As filed with the Securities and Exchange Commission on April
24, 1997
Registration No. 33-82610
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. 3 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 12 (X)
(Check appropriate box or boxes)
MAXIM SERIES ACCOUNT
(Exact name of Registrant)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Address of Depositor's Principal Executive Officers) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson, LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
It is proposed that this filing will become effective (check
appropriate space):
Immediately upon filing pursuant to paragraph
(b) of Rule 485
X On May 1, 1997, pursuant to paragraph (b) of
Rule 485.
60 days after filing pursuant to paragraph
(a)(1) of Rule 485.
On , pursuant to paragraph
(a)(1) of Rule 485.
75 days after filing pursuant to paragraph
(a)(2) of Rule 485.
On , pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following:
This post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
The Registrant has chosen to register an indefinite number of
securities in accordance with Rule 24f-2. The Rule 24f-2 Notice
for Registrant's most recent fiscal year was filed on February 28,
1997.
MAXIM SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis Fee Table; Questions and Answers about the Series
Account Variable Annuity
4. Condensed Financial Information Condensed Financial
Information
5. General Description of Registrant, Depositor and
Portfolio Companies Great-West Life & Annuity Insurance
Company; Maxim Series Account; Investments of the Series Account;
Voting Rights
6. Deductions Administrative Charges; Risk Charges, Premium Taxes
and Other Deductions; Appendix A; Distribution of the Contracts
7. General Description of Variable Annuity Contracts The
Contracts; Investments of the Series Account; Statement of
Additional Information
8. Annuity Period Annuity Options
9. Death Benefit The Contracts-Accumulation Period - Death
Benefit; Prior to Retirement Date; Annuity Payments
FORM N-4 ITEM PROSPECTUS CAPTION
10 Purchases and Contract Value The Contracts-General; The
Contracts-Accumulation Period; Distribution of the Contracts; Cover
Page; Great-West Life & Annuity Insurance Company
11. Redemptions The Contracts-Accumulation Period - Total and
Partial Surrenders; Return Privilege
12. Taxes Federal Tax Consequences
13. Legal Proceedings Legal Proceedings
14. Table of Contents of Statement of Additional Information
Statement of Additional Information
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Not Applicable
18. Services Custodian and Accountants
19. Purchase of Securities Being Offered Not Applicable
20. Underwriters Underwriter
21. Calculation of Performance Data Calculation of Performance
Data
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
PART A
INFORMATION REQUIRED IN A PROSPECTUS
MAXIM SERIES ACCOUNT
of Great-West Life & Annuity Insurance Company
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACTS
MAXIMUM VALUE PLAN (MVP)
Distributed by: BenefitsCorp Equities, Inc.
8515 E. Orchard Road, Englewood, Colorado 80111
The individual flexible premium variable annuity contracts
described in this prospectus ("Variable Annuity Contracts" or
"Contracts") are designed and offered to provide retirement
programs for individuals. The Contracts are issued by Great-West
Life & Annuity Insurance Company ("GWL&A"). BenefitsCorp Equities,
Inc. ("BCE"), a wholly owned subsidiary of GWL&A, is the principal
underwriter and distributor of the Contracts. The Contracts may be
issued under retirement plans which qualify for Federal tax
benefits under Sections 401 and 408 of the Internal Revenue Code as
individual retirement accounts/individual retirement annuities
("IRAs"), and under other retirement plans which do not qualify
under the Internal Revenue Code ("non-qualified plans").
The Contracts may be purchased by a minimum initial
Purchase
Payment of $5,000 for non-qualified plans and $2,000 for IRAs.
Additional Purchase Payments of at least $500 ($50 for Automatic
Contribution Plans) may be made at any time before Annuity payments
begin, subject to certain limitations.
GWL&A believes that the annuity contracts will qualify for
tax
treatment under Section 72 of the Internal Revenue Code. Pursuant
to that Section, as amended, surrenders prior to the Annuity
Commencement Date are subject to possible current taxation as well
as the possible imposition of a penalty tax as described more fully
under the section entitled "Federal Tax Status."
The value of the Contract prior to annuitization, and thus the
amount accumulated to provide annuity payments will depend upon the
investment performance of the Series Account. Likewise, the amount
of the initial annuity payment will also depend upon the prior
investment performance of the Series Account. Subsequent annuity
payments may vary based upon the investment experience of the
Series Account. However, the Contract Owner may elect before the
first annuity payment, a fixed annuity payment which is not
affected by such experience. Charges imposed under the Contracts
include contract maintenance charges, deductions for mortality and
expense risk guarantees and a surrender charge. (See
"Administrative Charges, Risk Charges and Premium Taxes.")
Purchase Payments will be allocated to the Maxim Series
Account of GWL&A (the "Series Account"), a segregated investment
account of GWL&A. The Series Account currently has fifteen
Investment Divisions available to which Purchase Payments may be
allocated. Thirteen of the Investment Divisions invest in shares of
Maxim Series Fund, Inc. (The "Fund"), a series, open-end management
investment company. The Series Account also has two Investment
Divisions which invest in shares of American Century Variable
Portfolios, Inc., ("American Century") a diversified, series,
open-end management investment company. The Investment Divisions
are more fully described on page 2 of this prospectus.
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE
MAXIM SERIES FUND, INC., AMERICAN CENTURY VP CAPITAL APPRECIATION
FUND AND AMERICAN CENTURY VP BALANCED FUND. THESE PROSPECTUSES
PROVIDE INFORMATION A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE
INVESTING AND SHOULD BE KEPT FOR FUTURE REFERENCE. ADDITIONAL
INFORMATION ABOUT THE CONTRACTS HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN A STATEMENT OF ADDITIONAL INFORMATION,
DATED MAY 1, 1997, WHICH IS INCORPORATED HEREIN BY REFERENCE. THE
STATEMENT OF ADDITIONAL INFORMATION, THE TABLE OF CONTENTS OF WHICH
IS SET FORTH ON THE LAST PAGE OF THIS PROSPECTUS, IS AVAILABLE
WITHOUT CHARGE UPON REQUEST BY WRITING OR TELEPHONING GWL&A AT THE
ADDRESS OR TELEPHONE NUMBER SET FORTH ON THE LAST PAGE OF THIS
PROSPECTUS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
Following is a description of the Portfolios of the Fund and
American Century available under this Series Account:
n the Maxim Money Market Portfolio, which seeks preservation of
capital, liquidity and the highest possible current income
consistent with the foregoing objectives, through investments in
short-term money market securities. Shares of the Maxim Money
Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will
be able to maintain a stable net asset value of $1.00 per share;
n the Maxim Bond Portfolio, which seeks to achieve maximum total
return, consistent with the preservation of capital, through
investment in an actively managed portfolio of debt securities;
n the Maxim Stock Index Portfolio, which seeks to provide
investment results, before fees, that correspond to the total
return of the S&P 500 Index and the S&P MidCap Index, weighted
according to their respective pro-rata share of the market;
n the Maxim U.S. Government Securities Portfolio, which 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;
n the Maxim Total Return Portfolio, which seeks to obtain the
highest possible total return, through a combination of income and
capital appreciation, consistent with reasonable risk;
n the Maxim Small-Cap Index Portfolio, which seeks investment
results, before fees, that correspond to the total return of the
Russell 2000 Index;
n the Maxim MidCap Portfolio (Growth Fund I), which seeks long-term
growth of capital through investment in at least 65% of the
Portfolio's assets in medium sized companies;
n the Maxim INVESCO Balanced Portfolio, which seeks to achieve a
high total return on investments through capital appreciation and
current income. The Portfolio invests in a combination of common
stocks (normally 50% to 70% of total assets) and fixed-income
securities (normally 25% or more).
n the Maxim INVESCO Small-Cap Growth Portfolio, which seeks
long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies
with market capitalizations of $1 billion or less at the time of
initial purchase;
n the Maxim INVESCO ADR Portfolio, which seeks to achieve a high
total return on investment through capital appreciation and current
income, while reducing risk through diversification by investing
substantially all its assets in foreign securities that are issued
in the form of American Depository Receipts ("ADRs") or foreign
stocks that are registered with the Securities and Exchange
Commission and traded in the U.S.;
n the Maxim T. Rowe Price Equity/Income Portfolio, which seeks to
provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of
established companies;
n the Maxim Corporate Bond Portfolio, which seeks high total
investment return by investing primarily in debt securities
(including convertibles), although up to 20% of its assets, at the
time of acquisition, may be invested in preferred stocks;
n the Maxim Small-Cap Value Portfolio (Ariel Value), which seeks to
achieve long-term capital appreciation by investing primarily in
common stocks, although the Portfolio may also invest in other
securities, including restricted and preferred stocks;
n American Century VP Capital Appreciation, which seeks capital
growth by investment in common stocks (including securities
convertible to common stocks) and other securities that meet
certain fundamental and technical standards and, in the opinion of
American Century's management, have better than average potential
for appreciation;
n American Century VP Balanced, which seeks capital growth and
current income by investment of approximately 60% of its assets in
common stocks (including securities convertible to common stocks)
and the remaining assets in bonds and other fixed income securities
which, in the opinion of American Century's management, have better
than average potential for appreciation.
TABLE OF CONTENTS
Page
FEE TABLE 4
EXAMPLES 5
FINANCIAL HIGHLIGHTS 6
GLOSSARY OF SPECIAL TERMS 9
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE ANNUITY 11
PERFORMANCE RELATED INFORMATION 13
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY 14
MAXIM SERIES ACCOUNT OF GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY 14
THE CONTRACTS 15
INVESTMENTS OF THE SERIES ACCOUNT 19
ADMINISTRATIVE CHARGES, RISK CHARGES AND PREMIUM TAXES 22
PERIODIC PAYMENT OPTION 23
ANNUITY OPTIONS 23
FEDERAL TAX STATUS 25
VOTING RIGHTS 28
DISTRIBUTION OF THE CONTRACTS 29
RETURN PRIVILEGE 29
STATE REGULATION 29
REPORTS 29
LEGAL PROCEEDINGS 29
LEGAL MATTERS 29
REGISTRATION STATEMENT 29
STATEMENT OF ADDITIONAL INFORMATION 30
The Contracts are not available in all states
NO PERSON IS AUTHORIZED BY GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY TO PROVIDE INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE
OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF, OR SOLICITATION OF AN OFFER TO ACQUIRE, ANY
INTEREST OR PARTICIPATION IN THE VARIABLE ANNUITY CONTRACTS OFFERED
BY THIS PROSPECTUS TO ANYONE IN ANY STATE OR JURISDICTION IN WHICH
SUCH SOLICITATION OR OFFER MAY NOT BE MADE LAWFULLY.
FEE TABLE
Contract Owner Transaction Expenses
Deferred Sales Load (as a percentage of purchase payments
or amount surrendered, as applicable) 7% maximum
Surrender Fees None
Annual Contract Fee $27.00
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality Risk Fees 0.85%
Expense Risk Fees 0.40%
Total Separate Account Annual Expenses 1.25%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Fund
average net assets)
Maxim Money Market
Maxim Bond
Maxim Stock Index
Maxim U.S. Govt. Securities
Maxim Total Return
Maxim Small-Cap Index
Management Fees
.46%
.60%
.60%
.60%
.60%
.60%
Other Expenses
None
None
None
None
None
None
TOTAL Maxim Series Fund Expenses
.46%
.60%
.60%
.60%
.60%
.60%
Maxim MidCap (Growth Fund I)
Maxim Corporate Bond
Maxim Small-Cap Value (Ariel Value)
Maxim T. Rowe Price Equity/Income
Maxim INVESCO ADR
Maxim INVESCO Small-Cap Growth
Maxim INVESCO Balanced Management Fees
.95%
.90%
1.00%
.80%
1.00%
.95%
1.00%
Other Expenses
.15%
None
.35%
.15%
.30%
.15%
None
TOTAL Maxim Series Fund Expenses
1.10%
.90%
1.35%
.95%
1.50%
1.10%
1.00%
American Century Variable Portfolios, Inc. Annual Expenses (as a
percentage of Fund average net assets)
American Century VP Capital Appreciation
American Century VP Balanced
Management Fees
1.00%
1.00%
Other Expenses
None
None
TOTAL American Century Expenses
1.00%
1.00%
Any premium or other taxes levied by any governmental entity
with respect to the Contracts will presently be paid by GWL&A.
GWL&A reserves the right to, in the future, deduct the premium tax
from Contract Values instead of GWL&A making the premium tax
payments. The applicable premium tax rates that states and other
governmental entities impose currently range from 0% to 3.50% and
are subject to change by the respective state legislatures, by
administrative interpretations, or by judicial act. (See
"Administrative Charges, Risk Charges and Premium Taxes.")
EXAMPLES
If you do not take a distribution from your Contract, or if you
annuitize at the end of the applicable time period, you would pay
the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
1 Year
3 Year
5 Year
10 Year
Maxim Money Market Investment Division
$18.42
$ 59.86
$108.09
$264.21
Maxim Bond, Maxim Stock Index, Maxim U.S. Government Securities,
Maxim Total Return and Maxim Small-Cap Index Investment Divisions
$19.86
$64.46
$116.23
$283.18
Maxim MidCap (Growth Fund I) and
Maxim INVESCO Small-Cap Growth
Investment Divisions
$25.00
$80.73
$144.87
$348.81
American Century VP Balanced, American Century VP Capital
Appreciation and Maxim INVESCO Balanced Investment Divisions
$23.97
$77.50
$139.20
$335.95
Maxim Small-Cap Value (Ariel Value)
Investment Division
$27.56
$88.78
$158.93
$380.41
Maxim INVESCO ADR
Investment Division
$27.05
$87.18
$156.13
$374.16
Maxim T. Rowe Price Equity/Income
Investment Division
$23.46
$75.88
$136.36
$329.47
Maxim Corporate Bond
Investment Division
$22.95
$74.25
$133.50
$322.95
If you take a distribution in whole from your Contract at the end
of the applicable time period, you would pay the following expenses
on a $1,000 investment, assuming a 5% annual return on assets:
1 Year
3 Year
5 Year
10 Year
Maxim Money Market Investment Division
$90.63
$114.75
$143.13
$264.21
Maxim Bond, Maxim Stock Index, Maxim U.S. Government Securities,
Maxim Total Return and Maxim Small-Cap Index Investment Divisions
$91.97
$119.12
$151.04
$283.18
Maxim MidCap (Growth Fund I) and
Maxim INVESCO Small-Cap Growth
Investment Divisions
$96.75
$134.58
$178.82
$348.81
American Century VP Balanced, American Century VP Capital
Appreciation and Maxim INVESCO Balanced Investment Divisions
$95.80
$131.51
$173.32
$335.95
Maxim Small-Cap (Ariel Value)
Investment Division
$99.13
$142.22
$192.45
$380.41
Maxim INVESCO ADR
Investment Division
$100.56
$146.78
$200.55
$399.00
Maxim T. Rowe Price Equity/Income
Investment Division
$95.32
$129.97
$170.55
$329.47
Maxim Corporate Bond
Investment Division
$94.84
$128.42
$167.79
$322.95
The above Examples should not be considered a representation
of past or future expenses. Actual expenses may be greater or less
than those shown, subject to the guarantees in the Contracts.
The purpose of the tables shown above is to assist the
Contract Owner in understanding the various costs and expenses that
a Contract Owner will bear directly or indirectly. For more
information pertaining to these costs and expense see
"Administrative Charges, Risk Charges and Premium Taxes."
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Years Ended December 31, 1996
Investment Division
1996
1995
1994
MAXIM BONDa
Value at beginning of period
$ 11.10
$ 9.76
$ 10.00
Value at end of period
$ 11.43
$ 11.10
$ 9.76
Increase (decrease) in value of accumulation units
$ 0.33
$ 1.34
$ (0.24)
Number of accumulation units outstanding at end of period
5,196.46
1,675.75
455.62
MAXIM STOCK INDEXa
Value at beginning of period
$ 13.05
$ 9.74
$ 10.00
Value at end of period
$ 15.70
$ 13.05
$ 9.74
Increase (decrease) in value of accumulation units
$ 2.65
$ 3.31
$ (0.26)
Number of accumulation units outstanding at end of period
130,996.47
17,200.32
2,306.48
MAXIM MIDCAP (GROWTH FUND I)a
Value at beginning of period
$ 13.49
$ 10.80
$ 10.00
Value at end of period
$ 14.12
$ 13.49
$ 10.80
Increase (decrease) in value of accumulation units
$ 0.63
$ 2.69
$ 0.80
Number of accumulation units outstanding at end of period
83,398.90
24,467.21
4,508.26
MAXIM SMALL-CAP INDEX a
Value at beginning of period
$ 12.18
$ 9.77
$ 10.00
Value at end of period
$ 13.87
$ 12.18
$ 9.77
Increase (decrease) in value of accumulation units
$ 1.69
$ 2.41
$ (0.23)
Number of accumulation units outstanding at end of period
10,975.88
2,705.63
986.29
MAXIM TOTAL RETURN a
Value at beginning of period
$ 11.72
$ 9.67
$ 10.00
Value at end of period
$ 12.94
$ 11.72
$ 9.67
Increase (decrease) in value of accumulation units
$ 1.22
$ 2.05
$ (0.33)
Number of accumulation units outstanding at end of period
30,202.42
9,694.71
2,085.24
Investment Division
1996
1995
1994
AMERICAN CENTURY VP BALANCED a
Value at beginning of period
$ 11.79
$ 9.85
$ 10.00
Value at end of period
$ 13.06
$ 11.79
$ 9.85
Increase (decrease) in value of accumulation units
$ 1.27
$ 1.94
$ (0.15)
Number of accumulation units outstanding at end of period
19,490.47
7,745.10
199.55
MAXIM CORPORATE BOND f
Value at beginning of period
$ 12.03
$ 10.00
Value at end of period
$ 13.12
$ 12.03
Increase (decrease) in value of accumulation units
$ 1.09
$ 2.03
Number of accumulation units outstanding at end of period
12,487.29
799.35
MAXIM INVESCO ADR b
Value at beginning of period
$ 11.25
$ 10.00
Value at end of period
$ 13.46
$ 11.25
Increase (decrease) in value of accumulation units
$ 2.21
$ 1.25
Number of accumulation units outstanding at end of period
15,132.95
2,623.01
MAXIM INVESCO SMALL-CAP GROWTH b
Value at beginning of period
$ 13.09
$ 10.00
Value at end of period
$ 16.39
$ 13.09
Increase (decrease) in value of accumulation units
$ 3.30
$ 3.09
Number of accumulation units outstanding at end of period
33,993.67
4,511.19
MAXIM MONEY MARKET e
Value at beginning of period
$ 10.17
$ 10.00
Value at end of period
$ 10.55
$ 10.17
Increase (decrease) in value of accumulation units
$ 0.38
$ 0.17
Number of accumulation units outstanding at end of period
30,070.95
15,499.45
Investment Division
1996
1995
MAXIM SMALL-CAP VALUE (ARIEL VALUE) d
Value at beginning of period
$ 11.60
$ 10.00
Value at end of period
$ 13.51
$ 11.60
Increase (decrease) in value of accumulation units
$ 1.91
$ 1.60
Number of accumulation units outstanding at end of period
1,551.40
697.92
MAXIM T. ROWE PRICE EQUITY/INCOME b
Value at beginning of period
$ 12.92
$ 10.00
Value at end of period
$ 15.24
$ 12.92
Increase (decrease) in value of accumulation units
$ 2.32
$ 2.92
Number of accumulation units outstanding at end of period
67,415.13
19,500.37
MAXIM U.S. GOVERNMENT SECURITIES c
Value at beginning of period
$ 11.12
$ 10.00
Value at end of period
$ 11.41
$ 11.12
Increase (decrease) in value of accumulation units
$ 0.29
$ 1.12
Number of accumulation units outstanding at end of period
15,784.10
14,812.67
AMERICAN CENTURY VP CAPITAL APPRECIATION c
Value at beginning of period
$ 12.94
$ 10.00
Value at end of period
$ 12.23
$ 12.94
Increase (decrease) in value of accumulation units
$ ( 0.71)
$ 2.94
Number of accumulation units outstanding at end of period
15,595.65
6,110.86
MAXIM INVESCO BALANCED g
Value at beginning of period
$ 10.00
Value at end of period
$ 10.13
Increase (decrease) in value of accumulation units
$ 0.13
Number of accumulation units outstanding at end of period
1,307.11
Current Accumulation Unit Values can be obtained by calling GWL&A
toll-free at 1-800-523-4106
a The Investment Division commenced operations on September
19, 1994, at a unit value of $10.00
b The Investment Division commenced operations on January 6,
1995, at a unit value of $10.00.
c The Investment Division commenced operations on January 18,
1995, at a unit value of $10.00.
d The Investment Division commenced operations on March 9,
1995, at a unit value of $10.00.
e The Investment Division commenced operations on August 4,
1995, at a unit value of $10.00.
f The Investment Division commenced operations on August 8,
1995, at a unit value of $10.00.
g The Investment Division commenced operations on October 1,
1996, at a unit value of $10.00.
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the following terms have the indicated
meanings.
Accumulation Period: The period before the Annuity Commencement
Date.
Accumulation Unit: An accounting measure used to determine the
Contract Value before the Annuity Commencement Date.
Annuitant: The person upon whose life the annuity payments will be
based.
Annuity: A series of payments made in respect of an Annuitant for
life with a minimum number of payments certain or an ascertainable
sum guaranteed, or for the joint lifetime of annuitants and
thereafter during the lifetime of the survivor.
Annuity Account: A record that reflects the total value of the
Contract Owner's Contract Value.
Annuity Commencement Date: The date on which annuity payments
commence.
Annuity Period: The period after the Annuity Commencement Date.
Annuity Unit: An accounting measure used to determine the dollar
value of the variable annuity payment.
Automatic Contribution Plan: A plan provided to the Contract Owner
to allow for automatic payment of Purchase Payments. The Purchase
Payment amount will be withdrawn from the Contract Owner's
pre-authorized bank account and automatically credited to the
Annuity Account.
Beneficiary: The person(s) entitled to receive the amount payable
upon death when the Annuitant dies before the Annuity Commencement
Date and there is no secondary annuitant; or any annuity payments
or unpaid proceeds payable under a method of payment option where
the Annuitant dies after the Annuity Commencement Date.
Contract: An agreement between GWL&A and the Contract Owner
providing a variable annuity. The agreement consists of the
contract form and the application.
Contract Owner: The Contract Owner is the person to whom a
Contract, as described herein, is issued.
Contract Value: The sum of the dollar values of all the
Accumulation Units credited to the Contract during the Accumulation
Period.
Executive Offices: 8515 East Orchard Road, Englewood, Colorado
80111.
Fixed Annuity: An annuity with payments which remain the same
throughout the payment period and which do not reflect the
investment experience of the Series Account.
Investment Division: The Series Account is divided into
Investment
Divisions, one for each designated Portfolio maintained by the Fund
and/or American Century and made available to the Series
Account.
Partial Surrender: A Partial Surrender is a partial redemption of
the Contract Value prior to the Annuity Commencement Date.
Purchase Payment(s): The total dollar amount paid (including the
initial payment and any additional payments made during the
Accumulation Period) to purchase an annuity by or on behalf of a
Contract Owner.
Request: Any request in a form, either written, telephoned or
computerized, satisfactory to GWL&A and received by GWL&A at its
Executive Office, from the Contract Owner, or the Contract Owner's
designee as required by any provisions of the Contract, or as
required by GWL&A.
Series Account: The segregated investment account called "Maxim
Series Account of Great-West Life & Annuity Insurance Company"
existing under Colorado law and registered as a unit investment
trust under the Investment Company Act of 1940, as amended (the
"1940 Act").
Sub-Account: Each Investment Division is divided into six
Sub-Accounts, two for allocations under the individual flexible
premium contracts issued in connection with IRAs and non-qualified
plans and four for allocations under other variable annuity
contracts previously offered by GWL&A in connection with IRAs and
non-qualified plans.
Surrender: A surrender of the Contract is a total redemption of the
Contract Value prior to the Annuity Commencement Date.
Surrender Charge: An amount equal to a percentage of the amount
surrendered based on the table shown under "Administrative Charges,
Risk Charges and Premium Tax." This charge may also be referred to
as a Contingent Deferred Sales Charge.
Transfer: The moving of money from one Investment Division to
another Investment Division.
Valuation Date: The date on which the net asset value of the
Fund
and/or American Century is determined. For more information on how
shares are valued see "The Contracts - Valuation of Accumulation
Units."
Variable Annuity: An annuity providing for payments, the amount of
which will vary in accordance with the changing values of
securities held in the Series Account.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE ANNUITY
What is a variable annuity?
The Variable Annuity Contract offered in this prospectus is
a
flexible payment contract, with the option to make additional
Purchase Payments during the Accumulation Period. The Contract
provides for annuity payments commencing at a future date specified
by the Contract Owner. The value of the Contract and the amount of
the annuity payments will vary according to the investment results
of the Fund and/or American Century.
Who can invest and what is the minimum payment?
Any individual of legal age who is not older than age 90, may
purchase a Contract in the states where the Variable Annuity
Contract may be sold lawfully. In the case of IRAs, the individual
must also be eligible to participate in an IRA for which the
Contracts are designed.
The minimum initial Purchase Payment necessary to purchase a
Contract is $5,000 for a non-qualified plan and $2,000 for an IRA.
The Contract Owner may make additional Purchase Payments during the
Accumulation Period. Each additional Purchase Payment must equal at
least $500 unless payments are made through an Automatic
Contribution Plan which is subject to a $50 minimum.
What is the objective of the contracts offered in this Prospectus?
The objective of the Contracts, which may or may not be
realized, is to provide level annuity payments during periods when
the economy is relatively stable and to provide increased annuity
payments during inflationary and growth periods. GWL&A seeks to
assist the Contract Owner in accomplishing this objective by
agreeing to make annuity payments continuously for the life of the
Annuitant(s) under the Contracts even if such Annuitant(s) outlives
the life expectancy used in computing his/her or their annuity.
While GWL&A is obligated to make annuity payments regardless of the
longevity of the Annuitant(s), the amount of variable annuity
payments is not guaranteed. Fixed (guaranteed amount) annuity
options are available under the Contracts at the time of
annuitization. The market risk factors under the Contracts are
borne by the Contract Owner. No assurance can be given that the
value of the Contracts during the years before maturity, or the
aggregate amount of annuity payments under the Contracts after
maturity, will equal or exceed Purchase Payment(s) made under such
Contracts. Nevertheless, GWL&A guarantees that, in the event of the
Annuitant's death before the Contract anniversary nearest his 75th
birthday and before the Annuity Commencement Date, the Death
Benefit payable will not be less than the total Purchase Payment(s)
made under the contract less any partial surrenders and surrender
charges. (See "The Contracts - Death Benefit Prior to Annuity
Commencement Date.")
What are the Fund and/or American Century?
The Purchase Payment(s) are allocated to the Series
Account.
The assets of the Series Account are invested at net asset value in
shares of the Fund and/or American Century. The Fund is an open-end
management investment company of the series type. American Century
is a diversified, open-end management investment company of the
series type. The Series Account currently invests in thirteen of
the Fund's investment Portfolios and two of American Century's
investment Portfolios.
A more complete description of the Fund and its Portfolios
and
American Century and its Portfolios can be found in the
accompanying prospectuses which should be read together with this
prospectus. The Fund and American Century are required to redeem
shares at GWL&A's request. GWL&A reserves the right to add, delete
or substitute investment Portfolios subject to the approval, as
necessary, by the Securities and Exchange Commission.
How will the Contracts be distributed?
The Contracts will be distributed through BCE and will be
sold
by duly licensed insurance agents of GWL&A, registered with BCE,
independent insurance brokers, and various other registered
broker-dealers. (See "Distribution of the Contracts.")
Is there a short-term cancellation right?
Yes. Within 10 days (longer in some states) after the Contract
is first received, it may be canceled by the Contract Owner for any
reason by delivering or mailing it along with a written request to
cancel, to GWL&A's Executive Offices or to an authorized agent of
GWL&A. (See "Return Privilege.")
What are the charges?
GWL&A deducts a "Contract Maintenance Charge" of $27 annually
from the Contract Value. GWL&A also deducts from the net asset
value of the Series Account an amount, computed daily, equal to an
annual rate of 0.85% for mortality and 0.40% for expense risk
guarantees. There are no deductions made from the Purchase
Payment(s). There are also charges associated with the total or
partial surrender of a Contract prior to the Annuity Commencement
Date. The maximum Surrender Charge is 7%. (See "Administrative
Charges, Risk Charges and Premium Taxes.")
In addition to the charges set forth above, GW Capital
Management, Inc. ("GW Capital"), which serves as investment adviser
to the Fund, imposes a charge against the net asset value of the
Fund, computed daily, for investment advisory services and certain
administrative expenses. American Century Investment Management,
Inc., which serves as investment adviser to American Century, also
imposes a charge against the net asset value of American Century,
computed monthly, for investment advisory services and certain
administrative expenses. (See "Investments of the Series Account -
Investment Advisers.")
What Annuity Options are available?
The Contract Owner may select any of several Annuity Options,
payable on a fixed or variable basis. (See "Annuity Options.")
Can I surrender the Contract in whole or in part?
Contract Owners may surrender their Contracts in whole or
in
part prior to the Annuity Commencement Date, subject to the
following charges: (a) a Contingent Deferred Sales Charge may be
incurred for the total or partial surrender of Contract Value
attributable to Purchase Payments which have been credited to a
Contract for less than 7 contract years, (see "Administrative
Charges, Risk Charges and Premium Taxes") and (b) the Contract
Maintenance Charge in the amount of $27 is incurred for total
surrender of the Contract in any contract year. These surrender
rights may be limited by a retirement plan under which the
Contracts are issued. (See "The Contracts-Accumulation Period -
Total and Partial Surrenders," for a description of surrender
procedures.) Upon a total or partial surrender, a penalty tax may
be imposed pursuant to Section 72 of the Internal Revenue Code of
1986, as amended (the "Code") (See "Federal Tax Status.")
Can I change the Investment Division selected for my variable
annuity?
Yes, all or a portion of the Contract Value may be
transferred
at any time prior to the Annuity Commencement Date by Request
without charge. If a Transfer Request is made within 30 days of the
Annuity Commencement Date, GWL&A may delay the Annuity Commencement
Date by up to 30 days. (See "The Contracts - Transfers Among
Investment Divisions.")
What voting rights will I have?
Contract Owners will be entitled to instruct GWL&A to vote
a
proportional number of Fund and/or American Century shares held in
the Series Account based upon the value of their Contract. (See
"Voting Rights.")
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain
performance related information concerning its Investment
Divisions. Performance information about an Investment Division is
based on the Investment Division's historical performance only and
is not intended to indicate future performance. Below is a table of
performance related information for stated periods ended December
31, 1996.
Investment Division
Yield
Effective Yield
Maxim Money Market
3.65%
3.77%
Yield and effective yield for the Money Market Investment Division
is for the 7-day period ended December 31, 1996. Yield calculations
take into account recurring charges against the Series Account and
the Money Market Portfolio. All yield and effective yield
information is annualized.
Average Annual Total Return
Investment Division
Portfolio
Inception
Portfolio
Inception in
Contract
One Year
Five Years
Ten Years
or Since Inception
Maxim Bond
7/1/82
9/19/94
- -4.25%
4.26%
6.11%
Maxim Stock Index
7/1/82
9/19/94
11.83%
11.87%
11.55%
Maxim U.S. Government Securities
4/8/85
1/18/95
- -4.55%
4.85%
6.78%
Maxim Small-Cap Index
12/1/93
9/19/94
5.88%
N/A
8.47%
Maxim MidCap (Growth Fund I)
12/31/93
9/19/94
- -2.69%
N/A
10.81%
Maxim Total Return
8/6/87
9/19/94
- -0.02%
6.98%
7.69%
American Century VP Balanced
5/1/91
9/19/94
3.04%
4.74%
8.26%
American Century VP Capital Appreciation
11/20/87
1/18/95
- -12.11%
4.21%
9.40%
Maxim Small-Cap Value (Ariel Value)
12/1/93
3/9/95
8.30%
N/A
7.59%
Maxim INVESCO Small-Cap Growth
11/1/94
1/6/95
16.35%
N/A
22.07%
Maxim T. Rowe Price Equity/Income
11/1/94
1/6/95
9.61%
N/A
18.22%
Maxim INVESCO ADR
11/1/94
1/6/95
11.25%
N/A
11.45%
Maxim Corporate Bond
11/1/94
8/8/95
1.34%
N/A
12.64%
Maxim INVESCO Balanced
11/1/96
11/1/96
N/A
N/A
- -5.77%
The table above shows the total return for each Investment
Division of the Series Account calculated on the basis of the
historical performance of the corresponding Maxim and American
Century Portfolios available under the Contracts (calculated from
inception for each corresponding Portfolio or ten years, as
applicable) and assumes that the Portfolios were available under
the Contract for all of the periods shown (which they were not).
Actual total return is shown for periods after which the respective
Portfolios became available under Contract. The returns shown
reflect deductions for all Series Account expenses and Portfolio
expenses. The inception dates of each Investment Division and the
corresponding Maxim and American Century Portfolios are also listed
in the table above.
The Series Account may include total return advertisements
or
other sales material regarding the various Investment Divisions
available through the Series Account. When the Series Account
advertises total return, it will be calculated for one year, five
years and ten years or some other relevant period if the Portfolio
has not been in existence for at least ten years. Total return is
measured by comparing the value of an investment at the beginning
of the relevant period to the value of the same investment at the
end of the period (assuming immediate reinvestment of any dividends
or capital gains distributions.) In calculating total return, it
is assumed that the entire value of the Investment Division will be
distributed on the last day of the period and any Surrender Charge
will be deducted.
For the Maxim Money Market Investment Division, "yield"
refers
to the income generated by an investment in the Maxim Money Market
Investment Division over a stated seven-day period. This income is
then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The "effective yield" of the Maxim Money Market
Investment Division is calculated similarly but, when annualized,
the income earned by an investment is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because
of the compounding effect of this assumed reinvestment. The yield
and effective yield calculations for the Maxim Money Market
Investment Division includes all recurring charges under the
Contracts (but does not include any Surrender Charges), and is
lower than yield and effective yield for the Fund which does not
have comparable charges.
For more complete information regarding the method used to
calculate yields, effective yields, and total return of the
respective Investment Divisions, see the Statement of Additional
Information.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized
under the laws of the state of Kansas as the National Interment
Association. Its name was changed to Ranger National Life Insurance
Company in 1963 and to Insuramerica Corporation prior to changing
to its current name in February of 1982. In September of 1990,
GWL&A redomesticated and is now organized under the laws of the
state of Colorado.
GWL&A is authorized to engage in the sale of life insurance,
accident and health insurance and annuities. It is qualified to do
business in Puerto Rico, the District of Columbia and 49 states in
the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life
Assurance Company. The Great-West Life Assurance Company is a
subsidiary of Great-West Lifeco Inc., a holding company. Great-West
Lifeco Inc. is in turn a subsidiary of Power Financial Corporation,
a financial services company. Power Corporation of Canada, a
holding and management company, has voting control of Power
Financial Corporation. Mr. Paul Desmarais, through a group of
private holding companies, which he controls, has voting control of
Power Corporation of Canada.
GWL&A has primary responsibility for administration of the
Contracts and the Series Account. Its Executive Offices are located
at 8515 E. Orchard Road, Englewood, Colorado 80111.
MAXIM SERIES ACCOUNT OF GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
The Series Account was originally established by GWL&A under
Kansas law on June 24, 1981. The Series Account now exists pursuant
to Colorado law as a result of the redomestication of GWL&A. The
Series Account has been registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the provisions of
the 1940 Act. Such registration does not involve supervision of the
management of the Series Account or GWL&A by the Securities and
Exchange Commission
The Series Account currently has fifteen Investment Divisions
available to Contract Owners. If, in the future, GWL&A determines
that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made
available to existing Contract Owners to the extent and on a basis
to be determined by GWL&A. Each Investment Division will invest
solely in shares of the Fund or American Century. Each Investment
Division is subdivided into six Sub-Accounts. Two sub-accounts are
for allocations under this individual flexible premium Contract
issued in connection with IRAs and non-qualified plans. The four
remaining sub-accounts are for allocations under other variable
annuity contracts previously offered by GWL&A in connection with
qualified plans and non-qualified plans.
GWL&A does not guarantee the investment performance of the
Series Account. The value of a Contract and the amount of variable
annuity payments depends on the investment performance of the Fund
and/or American Century. Thus, the Contract Owner bears the full
investment risk for all amounts allocated to the Series Account.
The Series Account is administered and accounted for as part
of the general business of GWL&A; but the income, capital gains, or
capital losses of each Sub-Account of each Investment Division are
credited to or charged against the assets held in that Sub-Account
in accordance with the terms of each Contract, without regard to
other income, capital gains or capital losses of any other
Sub-Account or arising out of any other business GWL&A may conduct.
Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A
may conduct. Nevertheless, all obligations arising under the
contracts are general corporate obligations of GWL&A. GWL&A has
primary responsibility with respect to the administration of the
affairs of the Series Account.
THE CONTRACTS
Purchase Payment(s)
Persons wishing to purchase a Contract must complete an
application form to be forwarded to GWL&A for acceptance. The
minimum initial Purchase Payment for a Contract is $5,000 for a
non-qualified Contract and $2,000 for an IRA Contract.
Prior to the Annuity Commencement Date, the Contract Owner may
make additional Purchase Payments either directly or through an
Automatic Contribution Plan. The minimum amount of an additional
Purchase Payment is $500 except if made by an Automatic
Contribution Plan in which case the minimum additional Purchase
Payment amount is $50. Nevertheless, for purposes of calculating
the Surrender Charge (see "Administrative Charges, Risk Charges and
Premium Taxes) that is incurred for partial or total surrenders of
Contract Value, the initial Purchase Payment under a Contract
determines the status of any additional Purchase Payments.
Purchase of Contracts
No sales load is deducted from the Contract Purchase
Payment(s); however, upon total or partial surrender of the
Contract Value, GWL&A may deduct certain charges as reimbursement
for sales and administrative expenses. (See "Administrative
Charges, Risk Charges and Premium Taxes.")
The initial Purchase Payment will be applied after receipt
by
GWL&A within two business days, if the application form is
complete. If an incomplete application form is completed within
five business days of GWL&A's receipt, the initial Purchase Payment
will be applied within two business days of the application's
completion. If an incomplete application can not be completed
within five business days after receipt by GWL&A the initial
purchase payment will be returned at once unless the prospective
purchaser specifically consents to GWL&A retaining the Purchase
Payment until the application is completed. Subsequent Purchase
Payments will be applied upon receipt by GWL&A on the day
received.
Amendment of Contracts
GWL&A reserves the right to amend the contracts to meet the
requirements of the Investment Company Act of 1940 or other
applicable federal or state laws or regulations. GWL&A will notify
the Contract Owners of any such changes.
Ownership
The Contract Owner has all rights under the Contract. Under
law, the assets of the Series Account are held for the exclusive
benefit of Contract Owners and their designated Beneficiaries and
are not chargeable with liabilities arising out of any other
business that GWL&A may conduct.
Contracts issued to non-qualified plans may be assigned to
another person, but such assignment or transfer shall not be
effective until written notification is received and recorded by
GWL&A. Contracts issued for IRAs may not be assigned. GWL&A
assumes no responsibility for the validity or effect of any
assignment. Contract Owners should consult their tax advisors
regarding the consequences of an assignment.
Transfers Among Investment Divisions
Where permitted by state law and the applicable retirement
plan, Investment Division transfers are permitted while the
Annuitant is living, as described below. No charge is made by GWL&A
for effecting any transfer.
Contract Owners who contemplate making a transfer should
carefully consider their annuity objectives and those of their
current and proposed Investment Division(s) before electing a
transfer. Frequent transfers may be inconsistent with the long-term
objective of the Contract. Prior to the Annuity Commencement Date,
a Contract Owner may transfer all or a portion of the Contract
Value allocated to an Investment Division of the Series Account to
other Investment Division(s) subject to the limitations described
below. A Transfer will result in the purchase of Accumulation Units
in one Investment Division, and a surrender of Accumulation Units
in the other Investment Division(s). Such Transfer will be
accomplished at relative Accumulation Unit values next computed
immediately following GWL&A's receipt of a Contract Owner's Request
unless a later date is designated. Transfer Requests received after
4:00 p.m., EST/EDT, shall be deemed to have been received on the
next following valuation date. Transfers among Investment Divisions
generally may be made without incurring any Federal income taxes.
If a Transfer request is received by GWL&A within 30 days of the
Annuity Commencement Date, GWL&A may delay the Annuity Commencement
Date by not more than 30 days.
For Requests made by telephone, GWL&A will use reasonable
procedures such as requiring certain identifying information from
the caller, tape recording the telephone instructions, and
providing written confirmation of the transactions, in order to
confirm that instructions communicated are genuine. Any telephone
instructions reasonably believed by GWL&A to be genuine will be the
responsibility of the Contract Owner, including losses arising from
any errors in the communication of instructions. As a result, the
Contract Owner will bear the risk of loss. If GWL&A does not employ
reasonable procedures to confirm that instructions communicated are
genuine, GWL&A may be liable for any losses due to unauthorized or
fraudulent instructions.
Once annuity payments have begun, no Transfers may be made
from a fixed annuity payment option to a variable payment option,
or vice versa; however, for variable annuity payment options,
Transfers may be made among Sub-Accounts. Transfers after the
Annuity Commencement Date will be made by converting the number of
Annuity Units being Transferred to the number of Annuity Units of
the Sub-Account to which the Transfer is made. The result will be
that the next annuity payment, if it were made at that time, would
be the same amount that it would have been without the Transfer.
Thereafter, annuity payments will reflect changes in the value of
the new Annuity Units.
Custom Transfer: Dollar Cost Averaging (Automatic
Transfers)
A Contract Owner may, by Request, automatically Transfer
amounts from one Investment Division selected from among those
being allowed under this option to any of the other Investment
Divisions at regular intervals. The intervals between Transfers may
be monthly, quarterly, semi-annually or annually. The Transfer will
be initiated one frequency period following the date of the
Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set
forth in the Contract. Transfers can only occur on dates the New
York Stock Exchange ("NYSE") is open. If there are insufficient
funds in the applicable Investment Division on the date of
Transfer, no Transfer will be made; however, Custom Transfer:
Dollar Cost Averaging will resume once there are sufficient funds
in the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the
selected Investment Division is $100 per month.
2. The Contract Owner must specify the percentage or dollar
amount to be Transferred, the Accumulation Unit Values will be
determined on each Transfer date.
Custom Transfer: Dollar Cost Averaging may be used to
purchase Accumulation Units of the Investment Divisions over a
period of time so fewer Accumulation Units are purchased when
prices are greater and more Accumulation Units when prices are
lower. Participation in Custom Transfer: Dollar Cost Averaging
does not, however, assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Contract
Owner, by Request, may cease Custom Transfer: Dollar Cost
Averaging at any time. The Company reserves the right to modify,
suspend or terminate Custom Transfer: Dollar Cost Averaging at any
time.
Custom Transfer: Rebalancer Option
The Contract Owner may, by Request, automatically Transfer
among the Investment Divisions on a periodic basis by electing the
Custom Transfer: Rebalancer Option. This option automatically
reallocates the Variable Account Value to maintain a particular
allocation among Investment Divisions selected by the Contract
Owner. The amounts allocated in each Investment Division will
increase or decrease at different rates depending on the investment
experience of the Investment Division.
The Contract Owner may Request that the rebalancing occur
one
time only, in which case the Transfer will take place after it has
been received and processed by the Company as provided in the
Contract. Rebalancing may also be set up on a quarterly,
semi-annual or annual basis, in which case the first Transfer will
be initiated one frequency period following the date of the
Request. On the Transfer date for the specified Request, assets
will be automatically reallocated to the selected Investment
Divisions. Rebalancing will continue on the same day each interval
unless terminated by you, or for other reasons as set forth in the
Contract. Transfers can only occur on dates the NYSE is open. In
order to participate in the Custom Transfer: Rebalancer Option,
the Contract Owner's entire Variable Account Value must be
included.
The Contract Owner must specify the percentage of Variable
Account Value to be allocated to each Investment Division and the
frequency of rebalancing. The Contract Owner, by Request, may
modify the allocations or cease the Custom Transfer: Rebalancer
Option at any time. Participation in the Custom Transfer:
Rebalancer Option and Custom Transfer: Dollar Cost Averaging at
the same time is not allowed. Participation in the Custom Transfer:
Rebalancer Option does not assure a greater profit, nor will it
prevent or necessarily alleviate losses in a declining market. The
Company reserves the right to modify, suspend, or terminate the
Custom Transfer: Rebalancer Option at any time.
ACCUMULATION PERIOD
Allocation of Purchase Payment(s)
Purchase Payment(s) are allocated according to instructions
of
the Contract Owner to one of two Sub-Accounts of each existing
Investment Division, one for allocations under a Contract issued in
connection with an IRA and the other for a Contract issued in
connection with a non-qualified plan. Upon allocation to the
appropriate Sub-Account, the Purchase Payment is converted into
Accumulation Units. The number of Accumulation Units credited with
respect to the initial Purchase Payment under a Contract is
determined by dividing the amount allocated to each Sub-Account by
the value of an Accumulation Unit for that Sub-Account. The number
of Accumulation Units with respect to any additional Purchase
Payments under a Contract is determined by dividing the amount
allocated to the appropriate Sub-Account by the value of an
Accumulation Unit for that Sub-Account on the valuation date the
Purchase Payment is accepted. Purchase Payments received after 4:00
p.m., EST/EDT, shall be deemed to have been received on the next
following valuation date. The number of Accumulation Units so
determined shall not be changed by any subsequent change in the
value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the Fund and/or American Century.
Valuation of Contracts
The value of a Contract Owner's Contract at any time prior to
the Annuity Commencement Date equals the sum of the values of the
Accumulation Units credited under the Contract.
Valuation of Accumulation Units
A "Valuation Date" is the date on which the net asset
values
of the shares of the Fund and/or American Century are determined.
Purchasers should refer to the Fund and/or American Century
prospectuses for information concerning pricing. The Fund and
American Century currently compute the net asset value per share of
each Portfolio as of 4:00 p.m., EST/EDT daily, Monday through
Friday, except on (i) days on which changes in the value of the
Fund's and/or American Century's portfolio securities will not
materially affect the current net asset value of the shares of the
Portfolio of the Fund and/or American Century; (ii) days during
which no shares of a Portfolio of the Fund or American Century were
tendered for redemption and no order to purchase or sell such
shares is received by the Fund or American Century; or (iii)
holidays on which the New York Stock Exchange is closed. On the day
after Thanksgiving, however, transactions submitted other than by
automated voice response unit or by computer link will not be
processed. A "Valuation Period" is the period between the ending of
two successive Valuation Dates.
Accumulation Units for each Sub-Account are valued
separately,
but the method used for valuing Accumulation Units in each
Sub-Account is the same. Initially, the value of each Accumulation
Unit was set at $10.00. Thereafter, the value of an Accumulation
Unit in any Sub-Account on any Valuation Date equals the value of
an Accumulation Unit in that Sub-Account as of the immediately
preceding Valuation Date multiplied by the "Net Investment Factor"
of that Sub-Account for the current Valuation Period. Accumulation
Unit Values are valued once each day in which the Fund and/or
American Century shares are valued.
The Net Investment Factor for each Sub-Account for any
Valuation Period is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the net result of:
(1) the net asset value per share of the Fund and/or
American Century shares held in the Sub-Account determined as of
the end of the current Valuation Period, plus
(2) the per share amount of any dividend (or, if applicable,
capital gain) distributions made by the Fund and/or American
Century, on shares held in the Sub-Account if the "ex-dividend"
date occurs during the current Valuation Period, minus or plus
(3) a per unit charge or credit for any taxes incurred by, or
provided for, in the Sub-Account, which is determined by GWL&A to
have resulted from the maintenance of the Sub-Account; and
(b) is the net result of:
(1) the net asset value per share of the Fund and/or American
Century shares held in the Sub-Account determined as of the end of
the immediately preceding Valuation Period, minus or plus
(2) the per unit charge or credit for any taxes provided for
the immediately preceding Valuation Period; and
(c) is a factor representing the charges deducted from the
Series Account on a daily basis for mortality and expense risks.
Such factor is equal on an annual basis to 1.25% of the daily net
asset value of the Series Account.
The Net Investment Factor may be greater or less than one and,
therefore, the value of an Accumulation Unit in any Sub-Account may
increase or decrease from Valuation Period to Valuation Period.
The net asset value per share referred to in paragraphs (a)(1)
and (b)(1), above, reflect the investment performance of the Fund
and/or American Century as well as the payment of Fund expenses.
(See "Investments of the Series Account.")
Death Benefit Prior to Annuity Commencement Date
In the event of the death of an Annuitant prior to the
Annuity
Commencement Date and before age 75, a Death Benefit will be paid
to the Beneficiary in an amount which is the greater of either (1)
the Contract Value as of the date notice of death is received, less
Premium Tax, if any; or (2) the total Purchase Payment(s) made
under the Contract less the amount of any partial surrenders of
Contract Value, any Surrender Charges for such partial surrenders
(See "Administrative Charges, Risk Charges and Premium Taxes -
Surrender Charge") and any periodic payments, less Premium Tax, if
any. If the Annuitant dies before the Annuity Commencement Date,
and after age 75, the Contract Value as of the date of death, less
Premium Tax, if any, will be paid to the Beneficiary.
If the Contract Owner has not elected an annuity option, the
Beneficiary may make an election during a 60 day period commencing
with the date of death of the Annuitant. The Annuity Commencement
Date shall be the date specified in the election, but no later than
60 days after receipt of notification of death by GWL&A. Contract
Value for purposes of exercising the annuity option will be the
same as reflected in the preceding paragraph. If no election is
made, a variable life annuity with a guaranteed period of 20 years
will be provided.
The Contract Owner may designate or change a Beneficiary
during the life of the Annuitant by filing a Request in a form
acceptable to GWL&A. Each change of Beneficiary revokes any
previous designation. GWL&A reserves the right to require
presentation of the Contract for endorsement of a change of
Beneficiary.
Unless otherwise provided in the Beneficiary designation, one
of the following procedures will take place on the death of a
Beneficiary: (1) if any Beneficiary dies before the Annuitant, that
Beneficiary's interest will pass to any other surviving
Beneficiaries to be shared equally; or (2) if no other Beneficiary
survives the Annuitant, the Beneficiary's interest will pass to the
Contract Owner. There are no restrictions on a Beneficiary's use of
the proceeds unless previously so limited by the Contract Owner.
Total and Partial Surrenders
The Contract provides that a Contract Owner may, upon
Request,
surrender the Contract, in whole or in part, prior to the Annuity
Commencement Date (unless prohibited by any applicable retirement
plan) and subject to the limitations described below. After any
partial surrender, the Contract Value must be at least $2,000. The
Contract Value available upon surrender is the current value of the
contract at the end of the Valuation Period during which the
Request for total or partial surrender is received by GWL&A.
Requests for total or partial surrender received after 4:00 p.m.,
EST/EDT, shall be deemed to have been received on the next
following Valuation Date. If a partial surrender is made within 30
days prior to the Annuity Commencement Date, GWL&A may delay the
Annuity Commencement Date by 30 days. The amount of any partial
surrender requested, plus any Surrender Charges, will be deducted
from the Contract Value. The contract Owner must elect the
Sub-Account(s) from which a partial surrender is to be made. If no
election is made, the Request for partial surrender will be denied.
The proceeds will be paid in one sum within seven days after GWL&A
receives the Request at its Executive Offices at 8515 East Orchard
Road, Englewood, Colorado 80111. The payment may be postponed as
permitted by the Investment Company Act of 1940.</R.
There are certain charges associated with the total or partial
surrender of a Contract prior to the Annuity Commencement Date.
(See "Administrative Charges, Risk Charges and Premium Taxes.")
The tax consequences of total and partial surrenders are
discussed under the section entitled "Federal Tax Status".
INVESTMENTS OF THE SERIES ACCOUNT
Purchase Payments made under a Contract are allocated by
GWL&A
in accordance with the direction of the Contract Owner to the
appropriate Sub-Account of the designated Investment Division of
the Series Account, depending upon whether the Contract is issued
in connection with an IRA or a non-qualified plan. Each Investment
Division invests in shares of the Fund or American Century at net
asset value.
Investment Advisers
The investment adviser (the "Investment Adviser") for the
Fund
is GW Capital, which is registered with the Securities and Exchange
Commission as an investment adviser. The Investment Adviser
provides portfolio management and investment advice to the Fund and
administers its other affairs subject to the supervision of the
Fund's Board of Directors.
The Investment Advisory Agreement obligates the Investment
Adviser to provide investment advisory services and to pay all
compensation of and furnish office space for officers and employees
of the Investment Adviser connected with investment and economic
research, trading and investment management of the Fund. The
Investment Advisory Agreement also obligates the Investment Adviser
to pay all other expenses incurred in the Fund's operation and all
of its general administrative expenses, except extraordinary
expenses. As compensation for its services to the Fund, the
Investment Adviser receives monthly compensation at the annual rate
of 0.46% of the average daily net assets of the Maxim Money Market
Portfolio of the Fund; 0.60% of the average daily net assets of
each of the following: the Maxim Bond Portfolio; the Maxim U.S.
Government Securities Portfolio; the Maxim Stock Index Portfolio;
the Maxim Total Return Portfolio; and the Maxim Small-Cap Index
Portfolio. The Investment Adviser also receives monthly
compensation at the annual rate 0.90% of the average daily net
assets of the Maxim Corporate Bond Portfolio.
With respect to the remaining Portfolios, the Investment
Adviser receives monthly compensation at the annual rate of 0.80%
of the average daily net assets of the Maxim T. Rowe Price
Equity/Income Portfolio; 0.95% of the average daily net assets of
each of the Maxim INVESCO Small-Cap Growth and Maxim MidCap (Growth
Fund I) Portfolios; and, 1.00% of the average daily net assets of
the Maxim INVESCO ADR Portfolio, the Maxim INVESCO Balanced
Portfolio and the Maxim Small-Cap Value (Ariel Value) Portfolio,
respectively, as compensation for its services in connection with
these Portfolios. The Investment Adviser is responsible for all
expenses incurred in performing investment advisory services. The
Fund pays other expenses incurred in its operation with respect to
these Portfolios, including general administrative and
extraordinary expenses. The Investment Adviser has agreed to pay
any expenses of the Fund which exceed an annual rate of 0.95% of
the average daily net assets of the Maxim T. Rowe Price
Equity/Income Portfolio; 1.10% of the average daily net assets of
the Maxim INVESCO Small-Cap Growth and Maxim MidCap (Growth Fund I)
Portfolios, respectively; 1.35% of the average daily net assets of
the Maxim Small-Cap Value (Ariel Value) Portfolio and 1.30% of the
average daily net assets of the Maxim INVESCO ADR Portfolio.
American Century Investment Management, Inc. is the
investment
adviser for American Century. American Century Investment
Management, Inc. has been the investment adviser of American
CenturySM Investments, a group of registered investment companies,
since 1958. Additionally, it acts as the investment adviser for
employee benefit plans and endowment funds.
American Century Investment Management, Inc. supervises and
manages the investment Portfolios of American Century and directs
the purchase and sale of its investment securities, subject only to
any directions of American Century's Board of Directors. American
Century Investment Management, Inc. pays all the expenses of
American Century except brokerage, taxes, interest, fees and
expenses of non-interested directors (including counsel fees) and
extraordinary expenses. American Century Services Corporation,
American Century Tower, 4500 Mail Street, Kansas City, Missouri
64111, is transfer agent of American CenturySM Investments. It
provides facilities, equipment and personnel to American CenturySM
Investments, and is paid for such services by American Century
Investment Management, Inc. Certain administrative services that
would otherwise be performed by American Century Services
Corporation, may be performed by the insurance company that
purchases American Century shares, and American Century Investment
Management, Inc. may pay it for such services.
For the foregoing services, American Century Investment
Management, Inc. is paid a fee of 1.00% of the average net assets
of each series of American Century during the year. The fee is paid
and computed each month by multiplying 1.00% of the average daily
closing net asset values of the shares of each series of American
Century during the previous month by a fraction, the numerator of
which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years). Many investment
companies pay smaller investment management fees, however, most
companies also pay in addition certain of their own expenses, while
American Century expenses specified above are paid by American
Century Investment Management, Inc..
American Century Investment Management, Inc. and American
Century Services Corporation are both wholly owned by American
Century Companies, Inc. James E. Stowers, Jr., President of
American CenturySM Investments, controls American Century
Companies, Inc. by virtue of his ownership of a majority of its
common stock.
Sub-Advisers
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the
sub-advisor to the Maxim T. Rowe Price Equity/Income Portfolio. T.
Rowe Price is a Maryland corporation, registered as an investment
adviser with the Securities and Exchange Commission. Its principal
business address is 100 East Pratt Street, Baltimore, Maryland
21202. T. Rowe Price receives monthly compensation from the
Investment Adviser at the annual rate of 0.50% on the first $20
million of average daily net assets, 0.40% on the next $30 million
of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser of
the
Maxim INVESCO Small-Cap Growth Portfolio and the Maxim INVESCO
Balanced Portfolio. ITC is a Colorado Trust Company and an indirect
wholly-owned subsidiary of INVESCO PLC. ITC and a registered
investment trust company. Its principal business address is 7800 E.
Union Avenue, Denver, Colorado 80237. With respect to the Maxim
INVESCO Small-Cap Growth Portfolio ITC receives monthly
compensation from the Investment Adviser at the rate of 0.55% on
the first $25 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, 0.40% on the next $25
million of average daily net assets, and 0.35% on all amounts over
$100 million of average daily net assets. ITC also receives
monthly compensation from the Investment Adviser at an annual rate
of 0.50% of the average net daily net assets of the Maxim INVESCO
Balanced Portfolio up to $25 million, 0.45% on the next $50
million, 0.40% on the next $25 million, and 0.35% of such value in
excess of $100 million.
INVESCO Capital Management, Inc. ("ICMI") serves as the
sub-adviser to the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an indirect wholly-owned subsidiary of INVESCO PLC.
ICMI is registered as an investment adviser with the Securities and
Exchange Commission. Its principal business address is 1315
Peachtree Street, Atlanta, Georgia 30309. ICMI receives monthly
compensation from the Investment Adviser at the annual rate of
0.55% on the first $50 million of average daily net assets, 0.50%
on the next $50 million of average daily net assets, and 0.40% on
assets over $100 million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as
the
sub-adviser to the Maxim Corporate Bond Portfolio. Loomis Sayles is
a Delaware limited partnership and is an indirect, majority-owned
subsidiary company of New England Life Insurance Company. Loomis
Sayles is registered as an investment adviser with the Securities
and Exchange Commission. Its principal business address is One
Financial Center, Boston, Massachusetts 02111. Loomis Sayles
receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% of the average daily net assets of the Maxim
Corporate Bond Portfolio.
Ariel Capital Management, Inc. ("Ariel") serves as the
sub-adviser to the Maxim Small-Cap Value (Ariel Value) Portfolio.
Ariel is a privately held minority-owned money manager registered
with the Securities and Exchange Commission as an investment
adviser. Its principal business address is 307 North Michigan
Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of
0.40% on assets up to $5 million of average daily net assets, 0.35%
on the next $10 million of average daily net assets, 0.30% on the
next $10 million of average daily net assets, and 0.25% on assets
over $25 million of average daily net assets.
Janus Capital Corporation ("Janus") serves as the
sub-adviser
to the Maxim MidCap (Growth Fund I) Portfolio. As such, Janus is
responsible for managing the investment and reinvestment of assets
of the Maxim MidCap (Growth Fund I) Portfolio, subject to review
and supervision of the Investment Adviser and the Board of
Directors. Janus bears all expenses in connection with the
performance of its services, such as compensating and furnishing
office space for its officers and employees connected with
investment and economic research, trading and investment management
of the Maxim MidCap (Growth Fund I) Portfolio. Janus is a Colorado
corporation, registered as an investment adviser with the
Securities and Exchange Commission. Its principal address is 100
Fillmore Street, Suite 300, Denver, Colorado 80206. The Investment
Adviser is responsible for compensating Janus, which receives
monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over
$100 million of the Maxim MidCap (Growth Fund I) Portfolio
assets.
Participating Mutual Funds
The investment objectives and policies of the Fund and
American Century are summarized on page 2 of this prospectus.
Information about the Fund and American Century, their investment
objectives, restrictions, policies, expenses and other information
of interest to Contract Owners may be found in the accompanying
Fund and American Century prospectuses, which should be read
together with this prospectus before investing. The investment
objectives and policies of the Fund and American Century are
fundamental and cannot be changed without the affirmative vote of
a majority of the outstanding voting securities of the Fund or
American Century. The portfolio investments of the Fund and
American Century are subject to risks of changing market and
economic conditions and the ability of the Fund's and American
Century's management to anticipate such changes. THERE IS NO
ASSURANCE THAT THE PORTFOLIOS OF THE FUND OR AMERICAN CENTURY WILL
ACHIEVE THEIR STATED OBJECTIVES.
Reinvestment and Redemption
All dividend distributions of the Fund and American Century
will be automatically reinvested in shares of the Fund and American
Century at their net asset value on the date of distribution; all
capital gains distributions of the Fund and American Century, if
any, will likewise be reinvested at the net asset value on the
record date. GWL&A will redeem Fund and American Century shares at
their net asset value to the extent necessary to make annuity or
other payments under the Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law
as currently applicable or subsequently changed, to make additions
to, deletions from or substitutions for the investments held by the
Series Account. In the future, GWL&A may establish additional
Investment Divisions within the Series Account. These Investment
Divisions will be established if and when, in the sole discretion
of GWL&A, marketing needs and investment conditions warrant, and
will be made available to existing Contract Owners to the extent
and on the basis to be determined by GWL&A.
If the shares of the Fund or American Century should no
longer
be available for investment, or, in the judgment of GWL&A's
management, further investment in Fund or American Century shares
should become inappropriate in view of the purposes of the
Contract, then GWL&A may substitute shares of another mutual fund
for shares already purchased, or to be purchased in the future,
under the Contract. No substitution of securities in any Contract
Owner's account may take place without prior approval of the
Securities and Exchange Commission.
Mixed and Shared Funding
The Series Account invests in shares of the Fund and
American
Century, both of which are open-end management investment
companies, which are registered with the Securities and Exchange
Commission. Such registration does not involve supervision of the
management of the Fund or American Century by the Securities and
Exchange Commission. Shares of the Fund are also sold to the other
separate accounts established by GWL&A to receive and invest
premiums paid under variable annuity contracts and variable life
policies issued by GWL&A. The Fund is also sold to other insurance
companies to fund the benefits of variable annuity or variable life
insurance contracts. Shares of American Century are also sold to
other separate accounts established by GWL&A and to other insurance
companies to fund the benefits of variable annuity or variable life
insurance contracts. In the future, shares of the Fund or American
Century may be sold to other separate accounts of GWL&A or its
affiliates. It is conceivable that, in the future, it may be
disadvantageous for variable life insurance separate accounts and
variable annuity separate accounts to invest in the Fund and/or
American Century simultaneously. Although neither GWL&A nor the
Fund nor American Century currently foresee any such disadvantages,
either to variable life insurance policy owners or to variable
annuity contract owners, the Boards of Directors of both the Fund
and American Century intend to monitor events in order to identify
any material conflicts between such policy owners and contract
owners and to determine what action, if any, should be taken in
response thereto. Such action could include the sale of Fund shares
by one or more of GWL&A's separate accounts or other insurance
companies, or the sale of American Century shares by GWL&A or other
insurance companies, which could have adverse consequences.
Material conflicts between policy owners and contract owners could
result from, for example, (1) changes in state insurance laws, (2)
changes in federal income tax laws, (3) changes in the investment
management of any Portfolio of the Fund or American Century, or (4)
differences in voting instructions between those given by policy
owners and those given by contract owners.
ADMINISTRATIVE CHARGES, RISK CHARGES AND PREMIUM TAXES
Contract Maintenance Charge
Prior to the Annuity Commencement Date, GWL&A will deduct a
Contract Maintenance Charge in the amount of $27 annually from the
Contract Value to compensate GWL&A for the administrative services
provided to Contract Owners. This charge will be prorated among the
Investment Divisions in which the Contract is invested based upon
the portion of the Contract Value allocated to the Investment
Division.
Surrender Charge
In the circumstances described below, a Surrender Charge will
be deducted on any total or partial surrender. However, a Surrender
Charge Free Amount may be applied in some circumstances. The
Surrender Charge Free Amount is an amount against which the
Surrender Charge will not be assessed. The Surrender Charge Free
Amount shall not exceed 10% of the Contract Value at December 31 of
the calendar year prior to the year in which the amount is being
surrendered. Only one Surrender Charge Free Amount is available in
each calendar year. The Surrender Charge Free Amount will be
applied on the first surrender made in that year.
On any total or partial surrender, a Surrender Charge will be
deducted on the amount in excess of the Surrender Charge Free
Amount except when the Contract Owner elects: (a) a payment option
with an annuity payment period of at least thirty-six (36) months;
or (b) a periodic payment option (unless there is a partial
surrender, see "Periodic Payment Option"); or (c) a surrender due
to a medical condition requiring the Contract Owner's confinement
to an eligible nursing home for 90 consecutive days. The Surrender
Charge will be equal to a percentage of the amount distributed
based on the table shown below:
Year Completed Percentage of Distribution
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7+ 0%
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts, from the daily net asset value of the Series
Account attributable to the Contracts, an amount, computed daily,
which is equal to an annual rate of 1.25%, 0.85% is allocable to
mortality risk and 0.40% is allocable to expense risk. This charge
is designed to compensate GWL&A for its assumption of certain
mortality, death benefit and expense risks described below. The
level of this charge is guaranteed and will not change.
GWL&A's assumption of mortality risks guarantees that the
variable annuity payments made to the Beneficiary or other payee
will not be affected by the mortality experience (life span) of
persons receiving such payments, or of the general population.
GWL&A assumes this "mortality risk" by virtue of annuity rates
incorporated in the Contract which cannot be changed. In addition,
if the Annuitant should die prior to the Contract anniversary
nearest his 75th birthday, GWL&A is at risk to the extent that the
amount of Purchase Payment(s) made exceed the Contract Value less
any partial surrenders and Surrender Charges as of the date notice
of death is received.
GWL&A also assumes the risk that the charges for
administrative expenses, which cannot be increased by GWL&A, will
be insufficient to cover actual administrative costs. The
administrative services which GWL&A provides to Contract Owners
include processing of application for and issuance of the
Contracts, processing of transfers among Investment DivisionS as
requested, purchase and redemption of Fund and/or American Century
shares as required, maintenance of records, administration of
annuity payments, accounting and valuation services, and regulatory
and reporting services.
If the 1.25% charge proves insufficient to cover
administrative costs in excess of the Contract Maintenance Charge
made for administrative expenses, plus any losses from the
mortality risk, the loss will be borne by GWL&A; conversely, if the
amount deducted proves more than sufficient, the excess will be a
profit to GWL&A.
Deductions for Premium Taxes
Any premium tax or other tax (herein collectively referred to
as premium taxes) levied by any government entity as a result of
the existence of the Contracts or the Series Account is currently
paid when due by GWL&A in accordance with applicable law. Because
GWL&A is a Colorado corporation a tax of up to 3.50% could apply if
a tax is levied.
The applicable premium tax rates that states and other
governmental entities impose on the purchase of an annuity are
subject to change by the respective state legislatures, by
administrative interpretations or by judicial acts. Such premium
taxes will depend, among other things, on the state of residence of
the Contract Owner and the insurance laws, tax laws and status of
GWL&A in these states when the premium taxes are incurred.
PERIODIC PAYMENT OPTION
The periodic payment option is a distribution option that is
not considered an Annuity option. Since the periodic payment option
is not an Annuity option, the Contract remains in the Accumulation
Period and retains all rights and flexibility described in this
prospectus except that no Purchase Payments may be made while the
Contract Owner is receiving periodic payments. The Surrender Charge
does not apply to periodic payments but if a partial surrender from
the periodic payment option is made, a Surrender Charge will be
deducted and the Surrender Charge Free Amount will not apply. If
periodic payments cease, the Contract Owner may resume making
Purchase Payments at which time the Surrender Charge Free Amount
again becomes effective.
For distributions from a periodic payment option, all or a
portion of such distributions will be includable in the Contract
Owner's gross income in the year in which the distribution is
taken. In addition, an early withdrawal penalty may apply if such
distribution is taken prior to age 59 1/2.
To elect the periodic payment option, the Contract Owner
must
Request that all or part of the Contract Value be applied to the
periodic payment option. The Contract Owner must specify: (1) the
payment frequency (either 12, 6, 3 or 1 month intervals); (2) the
payment amount (a minimum of $50 is required); (3) the calendar day
of the month on which payments will be made; (4) one payment
option; and, (5) the allocation of payments among Sub-Accounts.
Once a Sub-Account has been depleted, GWL&A will automatically
prorate the remaining payments among all Sub-Accounts unless the
Contract Owner Requests the selection of another Sub-Account.
Payments will cease the earlier of: (1) the date the amount
elected to be paid under the option selected has been reduced to
zero; (2) the Contract Owner Requests the payments to stop; (3) the
death of the Annuitant or Contract Owner; or, (4) the Contract
Value is zero.
The Contract Owner must elect one of the following 3 payment
options: (1) Income for a Specified Period for at least thirty-six
(36) months - The Contract Owner elects the duration over which
payments will be made. This amount may vary based on the duration;
or, (2) Income of a Specified Amount for at least thirty-six (36)
months - The Contract Owner elects the dollar amount of the
payments. Based on the amount elected, the duration may vary; or,
(3) Minimum Distribution - The Contract Owner may Request minimum
distributions, on IRAs only, as specified under Section 401(a)(9)
of the Code.
ANNUITY OPTIONS
A Contract Owner selects an Annuity Commencement Date prior to
issuance of the Contract, except that Contracts issued in
connection with individual retirement annuity plans (described in
Section 408(b) of the Code) provide for annuity payments to
commence at the date and under the option specified in the plan.
Upon Request, the Contract Owner may change a previously
selected Annuity Commencement Date by postponing or accelerating
the Annuity Commencement Date. The Contract Owner must give GWL&A
at least 30 days notice before effecting the commencement of
annuity payments.
The Contract provides for four annuity payment options
("Annuity Options") described below, as well as any such other
Annuity Options as GWL&A may choose to make available in the
future. The Contract Owner may choose a combination of any of the
Annuity Options. A Contract Owner may change his selection of an
Annuity Option upon Request at least 30 days prior to the Annuity
Commencement Date. The Contract also provides that the Contract
Owner may elect to receive the Contract Value in one sum at the
Annuity Commencement Date. However, a one sum amount and annuity
payment periods of less of than thirty-six (36) months will be
subject to any applicable Surrender Charge.
If a Contract Owner does not elect otherwise, the Contract
automatically provides for a variable life annuity (with respect to
the variable portion of the Contract Value) and/or a fixed life
annuity (with respect to the fixed portion of the Contract Value)
with a guaranteed period of 20 years.
The level of annuity payments under the following options is
based upon the option selected and, depending on the option chosen,
such factors as the age at which payments begin and the frequency
and duration of payments.
Option No. 1: Income of Specified Amount (available solely as fixed
dollar payments)
The amount applied under this Option may be paid to the payee
in equal annual, semiannual, quarterly or monthly installments of
the dollar amount elected of not more than 240 months. Since
payments under this Option will not vary with the investment
performance of the Investment Division(s) of the Series Account, no
deduction will be made by GWL&A after the Annuity Commencement Date
for the assumption of mortality and expense risks.
Option No. 2: Income for Specified Period (available solely as
fixed dollar payments)
Annuity Payments are paid to a payee annually, semiannually,
quarterly or monthly, as elected, for a selected number of years.
Since payments under this Option will not vary with the investment
performance of Investment Division(s) of the Series Account, no
deduction will be made by GWL&A after the Annuity Commencement Date
for assumption of mortality and expense risks.
Option No. 3: Life Annuity with Payments Guaranteed for Designated
Period
This option provides for monthly payments during a designated
period and thereafter throughout the lifetime of the payee. The
designated period may be 5, 10, 15 or 20 years. This option is
available on either a variable or a fixed dollar payment basis.
Option No. 4: Life Annuity
This option provides for monthly payments for the Annuitant's
lifetime, without a guaranteed period. This option is available on
either a variable or fixed dollar payment basis.
Variable Annuity Payments
Variable annuity payments will be determined on the basis
of
(i) the value of the Contract prior to the Annuity Commencement
Date; (ii) the Annuity Tables contained in the Contract which
reflect the adjusted age of the Annuitant, (iii) the type of
Annuity Option selected; and (iv) the investment performance of the
Sub-Accounts. The Annuitant receives the value of a fixed number of
Annuity Units each month.
The dollar amount of the first monthly variable annuity
payment is determined by applying the total value of the
Accumulation Units credited under the Contract valued as the fifth
Valuation Period prior to the Annuity Commencement Date (less any
premium taxes) to the Annuity Tables contained in the Contract.
Amounts shown in the tables are based on the 1983 Table (a) for
Individual Annuity Valuation with an assumed investment return at
the rate of 2.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the
Contract tables by the number of thousands of dollars of value
accumulated under the Contract. These Annuity Tables vary according
to the form of annuity selected and according to the age of the
Annuitant at the Annuity Commencement Date.
At the Annuity Commencement Date, the Annuitant is credited
with Annuity Units for the Sub-Account on which variable annuity
payments are based. The number of Annuity Units to be credited is
determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior
to the Annuity Commencement Date in each Sub-Account selected.
Although the number of Annuity Units is fixed by this process, the
value of such Units will vary with the value of the Fund and/or
American Century. (See also "Administrative Charges, Risk Charges
and Premium Taxes.")
The 2.5% interest rate stated above is the measuring point
for
subsequent annuity payments. If the actual Net Investment Factor
(annualized) exceeds 2.5%, the payment will increase at a rate
equal to the amount of such excess. Conversely, if the actual rate
is less than 2.5%, annuity payments will decrease. If the assumed
rate of interest were to be increased, annuity payments would start
at a higher level but would increase more slowly or decrease more
rapidly.
The amount of the second and subsequent payments is determined
by multiplying the Contract Owner's fixed number of Annuity Units
by the appropriate Annuity Unit value for the fifth Valuation
Period preceding the date that payment is due.
The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the
immediately preceding Valuation Period by the product of:
( a) the Net Investment Factor of the Sub-Account for the
Valuation Period for which the Annuity Unit value is being
determined, and
(b) a factor of .999932 to neutralize the assumed investment
return of 2.5% per year in the annuity table.
The value of each Sub-Account's Annuity Unit was set initially
at $10.00.
The value of the Annuity Units is determined as of a Valuation
Period five days prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in
advance of their due dates. Such checks will normally be issued and
mailed at least 3 days before the due date.
Fixed Annuity Payments
Contract Owners may elect an Annuity Option that provides for
annuity payments on a fixed basis. GWL&A guarantees the dollar
amount of payments made on a fixed basis throughout the payment
period. The amount applied to purchase an annuity will be that
portion of the Contract Value applied, less any applicable premium
tax, based on the Accumulation Unit Value for the fifth Valuation
Period preceding the Annuity Commencement Date.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon
whose age, sex or survival payments depend.
Frequency and Amount of Annuity Payments
Annuity payments, both fixed and variable, will be paid
annually, semiannually, quarterly or monthly, as requested.
However, if the net amount available in the Series Account to apply
under any Annuity Option is less than $2,000, GWL&A shall have the
right to pay such amount in one lump sum in lieu of the payment
otherwise requested. In addition, if the payments from the Series
Account would be or become less than $50, GWL&A shall have the
right to change the frequency of payments to such intervals (at
least once a year) as will result in payments of at least $50. The
maximum amount that may be applied under any Annuity Option, or any
combination thereof, without GWL&A's prior written consent is
$1,000,000.
FEDERAL TAX STATUS
Introduction
The Contracts are designed for use by individuals who wish to
purchase non-qualified annuities pursuant to Section 72 of the Code
or individual retirement annuities which may qualify for special
tax treatment under Section 408 of the Code.
The ultimate effect of federal income taxes on the amount held
under a Contract, on annuity payments and on the economic benefit
to the Contract Owner, Annuitant or Beneficiary depends upon
GWL&A's tax status, on the type of Contract purchased and upon the
tax and employment status of the individual concerned.
It should be understood that the following discussion is
not
exhaustive, and is not intended as tax advice. Special rules may
apply to certain situations not discussed here. GWL&A intends to
comply with all rules and regulations, including but not limited to
the diversification requirements of the Code to assure that the
Contracts will continue to be treated as annuity contracts for
federal income tax purposes. However, this discussion is based upon
GWL&A's understanding of current federal income tax law and no
representation is made regarding the likelihood of continuation of
current law or of the current interpretations by the Internal
Revenue Service. No attempt is made to consider state or other tax
laws. The Contract Owner, Annuitant and Beneficiary are responsible
for determining that contributions, distributions and other
transactions with respect to the Contract comply with applicable
laws. FOR FURTHER INFORMATION, CONSULT A QUALIFIED TAX ADVISER.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United
States
as a life insurance company in accordance with Part I of Subchapter
L of the Code. Maxim Series Account is taxed as a part of GWL&A;
not as a "regulated investment company" under Part I of Subchapter
M of the Code. Investment income and realized capital gains on the
assets of the Series Account are reinvested and are taken into
account in determining the Series Account Value. Under existing
federal income tax law, such amounts do not result in any tax on
GWL&A which will be chargeable to the Contract Owner or the Series
Account. GWL&A reserves the right to make a deduction from the
Contract for taxes, if any, imposed with respect to such items in
the future.
Diversification Requirements
The Code imposes certain diversification requirements on the
underlying assets of variable annuity contracts. The Code provides
that a variable annuity contract shall not be treated as an annuity
contract for any period (and any subsequent period) for which the
investments are not "adequately diversified." The assets of the
Fund and American Century are expected to meet the diversification
requirements, however, disqualification of the Contract as an
annuity contract for failure to meet diversification requirements
would result in the imposition of federal income tax on the
Contract Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract.
Taxation of Annuities in General
Section 72 of the Code governs the federal taxation of
annuities in general. A Contract Owner who is a natural person
generally is not taxed on increases (if any) in the value of the
Contract until a total or partial distribution from the Contract
occurs. However, the Contract Owner may be subject to taxation
currently under certain circumstances. For example, an assignment,
pledge, or agreement to assign or pledge any portion of the
Contract generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or
an annuity) is taxable as ordinary income.
Any Contract Owner which is not a natural person (e.g. a
corporation) generally must include in income any increase in the
excess of the value in the Contract over the "investment in the
Contract" during each taxable year. The investment in the Contract
is the amount of after-tax premiums paid for a non-qualified
annuity contract or any non-deductible amounts contributed to an
IRA. The rule does not apply where the non-natural person is the
nominal owner of a Contract and the beneficial owner is a natural
person. Certain other exceptions may apply. A prospective owner
that is not a natural person may wish to discuss these matters with
a competent tax adviser. The following discussion generally applies
to a Contract owned by a natural person.
Partial or Total Distributions
Under Section 72 of the Code, partial distributions are
generally treated as taxable income to the extent that the value in
the Contract immediately before the distribution exceeds the
"investment in the Contract" at that time. Total distributions are
taxed as ordinary income to the extent that the amount received
exceeds the "investment in the Contract."
Section 72(q) of the Code, imposes a penalty tax on partial
withdrawals and complete surrenders from non-qualified annuity
contracts equal to 10% of the amount treated as taxable income. In
general, the penalty tax does not apply to withdrawals or
surrenders (1) that are made on or after age 59 1/2, (2) that are
as a result of death or disability, (3) that are received as
substantially equal installments as a life annuity, (4) that are
allocable to the Contract Owners "investment in the Contract"
before August 14, 1982, or (5) that are received under an immediate
annuity.
Annuity Payments
The tax consequences of annuity payments may vary depending
upon the annuity form elected under the Contract. In general,
however, only the portion of the annuity payment that represents
the amount by which the value in the Contract exceeds the
investment in the Contract will be taxed. Once the investment in
the Contract is recovered, the full amount of any additional
annuity payments is taxable. For fixed annuity payments there is no
tax on the portion of each payment which represents the same ratio
that the investment in the Contract bears to the total expected
value of the annuity payments for the term of the payments; the
remainder of each annuity payment is taxable. Once the investment
in the Contract has been fully recovered, the full amount of any
additional annuity payments is taxable. If the annuity payments
cease as a result of an Annuitant's death before full recovery of
the investment in the Contract, a competent tax adviser should be
consulted regarding the deductibility of the unrecovered
amount.
Multiple Contracts
All non-qualified deferred annuity contracts issued by the
same insurer (or affiliates) to the same Contract Owner during any
calendar year will be treated as one annuity contract in
determining the amount includable in gross income under Section
72(e) of the Code and any regulations which may be issued
thereunder. Amounts received under any such Contract may be taxable
(and may be subject to the 10% penalty tax) to the extent of the
combined income in all such Contracts.
Transfer of Ownership
The transfer of ownership of a Contract or the designation
of
an Annuitant, Payee or Beneficiary who is not also the Owner may
result in adverse tax consequences to the Contract Owner that are
not discussed here. A Contract Owner contemplating any such
designation, transfer or assignment should contact a competent tax
adviser with respect to the potential tax effects of such a
transaction.
Exchanges
Section 1035 of the Code provides that no gain or loss will be
recognized on the exchange of one annuity contract for another.
Contracts issued on or after January 19, 1985 in exchange for
another annuity contract are treated as new contracts for purposes
of the penalty and distribution at death rules. Special rules apply
to contracts issued prior to August 14, 1982. Prospective Contract
Owners wishing to take advantage of a Section 1035 exchange should
consult their tax advisers.
Individual Retirement Annuities
The Contract may be purchased as an IRA as described in
Section 408 of the Code. Section 408 permits eligible individuals
to contribute to an IRA. The annuitant must at all times be the
Contract Owner. The entire interest of the Contract Owner is
nonforfeitable and nontransferable. Contributions, except for
rollover contributions, may not exceed the limitations allowable
under the Code. An IRA may be purchased with retirement savings
distributed from another IRA, a tax-qualified employer pension or
profit-sharing plan, or a Code Section 403(b) tax sheltered annuity
which are rolled over into an IRA. The amounts rolled over are not
taxable in the year of distribution. Rollover IRAs are subject to
additional requirements not discussed here. Please consult a
competent tax adviser regarding these rules.
The Contract Owner may not borrow from the contract or pledge
all or any portion of the annuity as security for a loan. If the
Contract Owner borrows money under the Contract, including a policy
loan, or pledges any portion of the Contract as security for a
loan, the Contract ceases to qualify as an IRA as of the first day
of the year, and the fair market value of the Contract is
includable in the Contract Owner's gross income for the year.
Code Section 408(d)(1) provides that distributions from IRAs,
unless rolled over to another IRA as provided in the Code, are
generally taxed for federal income tax purposes under Code Section
72. Under these rules, a portion of the distribution may be
excludable from income if any non-deductible contributions were
made. However, if the IRA was funded entirely from deductible
(pre-tax) contributions, the entire amount distributed will be
taxable to the Contract Owner as ordinary income in the year
distributed. There is no special averaging treatment for lump sum
distributions from IRAs.
Required Beginning Date/Minimum Distribution Requirements
The Contract Owner's entire interest in an IRA generally must
be distributed, or begin to be distributed, by the Contract Owner's
required beginning date, which is April 1 following the calendar
year in which the Contract Owner reaches age 70 1/2. All
distributions from an IRA must satisfy the requirements of Section
401(a)(9) of the Code, including the incidental death benefit
requirements of Section 401(a)(9)(G) and the regulations
thereunder. In general, required distributions must be made over a
period not exceeding the life expectancy of the Contract Owner or
the joint lives or life expectancy of the Contract Owner and
his/her designated beneficiary. If the amount distributed does not
meet the these requirements, a 50% penalty tax on the amount which
was required to be, but was not distributed may be imposed upon the
Contract Owner under Section 4974.
Penalty Taxes
Distributions from an IRA which are made before the Contract
Owner attains age 59 1/2 are premature distributions and are
subject to an additional tax equal to 10% of the amount of the
distributions which is includable in gross income in the tax year.
However, under Code Section 72(t), the penalty tax will not apply
to distributions: (1) made to a beneficiary on or after the death
of the Contract Owner; (2) attributable to the Contract Owner's
being disabled within the meaning of Code Section 72(m)(7); or (3)
made as a part of a series of substantially equal periodic payments
(at least annually) for the life or life expectancy of the Contract
Owner or the joint lives or life expectancies of the Contract Owner
and his or her designated beneficiary.
If the penalty tax does not apply to a distribution as a
result of the application of item (3) above, and the series of
payments are subsequently modified (other than by reason of death
or disability), (a) before the close of the period which is five
(5) years from the date of the first payment and after the Contract
Owner attains age 59 1/2, or (b) before the Contract Owner attains
age 59 1/2, the tax for the first year when the modification occurs
will be increased by an amount (determined by the regulations)
equal to the tax that would have been imposed but for item (3)
above, plus interest for the deferral period.
Distributions on Death of Contract Owner
Distributions made to a Beneficiary upon the Contract Owner's
death from a non-qualified plan must be made pursuant to the rules
contained in Section 72(s) of the Code or pursuant to the rules in
Section 401(a)(9) of the Code in the case of a distribution from an
IRA. Generally, if the Contract Owner dies while receiving annuity
payments or other required minimum distribution, but before the
entire interest in the annuity has been distributed, the remainder
of his interest must generally be distributed to the Beneficiary at
least as rapidly as under the method in effect as of the Contract
Owner's date of death.
If the Contract Owner dies before payments have begun, his
entire interest generally must be distributed in full within five
years after such death or on or before December 31 of the calendar
year that contains the fifth anniversary of the date of the
Contract Owner's death, in the case of a distribution from an IRA,
unless the Contract Owner has named an individual beneficiary. If
an individual other than the surviving spouse has been designated
as Beneficiary, payments may be made over the life of that
individual or over a period not extending beyond the life
expectancy of the Beneficiary so long as payments begin not later
than one year after the Contract Owner's death or on or before
December 31 of the year following the year of death, in the case of
an IRA. If the Beneficiary is the Contract Owner's spouse,
distributions from an IRA are not required to begin until the date
the Contract Owner would have attained age 70 1/2. If the spouse
dies before distributions begin, the rules discussed above
regarding IRAs will apply as if the spouse were the Contract Owner.
However, the surviving spouse, if the Beneficiary, may elect
to treat the entire IRA as his or her own IRA regardless of whether
distributions had begun to the deceased Contract Owner or have
begun to the surviving spouse. As the new Contract Owner, the
surviving spouse may make contributions to the IRA and make
rollovers from it. Such an election is deemed made if any amounts
required to be distributed on the Contract Owner's death under
these rules have not been distributed or any additional amounts are
contributed to the IRA.
Federal Income Tax Withholding on Distributions
Distributions from the Contract are subject to income tax
withholding; if the distribution is in the form of an annuity or
similar periodic payments, amounts are withheld as though each
distribution were a payment of wages; in the case of any other kind
of distribution, a flat 10% is withheld, unless the recipient
elects not to have the tax withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of
the Series Account at regular and special meetings of stockholders
of the Fund or American Century. The 1940 Act and the regulations
thereunder as presently interpreted, require that the shares of the
applicable underlying mutual fund be voted in accordance with
instructions received from Contract Owners having voting interests
in the Sub-Accounts and, accordingly, GWL&A will do so. However, if
the 1940 Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, and as a result
GWL&A determines that it is permitted to vote the Fund and American
Century shares in its own right, it may elect to do so.
The number of votes which a Contract Owner has the right to
cast will be determined by applying his percentage interest in a
Sub-Account to the total number of votes attributable to the
Sub-Account. In determining the number of votes, fractional shares
will be recognized. After the Annuity Commencement Date the votes
attributable to a Contract will decrease.
Fund or American Century shares held in a Sub-Account as to
which no timely instructions are received, and shares that are not
otherwise attributable to Contract Owners, will be voted by GWL&A
in proportion to the voting instructions which are received with
respect to all Contracts participating in that Sub-Account of this
Series Account. Voting instructions to abstain on any item to be
voted upon will be applied on a pro-rata basis to reduce the votes
eligible to be cast.
Each person having a voting interest will receive proxy
materials, reports and other materials relating to the applicable
underlying mutual fund.
DISTRIBUTION OF THE CONTRACTS
BCE is the principal underwriter and the distributor of the
Contracts. BCE is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Applications for the Contracts will be
solicited by duly licensed insurance agents of GWL&A who are
registered with BCE, as well as independent registered insurance
brokers who must also be NASD registered broker-dealers or
representatives thereof.
The maximum commission as a percentage of the Purchase
Payment(s) made under a Contract payable to BCE agents is 6.25%. In
addition, BCE may reimburse portions of expenses incurred pursuant
to BCE's expense reimbursement allowance program.
RETURN PRIVILEGE
Within 10 days (may be longer in some states) after the
Contract is first received, it may be canceled for any reason by
delivering or mailing it together with a written request to cancel
to GWL&A's Executive Offices or to an authorized agent of GWL&A.
Upon cancellation, GWL&A will pay the owner the Contract Value as
of the date of surrender. No Surrender Charge or other charge will
be deducted.
STATE REGULATION
As a life insurance company organized and operated under
Colorado law, GWL&A is subject to provisions governing such
companies and to regulation by the Commissioner of Insurance.
GWL&A's books and accounts are subject to review and
examination by the Colorado Insurance Department at all times and
a full examination of its operations is conducted by the National
Association of Insurance Commissioners (NAIC) at least once every
3 years.
REPORTS
As presently required by the 1940 Act and regulations
promulgated thereunder, GWL&A will mail to the Contract Owner
reports containing such information as may be required under that
Act or by any other applicable law or regulation. These reports
will be mailed, at least semi-annually after the first contract
year, to the last known address of record which GWL&A maintains at
its Executive Offices,
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is
not involved in any litigation which would have a material adverse
effect on the ability of GWL&A to perform its contract with the
Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable
annuity contracts and the validity of the Contracts have been
passed upon by Ruth B. Lurie, Vice-President, Counsel and Associate
Secretary. Certain legal matters relating to the Federal securities
laws have been passed upon for GWL&A by Jorden Burt Berenson &
Johnson, LLP., Washington, D.C.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission, under the Securities Act of 1933 as
amended, with respect to the Contracts offered hereby. This
prospectus does not contain all the information set forth in the
Registration Statement and amendments thereto and exhibits filed as
a part thereof, to all of which reference is hereby made for
further information concerning the Series Account, GWL&A and the
Contracts offered hereby. Statements contained in this prospectus
as to the content of Contracts and other legal instruments are
summaries. For a complete statement of the terms thereof reference
is made to such instruments as filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Separate
Account and GWL&A. The Table of Contents of the Statement of
Additional Information is set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Data
4. Financial Statements
Inquiries and requests for a Statement of Additional
Information should be directed to GWL&A in writing at 8515 E.
Orchard Road, Englewood, Colorado 80111, or by telephoning GWL&A at
(800) 228-8706 (Outside Colorado) or (303) 689-4538 (Colorado).
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
MAXIM SERIES ACCOUNT
Individual Flexible Premium Variable Annuity Contracts
issued by
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
Telephone: (800) 468-8661 (Outside Colorado)
(800) 547-4957 (Colorado)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a
Prospectus
and should be read in conjunction with the Prospectus, dated May 1,
1997, which is available without charge by contacting Great-West
Life & Annuity Insurance Company ("GWL&A") at the above address or
at the above telephone number.
May 1, 1997
TABLE OF CONTENTS
Page
CUSTODIAN AND INDEPENDENT AUDITOR B-3
UNDERWRITER B-3
CALCULATION OF PERFORMANCE DATA B-3
FINANCIAL STATEMENTS B-5
CUSTODIAN AND INDEPENDENT AUDITORS
A. Custodian
The assets of Maxim Series Account (the "Series Account")
are held by GWL&A. The assets of the Series Account are kept
physically segregated and held separate and apart from the general
account of GWL&A. GWL&A maintains records of all purchases and
redemptions of shares of the Fund. Additional protection for the
assets of the Series Account is afforded by blanket fidelity bonds
issued to The Great-West Life Assurance Company ("Great-West") in
the amount of $30 million (Canadian), which covers all officers and
employees of GWL&A.
B. Independent Auditors
The accounting firm of Deloitte & Touche LLP performs
certain accounting and auditing services for GWL&A and the Series
Account. The principal business address of Deloitte & Touche LLP
is 555 Seventeenth Street, Suite 3600, Denver, Colorado 80202-3942.
The statements of assets and liabilities of Maxim
Series
Account as of December 31, 1996, the related statement of
operations for the year then ended, the statements of changes in
net asset for each of the two years then ended and the consolidated
balance sheets for Great-West Life & Annuity Insurance Company at
December 31, 1996, 1995 and the related consolidated statements of
income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1996, included in this
Statement of Additional Information have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports
appearing herein and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and
auditing.
UNDERWRITER
The offering of the Contracts is made on a continuous basis
by
BenefitsCorp Equities, Inc. ("BCE"), a wholly owned subsidiary of
GWL&A. Previously, the Contracts were offered through Great-West
an affiliate of GWL&A. No payments were made to Great-West for the
years 1992 through 1996 and no payments were made to BCE in
1996.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield Quotations for the Money Market
Investment Division
The yield quotation for the Money Market Investment
Division
set forth in the Prospectus is for the seven-day period ended
December 31, 1996 and is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit in
the Money Market Investment Division at the beginning of the
period, subtracting a hypothetical charge reflecting deductions
from Participant accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by
(365/7) with the resulting yield figure carried to the nearest
hundredth of one percent.
The effective yield quotation for the Money Market
Investment
Division set forth in the Prospectus is for the seven-day period
ended December 31, 1996 and is carried to the nearest hundredth of
one percent, computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing
account having a balance of one Accumulation Unit in the Money
Market Investment Division at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from
Participant accounts, and dividing the difference by the value of
the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following
formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN +1 365/7]-1.
For purposes of the yield and effective yield computations,
the hypothetical charge reflects all deductions that are charged to
all Participant accounts in proportion to the length of the base
period, and for any fees that vary with the size of the account,
the account size is assumed to be the Money Market Investment
Division's mean account size. The specific percentage applicable to
a particular withdrawal would depend on a number of factors
including the length of time the Contract Owner has participated
under the Contracts. (See "Administrative Charges, Risk Charges
and Premium Taxes" in the prospectus.) No deductions or sales
loads are assessed upon annuitization under the Contracts.
Realized gains and losses from the sale of securities and
unrealized appreciation and depreciation of the Money Market
Investment Division and the Fund are excluded from the calculation
of yield.
B. Total Return and Yield Quotations for All Investment Divisions
(Other than Money Market)
The total return quotations for all Investment Divisions,
other than the Money Market, set forth in the Prospectus are
average annual total return quotations for the one-year period
ended December 31, 1996. The quotations are computed by finding
the average annual compounded rates of return over the relevant
periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the particular period at
the end of the particular period
For purposes of the total return quotations for these Investment
Divisions, the calculations take into effect all fees that are
charged to the Contract Value , and for any fees that vary with the
size of the account, the account size is assumed to be the
respective Investment Divisions' mean account size. The
calculations also assume a complete redemption as of the end of the
particular period.
FINANCIAL STATEMENTS
The financial statements of GWL&A as contained herein should
be considered only as bearing upon GWL&A's ability to meet its
obligations under the Contracts, and they should not be considered
as bearing on the investment performance of the Series Account.
The interest of Contract Owners under the Contracts are affected
solely by the investment results of the Series Account.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Financial Statements for the Years
Ended December 31, 1996 and 1995
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Contract Owners of
Maxim Series Account
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying statements of assets and
liabilities of Maxim Series I, Maxim Series II and Maxim Series III
of Maxim Series Account of Great-West Life & Annuity Insurance
Company as of December 31, 1996, the related statements of
operations for the year then ended and the statements of changes in
net assets for each of the two years then ended, including each of
the investment divisions. These financial statements are the
responsibility of the Series Account's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Maxim Series I, Maxim
Series II and Maxim Series III of Maxim Series Account of
Great-West Life & Annuity Insurance Company at December 31, 1996,
the results of its operations for the year or period then ended,
and the changes in its net assets for each of the two years then
ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 7, 1997
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Maxim Series I
ASSETS:
Shares
Cost
Value
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
Money Market\Non-Qualified
30,451
$30,499
$30,472
Bond\Non-Qualified
76,393
95,837
92,121
Bond\Qualified
13,222
15,988
15,944
Stock Index\Qualified
3,755
20,355
8,880
Total Return\Non-Qualified
33,647
38,996
45,126
Total investments
$201,675
192,543
Other assets and liabilities:
Other assets
381
Due to Great-West Life & Annuity Insurance Company
(292)
Other liabilities
(35)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5)
$192,597
See notes to financial statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Maxim Series II
ASSETS:
Shares
Cost
Value
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
Money Market\Non-Qualified
1,100,797
$1,100,674
$1,101,542
Money Market\Qualified
1,041,525
1,052,299
1,042,230
Bond\Non-Qualified
1,329,794
1,635,343
1,603,586
Bond\Qualified
1,852,873
2,323,465
2,234,362
Stock Index\Non-Qualified
2,796,786
4,456,199
6,614,330
Stock Index\Qualified
3,607,130
5,452,865
8,530,773
U.S. Government Securities/Non-Qualified
5,957,296
6,557,019
6,397,012
U.S. Government Securities/Qualified
3,960,834
4,379,008
4,253,188
Total Return/Non-Qualified
3,292,983
3,921,297
4,416,449
TCI Portfolios, Inc. - TCI Growth
34,262
373,995
350,845
TCI Portfolios, Inc. - TCI Balanced
46,150
297,771
347,970
Total investments
$31,549,935
36,892,287
Other assets and liabilities:
Premiums due and accrued
400
Other assets
472
Due to Great-West Life & Annuity Insurance Company
(46,592)
Other liabilities
(121)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5)
$36,846,446
See notes to financial statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Maxim Series III
ASSETS:
Shares
Cost
Value
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
Bond
49,306
$59,588
$59,459
Corporate Bond
141,121
160,903
163,951
INVESCO ADR
150,802
181,415
203,709
INVESCO Balanced
12,732
13,399
13,251
INVESCO Small-Cap Growth
389,143
606,178
557,647
Mid-Cap
822,697
1,179,465
1,178,638
Money Market
317,497
317,707
317,712
Small-Cap Index
123,186
150,209
152,378
Small-Cap Value
16,817
17,610
20,987
Stock Index
870,318
1,921,202
2,058,280
Total Return
291,612
387,771
391,101
T. Rowe Price Equity/Income
709,651
933,256
1,028,392
U.S. Government Securities
167,873
180,111
180,264
TCI Portfolios, Inc. - TCI Balanced
33,809
241,580
254,921
TCI Portfolios, Inc. - TCI Growth
18,648
210,414
190,955
Total investments
$6,560,808
6,771,645
Other assets and liabilities:
Premiums due and accrued
193
Due to Great-West Life & Annuity Insurance Company
(6,895)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5)
$6,764,943
See notes to financial statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series I
Money Market Investment Division
Non-Qualified
Bond Investment Division
Non-Qualified
Qualified
Stock Index Investment Division
Qualified
Total Return Investment Division
Non-Qualified
Total Maxim I
INVESTMENT INCOME
$2,042
$5,517
$954
$164
$3,403
$12,080
EXPENSES- mortality and expense
risks (Note 3)
519
1,130
197
104
537
2,487
NET INVESTMENT INCOME
1,523
4,387
757
60
2,866
9,593
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(11)
142
(3)
40
142
310
Net change in unrealized appreciation
(depreciation) on investments
11
(1,884)
(298)
1,396
1,229
454
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
0
(1,742)
(301)
1,436
1,371
764
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
$1,523
$2,645
$456
$1,496
$4,237
$10,357
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series II
Money Market Investment Division
Non-Qualified
Qualified
Bond Investment Division
Non-Qualified
Qualified
Stock Index Investment Division
Non-Qualified
Qualified
INVESTMENT INCOME
$64,298
$56,370
$108,265
$144,671
$125,722
$160,362
EXPENSES- mortality and expense
risks (Note 3)
18,319
16,077
25,762
33,862
89,301
113,655
NET INVESTMENT INCOME
45,979
40,293
82,503
110,809
36,421
46,707
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(28,915)
(18,981)
298,857
327,464
Net change in unrealized appreciation
(depreciation) on investments
(7,476)
(27,583)
828,550
1,121,694
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
0
0
(36,391)
(46,564)
1,127,407
1,449,158
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
$45,979
$40,293
$46,112
$64,245
$1,163,828
$1,495,865
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series II
U.S. Government Securities Investment Division
Non-Qualified
Qualified
Total Return Investment Division
Non-Qualified
TCI Growth Investment Division
TCI Balanced Investment Division
Total Maxim II
INVESTMENT INCOME
$426,274
$286,948
$335,985
$47,796
$15,767
$1,772,458
EXPENSES- mortality and expense
risks (Note 3)
98,433
66,483
61,081
5,770
4,739
533,482
NET INVESTMENT INCOME
327,841
220,465
274,904
42,026
11,028
1,238,976
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(52,580)
(21,782)
147,014
12,701
14,357
678,135
Net change in unrealized appreciation (depreciation)
on investments
(120,325)
(95,024)
1,201
(79,472)
5,880
1,627,445
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(172,905)
(116,806)
148,215
(66,771)
20,237
2,305,580
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
$154,936
$103,659
$423,119
$(24,745)
$31,265
$3,544,556
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series III
Bond Investment Division
Corporate Bond Investment Division
INVESCO ADR Investment Division
INVESCO Balanced Investment Division (F)
INVESCO Small-Cap Growth Investment Division
Mid-Cap Investment Division
INVESTMENT INCOME
$2,701
$11,481
$1,514
$81
$62,458
$1,553
EXPENSES- mortality and expense
risks (Note 3)
503
1,320
1,155
7
3,731
10,671
NET INVESTMENT INCOME (LOSS)
2,198
10,161
359
74
58,727
(9,118)
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
339
202
2,274
13,572
39,570
Net change in unrealized appreciation (depreciation)
on investments
(519)
2,860
18,790
(148)
(53,489)
(36,244)
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(180)
3,062
21,064
(148)
(39,917)
3,326
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
$2,018
$13,223
$21,423
(74)
$18,810
$(5,792)
(F) The investment division commenced operations on October 31,
1996.
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series III
Money Market Investment Division
Small-Cap Index Investment Division
Small-Cap Value Investment Division
Stock Index Investment Division
Total Return Investment Division
T. Rowe Price Equity/Income Investment Division
INVESTMENT INCOME
$12,455
$11,985
$159
$29,019
$27,285
$34,185
EXPENSES- mortality and expense
risks (Note 3)
3,157
1,011
213
9,669
3,052
7,694
NET INVESTMENT INCOME (LOSS)
9,298
10,974
(54)
19,350
24,233
26,491
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
3,379
20
9,347
1,683
9,095
Net change in unrealized appreciation (depreciation)
on investments
5
(1,228)
2,935
123,478
812
76,299
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
5
2,151
2,955
132,825
2,495
85,394
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
$9,303
$13,125
$2,901
$152,175
$26,728
$111,885
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Maxim Series III
U.S. Government Securities Investment Division
TCI Balanced Investment Division
TCI Growth Investment Division
Total Maxim Series III
INVESTMENT INCOME
$10,135
$8,010
$16,009
$229,030
EXPENSES- mortality and expense
risks (Note 3)
1,975
2,218
2,116
48,492
NET INVESTMENT INCOME (LOSS)
8,160
5,792
13,893
180,538
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(3,256)
1,350
(2,953)
74,622
Net change in unrealized appreciation (depreciation)
on investments
(1,320)
12,300
(22,156)
122,375
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(4,576)
13,650
(25,109)
196,997
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
$3,584
$19,442
$(11,216)
$377,535
See notes to financial statements.
(Concluded)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series I
Money Market Investment Division
Non-Qualified
1996
1995
Qualified
1995
Bond Investment Division
Non-Qualified
1996
1995
Qualified
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$1,523
$1,775
$1,382
$4,387
$4,166
$757
$1,516
Net realized gain (loss)
on investments
(11)
(1,240)
142
142
(3)
273
Net change in unrealized
appreciation (depreciation)
on investments
11
1,205
(1,884)
6,554
(298)
3,641
Increase (decrease) in net assets
resulting from operations
1,523
1,775
1,347
2,645
10,862
456
5,430
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
451
Redemptions
(13,393)
(90)
(115,413)
(90)
(91)
(54)
(57)
Net transfers from (to) other
annuity contracts
99,248
(42,248)
(Decrease) in net assets
resulting from unit transactions
(13,393)
(90)
(15,714)
(90)
(91)
(54)
(42,305)
INCREASE (DECREASE) IN
NET ASSETS
(11,870)
1,685
(14,367)
2,555
10,771
402
(36,875)
NET ASSETS:
Beginning of period
42,313
40,628
14,367
89,458
78,687
15,596
52,471
End of period
$30,443
$42,313
$0
$92,013
$89,458
$15,998
$15,596
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series I
Stock Index Investment Division
Qualified
1996
1995
Total Return Investment Division
Non-Qualified
1996
1995
Total Maxim I
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$60
$58
$2,866
$1,924
$9,593
$10,821
Net realized gain (loss) on
investments
40
24,838
142
86
310
24,099
Net change in unrealized
appreciation (depreciation)
on investments
1,396
(15,183)
1,229
5,148
454
1,365
Increase (decrease) in net assets
resulting from operations
1,496
9,713
4,237
7,158
10,357
36,285
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
451
Redemptions
(26)
(24)
(30)
(30)
(13,593)
(115,705)
Net transfers from (to) other
annuity contracts
(57,000)
(Decrease) in net assets
resulting from unit transactions
(26)
(57,024)
(30)
(30)
(13,593)
(115,254)
INCREASE (DECREASE) IN
NET ASSETS
1,470
(47,311)
4,207
7,128
(3,236)
(78,969)
NET ASSETS:
Beginning of period
7,596
54,907
40,870
33,742
195,833
274,802
End of period
$9,066
$7,596
$45,077
$40,870
$192,597
$195,833
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series II
Money Market Investment Division
Non-Qualified
1996
1995
Qualified
1996
1995
Bond Investment Division
Non-Qualified
1996
1995
Qualified
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$45,979
$77,861
$40,293
$76,363
$82,503
$94,764
$110,809
$119,744
Net realized gain (loss)
on investments
(20)
2
(28,915)
(34,133)
(18,981)
(25,169)
Net change in unrealized
appreciation (depreciation) on
investments
20
(2)
(7,476)
195,592
(27,583)
224,190
Increase (decrease) in net assets
resulting from operations
45,979
77,861
40,293
76,363
46,112
256,223
64,245
318,765
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
10,602
10,332
2,107
18,180
2,642
4,596
9,722
41,008
Redemptions
(456,051)
(648,752)
(779,060)
(678,802)
(308,314)
(327,662)
(369,922)
(376,661)
Net transfers from (to) other
annuity contracts
(117,915)
183,205
64,102
288,908
(68,278)
(42,026)
(68,489)
171,834
Increase (decrease) in net assets
resulting from unit transactions
(563,364)
(455,215)
(712,851)
(371,714)
(373,950)
(365,092)
(428,689)
(163,819)
INCREASE (DECREASE) IN
NET ASSETS
(517,385)
(377,354)
(672,558)
(295,351)
(327,838)
(108,869)
(364,444)
154,946
NET ASSETS:
Beginning of period
1,617,451
1,994,805
1,713,508
2,008,859
1,929,382
2,038,251
2,596,127
2,441,181
End of period
$1,100,066
$1,617,451
$1,040,950
$1,713,508
$1,601,544
$1,929,382
$2,231,683
$2,596,127
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series II
Stock Index Investment Division
Non-Qualified
1996
1995
Qualified
1996
1995
U.S. Government Securities Investment Division
Non-Qualified
1996
1995
Qualified
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$36,421
$69,735
$46,707
$91,569
$327,841
$406,515
$220,465
$279,423
Net realized gain (loss)
on investments
298,857
375,768
327,464
276,168
(52,580)
(77,528)
(21,782)
(22,695)
Net change in unrealized
appreciation (depreciation) on
investments
828,550
1,224,900
1,121,694
1,745,244
(120,325)
715,762
(95,024)
460,001
Increase (decrease) in net assets
resulting from operations
1,163,828
1,670,403
1,495,865
2,112,981
154,936
1,044,749
103,659
716,729
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
33,011
45,499
67,790
79,742
3,477
6,125
17,606
69,028
Redemptions
(857,902)
(1,475,317)
(939,004)
(1,143,409)
(1,009,686)
(1,914,411)
(897,604)
(1,229,287)
Net transfers (to) other
annuity contracts
339,927
19,699
19,945
(66,192)
(206,183)
10,477
(140,529)
(20,243)
Increase (decrease) in net assets
resulting from unit transactions
(484,964)
(1,410,119)
(851,269)
(1,129,859)
(1,212,392)
(1,897,809)
(1,020,527)
(1,180,502)
INCREASE (DECREASE) IN
NET ASSETS
678,864
260,284
644,596
983,122
(1,057,456)
(853,060)
(916,868)
(463,773)
NET ASSETS:
Beginning of period
5,927,241
5,666,957
7,875,672
6,892,550
7,446,276
8,299,336
5,164,840
5,628,613
End of period
$6,606,105
$5,927,241
$8,520,268
$7,875,672
$6,388,820
$7,446,276
$4,247,972
$5,164,840
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series II
Total Return Investment Division Non-Qualified
1996
1995
TCI Growth Investment Division
1996
1995
TCI Balanced Investment Division
1996
1995
Total Maxim II
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$274,904
$204,837
$42,026
$(3,297)
$11,028
$3,496
$1,238,976
$1,421,010
Net realized gain (loss)
on investments
147,014
295,322
12,701
6,178
14,357
18,902
678,135
812,795
Net change in unrealized
appreciation (depreciation) on
investments
1,201
385,889
(79,472)
58,010
5,880
37,951
1,627,445
5,047,557
Increase (decrease) in net assets
resulting from operations
423,119
886,048
(24,745)
60,891
31,265
60,349
3,544,556
7,281,362
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
27,548
85,201
64,306
3,937
6,330
27,600
245,141
391,248
Redemptions
(497,539)
(961,238)
(69,788)
(53,950)
(63,230)
(94,347)
(6,248,100)
(8,903,836)
Net transfers from (to) other
annuity contracts
89,819
(690,616)
25,652
115,510
61,949
29,444
Increase (decrease) in net assets
resulting from unit transactions
(380,172)
(1,566,653)
20,170
65,497
5,049
(37,303)
(6,002,959)
(8,512,588)
INCREASE (DECREASE) IN
NET ASSETS
42,947
(680,605)
(4,575)
126,388
36,314
23,046
(2,458,403)
(1,231,226)
NET ASSETS:
Beginning of period
4,368,144
5,048,749
354,983
228,595
311,225
288,179
39,304,849
40,536,075
End of period
$4,411,091
$4,368,144
$350,408
$354,983
$347,539
$311,225
$36,846,446
$39,304,849
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series III
Bond Investment Division
1996
1995
Corporate Bond Investment Division (E)
1996
1995
INVESCO ADR Investment Division (A)
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$2,198
$285
$10,161
$349
$359
$14
$74
Net realized gain (loss)
on investments
339
202
94
2,274
336
Net change in unrealized
appreciation (depreciation) on
investments
(519)
400
2,860
188
18,790
3,504
(148)
Increase (decrease) in net assets
resulting from operations
2,018
685
13,223
631
21,423
3,854
(74)
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
41,713
13,473
142,965
8,989
135,916
36,402
3,658
Redemptions
(13)
(1,089)
(1,932)
Net transfers from (to) other
annuity contracts
(2,926)
(946)
18,762
(10,757)
9,660
Increase in net assets
resulting from unit transactions
38,774
13,473
140,930
8,989
152,746
25,645
13,318
INCREASE IN NET ASSETS
40,792
14,158
154,153
9,620
174,169
29,499
13,244
NET ASSETS:
Beginning of period
18,603
4,445
9,620
29,499
End of period
$59,395
$18,603
$163,773
$9,620
$203,668
$29,499
$13,244
(A) The Investment Division commenced operations on January 6,
1995.
(E) The Investment Division commenced operations on August 8,
1995.
(F) The Investment Division commenced operations on October 31,
1996.
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series III
INVESCO Small-Cap Growth Investment Division (A)
1996
1995
Mid-Cap Investment Division
1996
1995
Money Market Investment Division (D)
1996
1995
Small-Cap Index Investment Division
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$58,727
$1,549
$(9,118)
$6,385
$9,298
$871
$10,974
$661
Net realized gain (loss)
on investments
13,572
6
39,570
69
3,379
9
Net change in unrealized
appreciation (depreciation) on
investments
(53,489)
4,958
(36,244)
33,444
5
(1,228)
3,801
Increase (decrease) in net assets
resulting from operations
18,810
6,513
(5,792)
39,898
9,303
871
13,125
4,471
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
368,120
52,547
931,515
235,976
303,515
156,777
119,823
8,866
Redemptions
(654)
(13,648)
(6,451)
(2,904)
(6)
Net transfers from (to) other
annuity contracts
111,723
(64,886)
12,021
(150,207)
(13,677)
9,981
Increase in net assets resulting
from unit transactions
479,189
52,547
852,981
241,546
150,404
156,777
106,140
18,847
INCREASE IN NET ASSETS
497,999
59,060
847,189
281,444
159,707
157,648
119,265
23,318
NET ASSETS:
Beginning of period
59,060
330,119
48,675
157,648
32,950
9,632
End of period
$557,059
$59,060
$1,177,308
$330,119
$317,355
$157,648
$152,215
$32,950
(A) The Investment Division commenced operations on January 6,
1995.
(D) The Investment Division commenced operations on August 4,
1995.
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series III
Small-Cap Value Investment Division (C)
1996
1995
Stock Index Investment Division
1996
1995
Total Return Investment Division
1996
1995
T. Rowe Price Equity/Income Investment Division (A)
FROM OPERATIONS:
Net investment income (loss)
$(54)
$515
$19,350
$2,210
$24,233
$4,227
$26,491
$3,475
Net realized gain (loss)
on investments
20
2
9,347
2,144
1,683
9
9,095
3
Net change in unrealized
appreciation (depreciation) on
investments
2,935
442
123,478
14,334
812
2,875
76,299
18,837
Increase (decrease) in net assets
resulting from operations
2,901
959
152,175
18,688
26,728
7,111
111,885
22,315
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
9,987
7,138
1,502,538
177,476
233,246
86,350
574,980
221,192
Redemptions
(20)
(12,057)
(935)
(7,079)
(1,506)
Net transfers from (to) other
annuity contracts
189,433
5,842
18,009
95,467
10,022
Increase in net assets resulting
from unit transactions
9,967
7,138
1,679,914
183,318
250,320
86,350
663,368
229,708
INCREASE IN NET ASSETS
12,868
8,097
1,832,089
202,006
277,048
93,461
775,253
252,023
NET ASSETS:
Beginning of period
8,097
224,474
22,468
113,623
20,162
252,023
End of period
$20,965
$8,097
$2,056,563
$224,474
$390,671
$113,623
$1,027,276
$252,023
(A) The Investment Division commenced operations on January 6,
1995.
(C) The Investment Division commenced operations on March 9, 1995.
See notes to financial statements.
(Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 and 1995
Maxim Series III
U.S. Government Securities Investment Division (B)
1996
1995
TCI Balanced Investment Division
1996
1995
TCI Growth Investment Division (B)
1996
1995
Total Maxim Series III
1996
1995
FROM OPERATIONS:
Net investment income (loss)
$8,160
$2,270
$5,792
$280
$13,893
$(229)
$180,538
$22,862
Net realized gain (loss)
on investments
(3,256)
(54)
1,350
3
(2,953)
(150)
74,622
2,471
Net change in unrealized
appreciation (depreciation) on
investments
(1,320)
1,473
12,300
998
(22,156)
2,697
122,375
87,951
Increase (decrease) in net assets resulting
from operations
3,584
3,689
19,442
1,281
(11,216)
2,318
377,535
113,284
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
166,825
173,654
171,225
67,061
156,340
83,237
4,862,366
1,329,138
Redemptions
(2,318)
(2,946)
(3,325)
(6,452)
(48,926)
(14,409)
Net transfers from (to) other
annuity contracts
(152,683)
(12,684)
(24,394)
21,007
(30,160)
3,175
35,432
Increase in net assets resulting
from unit transactions
11,824
160,970
143,885
88,068
122,855
76,785
4,816,615
1,350,161
INCREASE IN NET ASSETS
15,408
164,659
163,327
89,349
111,639
79,103
5,194,150
1,463,445
NET ASSETS:
Beginning of period
164,659
91,315
1,966
79,103
1,570,793
107,348
End of period
$180,067
$164,659
$254,642
$91,315
$190,742
$79,103
$6,764,943
$1,570,793
(B) The Investment Division commenced operations on January 18,
1995.
See notes to financial statements.
(Concluded)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. HISTORY OF THE SERIES ACCOUNT
The Maxim Series Account of Great-West Life & Annuity
Insurance Company (the Series Account) is a separate account of
Great-West Life & Annuity Insurance Company (the Company) and was
established under Kansas law on June 24, 1981. In 1990 the Series
Account was amended to conform to and comply with Colorado law in
connection with the Company's redomestication to the State of
Colorado. The Series Account is registered with the Securities and
Exchange Commission as a unit investment trust under the provisions
of the Investment Company Act of 1940, as amended.
The Series Account has various investment divisions (the
Funds) which invest in shares of open-end management investment
companies as follows:
Investment Division
Underlying Fund Investment
Maxim Series I:
Money Market
Maxim Series Fund, Inc. - Money Market
Bond
Maxim Series Fund, Inc. - Bond
Stock Index
Maxim Series Fund, Inc. - Stock Index
Total Return
Maxim Series Fund, Inc. - Total Return
U.S. Government Securities
Maxim Series Fund, Inc. - U.S. Government Securities
Maxim Series II:
Money Market
Maxim Series Fund, Inc. - Money Market
Bond
Maxim Series Fund, Inc. - Bond
Stock Index
Maxim Series Fund, Inc. - Stock Index
U.S. Government Securities
Maxim Series Fund, Inc. - U.S. Government Securities
Total Return
Maxim Series Fund, Inc. - Total Return
TCI Growth
TCI Portfolios, Inc. - TCI Growth
TCI Balanced
TCI Portfolios, Inc. - TCI Balanced
Maxim Series III:
Bond
Maxim Series Fund, Inc. - Bond
Corporate Bond
Maxim Series Fund, Inc. - Corporate Bond
INVESCO ADR
Maxim Series Fund, Inc. - INVESCO ADR
INVESCO Balanced
Maxim Series Fund, Inc. - INVESCO Balanced
INVESCO Small-Cap Growth
Maxim Series Fund, Inc. - INVESCO Small-Cap Growth
Mid-Cap
Maxim Series Fund, Inc. - Mid-Cap
Money Market
Maxim Series Fund, Inc. - Money Market
Small-Cap Index
Maxim Series Fund, Inc. - Small-Cap Index
Small-Cap Value
Maxim Series Fund, Inc. - Small-Cap Value
Stock Index
Maxim Series Fund, Inc. - Stock Index
Total Return
Maxim Series Fund, Inc. - Total Return
T. Rowe Price Equity/Income
Maxim Series Fund, Inc. - T. Rowe Price Equity/Income
U.S. Government Securities
Maxim Series Fund, Inc. - U.S. Government Securities
TCI Balanced
TCI Portfolios, Inc. - TCI Balanced
TCI Growth
TCI Portfolios, Inc. - TCI Growth
As of September 24, 1984, the administrative charges of the
Series Account were changed by a vote of the Board of Directors.
Contracts purchased prior to September 24, 1984 (Maxim I Series)
were and will remain subject to the previous charges while
contracts purchased after September 24, 1984 (Maxim II Series) are
charged with the new amounts (see Note 3). As a result of changes
in the administrative charges, the contracts purchased after
September 24, 1984 are being accounted for separately.
As of September 19, 1994, the Company began offering a new
contract in the Series Account (Maxim III Series or MVP contracts).
The administrative charges for these contracts differ from the
administrative charges for contracts in the Maxim I Series and the
Maxim II Series (see Note 3) and are therefore, accounted for
separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
of the Series Account which are in accordance with the accounting
principles generally accepted in the investment company industry:
a. Security Transactions - Security transactions are
recorded on the trade date. Cost of investments sold is determined
on the basis of identified cost.
Dividend income is accrued as of the ex-dividend date and
expenses are accrued on a daily basis.
b. Security Valuation - The investments in shares of the
underlying funds are valued at the closing net asset value per
share as determined by each portfolio at year end.
The cost of investments represents shares of the
underlying funds which were purchased by the Series Account.
Purchases are made at the net asset value from net purchase
payments or through reinvestment of all distributions from the
underlying funds.
c. Federal Income Taxes - The Series Account income is
automatically applied to increase contract reserves. Under
existing federal income tax law, this income is not taxed to the
extent it is applied to increase reserves under a contract. The
Company reserves the right to charge the Series Account for federal
income taxes attributable to the Series Account if such taxes are
imposed in the future.
3. CHARGES UNDER THE CONTRACTS
a. Contract Maintenance Charge - On the last valuation date of
each contract year before the retirement date, the Company deducts
from each participant account a maintenance charge of $30 for
contracts purchased before September 24, 1984 and $35 for contracts
purchased after September 24, 1984, as compensation for the
administrative services provided to contract owners. To compensate
the Company for administrative services for contracts issued after
September 19, 1994, a contract maintenance charge of $27 is
deducted from each participant account on the first day of each
calendar year. If the account is established after the beginning
of the year, the charge is deducted on the first day of the next
calendar quarter and prorated for the portion of the year
remaining.
b. Charges Incurred for Total or Partial Surrenders - Certain
contracts contain provisions relating to a contingent deferred
sales charge. In such contracts, charges will be made for total or
partial surrender of a participant annuity account in excess of the
"free amount" before the retirement date by a deduction from a
participant's account. The "free amount" for contracts purchased
after September 19, 1994, is an amount equal to 10% of the
participant account value at December 31 of the calendar year prior
to the partial or total surrender.
c. Deductions for Assumption of Mortality and Expense Risks
- - The Company deducts an amount, computed daily, from the net asset
value of the Series Account investments, equal to an annual rate of
1.25% (1.00% allocable to mortality risk and .25% allocable to
expense risk) for the contracts purchased before September 24,
1984. For contracts purchased after September 24, 1984 and through
September 19, 1994, the annual rate is 1.4% (1.0% allocable to the
mortality risk and .4% allocable to the expense risk). For
contracts purchased after September 19, 1994, the annual rate is
1.25% (.85% allocable to the mortality risk and .4% allocable to
the expense risk). This charge is designed to compensate the
Company for its assumption of certain mortality, death benefit and
expense risks. The level of this charge is guaranteed and will not
change.
d. Deductions for Premium Taxes - The Company currently will
pay any applicable premium tax or other tax, levied by any
government, when due. If the contract value is used to purchase an
annuity under the annuity options, the dollar amount of any premium
tax previously paid or payable upon annuitization by the Company
will be charged against the contract value.
4. RELATED-PARTY SERVICES
The Company's parent, The Great-West Life Assurance Company, served
as investment advisor to Maxim Series Fund, Inc. through October
31, 1996. Effective November 1, 1996 a wholly-owned subsidiary of
the Company, GW Capital Management, Inc., serves as investment
advisor. Fees are assessed against the average daily net asset
value of the Funds to compensate GW Capital Management, Inc. for
investment advisory services.
5. COMPONENTS OF NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF
CAPITAL
The following is a summary of the net assets applicable to
outstanding units of capital at December 31, 1996, for each
investment division.
Maxim Series I
Units
Unit Value
Total Maxim I Variable Annuity Contract Liabilities
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL:
Investment Division:
Money Market\Non-Qualified
1,402.4300
$21.706993
$30,443
Bond\Non-Qualified
2,729.5690
33.709888
92,013
Bond\Qualified
521.3258
30.687842
15,998
Stock Index\Qualified
175.8499
51.556484
9,066
Total Return\Non-Qualified
2,301.4211
19.586726
45,077
TOTAL
$192,597
(Continued)
5. COMPONENTS OF NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF
CAPITAL
[Continued]
Maxim Series II
Units
Unit Value
Total Maxim II Variable Annuity Contract Liabilities
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL:
Investment Division:
Money Market\Non-Qualified
64,049.3121
$17.175299
$1,100,066
Money Market\Qualified
61,373.5645
16.960886
1,040,950
Bond\Non-Qualified
64,147.0845
24.966746
1,601,544
Bond\Qualified
88,677.2808
25.166340
2,231,683
Stock Index\Non-Qualified
159,266.2614
41.478371
6,606,105
Stock Index\Qualified
202,398.6329
42.096471
8,520,268
U.S. Government Securities/Non-Qualified
272,571.1706
23.439091
6,388,820
U.S. Government Securities/Qualified
183,063.5196
23.204907
4,247,972
Total Return/Non-Qualified
219,989.4109
20.051378
4,411,091
TCI Growth
26,567.3098
13.189460
350,408
TCI Balanced
24,745.2008
14.044688
347,539
TOTAL
$36,846,446
Maxim Series III
Units
Unit Value
Total Maxim III Variable Annuity Contract Liabilities
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL:
Investment Division:
Bond
5,196.4590
$11.429722
$59,395
Corporate Bond
12,487.2880
13.115265
163,773
INVESCO ADR
15,132.9530
13.458576
203,668
INVESCO Balanced
1,307.1090
10.132674
13,244
INVESCO Small-Cap Growth
33,993.6680
16.387153
557,059
Mid-Cap
83,389.9040
14.118114
1,177,308
Money Market
30,070.9530
10.553529
317,355
Small-Cap Index
10,975.8830
13.868088
152,215
Small-Cap Value
1,551.3980
13.514089
20,965
Stock Index
130,996.4720
15.699377
2,056,563
Total Return
30,202.4170
12.935069
390,671
T. Rowe Price Equity/Income
67,415.1290
15.238073
1,027,276
U.S. Government Securities
15,784.0970
11.408091
180,067
TCI Balanced
19,490.4690
13.064964
254,642
TCI Growth
15,595.6450
12.230478
190,742
TOTAL
$6,764,943
(Concluded)
6. SELECTED DATA
The following is a summary of selected data for a unit of
capital of the Series Account at the beginning and end of the year
and the number of units outstanding at December 31, 1996, 1995,
1994, 1993, and 1992, by investment division:
Maxim Series I
Money Market Non-Qualified
Money Market Qualified
Bond Non-Qualified
Bond Qualified
Stock Index Qualified
Total Return Non-Qualified
1996
Beginning Unit Value
$ 20.92
$ 0.00
$ 32.74
$ 29.81
$ 43.05
$ 17.75
Ending Unit Value
$ 21.71
$ 0.00
$ 33.71
$ 30.69
$ 51.56
$ 19.59
Number of Units Outstanding
1,402.43
0.00
2,729.57
521.33
175.85
2,301.42
1995
Beginning Unit Value
$ 20.04
$ 20.01
$ 28.77
$ 26.21
$ 32.29
$ 14.65
Ending Unit Value
$ 20.92
$ 0.00
$ 32.74
$ 29.81
$ 43.05
$ 17.75
Number of Units Outstanding
2,022.86
0.00
2,732.24
523.12
176.42
2,301.96
1994
Beginning Unit Value
$ 19.54
$ 19.51
$ 29.84
$ 27.18
$ 32.65
$ 15.24
Ending Unit Value
$ 20.04
$ 20.01
$ 28.77
$ 26.21
$ 32.29
$ 14.65
Number of Units Outstanding
2,027.25
718.03
2,735.02
2,001.77
1,700.61
2,303.69
1993
Beginning Unit Value
$ 19.23
$ 19.21
$ 27.83
$ 25.36
$ 30.10
$ 13.75
Ending Unit Value
$ 19.54
$ 19.51
$ 29.84
$ 27.18
$ 32.65
$ 15.24
Number of Units Outstanding
2,031.80
720.03
2,738.15
2,004.45
2,221.73
1,192.30
1992
Beginning Unit Value
$ 18.82
$ 18.79
$ 26.52
$ 24.17
$ 28.79
$ 13.21
Ending Unit Value
$ 19.23
$ 19.21
$ 27.83
$ 25.36
$ 30.10
$ 13.75
Number of Units Outstanding
1,003.50
1,892.89
3,360.64
2,300.77
2,651.87
1,510.03
(Continued)
6. SELECTED DATA (continued)
Maxim Series II
Money Market Non-Qualified
Money Market Qualified
Bond Non-Qualified
Bond Qualified
Stock Index Non-Qualified
Stock Index Qualified
U.S. Government Securities Non-Qualified
U.S. Government Securities Qualified
Total Return Non-Qualified
TCI Growth (A)
TCI Balanced (A)
1996
Beginning Unit Value
$ 16.58
$ 16.37
$ 24.29
$ 24.48
$ 34.53
$ 35.04
$ 22.88
$ 22.65
$ 18.20
$ 14.00
$ 12.69
Ending Unit Value
$ 17.18
$ 16.96
$ 24.97
$ 25.17
$ 41.48
$ 42.10
$ 23.44
$ 23.20
$ 20.05
$ 13.19
$ 14.04
Number of Units Outstanding
64,049.31
61,373.56
64,147.08
88,677.28
159,266.26
202,398.63
272,571.17
183,063.52
219,989.41
26,567.31
24,745.20
1995
Beginning Unit Value
$ 15.90
$ 15.71
$ 21.37
$ 21.54
$ 25.81
$ 26.19
$ 19.98
$ 19.78
$ 15.04
$ 10.82
$ 10.62
Ending Unit Value
$ 16.58
$ 16.37
$ 24.29
$ 24.48
$ 34.53
$ 35.04
$ 22.88
$ 22.65
$ 18.20
$ 14.00
$ 12.69
Number of Units Outstanding
97,581.56
104,679.99
79,442.17
106,047.41
171,678.12
224,763.46
325,518.95
228,062.15
239,974.08
25,359.37
24,517.40
1994
Beginning Unit Value
$ 15.53
$ 15.33
$ 22.20
$ 22.38
$ 26.13
$ 26.52
$ 20.93
$ 20.72
$ 15.67
$ 11.11
$ 10.71
Ending Unit Value
$ 15.90
$ 15.71
$ 21.37
$ 21.54
$ 25.81
$ 26.19
$ 19.98
$ 19.78
$ 15.04
$ 10.82
$ 10.62
Number of Units Outstanding
125,420.05
127,897.77
95,366.99
113,313.38
219,588.42
263,158.31
415,446.66
284,597.25
335,713.57
21,121.89
27,124.38
1993
Beginning Unit Value
$ 15.31
$ 15.12
$ 20.74
$ 20.90
$ 24.12
$ 24.48
$ 19.41
$ 19.21
$ 14.16
$ 10.20
$ 10.08
Ending Unit Value
$ 15.53
$ 15.33
$ 22.20
$ 22.38
$ 26.13
$ 26.52
$ 20.93
$ 20.72
$ 15.67
$ 11.11
$ 10.71
Number of Units Outstanding
135,293.72
105,196.10
154,786.15
147,002.74
284,941.95
332,747.75
649,198.60
417,423.10
438,337.99
44,619.57
33,951.49
1992
Beginning Unit Value
$ 15.00
$ 14.82
$ 19.79
$ 19.95
$ 23.11
$ 23.45
$ 18.06
$ 17.88
$ 13.62
$ 10.00
$ 10.00
Ending Unit Value
$ 15.31
$ 15.12
$ 20.74
$ 20.90
$ 24.12
$ 24.48
$ 19.41
$ 19.21
$ 14.16
$ 10.20
$ 10.08
Number of Units Outstanding
178,042.42
183,558.09
186,256.95
173,575.16
331,096.23
414,325.07
816,505.97
505,474.92
542,293.10
15,624.73
2,641.92
(A) The Investment Divisions commenced operations on December 1,
1992, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued)
Maxim Series III
Bond (A)
Corporate Bond (F)
INVESCO ADR (B)
INVESCO Balanced (G)
INVESCO Small-Cap Growth (B)
Mid-Cap (A)
Money Market (E)
Small-Cap Index (A)
1996
Beginning Unit Value
$ 11.10
$ 12.03
$ 11.25
$ 10.00
$ 13.09
$ 13.49
$ 10.17
$ 12.18
Ending Unit Value
$ 11.43
$ 13.12
$ 13.46
$ 10.13
$ 16.39
$ 14.12
$ 10.55
$ 13.87
Number of Units Outstanding
5,196.46
12,487.29
15,132.95
1,307.11
33,993.67
83,389.90
30,070.95
10,975.88
1995
Beginning Unit Value
$ 9.76
$ 10.00
$ 10.00
$ 10.00
$ 10.80
$ 10.00
$ 9.77
Ending Unit Value
$ 11.10
$ 12.03
$ 11.25
$ 13.09
$ 13.49
$ 10.17
$ 12.18
Number of Units Outstanding
1,675.75
799.35
2,623.01
4,511.19
24,467.21
15,499.45
2,705.63
1994
Beginning Unit Value
$ 10.00
$ 10.00
$ 10.00
Ending Unit Value
$ 9.76
$ 10.80
$ 9.77
Number of Units Outstanding
455.62
4,508.26
986.29
(A) The Investment Division commenced operations on September 19,
1994, at a unit value of $10.00.
(B) The Investment Division commenced operations on January 6,
1995, at a unit value of $10.00.
(E) The Investment Division commenced operations on August 4,
1995, at a unit value of $10.00.
(F) The Investment Division commenced operations on August 8,
1995, at a unit value of $10.00.
(G) The Investment Division commenced operations on October 31,
1996, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued)
Maxim Series III
Small-Cap Value (D)
Stock Index (A)
Total Return (A)
T. Rowe Price Equity/Income (B)
U.S. Government Securities (C)
TCI Balanced (A)
TCI Growth (C)
1996
Beginning Unit Value
$ 11.60
$ 13.05
$ 11.72
$ 12.92
$ 11.12
$ 11.79
$ 12.94
Ending Unit Value
$ 13.51
$ 15.70
$ 12.94
$ 15.24
$ 11.41
$ 13.06
$ 12.23
Number of Units Outstanding
1,551.40
130,996.47
30,202.42
67,415.13
15,784.10
19,490.47
15,595.65
1995
Beginning Unit Value
$ 10.00
$ 9.74
$ 9.67
$ 10.00
$ 10.00
$ 9.85
$ 10.00
Ending Unit Value
$ 11.60
$ 13.05
$ 11.72
$ 12.92
$ 11.12
$ 11.79
$ 12.94
Number of Units Outstanding
697.92
17,200.32
9,694.71
19,500.37
14,812.67
7,745.10
6,110.86
1994
Beginning Unit Value
$ 10.00
$ 10.00
$ 10.00
Ending Unit Value
$ 9.74
$ 9.67
$ 9.85
Number of Units Outstanding
2,306.48
2,085.24
199.55
(A) The Investment Division commenced operations on September 19,
1994, at a unit value of $10.00.
(B) The Investment Division commenced operations on January 6,
1995, at a unit value of $10.00.
(C) The Investment Division commenced operations on January 18,
1995, at a unit value of $10.00.
(D) The Investment Division commenced operations on March 9, 1995,
at a unit value of $10.00.
(Concluded)
7. CHANGE IN SHARES
The following is a summary of the net change in the total
investment shares held in each of the respective underlying funds:
For the year ended December 31,
1996
1995
Maxim Series I
Maxim Series Fund, Inc.
- - Money Market/Non-Qualified
(11,832)
1,683
Maxim Series Fund, Inc.
- - Money Market/Qualified
(14,386)
Maxim Series Fund, Inc.
- - Bond/Non-Qualified
3,659
3,410
Maxim Series Fund, Inc.
- - Bond/Qualified
600
(33,538)
Maxim Series Fund, Inc.
- - Stock Index/Qualified
17
(32,792)
Maxim Series Fund, Inc.
- - Total Return/Non-Qualified
2,133
1,489
Maxim Series II
Maxim Series Fund, Inc.
- - Money Market/Non-Qualified
(515,801)
(377,128)
Maxim Series Fund, Inc.
- - Money Market/Qualified
(670,956)
(295,173)
Maxim Series Fund, Inc.
- - Bond/Non-Qualified
(238,899)
(226,940)
Maxim Series Fund, Inc.
- - Bond/Qualified
(257,873)
(39,815)
Maxim Series Fund, Inc.
- - Stock Index/Non-Qualified
(197,576)
(789,596)
Maxim Series Fund, Inc.
- - Stock Index/Qualified
(371,549)
(623,632)
Maxim Series Fund, Inc.
- - U.S. Government Securities/Non-Qualified
(811,859)
(1,418,380)
Maxim Series Fund, Inc.
- - U.S. Government Securities/Qualified
(734,240)
(857,605)
Maxim Series Fund, Inc.
- - Total Return/Non-Qualified
(75,371)
(1,124,372)
TCI Portfolios, Inc.
- - TCI Growth
4,825
4,615
TCI Portfolios, Inc.
- - TCI Balanced
1,939
(4,145)
Maxim Series III
Maxim Series Fund, Inc.
- - Bond
40,149
5,258
Maxim Series Fund, Inc.
- - Corporate Bond
132,764
8,357
Maxim Series Fund, Inc.
- - INVESCO ADR
124,589
26,213
Maxim Series Fund, Inc.
- - INVESCO Balanced
12,732
Maxim Series Fund, Inc.
- - INVESCO Small-Cap Growth
349,181
39,962
Maxim Series Fund, Inc.
- - Mid-Cap
590,752
187,690
Maxim Series Fund, Inc.
- - Money Market
159,940
157,557
Maxim Series Fund, Inc.
- - Small-Cap Index
94,971
18,075
Maxim Series Fund, Inc.
- - Small-Cap Value
9,228
7,589
Maxim Series Fund, Inc.
- - Stock Index
774,415
80,922
Maxim Series Fund, Inc.
- - Total Return
203,992
69,616
Maxim Series Fund, Inc.
- - T. Rowe Price Equity/Income
516,525
193,126
Maxim Series Fund, Inc.
- - U.S. Government Securities
47,132
120,741
TCI Portfolios, Inc.
- - TCI Balanced
27,455
6,024
TCI Portfolios, Inc.
- - TCI Growth
12,712
5,936
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(A wholly-owned subsidiary of
The Great-West Life Assurance Company)
Consolidated Financial Statements for the
Years Ended December 31, 1996, 1995, and 1994
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying consolidated balance sheets of
Great-West Life & Annuity Insurance Company (a wholly-owned
subsidiary of The Great-West Life Assurance Company) and
subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Great-West Life & Annuity Insurance Company and subsidiaries as of
December 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 25, 1997
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
ASSETS
1996
1995
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value $2,041,064 and
$2,158,043)
$ 1,992,681
$ 2,054,204
Available-for-sale, at fair value (amortized cost $6,151,519
and $6,087,969)
6,206,478
6,263,187
Common stock
19,715
9,440
Mortgage loans on real estate, net
1,487,575
1,713,195
Real estate, net
67,967
60,454
Policy loans
2,523,477
2,237,745
Short-term investments, available-for-sale (cost approximates
fair value)
419,008
134,835
Total Investments
12,716,901
12,473,060
Cash
125,182
90,939
Reinsurance receivable
196,958
333,924
Deferred policy acquisition costs
282,780
278,526
Investment income due and accrued
198,441
211,922
Other assets
57,244
40,038
Premiums in course of collection
74,693
85,990
Deferred income taxes
214,404
168,941
Separate account assets
5,484,631
3,998,878
TOTAL ASSETS
$19,351,234
$17,682,218
See notes to consolidated financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY
1996
1995
POLICY BENEFIT LIABILITIES:
Policy reserves
$11,022,595
$10,845,935
Policy and contract claims
372,327
359,791
Policyholders' funds
153,867
154,872
Experience refunds
87,399
83,562
Provision for policyholders' dividends
51,279
47,760
GENERAL LIABILITIES:
Due to Parent Corporation
151,431
149,974
Repurchase agreements
286,736
375,299
Commercial paper
84,682
84,854
Other liabilities
488,818
451,555
Undistributed earnings on
participating business
133,255
136,617
Separate account liabilities
5,484,631
3,998,878
Total Liabilities
18,317,020
16,689,097
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
600 shares issued and outstanding
60,000
60,000
Series B, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
200 shares issued and outstanding
20,000
20,000
Series C, cumulative, 1500 shares authorized,
none outstanding
Series D, cumulative, 1500 shares authorized,
none outstanding
Series E, non-cumulative, 2,000,000
shares authorized, liquidation value of $20.90
per share, issued, and outstanding
41,800
41,800
Common stock, $1 par value; 50,000,000 shares authorized;
7,032,000 shares issued and outstanding
7,032
7,032
Additional paid-in capital
664,265
657,265
Net unrealized gains on securities available-for-sale, net
14,951
58,763
Retained earnings
226,166
148,261
Total Stockholder's Equity
1,034,214
993,121
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$19,351,234
$17,682,218
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Dollars in Thousands)
1996
1995
1994
REVENUES:
Annuity contract charges and premiums
$91,881
$79,816
$61,122
Life, accident, and health premiums earned (net of
premiums ceded totaling $(104,250), $60,880
and $48,115)
1,107,367
987,611
938,947
Net investment income
836,642
835,046
767,646
Net realized gains (losses) on investments
(21,078)
7,465
(71,939)
2,014,812
1,909,938
1,695,776
BENEFITS AND EXPENSES:
Life and other policy benefits (net of reinsurance
recoveries totaling $52,675, $43,574,
and $18,937)
515,750
557,469
548,950
Increase in reserves
229,198
98,797
64,834
Interest paid or credited to contractholders
561,786
562,263
529,118
Provision for policyholders' share of earnings (losses)
on participating business
(7)
2,027
(725)
Dividends to policyholders
49,237
48,150
42,094
1,355,964
1,268,706
1,184,271
Commissions
106,561
122,926
120,058
Operating expenses
336,719
314,810
261,311
Premium taxes
25,021
26,884
27,402
1,824,265
1,733,326
1,593,042
INCOME BEFORE INCOME TAXES
190,547
176,612
102,734
PROVISION FOR INCOME TAXES:
Current
77,134
88,366
65,070
Deferred
(21,162)
(39,434)
(36,614)
55,972
48,932
28,456
NET INCOME
$134,575
$127,680
$74,278
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Dollars in Thousands)
Preferred Stock
Shares
Amount
Common Stock
Shares
Amount
Additional Paid-In Capital
Net Unrealized Gains (Losses)
Retained Earnings (Deficit)
Total
BALANCE, JANUARY 1, 1994
2,000,800
$121,800
7,032,000
$7,032
$656,793
$0
$35,721
$821,346
Adjustment to beginning balance for change in
accounting method for investment
securities
6,515
6,515
Change in net unrealized gains (losses)
(84,942)
(84,942)
Capital contributions
472
472
Dividends
(40,438)
(40,438)
Net income
74,278
74,278
BALANCE, DECEMBER 31, 1994
2,000,800
121,800
7,032,000
7,032
657,265
(78,427)
69,561
777,231
Change in net realized gains (losses)
137,190
137,190
Dividends
(48,980)
(48,980)
Net income
127,680
27,680
BALANCE, DECEMBER 31, 1995
2,000,800
121,800
7,032,000
7,032
657,265
58,763
148,261
993,121
Change in net unrealized gains (losses)
(43,812)
(43,812)
Capital contributions
7,000
7,000
Dividends
(56,670)
(56,670)
Net income
134,575
134,575
BALANCE, DECEMBER 31, 1996
2,000,800
$121,800
7,032,000
$7,032
$664,265
$14,951
$226,166
$1,034,214
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Dollars in Thousands)
1996
1995
1994
OPERATING ACTIVITIES:
Net income
$134,575
$127,680
$74,278
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain (loss) allocated to participating policyholders
(7)
2,027
(725)
Amortization of investments
15,518
26,725
36,978
Realized losses (gains) on disposal of investments
and write-downs of mortgage loans and real estate
21,078
(7,465)
71,939
Amortization
49,454
49,464
29,197
Deferred income taxes
(20,258)
(39,763)
(38,631)
Changes in assets and liabilities:
Policy benefit liabilities
358,393
346,975
93,998
Reinsurance receivable
136,966
(38,776)
(25,868)
Accrued interest and other receivables
24,778
(17,617)
(26,032)
Other, net
(8,076)
8,834
96,950
Net cash provided by operating activities
712,421
458,084
312,084
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to-maturity
Sales
18,821
16,014
Maturities and redemptions
516,838
655,993
1,034,324
Available-for-sale
Sales
3,569,608
4,211,649
1,753,445
Maturities and redemptions
803,369
253,747
141,299
Mortgage loans
235,907
260,960
291,102
Real estate
2,607
4,401
29,868
Common stock
1,888
178
Purchases of investments:
Fixed maturities
Held-to-maturity
(453,787)
(490,228)
(673,567)
Available-for-sale
(4,753,154)
(4,932,566)
(2,606,028)
Mortgage loans
(23,237)
(683)
(9)
Real estate
(15,588)
(5,302)
(9,253)
Common stock
(12,113)
(4,218)
(2,063)
Net cash used in investing activities
(127,662)
(27,426)
(24,690)
(Continued)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Dollars in Thousands)
1996
1995
1994
FINANCING ACTIVITIES:
Contract withdrawals, net of deposits
$(413,568)
$(217,190)
$(238,166)
Due to Parent Corporation
1,457
(9,143)
(13,078)
Dividends paid
(56,670)
(48,980)
(40,438)
Net commercial paper (repayments) borrowings
(172)
(4,832)
89,686
Net repurchase agreements repayments
(88,563)
(191,195)
(39,244)
Capital contributions
7,000
Net cash used in financing activities
(550,516)
(471,340)
(241,240)
NET INCREASE (DECREASE) IN CASH
34,243
(40,682)
46,154
CASH, BEGINNING OF YEAR
90,939
131,621
85,467
CASH, END OF YEAR
$125,182
$90,939
$131,621
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes
$103,700
$83,841
$68,892
Interest
15,414
17,016
12,229
See notes to consolidated financial statements.
(Concluded)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Amounts in Thousands, except Share Amounts)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company
(the Company) is a wholly-owned subsidiary of The Great-West Life
Assurance Company (the Parent Corporation). The Company is an
insurance company domiciled in the State of Colorado. The Company
offers a wide range of life insurance, health insurance, and
retirement and investment products to individuals, businesses, and
other private and public organizations throughout the United
States.
Basis of Presentation - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
material intercompany transactions and balances have been
eliminated in consolidation.
Certain reclassifications have been made to the 1995 and 1994
financial statements to conform with the basis of presentation used
in 1996.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed maturities
at the time of purchase. Fixed maturities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost unless fair value is less
than cost and the decline is deemed to be other than temporary, in
which case they are written down to fair value and a new cost basis
is established.
Fixed maturities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the net unrealized gains and losses
reported as a separate component of stockholder's equity. The net
unrealized gains and losses in derivative financial instruments
used to hedge available-for-sale securities are included in the
separate component of stockholder's equity.
The amortized cost of fixed maturities classified as
held-to-maturity or available-for-sale is adjusted for amortization
of premiums and accretion of discounts using the effective interest
method over the estimated life of the related bonds. Such
amortization is included in net investment income. Realized gains
and losses, and declines in value judged to be other-than-temporary
are included in net realized gains (losses) on investments.
2. Mortgage loans on real estate are carried at their unpaid
balances adjusted for any unamortized premiums or discounts and any
valuation reserves. Interest income is accrued on the unpaid
principal balance. Discounts and premiums are amortized to net
investment income using the effective interest method. Accrual of
interest is discontinued on any impaired loans where collection of
interest is doubtful.
The Company maintains an allowance for credit losses at a
level that, in management's opinion, is sufficient to absorb
possible credit losses on its impaired loans and to provide
adequate provision for any possible future losses in the portfolio.
Management's judgment is based on past loss experience, current and
projected economic conditions, and extensive situational analysis
of each individual loan.
Effective January 1, 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosures". In accordance with these standards, a mortgage loan
is considered to be impaired when it is probable that the Company
will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The measurement of
impaired loans is based on the fair value of the collateral. As
the Company was already providing for impairment of loans through
an allowance for credit losses, the implementation of these
statements had no material effect on the Company's financial
statements.
3. Real estate is carried at the lower of cost or fair value, net
of costs of disposal. Effective January 1, 1996, the Company
adopted SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The
implementation of this statement had no material effect on the
Company's financial statements.
4. Investments in common stock are carried at fair value.
5. Policy loans are carried at their unpaid balances.
6. Short-term investments include securities purchased with
initial maturities of one year or less and are carried at amortized
cost. The Company considers short-term investments to be
available-for-sale and amortized cost approximates fair value.
Gains and losses realized on disposal of investments are
determined on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs,
which consist of sales commissions and other costs that vary with
and are primarily related to the production of new and renewal
business, have been deferred to the extent recoverable. Deferred
costs associated with the annuity products are being amortized
over the life of the contracts in proportion to the emergence of
gross profits. Retrospective adjustments of these amounts are made
when the Company revises its estimates of current or future gross
profits. Deferred costs associated with traditional life insurance
are amortized over the premium paying period of the related
policies in proportion to premium revenues recognized.
Amortization of deferred policy acquisition costs totaled $47,089,
$48,054, and $28,199 in 1996, 1995, and 1994, respectively.
Separate Account - Separate account assets and related
liabilities are carried at fair value. The Company's separate
accounts invest in shares of Maxim Series Fund, Inc., a
diversified, open-end management investment company which is an
affiliate of the Company, shares of other external mutual funds, or
government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and
annuity policy reserves with life contingencies of $5,242,753, and
$4,675,175 at December 31, 1996 and 1995, respectively, are
computed on the basis of estimated mortality, investment yield,
withdrawals, future maintenance and settlement expenses, and
retrospective experience rating premium refunds. Annuity contract
reserves without life contingencies of $5,779,842 and $6,170,760,
at December 31, 1996 and 1995, respectively, are established at the
contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance
companies are carried as reinsurance receivable on the balance
sheet (See Note 3). The cost of reinsurance related to
long-duration contracts is accounted for over the life of the
underlying reinsured policies using assumptions consistent with
those used to account for the underlying policies.
Policy and Contract Claims - Policy and contract claims
include provisions for reported claims in process of settlement,
valued in accordance with the terms of the related policies and
contracts, as well as provisions for claims incurred and unreported
based primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity
policy reserves are $3,591,077 and $3,339,316 at December 31, 1996
and 1995, respectively. Participating business approximates 50.3%
of the Company's ordinary life insurance in force and 92.2% of
ordinary life insurance premium income at December 31, 1996.
The liability for undistributed earnings on participating
business was decreased by $3,362 in 1996, which represented $7 of
losses on participating business, a reduction of $2,924 to reflect
the net change in unrealized gains on securities classified as
available-for-sale, net of certain adjustments to policy reserves
and income taxes, and a decrease of $431 due to reinsurance
transactions (See Note 2).
The amount of dividends to be paid from undistributed earnings
on participating business is determined annually by the Board of
Directors. Amounts allocable to participating policyholders are
consistent with established Company practice.
The Company has established a Participating Policyholder
Experience Account (PPEA) for the benefit of all participating
policyholders which is included in the accompanying consolidated
balance sheet. Earnings associated with the operation of the PPEA
are credited to the benefit of all participating policyholders. In
the event that the assets of the PPEA are insufficient to provide
contractually guaranteed benefits, the Company must provide such
benefits from its general assets.
The Company has also established a Participation Fund Account
(PFA) for the benefit of the participating policyholders previously
transferred to the Company from the Parent under an assumption
reinsurance transaction. The PFA is part of the PPEA. The assets
and liabilities associated with these policies are segregated in
the accounting records of the Company. Earnings derived from the
operation of the PFA accrue solely for the benefit of the acquired
participating policyholders.
Recognition of Premium Income and Benefits and Expenses - Life
insurance premiums are recognized as earned. Annuity premiums with
life contingencies are recognized as received. Accident and health
premiums are earned on a monthly pro rata basis. Revenues for
annuity and other contracts without significant life contingencies
consist of contract charges for the cost of insurance, contract
administration, and surrender fees that have been assessed against
the contract account balance during the period. Benefits and
expenses on policies with life contingencies are associated with
premium income by means of the provision for future policy benefit
reserves, resulting in recognition of profits over the life of the
contracts. The average crediting rate on annuity products was
approximately 6.8% in 1996.
Income Taxes - Income taxes are recorded using the asset and
liability approach which requires, among other provisions, the
recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating
future tax consequences, all expected future events (other than the
enactments or changes in the tax laws or rules) are considered.
Although realization is not assured, management believes it is more
likely than not that the deferred tax asset, net of a valuation
allowance, will be realized.
Repurchase Agreements and Securities Lending - The Company
enters into repurchase agreements with third-party broker-dealers
in which the Company sells securities and agrees to repurchase
substantially similar securities at a specified date and price.
Such agreements are accounted for as collateralized borrowings.
Interest expense on repurchase agreements is recorded at the coupon
interest rate on the underlying securities. The repurchase fee
received or paid is amortized over the term of the related
agreement and recognized as an adjustment to investment income.
The Company will implement Statement of Financial Accounting
Standards (SFAS) No. 125 "Accounting for Transfer and Servicing of
Financial Assets and Extinguishments of Liabilities" in 1998 as it
relates to repurchase agreements and securities lending
arrangements. Management estimates the effect of the change will
not be material.
Derivatives - The Company engages in hedging activities to manage
interest rate and foreign exchange risk (See Note 6).
2. RELATED-PARTY TRANSACTIONS
On October 31, 1996 the Company recaptured certain pieces of
an individual participating insurance block of business previously
reinsured to the Parent Corporation on December 31, 1992. The
Company recorded, at estimated fair value, the following at October
31, 1996 as a result of this transaction:
Assets Liabilities and
Stockholder's Equity
Cash $162,000 Policy reserves $164,839
Mortgages 19,753 Due to parent corporation 9,180
Other 18 Deferred income taxes 1,283
Undistributed earnings on Stockholder's equity 7,000
participating business 431
$182,302 $182,302
The Company and the Parent Corporation have a number of
service agreements whereby the Parent Corporation administers,
distributes, and underwrites business for the Company and
administers the Company's investment portfolio. Certain operating
expenses represent allocations made by the Parent Corporation to
the Company for services provided pursuant to these service
agreements. These transactions are summarized as follows:
Years Ended December 31,
1996
1995
1994
Investment management expense (included in net
investment income)
$14,800
$15,182
$13,841
Administrative and underwriting payments
(included in operating expenses)
304,599
301,529
269,020
Effective January 1, 1997 all employees of the U.S. operations of
the Parent Corporation and the related benefit plans were
transferred to the Company. All related employee benefit plan
assets and liabilities were transferred from the Parent Corporation
to the Company with no material impact on the Company's financial
position. There will not be any material effect on the Company's
operating expenses as the costs associated with the employees and
these benefit plans are reflected in the present service
agreements.
At December 31, 1996 and 1995, due to Parent Corporation
includes $31,639 and $27,814 due on demand and $119,792 and
$122,160 of notes payable which bear interest and mature at various
dates. These notes may be prepaid in whole or in part at any time
without penalty; the issuer may not demand payment before the
maturity date. The Company also has available an arrangement to
obtain advances from the Parent Corporation to fund short-term
liquidity needs. The due on demand to the Parent Corporation bears
interest at the public bond rate (7.0% and 6.4% at December 31,
1996 and 1995, respectively) while the remainder bear interest at
various rates.
3. REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured and to recover a portion
of benefits paid by ceding risks to other insurance enterprises
under excess coverage and co-insurance contracts. The Company
retains a maximum of $1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company; consequently,
allowances are established for amounts deemed uncollectible. The
Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the
reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. At December 31, 1996 and 1995, reinsurance
receivables with a carrying value of $196,958 and $333,924,
respectively, were due primarily from the Parent Corporation.
Total reinsurance premiums assumed from the Parent Corporation
were $1,693, $1,606 and $2,438, in 1996, 1995, and 1994,
respectively.
The Company considers all accident and health policies to be
short-duration contracts. The following schedule details life
insurance in force and life and accident/health premiums:
Gross Amount
Ceded Primarily to the Parent Corporation
Assumed Primarily From Other Companies
Net Amount
Percentage of Amount Assumed to Net
December 31, 1996:
Life insurance in force:
Individual
$23,409,823
$5,246,079
$3,482,118
$21,645,862
16.1%
Group
47,682,237
1,817,511
49,499,748
3.7%
Total
$71,092,060
$5,246,079
$5,299,629
$71,145,610
Premiums:
Life insurance
$334,127
$(111,743)
$19,633
$465,503
4.2%
Accident/health
592,577
7,493
56,780
641,864
8.8%
Total
$926,704
$(104,250)
$76,413
$1,107,367
December 31, 1995:
Life insurance in force:
Individual
$22,388,520
$7,200,882
$3,476,784
$18,664,422
18.6%
Group
48,415,592
1,954,313
50,369,905
3.9%
Total
$70,804,112
$7,200,882
$5,431,097
$69,034,327
Premiums:
Life insurance
$339,342
$51,688
$21,028
$308,682
6.8%
Accident/health
623,626
9,192
64,495
678,929
9.5%
Total
$962,968
$60,880
$85,523
$987,611
December 31, 1994:
Life insurance in force:
Individual
$21,461,590
$7,411,811
$3,415,596
$17,465,375
19.6%
Group
48,948,669
2,102,228
51,050,897
4.1%
Total
$70,410,259
$7,411,811
$5,517,824
$68,516,272
Premiums:
Life insurance
$322,263
$42,946
$22,009
$301,326
7.3%
Accident/health
579,650
5,169
63,140
637,621
9.9%
Total
$901,913
$48,115
$85,149
$938,947
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
1996
1995
1994
Investment income:
Fixed maturities and short-term investments
$601,913
$591,561
$555,103
Mortgage loans on real estate
140,823
171,008
182,544
Real estate
5,292
3,936
5,700
Policy loans
175,746
163,547
116,060
Other
3,319
927,095
930,052
859,407
Investment expenses, including
interest on amounts charged
by the Parent Corporation
of $11,282, $10,778, and $11,145
90,453
95,006
91,761
Net investment income
$836,642
$835,046
$767,646
5. NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
1996
1995
1994
Realized gains (losses):
Fixed Maturities
$(11,624)
$28,166
$(39,775)
Mortgage loans on real estate
1,143
1,309
2,120
Real estate
(10)
(102)
Provisions
(10,597)
(22,000)
(34,182)
Net realized gains (losses) on investments
$(21,078)
$7,465
$(71,939)
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1996 are summarized as
follows:
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Carrying Value
Held-to-Maturity:
U.S. Treasury Securities and
obligations of U.S. Government
Agencies:
Collateralized mortgage
obligations
$
$
$
$
$
Direct mortgage pass-through
certificates
Other
10,935
630
106
11,459
10,935
Collateralized mortgage obligations
Public utilities
284,954
12,755
320
297,389
284,954
Corporate bonds
1,634,745
41,195
7,360
1,668,580
1,634,745
Foreign governments
12,577
556
3
13,130
12,577
State and municipalities
49,470
1,051
15
50,506
49,470
$ 1,992,681
$ 56,187
$ 7,804
$ 2,041,064
$1,992,681
Available-for-Sale:
U.S. Treasury Securities and
obligations of U.S.
Government Agencies:
Collateralized mortgage
obligations
$ 658,612
$ 8,058
$ 3,700
$ 662,970
$ 662,970
Direct mortgage pass-through
certificates
844,291
5,093
10,908
838,476
838,476
Other
359,220
596
2,686
357,130
357,130
Collateralized mortgage obligations
614,773
13,619
3,553
624,839
624,839
Public utilities
628,382
6,523
5,375
629,530
629,530
Corporate bonds
2,907,875
56,551
5,250
2,959,176
2,959,176
Foreign governments
110,013
1,762
5,673
106,102
106,102
State and municipalities
28,353
21
119
28,255
28,255
$ 6,151,519
$ 92,223
$ 37,264
$ 6,206,478
$6,206,478
6. SUMMARY OF INVESTMENTS [Continued]
Fixed maturities owned at December 31, 1995 are summarized as
follows:
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Carrying Value
Held-to-Maturity:
U.S. Treasury Securities and
obligations of U.S.
Government Agencies:
Collateralized mortgage
obligations
$
$
$
$
$
Direct mortgage pass-through
certificates
Other
11,107
1,093
12,200
11,107
Collateralized mortgage obligations
Public utilities
269,671
22,084
95
291,660
269,671
Corporate bonds
1,732,046
83,583
5,867
1,809,762
1,732,046
Foreign governments
18,596
1,087
12
19,671
18,596
State and municipalities
22,784
1,966
24,750
22,784
$ 2,054,204
$ 109,813
$ 5,974
$2,158,043
$ 2,054,204
Available-for-Sale:
U.S. Treasury Securities and
obligations of U.S.
Government Agencies:
Collateralized mortgage
obligations
$ 561,475
$ 9,983
$ 1,948
$ 569,510
$ 569,510
Direct mortgage pass-through
certificates
794,056
11,980
2,233
803,803
803,803
Other
561,736
7,703
39
569,400
569,400
Collateralized mortgage obligations
490,074
18,044
3,304
504,814
504,814
Public utilities
581,482
16,607
2,425
595,664
595,664
Corporate bonds
2,943,918
121,537
26
3,065,429
3,065,429
Foreign governments
141,362
5,021
5,644
140,739
140,739
State and municipalities
13,866
22
60
13,828
13,828
$ 6,087,969
$ 190,897
$ 15,679
$6,263,187
$ 6,263,187
Most of the collateralized mortgage obligations consist of
planned amortization classes with final stated maturities of two to
thirty years and average lives of less than one to fourteen years.
Prepayments on all mortgage-backed securities are monitored monthly
and amortization of the premium and/or the accretion of the
discount associated with the purchase of such securities is
adjusted by such prepayments.
The cumulative effect as of January 1, 1994 of adopting SFAS
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," increased the opening balance of stockholders' equity
by $6,515 to reflect the net unrealized gains on securities
classified as available-for-sale (previously carried at the lower
of aggregate amortized cost or fair value) and the corresponding
adjustments to deferred policy acquisition costs, policy reserves,
and amounts allocable to the liability for undistributed earnings
on participating business, all net of income taxes.
In November 1995, the Financial Accounting Standards Board
issued a special report entitled "A Guide to Implementation of SFAS
115 on Accounting for Certain Investments in Debt and Equity
Securities". In accordance with the adoption of this guidance, the
Company reassessed the classification of its investment portfolio
in December 1995 and reclassed securities totaling $2,119,814 from
held-to-maturity to available-for-sale. In connection with this
reclassification, an unrealized gain, net of related adjustments
(see above), of $23,449 was recognized in stockholder's equity at
the date of transfer.
The estimated fair value of fixed maturities that are publicly
traded are obtained from an independent pricing service. To
determine fair value for fixed maturities not actively traded, the
Company utilized discounted cash flows calculated at current market
rates on investments of similar quality and term.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1996, by projected maturity, are shown
below. Actual maturities will likely differ from these projections
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Held-to-Maturity
Amortized Cost
Estimated Fair Value
Available-for-Sale
Amortized Cost
Estimated Fair Value
Due in one year or less
$197,135
$200,356
$294,236
$308,805
Due after one year through five years
840,192
860,192
1,294,892
1,300,473
Due after five years through ten years
621,900
641,103
934,312
940,880
Due after ten years
140,061
145,287
422,179
432,721
Mortgage-backed securities
2,117,676
2,126,285
Asset-backed securities
193,393
194,126
1,088,224
1,097,314
$1,992,681
$2,041,064
$6,151,519
$6,206,478
Proceeds from sales of securities available-for-sale were
$3,569,608, $4,211,649, and $1,753,445 during 1996, 1995, and 1994,
respectively. The realized gains on such sales totaled $24,919,
$39,755, and $7,030 for 1996, 1995, and 1994, respectively. The
realized losses totaled $40,748, $15,516, and $50,612 for 1996,
1995, and 1994, respectively. During 1996, 1995, and 1994
held-to-maturity securities with an amortized cost of $0, $18,087,
and $15,300 were sold due to credit deterioration with
insignificant realized gains and losses.
At December 31, 1996 and 1995, pursuant to fully
collateralized securities lending arrangements, the Company had
loaned $230,419 and $343,351 of fixed maturities, respectively.
The Company makes limited use of derivative financial
instruments to manage interest rate and foreign exchange risk.
Such hedging activity consists of interest rate swap agreements,
interest rate floors and caps, and foreign currency exchange
contracts. Interest rate floors and caps are interest rate
protection instruments that require the payment by a counter-party
to the Company of an interest differential. This differential
represents the difference between current interest rates and an
agreed-upon rate, the strike rate, applied to a notional principal
amount. Interest rate swap agreements are used to convert the
interest rate on certain fixed maturities from a floating rate to
a fixed rate. Interest rate swap transactions generally involve
the exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying principal
amounts. Foreign currency exchange contracts are used to hedge the
foreign exchange rate risk associated with bonds denominated in
other than U.S. dollars. The differential paid or received on
interest rate and amounts received under interest rate floor and
cap agreements are recognized as an adjustment to net investment
income on the accrual method. Gains and losses on foreign exchange
contracts are deferred and recognized in net investment income when
the hedged transactions are realized.
Although derivative financial instruments taken alone may
expose the Company to varying degrees of market and credit risk
when used solely for hedging purposes, these instruments typically
reduce overall market and interest rate risk. The Company controls
the credit risk of its financial contracts through credit
approvals, limits, and monitoring procedures. As the Company
generally enters into transactions only with high quality
institutions, no losses associated with non-performance on
derivative financial instruments have occurred or are expected to
occur.
The following table summarizes the financial hedge
instruments:
December 31, 1996
Notional Amount
Strike/Swap Rate
Maturity
Interest Rate Floor
$100,000
4.5% [LIBOR]
1999
Interest Rate Caps
260,000
11.0% to 11.82%[CMT]
2000 to 2001
Interest Rate Swaps
187,847
6.203% to 9.35%
01/98 to 02/2003
Foreign Currency Exchange
Contracts
61,012
N/A
09/98 to 03/2003
December 31, 1995
Notional Amount
Strike/Swap Rate
Maturity
Interest Rate Floor
$100,000
4.5% [LIBOR]
1999
Interest Rate Cap
100,000
11.0% [CMT]
2000
Interest Rate Swaps
165,000
6.203% to 9.35%
01/98 to 2/2002
Foreign Currency Exchange
Contracts
66,650
N/A
10/96 to 09/98
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines
designed to emphasize a diversified and geographically dispersed
portfolio of mortgages collateralized by commercial and industrial
properties located in the United States. The Company's policy is
to obtain collateral sufficient to provide loan-to-value ratios of
not greater than 75% at the inception of the mortgages. At
December 31, 1996 approximately 32% and 10% of the Company's
mortgage loans were collateralized by real estate located in
California and Michigan, respectively.
The following represents impairments and other information under
SFAS No. 114:
1996
1995
Impaired Loans
Loans with related allowance for credit losses of $2,793 and $654
$16,443
$3,254
Loans with no related allowance for credit losses
31,709
20,424
Average balance of impaired loans during the year
39,064
29,150
Interest income recognized [while impaired]
923
675
Interest income received and recorded [while impaired] using the
cash basis method of recognition
1,130
857
As part of an active loan management policy and in the
interest of maximizing the future return of each individual loan,
the Company may from time to time alter the original terms of
certain loans. These restructured loans, all performing in
accordance with their modified terms that are not impaired,
aggregated $68,254, and $89,160 at December 31, 1996, and 1995,
respectively.
The following table presents changes in the allowance for
credit losses since January 1, 1995 (date of the adoption of SFAS
No. 114):
1996
1995
Balance, beginning of year
$63,994
$57,987
Provision for loan losses
4,470
15,877
Chargeoffs
(3,468)
(10,480)
Recoveries
246
610
Balance, end of year
$65,242
$63,994
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially
supported by a $50,000 standby letter-of-credit. At December 31,
1996, commercial paper outstanding has maturities ranging from 49
to 123 days and interest rates ranging from 5.4% to 5.6%. At
December 31, 1995, maturities ranged from 25 to 160 days and
interest rates ranged from 5.7% to 5.9%.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all
assets and liabilities and hedge contracts considered to be
financial instruments:
December 31,
1996
Carrying Amount
Estimated Fair Amount
1995
Carrying Amount
Estimated Fair Value
ASSETS:
Fixed maturities and short-term
investments
$8,618,167
$8,666,550
$8,452,226
$8,556,065
Mortgage loans on real estate
1,487,575
1,506,162
1,713,195
1,749,514
Policy loans
2,523,477
2,523,477
2,237,745
2,237,745
Common stock
19,715
19,715
9,440
9,440
LIABILITIES:
Annuity contract reserves
without life contingencies
5,779,842
5,821,404
6,170,760
6,268,749
Policyholders' funds
153,867
153,867
154,872
154,872
Due to Parent Corporation
151,431
154,479
149,974
152,347
Repurchase agreements
286,736
286,736
375,299
375,299
Commercial paper
84,682
84,682
84,854
84,854
HEDGE CONTRACTS:
Interest rate floor
62
124
84
1,320
Interest rate cap
173
173
90
90
Interest rate swaps
4,746
4,746
10,052
10,052
Foreign currency exchange
contracts
(8,954)
(8,954)
(4,604)
(4,604)
The estimated fair value of financial instruments has been
determined using available market information and appropriate
valuation methodologies. However, considerable judgment is
necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented are
not necessarily indicative of the amounts the Company could realize
in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Mortgage loans fair value estimates generally are based on a
discounted cash flow basis. A discount rate "matrix" is
incorporated whereby the discount rate used in valuing a specific
mortgage generally corresponds to that mortgage's remaining term.
The rates selected for inclusion in the discount rate "matrix"
reflect rates that the Company would quote if placing loans
representative in size and quality to those currently in the
portfolio.
Policy loans accrue interest generally at variable rates with
no fixed maturity dates and, therefore, estimated fair value
approximates carrying value.
The fair value of annuity contract reserves without life
contingencies is estimated by discounting the cash flows to
maturity of the contracts, utilizing current credited rates for
similar products.
The estimated fair value of policyholders' funds is the same
as the carrying amount as the Company can change the crediting
rates with 30 days notice.
The estimated fair value of due to Parent Corporation is based
on discounted cash flows at current market spread rates on high
quality investments.
The carrying value of repurchase agreements and commercial
paper is a reasonable estimate of fair value due to the short-term
nature of the liabilities.
The estimated fair value of financial hedge instruments, all
of which are held for other than trading purposes, is the estimated
amount the Company would receive or pay to terminate the agreement
at each year-end, taking into consideration current interest rates
and other relevant factors. Included in the net gain position for
interest rates swaps are $160 and $0 of unrealized losses in 1996
and 1995, respectively. Included in the net loss position for
foreign currencies exchange contracts are $8,954 and $5,497 loss
exposures in 1996 and 1995, respectively.
See note 6 for additional information on policies regarding
estimated fair value of fixed maturities.
9. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income
tax rate and the Company's effective rate:
1996
1995
1994
Federal tax rate
35.0%
35.0%
35.0%
Change in tax rate resulting from:
Investment income not subject to federal tax
(1.0)
(0.5)
(1.0)
Release of contingent liability
(4.7)
Change in valuation allowance
0.8
(7.8)
(6.9)
State and environmental taxes
0.7
0.7
0.9
Other, net
(1.4)
0.3
(0.3)
Total
29.4%
27.7%
27.7%
Temporary differences which give rise to the deferred tax
assets and liabilities as of December 31, 1996 and 1995 are as
follows:
1996
Deferred Tax Asset
Deferred Tax Liability
1995
Deferred Tax Asset
Deferred Tax Liability
Policyholder reserves
$151,239
$
$162,073
$
Deferred policy acquisition costs
57,031
55,542
Deferred acquisition cost proxy tax
70,413
58,481
Investment assets
35,658
16,372
Net operating loss carryforwards
12,295
17,588
Tax credits and other
5,366
4,786
Subtotal
274,971
57,031
242,928
71,914
Valuation allowance
(3,536)
(2,073)
Total Deferred Taxes
$271,435
$57,031
$240,855
$71,914
Amounts related to investment assets above include $8,530 and
$33,735 related to the unrealized gains on the Company's fixed
maturities available-for-sale at December 31, 1996 and 1995,
respectively.
The Company files a separate tax return and, therefore, losses
incurred by subsidiaries cannot be offset against operating income
of the Company. At December 31, 1996, the Company's subsidiaries
have approximately $35,128 of net operating loss carryforwards,
expiring through the year 2011. The tax benefit of subsidiaries'
net operating loss carryforwards, net of a valuation allowance of
$1,612 are included in the deferred tax assets.
The Company's valuation allowance was increased/(decreased) in
1996, 1995, and 1994 by $1,463, $(13,145), and $(6,278),
respectively, primarily as a result of taxable income in
subsidiaries which was greater than expected and the resulting
re-evaluation by management of future estimated taxable income in
the subsidiaries.
Under pre-1984 life insurance company income tax laws, a portion of
life insurance company gain from operations was not subject to
current income taxation but was accumulated, for tax purposes, in
a memorandum account designated as "policyholders' surplus
account." The aggregate accumulation in the account is $7,742 and
the Company does not anticipate any transactions which would cause
any part of the amount to become taxable. Accordingly, no
provision has been made for possible future federal income taxes on
this accumulation.
Pursuant to a December 31, 1993 agreement between the Company
and its Parent whereby the Company assumed responsibility for the
Parent Corporation's income tax liability for fiscal years prior to
1994, the Company had previously recorded a contingent liability
provision. The Company's 1996 results of operations include a
release of $25,600 from the provision, to reflect the resolution of
1988 and l989 tax issues with the Internal Revenue Service (IRS).
Audits of tax years 1990 and 1991 are in the process of being
finalized. The IRS is currently auditing tax years 1992 and 1993.
In the opinion of Company management, the amounts paid or accrued
are adequate; however, it is possible that the Company's accrued
amounts may change as a result of the completion of the IRS audits.
10. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are
owned by the Parent Corporation. The dividend rate on the Series
A Stated Rate Auction Preferred Stock (STRAPS) is 7.3% through
December 30, 2002. The Series A STRAPS are redeemable at the
option of the Company on or after December 29, 2002 at a price of
$100,000 per share, plus accumulated and unpaid dividends.
The dividend rate on the Series B Straps is 5.8% through
December 30, 1997. The Series B STRAPS are redeemable at the
option of the Company on or after December 29, 1997 at a price of
$100,000 per share, plus accumulated and unpaid dividends.
The Company's Series E 7.5% non-cumulative, non-redeemable
preferred shares are redeemable by the Company after April 1, 1999.
The shares are convertible into common shares at the option of the
holder on or after September 30, 1999, at a conversion price
negotiated between the holder and the Company or at a formula
determined conversion price in accordance with the share
conditions.
The Company received $472 of contributed capital in the form
of deferred tax assets from the Parent Corporation during 1994 in
connection with reinsurance transactions with the Parent.
The Company's net income and capital and surplus, as
determined in accordance with statutory accounting principles and
practices for December 31 are as follows:
1996
1995
1994
(Unaudited)
Net Income
$180,635
$114,931
$70,091
Capital and Surplus
713,324
653,479
621,589
The maximum amount of dividends which can be paid to
stockholders by insurance companies domiciled in the State of
Colorado is subject to restrictions relating to statutory surplus
and statutory net gain from operations. Statutory surplus and net
gains from operations at December 31, 1996 were $584,492 and
$182,044 (unaudited), respectively. The Company should be able to
pay up to $182,044 (unaudited) of dividends without regulatory
approval in 1997.
Dividends of $8,587, $9,217, and $7,475, were paid on
preferred stock in 1996, 1995, and 1994, respectively. In
addition, dividends of $48,083, $39,763, and $32,963, were paid on
common stock in 1996, 1995 and 1994, respectively. Dividends are
paid as determined by the Board of Directors.
The Company is involved in various legal proceedings which
arise in the ordinary course of its business. In the opinion of
management, after consultation with counsel, the resolution of
these proceedings should not have a material adverse effect on its
financial position or results of operations.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The statements of assets and liabilities of Maxim
series Account as of December 31, 1996, the related statement of
operations for the year then ended, the statements of changes in
net asset for each of the two years then ended and the consolidated
balance sheets for Great-West Life & Annuity Insurance Company at
December 31, 1996, 1995 and the related consolidated statements of
income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1996, are included in Part
B.
(b) Exhibits
Items (1), (2), and (8) are incorporated by
reference to Registrant's Form S-6 Registration Statement filed
February 21, 1984 and Pre-Effective Amendment No. 1 thereto filed
June 29, 1984.
(3) Copy of Underwriting Agreement is attached
hereto as Exhibit 3.
(4) Form of variable annuity contracts no longer
being offered by are incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to its Form S-6 Registration
Statement filed March 10, 1982. Copy of variable annuity contract
currently being offered by Registrant is incorporated by reference
to Registrant's Post-Effective Amendment No. 9.
(5) Form of application used with variable annuity
contracts no longer being offered by Registrant are incorporated by
reference to Registrant's Pre-Effective Amendment No. 2 to its Form
S-6 Registration Statement filed March 10, 1982. Copy of
application used with variable annuity contract currently is
incorporated by reference to Registrant's Post-Effective Amendment
No. 9.
(6) Copy of Articles of Redomestication and Bylaws
of Depositor is incorporated by reference to Registrant's
Post-Effective Amendment No. 9.
(7) Not Applicable
(9) Copy of opinion of counsel for contracts no
longer being offered by Registrant are incorporated by reference to
Registrant's Post-Effective Amendment No. 14 to its Registration
Statement filed April 30, 1987. Copy of opinion of counsel for
contracts currently being offered by Registrant is incorporated by
reference to Registrant's Post-Effective Amendment No. 9.
(10) (a) Written Consent of Jorden Burt Berenson &
Johnson, LLP
(b) Written Consent of Deloitte & Touche LLP
(c) Written Consent of Ruth B. Lurie
(11) Not Applicable
(12) Not Applicable
(13) Calculations of Performance Data is filed
herein.
(14) Financial Data Schedule is filed herein.
Item 25. Directors and Officers of the Depositor
Position and
Offices
Name Principal Business Address with
Depositor
James Balog 2205 North Southwinds Boulevard
Director
Vero Beach, Florida 39263
James W. Burns, O.C. (4)
Director
Orest T. Dackow (3)
Director
Paul Desmarais, Jr. (4) Director
Robert G. Graham 574 Spoonbill Drive
Director
Sarasota, FL 34236
Robert Gratton (5) Chairman
N. Berne Hart 2552 East Alameda Avenue
Director
Denver, Colorado 80209
Kevin P. Kavanagh (1) Director
William Mackness 61 Waterloo Street
Director
Winnipeg, Manitoba R3N 0S3
William T. McCallum (3) Director,
President and Chief Executive Officer
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited
Director
P.O. Box 130
275 Commercial Street
North Sydney, Nova Scotia B2A 3M2
P. Michael Pitfield, P.C., Q.C. (4)
Director
Michel Plessis-Belair, F.C.A. (4)
Director
Ross J. Turner Genstar Investment Corporation
Director
950 Tower Lane
Metro Tower, Suite 1170
Foster City, California 94404
Brian E. Walsh Trinity L.P.
Director
115 Putnam Ave.
Greenwich, Connecticut 06830
Robert D. Bond (3) Senior Vice
President, Financial Services
John A. Brown (3) Senior
Vice
President, Sales, Financial Services
Position
and Offices
Name Principal Business Address
with Depositor
John T. Hughes (3) Senior Vice
President, Chief Investment Officer
Robert E. Kavanagh (3) Senior
Vice
President, Employee Benefits Sales
D. Craig Lennox (3) Senior Vice
President, General Counsel and Secretary
Dennis Low (3) Executive Vice
President, Financial Services
Alan D. MacLennan (2) Executive
Vice President, Employee Benefits
Steve H. Miller (2) Senior
Vice
President, Employee Benefits Sales
James D. Motz (2) Executive Vice
President, Employee Benefits Operations
Marty Rosenbaum (2) Senior
Vice
President, Employee Benefits Operations
Douglas L. Wooden (3) Senior
Vice
President, Financial Services
______________________________________
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal,
Quebec, Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal,
Quebec, Canada H2Y 2J3.
Item 26. Persons controlled by or under common control with the
Depositor or Registrant
Power Corporation of Canada
100% Marquette Communications Corporation
100% - 171263 Canada Inc.
68.1% - Power Financial Corporation
86.4% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
94% - Maxim Series Fund, Inc.
100% - Greenwood Property Corporation
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
100% - Orchard Series Fund
Item 27. Number of Contract Owners
As of February 28, 1997, there were 350 Contract
Owners.
Item 28. Indemnification
Provisions exist under the Colorado General Corporation
Code and the Bylaws of GWL&A whereby GWL&A may indemnify a
director, officer, or controlling person of GWL&A against
liabilities arising under the Securities Act of 1933. The
following excerpts contain the substance of these provisions:
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) "Corporation" includes any domestic or foreign
entity that is a predecessor of the corporation by reason of a
merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the
transaction.
(2) "Director" means an individual who is or was a
director of a corporation or an individual who, while a director of
a corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, fiduciary or agent
of another domestic or foreign corporation or other person or
employee benefit plan. A director is considered to be serving an
employee benefit plan at the corporation's request if his or her
duties to the corporation also impose duties on or otherwise
involve services by, the director to the plan or to participants in
or beneficiaries of the plan.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with
respect to a proceeding to pay a judgment, settlement, penalty,
fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to
a director, the office of director in the corporation and, when
used with respect to a person other than a director as contemplated
in Section 7-109-107, means the office in the corporation held by
the officer or the employment, fiduciary, or agency relationship
undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any
other domestic or foreign corporation or other person or employee
benefit plan.
(6) "Party" includes a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding.
(7) "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
Section 7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this
section, a corporation may indemnify a person made a party to the
proceeding because the person is or was a director against
liability incurred in any proceeding if:
(a) The person conducted himself or herself in good
faith;
(b) The person reasonably believed:
(I) In the case of conduct in an official
capacity with the corporation, that his or her conduct was in the
corporation's best interests; or
(II) In all other cases, that his or her
conduct was at least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the
person had no reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee
benefit plan for a purpose the director reasonably believed to be
in the interests of the participants in or beneficiaries of the
plan is conduct that satisfies the requirements of subparagraph
(II) of paragraph (b) of subsection (1) of this section. A
director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirements of subparagraph (a) of
subsection (1) of this section.
(3) The termination of any proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, is not, of itself, determinative that the
director did not meet the standard of conduct described in this
section.
(4) A corporation may not indemnify a director under
this section:
(a) In connection with a proceeding by or in the
right of the corporation in which the director was adjudged liable
to the corporation; or
(b) In connection with any proceeding charging that
the director derived an improper personal benefit, whether or not
involving action in his official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(5) Indemnification permitted under this section in
connection with a proceeding by or in the right of a corporation is
limited to reasonable expenses incurred in connection with the
proceeding.
Section 7-109-103. Mandatory Indemnification of Directors.
Unless limited by the articles of incorporation, a
corporation shall be required to indemnify a person who is or was
a director of the corporation and who was wholly successful, on the
merits or otherwise, in defense of any proceeding to which he was
a party, against reasonable expenses incurred by him in connection
with the proceeding.
Section 7-109-104. Advance of Expenses to Directors.
(1) A corporation may pay for or reimburse the
reasonable expenses incurred by a director who is a party to a
proceeding in advance of the final disposition of the proceeding
if:
(a) The director furnishes the corporation a
written affirmation of his good-faith belief that he has met the
standard of conduct described in Section 7-109-102;
(b) The director furnishes the corporation a
written undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately determined that he
or she did not meet such standard of conduct; and
(c) A determination is made that the facts then
know to those making the determination would not preclude
indemnification under this article.
(2) The undertaking required by paragraph (b) of
subsection (1) of this section shall be an unlimited general
obligation of the director, but need not be secured and may be
accepted without reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under
this section shall be made in the manner specified in Section
7-109-106.
Section 7-109-105. Court-Ordered Indemnification of
Directors.
(1) Unless otherwise provided in the articles of
incorporation, a director who is or was a party to a proceeding may
apply for indemnification to the court conducting the proceeding or
to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers
necessary, may order indemnification in the following manner:
(a) If it determines the director is entitled to
mandatory indemnification under section 7-109-103, the court shall
order indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(b) If it determines that the director is fairly
and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director met the
standard of conduct set forth in section 7-109-102 (1) or was
adjudged liable in the circumstances described in Section 7-109-102
(4), the court may order such indemnification as the court deems
proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the
circumstances described Section 7-109-102 (4) is limited to
reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered
indemnification.
Section 7-109-106. Determination and Authorization of
Indemnification of Directors.
(1) A corporation may not indemnify a director under
Section 7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the director is
permissible in the circumstances because he has met the standard of
conduct set forth in Section 7-109-102. A corporation shall not
advance expenses to a director under Section 7-109-104 unless
authorized in the specific case after the written affirmation and
undertaking required by Section 7-109-104(1)(a) and (1)(b) are
received and the determination required by Section 7-109-104(1)(c)
has been made.
(2) The determinations required to be made subsection
(1) of this section shall be made:
(a) By the board of directors by a majority vote of
those present at a meeting at which a quorum is present, and only
those directors not parties to the proceeding shall be counted in
satisfying the quorum.
(b) If a quorum cannot be obtained, by a majority
vote of a committee of the board of directors designated by the
board of directors, which committee shall consist of two or more
directors not parties to the proceeding; except that directors who
are parties to the proceeding may participate in the designation of
directors for the committee.
(3) If a quorum cannot be obtained as contemplated in
paragraph (a) of subsection (2) of this section, and the committee
cannot be established under paragraph (b) of subsection (2) of this
section, or even if a quorum is obtained or a committee designated,
if a majority of the directors constituting such quorum or such
committee so directs, the determination required to be made by
subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote
of the board of directors or the committee in the manner specified
in paragraph (a) or (b) of subsection (2) of this section or, if a
quorum of the full board cannot be obtained and a committee cannot
be established, by independent legal counsel selected by a majority
vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and evaluation as
to reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible; except that,
if the determination that indemnification is permissible is made by
independent legal counsel, authorization of indemnification and
advance of expenses shall be made by the body that selected such
counsel.
Section 7-109-107. Indemnification of Officers, Employees,
Fiduciaries, and Agents.
(1) Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory
indemnification under section 7-109-103, and is entitled to apply
for court-ordered indemnification under section 7-109-105, in each
case to the same extent as a director;
(b) A corporation may indemnify and advance
expenses to an officer, employee, fiduciary, or agent of the
corporation to the same extent as a director; and
(c) A corporation may indemnify and advance
expenses to an officer, employee, fiduciary, or agent who is not a
director to a greater extent, if not inconsistent with public
policy, and if provided for by its bylaws, general or specific
action of its board of directors or shareholders, or contract.
Section 7-109-108. Insurance.
A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee,
fiduciary, or agent of the corporation and who, while a director,
officer, employee, fiduciary, or agent of the corporation, is or
was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of any
other domestic or foreign corporation or other person or of an
employee benefit plan against any liability asserted against or
incurred by the person in that capacity or arising out of his or
her status as a director, officer, employee, fiduciary, or agent
whether or not the corporation would have the power to indemnify
the person against such liability under the Section 7-109-102,
7-109-103 or 7-109-107. Any such insurance may be procured from
any insurance company designated by the board of directors, whether
such insurance company is formed under the laws of this state or
any other jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity or any
other interest through stock ownership or otherwise.
Section 7-109-109. Limitation of Indemnification of
Directors.
(1) A provision concerning a corporation's
indemnification of, or advance of expenses to, directors that is
contained in its articles of incorporation or bylaws, in a
resolution of its shareholders or board of directors, or in a
contract, except for an insurance policy or otherwise, is valid
only to the extent the provision is not inconsistent with Sections
7-109-101 to 7-109-108. If the articles of incorporation limit
indemnification or advance of expenses, indemnification or advance
of expenses are valid only to the extent not inconsistent with the
articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a
corporation's power to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a
proceeding at a time when he or she has not been made a named
defendant or respondent in the proceeding.
Section 7-109-110. Notice to Shareholders of Indemnification
of Director.
If a corporation indemnifies or advances expenses to
a director under this article in connection with a proceeding by or
in the right of the corporation, the corporation shall give written
notice of the indemnification or advance to the shareholders with
or before the notice of the next shareholders' meeting. If the
next shareholder action is taken without a meeting at the
instigation of the board of directors, such notice shall be given
to the shareholders at or before the time the first shareholder
signs a writing consenting to such action.
Bylaws of GWL&A
Article II, Section 11. Indemnification of Directors.
The Company may, by resolution of the Board of
Directors, indemnify and save harmless out of the funds of the
Company to the extent permitted by applicable law, any director,
officer, or employee of the Company or any member or officer of any
committee, and his heirs, executors and administrators, from and
against all claims, liabilities, costs, charges and expenses
whatsoever that any such director, officer, employee or any such
member or officer sustains or incurs in or about any action, suit,
or proceeding that is brought, commenced, or prosecuted against him
for or in respect of any act, deed, matter or thing whatsoever
made, done, or permitted by him in or about the execution of his
duties of his office or employment with the Company, in or about
the execution of his duties as a director or officer of another
company which he so serves at the request and on behalf of the
Company, or in or about the execution of his duties as a member or
officer of any such Committee, and all other claims, liabilities,
costs, charges and expenses that he sustains or incurs, in or about
or in relation to any such duties or the affairs of the Company,
the affairs of such Committee, except such claims, liabilities,
costs, charges or expenses as are occasioned by his own willful
neglect or default. The Company may, by resolution of the Board of
Directors, indemnify and save harmless out of the funds of the
Company to the extent permitted by applicable law, any director,
officer, or employee of any subsidiary corporation of the Company
on the same basis, and within the same constraints as, described in
the preceding sentence.
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriter
(a) BenefitsCorp Equities, Inc. ("BCE") currently
distributes
securities of Great-West Variable Annuity Account A, FutureFunds
Series Account, and Pinnacle Series Account in addition to those of
the Registrant.
(b) Directors and Officers of BCE
Position and
Offices
Name Principal Business Address with
Underwriter
Charles P. Nelson (1) Director and
President
Robert K. Shaw (1) Director
Dennis Low (1) Director
Gregg E. Seller 18101 Von Karman Ave.
Director and Vice President
Suite 1460 Major
Accounts
Irvine, CA 92715
John Brown (1) Director
Robert D. Bond (1) Director
Doug L. Wooden (1) Director
Jack Baker (1) Vice
President, Licensing
and Contracts
Glen R. Derback (1) Treasurer
Ruth B. Lurie (1) Secretary
Beverly A. Byrne (1) Assistant
Secretary
____________
(1) 8515 E. Orchard Road, Englewood, Colorado 80111
(c) Commissions and other compensation received by Principal
Underwriter during Registrant's last fiscal year:
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption
Commissions Compensation
BCE -0- -0-
- -0-
-0-
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the Registrant through
GWL&A, 8515 E. Orchard Road, Englewood, Colorado 80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old for so
long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes to include either (1) as part
of any application to purchase a contract offered by the
Prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a postcard or similar
written communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this form promptly upon written or oral
request.
(d) GWL&A represents that the fees and charges
deducted
under the Contracts, in the aggregate, are reasonable in relation
to the services rendered, the expenses to be incurred, and the
risks assumed by GWL&A.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets the requirements of Rule 485(b) for effectiveness and has
caused this Post-Effective Amendment No. 3 to the Registration
Statement to be signed on its behalf, in the City of Englewood,
State of Colorado, on this 24th day of April, 1997.
MAXIM SERIES ACCOUNT
(Registrant)
By: _/s/ William T. McCallum
_
William T. McCallum, President
and Chief Executive Officer of
Great-West Life & Annuity
Insurance Company
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By: _/s/ William T.
McCallum_________________
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Post-Effective
Amendment No. 3 has been signed by the following persons in the
capacities with Great-West Life & Annuity Insurance Company and on
the dates indicated:
Signature and Title Date
_/s/ R. Gratton*________ ________ April _24 , 1997
Director and Chairman of the
Board (Robert Gratton)
_/s/ William T. McCallum__________ April _24 , 1997
Director, President and Chief Executive
Officer (William T. McCallum)
_/s/ G.R. Derback__________________ April _24_, 1997
Vice President and Controller
(Glen R. Derback)
____________________________________ April ______, 1997
Director, (James Balog)
_/s/ J.W. Burns*_______________________ April _24_, 1997
Director, (James W. Burns)
Signature and Title Date
_/s/ O.T. Dackow*_________________ April ___24_, 1997
Director (Orest T. Dackow)
_/s/ P. Desmarais, Jr.*_____________ April __24 ,1997
Director (Paul Desmarais, Jr.)
____________________________________ April ______, 1997
Director (Robert G. Graham)
_/s/ N.B. Hart*_____________________ April __24__, 1997
Director (N. Berne Hart)
_/s/ K.P. Kavanagh*__________________ April __24__, 1997
Director (Kevin P. Kavanagh)
________________________________ April ______, 1997
Director (William Mackness)
_/s/ J.E.A. Nickerson* __________ April __24__, 1997
Director (Jerry E.A. Nickerson)
_/s/ P.M. Pitfield* _____________ April _24___, 1997
Director (P. Michael Pitfield)
_/s/ M. Plessis-Belair________________ April __24__, 1997
Director (Michel Plessis-Belair)
_/s/ R.J. Turner* _______________ April __24__, 1997
Director (Ross J. Turner)
_/s/ B.E. Walsh* ________________ April __24__, 1997
Director (Brian E. Walsh)
*By: __/s/ D.C. Lennox__________________ April __24__, 1997
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed under
Post-Effective Amendment Nos. 16 and 19 to this Registration
Statement and Post-Effective Amendment No. 2 to this Registration
Statement..
EXHIBIT 3
UNDERWRITING AGREEMENT
S-1
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3236)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT made this 1st day of December
1996, by and between BenefitsCorp Equities, Inc. (the
"Underwriter") and Great-West Life & Annuity Insurance Company (the
"Insurance Company"), on its own behalf and on behalf of the Maxim
Series Account of Great-West Life & Annuity Insurance Company (the
"Series Account"), as follows:
WHEREAS, the Insurance Company has registered the Series
Account as a unit investment trust under the Investment Company Act
of 1940, as amended (the "1940 Act") and has registered the
Contracts under the Securities Act of 1933;
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Insurance Company and the Series Account desire
to have the Contracts sold and distributed through the Underwriter,
and the Underwriter is willing to sell and distribute such
Contracts under the terms stated herein;
NOW THEREFORE, the parties hereto agree as follows:
1. Representations, Responsibilities and Warranties of Insurance
Company
1.01 The Insurance Company represents that it has the authority,
and hereby agrees to, grant the Underwriter the right to serve as
the distributor and principal underwriter of the Contracts during
the term of this Agreement.
1.02 The Insurance Company represents and warrants that it is duly
licensed as an insurance company under the laws of the State of
Colorado and that it has taken all appropriate actions to establish
the Series Account in accordance with state and federal laws.
1.03 The Insurance Company agrees to update and maintain a current
prospectus for the Contracts as required by law.
1.04 The Insurance Company represents that it reserves the right
to appoint or refuse to appoint, any proposed associated person of
the Underwriter as an agent or broker of the Insurance Company.
The Insurance Company also retains the right to terminate such
agents or brokers once appointed.
1.05 On behalf of the Series Account, the Insurance Company shall
furnish the Underwriter with copies of all financial statements and
other documents which the Underwriter reasonably requests for use
in connection with the distribution of the contracts.
2. Representations, Responsibilities and Warranties of
Underwriter
2.01 Underwriter represents that it has the authority and hereby
agrees to serve as distributor and principal underwriter of the
Contracts during the term of this Agreement.
2.02 The Underwriter represents that it is duly registered as a
broker-dealer under the 1934 Act and is a member in good standing
of the NASD and to the extent necessary to offer the Contracts,
shall be duly registered or otherwise qualified under the
securities laws of any state or other jurisdiction.
2.03 The Underwriter agrees to use its best efforts to solicit
applications for the Contracts, and to undertake, at its own
expense, to provide all sales services relative to the Contracts
and otherwise to perform all duties and functions which are
necessary and proper for the distribution of the Contracts.
2.04 The Underwriter agrees to offer the Contracts for sale in
accordance with the prospectus therefor, then in effect. The
Underwriter represents and agrees that it is not authorized to give
any information or make any representations concerning the
Contracts other than those contained in the current prospectus as
filed with the SEC or in such sales literature as may be authorized
by the Insurance Company.
2.05. The Underwriter shall be fully responsible for carrying out
its sales, underwriting and compliance supervisory obligations
hereunder in compliance with the NASD Conduct Rules and all other
relevant federal and state securities laws and regulations.
Without limiting the generality of the foregoing, the Underwriter
agrees that it shall have full responsibility for:
(a) ensuring that no person shall offer or sell the Contracts on
its behalf until such person is duly registered as a representative
of the Underwriter, and duly licensed and appointed by the
Insurance Company;
(b) ensuring that no person shall offer or sell the Contracts on
its behalf until the Underwriter has confirmed that the Insurance
Company is appropriately licensed, or otherwise qualified to offer
and sell such Contracts under the federal securities laws and any
applicable state or jurisdictional securities and/or insurance laws
in each state or jurisdiction in which such Contracts may be
lawfully sold;
(c) continually training, supervising, and controlling all
registered representatives and other agents of the Underwriter for
purposes of complying with the NASD Conduct Rules and with federal
and state securities laws which may be applicable to the offering
and sale of the Contracts. In this respect, the Underwriter shall:
(1) conduct training programs (including the preparation and
utilization of training materials) as is necessary, in the
Underwriter's opinion, to comply with applicable laws and
regulations;
(2) establish and implement reasonable written procedures for the
supervision of the sales practices of agents, representatives or
brokers who sell the Contracts; and
(3) take reasonable steps to ensure that its associated persons
shall not make recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to believe that the
purchase of the Contract is suitable for such applicants; and
(d) supervising and ensuring compliance with NASD rules of all
administrative functions performed by the Underwriter with respect
to the offering and sale of the Contracts and representations with
respect to the Series Account.
2.06 The Underwriter, or its affiliates, on behalf of the
Insurance Company, shall apply for the proper insurance licenses in
the appropriate states or jurisdictions for the designated persons
associated with the Underwriter or with independent broker-dealers
which have entered into agreements with the Underwriter for the
sale of the Contracts. The Underwriter agrees to pay all licensing
or other fees necessary to properly authorize such persons for the
sale of the Contracts.
2.07 The Underwriter shall have the responsibility for paying (i)
all commissions or other fees to its associated persons which are
due for the sale of the Contracts and (ii) any compensation to
independent broker-dealers and their associated persons due under
the terms of any sales agreements between the Underwriter and such
broker-dealers. Provided, however, the Insurance Company retains
the ultimate right to reject any commission rate allowed by the
Underwriter. Furthermore, no associated person or independent
broker-dealer shall have an interest in the surrender charges,
deductions or other fees payable to Underwriter as set forth
herein. The Underwriter shall have the responsibility for
calculating and furnishing periodic reports to the Insurance
Company as to the sale of the Contracts, and as to the commissions
and service fees payable to persons selling the Contracts.
3. Records and Confidentiality
3.01 The Insurance Company and the Underwriter shall cause to be
maintained and preserved for the periods prescribed, such accounts,
books, records, files and other documents and materials ("Records")
as are required of it by the 1940 Act and any other applicable laws
and regulations. The Records of the Insurance Company, the Series
Account and the Underwriter as to all transactions hereunder shall
be maintained so as to disclose clearly and accurately the nature
and details of the transactions.
3.02 The Underwriter shall cause the Insurance Company to be
furnished with such Records, or copies thereof, as the Insurance
Company may reasonably request for the purpose of meeting its
reporting and recordkeeping requirements under the insurance laws
of the State of Colorado and any other applicable states or
jurisdictions.
3.03 The Insurance Company shall cause the Underwriter to be
furnished with any Records, or copies thereof, as the Underwriter
may reasonably request for the purpose of meeting its reporting and
recordkeeping requirements under the federal securities laws or the
securities laws of any inquiring jurisdiction.
3.04 The Underwriter agrees and understands that all Records shall
be the sole property of the Insurance Company and that such
property shall be held by the Underwriter, or its agents during the
term of this agreement. Upon termination, all Records shall be
returned to the Insurance Company.
3.05 Insurance Company agrees and understands that the Underwriter
may maintain copies of the Records as is required by any relevant
securities law, the SEC, the NASD or any other self regulatory
agency.
3.06 Underwriter shall establish and maintain facilities and
procedures for the safekeeping of all Records relative to this
Agreement.
3.07 The parties hereto agree that all Records pertaining to the
business of the other party which are exchanged or received
pursuant to this Agreement, shall remain confidential and shall not
be voluntarily disclosed to any other person, except to the extent
disclosure thereof may be required by law. All such confidential
information in the possession of each of the parties hereto shall
be returned to the party from whom it was obtained upon the
termination or expiration of this Agreement.
4. Relationship of the Parties
4.01 Notwithstanding anything in this Agreement to the contrary,
the Underwriter or the Insurance Company may enter into sales
agreements with independent broker-dealers for the sale of the
Contracts.
4.02 All such sales agreements as described in 4.01, above, which
are entered into by the Insurance Company or the Underwriter shall
provide that each independent broker-dealer will assume full
responsibility for continued compliance by itself and its
associated persons with NASD Conduct Rules and applicable federal
and state securities laws. All associated persons of such
independent broker-dealers soliciting applications for the
Contracts shall be duly and appropriately licensed and/or appointed
for the sale of the Contracts under the insurance laws of the
applicable state or jurisdiction in which the Contracts may be
lawfully sold.
4.03 The services of the Underwriter to the Series Account
hereunder are not to be deemed exclusive and the Underwriter shall
be free to render similar services to others so long as the
services rendered hereunder are not interfered with or impaired.
5. Term and Termination
5.01 Subject to termination, the Agreement shall remain in full
force and effect for one year, and shall continue in full force and
effect from year to year until terminated as provided below. Each
additional year shall be an additional term of this Agreement.
5.02 This Agreement may be terminated:
(a) by either party upon sixty (60) days written notice to the
other party;
(b) immediately, upon written notice in the event of bankruptcy or
insolvency of one party;
(c) at any time upon mutual written consent of the parties;
(d) immediately in the event of its assignment; provided however,
"assigned" shall not include any transaction exempted from section
15(b)(2) of the 1940 Act;
(e) immediately in the event that the Underwriter no longer
qualifies as a broker-dealer under applicable federal law; and
(f) immediately in the event of fraud, misrepresentation,
conversion or unlawful withholding of funds by a party.
5.03 Upon termination of this Agreement, all authorization,
rights, and obligations shall cease except the obligations to
settle accounts hereunder, including payments or premiums or
contributions subsequently received for Contracts in effect at the
time of termination or issued pursuant to applications received by
the Insurance Company prior to termination.
5.04 After notice of termination, the parties agree to cooperate
to effectuate an orderly transition of all accounts, payments and
Records.
6. Miscellaneous
6.01 This Agreement shall be subject to the provisions of the 1940
Act, the 1934 Act and the rules, regulations and rulings
thereunder. In addition it shall be subject to the rulings of the
NASD, as issued from time to time, and any exemptions from the 1940
Act the SEC may grant. All terms of this Agreement will be
interpreted and construed in accordance with compliance of this
section 6.01.
6.02 Except as otherwise provided, Underwriter acknowledges that
Insurance Company retains the overall right and responsibility to
direct and control the activities of the Underwriter.
6.03 If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall remain in full force and effect.
6.04 This Agreement constitutes the entire Agreement between the
parties hereto and may not be modified except in a written
instrument executed by all the parties hereto.
6.05 This Agreement shall be governed by the internal laws of the
State of Colorado.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective duly authorized officers and have caused
their respective seals to be affixed hereto, as of the day and year
first written above.
Great-West Life & Annuity Insurance Company
/s/ Joan Preyer__________________ By: /s/ William T.
McCallum____________
Witness: William T. McCallum
President and Chief
Executive Officer
BenefitsCorp Equities, Inc.
/s/ Shelley R. Fredrick__________ By: /s/ Charles P.
Nelson______________
Witness: Charles P. Nelson
President
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON, LLP
April 18, 1997
Great-West Life & Annuity Insurance Company
Maxim Series Account
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We hereby consent to the use of our name under the caption
"Legal Matters" in the
Prospectus contained in Post-Effective Amendment No. 3 to the
Registration Statement on Form N-4
(File No. 33-82610) filed by Maxim Series Account of Great-West
Life & Annuity Insurance
Company with the Securities and Exchange Commission under the
Securities Act of 1933 and the
Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson
LLP
JORDEN BURT BERENSON & JOHNSON LLP
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Post-Effective Amendment No. 3 to the
Registration Statement
on Form N-4 (Registration No. 33-82610) of Maxim Series Account of
Great-West Life & Annuity
Insurance Company of our reports on Maxim Series Account dated
February 7, 1997 and on Great-
West Life & Annuity Insurance Company dated January 25, 1997, and
to the reference to us under the
heading "Independent Auditors" appearing in the Statement of
Additional Information, which is a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 16, 1997
EXHIBIT 10 (c)
WRITTEN CONSENT OF RUTH B. LURIE
April 18, 1997
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Maxim Series Account
Ladies and Gentlemen:
I hereby consent to the use of my name under the caption
"Legal Opinions" in the Prospectus for Maxim Series Account
contained in the Registration Statement Form N-4 filed by
Great-West Life & Annuity Insurance Company and Maxim Series
Account with the Securities and Exchange Commission under the
Securities Act of 1933, the Investment Company Act of 1940 and the
amendments thereto.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary
EXHIBIT 13
YIELD AND EFFECTIVE YIELD CALCULATIONS
Money Market Investment Division
Yield for the Money Market Investment Division is calculated on a
seven day period.
The current yield formula = base period return x (365/7)
The effective yield formula = [(1 + base period return)365/7] - 1
Base period return is calculated as follows:
Ending account value
-Beginning account value
-Expenses accrued for the period
Net change in account value
Net change in account value/Beginning account value = base period
return.
Following is an example of these calculations based on the
following assumed expenses: 1.25% mortality and expense risk
charge; $27 contract maintenance charge and a contingent deferred
sales charge of 7% if contract surrendered in year 1, 6% if
contract surrendered in year 2, 5% if contract surrendered in year
3, 4% if contract surrendered in year 4, 3% if contract surrendered
in year 5, 2% if surrendered in year 6, and 0% if contract
surrendered in year 7 or after.
a= Value of one accumulation unit at beginning of period =
10.54605
b= Value of one accumulation unit at end of period = 10.55353
c= Annual maintenance charges accrued in period = $2.87
d= Average number of units outstanding in period = 1000.00
e= Base period return
Yield if contingent deferred sales charge applies:
Yield = (b-a-c/d)
a
= $10.55353 - 10.54606 - $2.87/ 1000.00
10.54605
e= 0.000437
f= Annualized yield - e x (365/7) = 2.28%
g= Effective yield - {[1 + (e)]365/7} - 1 = 2.30%
Yield if contingent deferred sales charge does not apply:
Yield = (b-a-c/d)
a
= $10.55353 - 10.54606 - $2.87/ 1000.00
10.54605
e= 0.000499
f= Annualized yield - e x (365/7) = 2.60%
g= Effective yield - {[1 + (e)]365/7} - 1 = 2.64%
TOTAL RETURN CALCULATION
FORMULA: P(1+T)N = ERV
Where: T= Average annual total return
N= The number of years including portions of years
where applicable for which the performance is being measured
ERV= Ending redeemable value of a hypothetical $1,000
payment made at the beginning of the applicable period
P= A hypothetical $1,000 initial payment made at the
inception of the Investment Division
Assumed expenses = 1.25% mortality and expense risk charge; $27
contract maintenance charge and a contingent deferred sales charge
of 7% if contract surrendered in year 1, 6% if contract
surrendered in year 2, 5% if contract surrendered in year 3, 4% if
contract surrendered in year 4, 3% if contract surrendered in year
5, 2% if surrendered in year 6, and 0% if contract surrendered in
year 7 or after.
The above formula can be restated to solve for T as follows:
T = [(ERV/P)1/N] - 1
Following are examples of this calculation on a 1 year, 5 year, 10
year and since inception basis if contingent deferred sales charge
applies
1 year total return:
ERV = 1,118.30
N= 1.00
P= 1,000.00
Therefore, 1 year total return is 11.83% .
5 year total return:
ERV = 1,752.14
N= 5.00
P= 1,000.00
Therefore, 5 year total return is 11.87% .
10 year total return:
ERV = 2,983.29
N= 10.00
P= 1,000.00
Therefore, 10 year total return is 11.55% .
Since inception total return:
ERV = 45,383.53
N= 14.50
P= 1,000.00
Therefore, since inception total return is 12.31% .
Following are examples of this calculation on a 1 year, 5 year, 10
year and since inception basis if contingent deferred sales charge
does not apply:
1 year total return:
ERV = 1,202.20
N= 1.00
P= 1,000.00
Therefore, 1 year total return is 20.22% .
5 year total return:
ERV = 1,806.04
N= 5.00
P= 1,000.00
Therefore, 5 year total return is 12.55% .
10 year total return:
ERV = 2,983.29
N= 10.00
P= 1,000.00
Therefore, 10 year total return is 11.55% .
Since inception total return:
ERV = 45,383.53
N= 14.50
P= 1,000.00
Therefore, since inception total return is 12.31% .
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<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MAXIM II
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 31549935
<INVESTMENTS-AT-VALUE> 36892287
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