File No. 811-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-8B-2
REGISTRATION STATEMENT OF UNIT INVESTMENT TRUSTS
WHICH ARE CURRENTLY ISSUING SECURITIES
Pursuant to Section 8(b) of the Investment Company Act of 1940
COLI VUL-2 SERIES ACCOUNT
(Name of Unit Investment Trust)
Not the issuer of periodic payment plan certificates.
X Issuer of periodic payment plan certificates.
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I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Furnish name of the trust and the Internal Revenue Service
Employer Identification Number.
COLI VUL-2 Series Account (the "Series Account"). There is no
Internal Revenue Service Employer Identification Number for
the Series Account.
(b) Furnish title of each class or series of securities issued by
the trust.
Individual Flexible Premium Variable Universal Life Insurance
Policies (the "Policies").
2. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each
depositor of the trust.
Great-West Life & Annuity Insurance Company
(the "Company" or "Great-West")
8515 East Orchard Road
Englewood, Colorado 80111
IRS Employer Identification Number: 84-0467907
3. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each
custodian or trustee of the trust indicating for which class or series
of securities each custodian or trustee is acting.
There is no custodian or trustee.
4. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each
principal underwriter currently distributing securities of the trust.
No Policies are currently being distributed. When distribution
commences, the principal underwriter will be:
BenefitsCorp Equities, Inc. ("BCE")
8515 East Orchard Road
Englewood, Colorado 80111
IRS Employer Identification Number: 84-096540
5. Furnish name of state or other sovereign power, the laws of which
govern with respect to the organization of the trust.
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State of Colorado
6. (a) Furnish the dates of execution and termination of any
indenture or agreement currently in effect under the terms of
which the trust was organized and issued or proposes to issue
securities.
The Series Account was established pursuant to Colorado law
by resolution of the Board of Directors of Great-West
adopted on November 25, 1997. The Series Account will
continue in existence until its complete liquidation and the
distribution of its assets to the persons entitled to
receive them.
(b) Furnish the dates of execution and termination of any
indenture or agreement currently in effect pursuant to which
the proceeds of payments on securities issued or to be issued
by the trust are held by the custodian or trustee.
Not applicable, for the reasons set forth under Item 3, which
is incorporated herein by reference.
7. Furnish in chronological order the following information with respect
to each change of name of the trust since January 1, 1930. If the name
has never been changed, so state.
The Series Account has never been known by any other name.
8. State the date on which the fiscal year of the trust ends.
The fiscal year of the Series Account ends on December 31.
Material Litigation
Furnish a description of any pending legal proceedings, material with
respect to the security holders of the trust by reason of the nature of
the claim or the amount thereof, to which the trust, the depositor, or
the principal underwriter is a party or of which the assets of the
trust are the subject, including the substance of the claims involved
in such proceeding and the title of the proceeding. Furnish a similar
statement with respect to any pending administrative proceeding
commenced by a governmental authority or any such proceeding or legal
proceeding known to be contemplated by a governmental authority.
Include any proceeding which, although immaterial itself, is
representative of, or one of, a group which in the aggregate is
material.
There are no pending legal proceedings affecting the Series Account.
Great-West is engaged in routine law suits which, in its management's
judgment, are not of material importance to its total assets or
material with respect to the Series Account.
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II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
General Information Concerning the Securities of the Trust and the Rights of
Holders
10. Furnish a brief statement with respect to the following matters for
each class or series of securities issued by the trust:
(a) Whether the securities are of the registered or bearer type;
The Policies which are to be issued are of the registered type
insofar as all Policies are owned by the person(s) named in a
Policy as the Owner (the "Owner"), and the records concerning
the Owner are maintained by or on behalf of the Company.
(b) Whether the securities are of the cumulative or distributive
type;
The Policies are of the cumulative type, providing for no
direct distribution of income, dividends or capital gains.
Such amounts are not separately identifiable but are reflected
in the Account Values and death benefit under a Policy at any
time.
(c) The rights of security holders with respect to withdrawal or
redemption;
See "About the Policy -- Termination of Policy," "About the
Policy -- Surrenders" and "About the Policy -- Policy Loans"
in the Prospectus in Exhibit D, incorporated herein by
reference.
(d) The rights of security holders with respect to conversion,
transfer, partial redemption and similar matters;
See "About the Policy -- Termination of Policy", "About the
Policy -- Partial Withdrawals", "About the Policy --
Surrenders", "About the Policy -- Premium Payments", "About
the Policy -- Transfers Between Divisions", "About the Policy
-- Dollar Cost Averaging", "About the Policy -- The Rebalancer
Option" and "About the Policy -- Policy Loans" in the
Prospectus in Exhibit D, incorporated herein by reference.
(e) If the trust is the issuer of periodic payment plan
certificates, the substance of the provisions of any indenture
or agreement with respect to lapses or defaults by security
holders in making principal payments, and with respect to
reinstatement;
See "About the Policy -- Termination of Policy", "About the
Policy -- Grace Period" and "About the Policy --
Reinstatement" in the Prospectus in Exhibit D, incorporated
herein by reference.
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(f) The substance of the provisions of any indenture or agreement
with respect to voting rights, together with the names of any
persons other than security holders given the right to
exercise voting rights pertaining to the trust's securities or
the underlying securities and the relationship of such persons
to the trust;
See "Voting Rights" in the Prospectus in Exhibit D,
incorporated herein by reference.
(g) Whether security holders must be given notice of any change
in:
(1) the composition of the assets of the trust;
See "Report to Owners" in the Prospectus in Exhibit
D, incorporated herein by reference. Except to the
extent described in the Prospectus, no changes in the
terms and conditions of the Policies can be made
without notice to and/or consent of Policy Owners. As
described in the response to other items of this
form, however, the Policies permit the Company to
exercise discretion in changing certain fees and
charges, restricting certain Policy Owner rights and
taking certain other actions.
(2) the terms and conditions of the securities issued by
the trust;
See 10(g)(1) above, which is incorporated herein by
reference.
(3) the provisions of any indenture or agreement of the
trust;
No notice to or consent from Owners is required in
connection with any change in the provisions of the
resolution of the Company's Board of Directors
pursuant to which the Series Account was established
and the Policies will be issued.
(4) the identity of the depositor, trustee or custodian;
There is no requirement for notice to, or consent of
Owners with respect to any change in the identity of
the Series Account's depositor.
(h) Whether the consent of security holders is required in order
for action to be taken concerning any change in:
(1) the composition of the assets of the trust;
See "Addition, Deletion and Substitution of
Investments" and "Allocation of Net Premium" in
the Prospectus in Exhibit D, incorporated herein
by reference. Also see (g)(1) above, which is
incorporated herein by reference.
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(2) the terms and conditions of the securities issued by
the trust;
See (g)(2) above, which is incorporated herein by
reference.
(3) the provisions of any indenture or agreement of the
trust;
See (g)(3) above, which is incorporated herein by
reference.
(4) the identity of the depositor, trustee or custodian;
See (g)(4) above, which is incorporated herein by
reference.
(i) Any other principal feature of the securities issued by the
trust or any other principal right, privilege or obligation
not covered by subdivisions (a) to (g) or by any other item in
this form.
See "About the Policy" in the Prospectus in Exhibit D,
incorporated herein by reference.
Information Concerning the Securities Underlying the Trust's Securities
11. Describe briefly the kind or type of securities comprising the unit of
specified securities in which security holders have an interest. If the
trust owns or will own any securities of its regular brokers or dealers
as defined in Rule 10b-1 under the Act, or their parents, identify
those brokers or dealers and state the value of the registrant's
aggregate holdings of the securities of each subject issuer as of the
close of the registrant's most recent fiscal year.
The Policy Owner will not be the owner of the securities held in the
Series Account, although the value of those securities will be used to
calculate Policy benefits. The securities are owned by the Company but
held in the Series Account pursuant to Colorado insurance laws
governing the operation of separate accounts. The securities held in
the Series Account will be shares of the Portfolios described below,
which are the following registered, open-end management investment
companies or series thereof: American Century Variable Portfolios, Inc.
("American Century Funds); Dreyfus Stock Index Fund and Dreyfus
Variable Investment Fund (collectively the "Dreyfus Funds"); Federated
Insurance Series (the "Federated Funds"); INVESCO Variable Investments
Fund, Inc. (the "INVESCO Funds"); Janus Aspen Series (the "Janus
Funds"); Maxim Series Fund (the "Maxim Funds"); and Neuberger&Berman
Advisers Management Trust (the "N&B AMT Funds").
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American Century Investment Management, Inc. is the investment adviser
to each Portfolio of the American Century Funds. The Dreyfus
Corporation is the investment adviser to the Dreyfus Funds. Mellon
Equity Associates, an affiliate of The Dreyfus Corporation, serves as
index fund manager to The Dreyfus Stock Index Fund. Fayez Sarofim & Co.
is the sub-adviser to the Dreyfus Capital Appreciation Portfolio.
Federated Advisers is the investment adviser to the Federated Funds.
INVESCO Funds Group, Inc. is the investment adviser to the INVESCO
Funds. INVESCO Capital Management, Inc. an affiliate of INVESCO Funds
Group, Inc., serves as the sub-adviser to the INVESCO VIF-Total Return
Portfolio. Janus Capital Corporation is the investment adviser to the
Janus Funds. GW Capital Management, LLC, an affiliate of Great-West, is
the investment adviser to the Maxim Funds. Founders Asset Management,
LLC is the sub-adviser to the Maxim Blue Chip Portfolio. Loomis Sayles
& Company, L.P. is the sub-adviser to the Maxim Corporate Bond
Portfolio and the Maxim Small-Cap Aggressive Growth Portfolio.
Institutional Trust Company is the sub-adviser to the Maxim INVESCO ADR
Portfolio, the Maxim INVESCO Balanced Portfolio and the Maxim INVESCO
Small-Cap Growth Portfolio. Janus Capital Corporation is the
sub-adviser to the Maxim MidCap Portfolio. Ariel Capital Management,
Inc. is the sub-adviser to the Maxim Small-Cap Value Portfolio.
Neuberger&Berman Management Incorporated is the investment adviser to
the portfolios of Neuberger&Berman Advisers Managers Trust in which the
N&B AMT Funds invest their assets. Neuberger&Berman, LLC, an affiliate
of Neuberger&Berman Management Incorporated serves as the sub-adviser
to those portfolios of the Neuberger&Berman Advisers Managers Trust.
For additional information about the Portfolios, and their advisers and
subadvisers, see "The Investment Options" in the prospectus in Exhibit
D, incorporated herein by reference.
The investment objectives of the Funds in which the Series Account
invests are as follows:
Portfolios of American Century Funds
and Series Account Divisions
American Century VP Income & Growth seeks dividend growth, current
income and capital appreciation by investing in common stocks.
American Century VP International seeks capital growth by investing
primarily in an internationally diversified portfolio of common stocks that are
considered by the adviser to have prospects for appreciation.
American Century VP Value seeks long-term capital growth by investing
in securities that the adviser believes to be undervalued at the time of
purchase. Income is a secondary objective.
Dreyfus Funds and
Series Account Divisions
Dreyfus Stock Index Fund seeks to provide investment results that
correspond to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index.
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Dreyfus Capital Appreciation Portfolio seeks to provide long-term
capital growth consistent with the preservation of capital by investing
primarily in the common stocks of domestic and foreign issuers. Current income
is a secondary investment objective.
Dreyfus Growth and Income Portfolio seeks to provide long-term capital
growth, current income and growth of income, consistent with reasonable
investment risk by investing primarily in equity securities, debt securities and
money market instruments of domestic and foreign issuers.
Portfolios of Federated Funds
and Series Account Divisions
Federated American Leaders Fund II seeks to achieve long-term growth of
capital by investing, under normal circumstances, at least 65% of its total
assets in common stock of "blue-chip" companies. The Fund's secondary objective
is to provide income.
Federated Growth Strategies Fund II seeks capital appreciation by
investing at least 65% of its assets in equity securities of companies with
prospects for above-average growth in earnings and dividends or companies where
significant fundamental changes are taking place.
Federated High Income Bond Fund II seeks high current income by
investing primarily in a professionally managed, diversified portfolio of
fixed-income securities, including lower-rated corporate debt obligations
commonly referred to as "junk bonds."
Federated International Equity Fund II seeks to obtain a total return
on its assets by investing at least 65% of its assets in equity securities of
issuers located in at least three different countries outside the United States.
Portfolios of INVESCO Funds
and Series Account Divisions
INVESCO VIF - High Yield Portfolio seeks a high level of current income
by investing substantially all of its assets in lower-rated bonds and other debt
securities and in preferred stock.
INVESCO VIF - Industrial Income Portfolio seeks the best possible
current income while following sound investment practices by investing at least
65% of its total assets in dividend-paying common stocks, with up to 10% of its
total assets invested in equity securities that do not pay regular dividends and
the remainder invested in other income-producing securities such as corporate
bonds. Capital growth potential is an additional consideration in the selection
of portfolio securities.
INVESCO VIF - Total Return Portfolio seeks a high total return on
investment through capital appreciation and current income by investing in a
combination of equity and fixed-income securities. INVESCO Capital Management,
Inc. serves as the sub-adviser to this Fund and, as such, provides day-to-day
management.
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Portfolios of Janus Fund and
Series Account Divisions
Balanced Portfolio seeks long-term growth of capital, balanced by
current income by investing up to 40-60% of its assets in securities selected
primarily for their growth potential and 40-60% of its assets in securities
selected primarily for their income potential.
Flexible Income Portfolio seeks to maximize total return from a
combination of income and capital appreciation by investing primarily in
income-producing securities.
High-Yield Portfolio seeks high current income as its primary objective
by investing primarily in high yield/high risk fixed-income securities, commonly
referred to as "junk bonds." Capital appreciation is a secondary objective when
consistent with the primary objective.
Worldwide Growth Portfolio seeks long-term growth of capital by
investing primarily in common stocks of foreign and domestic issuers.
Portfolios of Maxim Fund and
Series Account Divisions
Maxim Corporate Bond Portfolio seeks high total investment return by
investing primarily in debt securities (including convertibles), although up to
20% of its total assets may be invested in preferred stocks.
Maxim INVESCO ADR Portfolio seeks to achieve a high total return on
investment through capital appreciation and current income, while reducing risk
through diversification, by investing in foreign securities that are issued in
the form of American Depository Receipts or foreign stocks that are registered
with the SEC and traded in the United States.
Maxim INVESCO Balanced Portfolio seeks to achieve a high total return
on investment through capital appreciation and current income by investing in a
combination of common stocks and fixed-income securities.
Maxim INVESCO Small-Cap Growth Portfolio seeks long-term capital growth
by investing its assets principally in a diversified group of equity securities
of emerging growth companies with market capitalization of $1 billion or less at
the time of initial purchase.
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Maxim MidCap Portfolio seeks long-term growth of capital by normally
investing at least 65% of its assets in securities issued by medium-sized
companies.
Maxim Money Market Portfolio seeks preservation of capital, liquidity
and the highest possible current income through investments in short-term money
market securities. An investment in this Fund is not insured by the Federal
Deposit Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share, it is possible
to lose money.
Maxim U.S. Government Securities Portfolio seeks the highest level of
return consistent with preservation of capital and substantial credit protection
by investing primarily in mortgage-related securities issued or guaranteed by an
agency or instrumentality of the U.S. Government, other U.S. agency and
instrumentality obligations and in U.S. Treasury obligations.
Maxim Profile Portfolios
Maxim Aggressive Profile Portfolio seeks to achieve a high total return
on investment through long-term capital appreciation by investing in other Maxim
Funds with an emphasis on equity investments.
Maxim Moderately Aggressive Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation by investing
in other Maxim Funds with an emphasis on equity investments, though income is a
secondary consideration.
Maxim Moderate Profile Portfolio seeks to achieve a high total return
on investment through long-term capital appreciation by investing in other Maxim
Funds with a relatively equal emphasis on equity and fixed-income investments.
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Maxim Moderately Conservative Profile Portfolio seeks to achieve the
highest possible total return consistent with reasonable risk through a
combination of income and capital appreciation by investing in other Maxim Funds
with primary emphasis on fixed-income investments, and, to a lesser degree, in
other Maxim Funds with an emphasis on equity investments.
Maxim Conservative Profile Portfolio seeks to achieve total return
consistent with preservation of capital primarily through fixed-income
investments by investing in other Maxim Funds with an emphasis on fixed-income
investments.
Portfolios of N&B AMT Funds and
Series Account Divisions
The portfolios listed below invest their assets in a corresponding
portfolio of Neuberger&Berman Advisers Managers Trust, an open-end investment
company registered under the 1940 Act. This type of arrangement is commonly
referred to as a "master/feeder" structure and is different from that of many
other investment companies which directly acquire and manage their own assets.
The investment objectives of the portfolios listed below are identical to the
corresponding portfolios in which they invest and their investment performance
will directly correspond with the investment performance of those corresponding
portfolios. Neuberger&Berman Management Incorporated serves as the investment
adviser to Advisers Managers Trust and Neuberger&Berman, LLC acts as
sub-adviser.
Guardian Portfolio seeks capital appreciation, and, secondarily,
current income by investing primarily in common stocks of long-established,
high- quality companies. A value-oriented investment approach is used in
selecting securities.
Mid-Cap Growth Portfolio seeks capital appreciation by investing, under
normal market conditions, in equity securities of medium-sized companies. A
growth-oriented investment approach is used in selecting securities.
Partners Portfolio seeks capital growth by investing in common stocks
and other equity securities of medium to large capitalization established
companies. A value-oriented investment approach is used in selecting securities.
Socially Responsive Portfolio seeks long-term capital appreciation by
investing in stocks of medium to large capitalization companies that meet both
financial and social criteria. A value-oriented investment approach is used in
selecting securities.
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12. If the trust is the issuer of periodic payment plan certificates and if
any underlying securities were issued by another investment company,
furnish the following information for each such company:
(a) Name of company;
American Century Variable Portfolios, Inc.
Dreyfus Life and Annuity Index Fund, Inc., dba,
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Federated Insurance Series
INVESCO Variable Investments Fund, Inc.
Janus Aspen Series
Maxim Series Fund, Inc.
Neuberger&Berman Advisers Management Trust
(b) Name and principal business address of depositor;
Not applicable.
(c) Name and principal business address of trustee or custodian;
Custodian for Federated Funds, INVESCO Funds, Janus Funds and
N&B AMT Funds:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian for American Century VP International:
UMB Bank, N.A.
10th and Grand
Kansas City, Missouri 64105
Custodian for all American Century Funds other than American
Century VP International:
Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10036
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Custodian for Dreyfus Stock Index Fund
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
Custodian for Dreyfus Funds other than the Dreyfus Stock Index
Fund:
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Custodian for Maxim Funds:
The Bank of New York
45 Wall Street
New York, New York 10286
(d) Name and principal business address of principal underwriter;
Distributor for American Century Funds:
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
Distributor for Dreyfus Funds:
Premier Mutual Fund Services, Inc.
60 State Street
Boston, Massachusetts 02109
Distributor for Federated Funds:
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
Distributor for INVESCO Funds:
INVESCO Distributors, Inc.
7800 East Union Avenue
Denver, Colorado 80237
Distributor for Janus Funds:
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206
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Distributor for Maxim Funds:
Not applicable.
Distribution for N&B AMT Funds:
Neuberger&Berman Management Incorporated
605 Third Avenue
2nd Floor
New York, New York 10158-0180
(e) The period during which the securities of such company have
been the underlying securities.
No underlying securities have to date been acquired by the
Series Account.
Information concerning Loads, Fees, Charges and Expenses
13. (a) Furnish the following information with respect to each load,
fee, expense or charge to which (1) principal payments; (2)
underlying securities; (3) distributions; (4) cumulated or
reinvested distributions or income; and (5) redeemed or
liquidated assets of the trust's securities are subject:
(A) the nature of such load, fee, expense, or charge;
(B) the amount thereof;
(C) the name of the person to whom such amounts are paid
and his relationship to the trust;
(D) the nature of the services performed by such person
in consideration for such load, fee, expense, or
charge.
For sub-paragraphs (A) to (D) of this sub-item, see "About the
Policy -- Charges and Deductions", in the Prospectus in
Exhibit D, incorporated herein by reference.
(b) For each installment payment type of periodic payment plan
certificate of the trust, furnish the following information
with respect to sales load and other deductions from principal
payments (chart omitted).
See "About the Policy -- Charges and Deductions -- Expense
Charges Applied to Premium", and "About the Policy --
Supplemental Benefits -- Term Life Insurance Rider" in the
Prospectus in Exhibit D, incorporated herein by reference.
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(c) State the amount of total deductions as a percentage of the
net amount invested for each type of security issued by the
trust. State each different sales charge available as a
percentage of the public offering price and as a percentage of
the net amount invested. List any special purchase plans or
methods established by rule or exemptive order that reflect
scheduled variations in, or elimination of, the sales load,
and identify each class of individuals or transactions to
which such plans apply.
See (a) and (b) above, which are incorporated herein by
reference.
(d) Explain fully the reasons for any difference in the price at
which securities are offered generally to the public, and the
price at which securities are offered for any class of
transactions to any class or group of individuals, including
officers, directors, or employees of the depositor, trustee,
custodian, or principal underwriter.
See "About the Policy -- Charges and Deductions -- Monthly
Deduction" and "About the Policy -- Charges and Deductions --
Expense Charges Applied to Premium", and "About the Policy --
Supplemental Benefits -- Term Life Insurance Rider" in the
Prospectus in Exhibit D, incorporated herein by reference.
(e) Furnish a brief description of any loads, fees, expenses or
charges not covered in Item 13(a) which may be paid by
security holders in connection with the trust or its
securities.
None
(f) State whether the depositor, principal underwriter, custodian
or trustee, or any affiliated person of the foregoing may
receive profits or other benefits not included in answer to
Item 13(a) or 13(d) through the sale or purchase of the
trust's securities or interests in such securities, or
underlying securities or interests in underlying securities,
and describe fully the nature and extent of such profits or
benefits.
See "About the Policy -- Summary of Policy -- Fees and
Expenses of the Funds" and "About the Policy -- Charges and
Deductions -- Fund Expenses", in the Prospectus in Exhibit D,
incorporated herein by reference.
(g) State the percentage that the aggregate annual charges and
deductions for maintenance and other expenses of the trust
bear to the dividend and interest income from the trust
property during the period covered by the financial statements
filed herewith:
Not applicable since the Series Account has not yet commenced
operations.
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Information Concerning the Operations of the Trust
14. Describe the procedure with respect to applications (if any) and the
issuance and authentication of the trust's securities, and state the
substance of the provisions of any indenture or agreement pertaining
thereto.
See "About the Policy -- Policy Application, Issuance and Initial
Premium", "About the Policy -- Premium Payments -- Allocation of Net
Premiums", and "Distribution of the Policy" in the Prospectus in
Exhibit D, incorporated herein by reference.
15. Describe the procedure with respect to the receipt of payments from
purchasers of the trust's securities and the handling of the proceeds
thereof, and state the substance of the provisions of any indenture or
agreement pertaining thereto.
See "About the Policy -- Policy Application, Issuance and Initial
Premium", "About the Policy -- Premium Payments", and "About the Policy
-- Transfers Between Divisions" in the Prospectus in Exhibit D,
incorporated herein by reference.
16. Describe the procedure with respect to the acquisition of underlying
securities and the disposition thereof, and state the substance of the
provisions of any indenture or agreement pertaining thereto.
See "The Series Account" and "The Investment Options" in the Prospectus
in Exhibit D incorporated herein by reference.
17. (a) Describe the procedure with respect to withdrawal or
redemption by security holders.
The procedures with respect to withdrawal or redemption by
security holders are described in response to Items 10(c) and
10(d), which are incorporated herein by reference.
(b) Furnish the names of any persons who may redeem or repurchase,
or are required to redeem or repurchase, the trust's
securities or underlying securities from security holders, and
the substance of the provisions of any indenture or agreement
pertaining thereto.
See Items 10(c), 10(d) and 10(e) and 17(a), which are
incorporated herein by reference.
(c) Indicate whether repurchased or redeemed securities will be
canceled or may be resold.
Not applicable. Series Account assets are used to support
benefits and amounts payable under a Policy and there is no
limit on the amount of Series Account interests that may be
sold.
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18. (a) Describe the procedure with respect to the receipt, custody
and disposition of the income and other distributable funds of
the trust and state the substance of the provisions of any
indenture or agreement pertaining thereto.
See "The Investment Options" and "About the Policy -- Premium
Payments --Allocation of Net Premiums" in the Prospectus in
Exhibit D, incorporated herein by reference.
(b) Describe the procedure, if any, with respect to the
reinvestment of distributions to security holders and state
the substance of the provisions of any indenture or agreement
pertaining thereto.
Not applicable.
(c) If any reserves or special funds are created out of income or
principal, state with respect to each such reserve or fund the
purpose and ultimate disposition thereof, and describe the
manner of handling of same.
The assets of the Series Account which are allocable to the
Policies constitute a reserve for the payment of benefits
under the Policies. The general assets of the Company are also
available to satisfy the Company's contractual obligations
under the Policies.
(d) Submit a schedule showing the periodic and special
distributions which have been made to security holders during
the three years covered by the financial statements filed
herewith. State for each such distribution the aggregate
amount and amount per share. If distributions from sources
other than current income have been made, identify each such
other source and indicate whether such distribution represents
the return of principal payments to security holders. If
payments other than cash were made describe the nature
thereof, the account charged and the basis of determining the
amount of such charge.
Not applicable.
19. Describe the procedure with respect to the keeping of records and
accounts of the trust, the making of reports and the furnishing of
information to security holders, and the substance of the provisions of
any indenture or agreement pertaining thereto.
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The Company has responsibility for all administration of the Policies.
The Company, among other things, will maintain the records and books of
the Series Account. It also will maintain records of the name, address,
taxpayer identification number, and other pertinent information for
each Owner and the number and type of Policy issued to each such Owner
and records with respect to the Account Value, Cash Surrender Value,
Unit Value and the death benefit of each Policy. Under the Distribution
Agreement among the Company on its own behalf and on behalf of the
Series Account and BCE, BCE will maintain certain records relating to
the sale of the Policies.
See "Report to Owner " in the Prospectus in Exhibit D, incorporated
herein by reference.
20. State the substance of the provisions of any indenture or agreement
concerning the trust with respect to the following:
(a) Amendments to such indenture or agreement;
Item 10(g) is incorporated herein by reference.
(b) The extension or termination of such indenture or agreement;
Items 6(a) and 6(b) are incorporated herein by reference.
(c) The removal or resignation of the trustee or custodian, or the
failure of the trustee or custodian to perform its duties,
obligations and functions;
Not applicable, for the reasons set forth in Item 3, which is
incorporated herein by reference.
(d) The appointment of a successor trustee and the procedure if a
successor trustee is not appointed;
Not applicable.
(e) The removal or resignation of the depositor, or the failure of
the depositor to perform its duties, obligations and
functions;
There are no provisions relative to the removal or resignation
of the depositor or the failure of the depositor to perform
its duties, obligations and functions. The Company is bound
under the Policies and Colorado insurance law to carry out its
obligations and those of the Series Account under the
Policies.
(f) The appointment of a successor depositor and the procedure if
a successor depositor is not appointed.
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There are no provisions relating to the appointment of a
successor depositor or the procedure if a successor depositor
is not appointed. The Company is bound under the Policies and
Colorado insurance law to carry out its obligations (including
those with respect to the Series Account) under the Policies.
21. (a) State the substance of the provisions of any indenture or
agreement with respect to loans to security holders.
See "About the Policy -- Policy Loans" in the Prospectus in
Exhibit D, incorporated herein by reference.
(b) Furnish a brief description of any procedure or arrangement by
which loans are made available to security holders by the
depositor, principal underwriter, trustee or custodian, or any
affiliated person of the foregoing. The following items should
be covered:
(1) the name of each person who makes such agreements or
arrangements with security holders;
(2) the rate of interest payable on such loans;
(3) the period for which loans may be made;
(4) costs or charges for default in repayment at maturity;
(5) other material provisions of the agreement or
arrangements.
Item 21(a) is incorporated herein by reference.
(c) If such loans are made, furnish the aggregate amount of loans
outstanding at the end of the last fiscal year, the amount of
interest collected during the last fiscal year allocated to
the depositor, principal underwriter, trustee or custodian or
affiliated person of the foregoing and the aggregate amount of
loans in default at the end of the last fiscal year covered by
financial statements filed herewith.
Not applicable, since no Policies have yet been sold.
22. State the substance of the provisions of any indenture or agreement
with respect to limitations on the liabilities of the depositor,
trustee or custodian, or any other party to such indenture or
agreement.
There are no such provisions.
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23. Describe any bonding arrangement for officers, directors, partners or
employees of the depositor or principal underwriter of the trust,
including the amount of coverage and the type of bond.
See "Great-West Life & Annuity Insurance Company" in the Prospectus in
Exhibit D, incorporated herein by reference.
24. State the substance of any other material provisions of any indenture
or agreement concerning the trust or its securities and a description
of any other material functions or duties of the depositor, trustee or
custodian not stated in Item 10 or Items 14 to 23 inclusive.
See "About the Policy -- Death Benefit", "About the Policy -- Changes
in Death Benefit Option", "About the Policy -- Changes in Total Face
Amount", "About the Policy -- Paid-Up Life Insurance", "About the
Policy -- Deferral of Payment" and "About the Policy -- Other Policy
Provisions" in the Prospectus in Exhibit D, incorporated herein by
reference.
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
ORGANIZATION AND OPERATIONS OF DEPOSITOR
25. State the form of organization of the depositor of the trust, the name
of the state or other sovereign power under the laws of which the
depositor was organized and the date of organization.
See "Great-West Life & Annuity Insurance Company" in the Prospectus in
Exhibit D, incorporated herein by reference.
26. (a) Furnish the following information with respect to all fees
received by the depositor of the trust in connection with the
exercise of any functions or duties concerning securities of
the trust during the period covered by the financial
statements filed herewith: (Chart omitted)
The Company has not received any such fees as yet.
(b) Furnish the following information with respect to any fee or
any participation in fees received by the depositor from any
underlying investment company or any affiliated person or
investment adviser of such company:
(1) the nature of such fee or participation;
(2) the name of the person making payment;
(3) the nature of the services rendered in consideration
for such fee or participation;
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(4) the aggregate amount received during the last fiscal
year covered by the financial statements filed
herewith.
The Company has not received any such fees.
27. Describe the general character of the business engaged in by the
depositor including a statement as to any business other than that of
depositor of the trust. If the depositor acts or has acted in any
capacity with respect to any investment company or companies other than
the trust, state the name or names of such company or companies, their
relationship, if any, to the trust, and the nature of the depositor's
activities therewith. If the depositor has ceased to act in such named
capacity, state the date of and circumstances surrounding such
cessation.
See "Great-West Life & Annuity Insurance Company" in the Prospectus in
Exhibit D, incorporated herein by reference.
Officials and Affiliated Persons of Depositor
28. (a) Furnish as at latest practicable date the following
information with respect to the depositor of the trust, with
respect to each officer, director, or partner of the
depositor, and with respect to each natural person directly or
indirectly owning, controlling or holding with power to vote
five percent or more of the outstanding voting securities of
the depositor. (Chart omitted).
Items 29 and 30 are incorporated herein by reference.
(b) Furnish a brief statement of the business experience during
the last five years of each officer, director or partner of
the depositor.
See "Our Directors and Executive Officers" in the Prospectus
in Exhibit D, incorporated herein by reference.
Companies Owning Securities of Depositor
29. Furnish as at latest practicable date the following information with
respect to each company which directly or indirectly owns, controls or
holds with power to vote five percent or more of the outstanding voting
securities of the depositor.
The Great-West Life Assurance Company indirectly owns 100% of the
outstanding voting securities of Great-West. Great-West Lifeco Inc.
owns 99.5% of The Great-West Life Assurance Company. Power Financial
Corporation of Canada owns 81.2% of Great-West Lifeco Inc. Power
Corporation of Canada owns, through wholly-owned subsidiaries, 68.1% of
Power Financial Corporation. Mr. Paul Desmarais, through a group of
private holding companies, which he controls, has voting control of
Power Corporation of Canada.
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Controlling Persons
30. Furnish as at latest practicable date the following information with
respect to any person, other than those covered by Items 28, 29 and 42
who directly or indirectly controls the depositor.
Not applicable
Compensation of Officers and Directors of Depositor
Compensation of Officers of Depositor
31. Furnish the following information with respect to the remuneration for
services paid by the depositor during the last fiscal year covered by
financial statements filed herewith:
(a) Directly to each of the officers or partners of the depositor
directly receiving the three highest amounts of remuneration:
No officer, director or employee has been paid any separate
remuneration by the Company for services with respect to the
Series Account.
(b) Directly to all officers or partners of the depositor as a
group exclusive of persons whose remuneration is included
under Item 31 (a), stating separately the aggregate amount
paid by the depositor itself and the aggregate amount paid by
all the subsidiaries.
Item 31(a) is incorporated herein by reference.
(c) Indirectly or through subsidiaries to each of the officers or
partners of the depositor.
Item 31(a) is incorporated herein by reference.
Compensation of Directors
32. Furnish the following information with respect to the remuneration for
services, exclusive of remuneration reported under Item 31, paid by the
depositor during the last fiscal year covered by financial statements
filed herewith:
(a) The aggregate direct remuneration to directors;
Item 31(a) is incorporated herein by reference.
(b) Indirectly or through subsidiaries to directors.
Item 31(a) is incorporated herein by reference.
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Compensation to Employees
33. (a) Furnish the following information with respect to the
aggregate amount of remuneration for services of all employees
of the depositor (exclusive of persons whose remuneration is
reported in Items 31 and 32) who received remuneration in
excess of $10,000 during the last fiscal year covered by
financial statements filed herewith from the depositor and any
of its subsidiaries.
Item 31(a) is incorporated herein by reference.
(b) Furnish the following information with respect to the
remuneration for services paid directly during the last fiscal
year covered by financial statements filed herewith to the
following classes of persons (exclusive of those persons
covered by Item 33(a)): (1) sales managers, branch managers,
district managers and other persons supervising the sale of
registrant's securities; (2) salesmen, sales agents,
canvassers and other persons making solicitations but not in a
supervisory capacity; (3) administrative and clerical
employees; and (4) others (specify). If a person is employed
in more than one capacity, classify according to predominant
type of work.
Item 31(a) is incorporated herein by reference.
Compensation to Other Persons
34. Furnish the following information with respect to the aggregate amount
of compensation for services paid any person (exclusive of persons
whose remuneration is reported in Items 31, 32 and 33), whose aggregate
compensation in connection with services rendered with respect to the
trust in all capacities exceeded $10,000 during the last fiscal year
covered by financial statements filed herewith from the depositor and
any of its subsidiaries:
Not applicable, because the Series Account has not yet commenced
operations.
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
Distribution of Securities
35. Furnish the names of the states in which sales of the trust's
securities: (a) are currently being made, (b) are presently proposed to
be made, and (c) have been discontinued, indicating by appropriate
letter the status with respect to each state.
No sales of the Policies have been made or are currently being made. It
is presently proposed to sell the Policies in all the states (except
New York and New Jersey), the District of Columbia and Puerto Rico, to
the extent that, and at such time as, the Company obtains necessary
regulatory clearance in such states to do so.
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36. If sales of the trust's securities have at any time since January 1,
1936 been suspended for more than a month describe briefly the reasons
for such suspension.
Not applicable.
37. (a) Furnish the following information with respect to each
instance where, subsequent to January 1, 1937, any federal or
state governmental officer, agency, or regulatory body denied
authority to distribute securities of the trust, excluding a
denial which was merely a procedural step prior to any
determination by such officer, etc. and which denial was
subsequently rescinded:
(1) name of officer, agency or body;
(2) date of denial;
(3) brief statement of reasons given for denial.
As to (1) through (3), none.
(b) Furnish the following information with regard to each instance
where, subsequent to January 1, 1937, the authority to
distribute securities of the trust has been revoked by any
federal or state governmental officer, agency or regulatory
body:
(1) name of officer, agency or body;
(2) date of revocation;
(3) brief statement of reasons given for revocation.
As to (1) through (3), none.
38. (a) Furnish a general description of the method of distribution of
securities of the trust.
See "Distribution of the Policy" in the Prospectus in Exhibit
D, incorporated herein by reference.
(b) State the substance of any current selling agreement between
each principal underwriter and the trust or the depositor,
including a statement as to the inception and termination
dates of the agreement, any renewal and termination
provisions, and any assignment provisions.
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The Company will execute a Distribution Agreement with BCE
whereby BCE will distribute the Policies on a best efforts
basis. The agreement will be effective on the date stipulated
and will remain effective until terminated by either party
upon not less than 60 days advance written notice and may
not be assigned, except by operation of law.
See Exhibit 1-A(3)(a) and "Distribution of the Policy" in the
Prospectus in Exhibit D, incorporated herein by reference.
(c) State the substance of any current agreements or arrangements
of each principal underwriter with dealers, agents, salesmen,
etc. with respect to commissions and overriding commissions,
territories, franchises, qualifications and revocations. If
the trust is the issuer of periodic payment plan certificates,
furnish schedules of commissions and the bases thereof. In
lieu of a statement concerning schedules of commissions, such
schedules of commissions may be filed as Exhibit A(3)(c).
See Exhibits 1-A(3)(b) and (c) and "Distribution of the
Policy" in the Prospectus in Exhibit D, incorporated herein by
reference.
Information Concerning Principal Underwriter.
39. (a) State the form of organization of each principal underwriter
of securities of the trust, the name of the state or other
sovereign power under the laws of which each underwriter was
organized and the date of organization.
BCE is a corporation organized under the laws of the State of
Delaware on October 12, 1984.
(b) State whether any principal underwriter currently distributing
securities of the trust is a member of the National
Association of Securities Dealers, Inc.
Not applicable as the Series Account currently is not
distributing securities. BCE is a member of the NASD.
40. (a) Furnish the following information with respect to all fees
received by each principal underwriter of the trust from the
sale of securities of the trust and any other functions in
connection therewith exercised by such underwriter in such
capacity or otherwise during the period covered by the
financial statements filed herewith:
Not applicable, since no Policies have yet been sold.
(b) Furnish the following information with respect to any fee or
any participation in fees received by each principal
underwriter from any underlying investment company or any
affiliated person or investment adviser of such company:
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(1) the nature of such fee or participation;
(2) the name of the person making payment;
(3) the nature of the services rendered in consideration
for such fee or participation;
(4) the aggregate amount received during the last fiscal
year covered by the financial statements filed
herewith.
The response to Item 40(a) is incorporated herein by
reference. No such fee or any participation in fees
are provided for. The response to Item 13(a) is
incorporated herein by reference.
41. (a) Describe the general character of the business engaged in by
each principal underwriter, including a statement as to any
business other than the distribution of securities of the
trust. If a principal underwriter acts or has acted in any
capacity with respect to any investment company or companies,
other than the trust, state the name or names of such company
or companies, their relationship, if any, to the trust and the
nature of such activities. If a principal underwriter has
ceased to act in such named capacity, state the date of and
circumstances surrounding such cessation.
BCE is a limited broker/dealer which distributes only variable
insurance products and mutual funds. It also acts as principal
underwriter for FutureFunds Series Account and Maxim Series
Account.
(b) Furnish as at latest practicable date the address of each
branch office of each principal underwriter currently selling
securities of the trust and furnish the name and residence
address of the person in charge of such office.
Not applicable, since no Policies are currently being sold.
(c) Furnish the number of individual salesmen of each principal
underwriter through whom any of the securities of the trust
were distributed for the last fiscal year of the trust covered
by the financial statements filed herewith and furnish the
aggregate amount of compensation received by such salesmen in
such year.
Not applicable, since no sales of Policies have yet been made.
42. Furnish as at latest practicable date the following information with
respect to each principal underwriter currently distributing securities
of the trust and with respect to each of the officers, directors or
partners of such underwriter.
See "Distribution of the Policy" in the Prospectus in Exhibit D,
incorporated herein by reference.
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43. Furnish, for the last fiscal year covered by the financial statements
filed herewith, the amount of brokerage commissions received by any
principal underwriter who is a member of a national securities exchange
and who is currently distributing the securities of the trust or
effecting transactions for the trust in the portfolio securities of the
trust.
Not applicable, since no Policies have yet been sold.
Offering Price or Acquisition Valuation of Securities of the Trust
44. (a) Furnish the following information with respect to the method
of valuation used by the trust for purposes of determining the
offering price to the public of securities issued by the trust
or the valuation of shares or interests in the underlying
securities acquired by the holder of a periodic payment plan
certificate:
(1) the source of quotations used to determine the value
of portfolio securities;
Fund shares are valued at net asset value, as
supplied to the Company by the Funds or their agents.
(2) whether opening, closing, bid, asked or any other
price is used;
Not applicable.
(3) whether price is as of the day of sale or as of any
other time;
The response to Item 16 is incorporated herein by
reference.
(4) a brief description of the methods used by registrant
for determining other assets and liabilities
including accrual for expenses and taxes (including
taxes on unrealized appreciation);
The Series Account's assets and liabilities (such as
charges against the Series Account) are valued in
accordance with generally accepted accounting
principles on an accrual basis. With regard to
charges for accrual of an income tax reserve, Item
13(a) is incorporated herein by reference.
(5) other items which registrant adds to the net asset
value in computing offering price of its securities;
Not applicable, for the reasons set forth in Item
44(b), which is incorporated herein by reference.
(6) whether adjustments are made for fractions:
(i) before adding distributor's compensation (load);
and
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(ii) after adding distributor's compensation (load):
Not applicable, because the Series Account does not
compute per-unit values in the manner presupposed by
this Item and Item 44(b). Appropriate adjustments
will be made for fractions in all computations.
(b) Furnish a specimen schedule showing the components of the
offering price of the trust's securities as at the latest
practicable date.
Since the Series Account has not issued any Policies, this
item cannot be answered in the way it contemplates. In return
for premium paid, the Policy Owners and beneficiaries have
insurance coverage in the amount of the death benefit under
the Policy, a right to the Cash Surrender Value of the Policy
and an interest in the Account Value of the Policy. The manner
of calculating these benefits, rights and interests is
described in Items 10(c), (d), (e) and (i), which are
incorporated herein by reference. The fees and charges to
which the Policies are subject are described in Item 13, which
is incorporated herein by reference, and the manner of
determining the amount of premium under a Policy is described
in Item 44(c), which is incorporated herein by reference.
(c) If there is any variation in the offering price of the trust's
securities to any person or classes of persons other than
underwriters, state the nature and amount of such variation
and indicate the person or classes of persons to whom such
offering is made.
In setting its premium rates, the Company considers actuarial
estimates of death and cash value benefits, terminations,
expenses, investment experience and amounts contributed to the
Company's surplus. For additional information as to how
premium rates are set, see Items 13(c) and 13(a), which are
incorporated herein by reference.
45. Furnish the following information with respect to any suspension of the
redemption rights of the securities issued by the trust during the
three fiscal years covered by the financial statements filed herewith:
(a) by whose action redemption rights were suspended;
(b) the number of days' notice given to security holders prior to
suspension of redemption rights;
(c) reason for suspension;
(d) period during which suspension was in effect.
There has been no such suspension.
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Redemption Valuation of Securities of the Trust
46. (a) Furnish the following information with respect to the method
of determining the redemption or withdrawal valuation of
securities issued by the trust:
(1) the source of quotations used to determine the value
of portfolio securities;
Item 44(a)(1) is incorporated herein by reference.
(2) whether opening, closing, bid, asked or any other
price is used;
Not applicable.
(3) whether price is as of the day of sale or as of any
other time;
Item 44(a)(3) is incorporated herein by reference.
(4) a brief description of the methods used by registrant
for determining other assets and liabilities
including accrual for expenses and taxes (including
taxes on unrealized appreciation);
Item 44(a)(4) is incorporated herein by reference.
(5) other items which registrant deducts from the net
asset value in computing redemption value of its
securities;
Item 44(a)(5) is incorporated herein by reference.
(6) whether adjustments are made for fractions.
Item 44(a)(6) is incorporated herein by reference.
(b) Furnish a specimen schedule showing the components of the
redemption price to the holders of the trust's securities as
at the latest practicable date.
To the extent that this paragraph is applicable, see the
answers to Items 44(a) and 46(a), which are incorporated
herein by reference.
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Purchase and Sale of Interests in Underlying Securities from and to
Security Holders
47. Furnish a statement as to the procedure with respect to the maintenance
of a position in the underlying securities or interests in the
underlying securities, the extent and nature thereof and the person who
maintains such a position. Include a description of the procedure with
respect to the purchase of underlying securities or interests in the
underlying securities from security holders who exercise redemption or
withdrawal rights and the sale of such underlying securities and
interests in the underlying securities to other security holders. State
whether the method of valuation of such underlying securities or
interests in the underlying securities differs from that set forth in
Items 44 and 46. If any item of expenditure included in the
determination of the valuation is not or may not actually be incurred
or expended, explain the nature of such item and who may benefit from
the transaction.
The response to Item 16 is incorporated herein by reference. There is
no procedure for the purchase of underlying securities or interests
therein from Owners who exercise surrender rights.
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Furnish the following information as to each trustee or custodian of
the trust:
(a) Name and principal business address;
(b) Form of organization;
(c) State or other sovereign power under the laws of which the
trustee or custodian was organized;
(d) Name of governmental supervising or examining authority.
Not applicable. The Series Account has neither trustee nor
custodian.
49. State the basis for the payment of fees or expenses of the trustee or
custodian for services rendered with respect to the trust and its
securities, and the aggregate amount thereof for the last fiscal year.
Indicate the person paying such fees or expenses. If any fees or
expenses are prepaid, state the unearned amount.
Not applicable.
50. State whether the trustee or custodian or any other person has or may
create a lien on the assets of the trust, and if so, give full
particulars, outlining the substance of the provisions of any indenture
or agreement with respect thereto.
No such lien may be created.
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VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Furnish the following information with respect to the insurance of
holders of securities:
(a) The name and address of the insurance company;
Various insurance benefits are provided under the Policies by
the Company, the address of which is incorporated herein by
reference to Item 2.
(b) The types of policies and whether individual or group
policies;
The Policies are flexible premium variable universal life
insurance policies and are issued on an individual basis.
(c) The types of risks insured and excluded;
The mortality and expense risk assumed is that the Company's
estimates of longevity and of the expenses incurred over the
lengthy period the Policy may be in effect --which estimates
are the basis for the level of other charges the Company makes
under the Policy -- will not be correct.
(d) The coverage of the policies;
See "About the Policy -- Death Benefit", "About the Policy --
Changes in Death Benefit Option", "About the Policy -- Changes
in Total Face Amount" in the Prospectus in Exhibit D,
incorporated herein by reference.
(e) The beneficiaries of such policies and the uses to which the
proceeds of policies must be put;
The recipient of the benefits of the insurance undertakings
described in Item 51(c) is either the designated primary
beneficiary, any contingent beneficiaries, or the estate of
the insured(s) as stated in the application for the Policy or
as subsequently modified by the Owner. There is no limitation
on the use of the proceeds.
(f) The terms and manner of cancellation and of reinstatement;
The insurance undertakings described in Item 51(c) are
integral parts of the Policy and may not be terminated while
the Policy remains in effect, except to the extent set forth
in Items 10(e) and 21(a), which are incorporated herein by
reference.
(g) The method of determining the amount of premium to be paid by
holders of securities;
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See "About the Policy -- Policy Application, Issuance and
Initial Premium" and "About the Policy -- Premium Payments" in
the Prospectus in Exhibit D, incorporated herein by reference.
(h) The amount of aggregate premiums paid to the insurance company
during the last fiscal year;
Not applicable, since no Policies have yet been sold.
(i) Whether any person other than the insurance company receives
any part of such Payments, the name of each such person and
the amount involved, and the nature of the services rendered
therefor;
Item 13(e) is incorporated herein by reference.
(j) The substance of any other material provisions of any
indenture or agreement of the trust relating to insurance.
None except as disclosed in this registration statement.
VII. POLICY OF REGISTRANT
52. (a) Furnish the substance of the provisions of any indenture or
agreement with respect to the conditions upon which and the
method of selection by which particular portfolio securities
must or may be eliminated from the assets of the trust or must
or may be replaced by other portfolio securities. If an
investment adviser or other person is to be employed in
connection with such selection, elimination or substitution,
state the name of such person, the nature of any affiliation
to the depositor, trustee or custodian, and any principal
underwriter, and the amount of the remuneration to be received
for such services. If any particular person is not designated
in the indenture or agreement, describe briefly the method of
selection of such person.
Items 10(g) and 10(h) are incorporated herein by reference
with regard to the Company's right to substitute any other
investment for shares of any of the Funds.
(b) Furnish the following information with respect to each
transaction involving the elimination of any underlying
security during the period covered by the financial statements
filed herewith:
(1) title of security;
(2) date of elimination;
(3) reasons for elimination;
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(4) the use of the proceeds from the sale of the
eliminated security;
(5) title of security substituted, if any;
(6) whether depositor, principal underwriter, trustee or
custodian or any affiliated person of the foregoing
were involved in the transaction;
(7) compensation or remuneration received by each such
person directly or indirectly as a result of the
transaction.
Not applicable, since no Policies have yet been sold.
(c) Describe the policy of the trust with respect to the
substitution and elimination of the underlying securities of
the trust with respect to:
(1) the grounds for elimination and substitution;
(2) the type of securities which may be substituted for
any underlying security;
(3) whether the acquisition of such substituted security
or securities would constitute the concentration of
investment in a particular industry or group of
industries or would conform to a policy of
concentration of investment in a particular industry
or group of industries;
(4) whether such substituted securities may be the
securities of any other investment company; and
(5) the substance of the provisions of any indenture or
agreement which authorize or restrict the policy of
the registrant in this regard.
Items 10(g) and 10(h) are incorporated herein by reference.
(d) Furnish a description of any policy (exclusive of policies
covered by paragraphs (a) and (b) herein) of the trust which
is deemed a matter of fundamental policy and which is elected
to be treated as such.
None.
Regulated Investment Company
53. (a) State the taxable status of the trust.
See "Our Taxes" in the Prospectus in Exhibit D, incorporated
herein by reference.
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(b) State whether the trust qualified for the last taxable year as
a regulated investment company as defined in Section 851 of
the Internal Revenue Code of 1954, and state its present
intention with respect to such qualification during the
current taxable year.
The Series Account has not and does not intend to so qualify.
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. If the trust is not the issuer of periodic payment plan certificates,
furnish the following information with respect to each class or series
of its securities:
Not applicable.
55. If the trust is the issuer of periodic payment plan certificates, a
transcript of a hypothetical account shall be filed in approximately
the following form on the basis of the certificate calling for the
smallest amount of payments. The schedule shall cover a certificate of
the type currently being sold assuming that such certificate had been
sold at a date approximately ten years prior to the date of
registration or at the approximate date of organization of the trust.
Not applicable. The Policies are life insurance contracts and do not
operate as the usual periodic payment plan certificate. Moreover, no
Policies have yet been sold and the Series Account has no operating
history.
56. If the trust is the issuer of periodic payment plan certificates,
furnish by years for the period covered by the financial statements
filed herewith in respect of certificates sold during such period, the
following information for each fully paid type of each installment
payment type of periodic payment plan certificate being issued by the
trust.
Not applicable, since no Policies have yet been sold.
57. If the trust is the issuer of periodic payment plan certificates,
furnish by years for the period covered by the financial statements
filed herewith the following information for each installment payment
type of periodic payment plan certificate currently being issued by the
trust.
Not applicable, since no Policies have yet been sold.
58. If the trust is the issuer of periodic payment plan certificates,
furnish the following information for each installment payment type of
periodic payment plan certificate outstanding as at the latest
practicable date.
Not applicable, since no Policies have yet been sold.
59. Financial Statements:
33
<PAGE>
Financial Statements of the Trust:
No financial statements are filed for the Series Account
because it has not yet commenced operations, has no assets nor
liabilities, and has received no income or incurred any
expense.
Financial Statements of the Depositor:
"Financial Statements" in the Prospectus included in Exhibit D
are incorporated herein by reference.
IX. EXHIBITS
Except as otherwise noted all exhibits are incorporated by reference to the
Registration Statement filed on Form S-6 of COL VUL-2 Series Account, filed
contemporaneously herewith.
Exhibit Number Title
- -------------- -----
1-A(1) Resolution of the Board of Directors of Great-West
establishing COLI VUL-2 Series Account*
1-A(2) Not Applicable
1-A(3)(a) Form of Distribution Agreement*
1-A(3)(b) Form of Broker-Dealer and General Agent Sales Agreement*
1-A(3)(c) Schedule of Sales Commissions*
1-A(4) Not Applicable
1-A(5)(a) Specimen Policy*
1-A(5)(b) Specimen Term Life Insurance Rider*
1-A(6)(a) Articles of Incorporation of Great-West**
1-A(6)(b) By-laws of Great-West***
1-A(7) Not Applicable
1-A(8) Form of Participation Agreement
1-A(9) Not Applicable
1-A(10) Specimen Application*
34
<PAGE>
B Not Applicable
C Not Applicable
D Prospectus included in Form S-6 Registration Statement of COLI
VUL-2 Series Account (File No. 333- ), filed contemporaneously
herewith.****
- ----------------------
*Incorporated by reference to Form S-6 Registration Statement of COLI VUL-2
Series Account (File No. 333- ), filed contemporaneously herewith.
**Incorporated by reference to Pre-Effective Amendment No. 2 to Form S-1 of
Great-West Life & Annuity Insurance Company (File No. 333-1173, filed on October
29, 1996).
***Incorporated by reference to Amendment No. 1 to Form 10-K of Great-West Life
& Annuity Insurance Company (File No. 333-1173, filed on March 31, 1998).
****Attached hereto.
35
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
depositor of the registrant has caused this registration statement to be duly
signed on behalf of the registrant in the City of Englewood and the State of
Colorado on the day 21st of January, 1999.
COLI VUL-2 SERIES ACCOUNT (Registrant)
By: GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BY: /s/William T. McCallum
----------------------------
William T. McCallum
President and Chief Executive Officer
Attest: /s/D.C. Lennox
-------------------------
D.C. Lennox
36
<PAGE>
EXHIBIT INDEX
EXHIBIT TITLE
D Prospectus included in Form S-6 Registration Statement
of COLI VUL-2 Series Account
(File No. 333-__________)
37
Great-West Life & Annuity Insurance Company
A Stock Company
8515 East Orchard Road
Englewood, Colorado 80111
(303) 689-3000
[logo] PROSPECTUS
A Flexible Premium Variable Universal Life Insurance Policy
offered by Great-West Life & Annuity Insurance Company
in connection with its COLI VUL-2 Series Account
This Prospectus describes a flexible premium variable universal life
insurance policy (the "Policy") offered by Great-West Life & Annuity Insurance
Company ("Great-West," "we" or "us"). The Policy is designed for use by
corporations and employers to provide life insurance coverage in connection
with, among other things, deferred compensation plans. The Policies are designed
to meet the definition of "life insurance contracts" for federal income tax
purposes.
The Policy allows "you," the Policy owner, within certain limits to:
o choose the type and amount of insurance coverage you need and increase or
decrease that coverage as your insurance needs change;
o choose the amount and timing of premium payments, within certain limits;
o allocate premium payments among 33 investment options and transfer Account
Value among available investment options as your investment objectives
change; and
o access your Policy's Account Value through loans and partial withdrawals or
total surrenders.
This Prospectus contains important information you should understand
before purchasing a Policy. We use certain special terms which are defined in
Appendix A. You should read this Prospectus carefully and keep it for future
reference.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or determined that this Prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The Date of this Prospectus is _____, 1999
<PAGE>
The Policies currently offer 33 investment options, each of which is a
Division of Great-West's COLI VUL-2 Series Account (the "Series Account"). Each
Division uses its assets to purchase, at their net asset value, shares of a
single mutual fund (collectively the "Funds"). The Divisions are referred to as
"variable" because their investment experience depends upon the investment
experience of the Funds in which they invest. Following is a list of the Funds
in which the Divisions currently invest:
American Century Variable Portfolios, Inc.
American Century VP Income & Growth
American Century VP International
American Century VP Value
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Dreyfus Capital Appreciation Portfolio
Dreyfus Growth and Income Portfolio
Federated Insurance Series
Federated American Leaders Fund II
Federated Growth Strategies Fund II
Federated High Income Bond Fund II
Federated International Equity Fund II
INVESCO Variable Investments Fund, Inc.
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Industrial Income Portfolio
INVESCO VIF - Total Return Portfolio
Janus Aspen Series
Balanced Portfolio
Flexible Income Portfolio
Maxim Series Fund, Inc.
Maxim Corporate Bond Portfolio
Maxim INVESCO ADR Portfolio
Maxim INVESCO Balanced Portfolio
Maxim INVESCO Small-Cap Growth
Portfolio
Maxim MidCap Portfolio
Maxim Money Market Portfolio
Maxim U.S. Government Securities Portfolio
Maxim Profile Portfolios:
Maxim Aggressive Profile Portfolio
Maxim Moderately Aggressive Profile
Portfolio
Maxim Moderate Profile Portfolio
Maxim Moderately Conservative Profile
Portfolio
Maxim Conservative Profile Portfolio
Neuberger&Berman Advisers Management Trust
Guardian Portfolio
Mid-Cap Growth Portfolio
Partners Portfolio
Socially Responsive Portfolio
You should contact your representative for further information as to the
availability of the Divisions. We may add or delete investment options in the
future.
The Policy does not have a guaranteed minimum Account Value. Your Policy's
Account Value may rise or fall, depending on the investment performance of the
Funds underlying the Divisions to which you have allocated your premiums. You
bear the entire investment risk on amounts allocated to the Divisions.
ii
<PAGE>
The investment policies and risks of each Fund are described in the accompanying
prospectuses for the Funds. Your Account Value will also reflect net premiums,
amounts withdrawn and cost of insurance or other charges.
The Policy provides for a Total Face Amount as shown on the Policy
Specifications page of your Policy. The death benefit payable under your Policy
may be greater than the Total Face Amount. As long as the Policy remains in
force and you make no withdrawals, the death benefit will never be less than the
Total Face Amount. If the Cash Surrender Value is insufficient to pay the Policy
charges, however, your Policy may lapse without value.
When the Insured dies, we will pay a death benefit to the beneficiary
specified by you. We will reduce the amount of the death benefit by any prior
withdrawals, unpaid Policy Debt, and unpaid Policy charges.
You generally may cancel the Policy by returning it to us within ten days
after you receive it. In some states, however, this right to return period may
be longer, as provided by state law. We will refund the greater of your
premiums, less any withdrawals, or Account Value.
It may not be advantageous for you to purchase a Policy to replace existing
life insurance coverage.
This Prospectus is valid only if accompanied by current prospectuses for
the Funds listed above. If any of these prospectuses are missing or outdated,
please contact us and we will send your the prospectus you need.
We may offer this Policy in group form in certain states, with individual
ownership represented by certificates. The description of Policies in this
Prospectus applies equally to certificates under group Policies unless the
context specifies otherwise.
The Policy may not be available in all states.
iii
<PAGE>
Table of Contents
Topic Page
Summary of Policy...................................................... 2
Great-West Life & Annuity Insurance
Company ............................................................. 8
The Series Account..................................................... 9
The Investment Options.................................................10
Expenses of the Funds..................................................16
About the Policy.......................................................16
Policy Application, Issuance and Initial Premium..................16
Free Look Period..................................................18
Premium Payments..................................................18
Premium. .....................................................18
Net Premiums..................................................19
Allocation of Net Premium.....................................19
Planned Periodic Premiums.....................................19
Death Benefit.....................................................20
Changes in Death Benefit Option...................................22
Changes in Total Face Amount......................................23
Minimum Changes...............................................23
Increases.....................................................23
Decreases.....................................................23
Surrenders........................................................23
Partial Withdrawal................................................23
Policy Loans......................................................24
Transfers Between Divisions.......................................24
Dollar Cost Averaging.............................................26
The Rebalancer Option.............................................26
Account Value.....................................................27
Net Investment Factor.........................................28
Splitting Units...............................................30
Charges and Deductions............................................31
Expense Charges Applied to Premium............................31
Mortality and Expense Risk Charge.............................31
Monthly Deduction.............................................32
Monthly Risk Rates...................................32
Service Charge.......................................33
Transfer Fee..................................................34
Partial Withdrawal Fee........................................34
Change of Death Benefit Option Fee............................34
Fund Expenses.................................................34
iv
<PAGE>
Paid-Up Life Insurance............................................35
Supplemental Benefits.............................................35
Term Life Insurance Rider.....................................35
Change of Insured Rider.......................................37
Continuation of Coverage..........................................37
Grace Period......................................................37
Termination of Policy.............................................38
Reinstatement.....................................................38
Deferral of Payment...............................................39
Rights of Owner...................................................39
Rights of Beneficiary.............................................40
Other Policy Provisions...........................................40
Exchange of Policy............................................40
Addition, Deletion or Substitution of Investments.............40
Entire Contract...............................................41
Alteration....................................................41
Modification..................................................41
Assignments...................................................42
Non-Participating.............................................42
Misstatement of Age or Sex (Non-Unisex Policy)................42
Suicide. .....................................................42
Incontestability..............................................43
Report to Owner...............................................43
Illustrations.................................................43
Notice and Elections..........................................43
Performance Information and Illustrations..............................44
Fund Performance..................................................44
Adjusted Fund Performance.........................................44
Other Information.................................................44
Policy Illustrations..............................................46
Federal Income Tax Considerations......................................46
Tax Status of the Policy..........................................46
Diversification of Investments....................................47
Policy Owner Control..............................................47
Tax Treatment of Policy Benefits..................................47
Life Insurance Death Benefit Proceeds.........................47
Tax Deferred Accumulation.....................................47
Distributions.................................................48
Modified Endowment Contracts..................................48
Distributions Under Modified Endowment Contracts..............49
Distributions Under a Policy That Is Not a MEC................50
Multiple Policies.............................................50
Treatment When Insured Reaches Attained Age 100...............50
Federal Income Tax Withholding................................50
Actions to Ensure Compliance with the Tax Law.................51
v
<PAGE>
Trade or Business Entity Owns or is Directly
or Indirectly a Beneficiary of the
Policy...............................................51
Other Employee Benefit Programs...................................52
Policy Loan Interest..............................................52
Our Taxes.........................................................52
Distribution of the Policy.............................................52
Voting Rights..........................................................53
Our Directors and Executive Officers...................................54
Other Information......................................................58
State Regulation..................................................58
Legal Proceedings.................................................58
Legal Matters.....................................................58
Experts...........................................................58
Registration Statements...........................................59
Year 2000 Compliance..............................................59
Financial Statements...................................................61
Appendix A -- Glossary of Terms........................................A-1
Appendix B -- Fees and Expenses of the
Funds.............................................................B-1
Appendix C -- Table of Death Benefit Percentages.......................C-1
Appendix D -- Sample Hypothetical
Illustrations.....................................................D-1
This Prospectus does not constitute an offering in any jurisdiction
where the offering would not be lawful. You should rely only on the information
contained in this Prospectus or in the prospectus or statement of additional
information of the Funds. We have not authorized anyone to provide you with
information that is different.
vi
<PAGE>
Summary of Policy
This is a summary of some of the most important features of
your Policy. The Policy is more fully described in the remainder
of the Prospectus. Please read this Prospectus carefully. Unless
otherwise indicated, the description of the Policy in this
Prospectus assumes that the Policy is in force, there is no
Policy Debt and current federal tax laws apply.
Corporate-Owned Variable Life Insurance
o The Policy provides for life insurance coverage on the
Insured and for a Cash Surrender Value which is payable if
your Policy is terminated during the Insured's lifetime. You
may also take partial withdrawals from and borrow portions
of your Account Value.
o The Account Value and death benefit of your Policy may
increase or decrease depending on the investment performance
of the Divisions to which you have allocated your premiums
and the death benefit option you have chosen. Your Policy
has no guaranteed minimum Cash Surrender Value. If the Cash
Surrender Value is insufficient to cover Policy charges,
your Policy may lapse without value.
o Under certain circumstances, a Policy may become a "modified
endowment contract" ("MEC") for federal tax purposes. This
may occur if you reduce the Total Face Amount of your Policy
or pay excessive premiums. We will monitor your premium
payments and other Policy transactions and notify you if a
payment or other transaction might cause your Policy to
become a MEC. We will not invest any premium or portion of a
premium that would cause your Policy to become a MEC. We
will promptly refund the money to you and, if you elect to
have a MEC contract, you can return the money to us with a
signed form of acceptance.
o We will issue Policies to corporations and employers to
provide life insurance coverage in connection with, among
other things, deferred compensation plans. We will issue
Policies on the lives of prospective Insureds who meet our
underwriting standards. An Insured's Issue Age must be
between 20 and 85 for Policies issued on a fully
underwritten basis and between 20 and 70 for Policies issued
on a guaranteed underwriting or a simplified underwriting
basis.
2
<PAGE>
Free Look Period
You may return your Policy to us for any reason within 10
days of receiving it, or such longer period as required by
applicable state law, and receive the greater of your premiums,
less any withdrawals, or your Account Value.
Premium Payments
o You must pay us an Initial Premium to put your Policy in
force. The minimum Initial Premium will vary based on
various factors, including the age of the Insured and the
death benefit option you select.
o Thereafter, you choose the amount and timing of premium
payments, within certain limits.
Death Benefit
o You may choose from among three death benefit options --
The Total Face o a fixed benefit equal to the Total Face Amount of your
Amount is the Policy;
minimum amount
of life insu- o a variable benefit equal to the sum of the Total Face
rance coverage Amount and your Policy's Account Value; or
specified in
your Policy o an increasing benefit equal to the sum of the Total
Face Amount and the accumulated value of all premiums
paid under your Policy accumulated at the interest rate
shown on the Policy Specifications page of your Policy.
o For each option, the death benefit may be greater if
necessary to satisfy federal tax law requirements.
o We will deduct any outstanding Policy Debt and unpaid Policy
charges before we pay a death benefit. In addition, prior
partial withdrawals may reduce the death benefit payable
under the first and third options.
o At any time, you may increase or decrease the Total Face
Amount, subject to our approval and other requirements set
forth in the Policy.
o After the first Policy Year, you may change your death
benefit option once each Policy Year.
3
<PAGE>
The Series Account
o We have established a separate account to fund the variable
benefits under the Policy.
o The assets of the separate account are insulated from the
claims of our general creditors.
Investment Options
o You may allocate your net premium payments among the 33
variable Divisions listed on the front cover of this
Prospectus.
o Each Division invests exclusively in shares of a single
mutual fund. Each Fund has distinct investment objectives
and policies, which are described in the accompanying
prospectuses for the Funds.
o You may transfer amounts from one Division to another.
Supplemental Benefits
o The following riders are available --
o term life insurance; and
o change of insured.
o We will deduct the cost, if any, of the rider(s) from your
Policy's Account Value on a monthly basis.
Accessing Your Policy's Account Value
o You may borrow from us using your Account Value as
collateral. Loans may be treated as taxable income if your
Policy is a "modified endowment contract" for federal income
Cash Surrender tax purposes and you have had positive net investment
Value is Account performance.
Value minus
any accrued o You may surrender your Policy for its Cash Surrender Value.
and unpaid There are no surrender charges associated with your Policy.
policy charges
and any o You may withdraw a portion of your Policy's Account Value at
Policy Debt. any time while your Policy is in force.
4
<PAGE>
o A withdrawal may reduce your death benefit, depending on
which death benefit option you have chosen.
o We will charge an administrative fee not greater than $25
per withdrawal on partial withdrawals after the first in a
Policy Year.
Account Value
o Your Policy's Account Value will reflect --
Account Value
is the sum of o the premiums you pay;
and the amount
of the Loan o the investment performance of the Divisions you select;
Account
o any Policy loans or partial withdrawals;
o your Loan Account balance; and
o the charges we deduct under the Policy.
Policy Charges and Deductions
o Expense Charges Against Premiums-- We will deduct a charge
from your premium payments that is guaranteed to be no more
than 10% to cover our sales expenses, premium tax expenses,
and certain federal tax consequences and other obligations
resulting from the receipt of premiums. The premium charge
consists of two portions: (i) a sales charge and (ii) a
"deferred acquisition cost" tax charge ("DAC charge") and
premium tax charge. The current sales charge in Policy Years
1 - 10 consists of 5.5% of premiums up to the target annual
premium plus 3.0% of premiums in excess of target, and 0% of
premiums in years thereafter. The current DAC and premium
tax charge equals 3.5% of premium in all Policy Years. We
may change these rates at any time subject to the overall
guarantee set forth above.
o Monthly Deduction -- At the beginning of each Policy Month,
we will deduct from your Policy's Account Value --
o a Monthly Risk Charge, to cover our anticipated costs
of providing insurance under the Policy;
o the cost of any supplemental benefit riders you choose
to add to your Policy;
5
<PAGE>
o a Service Charge to cover certain administrative
expenses in connection with the Policies. The Service
Charge is guaranteed not to exceed $15.00 each Policy
Month. Currently, this charge is $10.00 each Policy
Month for the first three Policy Years and $7.50 per
Policy Month thereafter; and
o any extra risk charge if the Insured is in a rated
class as specified in your Policy.
o Separate Account Charges -- On each Valuation Day we deduct
a Mortality and Expense Risk Charge from the Divisions to
compensate Great-West for the mortality and expense risks we
assume by issuing your Policy. The Mortality and Expense
Risk Charge will not exceed 0.90% of net asset value
annually of your Account Value. Currently, this charge is
0.45% in Policy Years 1 through 10, 0.30% in Policy Years 11
through 20, and 0.10% thereafter.
o Surrender Charges -- Your Policy has no surrender charges.
o Transfer Fee -- You may transfer Account Value among the
Divisions free of charge up to the first 12 transfers in one
calendar year. Thereafter, subject to certain exceptions, a
maximum administrative charge of $10 per transfer will be
deducted from your Account Value for all transfers in excess
of 12 made in the same calendar year.
o Partial Withdrawal Fee -- You may make one free partial
withdrawal of your Account Value each Policy Year.
Thereafter, a maximum administrative charge of $25 will be
deducted from your Account Value for all partial withdrawals
after the first made in the same Policy Year.
o Change of Death Benefit Option Fee -- A maximum
administrative charge of $100 will be deducted from your
Account Value each time you change your death benefit
option.
The charges assessed under the Policy are described in more
detail in "Charges and Deductions", beginning on page 31.
Fees and Expenses of the Funds
You will indirectly bear the costs of investment management
fees and expenses paid from the assets of the mutual fund
portfolios you select. The prospectuses for the Funds describe
their respective charges and expenses in more detail. We may
6
<PAGE>
receive compensation from the investment advisers or
administrators of the Funds. Such compensation will be consistent
with the services we provide and the cost savings resulting from
the arrangement and therefore may differ between Funds.
What if Charges and Deductions Exceed Account Value?
o Your Policy may terminate if your Account Value at the
beginning of any Policy Month is insufficient to pay all
charges and deductions then due.
o If your Policy would terminate due to insufficient value, we
will send you notice and allow you a 61 day Grace Period.
o If, within the Grace Period, you do not make a premium
payment sufficient to cover all accrued and unpaid charges
and deductions, your Policy will terminate at the end of the
Grace Period without further notice.
Reinstatement
If your Policy terminates due to insufficient value, we will
reinstate it within three years at your request, subject to
certain conditions.
Paid-Up Life Insurance
If the Insured reaches Attained Age 100 and your Policy is
in force, the Policy's Account Value, less Policy Debt, will be
applied as a single premium to purchase "paid-up" insurance. Your
Policy's Account Value will remain in the Series Account
allocated to the Divisions in accordance with your instructions.
The death benefit under this paid-up insurance generally will be
equal to your Account Value. As your Account Value changes based
on the investment experience of the Divisions, the death benefit
will increase or decrease accordingly.
7
<PAGE>
Federal Tax Considerations
Your Policy is structured to meet the definition of a "life
insurance contract" under the Tax Code. We may need to limit the
amount of your premium payments to ensure that your Policy
continues to meet that definition.
Your purchase of, and transactions under, your Policy may
have tax consequences that you should consider before purchasing
a Policy. In general, the death benefit will be excluded from the
gross income of the beneficiary. Increases in Account Value will
not be taxable as earned, although there may be income tax due on
a surrender of your Policy or partial withdrawal of your Policy's
Account Value. For more information on the tax treatment of the
Policy, see "Federal Income Tax Considerations" beginning on page
46 and consult your tax adviser.
Great-West Life & Annuity Insurance Company
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 February 1982. In September
1990, we redomesticated under the laws of Colorado.
We are authorized to do business in forty-nine states, the
District of Columbia, Puerto Rico and Guam. We issue individual
and group life insurance policies and annuity contracts and
accident and health insurance policies.
Great-West is a member of the Insurance Marketplace
Standards Association ("IMSA"). Accordingly, we may use the IMSA
logo and membership in IMSA in advertisements. Being a member of
IMSA means that Great-West has chosen to participate in IMSA's
Life Insurance Ethical Market Conduct Program.
Great-West is an indirect wholly-owned subsidiary of The
Great-West Life Assurance Company. The Great-West Life Assurance
Company is a subsidiary of Great-West Lifeco Inc., a holding
company. Great-West Lifeco Inc. is in turn a subsidiary of Power
Financial Corporation of Canada, a financial services company.
Power Corporation of Canada, a holding and management company,
has voting control of Power Financial Corporation of Canada. Mr.
Paul Desmarais, through a group of private holding companies,
which he controls, has voting control of Power Corporation of
Canada.
Great-West also acts as a sponsor for six other of its
separate accounts that are registered with the SEC as investment
companies: FutureFunds Series Account, Maxim Series Account,
Pinnacle Series Account, Retirement Plan Series Account, Variable
Annuity-1 Series Account, and Variable Annuity Account A.
8
<PAGE>
The officers and employees of Great-West are covered by a
joint fidelity bond. The fidelity bond coverage is $(Canadian)
100,000,000 in the aggregate with a single loss limit of
$(Canadian) 50,000,000. In addition to covering officers and
employees of Great-West, the joint fidelity bond also covers
certain affiliates of Great-West.
The Series Account
We established "COLI VUL-2 Series Account" (the "Series
Account") in accordance with Colorado law on November 25, 1997.
The Series Account may also be used to fund benefits payable
under other life insurance policies issued by us.
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.
The assets of We will at all times maintain assets in the Series Account
the Series with a total market value at least equal to the reserves and
Account are other liabilities relating to the variable benefits under all
insulated policies participating in the Series Account. Those assets may
from our not be charged with our liabilities from our other business. Our
general obligations under those policies are, however, our general
liabilities. corporate obligations.
The Series Account is registered with the Securities and
The Series Exchange Commission (the "SEC") under the Investment Company Act
Account is of 1940 ("1940 Act") as a unit investment trust. Registration
registered under the 1940 Act does not involve any supervision by the SEC of
with the SEC. the management or investment practices or policies of the Series
Account.
The Series Account is divided into 33 Divisions. Each
The Series Division invests exclusively in shares of a corresponding
Account has investment portfolio of a registered investment company (commonly
33 Divisions. known as a mutual fund). We may in the future add new or delete
Each Divi- existing Divisions. The income, gains or losses, realized or
sion invests unrealized, from assets allocated to each Division are credited
exclusively to or charged against that Division without regard to the other
in shares of income, gains or losses of the other Divisions. All amounts
a single allocated to a Division will be used to purchase shares of the
mutual fund corresponding Fund. The Divisions will at all times be fully
portfolio. invested in Fund 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 Funds.
The Investment Options
The Fund The Policy offers a number of investment options,
Prospectuses corresponding to the Divisions. Each Division invests in a single
have more Fund. Each Fund is a mutual fund registered under the 1940 Act,
information or a separate series of shares of such a mutual fund. More
about the comprehensive information, including a discussion of potential
Funds, and risks, is found in the current prospectuses for the Funds (the
may be ob- "Fund Prospectuses"). The Fund Prospectuses should be read in
tained from connection with this Prospectus. You may obtain a copy of each
us without Fund Prospectus without charge by Request.
charge.
9
<PAGE>
Each Fund holds its assets separate from the assets of the
other Funds, and each Fund has its own distinct investment
objective and policies. Each Fund operates as a separate
investment fund, and the income, gains and losses of one Fund
generally have no effect on the investment performance of any
other Fund.
The Funds are NOT available to the general public directly.
The Funds are available as investment options in variable life
insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in
certain qualified pension or retirement plans.
Some of the Funds have been established by investment
advisers which manage publicly traded mutual funds having similar
names and investment objectives. While some of the Funds may be
similar to, and may in fact be modeled after publicly traded
mutual funds, the Funds are not otherwise directly related to any
publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any similarly
named Fund may differ substantially.
The investment objectives of the current Funds are briefly
described below:
American Century Variable Portfolios, Inc. (advised by American
Century Investment Management, Inc.)
American Century VP Income & Growth seeks dividend growth,
current income and capital appreciation by investing in common
stocks.
American Century VP International seeks capital growth by
investing primarily in an internationally diversified portfolio
of common stocks that are considered by the adviser to have
prospects for appreciation.
American Century VP Value seeks long-term capital growth by
investing in securities that the adviser believes to be
undervalued at the time of purchase. Income is a secondary
objective.
Dreyfus Stock Index Fund (advised by The Dreyfus Corporation and
its affiliate Mellon Equity Associates)
Dreyfus Stock Index Fund seeks to provide investment results
that correspond to the price and yield performance of publicly
traded common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index.
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Dreyfus Variable Investment Fund (advised by The Dreyfus
Corporation)
Dreyfus Capital Appreciation Portfolio seeks to provide
long-term capital growth consistent with the preservation of
capital by investing primarily in the common stocks of domestic
and foreign issuers. Current income is a secondary investment
objective. Fayez Sarofim & Co. is the sub-adviser to this Fund
and, as such, provides day-to-day management.
Dreyfus Growth and Income Portfolio seeks to provide
long-term capital growth, current income and growth of income,
consistent with reasonable investment risk by investing primarily
in equity securities, debt securities and money market
instruments of domestic and foreign issuers.
Federated Insurance Series (advised by Federated Advisers)
Federated American Leaders Fund II seeks to achieve
long-term growth of capital by investing, under normal
circumstances, at least 65% of its total assets in common stock
of "blue-chip" companies. The Fund's secondary objective is to
provide income.
Federated Growth Strategies Fund II seeks capital
appreciation by investing at least 65% of its assets in equity
securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant
fundamental changes are taking place.
Federated High Income Bond Fund II seeks high current income
by investing primarily in a professionally managed, diversified
portfolio of fixed-income securities, including lower-rated
corporate debt obligations commonly referred to as "junk bonds."
Federated International Equity Fund II seeks to obtain a
total return on its assets by investing at least 65% of its
assets in equity securities of issuers located in at least three
different countries outside the United States.
INVESCO Variable Investments Fund, Inc. (advised by INVESCO Funds
Group, Inc.)
INVESCO VIF - High Yield Portfolio seeks a high level of
current income by investing substantially all of its assets in
lower-rated bonds and other debt securities and in preferred
stock.
INVESCO VIF - Industrial Income Portfolio seeks the best
possible current income while following sound investment
practices by investing at least 65% of its total assets in
dividend-paying common stocks, with up to 10% of its total assets
invested in equity securities that do not pay regular dividends
and the remainder invested in other income-producing securities
such as corporate bonds. Capital growth potential is an
additional consideration in the selection of portfolio
securities.
INVESCO VIF - Total Return Portfolio seeks a high total
return on investment through capital appreciation and current
income by investing in a combination of equity and fixed-income
securities.
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INVESCO Capital Management, Inc. serves as the sub-adviser to
this Fund and, as such, provides day-to- day management.
Janus Aspen Series (advised by Janus Capital Corporation)
Balanced Portfolio seeks long-term growth of capital,
balanced by current income by investing up to 40-60% of its
assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected
primarily for their income potential.
Flexible Income Portfolio seeks to maximize total return
from a combination of income and capital appreciation by
investing primarily in income-producing securities.
High-Yield Portfolio seeks high current income as its
primary objective by investing primarily in high yield/high risk
fixed-income securities, commonly referred to as "junk bonds."
Capital appreciation is a secondary objective when consistent
with the primary objective.
Worldwide Growth Portfolio seeks long-term growth of capital
by investing primarily in common stocks of foreign and domestic
issuers.
Maxim Series Fund, Inc. (advised by GW Capital Management, LLC, a
wholly-owned subsidiary of Great-West)
Maxim Corporate Bond Portfolio seeks high total investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its total assets may be
invested in preferred stocks. Loomis, Sayles & Company, L.P.
serves as sub-adviser to this Fund and, as such, provides
day-to-day management.
Maxim INVESCO ADR Portfolio seeks to achieve a high total
return on investment through capital appreciation and current
income, while reducing risk through diversification, by investing
in foreign securities that are issued in the form of American
Depository Receipts or foreign stocks that are registered with
the SEC and traded in the United States. Institutional Trust
Company serves as the sub-adviser to this Fund and, as such,
provides day-to-day management.
Maxim INVESCO Balanced Portfolio seeks to achieve a high
total return on investment through capital appreciation and
current income by investing in a combination of common stocks and
fixed-income securities. Institutional Trust Company serves as
the sub-adviser to this Fund and, as such, provides day-to-day
management.
Maxim INVESCO Small-Cap Growth Portfolio seeks long-term
capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth
companies with market capitalization of $1 billion or less at the
time of initial purchase. Institutional Trust Company serves as
the sub-adviser to this Fund and, as such, provides day-to-day
management.
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Maxim MidCap Portfolio seeks long-term growth of capital by
normally investing at least 65% of its assets in securities
issued by medium-sized companies. Janus Capital Corporation
serves as the sub-adviser to this Fund and, as such, provides
day-to-day management.
Maxim Money Market Portfolio seeks preservation of capital,
liquidity and the highest possible current income through
investments in short-term money market securities. An investment
in this Fund is not insured by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share,
it is possible to lose money.
Maxim U.S. Government Securities Portfolio seeks the highest
level of return consistent with preservation of capital and
substantial credit protection by investing primarily in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and
instrumentality obligations and in U.S. Treasury obligations.
Maxim Profile Portfolios
Maxim Aggressive Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation
by investing in other Maxim Funds with an emphasis on equity
investments.
Maxim Moderately Aggressive Profile Portfolio seeks to
achieve a high total return on investment through long-term
capital appreciation by investing in other Maxim Funds with an
emphasis on equity investments, though income is a secondary
consideration.
Maxim Moderate Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation
by investing in other Maxim Funds with a relatively equal
emphasis on equity and fixed-income investments.
Maxim Moderately Conservative Profile Portfolio seeks to
achieve the highest possible total return consistent with
reasonable risk through a combination of income and capital
appreciation by investing in other Maxim Funds with primary
emphasis on fixed-income investments, and, to a lesser degree, in
other Maxim Funds with an emphasis on equity investments.
Maxim Conservative Profile Portfolio seeks to achieve total
return consistent with preservation of capital primarily through
fixed-income investments by investing in other Maxim Funds with
an emphasis on fixed-income investments.
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Neuberger&Berman Advisers Management Trust
The portfolios listed below invest their assets in a
corresponding portfolio of Neuberger&Berman Advisers Managers
Trust, an open-end investment company registered under the 1940
Act. This type of arrangement is commonly referred to as a
"master/feeder" structure and is different from that of many
other investment companies which directly acquire and manage
their own assets. The investment objectives of the portfolios
listed below are identical to the corresponding portfolios in
which they invest and their investment performance will directly
correspond with the investment performance of those corresponding
portfolios. Neuberger&Berman Management Incorporated serves as
the investment adviser to Advisers Managers Trust and
Neuberger&Berman, LLC acts as sub-adviser.
Guardian Portfolio seeks capital appreciation, and,
secondarily, current income by investing primarily in common
stocks of long-established, high- quality companies. A
value-oriented investment approach is used in selecting
securities.
Mid-Cap Growth Portfolio seeks capital appreciation by
investing, under normal market conditions, in equity securities
of medium-sized companies. A growth-oriented investment approach
is used in selecting securities.
Partners Portfolio seeks capital growth by investing in
common stocks and other equity securities of medium to large
capitalization established companies. A value-oriented investment
approach is used in selecting securities.
Socially Responsive Portfolio seeks long-term capital
appreciation by investing in stocks of medium to large
capitalization companies that meet both financial and social
criteria. A value-oriented investment approach is used in
selecting securities.
You should contact your representative for further
information on the availability of the Divisions.
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Each Fund is subject to certain investment restrictions and
policies which may not be changed without the approval of a
majority of the shareholders of the Fund. See the accompanying
Fund Prospectuses for further information.
We automatically reinvest all dividends and capital gains
distributions from the Funds in shares of the distributing Fund
at their net asset value. The income and realized and unrealized
gains or losses on the assets of each Division are separate and
are credited to or charged against the particular Division
without regard to income, gains or losses from any other Division
or from any other part of our business. We will use amounts you
allocate to a Division to purchase shares in the corresponding
Fund and will redeem shares in the Funds to meet Policy
obligations or make adjustments in reserves. The Funds are
required to redeem their shares at net asset value and to make
payment within seven days.
The Funds may also be available to separate accounts
offering variable annuity and variable life products of other
affiliated and unaffiliated insurance companies, as well as our
other separate accounts. Although we do not anticipate any
disadvantages to this, there is a possibility that a material
conflict may arise between the interests of the Series Account
and one or more of the other separate accounts participating in
the Funds. A conflict may occur due to a change in law affecting
the operations of variable life and variable annuity separate
accounts, differences in the voting instructions of policyowners
and those of other companies, or some other reason. In the event
of conflict, we will take any steps necessary to protect
policyowners, including withdrawal of the Series Account from
participation in the Funds which are involved in the conflict or
substitution of shares of other Funds.
Expenses of the Funds
Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other
expenses. These expenses, therefore, are not direct charges
against Series Account assets or reductions from your Policy's
Account Value. You do, however, indirectly bear the expenses of
the Funds because those expenses are taken into consideration in
computing each Fund's net asset value, which is the share price
used to calculate the Unit Values of the Series Account. Fund
expenses are shown in Appendix B.
The management fees and other expenses of the Funds are more
fully described in the Fund Prospectuses. The information
relating to the Fund expenses was provided by each Fund and was
not independently verified by us. See "Charges and Deductions --
Fund Expenses" beginning on page 34 of this Prospectus.
About the Policy
Policy Application, Issuance and Initial Premium
To purchase a Policy, you must submit an application to our
Principal Office. We will then follow our underwriting procedures
designed to determine the insurability of the proposed Insured.
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<PAGE>
We may require a full underwriting, which includes a medical
examination and further information, before your application is
approved. We also may offer the Policy on a simplified
underwriting or guaranteed issue basis. Proposed Insureds must be
acceptable risks based on our applicable underwriting limits and
standards. We will not issue a Policy until the underwriting
process has been completed to our satisfaction. We reserve the
right to reject an application for any lawful reason or to "rate"
an Insured as a substandard risk, which will result in increased
Monthly Risk Charges. The Monthly Risk Charge also may vary
depending on the type of underwriting we use.
You must specify certain information in the application,
including the Total Face Amount, the death benefit option and
supplemental benefits, if any. The Total Face Amount generally
may not be decreased below $100,000.
Upon approval of the application, we will issue to you a
Policy on the life of the Insured. A specified Initial Premium
must be paid before we issue the Policy. The effective date of
coverage for your Policy (which we call the "Policy Date") will
be the date we receive a premium equal to or in excess of the
specified Initial Premium after we have approved your
application. If your premium payment is received on the 29th,
30th or 31st of a month, the Policy will be dated the 28th of
that month.
We generally do not accept premium payments before approval
of an application. However, at our discretion, we may elect to do
so. While your application is in underwriting, if we accept your
premium payment before approval of your application, we will
provide you with temporary insurance coverage in accordance with
the terms of our temporary insurance agreement. In our
discretion, we may limit the amount of premium we accept and the
amount of temporary coverage we provide. If we approve your
application, we will allocate your premium to the Series Account
on the Policy Date, as described below. Otherwise, we will
promptly return your payment to you. We will not credit interest
to your premium payment for the period while your application is
in underwriting.
We reserve the right to change the terms or conditions of
your Policy to comply with differences in applicable state law.
Variations from the information appearing in this Prospectus due
to individual state requirements are described in supplements
which are attached to this Prospectus or in endorsements to the
Policy, as appropriate.
Free Look Period
If you are not satisfied with your Policy, it may be
returned by delivering or mailing it to our Principal Office or
to the representative from whom the Policy was purchased within
10 days from the date you receive it (unless a longer period is
required under applicable state insurance law) (the "Free Look
Period").
A Policy returned under this provision will be deemed void.
You will receive a refund equal to the greater of --
o the sum of all premium payments made (less any withdrawals);
or
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o the Policy's Account Value.
During the Free Look Period, we will allocate your net
premium payments to the Division of the Series Account that
invests in the Maxim Money Market Portfolio. We will transfer the
Account Value in that Division to the other Divisions of the
Series Account in accordance with your allocation instructions
five days after the end of the Free Look Period.
Premium Payments
Premium. All premium payments must be made payable to "Great-West
Life & Annuity Insurance Company" and mailed to our Principal
Office. The Initial Premium will be due and payable on or before
your Policy's Issue Date. You may pay additional premium payments
to us in the amounts and at the times you choose, subject to the
limitations described below.
We reserve the right to limit the number of premium payments
we accept on an annual basis. No premium payment may be less than
$100 without our consent, although we will accept a smaller
premium payment if necessary to keep your Policy in force. We
reserve the right to restrict or refuse any premium payments that
exceed the Initial Premium amount shown on your Policy. We also
reserve the right not to accept a premium payment that causes the
death benefit to increase by an amount that exceeds the premium
received. Evidence of insurability satisfactory to us may be
required before we accept any such premium.
We will not accept premium payments that would, in our
opinion, cause your Policy to fail to qualify as life insurance
under applicable federal tax law. If a premium payment is made in
excess of these limits, we will accept only that portion of the
premium within those limits, and will refund the remainder to
you.
Net Premiums. The net premium is the amount you pay as the
premium less any Expense Charges Applied to Premium. See "Charges
and Deductions - - Expense Charges Applied to Premium," beginning
on page 31 of this Prospectus.
Allocation of Net Premium. Except as otherwise described herein,
your net premium will be allocated in accordance with the
allocation percentages you select. Percentages must be in whole
numbers.
Premiums received prior to the end of the Free Look Period
will initially be credited to the Maxim Money Market Portfolio
Division. Your initial allocation percentages will take effect
five days after the end of your state's Free Look Period.
You may change your allocation percentages at any time by
Request. Telephone Requests will be honored only if we have a
properly completed telephone authorization form for you on file.
An allocation change will be effective as of the date we receive
the Request for that change. We, our affiliates and the
representative from whom you purchased your Policy will not be
responsible for losses resulting from acting upon telephone
Requests reasonably believed to be genuine. We will use
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<PAGE>
reasonable procedures to confirm that instructions communicated
by telephone are genuine. You will be required to identify
yourself by name and a personal identification number for
transactions initiated by telephone. However, if we do not take
reasonable steps to ensure that a telephone authorization is
valid, we may be liable for such losses. We may suspend, modify
or terminate this telephone privilege at any time without notice.
Planned Periodic Premiums. While you are not required to make
additional premium payments according to a fixed schedule, you
may select a planned periodic premium schedule and corresponding
billing period, subject to our limits. We will send you reminder
notices for the planned periodic premium, unless you request to
have reminder notices suspended. You are not required, however,
to pay the planned periodic premium; you may increase or decrease
the planned periodic premium subject to our limits, and you may
skip a planned payment or make unscheduled payments. Depending on
the investment performance of the Divisions you select, the
planned periodic premium may not be sufficient to keep your
Policy in force, and you may need to change your planned payment
schedule or make additional payments in order to prevent
termination of your Policy.
Death Benefit
You may If your Policy is in force at the time of the Insured's
choose from death, we will pay the beneficiary an amount based on the death
three death benefit option you select once we have received Due Proof of the
benefit op- Insured's death. The amount payable will be:
tions. Your
choice will o the amount of the selected death benefit option, plus
affect the
insurance o any amounts payable under any supplemental benefit riders
charges we added to your Policy, less
deduct from
your Account o the value of any Policy Debt on the date of the Insured's
Value and the death, less
amount of the
death benefit. o any accrued and unpaid Policy charges.
We will pay this amount to the beneficiary in one lump sum,
unless we and the beneficiary agree on another form of
settlement. We will pay interest, at a rate not less than that
required by law, on the amount of Policy Proceeds, if payable in
one lump sum, from the date of the Insured's death to the date of
payment.
In order to meet the definition of life insurance under the
Internal Revenue Code of 1986, as amended (the "Code"), Section
7702 of the Code defines alternative testing procedures for the
minimum death benefit under a Policy: the guideline premium test
("GPT") and the cash value accumulation test ("CVAT"). See
"Federal Income Tax Considerations - Tax Status of the Policy,"
at page 46. The Policy must qualify under either the GPT or the
CVAT. When you purchase a Policy, you must choose the procedure
under which your Policy will qualify. You may not change your
choice while the Policy is in force.
Under both testing procedures, there is a minimum death
benefit required at all times equal to your Policy's Account
Value multiplied by some pre-determined factor. The factors used
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<PAGE>
to determined the minimum death benefit depend on the testing
procedure chosen and vary by age. The factors used for GPT are
shown in Appendix C and those used for CVAT are set forth in your
Policy.
Under the GPT, there is also a maximum amount of premium
which may be paid with respect to your Policy.
Use of the CVAT can be advantageous if you intend to
maximize the total amount of premiums paid. An offsetting
consideration, however, is that the factors used to determine the
You may minimum death benefit are higher under the CVAT, which can result
select from in a higher death benefit over time and, thus, a higher total
among three cost of insurance.
death bene-
fit options The Policy has three death benefit options.
Option 1. The "Level Death" Option. Under this option, the death
benefit is --
o the Policy's Total Face Amount on the date of the Insured's
death less any partial withdrawals; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
This death benefit option should be selected if you want to
minimize your cost of insurance.
Option 2. The "Coverage Plus" Option. Under this option, the
death benefit is --
o the sum of the Total Face Amount and Account Value of the
Policy on the date of the Insured's death; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
This death benefit option should be selected if you want
your death benefit to increase with your Policy's Account Value.
Option 3. The "Premium Accumulation" Option. Under this option,
the death benefit is --
o the sum of the Total Face Amount and premiums paid under the
Policy plus interest at the rate specified in your Policy
less any partial withdrawals; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
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This death benefit option should be selected if you want a
specified amount of death benefit plus a return of the premiums
you paid with guaranteed interest.
Changes in Death Benefit Option
After the first Policy Year, but not more than once each
Policy Year, you may change the death benefit option by Request.
Any change will be effective on the first day of the Policy Month
following the date we approve your Request. A maximum
administrative fee of $100 will be deducted from your Account
Value each time you change your death benefit option.
A change in the death benefit option will not change the
amount payable upon the death of the Insured. Any change is
subject to the following conditions:
o If the change is from Option 1 to Option 2, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the Policy's Account Value. Evidence
of insurability may be required.
o If the change is from Option 1 to Option 3, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the accumulated value of all premiums
at the interest rate shown in your Policy. Evidence of
insurability may be required.
o If the change is from Option 2 to Option 1, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the Policy's Account Value.
o If the change is from Option 2 to Option 3, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the Policy's Account Value less the
accumulated value of all premiums at the interest rate shown
in your Policy.
o If the change is from Option 3 to Option 1, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the accumulated value of all premiums
at the interest rate shown in your Policy.
o If the change is from Option 3 to Option 2, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the Policy's Account Value plus the
accumulated value of all premiums at the interest rate shown
in your Policy.
Changes in Total Face Amount
You may in- You may increase or decrease the Total Face Amount of your
crease or Policy at any time within certain limits.
decrease the
Total Face
Amount within
certain limits.
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Minimum Changes. Each increase or decrease in the Total Face
Amount must be at least $25,000. We reserve the right to change
the minimum amount by which you may change the Total Face Amount.
Increases. To Request an increase, you must provide satisfactory
evidence of the Insured's insurability. Once approved by us, an
increase will become effective on the Policy Anniversary
following our approval of your Request, subject to the deduction
of the first Policy Month's Monthly Risk Charge, Service Charge,
any extra risk charge if the Insured is in a rated class and the
cost of any riders.
Decreases. A decrease will become effective at the beginning of
the next Policy Month following our approval of your request. The
Total Face Amount after the decrease must be at least $100,000.
For purposes of the Incontestability Provision of your
Policy, any decrease in Total Face Amount will be applied in the
following order:
o first, to the most recent increase;
o second, to the next most recent increases, in reverse
chronological order; and
o finally, to the initial Total Face Amount.
Surrenders
If you sur- You may surrender your Policy for its Cash Surrender Value
render your at any time while the Insured is living. If you do, the insurance
Policy and coverage and all other benefits under the Policy will terminate.
receive its
Cash Sur- Cash Surrender Value is your Policy's Account Value less the sum
render Value, of:
you may
incur taxes o the outstanding balance of any Policy Debt; and
and tax
penalties. o any other accrued and unpaid Policy charges.
We will determine your Cash Surrender Value as of the end of
the first Valuation Date after we receive your Request for
surrender.
Partial Withdrawal
If you with- You may Request a partial withdrawal of Account Value at any
draw part of time while the Policy is in force. The amount of any partial
the Cash withdrawal must be at least $500 and may not exceed 90% of your
Surrender Policy's Account Value less the value of the Loan Account. An
Value, your administrative fee will be deducted from your Account Value for
Policy's all partial withdrawals after the first made during the same
death benefit Policy Year. This administrative fee is guaranteed to be no
will be re- greater than $25.
duced and
you may incur If you have chosen either Death Benefit Option 1 or Death
taxes and Benefit Option 3, then the death benefit payable will be reduced
tax penal- by the amount of any partial withdrawals.
ties.
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<PAGE>
Your Policy's Account Value will be reduced by the amount of
a partial withdrawal. The amount of a partial withdrawal will be
withdrawn from the Divisions in the proportion the amounts in the
Divisions bear to your Policy's Account Value. You cannot repay
amounts taken as a partial withdrawal. Any subsequent payments
received by us will be treated as additional premium payments and
will be subject to our limitations on premiums.
A partial withdrawal may have tax consequences. See "Federal
Income Tax Considerations - - Tax Treatment of Policy Benefits,"
beginning on page 47 of this Prospectus.
Policy Loans
You may You may request a Policy loan of up to 90% of your Policy's
borrow from Account Value, decreased by the amount of any outstanding Policy
us using Debt on the date the Policy loan is made. When a Policy loan is
your Account made, a portion of your Account Value equal to the amount of the
Value as Policy loan will be allocated to the Loan Account as collateral
collateral. for the loan. This amount will not be affected by the investment
experience of the Series Account while the loan is outstanding
and will be subtracted from the Divisions in the proportion the
amounts in the Divisions bear to your Account Value. The minimum
Policy loan amount is $500.
The interest rate on the Policy loan will be determined
annually at the beginning of each Policy Year. That interest rate
will be guaranteed for that Policy Year and will apply to all
Policy loans outstanding during that Policy Year. Interest is due
and payable on each Policy Anniversary. Interest not paid when
due will be added to the principal amount of the loan and will
bear interest at the loan interest rate.
Presently, the maximum interest rate for Policy loans is The
Moody's Corporate Bond Yield Average - Monthly Average
Corporates, which is published by Moody's Investor Service, Inc.
If that Average ceases to be published, the maximum interest rate
for Policy loans will be derived from a substantially similar
average adopted by your state's Insurance Commissioner.
We must reduce our Policy loan interest rate if the maximum
loan interest rate is lower than the loan interest rate for the
previous Policy Year by one-half of one percent or more.
We may increase the Policy loan interest rate but such
increase must be at least one-half of one percent. No increase
may be made if the Policy loan interest rate would exceed the
maximum loan interest rate. We will send you advance notice of
any increase in the Policy loan rate.
Interest will be credited to amounts held in the Loan
Account. The rate will be no less than the Policy loan interest
rate then in effect less 0.9%.
All payments we receive from you will be treated as premium
payments unless we have received notice, in form satisfactory to
us, that the funds are for loan repayment. If you have a Policy
loan, it is generally advantageous to repay the loan rather than
make a premium payment because premium payments incur expense
charges whereas loan repayments do not. Loan repayments will
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<PAGE>
first reduce the outstanding balance of the Policy loan and then
accrued but unpaid interest on such loans. We will accept
repayment of any Policy loan at any time while the Policy is in
force. Amounts paid to repay a Policy loan will be allocated to
the Divisions in the proportion the amounts in the Divisions bear
to your Account Value.
A Policy loan, whether or not repaid, will affect the Policy
Proceeds payable upon the Insured's death and the Account Value
because the investment results of the Divisions do not apply to
amounts held in the Loan Account. The longer a loan is
outstanding, the greater the effect is likely to be, depending on
the investment results of the Divisions while the loan is
outstanding. The effect could be favorable or unfavorable.
Transfers Between Divisions
Subject to our rules as they may exist from time to time,
you may at any time transfer to another Division all or a portion
of the Account Value allocated to a Division. We will make
transfers pursuant to a Request. Telephone Requests will be
honored only if we have a properly completed telephone
authorization form for you on file. We, our affiliates and the
representative from whom you purchased your Policy will not be
responsible for losses resulting from acting upon telephone
Requests reasonably believed to be genuine. We will use
reasonable procedures to confirm that instructions communicated
by telephone are genuine. For transactions initiated by
telephone, you will be required to identify yourself by name and
a personal identification number. However, if we do not take
reasonable steps to help ensure that a telephone authorization is
valid, we may be liable for such losses. We may suspend, modify
or terminate the telephone transfer privilege at any time without
notice.
Transfers may be Requested by indicating the transfer of
either a specified dollar amount or a specified percentage of the
Division's value from which the transfer will be made.
Transfer privileges are subject to our consent. We reserve
the right to impose limitations on transfers, including, but not
limited to: (1) the minimum amount that may be transferred; and
(2) the minimum amount that may remain in a Division following a
transfer from that Division.
An administrative charge of $10 per transfer will apply for
all transfers in excess of 12 made in a calendar year. We may
increase or decrease the transfer charge; however, it is
guaranteed to never exceed $10 per transfer. All transfers made
in a single day will count as only one transfer toward the 12
free transfers. The transfer of your Initial Premium from the
Maxim Money Market Portfolio Division to your selected Divisions
does not count toward the twelve free transfers. Likewise, any
transfers under Dollar Cost Averaging or periodic rebalancing of
your Account Value under the Rebalancer Option do not count
toward the twelve free transfers (a one time rebalancing,
however, will be counted as one transfer).
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<PAGE>
Dollar Cost Averaging
By Request, you may elect Dollar Cost Averaging in order to
purchase Units of the Divisions over a period of time.
Dollar Cost Averaging permits you to automatically transfer
a predetermined dollar amount, subject to our minimum, at regular
Dollar Cost intervals from any one or more designated Divisions to one or
Averaging more of the remaining, then available Divisions. The Unit Value
permits you will be determined on the dates of the transfers. You must
to transfer specify the percentage to be transferred into each designated
your Account Division. Transfers may be set up on any one of the following
Value at frequency periods: monthly, quarterly, semiannually, or annually.
regular The transfer will be initiated one frequency period following the
intervals date of your request. We will provide a list of Divisions
from one or eligible for Dollar Cost Averaging which may be modified from
more Divi- time to time. Amounts transferred through Dollar Cost Averaging
sions to are not counted against the twelve free transfers allowed in a
other calendar year. You may not participate in Dollar Cost Averaging
Divisions. and the Rebalancer Option (described below) at the same time.
Participation in Dollar Cost Averaging does not assure a greater
profit, or any profit, nor will it prevent or necessarily
alleviate losses in a declining market. We reserve the right to
modify, suspend, or terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Reba- By Request, you may elect the Rebalancer Option in order to
lancer Option automatically transfer Account Value among the Divisions on a
permits you periodic basis. This type of transfer program automatically
to reba- reallocates your Account Value so as to maintain a particular
lance your percentage allocation among Divisions chosen by you. The amount
Account Value allocated to each Division will grow or decline at different
so that you rates depending on the investment experience of the Divisions.
may main-
tain your You may Request that rebalancing occur one time only, in
chosen which case the transfer will take place on the date of the
percentage Request. This transfer will count as one transfer towards the
allocation twelve free transfers allowed in a calendar year.
among
Divisions. You may also choose to rebalance your Account Value on a
quarterly, semiannual, or annual basis, in which case the first
transfer will be initiated one frequency period following the
date of your request. On that date, your Account Value will be
automatically reallocated to the selected Divisions. Thereafter,
your Account Value will be rebalanced once each frequency period.
In order to participate in the Rebalancer Option, your entire
Account Value must be included. Transfers made with these
frequencies will not count against the twelve free transfers
allowed in a calendar year.
You must specify the percentage of Account Value to be
allocated to each Division and the frequency of rebalancing. You
may terminate the Rebalancer Option at any time by Request.
You may not participate in the Rebalancer Option and Dollar
Cost Averaging at the same time. Participation in the Rebalancer
Option does not assure a greater profit, or any profit, nor will
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<PAGE>
it prevent or necessarily alleviate losses in a declining market.
The Company reserves the right to modify, suspend, or terminate
the Rebalancer Option at any time.
Account Value
Your Account Value is the sum of your interests in each
Division you have chosen plus the amount in your Loan Account.
The Account Value varies depending upon the premiums paid,
Expense Charges Applied to Premium, Mortality and Expense Risk
Charge, Service Charges, Monthly Risk Charges, partial
withdrawals, fees, Policy loans and the net investment factor
(described below) for the Divisions to which your Account Value
is allocated.
A Valuation We measure the amounts in the Divisions in terms of Units
Date is any and Unit Values. On any given date, your interest in a Division
day on which is equal to the Unit Value multiplied by the number of Units
we, the appli- credited to you in that Division. Amounts allocated to a Division
cable Fund, will be used to purchase Units of that Division. Units are
and the NYSE redeemed when you make partial withdrawals, undertake Policy
are open for loans or transfer amounts from a Division, and for the payment of
business. Service Charges, Monthly Risk Charges and other fees. The number
of Units of each Division purchased or redeemed is determined by
The Valuation dividing the dollar amount of the transaction by the Unit Value
Period is the for the Division. The Unit Value for each Division was
period of established at $10.00 for the first Valuation Date of the
time from one Division. The Unit Value for any subsequent Valuation Date is
determination equal to the Unit Value for the preceding Valuation Date
of Unit multiplied by the net investment factor (determined as provided
Values to below). The Unit Value of a Division for any Valuation Date is
the next. determined as of the close of the Valuation Period ending on that
Valuation Date.
Transactions are processed on the date we receive a premium
at our Principal Office or upon approval of a Request. If your
premium or Request is received on a date that is not a Valuation
Date, or after the close of the New York Stock Exchange on a
Valuation Date, the transaction will be processed on the next
Valuation Date.
We apply your The Account Value attributable to each Division of the
Initial Pre- Series Account on the Policy Date equals:
mium on the
Policy Date, o that portion of net premium received and allocated to the
which will Division, less
be the Issue
Date (if we o the Service Charges due on the Policy Date, less
have already
received o the Monthly Risk Charge due on the Policy Date, less
your Initial
Premium) or o the Monthly Risk Charge for any riders due on the Policy
the Business Date.
Day we receive
a premium The Account Value attributable to each Division of the
equal to or Series Account on subsequent Valuation Dates is equal to:
in excess of
the Initial o the Account Value attributable to the Division on the
Premium after preceding Valuation Date multiplied by that Division's net
we have investment factor, plus
approved your
Policy
application.
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<PAGE>
o that portion of net premium received and allocated to the
Division during the current Valuation Period, plus
o that portion of the value of the Loan Account transferred to
the Division upon repayment of a Policy loan during the
current Valuation Period; plus
o any amounts transferred by you to the Division from another
Division during the current Valuation Period, less
o any amounts transferred by you from the Division to another
Division during the current Valuation Period, less
o that portion of any partial withdrawals deducted from the
Division during the current Valuation Period, less
o that portion of any Account Value transferred from the
Division to the Loan Account during the current Valuation
Period, less
o that portion of fees due in connection with a partial
surrender charged to the Division, less
o if the first day of a Policy Month occurs during the current
Valuation Period, that portion of the Service Charge for the
Policy Month just beginning charged to the Division, less
o if the first day of a Policy Month occurs during the current
Valuation Period, that portion of the Monthly Risk Charge
for the Policy Month just beginning charged to the Division,
less
o if the first day of a Policy Month occurs during the current
Valuation Period, that Division's portion of the cost for
any riders and any extra risk charge if the Insured is in a
rated class as specified in your Policy, for the Policy
Month just beginning.
Net Investment Factor. The net investment factor for each
Division for any Valuation Period is determined by deducting the
Mortality and Expense Risk Charge for each day in the Valuation
Period from the quotient of (1) and (2) where: (1) is the net
result of:
o the net asset value of a Fund share held in the Division
determined as of the end of the current Valuation Period,
plus
o the per share amount of any dividend or other distribution
declared on Fund shares held in the Division if the
"ex-dividend" date occurs during the current Valuation
Period, plus or minus
26
<PAGE>
o a per share credit or charge with respect to any taxes
incurred by or reserved for, or paid by us if not previously
reserved for, during the current Valuation Period which are
determined by us to be attributable to the operation of the
Division; and
(2) is the net result of:
o the net asset value of a Fund share held in the Division
determined as of the end of the preceding Valuation Period;
plus or minus
o a per share credit or charge with respect to any taxes
incurred by or reserved for, or paid by us if not previously
reserved for, during the preceding Valuation Period which
are determined by us to be attributable to the operation of
the Division.
The Mortality and Expense Risk Charge for the Valuation Period is
the annual Mortality and Expense Risk Charge divided by 365
multiplied by the number of days in the Valuation Period.
The net investment factor may be greater or less than or equal to
one.
Splitting Units. We reserve the right to split or combine the
value of Units. In effecting any such change, strict equity will
be preserved and no such change will have a material effect on
the benefits or other provisions of your Policy.
Charges and Deductions
Expense Charges Applied to Premium. We will deduct a maximum
charge of 10% from each premium payment. A maximum of 6.5% of
this charge will be deducted as sales load to compensate us in
part for sales and promotional expenses in connection with
selling the Policies, such as commissions, the cost of preparing
sales literature, other promotional activities and other direct
and indirect expenses. A maximum of 3.5% of this charge will be
used to cover premium taxes and certain federal income tax
obligations resulting from the receipt of premiums. All states
and a few cities and municipalities impose taxes on premiums paid
for life insurance, which generally range from 2% to 4% of
premium but may exceed 4% in some states (for example, Kentucky).
The amount of your state's premium tax may be higher or lower
than the amount attributable to premium taxes that we deduct from
your premium payments.
The current Expense Charge Applied to Premium for sales load
is 5.5% of premium up to target and 3.0% of premium in excess of
target for Policy Years 1 through 10. Your target premium will
depend on the initial Total Face Amount of your Policy, your
Issue Age, your sex (except in unisex states), and rating class
(if any). Thereafter, there is no charge for sales load. The
current Expense Charge Applied to Premium to cover our premium
taxes and the federal tax obligation described above is 3.5% in
all Policy Years.
As described in "Term Life Insurance Rider", we may offer a
Term Life Insurance Rider that may have the effect of reducing
the sales charge you pay on purchasing an equivalent amount of
insurance.
27
<PAGE>
We offer this rider in circumstances which result in the savings
of sales and distribution expenses and administrative costs. To
qualify, a corporation, employer, or other purchaser must satisfy
certain criteria such as, for example, the number of Policies it
expects to purchase, and the expected Total Face Amount under all
such Policies. Generally, the sales contacts and effort and
administrative costs per Policy depend on factors such as the
number of Policies purchased by a single owner, the purpose for
which the Policies are purchased, and the characteristics of the
proposed Insureds. The amount of reduction and the criteria for
qualification are related to the sales effort and administrative
costs resulting from sales to a qualifying owner. Great-West from
time to time may modify on a uniform basis both the amounts of
reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any
person, including the affected owners funded by the Series
Account.
Mortality and Expense Risk Charge. This charge is for the
mortality and expense risks we assume with respect to the Policy.
It is based on an annual rate that we apply against each Division
of the Series Account on a daily basis. We convert the Mortality
and Expense Risk Charge into a daily rate by dividing the annual
rate by 365. The Mortality and Expense Risk Charge will be
determined by us from time to time based on our expectations of
future interest, mortality experience, persistency, expenses and
taxes, but will not exceed 0.90% annually. Currently, the charge
is 0.45% for Policy Years 1 through 10, 0.30% for Policy Years 11
through 20 and 0.10% thereafter.
The mortality risk we assume is that the group of lives
insured under the Policies may, on average, live for shorter
periods of time than we estimated. The expense risk we assume is
that the costs of issuing and administering Policies may be more
than we estimated.
Monthly Deduction. We make a monthly deduction from your Account
Value on the Policy Date and the first day of each Policy Month.
This monthly deduction will be charged proportionally to the
amounts in the Divisions.
The monthly deduction equals the sum of (1), (2), (3) and (4)
where:
(1) is the cost of insurance charge (the Monthly Risk Charge)
equal to the current Monthly Risk Rate (described below)
multiplied by the net amount at risk divided by 1,000;
(2) is the Service Charge;
(3) is the monthly cost of any additional benefits provided by
riders which are a part of your Policy; and
(4) is any extra risk charge if the Insured is in a rated class
as specified in your Policy.
The net amount at risk equals:
o the death benefit divided by 1.00327374; less
28
<PAGE>
o your Policy's Account Value on the first day of a Policy
Month prior to assessing the monthly deduction.
If there are increases in the Total Face Amount other than
increases caused by changes in the death benefit option, the
monthly deduction described above is determined separately for
the initial Total Face Amount and each increase in the Total Face
Amount. In calculating the net amount at risk, your Account Value
will first be allocated to the most recent increase in the death
benefit and then to each increase in the Total Face Amount in the
reverse order in which the increases were made.
Monthly Risk Rates. The Monthly Risk Rate is used to
determine the cost of insurance charge for providing insurance
coverage under the Policy. The Monthly Risk Rates (except for any
such rate applicable to an increase in the Total Face Amount) are
based on the length of time your Policy has been in force and the
Insured's sex (in the case of non-unisex Policies) and Issue Age.
If the Insured is in a rated class as specified in your Policy,
we will deduct an extra risk charge that reflects that class
rating. The Monthly Risk Rates applicable to each increase in the
Total Face Amount are based on the length of time the increase
has been in force and the Insured's sex (in the case of
non-unisex Policies), Issue Age, and class rating, if any. The
Monthly Risk Rates will be determined by us from time to time
based on our expectations of future experience with respect to
mortality, persistency, interest rates, expenses and taxes, but
will not exceed the Guaranteed Maximum Monthly Risk Rates based
on the 1980 Commissioner's Standard Ordinary, Age Nearest
Birthday, Male/Female, Unismoke Ultimate Mortality Table ("1980
CSO"). Our Monthly Risk Rates for unisex Policies will never
exceed a maximum based on the 1980 CSO using male lives.
The Guaranteed Maximum Monthly Risk Rates reflect any class
rating applicable to the Policy. We have filed a detailed
statement of our methods for computing Account Values with the
insurance department in each jurisdiction where the Policy was
delivered. These values are equal to or exceed the minimum
required by law.
Service Charge. We will deduct a maximum of $15.00 from your
Policy's Account Value on the first day of each Policy Month to
cover our administrative costs, such as salaries, postage,
telephone, office equipment and periodic reports. This charge may
be increased or decreased by us from time to time based on our
expectations of future expenses, but will never exceed $15.00 per
Policy Month. The Service Charge will be deducted proportionally
from the Divisions. The current Service Charge is $10.00 per
Policy Month for Policy Years 1 through 3 and $7.50 per Policy
Month thereafter.
Transfer Fee. A maximum administrative charge of $10 per transfer
of Account Value from one Division to other Divisions will be
deducted from your Policy's Account Value for all transfers in
excess of 12 made in the same calendar year. The allocation of
your Initial Premium from the Maxim Money Market Portfolio
Division to your selected Divisions will not count toward the 12
free transfers. Similarly, transfers made under Dollar Cost
Averaging and periodic rebalancing under the Rebalancer Option do
not count as transfers for this purpose (although, a one-time
rebalancing under the Rebalancer Option will count as one
transfer). All transfers requested on the same Business Day will
be aggregated and counted as one transfer. The current charge is
$10 per transfer.
29
<PAGE>
Partial Withdrawal Fee. A maximum administrative fee of $25 will
be deducted from your Policy's Account Value for all partial
withdrawals after the first made in the same Policy Year.
Change of Death Benefit Option Fee. A maximum administrative fee
of $100 will be deducted from your Policy's Account Value each
time you change your death benefit option.
Fund Expenses. You indirectly bear the charges and expenses of
the Funds whose shares are held by the Divisions to which you
allocate your Account Value. The Series Account purchases shares
of the Funds at net asset value. Each Fund's net asset value
reflects investment advisory fees and administrative expenses
already deducted from the Fund's assets. For a summary of current
estimates of these charges and expenses, see Appendix B to this
Prospectus. For more information concerning the investment
advisory fees and other charges against the Funds, see the Fund
Prospectuses and the statements of additional information for the
Funds, which are available upon Request.
We may receive compensation from the investment advisers or
administrators of the Funds. Such compensation will be consistent
with the services we provide or the cost savings resulting from
the arrangement and, therefore, may differ between Funds.
Paid-Up Life Insurance
When the Insured reaches Attained Age 100 (if your Policy is
in force at that time), the entire Account Value of your Policy
(less outstanding Policy Debt) will be applied as a single
premium to purchase "paid-up" insurance. Outstanding Policy Debt
will be repaid at this time. This repayment may be treated as a
taxable distribution to you if your Policy is not a MEC. The net
single premium for this insurance will be based on the 1980
Commissioner's Standard Ordinary, Sex Distinct, Non-Smoker
Mortality Table. The cash value of your paid-up insurance, which
initially is equal to the net single premium, will remain in the
Divisions of the Series Account in accordance with your then
current allocation. While the paid-up life insurance is in effect
your assets will remain in the Series Account. You may change
your Division allocation instructions and you may transfer your
cash value among the Divisions. All charges under your Policy, to
the extent applicable, will continue to be assessed, except we
will no longer make a deduction each Policy Month for the Monthly
Risk Charge. Your death benefit will be equal to the cash value
of the paid-up policy and, thus, as your cash value changes based
on the investment experience of the Divisions, the death benefit
will increase or decrease accordingly. You may surrender the
paid-up insurance policy at any time and, if surrendered within
30 days of a Policy Anniversary, its cash value will not be less
than it was on that Policy Anniversary. See "Federal Income Tax
Considerations -- Treatment When Insured Reached Attained Age
100."
Supplemental Benefits
The following supplemental benefit riders are available,
subject to certain limitations. An additional Monthly Risk Charge
will be assessed for each rider which is in force as part of the
monthly deduction from your Account Value.
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<PAGE>
Term Life Insurance Rider
This Rider provides term life insurance on the Insured.
Coverage is renewable annually to the Insured's Attained Age 100.
The amount of coverage provided under this Rider varies from
month to month as described below. We will pay the Rider's death
benefit to the beneficiary when we receive Due Proof of death of
the Insured while this Rider is in force.
This Rider provides the same three death benefit options as
your Policy. The option you choose under the Rider must at all
times be the same as the option you have chosen for your Policy.
The Rider's death benefit will be determined at the beginning of
each Policy Month in accordance with one of those options. For
each of the options, your death benefit will be reduced by any
outstanding Policy Debt.
If you purchase this Rider, the Total Face Amount shown on
your Policy's Specifications Page will be equal to the minimum
amount of coverage provided by this Rider plus the Base Face
Amount (which is the minimum death benefit under your Policy
without the Rider's death benefit). The minimum allocation of
Total Face Amount between your Policy and the Rider is 10% and
90% at inception, respectively. The total death benefit payable
under the Rider and the Policy will be determined as described in
"Death Benefit" above, using the Total Face Amount shown on your
Policy's Specifications page.
Coverage under this Rider will take effect on the later of:
o the Policy Date of the Policy to which this Rider is
attached; or
o the Policy Anniversary following our approval of your
Request to add this Rider to your Policy, subject to the
deduction of the first Monthly Risk Charge for the Rider.
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<PAGE>
The Monthly Risk Rate for this Rider will be the same as
that used for the Policy and the Monthly Risk Charge for the
Rider will be determined by multiplying the Monthly Risk Rate by
the Rider's death benefit. This charge will be calculated on the
first day of each Policy Month and added to the Policy's Monthly
Risk Charge.
If you purchase this Rider, the target premium amount, to
which the sales charge applies, will be proportionately lower. As
a result, the sales charge deducted from your premium payments
will be less than you would pay on a single Policy providing the
same Total Face Amount of coverage as your Policy and Rider.
We will offer this Rider only in circumstances which result
in the savings of sales and distribution expenses. As a result,
in our discretion, we may decline to offer the Term Rider or
refuse to consent to a proposed allocation of coverage between a
Base Policy and Term Rider. In exercising this discretion, we
will not discriminate unfairly against any person, including the
affected owners funded by the Series Account. For more
information see "Expense Charges Applied to Premium" at page
31 above.
You may terminate this Rider by Request. This Rider also
will terminate on the earliest of the following dates:
o the date the Policy is surrendered or terminated;
o the expiration of the Grace Period of the Policy; or
o the death of the Insured.
Change of Insured Rider
This Rider permits you to change the Insured under your
Policy or any Insured that has been named by virtue of this
Rider. Before we change the Insured you must provide us with (1)
a Request for the change signed by you and approved by us; (2)
evidence of insurability for the new Insured; (3) evidence that
there is an insurable interest between you and the new Insured;
(4) evidence that the new Insured's age, nearest birthday, is
under 70 years; and (5) evidence that the new Insured was born
prior to the Policy Date. We may charge a maximum fee of $25 for
administrative expenses when you changed the Insured. When a
change of Insured takes effect, Policy premiums will be based on
the new Insured's age, sex, mortality class and the premium rate
in effect on the Policy Date.
Continuation of Coverage
If you cease making premium payments, coverage under your
Policy and any Riders to the Policy will continue until your
Policy's Account Value, less any Policy Debt, is insufficient to
cover the monthly deduction. When that occurs, the Grace Period
will go into effect.
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<PAGE>
Grace Period
If the first day of a Policy Month occurs during the
Valuation Period and your Policy's Account Value, less any Policy
Debt, is not sufficient to cover the monthly deduction for that
Policy month, then your Policy will enter the Grace Period
described below. If you do not pay sufficient additional premiums
during the Grace Period, your Policy will terminate without
value.
The Grace Period will allow 61 days for the payment of
premium sufficient to keep the Policy in force. Any such premium
must be in an amount sufficient to cover deductions for the
Monthly Risk Charge, the Service Charge, the cost for any riders
and any extra risk charge if the Insured is in a rated class for
the next two Policy Months. Notice of premium due will be mailed
to your last known address or the last known address of any
assignee of record at least 31 days before the date coverage
under your Policy will cease. If the premium due is not paid
within the Grace Period, then the Policy and all rights to
benefits will terminate without value at the end of the 61 day
period. The Policy will continue to remain in force during this
Grace Period. If the Policy Proceeds become payable by us during
the Grace Period, then any due and unpaid Policy charges will be
deducted from the amount payable by us.
Termination of Policy
Your Policy will terminate on the earlier of the date we
receive your Request to surrender, the expiration date of the
Grace Period due to insufficient value or the date of death of
the Insured.
Reinstatement
Before the Insured's death, we will reinstate your Policy,
provided that the Policy has not been surrendered, and provided
further that:
o you make your reinstatement Request within three years from
the date of termination;
o you submit satisfactory evidence of insurability to us;
o you pay an amount equal to the Policy charges which were due
and unpaid at the end of the Grace Period;
o you pay a premium equal to four times the monthly deduction
applicable on the date of reinstatement; and
o you repay or reinstate any Policy loan that was outstanding
on the date coverage ceased, including interest at 6.00% per
year compounded annually to the date of reinstatement of
your Policy.
A reinstated Policy's Total Face Amount may not exceed the
Total Face Amount at the time of termination. Your Account Value
on the reinstatement date will reflect:
o the Account Value at the time of termination; plus
o net premiums attributable to premiums paid to reinstate the
Policy; less
o the Monthly Expense Charge; less
33
<PAGE>
o the Monthly Cost of Insurance charge applicable on the date
of reinstatement.
The effective date of reinstatement will be the date the
application for reinstatement is approved by us.
Deferral of Payment
We will usually pay any amount due from the Series Account
within seven days after the Valuation Date following your Request
giving rise to such payment or, in the case of death of the
Insured, Due Proof of such death. Payment of any amount payable
from the Series Account on death, surrender, partial surrender,
or Policy loan may be postponed whenever:
o the New York Stock Exchange is closed other than customary
weekend and holiday closing, or trading on the NYSE is
otherwise restricted;
o the Securities and Exchange Commission, by order, permits
postponement for the protection of policyowners; or
o an emergency exists as determined by the Securities and
Exchange Commission, as a result of which disposal of
securities is not reasonably practicable, or it is not
reasonably practicable to determine the value of the assets
of the Series Account.
Rights of Owner
While the Insured is alive, unless you have assigned any of
these rights, you may:
o transfer ownership to a new owner;
o name a contingent owner who will automatically become the
owner of the Policy if you die before the Insured;
o change or revoke a contingent owner;
o change or revoke a beneficiary (unless a previous
beneficiary designation was irrevocable); o exercise all
other rights in the Policy;
o increase or decrease the Total Face Amount, subject to the
other provisions of the Policy; and o change the death
benefit option, subject to the other provisions of the
Policy.
When you transfer your rights to a new owner, you
automatically revoke any prior contingent owner designation. When
you want to change or revoke a prior beneficiary designation, you
have to specify that action. You do not affect a prior
beneficiary when you merely transfer ownership, or change or
revoke a contingent owner designation.
You do not need the consent of a beneficiary or a contingent
owner in order to exercise any of your rights. However, you must
give us written notice satisfactory to us of the Requested
action. Your
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<PAGE>
Request will then, except as otherwise specified herein, be
effective as of the date you signed the form, subject to any
action taken before it was received by us.
Rights of Beneficiary
The beneficiary has no rights in the Policy until the death
of the Insured, except an irrevocable beneficiary cannot be
changed without the consent of that beneficiary. If a beneficiary
is alive at that time, the beneficiary will be entitled to
payment of the Policy Proceeds as they become due.
Other Policy Provisions
Exchange of Policy. You may exchange your Policy for a new policy
issued by Great-West that does not provide for variable benefits.
The new policy will have the same Policy Date, Issue Age, and
Insured as your Policy on the date of the exchange. The exchange
must be made within 24 Policy Months after the Issue Date of your
Policy and all Policy Debt must be repaid.
Addition, Deletion or Substitution of Investments. Shares of any
or all of the Funds may not always be available for purchase by
the Divisions of the Series Account, or we may decide that
further investment in any such shares is no longer appropriate.
In either event, shares of other registered open-end investment
companies or unit investment trusts may be substituted both for
Fund shares already purchased by the Series Account and/or as the
security to be purchased in the future, provided that these
substitutions have been approved by the Securities and Exchange
Commission, to the extent necessary. We also may close a Division
to future premium allocations and transfers of Account Value. If
we do so, we will notify you and ask you to change your premium
allocation instructions. If you do not change those instructions
by the Division's closing date, premiums allocated to that
Division automatically will be allocated to the Maxim Money
Market Portfolio Division until you instruct us otherwise. A
Division closing may affect Dollar Cost Averaging and the
Rebalancer Option. We reserve the right to operate the Series
Account in any form permitted by law, to take any action
necessary to comply with applicable law or obtain and continue
any exemption from applicable laws, to assess a charge for taxes
attributable to the operation of the Series Account or for other
taxes, as described in "Charges and Deductions" beginning on page
31 of this Prospectus, and to change the way in which we assess
other charges, as long as the total other charges do not exceed
the maximum guaranteed changes under the Policies. We also
reserve the right to add Divisions, or to eliminate or combine
existing Divisions or to transfer assets between Divisions, or
from any Division to our general account. In the event of any
substitution or other act described in this paragraph, we may
make appropriate amendment to the Policy to reflect the change.
Entire Contract. Your entire contract with us consists of the
Policy, including the attached copy of your Policy application
and any attached copies of supplemental applications for
increases in the Total Face Amount, any endorsements and any
riders. Any illustrations prepared in connection with the Policy
do not form a part of our contract with you and are intended
solely to provide information about how values under the Policy,
such as Cash Surrender Value, death benefit and Account Value,
will change with the investment experience of the Divisions, and
such information is based solely upon data available at the time
such illustrations are prepared.
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<PAGE>
Alteration. Sales representatives do not have any authority to
either alter or modify your Policy or to waive any of its
provisions. The only persons with this authority are our
president, secretary, or one of our vice presidents.
Modification. Upon notice to you, we may modify the Policy if
such a modification --
o is necessary to make the Policy or the Series Account comply
with any law or regulation issued by a governmental agency
to which we are or the Series Account is subject;
o is necessary to assure continued qualification of the Policy
under the Internal Revenue Code or other federal or state
laws as a life insurance policy;
o is necessary to reflect a change in the operation of the
Series Account or the Divisions; or
o adds, deletes or otherwise changes Division options.
We also reserve the right to modify certain provisions of the
Policy as stated in those provisions. In the event of any such
modification, we may make appropriate amendment to the Policy to
reflect such modification.
Assignments. During the lifetime of the Insured, you may assign
all or some of your rights under the Policy. All assignments must
be filed at our Principal Office and must be in written form
satisfactory to us. The assignment will then be effective as of
the date you signed the form, subject to any action taken before
it was received by us. We are not responsible for the validity or
legal effect of any assignment.
Non-Participating. The Policy does not pay dividends.
Misstatement of Age or Sex (Non-Unisex Policy). If the age or (in
the case of a non-unisex Policy) sex of the Insured is stated
incorrectly in your Policy application or rider application, we
will adjust the amount payable appropriately as described in the
Policy.
If we determine that the Insured was not eligible for coverage
under the Policy after we discover a misstatement of the
Insured's age, our liability will be limited to a return of
premiums paid, less any partial withdrawals, any Policy Debt, and
the cost for riders.
Suicide. If the Insured, whether sane or insane, commits suicide
within two years after your Policy's Issue Date (one year if your
Policy is issued in Colorado or North Dakota), we will not pay
any part of the Policy Proceeds. We will pay the beneficiary
premiums paid, less the amount of any Policy Debt, any partial
withdrawals and the cost for riders.
If the Insured, whether sane or insane, commits suicide
within two years after the effective date of an increase in the
Total Face Amount (one year if your Policy is issued in Colorado
or North Dakota), then our liability as to that increase will be
the cost of insurance for that increase and that portion of the
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<PAGE>
Account Value attributable to that increase. The Total Face
Amount of the Policy will be reduced to the Total Face Amount
that was in effect prior to the increase.
Incontestability. All statements made in the application or in a
supplemental application are representations and not warranties.
We relied and will rely on those statements when approving the
issuance, increase in face amount, increase in death benefit over
premium paid, or change in death benefit option of the Policy. In
the absence of fraud, no statement can be used by us in defense
of a claim or to cancel the Policy for misrepresentation unless
the statement was made in the application or in a supplemental
application. In the absence of fraud, after the Policy has been
in force during the lifetime of the Insured for a period of two
years from its Issue Date, we cannot contest it except for
non-payment of premiums. However, any increase in the Total Face
Amount which is effective after the Issue Date will be
incontestable only after such increase has been in force during
the lifetime of the Insured for two years from the effective date
of coverage of such increase.
Report to Owner. We will maintain all records relating to the
Series Account and the Divisions. We will send you a report at
least once each Policy Year within 30 days after a Policy
Anniversary. The report will show current Account Value, current
allocation in each Division, death benefit, premiums paid,
investment experience since your last report, deductions made
since the last report, and any further information that may be
required by laws of the state in which your Policy was issued. It
will also show the balance of any outstanding Policy loans and
accrued interest on such loans. There is no charge for this
report.
In addition, we will send you the financial statements of the
Funds and other reports as specified in the Investment Company
Act of 1940, as amended. We also will mail you confirmation
notices or other appropriate notices of Policy transactions
quarterly or more frequently within the time periods specified by
law. Please give us prompt written notice of any address change.
Please read your statements and confirmations carefully and
verify their accuracy and contact us promptly with any question.
Illustrations. Upon request, we will provide you with an
illustration of how Cash Surrender Value, Account Value and death
benefits change with the investment experience of your Policy.
This illustration will be furnished to you for a nominal fee not
to exceed $50.
Notice and Elections. To be effective, all notices and elections
under the Policy must be in writing, signed by you, and received
by us at our Principal Office. Certain exceptions may apply.
Unless otherwise provided in the Policy, all notices, requests
and elections will be effective when received at our Principal
Office complete with all necessary information.
Performance Information and Illustrations
We may pre- We may sometimes publish performance information related to
sent mutual the Fund, the Series Account or the Policy in advertising, sales
fund port- literature and other promotional materials. This information is
folio per- based on past investment results and is not an indication of
formance in future performance.
sales
literature.
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<PAGE>
Fund Performance. We may publish a mutual fund portfolio's total
return or average annual total return. Total return is the change
in value of an investment over a given period, assuming
reinvestment of any dividends and capital gains. Average annual
total return is a hypothetical rate of return that, if achieved
annually, would have produced the same total return over a stated
period if performance had been constant over the entire period.
Average annual total returns smooth variations in performance,
and are not the same as actual year-by-year results.
We may also publish a mutual fund portfolio's yield. Yield
refers to the income generated by an investment in a portfolio
over a given period of time, expressed as an annual percentage
rate. When a yield assumes that income earned is reinvested, it
is called an effective yield. Seven-day yield illustrates the
income earned by an investment in a money market fund over a
recent seven-day period.
Total returns and yields quoted for a mutual fund portfolio
include the investment management fees and other expenses of the
portfolio, but do not include charges and deductions attributable
to your Policy. These expenses would reduce the performance
quoted.
Adjusted Fund Performance. We may publish a mutual fund
portfolio's total return and yields adjusted for charges against
the assets of the Series Account.
We may publish total return and yield quotations based on
the period of time that a mutual fund portfolio has been in
existence. The results for any period prior to any Policy being
offered will be calculated as if the Policy had been offered
during that period of time, with all charges assumed to be those
applicable to the Policy.
Other Information. Performance information may be compared, in
reports and promotional literature, to:
o the S&P 500, Dow Jones Industrial Average, Lehman Brothers
Aggregate Bond Index or other unmanaged indices so that
investors may compare the Division results with those of a
group of unmanaged securities widely regarded by investors
as representative of the securities markets in general;
o other groups of variable life variable accounts or other
investment products tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual
funds and other investment products by overall performance,
investment objectives, and assets, or tracked by other
services, companies, publications, or persons, such as
Morningstar, Inc., who rank such investment products on
overall performance or other criteria; or
o the Consumer Price Index (a measure for inflation) to assess
the real rate of return from an investment in the Division.
Unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for administrative
and management expenses.
38
<PAGE>
We may provide policy information on various topics of
interest to you and other prospective policyowners. These topics
may include:
o the relationship between sectors of the economy and the
economy as a whole and its effect on various securities
markets;
o investment strategies and techniques (such as value
investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer and account
rebalancing);
o the advantages and disadvantages of investing in
tax-deferred and taxable investments;
o customer profiles and hypothetical purchase and investment
scenarios;
o financial management and tax and retirement planning; and
o investment alternatives to certificates of deposit and other
financial instruments, including comparisons between a
Policy and the characteristics of, and market for, such
financial instruments.
Policy Illustrations. Upon request we will provide you with an
illustration of Cash Surrender Value, Account Value and death
benefits. The first illustration you Request during a Policy Year
will be provided to you free of charge. Thereafter, each
additional illustration Requested during the same Policy Year
will be provided to you for a nominal fee not to exceed $50.
Federal Income Tax Considerations
The following summary provides a general description of the
federal income tax considerations associated with the Policy and
does not purport to be complete or to cover all situations. This
discussion is not intended as tax advice. You should consult
We do not counsel or other competent tax advisers for more complete
make any information. This discussion is based upon our understanding of
guarantees the current federal income tax laws as they are currently
about the interpreted by the Internal Revenue Service (the "IRS"). We make
Policy's no representation as to the likelihood of continuation of the
tax status. current federal income tax laws or of the current interpretations
by the IRS. We do not make any guarantee regarding the tax status
of any policy or any transaction regarding the Policy.
The Policy may be used in various arrangements, including
non-qualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree
medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the
use of the Policy in any such arrangement is contemplated, you
should consult a qualified tax adviser for advice on the tax
attributes and consequences of the particular arrangement.
39
<PAGE>
Tax Status of the Policy
We believe A Policy has certain tax advantages when treated as a life
the Policy insurance contract within the meaning of Section 7702 of the
will be Internal Revenue Code of 1986, as amended (the "Code"). We
treated as believe that the Policy meets the Section 7702 definition of a
a life in- life insurance contract and will take whatever steps are
surance appropriate and reasonable to attempt to cause the Policy to
contract comply with Section 7702. We reserve the right to amend the
under federal Policies to comply with any future changes in the Code, any
tax laws. regulations or rulings under the Code and any other requirements
imposed by the IRS.
Diversification of Investments
Section 817(h) of the Code requires that the investments of
each Division of the Series Account be "adequately diversified"
in accordance with certain Treasury regulations. We believe that
the Divisions will be adequately diversified.
Policy Owner Control
In certain circumstances, the owner of a variable life
insurance policy may be considered, for federal income tax
purposes, the owner of the assets of the variable account used to
support the policy. In those circumstances, income and gains from
the variable account assets would be includible in the
policyowner's gross income. We do not know what standards will be
established, if any, in the regulations or rulings which the
Treasury has stated it expects to issue on this question. We
therefore reserve the right to modify the Policy as necessary to
attempt to prevent a policyowner from being considered the owner
of a pro-rata share of the assets of the Series Account.
The following discussion assumes that your Policy will
qualify as a life insurance contract for federal income tax
purposes.
Tax Treatment of Policy Benefits
Death bene- Life Insurance Death Benefit Proceeds. In general, the amount of
fits general- the death benefit payable under your Policy is excludible from
ly are not your gross income under the Code.
subject to
federal in- If the death benefit is not received in a lump sum and is,
come tax. instead, applied under a proceeds option agreed to by us and the
beneficiary, payments generally will be prorated between amounts
attributable to the death benefit, which will be excludable from
the beneficiary's income, and amounts attributable to interest
(occurring after the insured's death), which will be includable
in the beneficiary's income.
Investment Tax Deferred Accumulation. Any increase in your Account Value is
gains are generally not taxable to you unless you receive or are deemed to
normally not receive amounts from the Policy before the Insured dies.
taxed unless
distributed
to you be-
fore the
Insured dies.
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<PAGE>
Distributions. If you surrender your Policy, the amount you will
receive as a result will be subject to tax as ordinary income to
the extent that amount exceeds the "investment in the contract,"
which is generally the total of premiums and other consideration
paid for the Policy, less all amounts previously received under
the Policy to the extent those amounts were excludible from gross
income.
Depending on the circumstances, any of the following
transactions may have federal income tax consequences:
o the exchange of a Policy for a life insurance, endowment or
annuity contract;
o a change in the death benefit option;
o a policy loan;
o a partial surrender;
o a surrender;
o a change in the ownership of a Policy;
o a change of the named Insured; or
o an assignment of a Policy.
In addition, federal, state and local transfer and other tax
consequences of ownership or receipt of Policy Proceeds will
depend on your circumstances and those of the named beneficiary.
Whether partial withdrawals (or other amounts deemed to be
distributed) constitute income subject to federal income tax
depends, in part, upon whether your Policy is considered a
"modified endowment contract."
If you pay Modified Endowment Contracts. Section 7702A of the Code treats
more pre- certain life insurance contracts as "modified endowment
miums than contracts" ("MECs"). In general, a Policy will be treated as a
permitted MEC if total premiums paid at any time during the first seven
under the Policy Years exceed the sum of the net level premiums which would
seven-pay have been paid on or before that time if the Policy provided for
test, your paid-up future benefits after the payment of seven level annual
Policy will premiums ("seven-pay test"). In addition, a Policy may be treated
be a MEC. as a MEC if there is a "material change" of the Policy.
We will monitor your premium payments and other Policy
transactions and notify you if a payment or other transaction
might cause your Policy to become a MEC. We will not invest any
premium or portion of a premium that would cause your Policy to
become a MEC. We will promptly refund that money to you and, if
you elect to have a MEC contract, you can return the money to us
with a signed form of acceptance.
Further, if a transaction occurs which decreases the Total
Face Amount of your Policy during the first seven years, we will
retest your Policy, as of the date of its purchase, based on the
lower Total Face Amount to determine compliance with the
seven-pay test. Also, if a decrease in Total Face Amount occurs
within seven years of a "material change," we will retest your
Policy for compliance as of the date of the "material change."
Failure to comply in either case would result in the Policy's
classification as a MEC regardless of our efforts to provide a
payment schedule that would not otherwise violate the seven-pay
test.
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<PAGE>
The rules relating to whether a Policy will be treated as a
MEC are complex and cannot be fully described in the limited
confines of this summary. Therefore, you should consult with a
competent tax adviser to determine whether a particular
transaction will cause your Policy to be treated as a MEC.
Distributions Under Modified Endowment Contracts. If treated as a
MEC, your Policy will be subject to the following tax rules:
o First, partial withdrawals are treated as ordinary income
If your Policy subject to tax up to the amount equal to the excess (if any)
becomes a MEC, of your Account Value immediately before the distribution
Policy loans over the "investment in the contract" at the time of the
and surrenders distribution.
may incur
taxes and tax o Second, policy loans and loans secured by a Policy are
penalties. treated as partial withdrawals and taxed accordingly. Any
past-due loan interest that is added to the amount of the
loan is treated as a loan.
o Third, a 10 percent additional penalty tax is imposed on
that portion of any distribution (including distributions
upon surrender), policy loan, or loan secured by a Policy,
that is included in income, except where the distribution or
loan is:
o made when you are age 59 1/2 or older;
o attributable to your becoming disabled; or
o is part of a series of substantially equal periodic
payments for the duration of your life (or life
expectancy) or for the duration of the longer of your
or the beneficiary's life (or life expectancies).
If your Distributions Under a Policy That Is Not a MEC. If your Policy is
Policy is not a MEC, a distribution is generally treated first as a
not a MEC, tax-free recovery of the "investment in the contract," and then
partial with- as a distribution of taxable income to the extent the
drawals or distribution exceeds the "investment in the contract." An
surrenders exception is made for cash distributions that occur in the first
are taxed 15 Policy Years as a result of a decrease in the death benefit or
only if they other change which reduces benefits under the Policy which are
exceed your made for purposes of maintaining compliance with Section 7702.
investment Such distributions are taxed in whole or part as ordinary income
in your Policy (to the extent of any gain in the Policy) under rules prescribed
and Policy in Section 7702.
loans are
generally If your Policy is not a MEC, policy loans and loans secured
not taxed. by the Policy are generally not treated as distributions. Such
loans are instead generally treated as your indebtedness.
Finally, if your Policy is not a MEC, distributions
(including distributions upon surrender), policy loans and loans
secured by the Policy are not subject to the 10 percent
additional tax.
Multiple Policies. All modified endowment contracts issued by us
(or our affiliates) to you during any calendar year will be
treated as a single MEC for purposes of determining the amount of
a policy distribution which is taxable to you.
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<PAGE>
Treatment When Insured Reaches Attained Age 100. As described
above, when the Insured reaches Attained Age 100, we will issue
you a "paid-up" life insurance policy. We believe that the
paid-up life insurance policy will continue to qualify as a "life
insurance contract" under the Code. However, there is some
uncertainty regarding this treatment. It is possible, therefore,
that you would be viewed as constructively receiving the Cash
Surrender Value in the year in which the Insured attains age 100
and would realize taxable income at that time, even if the Policy
Proceeds were not distributed at that time. In addition, any
outstanding Policy Debt will be repaid at that time. This
repayment may be treated as a taxable distribution to you, if
your contract is not a MEC.
We may be Federal Income Tax Withholding. We will withhold and remit to the
required to federal government the amount of any tax due on that portion of a
withhold policy distribution which is taxable, unless you direct us
taxes from otherwise in writing at or before the time of the distribution.
certain dis- As the policyowner, however, you will be responsible for the
tributions payment of any taxes and early distribution penalties that may be
to you. due on policy distributions, regardless of whether those amounts
are subject to withholding.
Actions to Ensure Compliance with the Tax Law. We believe that
the maximum amount of premiums we intend to permit for the
Policies will comply with the Code definition of a "life
insurance contract." We will monitor the amount of your premiums,
and, if you pay a premium during a Policy Year that exceeds those
permitted by the Code, we will promptly refund the premium or a
portion of the premium before any allocation to the Funds. We
reserve the right to increase the death benefit (which may result
in larger charges under a Policy) or to take any other action
deemed necessary to ensure the compliance of the Policy with the
federal tax definition of a life insurance contract.
Trade or Business Entity Owns or Is Directly or Indirectly a
Beneficiary of the Policy
Where a Policy is owned by other than a natural person, the
owner's ability to deduct interest on business borrowing
unrelated to the Policy can be impacted as a result of its
ownership of cash value life insurance. No deduction will be
allowed for a portion of a taxpayer's otherwise deductible
interest expense unless the policy covers only one individual,
and such individual is, at the time first covered by the policy,
a 20 percent owner of the trade or business entity that owns the
policy, or an officer, director, or employee of such trade or
business. Although this limitation generally does not apply to
policies held by natural persons, if a trade or business (other
than one carried on as a sole proprietorship) is directly or
indirectly the beneficiary under a policy (e.g., pursuant to a
split-dollar agreement), the policy shall be treated as held by
such trade or business. The effect will be that a portion of the
trade or business entity's deduction for its interest expenses
will be disallowed unless the above exception for a 20 percent
owner, employee, officer or director applies.
The portion of the entity's interest deduction that is
disallowed will generally be a pro rata amount which bears the
same ratio to such interest expense as the taxpayer's average
unborrowed cash value bears to the sum of the taxpayer's average
unborrowed cash value and average adjusted bases of all other
assets. Any corporate or business use of the life insurance
should be carefully reviewed by your tax adviser with attention
to these rules as well as any other rules and possible tax law
changes that could occur with respect to business-owned life
insurance.
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<PAGE>
Other Employee Benefit Programs
Complex rules may apply when a Policy is held by an employer
or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These Policy owners also must
consider whether the Policy was applied for by or issued to a
person having an insurable interest under applicable state law,
as the lack of insurable interest may, among other things, affect
the qualification of the Policy as life insurance for federal
income tax purposes and the right of the beneficiary to death
benefits. Employers and employer-created trusts may be subject to
reporting, disclosure and fiduciary obligations under the
Employee Retirement Income Security Act of 1974, as amended. You
should consult your legal adviser.
Policy Loan Interest
Generally, no tax deduction is allowed for interest paid or
accrued on any indebtedness under a Policy.
Our Taxes
We are taxed as a life insurance company under Part I of
Subchapter L of the Code. The operations of the Series Account
are taxed as part of our operations. Investment income and
realized capital gains are not taxed to the extent that they are
applied under the Policies. As a result of the Omnibus Budget
Reconciliation Act of 1990, we are currently making, and are
generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently
deducting such expenses. This so-called "deferred acquisition
cost" tax ("DAC tax") applies to the deferred acquisition
expenses of a Policy and results in a significantly higher
corporate income tax liability for Great-West. We reserve the
right to adjust the amount of a charge to premium to compensate
us for these anticipated higher corporate income taxes.
A portion of the Expense Charges Applied to Premium is used
to offset the federal, state or local taxes that we incur which
are attributable to the Series Account or the Policy. We reserve
the right to adjust the amount of this charge.
Distribution of the Policy
The Policy will be sold by licensed insurance agents in
those states where the Policy may be lawfully sold. Such agents
will be registered representatives of broker-dealers registered
under the Securities Exchange Act of 1934 who are members of the
National Association of Securities Dealers, Inc. and who have
entered into selling agreements with our general distributor,
BenefitsCorp Equities, Inc. ("BCE"). BCE is an indirect,
wholly-owned subsidiary of Great-West and is registered with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 as broker-dealer and is a member of the National
Association of Securities Dealers, Inc. BCE also acts as the
general distributor of certain annuity contracts issued by us.
The maximum sales commissions payable to our agents, independent
registered insurance agents and other registered broker-dealers
44
<PAGE>
is 40% of the first year target premium. In addition, asset-based
trail commissions may be paid. A sales representative may be
required to return all the commissions paid if a Policy
terminates prior to the second Policy Anniversary.
The directors and executive officers of BCE are: Charles P.
Nelson, Chairman of the Board and President, Robert K. Shaw,
Director, John A. Brown, Director, Dennis Low, Director, G.E.
Seller, Director and Vice President, Major Accounts, Douglas L.
Wooden, Director, J. Baker, Vice President, Licensing and
Contracts, Glen Ray Derback, Treasurer, Beverly A. Byrne,
Secretary and T. L. Buckley, Compliance Officer. The principal
business address of each director and executive officer, except
G.E. Seller, is 8515 East Orchard Road, Englewood, Colorado
80111. G.E. Seller's principal business address is 18101 Von
Karman Avenue, Suite 1460, Irvine, California 92612.
Voting Rights
We are the legal owner of all shares of the Funds held in
the Divisions of the Series Account, and as such have the right
to vote upon matters that are required by the 1940 Act to be
approved or ratified by the shareholders of the Funds and to vote
upon any other matters that may be voted upon at a shareholders'
meeting. We will, however, vote shares held in the Divisions in
accordance with instructions received from policyowners who have
an interest in the respective Divisions.
We will vote shares held in each Division for which no
timely instructions from policyowners are received, together with
shares not attributable to a Policy, in the same proportion as
those shares in that Division for which instructions are
received.
The number of shares in each Division for which instructions
may be given by a policyowner is determined by dividing the
portion of the Account Value derived from participation in that
Division, if any, by the value of one share of the corresponding
Fund. We will determine the number as of the record date chosen
by the Fund. Fractional votes are counted. Voting instructions
will be solicited in writing at least 14 days prior to the
shareholders' meeting.
We may, if required by state insurance regulators, disregard
voting instructions if those instructions would require shares to
be voted so as to cause a change in the sub-classification or
investment policies of one or more of the Funds, or to approve or
disapprove an investment management contract. In addition, we may
disregard voting instructions that would require changes in the
investment policies or investment adviser, provided that we
reasonably disapprove of those changes in accordance with
applicable federal regulations. If we disregard voting
instructions, we will advise you of that action and our reasons
for it in our next communication to policyowners.
This description reflects our current view of applicable
law. Should the applicable federal securities laws change so as
to permit us to vote shares held in the Series Account in our own
right, we may elect to do so.
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<PAGE>
Our Directors and Executive Officers
Our directors and executive officers are listed below,
together with information as to their ages, dates of election and
principal business occupations during the last five years (if
other than their present business occupations). The asterisks
below denote the year that the indicated director was elected to
our board of directors.
<TABLE>
<CAPTION>
<S> <C>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
Directors
James Balog (70) Company Director since 1993
James W. Burns, O.C. (69) Chairman of the Boards of Great-West Lifeco,
Great-West Life, London Insurance Group Inc.
and London Life Insurance Company; Deputy
Chairman, Power Corporation since 1991
Orest T. Dackow (62) President and Chief Executive Officer, Great-
West Lifeco since 1991
Andre Desmarais (42) President and Co-Chief Executive Officer,
Power Corporation; Deputy Chairman, Power
Financial since 1997
Paul Desmarais, Jr. (44) Chairman and Co-Chief Executive Officer,
Power Corp; Chairman, Power Financial since
1991
Robert G. Graham (67) Company Director since January 1996;
previously Chairman and Chief Executive
Officer, Inter-City Products Corporation since
1991
Robert Gratton (55) Chairman of the Board of the Company;
President and Chief Financial Officer, Power
Financial since 1991
N. Berne Hart (69) Company Director since 1991
Kevin P. Kavanagh (66) Company Director since 1996
William Mackness (60) Company Director since July 1995; previously
Dean, Faculty of Management, University of
Manitoba since 1991
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<PAGE>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
William T. McCallum (56) President and Chief Executive Officer of the
Company; President and Chief Executive
Officer, United States Operations, Great-West
since 1990
Jerry Edgar Alan Nickerson (62) Chairman of the Board, H.B. Nickerson & Sons
Limited since 1994
The Honourable P. Michael Pittfield, P.C., Vice-Chairman, Power Corporation; Member of
Q.C. (61) the Senate of Canada since 1991
Michel Plessis-Belair, F.C.A. (56) Vice-Chairman and Chief Financial Officer,
Power Corporation; Executive Vice-President
and Chief Financial Officer, Power Financial
since 1991
Brian E. Walsh (45) Co-Founder and Managing Partner, Veritas
Capital Management, LLC since September
1997; previously Partner, Trinity L.P. from
January 1996; previously Managing Director and
Co-Head, Global Investment Bank, Bankers
Trust Company since 1995
Executive Officers
John A. Brown (51) Senior Vice President, Sales, Financial Services
of the Company and Great-West Life since 1992
Donna A. Goldin (51) Executive Vice President and Chief Operating
Officer, One Corporation since June 1996;
previously Executive Vice President and Chief
Operating Officer, Harris Methodist Health
Plan since March 1995; previously Executive
Vice President and Chief Operating Officers,
Private Healthcare Systems, Inc. since 1996
Mitchell T. G. Graye (43) Senior Vice President, Chief Financial Officer of
the Company; Senior Vice President, Chief
Financial Officer, United States, Great-West Life
since 1997
46
<PAGE>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
John T. Hughes (62) Senior Vice President, Chief Investment Officer
of the Company; Senior Vice President, Chief
Investment Officer; United States, Great-West
Life since 1989
D. Craig Lennox (51) Senior Vice President, General Counsel and
Secretary of the Company; Senior Vice
President and Chief U.S. Legal Officer,
Great-West Life since 1984
William T. McCallum (56) President and Chief Executive Officer of the
Company; President and Chief Executive
Officer, United States Operations, Great-West
Life since 1984
Steve H. Miller (46) Senior Vice President, Employee Benefits Sales
of the Company and Great-West Life since 1997
James D. Motz (49) Executive Vice President, Employee Benefits of
the Company and Great-West Life since 1992
Charles P. Nelson (37) Senior Vice President, Public Non-Profit
Markets of the Company and Great-West life
since 1998
Martin Rosenbaum (46) Senior Vice President, Employee Benefits
Operations of the Company and Great-West
Life since 1997
Robert K. Shaw (43) Senior Vice President, Individual Markets of the
Company and Great-West Life since 1998
Douglas L. Wooden (42) Executive Vice President, Financial Services of
the Company and Great-West Life since 1991
47
</TABLE>
<PAGE>
Other Information
State Regulation
We are subject to the laws of Colorado governing life
insurance companies and to regulation by Colorado's Commissioner
of Insurance, whose agents periodically conduct an examination of
our financial condition and business operations. We are also
subject to the insurance laws and regulations of the all
jurisdictions in which we are authorized to do business.
We are required to file an annual statement with the
insurance regulatory authority of those jurisdictions where we
are authorized to do business relating to our business operations
and financial condition as of December 31st of the preceding
year.
Legal Proceedings
There are no pending legal proceedings which would have an
adverse material effect on the Series Account. Great-West is
engaged in various kinds of routine litigation which, in our
judgment, is not material to its total assets or material with
respect to the Series Account.
Legal Matters
All matters of Colorado law pertaining to the Policy,
including the validity of the Policy and our right to issue the
Policy under Colorado law, have been passed upon by Ruth B.
Lurie, Vice President, Counsel and Associate Secretary of
Great-West. The law firm of Jorden Burt Boros Cicchetti Berenson
& Johnson LLP, 1025 Thomas Jefferson St., Suite 400, East Lobby,
Washington, D.C. 20007-5201, serves as special counsel to
Great-West with regard to the federal securities laws.
Experts
The consolidated financial statements for Great-West Life &
Annuity Insurance Company as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997
have been audited by Deloitte & Touch LLP, 555 17th Street, Suite
3600, Denver, Colorado 80202, independent auditors, as stated in
their reports. We have included those financial statements in
reliance upon the reports of Deloitte & Touche LLP, given upon
their authority as experts in accounting and auditing. Actuarial
matters included in this Prospectus and the registration
statement of which it is a part, including the hypothetical
48
<PAGE>
Policy illustrations, have been examined by Ron Laeyendecker,
F.S.A., M.A.A.A., Actuary of the Company, and are included in
reliance upon his opinion as to their reasonableness.
Registration Statements
This Prospectus is part of a registration statement that has
been filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to the Policy.
It does not contain all of the information set forth in the
registration statement and the exhibits filed as part of the
registration statement. You should refer to the registration
statement for further information concerning the Series Account,
Great-West, the mutual fund investment options, and the Policy.
The descriptions in this Prospectus of the Policies and other
legal instruments are summaries. You should refer to those
instruments as filed for their precise terms.
Year 2000 Compliance
The year 2000 ("Y2K") problem arises when a computer
performing date-based computations or operations produces
erroneous results due to the historical practice of using two
digit years within computer hardware and software. This causes
errors or misinterpretations of the century in date calculations.
Virtually all businesses, including Great-West, are required to
determine the extent of their Y2K problems. Systems that have a
Y2K problem must then be converted or replaced by systems that
will operate correctly with respect to the year 2000 and beyond.
Great-West has a written plan that encompasses all computer
hardware, software, networks, facilities (embedded systems) and
telephone systems. The plan also includes provisions for
identifying and verifying that major vendors and business
partners are Y2K compliant. Great-West is developing contingency
plans to address the possibility of both internal and external
failures as well. The plan calls for full Y2K compliance for core
systems by March 31, 1999 and full Y2K compliance for all
Great-West systems by October 31, 1999.
Great-West's plan establishes five phases for becoming Y2K
compliant. Phase 1 is "impact analysis" which includes initial
inventory and preliminary assessment of Y2K impact. Phase 2 is
"solution planning" which includes system by system planning to
outline the approach and timing for reaching compliance. Phase 3
is "conversion/renovation" which means the actual process of
replacing or repairing non-compliant systems. Phase 4 is
"testing" to ensure that the systems function correctly under a
variety of different date scenarios including current dates, year
49
<PAGE>
2000 and leap year dates. Phase 5 is "implementation" which means
putting Y2K compliant systems back into production.
As of September 1, 1998, Great-West had completed impact
analysis (phase 1) and solution planning (phase 2) for all of its
core systems and was more than 93% complete for phase 1 and 2
with respect to its systems as a whole. In addition, Great-West
was approximately 58% complete with respect to conversion and
renovation (phase 3), 42% complete with respect to testing (phase
4) and 38% complete with respect to implementation (phase 5).
In addition to ensuring that Great-West's own systems are
Y2K compliant, Great-West has identified third parties with which
Great-West has significant business relationships in order to
assess the potential impact on Great-West of the third parties'
Y2K issues and plans. Great-West expects to complete this process
during the first quarter of 1999 and will conduct system testing
with third parties throughout 1999. Great-West does not have
control over these third parties and cannot make any
representations as to what extent Great-West's future operating
results may be adversely affected by the failure of any third
party to address successfully its own Y2K issues.
On the basis of currently available information, the expense
incurred by Great-West, including anticipated future expenses,
related to the Y2K issue has not and is not expected to be
material to Great-West's financial condition or results of
operations. Great-West has spent approximately $7.5 million on
its Y2K project through the end of August 1998 and expects to
spend up to approximately $15.3 million on its Y2K project by the
end of 2000. All of these funds will come from Great-West's cash
flow from operations. Great-West has continued other scheduled
non-Y2K information systems changes and upgrades. Although work
on Y2K issues may have resulted in minor delays on the other
projects, the delays are not expected to have a material adverse
effect on Great-West's consolidated financial condition or
results of operations.
The most reasonably likely worst case Y2K scenario is that
Great-West will experience isolated internal or third party
computer failures and will be temporarily unable to process
insurance and annuity benefit transactions. All of Great-West's
Y2K efforts have been designed to prevent such an occurrence.
However, if Great-West identifies internal or third party Y2K
issues which cannot be timely corrected, there can be no
assurance that Great-West can avoid Y2K problems or that the cost
of curing the problem will not be material.
50
<PAGE>
In an effort to mitigate risks associated with Y2K failures,
Great-West is in the process of developing contingency plans to
address its core functions, including relations with third
parties. It is Great-West's expectation that contingency plans
will address possible failures generated internally, by vendors
or business partners and by customers. Possible general
approaches include manual processing, payments on an estimated
basis and use of disaster recovery facilities.
Financial Statements
Great-West's financial statements, which are included in
this prospectus, should be considered only as bearing on our
ability to meet our obligations with respect to the death benefit
and our assumption of the mortality and expense risks. They
should not be considered as bearing on the investment performance
of the Fund shares held in the Series Account.
There are no financial statements for the Series Account
because it had not commenced operations as of the date of this
Prospectus, has no assets or liabilities, and has received no
income or incurred any expense.
51
<PAGE>
Appendix A -- Glossary of Terms
Account Value -- The sum of the value of your interests in the Divisions and the
Loan Account.
Attained Age -- The Insured's Issue Age plus the number of completed Policy
Years.
Business Day -- Any day that we are open for business. We are open for business
every day that the New York Stock Exchange is open for trading.
Cash Surrender Value -- The Account Value minus any outstanding Policy Debt.
Divisions -- Divisions into which the assets of the Series Account are divided,
each of which corresponds to an investment choice available to you.
DueProof -- Such evidence as we may reasonably require in order to establish
that Policy Proceeds are due and payable.
Fund -- An underlying mutual fund in which a Division invests. Each Fund is an
investment company registered with the SEC or a separate investment series of
a registered investment company.
Initial Premium -- The initial premium amount specified in a Policy.
Insured -- The person whose life is insured under the Policy.
Issue Age -- The Insured's age as of the Insured's birthday nearest the Policy
Date.
Issue Date -- The date on which we issue a Policy.
Loan Account -- An account established for amounts transferred from the
Divisions as security for outstanding Policy Debt.
Policy Anniversary -- The same day in each succeeding year as the day of the
year corresponding to the Policy Date.
Policy Date -- The date coverage commences under your Policy and the date from
which Policy Months, Policy Years and Policy Anniversaries are measured.
Policy Debt -- The principal amount of any outstanding loan against the Policy,
plus accrued but unpaid interest on such loan.
Policy Month -- The one-month period commencing on the same day of the month as
the Policy Date.
A-1
<PAGE>
Policy Proceeds -- The amount determined in accordance with the terms of the
Policy which is payable at the death of the Insured. This amount is the death
benefit, decreased by the amount of any outstanding Policy Debt, and
increased by the amounts payable under any supplemental benefits.
Policy Year -- The one-year period commencing on the Policy Date or any Policy
Anniversary and ending on the next Policy Anniversary.
Principal Office -- Great-West Life & Annuity Insurance Company, 8515 East
Orchard Road, Englewood, Colorado 80111, or such other address as we may
hereafter specify to you by written notice.
Request -- Any instruction in a form, written, telephoned or computerized,
satisfactory to us and received at our Principal Office from you as required
by any provision of your Policy or as required by us. The Request is subject
to any action taken or payment made by us before it is processed.
SEC -- The United States Securities and Exchange Commission.
Series Account -- COLI VUL-2 Series Account of Great-West Life & Annuity
Insurance Company.
Total Face Amount -- The amount of life insurance coverage you request as
specified in your Policy.
Unit -- An accounting unit of measurement that we use to calculate the value of
each Division.
Unit Value -- The value of each Unit in a Division.
Valuation Date -- Any day that benefits vary and on which the New York Stock
Exchange is open for regular business, except as may otherwise be required or
permitted by the applicable rules and regulations of the SEC.
Valuation Period -- The period of time from one determination of Unit Values to
the next following determination of Unit Values. We will determine Unit
Values for each Valuation Date as of the close of the New York Stock Exchange
on that Valuation Date.
A-2
<PAGE>
<TABLE>
<CAPTION>
Appendix B -- Fees and Expenses of the Funds
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.
o American Century VP Income & --- --- --- ---
Growth
o American Century VP International --- --- --- ---
o American Century VP Value --- --- --- ---
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
o Dreyfus Capital Appreciation Portfolio --- --- --- ---
o Dreyfus Growth and Income Portfolio --- --- --- ---
Federated Insurance Series
o Federated American Leaders Fund II --- --- --- ---
o Federated Growth Strategies Fund II --- --- --- ---
o Federated High Income Bond Fund II --- --- --- ---
o Federated International Equity Fund II --- --- --- ---
INVESCO Variable Investments Fund, Inc.
o INVESCO VIF - High Yield Portfolio --- --- --- ---
o INVESCO VIF - Industrial Income --- --- --- ---
Portfolio
o INVESCO VIF - Total Return Portfolio --- --- --- ---
B-1
<PAGE>
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
Janus Aspen Series
o Balanced Portfolio --- --- --- ---
o Flexible Income Portfolio --- --- --- ---
o High-Yield Portfolio --- --- --- ---
o Worldwide Growth Portfolio --- --- --- ---
Maxim Series Fund, Inc.
o Maxim Corporate Bond Portfolio --- --- --- ---
o Maxim INVESCO ADR Portfolio --- --- --- ---
o Maxim INVESCO Balanced Portfolio --- --- --- ---
o Maxim INVESCO Small-Cap Growth --- --- --- ---
Portfolio
o Maxim MidCap Portfolio --- --- --- ---
o Maxim Money Market Portfolio --- --- --- ---
o Maxim U.S. Government Securities --- --- --- ---
Portfolio
Maxim Profile Portfolios:
o Maxim Aggressive Profile Portfolio --- --- --- ---
o Maxim Moderately Aggressive Portfolio --- --- --- ---
o Maxim Moderate Profile Portfolio --- --- --- ---
o Maxim Moderately Conservative Profile --- --- --- ---
Portfolio
o Maxim Conservative Profile Portfolio --- --- --- ---
B-2
<PAGE>
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
Neuberger&Berman Advisers Management
Trust
o Guardian Portfolio --- --- --- ---
o Mid-Cap Growth Portfolio --- --- --- ---
o Partners Portfolio --- --- --- ---
o Socially Responsive Portfolio --- --- --- ---
</TABLE>
The Fund expenses shown above are assessed at the Fund level and are
not direct charges against Series Account assets or reductions from Account
Values. These expenses are taken into consideration in computing each Fund's net
asset value, which is the share price used to calculate the Unit Values of the
Series Account. The following Funds are subject to the following fee waiver
and/or expense reimbursement arrangements.
[INSERT WAIVER & REIMBURSEMENT INFORMATION IN PRE-EFFECTIVE AMENDMENT]
The management fees and other expenses are more fully described in the
prospectuses for each Fund. The information relating to the Fund expenses was
provided by the Fund and was not independently verified by us.
B-3
<PAGE>
Appendix C -- Table of Death Benefit Percentages
<TABLE>
<CAPTION>
Applicable Applicable
Age Percentage Age Percentage
<S> <C> <C> <C>
20 250% 60 130%
21 250% 61 128%
22 250% 62 126%
23 250% 63 124%
24 250% 64 122%
25 250% 65 120%
26 250% 66 119%
27 250% 67 118%
28 250% 68 117%
29 250% 69 116%
30 250% 70 115%
31 250% 71 113%
32 250% 72 111%
33 250% 73 109%
34 250% 74 107%
35 250% 75 105%
36 250% 76 105%
37 250% 77 105%
38 250% 78 105%
39 250% 79 105%
40 250% 80 105%
41 243% 81 105%
42 236% 82 105%
43 229% 83 105%
44 222% 84 105%
45 215% 85 105%
46 209% 86 105%
47 203% 87 105%
48 197% 88 105%
49 191% 89 105%
50 185% 90 105%
51 178% 91 104%
52 171% 92 103%
53 164% 93 102%
54 157% 94 101%
55 150% 95 100%
56 146% 96 100%
57 142% 97 100%
58 138% 98 100%
59 134% 99 100%
</TABLE>
C-1
<PAGE>
Appendix D -- Sample Hypothetical Illustrations
Illustrations of Death Benefits, Surrender Values And Accumulated Premiums
The illustrations in this prospectus have been prepared to help show how values
under the Policy change with investment performance. The illustrations on the
following pages illustrate the way in which a Policy Year's death benefit,
Account Value and Cash Surrender Value could vary over an extended period of
time. They assume that all premiums are allocated to and remain in the Series
Account for the entire period shown and are based on hypothetical gross annual
investment returns for the Funds (i.e., investment income and capital gains and
losses, realized or unrealized) equivalent to constant gross annual rates of 0%,
6%, and 12% over the periods indicated.
The Account Values and death benefits would be different from those shown if the
gross annual investment rates of return averaged 0%, 6%, and 12% over a period
of years, but fluctuated above or below such averages for individual Policy
Years. The values would also be different depending on the allocation of a
Policy's total Account Value among the Divisions of the Series Account, if the
actual rates of return averaged 0%, 6% or 12%, but the rates of each Fund varied
above and below such averages.
The amounts shown for the death benefits and Account Values take into account
all charges and deductions imposed under the Policy based on the assumptions set
forth in the tables below. These include the Expense Charges Applied to Premium,
the Daily Risk Percentage charged against the Series Account for mortality and
expense risks, the Monthly Expense Charge and the Monthly Cost of Insurance. The
Expense Charges Applied to Premium is equal to a % charge for sales load and our
federal tax obligations and the applicable local and state premium tax assumed
to be %. The Daily Risk Percentage charged against the Series Account for
mortality and expense risks is an annual effective rate of 0.45% for the first
10 Policy Years, 0.30% for Policy Years 11 through 20, and 0.10% thereafter and
is guaranteed not to exceed an annual effective rate of .90%. The Monthly
Expense Charge is $10.00 per month for first three Policy Years and $7.50 per
Policy Month for all Policy Years thereafter. This Charge is guaranteed not to
exceed $15 per Policy Month.
The amounts shown in the tables also take into account the Funds' advisory fees
and operating expenses, which are assumed to be at an annual rate of % of the
average daily net assets of each Fund. This is based upon a simple average of
the advisory fees and expenses of all the Funds for the most recent fiscal year
taking into account any applicable expense caps or expense reimbursement
arrangements. Actual fees and expenses that you will incur may be more or less
than %, and will vary from year to year. See the prospectuses for the Fund for
more information on Fund expenses. The gross annual rates of investment return
of 0%, 6% and 12% correspond to net annual rates of %, %, and %, respectively,
during the first three policy years, ___%, ___%, and ___%, respectively, for
Policy Years 4 through 10, and _____%, ______% and _____%, respectively,
thereafter.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Series Account since no charges are currently made. If,
in the future, such charges are made, in order
D-1
<PAGE>
to produce the illustrated death benefits, Account Values and Cash Surrender
Values, the gross annual investment rate of return would have to exceed 0%, 6%,
or 12% by a sufficient amount to cover the tax charges.
The second column of each table shows the amount which would accumulate if an
amount equal to each premium were invested and earned interest, after taxes, at
% per year, compounded annually.
We will furnish upon request a comparable table using any specific set of
circumstances. In addition to a table assuming Policy charges at their maximum,
we will furnish a table assuming current Policy charges.
D-2
<PAGE>
TABLE 1
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
COLI VUL-2 SERIES ACCOUNT
Male, Preferred, Age 45
$ TOTAL FACE AMOUNT
ANNUAL PREMIUM $
DEATH BENEFIT OPTION ___
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
Hypothetical 0% Hypothetical 6% Hypothetical 12%
Premiums Gross Investment Return Gross Investment Return Gross Investment Return
Paid Plus Net_____% Net_____% Net_____%
--------------------------------- ---------------------------------- ---------------------------------
Interest Cash Cash Cash
Policy At % Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ---------- -------- ---------- ---------- ---------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D-3
<PAGE>
Age 60
Age 65
Age 70
Age 75
</TABLE>
(1) Assumes a $ premium is paid at the beginning of each Policy Year. Values
will be different if premiums are paid with a different frequently or in
different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
withdrawals may cause this your Policy to lapse due to insufficient Account
Value.
The hypothetical investment rates of return are illustrative only, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a policy owner,
and the different investment rates of return for the Funds. The Cash Surrender
Value and death benefit for a Policy would be different from those shown if the
actual rates of investment return averaged 0%, 6%, and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years. They would also be different if any policy loans or partial withdrawals
were made. No representations can be made that these hypothetical investment
rates of return can be achieved for any one year or sustained over any period of
time.
D-4
<PAGE>
TABLE 2
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
COLI VUL-2 SERIES ACCOUNT
Male, Preferred, Age 45
$ TOTAL FACE AMOUNT
ANNUAL PREMIUM $
DEATH BENEFIT OPTION
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
Hypothetical 0% Hypothetical 6% Hypothetical 12%
Premiums Gross Investment Return Gross Investment Return Gross Investment Return
Paid Plus Net______% Net_____% Net_____%
--------------------------------- ---------------------------------- ---------------------------------
Interest Cash Cash Cash
Policy At % Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D-5
<PAGE>
Age 60
Age 65
Age 70
Age 75
</TABLE>
(1) Assumes a $ premium is paid at the beginning of each Policy Year. Values
will be different if premiums are paid with a different frequently or in
different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
withdrawals may cause this your Policy to lapse due to insufficient Account
Value.
The hypothetical investment rates of return are illustrative only, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a policy owner,
and the different investment rates of return for the Funds. The Cash Surrender
Value and death benefit for a Policy would be different from those shown if the
actual rates of investment return averaged 0%, 6%, and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years. They would also be different if any policy loans or partial withdrawals
were made. No representations can be made that these hypothetical investment
rates of return can be achieved for any one year or sustained over any period of
time.
D-6
<PAGE>
[ Back Cover ]
The Securities and Exchange Commission maintains an Internet Web site
(http//www.sec.gov) that contains additional information about Great-West Life &
Annuity Insurance Company, the Policy and the Series Account which may be of
interest to you. The Web site also contains additional information about the
Policy Year's mutual fund investment options.
