========= ========= ======= ======== =======
Net Assets (000's) $6,416 $72,692 $71,644 $6,926 $2,449 $553
======= ========= ========= ======= ======== =======
======= ========= =======
1997
Beginning Unit $10.35 $10.07 $10.52 $10.27 $10.44 $10.31
Value
======= ========= =======
======= ========= ========= ======= ======== =======
Ending Unit Value $12.79 $10.49 $13.81 $10.98 $11.53 $10.04
======= ========= =======
======= ========= ========= ======= ======== =======
Number of Units 284,530.36 4,114,002.58 2,115,859.53 952,879.99 211,488.12 132,622.35
Outstanding
========
======= ========= ========= ======= =======
Net Assets (000's) $3,638 $43,163 $29,224 $10,465 $2,439 $1,332
======= ========= ========= ======= ======== =======
1996
Beginning Unit $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Value
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Ending Unit Value $10.35 $10.07 $10.52 $10.27 $10.44 $10.31
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Number of Units 16,525.39 297,045.95 62,674.08 70,715.11 24,613.07 2,220.85
Outstanding
======= ========= ========= ======= ======== =======
======= ========= ========= ======= ======== =======
Net Assets (000's) $171 $2,991 $ 659 $727 $257 $23
======= ========= ========= ======= ======== =======
</TABLE>
4. SELECTED DATA
The following is a summary of selected data for a unit of
capital and net assets of the Series Account.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Van Kampen American
Capital L.I.T. -
Morgan Stanley Real
Estate Securities
Portfolio
-----------------------
Date Commenced Operations 09/17/97
1999
Beginning Unit Value $9.25
=============
Ending Unit Value $8.86
=============
Number of Units Outstanding 347,935.46
=============
Net Assets (000's) $3,083
=============
1998
Beginning Unit Value $10.56
=============
=============
Ending Unit Value $9.25
=============
=============
Number of Units Outstanding 308,475.29
=============
=============
Net Assets (000's) $2,854
=============
1997
=============
Beginning Unit Value $10.00
=============
=============
Ending Unit Value $10.56
=============
=============
Number of Units Outstanding 176,075.27
=============
=============
Net Assets (000's) $1,859
=============
</TABLE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Financial Statements
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(An indirect wholly-owned subsidiary of
The Great-West Life Assurance Company)
Consolidated Financial Statements for the Years Ended
December 31, 1999, 1998, and 1997 and
Independent Auditors' Report
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 (an indirect wholly-owned subsidiary of
The Great-West Life Assurance Company) and subsidiaries as of December 31,
1999 and 1998, 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, 1999. 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, 1999 and 1998, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1999, the Company adopted Statement of Position No. 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" and, accordingly, changed its method of accounting for
software development costs.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 31, 2000
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998
---------------------- -----------------------
ASSETS
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value
$2,238,581 and $2,298,936) $ 2,260,581 $ 2,199,818
Available-for-sale, at fair value (amortized cost
$6,953,383 and $6,752,532) 6,727,922 6,936,726
Common stock, at fair value (cost $43,978 and 69,240 48,640
$41,932)
Mortgage loans on real estate, net 974,645 1,133,468
Real estate, net 103,731 73,042
Policy loans 2,681,132 2,858,673
Short-term investments, available-for-sale (cost
approximates fair value) 240,804 420,169
---------------------- -----------------------
Total Investments 13,058,055 13,670,536
Cash 257,840 176,119
Reinsurance receivable
Related party 5,015 5,006
Other 168,307 187,952
Deferred policy acquisition costs 282,295 238,901
Investment income due and accrued 137,810 157,587
Other assets 308,419 311,078
Premiums in course of collection 142,199 84,940
Deferred income taxes 253,323 191,483
Separate account assets 12,780,016 10,099,543
---------------------- -----------------------
TOTAL ASSETS $ 27,393,279 $ 25,123,145
====================== =======================
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
1999 1998
----------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
POLICY BENEFIT LIABILITIES:
Policy reserves
Related party $ 555,783 $ 555,300
Other 11,181,900 11,347,548
Policy and contract claims 391,968 428,798
Policyholders' funds 185,623 181,779
Provision for policyholders' dividends 70,726 69,530
GENERAL LIABILITIES:
Due to Parent Corporation 35,979 52,877
Due to GWL&A Financial 175,035
Repurchase agreements 80,579 244,258
Commercial paper 39,731
Other liabilities 638,469 761,505
Undistributed earnings on participating business 130,638 143,717
Separate account liabilities 12,780,016 10,099,543
----------------- -----------------
Total Liabilities 26,226,716 23,924,586
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value, 50,000,000 shares authorized,
0 shares 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 700,316 699,556
Accumulated other comprehensive income (loss) (84,861) 61,560
Retained earnings 544,076 430,411
----------------- -----------------
Total Stockholder's Equity 1,166,563 1,198,559
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 27,393,279 $ 25,123,145
================= =================
</TABLE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
REVENUES:
Premiums
Related party (including premiums
recaptured totaling $0,
$0, and $155,798) $ $ 46,191 $ 155,798
Other (net of premiums ceded totaling
$85,803, $86,511 and $61,194) 1,163,183 948,672 677,381
Fee income 635,147 516,052 420,730
Net investment income
Related party (10,923) (9,416) (8,957)
Other 886,869 906,776 890,630
Net realized gains on investments 1,084 38,173 9,800
---------------- ---------------- ----------------
2,675,360 2,446,448 2,145,382
---------------- ---------------- ----------------
BENEFITS AND EXPENSES:
Life and other policy benefits (net of
reinsurance recoveries totaling $80,681,
$81,205, and $44,871) 970,250 768,474 543,903
Increase in reserves
Related party 46,191 155,798
Other 33,631 78,851 90,013
Interest paid or credited to contractholders 494,081 491,616 527,784
Provision for policyholders' share of earnings
on participating business 13,716 5,908 3,753
Dividends to policyholders 70,161 71,429 63,799
---------------- ---------------- ----------------
1,581,839 1,462,469 1,385,050
Commissions 173,405 144,246 102,150
Operating expenses (income):
Related party (768) (5,094) (6,292)
Other 593,575 518,228 431,714
Premium taxes 38,329 30,848 24,153
---------------- ---------------- ----------------
2,386,380 2,150,697 1,936,775
INCOME BEFORE INCOME TAXES 288,980 295,751 208,607
---------------- ---------------- ----------------
PROVISION FOR INCOME TAXES:
Current 72,039 81,770 61,644
Deferred 11,223 17,066 (11,797)
---------------- ---------------- ----------------
83,262 98,836 49,847
---------------- ---------------- ----------------
NET INCOME $ 205,718 $ 196,915 $ 158,760
================ ================ ================
</TABLE>
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Comprehensive Retained
------------------------ --------------------
Shares Amount Shares Amount Capital Income (Loss) Earnings Total
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, JANUARY 1, 1997 2,000,800 121,800 7,032,000 7,032 $ 664,265 14,951 226,166 $ 1,034,214
Net income 158,760 158,760
Other comprehensive income 37,856 37,856
------------
Total comprehensive income 196,616
------------
Capital contributions 26,483 26,483
Dividends (71,394) (71,394)
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, DECEMBER 31, 1997 2,000,800 121,800 7,032,000 7,032 690,748 52,807 313,532 1,185,919
Net income 196,915 196,915
Other comprehensive income 8,753 8,753
------------
Total comprehensive income 205,668
------------
Capital contributions 8,808 8,808
Dividends (80,036) (80,036)
Purchase of preferred shares (2,000,800) (121,800) (121,800)
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, DECEMBER 31, 1998 0 0 7,032,000 7,032 $ 699,556 61,560 430,411 $ 1,198,559
Net income 205,718 205,718
Other comprehensive loss (146,421) (146,421)
------------
Total comprehensive loss 59,297
------------
Capital contributions
Dividends (92,053) (92,053)
Income tax benefit on stock
Compensation 760 760
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, DECEMBER 31, 1999 0 0 7,032,000 7,032 $ 700,316 (84,861) 544,076 $ 1,166,563
======================== ==================== ========= ======================== ============
</TABLE>
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
OPERATING ACTIVITIES:
Net income $ 205,718 $ 196,915 $ 158,760
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain allocated to participating
policyholders 13,716 5,908 3,753
Amortization of investments (22,514) (15,068) 409
Net realized gains on investments (1,084) (38,173) (9,800)
Depreciation and amortization 47,339 55,550 46,929
Deferred income taxes 11,223 17,066 (11,824)
Changes in assets and liabilities:
Policy benefit liabilities 650,959 938,444 498,114
Reinsurance receivable 19,636 (43,643) 112,594
Accrued interest and other receivables (37,482) 28,467 30,299
Other, net (146,150) (184,536) 64,465
---------------- ---------------- ----------------
Net cash provided by operating activities 741,361 960,930 893,699
---------------- ---------------- ----------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to maturity
Sales 9,920
Maturities and redemptions 520,511 471,432 359,021
Available-for-sale
Sales 3,176,802 6,169,678 3,174,246
Maturities and redemptions 822,606 1,268,323 771,737
Mortgage loans 165,104 211,026 248,170
Real estate 5,098 16,456 36,624
Common stock 18,116 3,814 17,211
Purchases of investments:
Fixed maturities
Held-to-maturity (563,285) (584,092) (439,269)
Available-for-sale (4,019,465) (7,410,485) (4,314,722)
Mortgage loans (2,720) (100,240) (2,532)
Real estate (41,482) (4,581) (64,205)
Common stock (19,698) (10,020) (29,608)
---------------- ---------------- ----------------
Net cash provided by (used in)
investing activities $ 61,587 $ 41,231 $ (243,327)
================ ================ ================
</TABLE>
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
==================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
FINANCING ACTIVITIES:
Contract withdrawals, net of deposits $ (583,900) $ (507,237) $ (577,538)
Due to Parent Corporation (16,898) (73,779) (19,522)
Due to GWL&A Financial 175,035
Dividends paid (92,053) (80,036) (71,394)
Net commercial paper repayments (39,731) (14,327) (30,624)
Net repurchase agreements (repayments)
borrowings (163,680) (81,280) 38,802
Capital contributions 8,808 11,000
Purchase of preferred shares (121,800)
Acquisition of subsidiary (82,669)
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net cash used in financing activities (721,227) (952,320) (649,276)
---------------- ---------------- ----------------
NET INCREASE IN CASH 81,721 49,841 1,096
CASH, BEGINNING OF YEAR 176,119 126,278 125,182
---------------- ---------------- ----------------
CASH, END OF YEAR $ 257,840 $ 176,119 $ 126,278
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 76,150 $ 111,493 $ 86,829
Interest 14,125 13,849 15,124
</TABLE>
See notes to consolidated financial statements. (Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Amounts in Thousands, except Share Amounts)
===============================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company (the Company) is
a wholly-owned subsidiary of GWL&A Financial Inc., a holding company formed
in 1998 (GWL&A Financial) and an indirect wholly-owned subsidiary of The
Great-West Life Assurance Company (the Parent Corporation). The Company is
an insurance company domiciled in the State of Colorado. The Company offers
a wide range of life insurance, health insurance, and retirement and
investment products to individuals, businesses, and other private and
public organizations throughout the United States.
Basis of Presentation - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The consolidated financial
statements include the accounts of the Company and its subsidiaries. All
material inter-company transactions and balances have been eliminated in
consolidation.
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
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 accumulated
other comprehensive income (loss) in stockholder's equity. The net
unrealized gains and losses on derivative financial instruments used to
hedge available-for-sale securities are also included in other
comprehensive income (loss).
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 estimated life of
the related bonds. Such amortization is included in net investment income.
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 net investment 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 credit losses on its impaired
loans. Management's judgement is based on past loss experience, current and
projected economic conditions, and extensive situational analysis of each
individual loan. The measurement of impaired loans is based on the fair
value of the collateral.
3. Real estate is carried at cost. The carrying value of real estate is
subject to periodic evaluation of recoverability.
4. Investments in common stock are carried at fair value.
5. Policy loans are carried at their unpaid balances.
6. 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.
7. Gains and losses realized on disposal of investments are determined on a
specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Internal Use Software - Effective January 1, 1999, the Company adopted
Statement of Position (SOP) No. 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 provides
guidance on accounting for costs associated with computer software
developed or obtained for internal use. As a result of the adoption of SOP
98-1, the Company capitalized $18,373 in internal use software development
costs for the year ended December 31, 1999.
Deferred Policy Acquisition Costs - Policy acquisition costs, which
primarily consist of sales commissions related to the production of new and
renewal business, have been deferred to the extent recoverable. Other costs
capitalized include expenses associated with the Company's group sales
representatives. These costs are variable in nature and are dependent upon
sales volume. 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
totaled $43,512, $51,724, and $44,298 in 1999, 1998, and 1997,
respectively.
Separate Accounts - Separate account assets and related liabilities are
carried at fair value. The Company's separate accounts invest in shares of
Maxim Series Fund, Inc. and Orchard Series Fund, Inc., both diversified,
open-end management investment companies which are affiliates of the
Company, shares of other external mutual funds, or government or corporate
bonds. Investment income and realized capital gains and losses of the
separate accounts accrue directly to the contractholders and, therefore,
are not included in the Company's statements of income. Revenues to the
Company from the separate accounts consist of contract maintenance fees,
administrative fees, and mortality and expense risk charges.
Life Insurance and Annuity Reserves - Life insurance and annuity policy
reserves with life contingencies of $7,169,885 and $6,866,478 at December
31, 1999 and 1998, 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 $4,468,685 and $4,908,964
at December 31, 1999 and 1998, respectively, are established at the
contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance companies are
carried as a 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 life and health 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 $4,297,823 and $4,108,314 at December 31, 1999 and 1998, respectively.
Participating business approximates 31.0%, 32.7%, and 50.5% of the
Company's ordinary life insurance in force and 94.0%, 71.9% and 91.1% of
ordinary life insurance premium income for the years ended December 31,
1999, 1998 and 1997, respectively.
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. Earnings derived from the operation of the PFA net
of a management fee paid to the Company accrue solely for the benefit of
the participating policyholders.
Recognition of Premium and Fee Income and Benefits and Expenses - Life
insurance premiums are recognized when due. 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. Fee income is derived primarily from contracts for claim
processing or other administrative services and from assets under
management. Fees from contracts for claim processing or other
administrative services are recorded as the services are provided. Fees
from assets under management, which consist of contract maintenance fees,
administration fees and mortality and expense risk charges, are recognized
when due. Benefits and expenses on policies with life contingencies impact
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 6.2%, 6.3%,
and 6.6% in 1999, 1998, and 1997.
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. Although realization is not assured, management believes it is
more likely than not that the deferred tax asset, net of a valuation
allowance, will be realized.
Repurchase Agreements and Securities Lending - 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.
The Company requires collateral in an amount greater than or equal to 102%
of the borrowing for all securities lending transactions.
Derivatives - The Company makes limited use of derivative financial
instruments to manage interest rate, market, and foreign exchange risk.
Such hedging activity consists primarily of interest rate swap agreements,
interest rate floors and caps, foreign currency exchange contracts, options
and equity swaps. The differential paid or received under the terms of
these contracts is 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.
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 amount. Interest rate floors and caps are interest rate
protection instruments that require the payment by a counter-party to the
Company of an interest rate differential. The differential represents the
difference between current interest rates and an agreed-upon rate, the
strike rate, applied to a notional principal amount. Foreign currency
exchange contracts are used to hedge the foreign exchange rate risk
associated with bonds denominated in other than U.S. dollars. Written call
options are stock conversion protection agreements that require the
counter-party to automatically call the bond for cash when the issuer
elects to convert the bond to common stock. Equity swap transactions
generally involve the exchange of variable market performance of a basket
of securities for a fixed interest rate.
Although derivative financial instruments taken alone may expose the
Company to varying degrees of market and credit risk when used solely for
hedging purposes, these instruments typically reduce overall market and
interest rate risk. The Company controls the credit risk of its financial
contracts through credit approvals, limits, and monitoring procedures. As
the Company generally enters into transactions only with high quality
institutions, no losses associated with non-performance on derivative
financial instruments have occurred or are expected to occur.
The Financial Accounting Standards Board has issued Statement No. 133,
"Accounting for Derivative Instruments and for Hedging Activities", which,
as amended, is required to be adopted in years beginning after June 15,
2000. This Statement provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
Although management has not completed its analysis of the impact of this
Statement, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial
position of the Company because of the Company's minimal use of
derivatives.
Stock Options - The Company applies the intrinsic value measurement
approach under APB Opinion No. 25 to stock-based compensation awards to
employees.
2. ACQUISITION
On July 8, 1998, the Company paid $82,669 in cash to acquire all of the
outstanding shares of Alta Health & Life Insurance Company (Alta), formerly
known as Anthem Health & Life Insurance Company. The purchase price was
based on Alta's adjusted book value, and was subject to further minor
adjustments. The results of Alta's operations, which had an insignificant
effect on net income in 1998, have been combined with those of the Company
since the date of acquisition.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price was allocated to the net assets
acquired based on their estimated fair values. The fair value of tangible
assets acquired and liabilities assumed was $379,934 and $317,440,
respectively. The goodwill representing the purchase price in excess of
fair value of net assets acquired is included in other assets and is being
amortized over 30 years on a straight-line basis.
3. RELATED-PARTY TRANSACTIONS
On December 31, 1998, the Company and the Parent Corporation entered into
an Indemnity Reinsurance Agreement pursuant to which the Company reinsured
by coinsurance certain Parent Corporation individual non-participating life
insurance policies. The Company recorded $859 in premium income and
increase in reserves, associated with certain policies, as a result of this
transaction. Of the $137,638 in reserves that was recorded as a result of
this transaction, $136,779 was recorded under SFAS No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments" ("SFAS No.
97"), accounting principles. The Company recorded, at the Parent
Corporation's carrying amount, which approximates estimated fair value, the
following at December 31, 1998 as a result of this transaction:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
Cash $ 24,600 Policy reserves $ 137,638
Deferred income taxes 3,816
Policy loans 82,649
Due from Parent Corporation 19,753
Other 6,820
------------ ------------
$ 137,638 $ 137,638
============ ============
</TABLE>
===========================================================================
In connection with this transaction, the Parent Corporation made a capital
contribution of $5,608 to the Company.
On September 30, 1998, the Company and the Parent Corporation entered into
an Indemnity Reinsurance Agreement pursuant to which the Company reinsured
by coinsurance certain Parent Corporation individual non-participating life
insurance policies. The Company recorded $45,332 in premium income and
increase in reserves as a result of this transaction. Of the $428,152 in
reserves that was recorded as a result of this transaction, $382,820 was
recorded under SFAS No. 97 accounting principles. The Company recorded, at
the Parent Corporation's carrying amount, which approximates estimated fair
value, the following at September 30, 1998 as a result of this transaction:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
===========================================
===========================================
Bonds $ 147,475 Policy reserves $ 428,152
===========================================
Mortgages 82,637 Due to Parent Corporation 20,820
===========================================
Cash 134,900
===========================================
Deferred policy acquisition costs 9,724
===========================================
Deferred income taxes 15,762
===========================================
Policy loans 56,209
===========================================
Other 2,265
===========================================
------------ ------------
$ 448,972 $ 448,972
=========================================== ============ ============
</TABLE>
In connection with this transaction, the Parent Corporation made a capital
contribution of $3,200 to the Company.
On September 30, 1998, the Company purchased furniture, fixtures and
equipment from the Parent Corporation for $25,184. In February 1997, the
Company purchased its corporate headquarters properties from the Parent
Corporation for $63,700.
On June 30, 1997, the Company recaptured all remaining pieces of an
individual participating insurance block of business previously reinsured
to the Parent Corporation on December 31, 1992. The Company recorded
$155,798 in premium income and increase in reserves as a result of this
transaction. The Company recorded, at the Parent Corporation's carrying
amount, which approximates estimated fair value, the following at June 30,
1997 as a result of this transaction:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
====================================
====================================
Cash $ 160,000 Policy reserves $ 155,798
====================================
Bonds 17,975 Due to Parent Corporation 20,373
====================================
Other 60 Deferred income taxes 2,719
====================================
Undistributed earnings on
====================================
participating business (855)
====================================
---------------- ----------------
$ 178,035 $ 178,035
==================================== ================ ================
</TABLE>
In connection with this transaction, the Parent Corporation made a capital
contribution of $11,000 to the Company.
Effective January 1, 1997, all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. All related employee benefit plan assets and liabilities were also
transferred to the Company (see Note 9). The transfer did not have a
material effect on the Company's operating expenses as the actual costs
associated with the employees and the benefit plans were charged previously
to the Company under administrative service agreements between the Company
and the Parent Corporation.
The Company performs administrative services for the U.S. operations of the
Parent Corporation. The following represents revenue from the Parent
Corporation for services provided pursuant to these service agreements. The
amounts recorded are based upon management's best estimate of actual costs
incurred and resources expended based upon number of policies and/or
certificates in force.
<TABLE>
<S> <C>
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Investment management revenue $ 130 $ 475 $ 801
Administrative and underwriting revenue 768 5,094 6,292
</TABLE>
At December 31, 1999 and 1998, due to Parent Corporation includes $10,641
and $17,930 due on demand and $25,338 and $34,947 of notes payable which
bear interest and mature on October 1, 2006. 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 amounts due on demand to the Parent
Corporation bear interest at the public bond rate (6.7% and 6.1% at
December 31, 1999 and 1998, respectively) while the note payable bears
interest at 5.4%.
On May 4, 1999, the Company issued a $175,000 subordinated note to GWL&A
Financial, the proceeds of which were used for general corporate purposes.
The subordinated note bears interest at 7.25% and is due June 30, 2048.
Payments of principal and interest under this subordinated note shall be
made only with prior written approval of the Commissioner of Insurance of
the State of Colorado. Payments of principal and interest on this
subordinated note are payable only out of surplus funds of the Company and
only at such time as the financial condition of the Company is such that at
the time of payment of principal or interest, its surplus after the making
of any such payment would exceed the greater of $1,500 or 1.25 times the
company action level amount as required by the most recent risk based
capital calculations.
Interest expense attributable to these related party obligations was
$11,053, $9,891, and $9,758 for the years ended December 31, 1999, 1998 and
1997, respectively.
4. 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. 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, 1999 and 1998, the
reinsurance receivable had a carrying value of $173,322 and $192,958,
respectively.
The following schedule details life insurance in force and life and
accident/health premiums:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ceded Assumed Percentage
Primarily to Primarily of Amount
Gross the Parent from Other Net Assumed
Amount Corporation Companies Amount to Net
--------------- ---------------- ---------------- --------------- -------------
December 31, 1999:
Life insurance in force:
Individual $ 35,362,934 $ 5,195,961 $ 8,467,877 $ 38,634,850 21.9%
Group 80,717,198 2,212,741 82,929,939 2.7%
--------------- ---------------- ---------------- ----------------
Total $ 116,080,132 $ 5,195,961 $ 10,680,618 $ 121,564,789
=============== ================ ================ ================
Premium Income:
Life insurance $ 306,101 $ 27,399 $ 46,715 $ 325,417 14.4%
Accident/health 801,755 58,247 79,753 823,261 9.7%
--------------- ---------------- ---------------- ----------------
Total $ 1,107,856 $ 85,646 $ 126,468 $ 1,148,678
=============== ================ ================ ================
December 31, 1998:
Life insurance in force:
Individual $ 34,017,379 $ 4,785,079 $ 8,948,442 $ 38,180,742 23.4%
Group 81,907,539 2,213,372 84,120,911 2.6%
--------------- ---------------- ---------------- ----------------
Total $ 115,924,918 $ 4,785,079 $ 11,161,814 $ 122,301,653
=============== ================ ================ ================
Premium Income:
Life insurance $ 352,710 $ 24,720 $ 65,452 $ 393,442 16.6%
Accident/health 571,992 61,689 74,284 584,587 12.7%
--------------- ---------------- ---------------- ----------------
Total $ 924,702 $ 86,409 $ 139,736 $ 978,029
=============== ================ ================ ================
December 31, 1997:
Life insurance in force:
Individual $ 24,598,679 $ 4,040,398 $ 3,667,235 $ 24,225,516 15.1%
Group 51,179,343 2,031,477 53,210,820 3.8%
--------------- ---------------- ---------------- ----------------
Total $ 75,778,022 $ 4,040,398 $ 5,698,712 $ 77,436,336
=============== ================ ================ ================
Premium Income:
Life insurance $ 320,456 $ (127,388) $ 19,923 $ 467,767 4.3%
Accident/health 341,837 32,645 34,994 344,186 10.2%
--------------- ---------------- ---------------- ----------------
Total $ 662,293 $ (94,743) $ 54,917 $ 811,953
=============== ================ ================ ================
</TABLE>
5. NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income is summarized as follows:
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Investment income:
Fixed maturities and short-term investments $ 636,946 $ 638,079 $ 633,975
Mortgage loans on real estate 88,033 110,170 118,274
Real estate 19,618 20,019 20,990
Policy loans 167,109 180,933 194,826
Other 138 285 18
--------------- --------------- ---------------
911,844 949,486 968,083
Investment expenses, including interest on
amounts charged by the related parties
of $11,053, $9,891, and $9,758 35,898 52,126 86,410
--------------- --------------- ---------------
Net investment income $ 875,946 $ 897,360 $ 881,673
=============== =============== ===============
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Realized gains (losses):
Fixed maturities $ (7,858) $ 38,391 $ 15,966
Mortgage loans on real estate 1,429 424 1,081
Real estate 513 363
Provisions 7,000 (642) (7,610)
--------------- --------------- ---------------
Net realized gains on investments $ 1,084 $ 38,173 $ 9,800
=============== =============== ===============
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1999 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 $ 63,444 $ 448 $ 687 $ 63,205 $ 63,444
Collateralized mortgage
obligations 115,357 9,360 105,997 115,357
Public utilities 223,705 2,773 3,011 223,467 223,705
Corporate bonds 1,724,915 19,179 30,753 1,713,341 1,724,915
Foreign governments 10,000 213 10,213 10,000
State and municipalities 123,160 738 1,540 122,358 123,160
------------ -------------- ------------- ------------ ------------
$ 2,260,581 $ 23,351 $ 45,351 $ 2,238,581 $ 2,260,581
============ ============== ============= ============ ============
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
------------ -------------- ------------- ------------ ------------
Available-for-Sale:
U.S. Treasury Securities
and obligations of U.S.
Government Agencies:
Collateralized mortgage
obligations $ 752,130 $ 2,342 $ 21,459 $ 733,013 $ 733,013
Direct mortgage pass-
through certificates 304,099 1,419 11,704 293,814 293,814
Other 178,142 77 1,431 176,788 176,788
Collateralized mortgage
obligations 909,105 1,183 39,980 870,308 870,308
Public utilities 468,087 1,106 14,242 454,951 454,951
Corporate bonds 3,929,160 24,287 148,923 3,804,524 3,804,524
Foreign governments 41,224 654 1,256 40,622 40,622
State and municipalities 371,436 108 17,642 353,902 353,902
------------ -------------- ------------- ------------ ------------
$ 6,953,383 $ 31,176 $ 256,637 $ 6,727,922 $ 6,727,922
============ ============== ============= ============ ============
Fixed maturities owned at December 31, 1998 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 $ 34,374 $ 1,822 $ $ 36,196 $ 34,374
Collateralized mortgage
obligations 10,135 194 9,941 10,135
Public utilities 213,256 12,999 460 225,795 213,256
Corporate bonds 1,809,957 78,854 3,983 1,884,828 1,809,957
Foreign governments 10,133 782 10,915 10,133
State and municipalities 121,963 9,298 131,261 121,963
------------ -------------- ------------- ------------ ------------
$ 2,199,818 $ 103,755 $ 4,637 $ 2,298,936 $ 2,199,818
============ ============== ============= ============ ============
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
------------ -------------- ------------- ------------ ------------
Available-for-Sale:
U.S. Treasury Securities
and obligations of U.S.
Government Agencies:
Collateralized mortgage
obligations $ 863,479 $ 39,855 $ 1,704 $ 901,630 $ 901,630
Direct mortgage pass-
through certificates 467,100 4,344 692 470,752 470,752
Other 191,138 1,765 788 192,115 192,115
Collateralized mortgage
obligations 926,797 16,260 1,949 941,108 941,108
Public utilities 464,096 14,929 36 478,989 478,989
Corporate bonds 3,557,209 123,318 17,420 3,663,107 3,663,107
Foreign governments 56,505 2,732 59,237 59,237
State and municipalities 226,208 4,588 1,008 229,788 229,788
------------ -------------- ------------- ------------ ------------
$ 6,752,532 $ 207,791 $ 23,597 $ 6,936,726 $ 6,936,726
============ ============== ============= ============ ============
</TABLE>
The collateralized mortgage obligations consist primarily of sequential and
planned amortization classes with final stated maturities of two to thirty
years and average lives of less than one to fifteen 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.
See Note 8 for additional information on policies regarding estimated fair
value of fixed maturities.
The amortized cost and estimated fair value of fixed maturity investments
at December 31, 1999, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity Available-for-Sale
------------------------------------- ------------------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
----------------- ----------------- ----------------- ----------------
Due in one year or less $ 221,172 $ 220,644 $ 323,466 $ 334,701
Due after one year
through five years 945,199 941,685 1,286,402 1,251,690
Due after five years
through ten years 684,729 677,531 716,353 684,513
Due after ten years 118,170 121,921 690,073 650,432
Mortgage-backed
securities 115,357 105,997 1,965,334 1,897,135
Asset-backed securities 175,954 170,803 1,971,755 1,909,451
----------------- ----------------- ----------------- ----------------
$ 2,260,581 $ 2,238,581 $ 6,953,383 $ 6,727,922
================= ================= ================= ================
</TABLE>
Proceeds from sales of securities available-for-sale were $3,176,802,
$6,169,678, and $3,174,246 during 1999, 1998, and 1997, respectively. The
realized gains on such sales totaled $10,080, $41,136, and $20,543 for
1999, 1998, and 1997, respectively. The realized losses totaled $19,720,
$8,643, and $10,643 for 1999, 1998, and 1997, respectively. During the
years 1999, 1998, and 1997, held-to-maturity securities with and amortized
cost of $0, $9,920 and $0 were sold due to deterioration with insignificant
gains and losses.
At December 31, 1999 and 1998, pursuant to fully collateralized securities
lending arrangements, the Company had loaned $0 and $115,168 of fixed
maturities, respectively.
The Company engages in hedging activities to manage interest rate, market
and foreign exchange risk. The following table summarizes the 1999
financial hedge instruments:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Notional Strike/Swap
December 31, 1999 Amount Rate Maturity
----------------------------- --------------- ------------------------------ -------------------------
Interest Rate Caps $ 1,362,000 7.64% - 11.82% (CMT) 6/00 - 12/04
Interest Rate Swaps 217,528 4.94%-6.8% 02/00 - 12/06
Foreign Currency
Exchange Contracts 19,478 N/A 03/00 - 07/06
Equity Swap 104,152 5.15% - 5.93% 01/01
Options 54,100 Various 01/02 - 12/02
The following table summarizes the 1998 financial hedge instruments:
Notional Strike/Swap
December 31, 1998 Amount Rate Maturity
----------------------------- ---------------- ------------------------------ -------------------------
Interest Rate Floor $ 100,000 4.50% (LIBOR) 11/99
Interest Rate Caps 1,070,000 6.75% - 11.82% (CMT) 12/99 - 10/03
Interest Rate Swaps 242,451 4.95% - 9.35% 08/99 - 02/03
Foreign Currency
Exchange Contracts 34,123 N/A 05/99 - 07/06
Equity Swap 95,652 4.00% 12/99
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
</TABLE>
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, 1999, approximately 34% of the Company's
mortgage loans were collateralized by real estate located in California.
The following represents impairments and other information with respect to
impaired mortgage loans:
<TABLE>
<S> <C> <C>
1999 1998
====================================================================== ---------------- ----------------
======================================================================
Loans with related allowance for credit losses of
======================================================================
$14,727 and $2,492 $ 25,877 $ 13,192
======================================================================
Loans with no related allowance for credit losses 17,880 10,420
======================================================================
Average balance of impaired loans during the year 43,866 31,193
======================================================================
Interest income recognized (while impaired) 1,877 2,308
======================================================================
Interest income received and recorded (while impaired)
======================================================================
using the cash basis method of recognition 1,911 2,309
======================================================================
</TABLE>
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 modify the original terms of certain loans. These restructured
loans, all performing in accordance with their modified terms, aggregated
$75,691 and $52,913 at December 31, 1999 and 1998, respectively.
The following table presents changes in allowance for credit losses:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
--------------- --------------- ---------------
Balance, beginning of year $ 67,242 $ 67,242 $ 65,242
Provision for loan losses (7,000) 642 4,521
Chargeoffs - (787) (2,521)
Recoveries 1,000 145
--------------- --------------- ---------------
Balance, end of year $ 61,242 $ 67,242 $ 67,242
=============== =============== ===============
</TABLE>
7. COMMERCIAL PAPER
The Company has a commercial paper program that is partially supported by a
$50,000 standby letter-of-credit. At December 31, 1999, no commercial paper
was outstanding. At December 31, 1998, commercial paper outstanding had
maturities ranging from 69 to 118 days and interest rates ranging from
5.10% to 5.22%.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<S> <C>
December 31,
---------------------------------------------------------------------
1999 1998
--------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- -------------- -------------- --------------
ASSETS:
Fixed maturities and
short-term investments $ 9,229,307 $ 9,207,307 $ 9,556,713 $ 9,655,831
Mortgage loans on real
Estate 974,645 968,964 1,133,468 1,160,568
Policy loans 2,681,132 2,681,132 2,858,673 2,858,673
Common stock 69,240 69,240 48,640 48,640
LIABILITIES:
Annuity contract reserves
without life contingencies 4,468,685 4,451,465 4,908,964 4,928,800
Policyholders' funds 185,623 185,623 181,779 181,779
Due to Parent Corporation 35,979 33,590 52,877 52,877
Due to GWL&A Financial 175,035 137,445 - - - -
Repurchase agreements 80,579 80,579 244,258 244,258
Commercial paper - - - - 39,731 39,731
</TABLE>
<TABLE>
<S> <C>
December 31,
---------------------------------------------------------------------
1999 1998
--------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- -------------- -------------- --------------
HEDGE CONTRACTS:
Interest rate floor - - - - 17 17
Interest rate caps 4,140 4,140 971 971
Interest rate swaps (1,494) (1,494) 6,125 6,125
Foreign currency exchange
contracts (10) (10) 689 689
Equity swap (7,686) (7,686) (8,150) (8,150)
Options (6,220) (6,220) - - - -
</TABLE>
The estimated fair values of financial instruments have been determined
using available information and appropriate valuation methodologies.
However, considerable judgement is required to interpret market data to
develop 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.
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 calculated at current market rates on investments of similar quality
and term.
Mortgage loans fair value estimates generally are based on discounted cash
flows. 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 crediting rates for similar products.
The estimated fair value of policyholders' 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 rates on high quality investments.
The fair value of due to GWL&A Financial reflects the price determined in
the public market at December 31, 1999.
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 loss position for interest rates swaps are $772 and $0
of unrealized losses in 1999 and 1998, respectively. Included in the net
gain position for foreign currency exchange contracts are $518 and $932 of
loss exposures in 1999 and 1998, respectively.
The carrying amounts for receivables and liabilities reported in the
balance sheet approximate fair value due to their short term nature.
9. EMPLOYEE BENEFIT PLANS
Effective January 1, 1997, all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. See Note 3 for further discussion.
The Company's Parent had previously accounted for the pension plan under
the Canadian Institute of Chartered Accountants (CICA) guidelines and had
recorded a prepaid pension asset of $19,091. As U.S. generally accepted
accounting principles do not materially differ from these CICA guidelines
and the transfer was between related parties, the prepaid pension asset was
transferred at carrying value. As a result, the Company recorded the
following effective January 1, 1997:
<TABLE>
<S> <C> <C>
Prepaid pension cost $ 19,091 Undistributed earnings on $ 3,608
====================================
Participating business
====================================
Stockholder's equity 15,483
====================================
---------------- ----------------
$ 19,091 $ 19,091
==================================== ================ ================
</TABLE>
The following table summarizes changes for the three years December 31,
1999, in the benefit obligations and in plan assets for the Company's
defined benefit pension plan and post-retirement medical plan. There is no
additional minimum pension liability required to be recognized. There were
no amendments to the plans due to the acquisition of Alta.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Post-Retirement
Pension Benefits Medical Plan
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ----------- ----------- ---------- ----------
Change in benefit obligation
Benefit obligation at beginning
of year $ 131,305 $ 115,057 $ 96,417 $ 19,944 $ 19,454 $ 16,160
Service cost 7,853 6,834 5,491 2,186 1,365 1,158
Interest cost 8,359 7,927 7,103 1,652 1,341 1,191
Addition of former Alta employees 4,155
Actuarial (gain) loss (22,363) 5,117 9,470 3,616 (1,613) 1,500
Prior service for former Alta
employees 2,471
Benefits paid (3,179) (3,630) (3,424) (641) (603) (555)
----------- ---------- ----------- ----------- ---------- ----------
Benefit obligation at end of year 126,130 131,305 115,057 29,228 19,944 19,454
----------- ---------- ----------- ----------- ---------- ----------
Change in plan assets
Fair value of plan assets at
beginning of year $ 183,136 $ 162,879 $ 138,221 $ $ $
Actual return on plan assets 12,055 23,887 28,082
Addition of former Alta employees
and other adjustments 81
Benefits paid (3,179) (3,630) (3,424)
----------- ---------- ----------- ----------- ---------- ----------
Fair value of plan assets at
end of year 192,093 183,136 162,879
----------- ---------- ----------- ----------- ---------- ----------
Funded status 65,963 51,831 47,822 (29,228) (19,944) (19,454)
Unrecognized net actuarial
(gain) loss (30,161) (11,405) (6,326) 3,464 (113) 1,500
Unrecognized prior service cost 3,614 2,310
Unrecognized net obligation or
(asset) at transition (18,170) (19,684) (21,198) 13,736 14,544 15,352
----------- ---------- ----------- ----------- ---------- ----------
Prepaid (accrued) benefit cost $ 21,246 $ 20,742 $ 20,298 $ (9,718) $ (5,513) $ (2,602)
=========== ========== =========== =========== ========== ==========
Weighted-average
assumptions as of
December 31
Discount rate 7.50% 6.50% 7.00% 7.50% 6.50% 7.00%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 5.00% 4.00% 4.50% 5.00% 4.00% 4.50%
Components of net
periodic benefit
Cost
Service cost $ 7,853 $ 6,834 $ 5,491 $ 2,186 $ 1,365 $ 1,158
Interest cost 8,360 7,927 7,103 1,652 1,341 1,191
Expected return on plan assets (15,664) (13,691) (12,286)
Amortization of transition (1,514) (1,514) (1,514) 808 808 808
obligation
Amortization of unrecognized prior
service cost 541 162
Amortization of gain from earlier
periods (80) 38
----------- ---------- ----------- ---------- ----------
----------- ---------- ----------- ----------- ---------- ----------
Net periodic (benefit) cost $ (504) $ (444) $ (1,206) $ 4,846 $ 3,514 $ 3,157
=========== ========== =========== =========== ========== ==========
</TABLE>
The Company-sponsored post-retirement medical plan (medical plan) provides
health benefits to retired employees. The medical plan is contributory and
contains other cost sharing features, which may be adjusted annually for
the expected general inflation rate. The Company's policy will be to fund
the cost of the medical plan benefits in amounts determined at the
discretion of management. The Company made no contributions to this plan in
1999, 1998, or 1997.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the medical plan. For measurement purposes, a 7.5%
annual rate of increase in the per capita cost of covered health care
benefits was assumed. A one-percentage-point change in assumed health care
cost trend rates would have the following effects:
<TABLE>
<S> <C> <C>
1-Percentage 1-Percentage
Point Point
Increase Decrease
-------------------- --------------------
Increase (decrease) on total of service and interest cost
on components $ 1,678 $ (1,285)
Increase (decrease) on post-retirement benefit obligation 7,897 (6,186)
</TABLE>
The Company sponsors a defined contribution 401(k) retirement plan which
provides eligible participants with the opportunity to defer up to 15% of
base compensation. The Company matches 50% of the first 5% of participant
pre-tax contributions. For employees hired after January 1, 1999, the
Company matches 50% of the first 8% of participant pre-tax contributions.
Company contributions for the years ended December 31, 1999, 1998, and 1997
totaled $5,504, $3,915, and $3,475, respectively.
The Company has a deferred compensation plan providing key executives with
the opportunity to participate in an unfunded, deferred compensation
program. Under the program, participants may defer base compensation and
bonuses, and earn interest on their deferred amounts. The program is not
qualified under Section 401 of the Internal Revenue Code. The total of
participant deferrals, which is reflected in other liabilities, was
$17,367, $16,102, and $13,952 for years ending December 31, 1999, 1998, and
1997, respectively. The participant deferrals earn interest at a rate based
on the average ten-year composite government securities rate plus 1.5%. The
interest expense related to the plan for the years ending December 31,
1999, 1998, and 1997 were $1,231, $1,185, and $1,019, respectively.
The Company also provides a supplemental executive retirement plan (SERP)
to certain key executives. This plan provides key executives with certain
benefits upon retirement, disability, or death based upon total
compensation. The Company has purchased individual life insurance policies
with respect to each employee covered by this plan. The Company is the
owner and beneficiary of the insurance contracts. The incremental expense
for this plan for 1999, 1998, and 1997 was $3,002, $2,840, and $2,531,
respectively. The total liability of $14,608, $11,323, and $8,828 as of
December 31, 1999, 1998, and 1997 is included in other liabilities.
10. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income tax rate and
the Company's effective rate:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
------------ ------------- ------------
Federal tax rate 35.0 % 35.0 % 35.0 %
Change in tax rate resulting from:
Settlement of Parent tax exposures (5.9) (20.2)
Provision for contingencies (0.5) 7.7
Policyholder share of earnings 1.7 0.7 0.6
Other, net (1.5) (2.3) 0.8
------------ ------------- ------------
Total 28.8 % 33.4 % 23.9 %
============ ============= ============
</TABLE>
The Company's income tax provision was favorably impacted in 1999 and 1997
by releases of contingent liabilities relating to taxes of the Parent
Corporation's U.S. branch associated with blocks of business that were
transferred from the Parent Corporation's U.S. branch to the Company from
1989 to 1993; the Company had agreed to the transfer of these tax
liabilities as part of the transfer of this business. The release recorded
in 1999 reflected the resolution of certain tax issues with the Internal
Revenue Service (IRS) relating to the 1992 - 1993 audit years. The release
recorded in 1997 reflected the resolution of certain tax issues with the
IRS relating to the 1990-1991 audit years. The release totaled $17,150 for
1999 and $42,150 for 1997; however, $8,900 of the 1999 release and $15,100
of the 1997 release was attributable to participating policyholders and
therefore had no effect on the net income of the Company since that amount
was credited to the provision for policyholders' share of earnings
(losses).
In addition to this release of contingent tax liabilities, the Company's
income tax provision for 1997 also reflects increases for other contingent
items relating to open tax years where the Company determined it was
probable that additional taxes could be owed based on changes in facts and
circumstances. The increase in 1997 was $16,000, of which $10,100 was
attributable to participating policyholders and therefore had no effect on
the net income of the Company. This increase in contingent tax liabilities
has been reflected as a component of the deferred income tax provisions as
the Company does not expect near term resolution of these contingencies.
Excluding the effect of the 1999 and 1997 tax items discussed above, the
effective tax rate for 1999 and 1997 was 35.2% and 36.4%.
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<S> <C> <C>
1999 1998
--------------------------------- ------------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Asset Liability Asset Liability
--------------- --------------- -------------- -------------
Policyholder reserves $ 131,587 $ $ 143,244 $
Deferred policy acquisition costs 49,455 39,933
Deferred acquisition cost proxy
tax 103,529 100,387
Investment assets 69,561 19,870
Net operating loss carryforwards 444 2,867
Other 582 6,566
--------------- --------------- -------------- -------------
Subtotal 305,121 50,037 253,064 59,803
Valuation allowance (1,761) (1,778)
--------------- --------------- -------------- -------------
Total Deferred Taxes $ 303,360 $ 50,037 $ 251,286 $ 59,803
=============== =============== ============== =============
</TABLE>
Amounts included in investment assets above include $58,711 and $(34,556)
related to the unrealized gains/(losses) on the Company's fixed maturities
available-for-sale at December 31, 1999 and 1998, respectively.
The Company will file a consolidated tax return for 1999. Losses incurred
by subsidiaries in prior years cannot be offset against operating income of
the Company. At December 31, 1999, the Company's subsidiaries had
approximately $1,271 of net operating loss carryforwards, expiring through
the year 2014. The tax benefit of subsidiaries' net operating loss
carryforwards are included in the deferred tax assets at December 31, 1999
and 1998, respectively.
The Company's valuation allowance was increased (decreased) in 1999, 1998,
and 1997 by $(17), $(1,792), and $34, respectively, as a result of the
re-evaluation by management of future estimated taxable income in its
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.
11. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130 "Reporting Comprehensive Income". This
Statement established new rules for reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no
impact on the Company's net income or stockholder's equity. This Statement
requires unrealized gains or losses on the Company's available-for-sale
securities and related offsets for reserves and deferred policy acquisition
costs, which prior to adoption were reported separately in stockholder's
equity, to be included in other comprehensive income. The 1997 financial
statements have been reclassified to conform to the requirements of
Statement No. 130.
Other comprehensive loss at December 31, 1999 is summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Before-Tax Tax (Expense) Net-of-Tax
==================================================
Amount or Benefit Amount
================================================== ---------------- ---------------- -----------------
Unrealized gains on available-for-sale
==================================================
securities:
==================================================
Unrealized holding gains (losses) arising
==================================================
during the period $ (303,033) $ 106,061 $ (196,972)
==================================================
Less: reclassification adjustment for
==================================================
(gains) losses realized in net income (9,958) 3,485 (6,473)
==================================================
---------------- ---------------- -----------------
Net unrealized gains (losses) (312,991) 109,546 (203,445)
==================================================
==================================================
Reserve and DAC adjustment 87,729 (30,705) 57,024
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Other comprehensive loss $ (225,262) $ 78,841 $ (146,421)
================================================== ================ ================ =================
</TABLE>
<TABLE>
<S> <C> <C>
Other comprehensive income at December 31, 1998 is summarized as follows:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
---------------- ---------------- -- -----------------
Unrealized gains on available-for-sale
securities:
Unrealized holding gains (losses) arising
during the period $ 39,430 $ (13,800) $ 25,630
Less: reclassification adjustment for
(gains) losses realized in net income (14,350) 5,022 (9,328)
---------------- ---------------- -----------------
Net unrealized gains 25,080 (8,778) 16,302
Reserve and DAC adjustment (11,614) 4,065 (7,549)
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Other comprehensive income $ 13,466 $ (4,713) $ 8,753
================ ================ =================
Other comprehensive income at December 31, 1997 is summarized as follows:
Before-Tax Tax (Expense) Net-of-Tax
==================================================
Amount or Benefit Amount
================================================== ---------------- ---------------- -----------------
Unrealized gains on available-for-sale
==================================================
securities:
==================================================
Unrealized holding gains (losses) arising
==================================================
during the period $ 80,821 $ (28,313) $ 52,508
==================================================
Less: reclassification adjustment for
==================================================
(gains) losses realized in net income 2,012 (704) 1,308
==================================================
---------------- ---------------- -----------------
Net unrealized gains 82,833 (29,017) 53,816
==================================================
==================================================
Reserve and DAC adjustment (24,554) 8,594 (15,960)
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Other comprehensive income $ 58,279 $ (20,423) $ 37,856
================================================== ================ ================ =================
</TABLE>
12. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
Effective September 30, 1998, the Company purchased all of its outstanding
series of preferred stock, which were owned by the Parent Corporation, for
$121,800. At December 31, 1999 and 1998, the Company has 1,500 authorized
shares each of Series A, Series B, Series C and Series D cumulative
preferred stock; and 2,000,000 authorized shares of non-cumulative
preferred stock.
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:
1999 1998 1997
-------------- --------------- ---------------
(Unaudited)
Net income 253,123 $ 225,863 $ 181,312
Capital and surplus 1,007,245 727,124 759,429
The maximum amount of dividends which can be paid to stockholders by
insurance companies domiciled in the State of Colorado are subject to
restrictions relating to statutory surplus and statutory net gain from
operations. Statutory surplus and net gains from operations at December 31,
1999 were $1,007,245 and $245,148 (unaudited), respectively. The Company
should be able to pay up to $245,148 (unaudited) of dividends in 2000.
Dividends of $0, $6,692, and $8,854 were paid on preferred stock in 1999,
1998, and 1997, respectively. In addition, dividends of $92,053, $73,344,
and $62,540 were paid on common stock in 1999, 1998, and 1997,
respectively. Dividends are paid as determined by the Board of Directors.
13. STOCK OPTIONS
Great-West Lifeco Inc. (Lifeco) is the parent of the Parent Corporation.
Lifeco has a stock option plan (the Lifeco plan) that provides for the
granting of options for common shares of Lifeco to certain officers and
employees of Lifeco and its subsidiaries, including the Company. Options
may be awarded at no less than the market price on the date of the grant.
Termination of employment prior to vesting results in forfeiture of the
options, unless otherwise determined by a committee that administers the
Lifeco plan. As of December 31, 1999, 1998, and 1997, stock available for
award to Company employees under the Lifeco plan aggregated 885,150,
1,424,400, and 3,440,000 shares.
The plan provides for the granting of options with varying terms and
vesting requirements. The basic options under the plan become exercisable
twenty percent per year commencing on the first anniversary of the grant
and expire ten years from the date of grant. Options granted in 1998 and
1997 to Company employees totaling 278,000 and 1,832,000, respectively,
become exercisable if certain long-term cumulative financial targets are
attained. If exercisable, the exercise period runs from April 1, 2002 to
June 26, 2007. Additional options granted in 1998 totaling 380,000 become
exercisable if certain sales or financial targets are attained. During 1999
and 1998, 11,250 and 30,000 of these options vested and accordingly, the
Company recognized compensation expense of $23 and $116, respectively. If
exercisable, the exercise period runs from the date that the particular
options become exercisable until January 27, 2008.
The following table summarizes the status of, and changes in, Lifeco
options granted to Company employees which are outstanding and the
weighted-average exercise price (WAEP) for the years ended December 31. As
the options granted relate to Canadian stock, the values, which are
presented in U.S. dollars, will fluctuate as a result of exchange rate
fluctuations:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
-------------------------- -------------------------- -------------------------
Options WAEP Options WAEP Options WAEP
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Jan. 1, 6,544,824 $ 8.07 5,736,000 $ 7.71 4,104,000 $ 6.22
Granted 575,500 16.48 988,000 13.90 1,932,000 11.56
Exercised 234,476 5.69 99,176 5.93 16,000 5.95
Expired or canceled 318,750 13.81 80,000 13.05 284,000 6.17
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Dec. 31, 6,567,098 9.04 6,544,824 8.07 5,736,000 7.71
============= ========== ============= ========== ============= =========
Options exercisable
at year-end 2,215,998 $ 6.31 1,652,424 $ 5.72 760,800 $ 5.96
============= ========== ============= ========== ============= =========
Weighted average fair
value of options
granted during year $ 5.23 $ 4.46 $ 2.83
============= ============= =============
The following table summarizes the range of exercise prices for outstanding
Lifeco common stock options granted to Company employees at December 31,
1999:
Outstanding Exercisable
======================== ------------------------------------------------ ---------------------------------
Average Average
========================
Exercise Average Exercise Exercise
========================
Price Range Options Life Price Options Price
------------------------ ---------------- ------------ ------------- ---------------- --------------
$ 5.87 - 7.80 3,554,348 6.63 $ 5.95 2,108,748 $ 5.92
========================
$11.25 - 15.81 2,842,000 7.86 $ 12.37 107,250 $ 14.03
========================
$16.53 - 18.65 170,500 9.18 17.93 - -
========================
</TABLE>
Of the exercisable Lifeco options, 2,174,748 relate to basic option grants
and 41,250 relate to variable grants.
Power Financial Corporation (PFC), which is the parent corporation of
Lifeco, has a stock option plan (the PFC plan) that provides for the
granting of options for common shares of PFC to key employees of PFC and
its affiliates. Prior to the creation of the Lifeco plan in April 1996,
certain officers of the Company participated in the PFC plan in Canada.
Under the PFC plan, options may be awarded at no less than the market price
on the date of the grant. Termination of employment prior to vesting
results in forfeiture of the options, unless otherwise determined by a
committee that administers the PFC plan. As of December 31, 1999, 1998 and
1997, stock available for award under the PFC plan aggregated 4,340,800,
4,400,800, and 4,400,800 shares.
Options granted to officers of the Company under the PFC plan became
exercisable twenty percent per year commencing on the date of the grant and
expire ten years from the date of grant.
The following table summarizes the status of, and changes in, PFC options
granted to Company officers which remain outstanding and the
weighted-average exercise price (WAEP) for the years ended December 31. As
the options granted relate to Canadian stock, the values, which are
presented in U.S. dollars, will fluctuate as a result of exchange rate
fluctuations:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
-------------------------- -------------------------- -------------------------
Options WAEP Options WAEP Options WAEP
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Jan. 1, 355,054 $ 2.89 1,076,000 $ 3.05 1,329,200 $ 3.14
Exercised 70,000 2.28 720,946 2.98 253,200 2.93
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Dec. 31, 285,054 3.23 355,054 2.89 1,076,000 3.05
============= ========== ============= ========== ============= =========
Options exercisable
at year-end 285,054 $ 3.23 355,054 $ 2.89 1,076,000 $ 3.05
============= ========== ============= ========== ============= =========
</TABLE>
As of December 31, 1999, the PFC options outstanding have exercise prices
between $2.38 and $3.65 and a weighted-average remaining contractual life
of 1.7 years.
The Company accounts for stock-based compensation using the intrinsic value
method prescribed by APB No. 25, "Accounting for Stock Issued to
Employees", under which compensation expenses for stock options are
generally not recognized for stock option awards granted at or above fair
market value. Had compensation expense for the Company's stock option plan
been determined based upon fair values at the grant dates for awards under
the plan in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income would have been reduced by $1,039,
$727, and $608, in 1999, 1998, and 1997, respectively. The fair value of
each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for those options granted in 1999, 1998, and 1997,
respectively: dividend yields of 3.63%, 3.0% and 3.0%, expected volatility
of 32.4%, 34.05%, and 24.04%, risk-free interest rates of 6.65%, 4.79%, and
4.72%, and expected lives of 7.5 years.
14. SEGMENT INFORMATION
The Company has two reportable segments: Employee Benefits and Financial
Services. The Employee Benefits segment markets group life and health and
401(k) products to small and mid-sized corporate employers. The Financial
Services segment markets and administers savings products to public and
not-for-profit employers and individuals and offers life insurance products
to individuals and businesses.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates performance based on profit or loss from
operations after income taxes.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately as each
segment has unique distribution channels.
The Company's operations are not materially dependent on one or a few
customers, brokers or agents.
Summarized segment financial information for the year ended and as of
December 31 was as follows:
<TABLE>
Year ended December 31, 1999
Operations:
<S> <C> <C> <C> <C> <C> <C>
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Revenue:
================================================
Premium income $ 990,449 $ 172,734 $ 1,163,183
================================================
Fee income 548,580 86,567 635,147
================================================
Net investment income 80,039 795,907 875,946
================================================
Realized investment gains (losses) (1,224) 2,308 1,084
================================================ ----------------- ----------------- -----------------
Total revenue 1,617,844 1,057,516 2,675,360
================================================
Benefits and Expenses:
================================================
Benefits 789,084 792,755 1,581,839
================================================
Operating expenses 661,119 143,422 804,541
================================================ ----------------- ----------------- -----------------
Total benefits and expenses 1,450,203 936,177 2,386,380
================================================ ----------------- ----------------- -----------------
----------------- ----------------- -----------------
================================================
================================================
Net operating income before income 167,641 121,339 288,980
taxes
================================================
Income taxes 51,003 32,259 83,262
----------------- ----------------- -----------------
Net income $ 116,638 $ 89,080 $ 205,718
================================================ ================= ================= =================
Assets:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Investment assets $ 1,467,464 $ 11,590,591 $ 13,058,055
================================================
Other assets 646,036 909,172 1,555,208
================================================
Separate account assets 7,244,145 5,535,871 12,780,016
================================================ ----------------- ----------------- -----------------
Total assets $ 9,357,645 $ 18,035,634 $ 27,393,279
================================================ ================= ================= =================
Year ended December 31, 1998
Operations:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Revenue:
================================================
Premium income $ 746,898 $ 247,965 $ 994,863
================================================
Fee income 444,649 71,403 516,052
================================================
Net investment income 95,118 802,242 897,360
================================================
Realized investment gains (losses) 8,145 30,028 38,173
================================================ ----------------- ----------------- -----------------
Total revenue 1,294,810 1,151,638 2,446,448
================================================
Benefits and Expenses:
================================================
Benefits 590,058 872,411 1,462,469
================================================
Operating expenses 546,959 141,269 688,228
================================================ ----------------- ----------------- -----------------
Total benefits and expenses 1,137,017 1,013,680 2,150,697
================================================ ----------------- ----------------- -----------------
----------------- ----------------- -----------------
================================================
================================================
Net operating income before income 157,793 137,958 295,751
taxes
================================================
Income taxes 50,678 48,158 98,836
----------------- ----------------- -----------------
Net income $ 107,115 $ 89,800 $ 196,915
================================================ ================= ================= =================
Assets:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Investment assets $ 1,434,691 $ 12,235,845 $ 13,670,536
================================================
Other assets 567,126 785,940 1,353,066
================================================
Separate account assets 5,704,313 4,395,230 10,099,543
================================================ ----------------- ----------------- -----------------
Total assets $ 7,706,130 $ 17,417,015 $ 25,123,145
================================================ ================= ================= =================
Year ended December 31, 1997
Operations:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Revenue:
================================================
Premium income $ 465,143 $ 368,036 $ 833,179
================================================
Fee income 358,005 62,725 420,730
================================================
Net investment income 100,067 781,606 881,673
================================================
Realized investment gains (losses) 3,059 6,741 9,800
================================================ ----------------- ----------------- -----------------
Total revenue 926,274 1,219,108 2,145,382
================================================
Benefits and Expenses:
================================================
Benefits 371,333 1,013,717 1,385,050
================================================
Operating expenses 427,969 123,756 551,725
================================================ ----------------- ----------------- -----------------
Total benefits and expenses 799,302 1,137,473 1,936,775
================================================ ----------------- ----------------- -----------------
----------------- ----------------- -----------------
================================================
================================================
Net operating income before income 126,972 81,635 208,607
taxes
================================================
Income taxes 28,726 21,121 49,847
----------------- ----------------- -----------------
Net income $ 98,246 $ 60,514 $ 158,760
================================================ ================= ================= =================
The following table, which summarizes premium and fee income by segment, represents supplemental information.
1999 1998 1997
====================================== ---------------- ---------------- -----------------
----------------
Premium Income:
======================================
======================================
Employee Benefits
======================================
Group Life & Health $ 990,449 $ 746,898 $ 465,143
====================================== ---------------- ---------------- -----------------
Total Employee Benefits 990,449 746,898 465,143
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Financial Services
======================================
======================================
Savings 14,344 16,765 22,634
======================================
Individual Insurance 158,390 231,200 345,402
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Financial Services 172,734 247,965 368,036
====================================== ---------------- ---------------- -----------------
Total premium income $ 1,163,183 $ 994,863 $ 833,179
====================================== ================ ================ =================
----------------
Fee Income:
======================================
======================================
Employee Benefits
======================================
Group Life & Health $ 454,071 $ 366,805 $ 305,302
======================================
(uninsured plans)
======================================
401(k) 94,509 77,844 52,703
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Employee Benefits 548,580 444,649 358,005
====================================== ---------------- ---------------- -----------------
---------------- ---------------- -----------------
Financial Services
======================================
======================================
Savings 81,331 71,403 62,725
======================================
Individual Insurance 5,236
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Financial Services 86,567 71,403 62,725
====================================== ---------------- ---------------- -----------------
Total fee income $ 635,147 $ 516,052 $ 420,730
====================================== ================ ================ =================
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
On October 6, 1999, the Company entered into a purchase and sale agreement
(the Agreement) with Allmerica Financial Corporation (Allmerica) to acquire
Allmerica's group life and health insurance business on March 1, 2000. This
business primarily consists of administrative services only and stop loss
policies. The in-force business is expected to be underwritten and retained
by the Company upon each policy renewal date. The purchase price, as
defined in the Agreement, will be based on a percentage of the amount
in-force at March 1, 2000 contingent on the persistency of the block of
business through March 2001. Management does not expect the purchase price
to have a material impact on the Company's consolidated financial
statements.
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.
16. SUBSEQUENT EVENTS
Effective January 1, 2000, the Company coinsured the majority of General
American Life Insurance Company's (General American) group life and health
insurance business which primarily consists of administrative services only
and stop loss policies. The agreement is expected to convert to an
assumption reinsurance agreement by January 1, 2001, pending regulatory
approval. The Company assumed approximately $150,000 of policy reserves and
miscellaneous liabilities in exchange for an equal amount of cash and
miscellaneous assets from General American.
C-2
C-1
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, 1999, 1998, and 1997 and for Variable
Annuity-1 Series Account are included in the Statement of Additional
Information.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(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
is incorporated by reference to Registrant's Pre-Effective Amendment No. 2.
(4) Copy of the form of the variable annuity contract is incorporated by
reference to Registrant's Pre-Effective Amendment No. 1.
(5) Copy of the form of application to be used with the variable annuity
contract provided pursuant to (4) is incorporated by reference to Registrant's
Pre-Effective Amendment No. 1.
(6) Copy of Articles of Incorporation and Bylaws of Depositor is incorporated
by reference to Registrant's Pre-Effective Amendment No. 2.
(7) Not applicable.
(8) Copies of participation agreements with underlying funds are incorporated
by reference to Registrant's Pre-Effective Amendment No. 2 and Registrant's
Post-Effective Amendment No. 2.
(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 Boros Cicchetti Berenson & Johnson LLP is
attached as Exhibit 10(a).
(b) Written Consent of Deloitte & Touche LLP is attached as Exhibit 10(b).
(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.
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 32963
James W. Burns, O.C. (4) Director
Orest T. Dackow (3) Director
Andre Desmarais (4) 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
265 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
Brian E. Walsh Veritas Capital Management, LLC
115 East Putnam Avenue
Greenwich, Connecticut 06830
Michael R. Bracco (2) Senior Vice-President,
Employee Benefits
John A. Brown (3) Senior
Vice-President,
Sales,
Healthcare Markets
Donna A. Goldin (2) Executive Vice-President
and Chief Operating
Officer, One Corporation
Mitchell T.G. Graye (3) Executive
Vice-President,
Chief Financial Officer
Mark S. Hollen (3) Senior
Vice-President,
FASCorp
John T. Hughes (3) Senior
Vice-President,
Chief Investment
Officer
D. Craig Lennox (6) Senior
Vice-President,
General Counsel and
Secretary
Steven H. Miller (2) Senior Vice
President,
Employee Benefits,
Sales
James D. Motz (2) Executive
Vice-President,
Employee Benefits
Charles P. Nelson (3) Senior
Vice-President,
Public Non-Profit
Markets
Martin L. Rosenbaum (2) Senior
Vice-President,
Employee Benefits
Gregory E. Seller (3) Senior
Vice-President,
Government Markets
Robert K. Shaw (3) Senior
Vice-President,
Individual Markets
George D. Webb (3) Senior
Vice-President,
Public/Non-Profit
Operations
Douglas L. Wooden (3) Executive
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.
(6) 8525 East Orchard Road, Englewood, Colorado 80111
Item 26. Persons controlled by or under common control with the Depositor or Registrant
------------------------------------------------------------------------------
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.4% - Power Financial Corporation
80.9% - Great-West Lifeco Inc.
100% - The Great-West Life Assurance Company
100% - GWL&A Financial (Nova Scotia) Co.
100% - GWL&A Financial Inc.
100% - Great-West Life & Annuity Insurance Company
100% - Anthem Health & Life Insurance Company
100% - First Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Orchard Capital Management, LLC
100% - Greenwood Investments, 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% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Health Plan, Inc.
100% - One Health Plan of Alaska, Inc.
100% - One Health Plan of Arizona, Inc.
100% - One of Arizona, Inc.
100% - One Health Plan of Maine, Inc.
100% - One Health Plan of Nevada, Inc.
100% - One Health Plan of New Hampshire, Inc.
100% - One Health Plan of New Jersey, Inc.
100% - One Health Plan of South Carolina, Inc.
100% - One Health Plan of Wisconsin, Inc.
100% - One Health Plan of Wyoming, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
100% - Benefits Advisors, Inc.
100% - Greenwood Property
Corporation
95% - Maxim Series Fund, Inc.*
100% - GWL Properties Inc.
100% - Great-West Realty Investments, Inc.
50% - Westkin Properties Ltd.
92%**- Orchard Series Fund
100% - Orchard Trust Company
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
</TABLE>
C-10
C-9
Item 27. Number of Contractowners
As of March 31, 2000, there were 8,575 contractowners.
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
<TABLE>
<S> <C>
(a) Charles Schwab & Co., Inc. ("Schwab") is the distributor of securities of
the Registrant.
(b) Directors and Officers of Schwab
Name Principal Business Address Position and Offices with Underwriter
Charles R. Schwab (1) Chairman, Director
David S. Pottruck (1) Chief Executive Officer, Director
Name Principal Business Address Position and Offices with Underwriter
Linnet F. Deily (1)
Vice Chairman and President - Schwab
Retail Group
Steven L. Scheid (1) Vice Chairman and Enterprise President -Financial Products and Services, Director
Dawn G. Lepore (1) Vice Chairman, Executive Vice President and Chief Information Officer
Elizabeth Sawi (1) Executive Vice President and Chief Administrative Officer
Karen W. Chang (1) Enterprise President - General Investor Services
John P. Coghlan (1) Vice Chairman and Enterprise
President - Retirement Plan Services
and Services for Investment Managers
Wayne W. Fieldsa (1) Enterprise President - Brokerage Operations
Lon Gorman (1) Vice Chairman and Enterprise President - Capital Markets and Trading
Susanne D. Lyons (1) Enterprise President - Retail Client
Services
Gideon Sasson (1) Enterprise President - Electronic Brokerage
Christopher V.Dodds
(1) Executive Vice President and Chief
Financial Officer
James M. Hackley (1) Executive Vice President - Retail Client Services
Frederick E. Matteson (1) Executive Vice President - Schwab Technology
Services
John P. McGonigle (1) Executive Vice President - Asset Management
Products and Services
Jeremiah H. Chafkin (1) Executive Vice President - SchwabFunds
Geoffrey Penney (1) Executive Vice President - Financial Products and
International Technology
George Rich (1) Executive Vice President - Human Resources
Leonard Short (1) Executive Vice President - CRS
Advertising and Brand Management
Carrie Dwyer (1) Executive Vice President - Corporate
Oversight and Corporate
Secretary
Colleen M. Hummer (1) Senior Vice President - Mutual Funds Operations
Name Principal Business Address Position and Offices with Underwriter
Willie C. Bogan (1) Vice President and Assistant Corporate Secretary
- --------------------------------------
</TABLE>
(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.
(e) GWL&A represents the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses to be incurred and the risks
assumed by GWL&A.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 6 to the Registration Statement on Form N-4 to be
signed on its behalf, in the City of Englewood, State of Colorado, on this 17th
day of April, 2000.
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
<TABLE>
<S> <C> <C>
/s/ R. Gratton* April 17, 2000
- --------------------------------------------
Director and Chairman of the
Board (Robert Gratton)
/s/ William T. McCallum April 17, 2000
- --------------------------------------------
Director, President and Chief Executive
Officer (William T. McCallum)
/s/ M.T.G. Graye April 17, 2000
- ------------------------------------
Executive Vice President, Chief
Financial Officer(M.T.G. Graye)
Signature and Title Date
/s/ James Balog* April 17, 2000
- ------------------------------------
Director, (James Balog)
/s/ James W. Burns* April 17, 2000
- ------------------------------------
Director, (James W. Burns)
/s/ Orest T. Dackow* April 17, 2000
- ------------------------------------
Director (Orest T. Dackow)
, 2000
Director (Andre Desmarais)
/s/ Paul Desmarais, Jr.* April 17, 2000
- --------------------------------------------
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham* April 17, 2000
- ------------------------------------
Director (Robert G. Graham)
/s/ N. Berne Hart* April 17, 2000
- ------------------------------------
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* April 17, 2000
- --------------------------------------------
Director (Kevin P. Kavanagh)
/s/ William Mackness* April 17, 2000
- ------------------------------------
Director (William Mackness)
/s/ Jerry E.A. Nickerson* April 17, 2000
- --------------------------------------------
Director (Jerry E.A. Nickerson)
Signature and Title Date
/s/ P. Michael Pitfield* April
- ---------------------------------------------------
17, 2000
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* April 17, 2000
- ------------------------------------
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh* April 17, 2000
- ------------------------------------
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox April 17, 2000
------------------------------------
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with the Registration Statement
and Pre-Effective Amendment No. 1 thereto.
</TABLE>
Exhibit 10(a)
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Suite 400E
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
(202) 965-8100
April 17, 2000
Great-West Life & Annuity Insurance Company
8525 East Orchard Road
Englewood, Colorado 80111
Re: Variable Annuity-1 Series Account
Post-Effective Amendment No. 6 to the Registration Statement on Form N-4
Files Nos. 333-01153; 811-7549
Ladies and Gentlemen:
We have acted as counsel to Great-West Life & Annuity Life & Annuity
Insurance Company, a Colorado corporation, regarding the federal securities laws
applicable to the issuance and sale of the Contracts described in the
above-referenced registration statement. We hereby consent to the reference to
us under the caption "Legal Matters" in the Prospectus filed today with the
Securities and Exchange Commission. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Exhibit 10(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No.6 to Registration
Statement No. 333-01153 of Variable Annuity-1 Series Account of Great-West Life
& Annuity Insurance Company of our report dated January 31,2000, included in the
annual report on Form 10-K of Great-West Life & Annuity Insurance Company, and
to the use of our report dated January 31, 2000 on the financial statements of
Great-West Life & Annuity Insurance Company and of our report dated February 23,
2000 on the financial statements of Variable Annuity-1 Series Account of
Great-West Life & Annuity Insurance Company included in this Registration
Statement. We also consent to the reference to us under the headings "Condensed
Financial Information" and "Experts" in such Prospectus, and under the heading
"Experts" in the Statement of Additional Information, which are part of such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 17, 2000
