As filed with the Securities and Exchange Commission on April 6, 1998
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. 4 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 15 (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 Boros Cicchetti 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, 1998, 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.
MAXIM SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
<TABLE>
<S> <C>
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page...................................................Cover Page
2. Definitions 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
<PAGE>
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
<PAGE>
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Not Applicable
18. Services Custodian and Accountants
19. Purchase of Securities Being Offered Not Applicable
20. Underwriters Underwriter
21. Calculation of Performance Data Calculation of Performance
Data
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
Maxim Series Account
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
8
<PAGE>
Maxim Series Account
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
924
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 twenty two Investment Divisions available to which
Purchase Payments may be allocated. Twenty one 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 one Investment
Division which invest in shares of VP Capital Appreciation Fund 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. AND AMERICAN CENTURY VP CAPITAL APPRECIATION 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, 1998, 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, 1998.
<PAGE>
Following is a description of the Portfolios of the Fund and American Century
available under this Series Account:
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;
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;
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;
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;
Small-Cap Index Portfolio seeks to provide investment results, before fees,
that correspond to the total return of the Standard & Poor's Small-Cap 600
Index.1
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;
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).
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;
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.;
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;
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;
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;
1 Standard & Poor's Small-Cap 600 Stock Index is a trademark of The McGraw-Hill
Companies, Inc. and has been licensed for use by Maxim Series Fund, Inc. and
Great-west Life & Annuity Insurance Company. The Portfolio is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of using this index.
<PAGE>
the Maxim Value Index Portfolio seeks to provide investment results, before
fees, that correspond to the total return of the Russell 1000 Value Index.2 The
Russell 1000 Value Index was developed by the Frank Russell Company to track
stock market performance of stocks from the Russell 1000 Index exhibiting
certain characteristics suggesting value potential.
the Maxim Growth Index Portfolio seeks to provide investment results, before
fees, that correspond to the total return of the Russell 1000 Growth Index.2 The
Russell 1000 Growth Index was developed by the Frank Russell Company to track
stock market performance of stocks from the Russell 1000 Index exhibiting
certain characteristics suggesting growth potential.
the Maxim Blue Chip Portfolio seeks long-term growth of capital and income by
investing primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
the Maxim MidCap Growth Portfolio seeks long-term appreciation by investing
primarily in common stocks of medium-sized (mid-cap) growth companies. The
Portfolio will normally invest at least 65% of its assets in a diversified
portfolio of mid-cap companies whose earnings are expected to grow at a faster
rate than the average company.
the Maxim Aggressive Profile Portfolio seeks to achieve a high total return on
investment through long-term capital appreciation by investing in other Maxim
Portfolios. It is designed for an investor who is willing to take on a greater
degree of risk now for the chance of better returns later and places a higher
priority on investment growth than on safety. This investor typically is
comfortable riding out the ups and downs of the markets. This Portfolio would
not be appropriate for an investor with a short investment horizon.
the Maxim Moderately Aggressive Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation by investing
in other Maxim Portfolios. It is designed for an investor who is willing to take
on a slightly greater degree of risk now for the chance of better returns later
and places a high priority on investment growth but also seeks some safety. This
investor typically is comfortable riding out the ups and downs of the markets
but is not comfortable with the volatility that would be associated with the
Maxim Aggressive Profile Portfolio. This Portfolio would not be appropriate for
an investor with a short investment horizon.
the Maxim Moderate Profile Portfolio seeks to achieve a high total return on
investment through long-term capital appreciation by investing in other Maxim
Portfolios. This investor likes the potential for higher returns but seeks more
safety than an aggressive or moderately aggressive investor.
the Maxim Moderately Conservative Profile Portfolio seeks to achieve the
highest possible total return consistent with reasonable risk through a
combination of income and capital appreciation by investing in other Maxim
Portfolios. This Portfolio is designed for an investor who places a priority on
investment safety but is willing to take some risk for a potential higher return
on investment. This investor may be approaching retirement or simply prefers to
take less risk than other investors.
the Maxim Conservative Profile Portfolio seeks to achieve total return
consistent with preservation of capital primarily through fixed income
investments by investing in other Maxim Portfolios. This Portfolio is designed
for an investor whose highest priority is safety for which the investor is
willing to accept lower potential return on investment. This investor may be
approaching retirement or simply prefers to take less risk than others.
The Series Account also has an Investment Division which invest in shares of
American Century Variable Portfolios, Inc. ("American Century"), a diversified,
series, open-end management investment company which is a member of the American
Centurysm Investments group of mutual funds. This Investment Division invests in
shares of the following portfolio of American Century:
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.
2 The Frank
Russell Company is not a sponsor of, or in any other way affiliated with the
Portfolio or the Fund.
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
FEE TABLE..................................................................................5
EXAMPLES...................................................................................6
FINANCIAL HIGHLIGHTS.......................................................................8
GLOSSARY OF SPECIAL TERMS.................................................................10
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE ANNUITY...........................12
PERFORMANCE RELATED INFORMATION...........................................................14
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY...............................................15
MAXIM SERIES ACCOUNT OF GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY.......................15
THE CONTRACTS.............................................................................16
INVESTMENTS OF THE SERIES ACCOUNT.........................................................20
ADMINISTRATIVE CHARGES, RISK CHARGES AND PREMIUM TAXES....................................23
PERIODIC PAYMENT OPTION...................................................................24
ANNUITY OPTIONS...........................................................................25
FEDERAL TAX STATUS........................................................................27
VOTING RIGHTS.............................................................................30
DISTRIBUTION OF THE CONTRACTS.............................................................30
RETURN PRIVILEGE..........................................................................31
STATE REGULATION..........................................................................31
REPORTS...................................................................................31
LEGAL PROCEEDINGS.........................................................................31
LEGAL MATTERS.............................................................................31
REGISTRATION STATEMENT....................................................................31
STATEMENT OF ADDITIONAL INFORMATION.......................................................31
</TABLE>
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.
<PAGE>
FEE TABLE
<TABLE>
Contract Owner Transaction Expenses
<S> <C> <C> <C> <C> <C> <C>
Deferred Sales Load (as a percentage of purchase payments
or amount surrendered, as applicable).....................................................7% maximum
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%
</TABLE>
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Fund average net
assets)
<TABLE>
- --------------- --------------- --------------- -------------- --------------- =============
Maxim Maxim Bond Maxim Maxim Maxim
Money Stock U.S. Govt. Small-Cap
Market Index Securities Index
- --------------- --------------- --------------- -------------- --------------- =============
<S> <C> <C> <C> <C> <C>
Management .46% .60% .60% .60% .60%
Fees
=============== --------------- --------------- -------------- --------------- =============
Other Expenses None None None None None
=============== =============== =============== ============== =============== =============
Total Expenses .46% .60% .60% .60% .60%
=============== =============== =============== ============== =============== =============
=============== --------------- --------- ------------- ------------- ---------- ===========
Maxim Maxim Maxim Maxim Maxim Maxim
MidCap Corporate Small-Cap T. Rowe INVESCO INVESCO
(Growth Fund Bond Value Price ADR Small-Cap
I) (Ariel Equity/Income Growth
Value)
=============== --------------- --------- ------------- ------------- ---------- ===========
Management .95% .90% 1.00% .80% 1.00% .95%
Fees
=============== --------------- --------- ------------- ------------- ---------- ===========
Other Expenses .11% None .28% .11% .30% .15%
=============== =============== ========= ============= ============= ========== ===========
Total Expenses 1.06% .90% 1.28% .91% 1.30% 1.10%
=============== =============== ========= ============= ============= ========== ===========
Maxim Maxim Maxim Maxim Maxim
INVESCO Value Index Growth Index Blue Chip MidCap
Balanced Growth
- ---------------
--------------- --------------- -------------- --------------- =============
Management Fees 1.00% .60% .60% 1.00% 1.00%
=============== --------------- --------------- -------------- --------------- =============
Other Expenses None None None .15% .05%
- --------------- --------------- --------------- -------------- --------------- =============
Total Expenses 1.00% .60% .60% 1.15% 1.05%
- --------------- --------------- --------------- -------------- --------------- =============
- ---------------
Maxim Maxim Maxim Maxim Maxim
Aggressive Moderately Moderate Moderately Conservative
Profile Aggressive Profile Conservative Profile
Profile Profile
- --------------- --------------- --------------- -------------- ---------------
- --------------- --------------- --------------- -------------- --------------- =============
Management Fees .25% .25% .25% .25% .25%
- --------------- --------------- --------------- -------------- ---------------
- --------------- --------------- --------------- -------------- --------------- =============
Other Expenses None None None None None
- --------------- --------------- --------------- -------------- --------------- =============
- --------------- --------------- --------------- -------------- ---------------
Total Expenses .25% .25% .25% .25% .25%
- --------------- --------------- --------------- -------------- --------------- =============
- ------------------------------ -------------------------------- ============================
Minimum Total Maxim Series Maximum Total Maxim Series
Fund Annual Expenses* Fund Annual Expenses**
- ------------------------------ -------------------------------- ============================
- ------------------------------ -------------------------------- ============================
Aggressive Profile+ 1.16% 1.46%
- ------------------------------ -------------------------------- ============================
- ------------------------------ -------------------------------- ============================
Moderately Aggressive 1.08% 1.40%
Profile+
- ------------------------------ -------------------------------- ============================
- ------------------------------ -------------------------------- ============================
Moderate Profile+ 1.02% 1.32%
- ------------------------------ -------------------------------- ============================
- ------------------------------ -------------------------------- ============================
Moderately Conservative 1.00% 1.23%
Profile+
- ------------------------------ -------------------------------- ============================
- ------------------------------ -------------------------------- ============================
Conservative Profile+ 0.85% 1.11%
- ------------------------------ -------------------------------- ============================
</TABLE>
+ Each Profile Portfolio will invest in shares of other Maxim Portfolios
("Underlying Portfolios"). Therefore, each Profile Portfolio will, in
addition to its own expenses such as management fees, bear its pro rata
share of the fees and expenses incurred by the Underlying Portfolios and the
investment return of each Profile Portfolio will be net of the Underlying
Portfolio's expenses.
* The Minimum Fees are determined by assuming the allocation of each Profile
Portfolio's assets to those Underlying Portfolios (please see the Maxim
Series Fund prospectus for the Profile Portfolios for further information on
the Profile Portfolios) with the lowest Total Annual Expenses.
** The Maximum Fees are determined by assuming the allocation of each Profile
Portfolio's assets to those Underlying Portfolios (please see the Maxim
Series Fund prospectus for the Profile Portfolios for further information on
the Profile Portfolios) with the highest Total Annual Expenses.
<PAGE>
American Century Variable Portfolios, Inc. Annual Expenses (as a percentage of
Fund average net assets)
----------------- =========================
American Century VP
Capital Appreciation
----------------- =========================
=========================
Management Fees 1.00%
=========================
================= =========================
Other Expenses None
=========================
================= =========================
Total Expenses 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:
<TABLE>
- --------------------------------------------- ------------ ------------ ------------ ============
1 Year 3 Year 5 Year 10 Year
- --------------------------------------------- ------------ ------------ ------------ ============
<S> <C> <C> <C> <C>
Maxim Money Market Investment Division $17.80 $ 57.88 $104.58 $256.00
============================================= ------------ ------------ ------------ ============
Maxim Bond, Maxim Stock Index, Maxim U.S.
Government Securities, Maxim Value Index,
Maxim Growth Index and Maxim Small-Cap $19.24 $62.49 $112.75 $275.09
Index Investment Divisions
============================================= ------------ ------------ ------------ ============
Maxim MidCap (Growth Fund I) and
Maxim INVESCO Small-Cap Growth Investment $24.38 $78.79 $141.47 $341.11
Divisions
============================================= ------------ ------------ ------------ ============
American Century VP Capital Appreciation
and Maxim INVESCO Balanced Investment $23.36 $75.55 $135.79 $328.17
Divisions
============================================= ------------ ------------ ------------ ============
Maxim Small-Cap Value (Ariel Value) $26.95 $86.85 $155.57 $372.90
Investment Division
============================================= ------------ ------------ ------------ ============
Maxim INVESCO ADR Investment Division $26.43 $85.25 $152.77 $366.61
============================================= ------------ ------------ ------------ ============
Maxim T. Rowe Price Equity/Income $22.85 $73.93 $132.93 $321.65
Investment Division
- --------------------------------------------- ------------ ------------ ------------ ============
Maxim Corporate Bond Investment Division $22.33 $72.30 $130.07 $315.09
- --------------------------------------------- ------------ ------------ ------------ ============
============================================= ------------ ------------ ------------ ============
Maxim Blue Chip Investment Division $24.90 $80.41 $144.31 $347.53
============================================= ------------ ------------ ------------ ============
Maxim MidCap Growth Investment Division $23.87 $77.18 $138.63 $334.65
============================================= ------------ ------------ ------------ ============
Maxim Aggressive Profile Investment Division $26.45 $85.57 $153.33 $367.87
============================================= ------------ ------------ ------------ ============
Maxim Moderately Aggressive Profile $25.82 $83.32 $149.39 $359.01
Investment Division
============================================= ------------ ------------ ------------ ============
Maxim Moderate Profile Investment Division $25.10 $81.06 $145.44 $350.09
============================================= ------------ ------------ ------------ ============
Maxim Moderately Conservative Profile $24.59 $79.44 $142.61 $343.68
Investment Division
============================================= ============ ============ ============ ============
Maxim Conservative Profile Investment $23.15 $74.90 $134.65 $325.56
Division
============================================= ============ ============ ============ ============
</TABLE>
<PAGE>
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:
<TABLE>
- --------------------------------------------- ------------ ------------ ------------ ============
1 Year 3 Year 5 Year 10 Year
- --------------------------------------------- ------------ ------------ ------------ ============
<S> <C> <C> <C> <C>
Maxim Money Market Investment Division $90.05 $112.87 $139.73 $256.00
============================================= ------------ ------------ ------------ ============
Maxim Bond, Maxim Stock Index, Maxim U.S.
Government Securities, Maxim Value Index,
Maxim Growth Index and Maxim Small-Cap $91.40 $117.25 $147.65 $275.09
Index Investment Divisions
============================================= ------------ ------------ ------------ ============
Maxim MidCap (Growth Fund I) and Maxim
INVESCO Small-Cap Growth Investment $96.18 $132.74 $175.52 $341.11
Divisions
============================================= ------------ ------------ ------------ ============
American Century VP Capital Appreciation
and Maxim INVESCO Balanced Investment $95.22 $129.66 $170.00 $328.17
Divisions
============================================= ------------ ------------ ------------ ============
Maxim Small-Cap (Ariel Value) Investment $98.56 $140.39 $189.19 $372.90
Division
============================================= ------------ ------------ ------------ ============
Maxim INVESCO ADR Investment Division $98.08 $138.87 $186.47 $366.61
============================================= ------------ ------------ ------------ ============
Maxim T. Rowe Price Equity/Income $94.75 $128.11 $167.23 $321.65
Investment Division
- --------------------------------------------- ------------ ------------ ------------ ============
Maxim Corporate Bond Investment Division $94.27 $126.57 $164.46 $315.09
- --------------------------------------------- ------------ ------------ ------------ ============
============================================= ------------ ------------ ------------ ============
Maxim Blue Chip Investment Division $96.65 $134.27 $178.27 $347.53
============================================= ------------ ------------ ------------ ============
Maxim MidCap Growth Investment Division $95.70 $131.20 $172.76 $334.65
============================================= ------------ ------------ ------------ ============
Maxim Aggressive Profile Investment Division $98.18 $139.17 $187.02 $367.87
============================================= ------------ ------------ ------------ ============
Maxim Moderately Aggressive Profile $97.51 $137.03 $183.20 $359.01
Investment Division
============================================= ------------ ------------ ------------ ============
Maxim Moderate Profile Investment Division $96.85 $134.89 $179.36 $350.09
============================================= ------------ ------------ ------------ ============
Maxim Moderately Conservative Profile $96.37 $133.35 $176.62 $343.68
Investment Division
============================================= ============ ============ ============ ============
Maxim Conservative Profile Investment $95.03 $129.04 $168.89 $325.56
Division
============================================= ============ ============ ============ ============
</TABLE>
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."
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Periods Ended December 31,
<TABLE>
- -------------------------------------------- ------------ ------------- ----------- -----------
Investment Division 1997 1996 1995 1994
------------- ----------- -----------
- -------------------------------------------- ------------
MAXIM BOND a
<S> <C> <C> <C> <C>
Value at beginning of period $ 11.43 $ 11.10 $ 9.76 $ 10.00
Value at end of period $ 12.09 $ 11.43 $ 11.10 $ 9.76
Increase (decrease) in value of $ $ 0.33 $ 1.34 $
accumulation units 0.66 (0.24)
Number of accumulation units outstanding 7,412.56 5,196.46 1,675.75
at end of period 455.62
- -------------------------------------------- ------------ ------------- ----------- -----------
- -------------------------------------------- ------------ ------------- ----------- -----------
MAXIM STOCK INDEXa
Value at beginning of period $ $ 13.05 $ 9.74 $ 10.00
15.70
Value at end of period $ $ 15.70 $ 13.05 $
20.50 9.74
Increase (decrease) in value of $ $ 2.65 $ 3.31 $
accumulation units 4.80 (0.26)
Number of accumulation units outstanding 169,289.23 130,996.47 17,200.32 2,306.48
at end of period
- -------------------------------------------- ------------ ------------- ----------- -----------
MAXIM MIDCAP (GROWTH FUND I)a
Value at beginning of period $ $ 13.49 $ 10.80 $
14.12 10.00
Value at end of period $ $ 14.12 $ 13.49 $
15.75 10.80
Increase (decrease) in value of $ $ 0.63 $ 2.69 $
accumulation units 1.63 0.80
Number of accumulation units outstanding 49,565.38 83,398.90 24,467.21
at end of period 4,508.26
- -------------------------------------------- ------------ ------------- ----------- -----------
MAXIM SMALL-CAP INDEX a
Value at beginning of period $ 13.87 $ 12.18 $ 9.77 $
10.00
Value at end of period $ 16.57 $ 13.87 $ 12.18 $
9.77
Increase (decrease) in value of $ $ 1.69 $ 2.41 $
accumulation units 2.70 (0.23)
Number of accumulation units outstanding 14,918.01 10,975.88 2,705.63
at end of period 986.29
-----------
- -------------------------------------------- ------------ ------------- -----------
MAXIM CORPORATE BOND f
Value at beginning of period $ 13.12 $ 12.03 $
10.00
Value at end of period $ 14.60 $ 13.12 $
12.03
Increase (decrease) in value of $ $ 1.09 $
accumulation units 1.48 2.03
Number of accumulation units outstanding 23,403.30 12,487.29
at end of period 799.35
- -------------------------------------------- ------------ ------------- -----------
MAXIM INVESCO ADR b
Value at beginning of period $ 13.46 $ 11.25 $
10.00
Value at end of period $ 14.90 $ 13.46 $
11.25
Increase (decrease) in value of $ $ 2.21 $
accumulation units 1.44 1.25
Number of accumulation units outstanding 31,948.04 15,132.95
at end of period 2,623.01
- -------------------------------------------- ------------ ------------- -----------
MAXIM INVESCO SMALL-CAP GROWTH b
Value at beginning of period $ 16.39 $ 13.09 $
10.00
Value at end of period $ 19.21 $ 16.39 $
13.09
Increase (decrease) in value of $ $ 3.30 $
accumulation units 2.82 3.09
Number of accumulation units outstanding 44,396.72 33,993.67
at end of period 4,511.19
- -------------------------------------------- ------------ ------------- -----------
MAXIM MONEY MARKET e
Value at beginning of period $ 10.55 $ 10.17 $
10.00
Value at end of period $ 10.97 $ 10.55 $
10.17
Increase (decrease) in value of $ $ 0.38 $
accumulation units 0.42 0.17
Number of accumulation units outstanding 55,509.88 30,070.95 15,499.45
at end of period
- -------------------------------------------- ------------ ------------- -----------
MAXIM SMALL-CAP VALUE (ARIEL VALUE) d
Value at beginning of period $ 13.51 $ 11.60 $
10.00
Value at end of period $ 17.01 $ 13.51 $
11.60
Increase (decrease) in value of $ $ 1.91 $
accumulation units 3.50 1.60
Number of accumulation units outstanding 3,045.87 1,551.40
at end of period 697.92
- -------------------------------------------- ------------ ------------- -----------
<PAGE>
FINANCIAL HIGHLIGHTS (CONT.)
- -------------------------------------------- ------------ ------------- -----------
Investment Division 1997 1996 1995
------------- -----------
- -------------------------------------------- ------------
MAXIM T. ROWE PRICE EQUITY/INCOME b
Value at beginning of period $ 15.24 $ 12.92 $
10.00
Value at end of period $ 19.39 $ 15.24 $
12.92
Increase (decrease) in value of $ $ 2.32 $
accumulation units 4.15 2.92
Number of accumulation units outstanding 106,469.26 67,415.13 19,500.37
at end of period
- -------------------------------------------- ------------ ------------- -----------
- -------------------------------------------- ------------ ------------- -----------
MAXIM U.S. GOVERNMENT SECURITIES c
Value at beginning of period $ 11.41 $ 11.12 $
10.00
Value at end of period $ 12.23 $ 11.41 $
11.12
Increase (decrease) in value of $ $ 0.29 $
accumulation units 0.82 1.12
Number of accumulation units outstanding 12,345.78 15,784.10
at end of period 14,812.67
- -------------------------------------------- ------------ ------------- -----------
AMERICAN CENTURY VP CAPITAL APPRECIATION c
Value at beginning of period $ 12.23 $ 12.94 $
10.00
Value at end of period $ 11.68 $ 12.23 $
12.94
Increase (decrease) in value of $ ( $ ( $
accumulation units 0.55) 0.71) 2.94
Number of accumulation units outstanding 16,591.59 15,595.65
at end of period 6,110.86
-----------
- -------------------------------------------- ------------ -------------
MAXIM INVESCO BALANCED g
Value at beginning of period $ 10.13 $ 10.00
Value at end of period $ 12.59 $ 10.13
Increase (decrease) in value of $ 2.46 $ 0.13
accumulation units
Number of accumulation units outstanding 32,937.69 1,307.11
at end of period
- -------------------------------------------- ------------ -------------
</TABLE>
KEY
Current Accumulation Unit Values can be obtained by calling GWL&A toll-free at
1-800-523-4106 a The Investment Division first received contributions on
September 19, 1994, at a unit value of $10.00 b The Investment Division first
received contributions on January 6, 1995, at a unit value of $10.00. c The
Investment Division first received contributions on January 18, 1995, at a unit
value of $10.00. d The Investment Division first received contributions on March
9, 1995, at a unit value of $10.00. e The Investment Division first received
contributions on August 4, 1995, at a unit value of $10.00. f The Investment
Division first received contributions on August 8, 1995, at a unit value of
$10.00. g The Investment Division first received contributions on October 1,
1996, at a unit value of $10.00.
<PAGE>
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/Administrative 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 may be divided into five Sub-Accounts, one
for allocations under these 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. Also referred to as a Total
Surrender
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.
<PAGE>
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 is 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 twenty one
of the Fund's investment Portfolios and one American Century investment
Portfolio.
A more complete description of the Fund and its Portfolios and the American
Century Portfolio 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, LLC ("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 (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. Nevertheless,
for purposes of calculating the Surrender Charge 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. 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.")
<PAGE>
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,
1997.
<TABLE>
-------------------------------------------------- ------------------- ------------------------
Investment Division Yield Effective Yield
-------------------------------------------------- ------------------- ------------------------
<S> <C> <C>
Maxim Money Market 3.96% 4.10%
-------------------------------------------------- ------------------- ------------------------
</TABLE>
Yield and effective yield for the Money Market Investment Division is
for the 7-day period ended December 31, 1997. 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
The following table illustrates standardized and non-standardized
average annual total return for the one, fie and ten year periods (or since
inception, as appropriate) ended December 31, 1997. Both the standardized and
the non-standardized data reflect the deduction of all fees and charges under
the Contract, including any Surrender Charge that would be imposed upon
Surrender of a Contract. However, the standardized data are calculated from
the inception date of the Investment Division in the Series Account and the
non-standardized data are calculated for periods preceding the inception date
of the Investment Division in the Series Account. Certain Investment
Divisions presently have no standardized data. Such data will be provided
when it becomes available.
<TABLE>
================================ --------- -------------- -------- ------- ------------- ==========
Portfolio Investment One Five Ten Years Ten Years
Investment Division Inception Division Year Years or Life of or Life
Inception in Investment of
Separate Division in Underlying
Account Separate Fund
Account Portfolio
================================ --------- -------------- -------- ------- ------------- ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maxim Bond 7/1/82 10/14/82 0.04% 3.66% 6.25% 6.60%
================================ --------- -------------- -------- ------- ------------- ==========
Maxim Stock Index 7/1/82 2/24/83 23.04% 15.81% 13.60% 14.12%
================================ --------- -------------- -------- ------- ------------- ==========
Maxim U.S. Government 4/8/85 4/12/85 1.48% 4.00% 5.22% 7.30%
Securities
================================ --------- -------------- -------- ------- ------------- ==========
Maxim Small-Cap Index 12/1/93 9/1/94 11.13% N/A 14.44% 11.38%
================================ --------- -------------- -------- ------- ------------- ==========
Maxim MidCap (Growth Fund I) 12/31/93 9/1/94 3.74% N/A 12.60% 11.32%
================================ --------- -------------- -------- ------- ------------- ==========
Maxim Corporate Bond 11/1/94 11/1/94 3.53% N/A 12.62% 12.62%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim INVESCO Balanced 11/1/96 11/1/96 15.57% N/A 14.53% 14.53%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
================================ --------- -------------- -------- ------- ------------- ==========
Maxim Small-Cap Value (Ariel 12/1/93 11/1/94 17.45% N/A 16.08% 12.21%
Value)
================================ --------- -------------- -------- ------- ------------- ==========
Maxim INVESCO Small-Cap Growth 11/1/94 11/1/94 9.02% N/A 20.95% 20.95%
================================ --------- -------------- -------- ------- ------------- ==========
Maxim T. Rowe Price 11/1/94 11/1/94 18.33% N/A 21.43% 21.43%
Equity/Income
================================ --------- -------------- -------- ------- ------------- ==========
Maxim INVESCO ADR 11/1/94 11/1/94 2.94% N/A 11.60% 11.60%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Value Index 12/1/93 1/15/98 23.15% N/A N/A 18.41%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Growth Index 12/1/93 1/15/98 18.72% N/A N/A 18.53%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Blue Chip 7/1/97 1/15/98 N/A N/A N/A -4.66%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim MidCap Growth 7/1/97 1/15/98 N/A N/A N/A 2.45%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Aggressive Profile 9/8/97 1/15/98 N/A N/A N/A -4.28%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Moderately Aggressive 9/8/97 1/15/98 N/A N/A N/A -3.96%
Profile
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Moderate Profile 9/8/97 1/15/98 N/A N/A N/A -4.93%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Moderately Conservative 9/8/97 1/15/98 N/A N/A N/A -5.23%
Profile
-------------------------------- --------- -------------- -------- ------- ------------- ==========
-------------------------------- --------- -------------- -------- ------- ------------- ==========
Maxim Conservative Profile 9/8/97 1/15/98 N/A N/A N/A -4.24%
-------------------------------- --------- -------------- -------- ------- ------------- ==========
================================ ========= ============== ======== ======= ============= ==========
American Century VP Capital 11/20/87 12/1/91 -9.55% 3.02% 3.66% 7.36%
Appreciation
================================ ========= ============== ======== ======= ============= ==========
</TABLE>
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 include all recurring charges under the Contracts (but do not include
any Surrender Charges), and are lower than
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 twenty two 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 may be
subdivided into five Sub-Accounts, as applicable to the relevant contract. One
sub-account is 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. All Investment Divisions may not be available under every contract.
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 cannot 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 Investment
Divisions. 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 Investment Division 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, a Death Benefit will be paid to
the Beneficiary in the amount of the Contract Value as of the date of death,
less Premium Tax, if any.
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.
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 0.25% of the average daily net assets of the Maxim Aggressive
Profile Portfolio, the Maxim Moderately Aggressive Profile Portfolio, the Maxim
Moderate Profile Portfolio, the Maxim Moderately Conservative Profile Portfolio
and the Maxim Conservative Profile Portfolio, 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
Small-Cap Index Portfolio, the Maxim Value Index Portfolio, and the Maxim Growth
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, the Maxim Blue Chip Portfolio and the
Maxim MidCap Growth 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; 1.05% of the average daily net assets of the Maxim
MidCap Growth Portfolio; 1.10% of the average daily net assets of the Maxim
INVESCO Small-Cap Growth and Maxim MidCap (Growth Fund I) Portfolios,
respectively; 1.15% of the average daily net assets of the Maxim Blue Chip
Portfolio; 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-adviser
to the Maxim T. Rowe Price Equity/Income Portfolio and the Maxim MidCap Growth
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. For its services
with respect to the Maxim T. Rowe Price Equity/Income Portfolio, T. Rowe Price
receives monthly compensation from the Investment Adviser at the annual rate of
0.50% on the first $20 million of the 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. With respect to the Maxim MidCap
Growth Portfolio, T. Rowe Price receives monthly compensation from the
Investment Adviser at the annual rate of 0.50% of all assets based on the
average daily net assets.
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
Metropolitan 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.
Founders Asset Management, LLC ("Founders") serves as the sub-adviser of the
Maxim Blue Chip Portfolio. Founders is a Delaware limited liability corporation
registered as an investment adviser with the Securities and Exchange Commission.
Its Principle business address is 2930 East Third Avenue, Denver, CO 80206.
Founders receives monthly compensation from the Investment Adviser at the annual
rate based on the average daily net assets of: 0.425% on the first $250 million,
0.350% on the next $250 million, 0.325% on the next $250 million and 0.300% on
amounts over $750 million.
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 if GWL&A, in its discretion, determines to discontinue a
Portfolio, 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 held by the Series Account may take place without
prior approval of the Securities and Exchange Commission, and 60 days prior
written notice to the Contract Owner.
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 includible 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 Investment Divisions. Once an
Investment Division has been depleted, GWL&A will automatically prorate the
remaining payments among all Investment Divisions unless the Contract Owner
Requests the selection of another Investment Division.
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 annual, semiannual, quarterly or monthly payments,
as elected, 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 annual, semiannual, quarterly or monthly payments,
as elected, 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
Investment Divisions. 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 that are: (1) made on or after age 59 1/2, (2) made as
a result of death or disability, (3) made as 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, (4) allocable to the Contract Owners
"investment in the Contract" before August 14, 1982 (including earnings
thereon), or (5) that are received under an immediate annuity.
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 is subsequently
modified (other than by reason of death or disability) before the Participant
reaches age 59 1/2 or within five (5) years of the date of the first payment
whichever is later, the Participant is liable for the 10% penalty plus interest
on all payments received before age 59 1/2. This penalty is imposed in the year
the modification or discontinuance occurs.
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
expectancies 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.
Premature Distributions
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); (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; (4) made to a Contract
Owner and used for medical care, but not in excess of the amount allowable as a
medical expense deduction to the Contract Owner for amounts paid during the
taxable year for medical care; (5) made to a Contract Owner and used for
qualified first-time homebuyer expenses but not in excess of $10,000; (6) made
to a Contact Owner and used for qualified higher education expenses.
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 is subsequently
modified (other than by reason of death or disability) before the Participant
reaches age 59 1/2 or within five (5) years of the date of the first payment
whichever is later, the Participant is liable for the 10% penalty plus interest
on all payments received before age 59 1/2. This penalty is imposed in the year
the modification or discontinuance occurs.
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
Boros Cicchetti Berenson & Johnson, LLP.
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
<PAGE>
B-5
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, 1998, 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, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
CUSTODIAN AND INDEPENDENT AUDITORS.........................................................B-3
UNDERWRITER................................................................................B-3
CALCULATION OF PERFORMANCE DATA............................................................B-4
FINANCIAL STATEMENTS.......................................................................B-5
</TABLE>
<PAGE>
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, 1997, the related statements of operations for the year then
ended, the statements of changes in net asset for each of the two years in the
period then ended and the consolidated balance sheets for Great-West Life &
Annuity Insurance Company at December 31, 1997 and 1996 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, 1997, 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. Prior
to 1996, 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 or 1997.
<PAGE>
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, 1997 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, 1997
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.
<PAGE>
B. Total Return Quotations for All Investment Divisions (Other than Money
Market)
The total return quotations set forth in the Prospectus are average
annual total return quotations for the one, five and ten year periods (or since
inception) ended December 31, 1997. 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, 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, 1997 AND 1996
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Financial Statements for the Years
Ended December 31, 1997 and 1996
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, 1997, the related
statements of operations for the year then ended and the statements of changes
in net assets for each of the two years in the period 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, 1997, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended in conformity with generally accepted accounting principles.
February 12, 1998
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
Maxim Series I
ASSETS: Shares Cost Value
---------------- --------------- ----------------
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
<S> <C> <C> <C>
Money Market\Non-Qualified 31,599 $ 31,646 $ 31,620
Bond\Non-Qualified 80,409 100,817 97,450
Bond\Qualified 5,004 5,994 6,065
Stock Index\Qualified 3,921 20,921 11,558
Total Return\Non-Qualified 34,979 41,259 55,056
--------------- ----------------
Total investments $ 200,637 201,749
===============
Other assets and liabilities:
Premiums due and accrued 387
Due to Great-West Life & Annuity Insurance Company (499)
Other liabilities (30)
----------------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $ 201,607
================
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
Maxim Series II
ASSETS: Shares Cost Value
---------------- ---------------- ----------------
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
<S> <C> <C> <C>
Money Market\Non-Qualified 831,689 $ 831,384 $ 832,252
Money Market\Qualified 967,076 977,797 967,730
Bond\Non-Qualified 1,125,869 1,369,526 1,364,480
Bond\Qualified 1,198,889 1,460,779 1,452,975
Stock Index\Non-Qualified 2,824,433 4,831,180 8,324,693
Stock Index\Qualified 3,543,051 5,801,289 10,442,738
U.S. Government 5,633,192 6,172,134 6,150,139
Securities/Non-Qualified
U.S. Government 3,289,464 3,626,615 3,591,332
Securities/Qualified
Total Return/Non-Qualified 3,286,654 4,050,267 5,173,089
American Century VP Funds -
VP Capital Appreciation 33,813 376,403 327,309
American Century VP Funds - VP 51,473 356,557 424,138
Balanced
---------------- ----------------
Total investments $ 29,853,931 39,050,875
================
Other assets and liabilities:
Premiums due and accrued 933
Due to Great-West Life & Annuity Insurance (90,499)
Company
Other liabilities (1,045)
----------------
=============================================================================
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $ 38,960,264
============================================================================= ================
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
Maxim Series III
ASSETS: Shares Cost Value
--------------- ---------------- ---------------
Investments in the underlying funds:
Maxim Series Fund, Inc. (Affiliate):
<S> <C> <C> <C>
Bond 74,004 $ 88,815 $ 89,687
Corporate Bond 285,497 339,697 342,055
INVESCO ADR 321,828 440,682 476,436
INVESCO Balanced 329,826 407,287 415,183
INVESCO Small-Cap Growth 535,120 844,011 853,787
Mid-Cap 503,122 731,797 781,461
Money Market 609,251 609,663 609,663
Small-Cap Index 196,606 249,982 247,487
Small-Cap Value 56,847 61,000 52,037
Stock Index 1,178,639 2,850,938 3,473,903
Total Return 368,125 516,374 579,418
T. Rowe Price Equity/Income 1,174,067 1,733,470 2,066,560
U.S. Government Securities 138,390 148,658 151,090
American Century VP Funds -
VP Capital Appreciation 20,049 203,292 194,075
American Century VP Funds - VP 37,121 268,650 305,875
Balanced
================ ---------------
Total investments $ 9,494,316 10,638,717
================
Other assets and liabilities:
Premiums due and accrued 83
Due to Great-West Life & Annuity Insurance Company (11,642)
---------------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $ 10,627,158
============================================================================== ===============
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Money Stock Index Total
Market Return
Investment Bond Investment Investment
Division Investment Division Division Division Total
------------ ------------------------- ------------ ------------
Non-QualifiedNon-Qualified Qualified Qualified Non-Qualified Maxim I
------------ ------------ ----------- ------------ ------------ -------------
Maxim Series I
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 1,590 5,955 $ 370 649 $ 2,684 11,248
EXPENSES- mortality and expense
risks (Note 3) 387 1,178 75 132 629 2,401
------------ ------------ ----------- ------------ ------------ -------------
NET INVESTMENT INCOME 1,203 4,777 295 517 2,055 8,847
------------ ------------ ----------- ------------ ------------ -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) on investments 161 (84) 72 194 343
Net change in unrealized appreciation
on investments 350 116 2,114 7,647 10,227
------------ ------------ ----------- ------------ ------------ -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 0 511 32 2,186 7,841 10,570
------------ ------------ ----------- ------------ ------------ -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,203 5,288 $ 327 2,703 $ 9,896 19,417
============ ============ =========== ============ ============ =============
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market Bond Stock Index
Investment Division Investment Division Investment Division
------------------------- ------------------------- -------------------------
Non-Qualified Qualified Non-Qualified Qualified Non-Qualified Qualified
------------ ------------ ------------ ------------ ------------ ------------
Maxim Series II
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 50,600 51,204 $ 91,880 106,367 $ 468,277 588,149
EXPENSES- mortality and expense
risks (Note 3) 13,839 13,985 20,899 24,757 106,417 134,474
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME 36,761 37,219 70,981 81,610 361,860 453,675
------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) on investments (17,212) (76,854) 280,879 503,901
Net change in unrealized appreciation
on investments 26,710 81,299 1,335,382 1,563,542
------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 0 0 9,498 4,445 1,616,261 2,067,443
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 36,761 37,219 $ 80,479 86,055 $ 1,978,121 2,521,118
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
VP
U.S. Government Total Return Capital VP
Securities Investment Appreciation Balanced
Investment Division Division Investment Investment Total
------------------------------ --------------
Non-Qualified Qualified Non-Qualified Division Division Maxim II
--------------- ------------- -------------- ------------- -------------- -------------
Maxim Series II
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 401,071 $ 244,718 $ 253,304 $ 5,904 $ 20,469 $ 2,281,943
EXPENSES- mortality and expense
risks (Note 3) 87,267 54,133 67,286 4,449 5,727 533,233
--------------- ------------- -------------- ------------- -------------- -------------
NET INVESTMENT INCOME 313,804 190,585 186,018 1,455 14,742 1,748,710
--------------- ------------- -------------- ------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on (29,726) (24,598) 125,689 3,706 21,377 787,162
investments
Net change in unrealized
appreciation
(depreciation) on investments 138,013 90,538 625,603 (25,944) 17,382 3,852,525
--------------- ------------- -------------- ------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 108,287 65,940 751,292 (22,238) 38,759 4,639,687
--------------- ------------- -------------- ------------- -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 422,091 $ 256,525 $ 937,310 $ (20,783) $ 53,501 $ 6,388,397
=============== ============= ============== ============= ============== =============
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate INVESCO INVESCO INVESCO
Bond Bond ADR Balanced Small-Cap Mid-Cap
Growth
Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division
--------------- ------------- ------------- -------------- -------------- -------------
Maxim Series III
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 5,161 $ 25,652 $ 10,207 $ 14,365 $ 49,971 $ 30,767
EXPENSES- mortality and expense
risks (Note 3) 1,006 2,757 4,435 1,731 8,766 11,065
--------------- ------------- ------------- -------------- -------------- -------------
NET INVESTMENT INCOME 4,155 22,895 5,772 12,634 41,205 19,702
--------------- ------------- ------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) on (217) 898 11,495 296 7,796 (19,901)
investments
Net change in unrealized
appreciation
(depreciation) on 1,001 (690) 13,460 8,044 58,307 50,491
investments
--------------- ------------- ------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 784 208 24,955 8,340 66,103 30,590
--------------- ------------- ------------- -------------- -------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,939 $ 23,103 $ 30,727 $ 20,974 $ 107,308 $ 50,292
=============== ============= ============= ============== ============== =============
</TABLE>
See notes to financial (Continued)
statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Money Small-Cap Small-Cap Stock Total T. Rowe
Price
Market Index Value Index Return Equity/Income
Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division
--------------- ------------- ------------- -------------- -------------- -------------
Maxim Series III
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 28,084 $ 37,588 $ 21,755 $ 191,528 $ 28,327 $ 110,825
EXPENSES- mortality and expense
risks (Note 3) 6,802 2,533 430 34,695 6,450 18,728
--------------- ------------- ------------- -------------- -------------- -------------
NET INVESTMENT INCOME 21,282 35,055 21,325 156,833 21,877 92,097
--------------- ------------- ------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on 5 6,399 94 80,860 21,955 25,531
investments
Net change in unrealized
appreciation
(depreciation) on (5) (4,664) (12,340) 485,887 59,714 237,954
investments
--------------- ------------- ------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1,735 (12,246) 566,747 81,669 263,485
--------------- ------------- ------------- -------------- -------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 21,282 $ 36,790 $ 9,079 $ 723,580 $ 103,546 $ 355,582
=============== ============= ============= ============== ============== =============
</TABLE>
See notes to financial (Continued)
statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. VP VP Capital Total
Government
Securities Balanced Appreciation Maxim
Investment Investment Investment Series
Division Division Division III
--------------- --------------- ------------- --------------
Maxim Series III
<S> <C> <C> <C> <C>
INVESTMENT INCOME $ 8,125 $ 14,883 $ 5,543 $ 582,781
EXPENSES- mortality and expense
risks (Note 3) 1,622 3,588 2,825 107,433
--------------- --------------- ------------- --------------
NET INVESTMENT INCOME 6,503 11,295 2,718 475,348
--------------- --------------- ------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on (630) 2,743 (18,558) 118,766
investments
Net change in unrealized
appreciation
on investments 2,279 23,884 10,242 933,564
--------------- --------------- ------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1,649 26,627 (8,316) 1,052,330
--------------- --------------- ------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 8,152 $ 37,922 $ (5,598) $ 1,527,678
=============== =============== ============= ==============
</TABLE>
See notes to financial (Concluded)
statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ----------------------------------------------------------------------------------------------------------
Money Market Bond
Investment Division Investment Division
--------------------------------------------------------------------------
Non-Qualified Non-Qualified Qualified
------------------------ ------------------------ ---------------------
1997 1996 1997 1996 1997 1996
----------- ---------- ----------- ----------- ---------- ---------
Maxim Series I
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,203 $ 1,523 $ 4,777 $ 4,387 $ 295 $ 757
Net realized gain (loss)
on investments (11) 161 142 (84) (3)
Net change in unrealized
appreciation
(depreciation)
on investments 11 350 (1,884) 116 (298)
----------- ---------- ----------- ----------- ---------- ---------
Increase in net assets
resulting from 1,203 1,523 5,288 2,645 327 456
operations
----------- ---------- ----------- ----------- ---------- ---------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
Redemptions (79) (13,393) (60) (90) (10,200) (54)
Net transfers
----------- ---------- ----------- ----------- ---------- ---------
Decrease in net assets
resulting from unit (79) (13,393) (60) (90) (10,200) (54)
transactions
----------- ---------- ----------- ----------- ---------- ---------
INCREASE (DECREASE) IN
NET ASSETS 1,124 (11,870) 5,228 2,555 (9,873) 402
NET ASSETS:
Beginning of year 30,443 42,313 92,013 89,458 15,998 15,596
----------- ---------- ----------- ----------- ---------- ---------
End of year $ 31,567 $ 30,443 $ 97,241 $ 92,013 $ 6,125 $ 15,998
=========== ========== =========== =========== ========== =========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Index Total Return
Investment Division Investment Division Total
----------------------- -----------------------
Qualified Non-Qualified Maxim I
----------------------- ----------------------- ------------------------
1997 1996 1997 1996 1997 1996
----------- ---------- ---------- ---------- ---------- -----------
Maxim Series I
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 517 $ 60 $ 2,055 $ 2,866 $ 8,847 $ 9,593
Net realized gain on
investments 72 40 194 142 343 310
Net change in unrealized
appreciation
on investments 2,114 1,396 7,647 1,229 10,227 454
----------- ---------- ---------- ---------- ---------- -----------
Increase in net assets
resulting from 2,703 1,496 9,896 4,237 19,417 10,357
operations
----------- ---------- ---------- ---------- ---------- -----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
Redemptions (38) (26) (30) (30) (10,407) (13,593)
Net transfers
----------- ---------- ---------- ---------- ---------- -----------
Decrease in net assets
resulting from unit (38) (26) (30) (30) (10,407) (13,593)
transactions
----------- ---------- ---------- ---------- ---------- -----------
INCREASE (DECREASE) IN
NET ASSETS 2,665 1,470 9,866 4,207 9,010 (3,236)
NET ASSETS:
Beginning of year 9,066 7,596 45,077 40,870 192,597 195,833
----------- ---------- ---------- ---------- ---------- -----------
End of year $ 11,731 $ 9,066 $ 54,943 $ 45,077 $ 201,607 $ 192,597
=========== ========== ========== ========== ========== ===========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Bond
Investment Division Investment Division
-------------------------------------------------- ----------------------------------------------------
Non-Qualified Qualified Non-Qualified Qualified
------------------------ ------------------------- -------------------------- ------------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
Maxim Series II
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income 36,761 $ 45,979 $ 37,219 $ 40,293 $ 70,981 $ 82,503 $ 81,610 $ 110,809
Net realized loss
on investments (17,212) (28,915) (76,854) (18,981)
Net change in unrealized
appreciation
(depreciation) on
investments 26,710 (7,476) 81,299 (27,583)
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
Increase in net
assets
resulting from 36,761 45,979 37,219 40,293 80,479 46,112 86,055 64,245
operations
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
FROM UNIT TRANSACTIONS:
Variable annuity
contract:
Purchase payments 3,719 10,602 11,347 2,107 2,174 2,642 8,847 9,722
Redemptions (260,301) (456,051) (81,095) (779,060) (252,043) (308,314) (564,184) (369,922)
Net transfers (49,859) (117,915) (42,689) 64,102 (70,940) (68,278) (312,933) (68,489)
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
Decrease in net
assets
resulting from (306,441) (563,364) (112,437) (712,851) (320,809) (373,950) (868,270) (428,689)
unit transactions
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
DECREASE IN
NET ASSETS (269,680) (517,385) (75,218) (672,558) (240,330) (327,838) (782,215) (364,444)
NET ASSETS:
Beginning of year 1,100,066 1,617,451 1,040,950 1,713,508 1,601,544 1,929,382 2,231,683 2,596,127
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
End of year 830,386 $ 1,100,066 $ 965,732 $ 1,040,950 $ 1,361,214 $ 1,601,544 $ 1,449,468 $ 2,231,683
=========== =========== =========== ============ =========== ============ =========== ===========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Index U.S. Government Securities
Investment Division Investment Division
-------------------------------------------------- --------------------------------------------------
Non-Qualified Qualified Non-Qualified Qualified
------------------------ ------------------------ ------------------------ ------------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Maxim Series II
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income $ 361,860 $ 36,421 $ 453,675 $ 46,707 $ 313,804 $ 327,841 $ 190,585 $ 220,465
Net realized gain (loss)
on investments 280,879 298,857 503,901 327,464 (29,726) (52,580) (24,598) (21,782)
Net change in unrealized
appreciation
(depreciation) on
investments 1,335,382 828,550 1,563,542 1,121,694 138,013 (120,325) 90,538 (95,024)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Increase in net
assets
resulting from 1,978,121 1,163,828 2,521,118 1,495,865 422,091 154,936 256,525 103,659
operations
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Variable annuity
contract:
Purchase payments 55,239 33,011 111,519 67,790 3,320 3,477 9,937 17,606
Redemptions (452,450) (857,902) (995,067) (939,004) (679,764) (1,009,686) (824,566) (897,604)
Net transfers 118,562 339,927 260,903 19,945 1,070 (206,183) (107,087) (140,529)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Decrease in net
assets
resulting from (278,649) (484,964) (622,645) (851,269) (675,374) (1,212,392) (921,716) (1,020,527)
unit transactions
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN
NET ASSETS 1,699,472 678,864 1,898,473 644,596 (253,283) (1,057,456) (665,191) (916,868)
NET ASSETS:
Beginning of year 6,606,105 5,927,241 8,520,268 7,875,672 6,388,820 7,446,276 4,247,972 5,164,840
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year $ 8,305,577 $ 6,606,105 $ 10,418,741 $ 8,520,268 $ 6,135,537 $ 6,388,820 $ 3,582,781 $ 4,247,972
=========== =========== =========== =========== =========== =========== =========== ===========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return VP Capital
Investment Division Appreciation VP Balanced Total
Non-Qualified Investment Division Investment Division Maxim II
---------------------- ------------------------- ----------------------- -------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------- ----------- ------------- ----------- ----------- ---------- ------------ ------------
Maxim Series II
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income $ 186,018 $ 274,904 $ 1,455 $ 42,026 $ 14,742 $ 11,028 $ 1,748,710 $ 1,238,976
Net realized gain
on investments 125,689 147,014 3,706 12,701 21,377 14,357 787,162 678,135
Net change in unrealized
appreciation
(depreciation) on
investments 625,603 1,201 (25,944) (79,472) 17,382 5,880 3,852,525 1,627,445
---------- ---------- ------------- ---------- ----------- ---------- ------------ -----------
Increase (decrease)
in net assets
resulting from 937,310 423,119 (20,783) (24,745) 53,501 31,265 6,388,397 3,544,556
operations
---------- ---------- ------------- ---------- ----------- ---------- ------------ -----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments 151,378 27,548 14,599 64,306 15,243 6,330 387,322 245,141
Redemptions (458,152) (497,539) (25,916) (69,788) (68,363) (63,230) (4,661,901) (6,248,100)
Net transfers 119,510 89,819 8,223 25,652 75,240 61,949
---------- ---------- ------------- ---------- ----------- ---------- ------------ -----------
Increase (decrease)
in net assets
resulting from (187,264) (380,172) (3,094) 20,170 22,120 5,049 (4,274,579) (6,002,959)
unit transactions
---------- ---------- ------------- ---------- ----------- ---------- ------------ -----------
INCREASE (DECREASE) IN
NET ASSETS 750,046 42,947 (23,877) (4,575) 75,621 36,314 2,113,818 (2,458,403)
NET ASSETS:
Beginning of year 4,411,091 4,368,144 350,408 354,983 347,539 311,225 36,846,446 39,304,849
---------- ---------- ------------- ---------- ----------- ---------- ------------ -----------
End of year $ 5,161,137 $ 4,411,091 $ 326,531 $ 350,408 $ 423,160 $ 347,539 $ 38,960,264 $ 36,846,446
========== ========== ============= ========== =========== ========== ============ ===========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Corporate Bond INVESCO ADR INVESCO Balanced
Investment Division Investment Division Investment Division Investment Division
(A)
----------------------- ------------------------ ----------------------- -----------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------------------
Maxim Series III
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income $ 4,155 $ 2,198 22,895 $ 10,161 $ 5,772 359 $ 12,634 $ 74
Net realized gain (loss)
on investments (217) 339 898 202 11,495 2,274 296
Net change in unrealized
appreciation
(depreciation) on
investments 1,001 (519) (690) 2,860 13,460 18,790 8,044 (148)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase (decrease) in
net assets
resulting from 4,939 2,018 23,103 13,223 30,727 21,423 20,974 (74)
operations
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments 35,790 41,713 138,392 142,965 225,162 135,916 190,216 3,658
Redemptions (6,161) (13) (4,961) (1,089) (8,885) (1,932) (203)
Net transfers (4,377) (2,926) 21,382 (946) 25,246 18,762 190,529 9,660
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase in net assets
resulting
from unit transactions 25,252 38,774 154,813 140,930 241,523 152,746 380,542 13,318
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
INCREASE IN NET ASSETS 30,191 40,792 177,916 154,153 272,250 174,169 401,516 13,244
NET ASSETS:
Beginning of year 59,395 18,603 163,773 9,620 203,668 29,499 13,244
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
End of year $ 89,586 $ 59,395 341,689 $ 163,773 $ 475,918 203,668 $ 414,760 $ 13,244
=========== =========== =========== =========== =========== =========== =========== ==========
(A) The Investment Division commenced
operations on October 31, 1996.
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INVESCO
Small-Cap Growth Mid-Cap Money Market Small-Cap Index
Investment Division Investment Division Investment Division Investment Division
----------------------- ----------------------- ------------------------ -----------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Maxim Series III
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 41,205 58,727 $ 19,702 $ (9,118) 21,282 $ 9,298 $ 35,055 $ 10,974
Net realized gain (loss)
on investments 7,796 13,572 (19,901) 39,570 5 6,399 3,379
Net change in unrealized
appreciation
(depreciation) on
investments 58,307 (53,489) 50,491 (36,244) (5) 5 (4,664) (1,228)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase (decrease) in
net assets
resulting from 107,308 18,810 50,292 (5,792) 21,282 9,303 36,790 13,125
operations
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments 187,569 368,120 93,958 931,515 342,544 303,515 55,155 119,823
Redemptions (9,025) (654) (33,886) (13,648) (47,563) (2,904) (367) (6)
Net transfers 9,949 111,723 (507,078) (64,886) (24,558) (150,207) 3,422 (13,677)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase (decrease) in
net assets
resulting from unit 188,493 479,189 (447,006) 852,981 270,423 150,404 58,210 106,140
transactions
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN
NET ASSETS 295,801 497,999 (396,714) 847,189 291,705 159,707 95,000 119,265
NET ASSETS:
Beginning of year 557,059 59,060 1,177,308 330,119 317,355 157,648 152,215 32,950
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
End of year $ 852,860 557,059 $ 780,594 $ 1,117,308 609,060 $ 317,355 $ 247,215 $ 152,215
=========== =========== =========== =========== =========== =========== =========== ==========
See notes to financial (Continued)
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Stock Index Total Return T. Rowe Price
Equity/Income
Investment Division Investment Division Investment Division Investment Division
----------------------- ------------------------ ----------------------- ----------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Maxim Series III
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 21,325 (54) $ 156,833 $ 19,350 21,877 $ 24,233 $ 92,097 26,491
Net realized gain
on investments 94 20 80,860 9,347 21,955 1,683 25,531 9,095
Net change in unrealized
appreciation
(depreciation) on
investments (12,340) 2,935 485,887 123,478 59,714 812 237,954 76,299
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase in net assets
resulting from 9,079 2,901 723,580 152,175 103,546 26,728 355,582 111,885
operations
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments 16,272 9,987 591,844 1,502,538 154,095 233,246 469,165 574,980
Redemptions (213) (20) (103,538) (12,057) (3,673) (935) (32,432) (7,079
Net transfers 5,879 201,638 189,433 (65,868) 18,009 244,718 95,467
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Increase in net assets
resulting
from unit transactions 21,938 9,967 689,944 1,679,914 84,554 250,320 681,451 663,368
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
INCREASE IN NET ASSETS 31,017 12,868 1,413,524 1,832,089 188,100 277,048 1,037,033 775,253
NET ASSETS:
Beginning of year 20,965 8,097 2,056,563 224,474 390,671 113,623 1,027,276 252,023
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
End of year $ 51,982 20,965 $ 3,470,087 $ 2,056,563 578,771 $ 390,671 $ 2,064,309 1,027,276
=========== =========== =========== =========== =========== =========== =========== ==========
See notes to financial (Continued
statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government VP Balanced VP Capital Growth Total
Securities Appreciation
Investment Division Investment Division Investment Division Maxim Series III
----------------------- ----------------------- ----------------------- -----------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
Maxim Series III
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income $ 6,503 $ 8,160 $ 11,295 $ 5,792 $ 2,718 $ 13,893 475,348 $ 180,538
Net realized gain (loss)
on investments (630) (3,256) 2,743 1,350 (18,558) (2,953) 118,766 74,622
Net change in unrealized
appreciation (depreciation)
on investments 2,279 (1,320) 23,884 12,300 10,242 (22,156) 933,564 122,375
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
Increase (decrease) in
net assets
resulting from 8,152 3,584 37,922 19,442 (5,598) (11,216) 1,527,678 377,535
operations
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments 61,892 166,825 30,157 171,225 95,085 156,340 2,687,296 4,862,366
Redemptions (12,877) (2,318) (1,230) (2,946) (42,473) (3,325) (307,487) (48,926)
Net transfers (86,296) (152,683) (15,956) (24,394) (43,902) (30,160) (45,272) 3,175
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
Increase (decrease) in
net assets
resulting from unit (37,281) 11,824 12,971 143,885 8,710 122,855 2,334,537 4,816,615
transactions
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN NET (29,129) 15,408 50,893 163,327 3,112 111,639 3,862,215 5,194,150
ASSETS
NET ASSETS:
Beginning of year 180,067 164,659 254,642 91,315 190,742 79,103 6,764,943 1,570,793
---------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
End of year $ 150,938 $ 180,067 $ 305,535 $ 254,642 $ 193,854 $ 190,742 10,627,158 $ 6,764,943
========== =========== =========== ========== =========== =========== =========== ==========
See notes to financial statements. (Concluded
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------
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 which invest in
shares of open-end management investment companies as follows:
<TABLE>
Investment Division Underlying Fund Investment
-------------------------------- -----------------------------------------------------
Maxim Series I:
<S> <C> <C> <C> <C> <C> <C>
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
VP Capital Appreciation American Century VP Funds - VP Capital
Appreciation
VP Balanced American Century VP Funds - VP 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
VP Balanced American Century VP Funds - VP Balanced
VP Capital Appreciation American Century VP Funds - VP Capital
Appreciation
</TABLE>
<PAGE>
As of September 24, 1984, the administrative charges of the Series
Account were changed by a vote of the Board of Directors. Contracts
purchased through 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.
d. Net Transfers - Net transfers include transfers between
investment divisions of the Series Account as well as transfers
between other investment options of the Company.
3. CHARGES UNDER THE 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.
<PAGE>
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, 1997, for each investment division.
<TABLE>
Total Maxim
I
Variable
Annuity
Maxim Series I Contract
Units Unit Value Liabilities
------------- --------------- --------------
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL:
Investment Division:
<S> <C> <C> <C>
Money Market\Non-Qualified 1,398.9073 $ 22.565418 $ 31,567
Bond\Non-Qualified 2,727.8729 35.647170 97,241
Bond\Qualified 188.9743 32.411372 6,125
Stock Index\Qualified 175.1807 66.965596 11,731
Total Return\Non-Qualified 2,299.9252 23.889028 54,943
--------------
TOTAL $ 201,607
==============
</TABLE>
<PAGE>
5. COMPONENTS OF NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL
[Continued]
The following is a summary of the net assets applicable to outstanding
units of capital at December 31, 1997, for each investment division.
<PAGE>
<TABLE>
Total Maxim
II
Variable
Annuity
Maxim Series II Contract
Units Unit Value Liabilities
------------- --------------- --------------
NET ASSETS APPLICABLE TO
OUTSTANDING
UNITS OF CAPITAL:
Investment Division:
<S> <C> <C>
Money Market\Non-Qualified 46,577.9056$ 17.827890 $ 830,386
Money Market\Qualified 54,854.4038 17.605361 965,732
Bond\Non-Qualified 51,635.7422 26.361862 1,361,214
Bond\Qualified 54,547.8778 26.572392 1,449,468
Stock Index\Non-Qualified 153,561.6091 54.086283 8,305,577
Stock Index\Qualified 189,804.0565 54.892088 10,418,741
U.S. Government 244,602.7910 25.083675 6,135,537
Securities/Non-Qualified
U.S. Government 144,275.8577 24.832852 3,582,781
Securities/Qualified
Total Return/Non-Qualified 211,352.1375 24.419609 5,161,137
VP Capital Appreciation 25,957.2366 12.579566 326,531
VP Balanced 26,379.4943 16.041242 423,160
--------------
TOTAL $ 38,960,264
==============
Total Maxim
III
Variable
Annuity
Maxim Series III Contract
Units Unit Value Liabilities
------------- --------------- --------------
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL:
Investment Division:
Bond 7,412.5558 $ 12.085751 $ 89,586
Corporate Bond 23,403.3005 14.600039 341,689
INVESCO ADR 31,948.0450 14.896622 475,918
INVESCO Balanced 32,937.6908 12.592263 414,760
INVESCO Small-Cap Growth 44,396.7174 19.209978 852,860
Mid-Cap 49,565.3827 15.748774 780,594
Money Market 55,509.8768 10.972105 609,060
Small-Cap Index 14,918.0143 16.571551 247,215
Small-Cap Value 3,045.8716 17.066458 51,982
Stock Index 169,289.2268 20.497983 3,470,087
Total Return 36,689.1064 15.775021 578,771
T. Rowe Price Equity/Income 106,469.2588 19.388777 2,064,309
U.S. Government Securities 12,345.7811 12.225859 150,938
VP Balanced 20,447.2741 14.942560 305,535
VP Capital Appreciation 16,591.5938 11.683859 193,854
--------------
TOTAL $ 10,627,158
==============
<PAGE>
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, 1997, 1996, 1995, 1994, and 1993, by
investment division:
Money Market Money Market Bond Bond Stock Index Total Return
Maxim Series I Non-Qualified Qualified Non-Qualified Qualified Qualified Non-Qualified
--------------
-------------------------------------------------------------------------------------------------
1997
Beginning Unit Value $ 21.71 $ 33.71 $ 30.69 $ 51.56 $ 19.59
=================================================================================================
Ending Unit Value $ 22.57 $ 35.65 $ 32.41 $ 66.97 $ 23.89
=================================================================================================
Number of Units 1,398.91 2,727.87 188.97 175.18 2,299.93
Outstanding
=================================================================================================
1996
Beginning Unit Value $ 20.92 $ 32.74 $ 29.81 $ 43.05 $ 17.75
=================================================================================================
Ending Unit Value $ 21.71 $ 33.71 $ 30.69 $ 51.56 $ 19.59
=================================================================================================
Number of Units 1,402.43 2,729.57 521.33 175.85 2,301.42
Outstanding
=================================================================================================
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 2,022.86 0.00 2,732.24 523.12 176.42 2,301.96
Outstanding
=================================================================================================
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 2,027.25 718.03 2,735.02 2,001.77 1,700.61 2,303.69
Outstanding
=================================================================================================
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 2,031.80 720.03 2,738.15 2,004.45 2,221.73 1,192.30
Outstanding
=================================================================================================
</TABLE>
(Continued)
<PAGE>
6. SELECTED DATA (continued)
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, 1997, 1996 1995, 1994, and 1993, by
investment division:
<TABLE>
Money Market Money Market Bond Bond Stock Index Stock Index
Maxim Series II Non-Qualified Qualified Non-Qualified Qualified Non-Qualified Qualified
- ---------------
-----------------------------------------------------------------------------------------
1997
<S> <C> <C> <C> <C> <C> <C>
Beginning Unit Value $ 17.18 $ 16.96 $ 24.97 $ 25.17 $ 41.48 $ 42.10
==========================================================================================
Ending Unit Value $ 17.83 $ 17.61 $ 26.36 $ 26.57 $ 54.09 $ 54.89
==========================================================================================
Number of Units Outstanding 46,577.91 54,854.40 51,635.74 54,547.88 153,561.61 189,804.06
==========================================================================================
1996
Beginning Unit Value $ 16.58 $ 16.37 $ 24.29 $ 24.48 $ 34.53 $ 35.04
==========================================================================================
Ending Unit Value $ 17.18 $ 16.96 $ 24.97 $ 25.17 $ 41.48 $ 42.10
==========================================================================================
Number of Units Outstanding 64,049.31 61,373.56 64,147.08 88,677.28 159,266.26 202,398.63
==========================================================================================
1995
Beginning Unit Value $ 15.90 $ 15.71 $ 21.37 $ 21.54 $ 25.81 $ 26.19
==========================================================================================
Ending Unit Value $ 16.58 $ 16.37 $ 24.29 $ 24.48 $ 34.53 $ 35.04
==========================================================================================
Number of Units Outstanding 97,581.56 104,679.99 79,442.17 106,047.41 171,678.12 224,763.46
==========================================================================================
1994
Beginning Unit Value $ 15.53 $ 15.33 $ 22.20 $ 22.38 $ 26.13 $ 26.52
==========================================================================================
Ending Unit Value $ 15.90 $ 15.71 $ 21.37 $ 21.54 $ 25.81 $ 26.19
==========================================================================================
Number of Units Outstanding 125,420.05 127,897.77 95,366.99 113,313.38 219,588.42 263,158.31
==========================================================================================
1993
Beginning Unit Value $ 15.31 $ 15.12 $ 20.74 $ 20.90 $ 24.12 $ 24.48
==========================================================================================
Ending Unit Value $ 15.53 $ 15.33 $ 22.20 $ 22.38 $ 26.13 $ 26.52
==========================================================================================
Number of Units Outstanding 135,293.72 105,196.10 154,786.15 147,002.74 284,941.95 332,747.75
==========================================================================================
</TABLE>
<TABLE>
U.S. U.S.
Government Government VP
Securities Securities Total Return Capital VP
Non-Qualified Qualified Non-Qualified Appreciation Balanced
---------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Beginning Unit Value $ 23.44 $ 23.20 $ 20.05 $ 13.19 $ 14.04
============================================= ===========================
Ending Unit Value $ 25.08 $ 24.83 $ 24.42 $ 12.58 $ 16.04
============================================= ===========================
Number of Units Outstanding 244,602.79 144,275.86 211,352,14 25,957.24 26,379.49
============================================= ===========================
1996
Beginning Unit Value $ 22.88 $ 22.65 $ 18.20 $ 14.00 $ 12.69
============================================= ===========================
Ending Unit Value $ 23.44 $ 23.20 $ 20.05 $ 13.19 $ 14.04
============================================= ===========================
Number of Units Outstanding 272,571.17 183,063.52 219,989.41 26,567.31 24,745.20
============================================= ===========================
1995
Beginning Unit Value $ 19.98 $ 19.78 $ 15.04 $ 10.82 $ 10.62
============================================= ===========================
Ending Unit Value $ 22.88 $ 22.65 $ 18.20 $ 14.00 $ 12.69
============================================= ===========================
Number of Units Outstanding 325,518.95 228,062.15 239,974.08 25,359.37 24,517.40
============================================= ===========================
1994
Beginning Unit Value $ 20.93 $ 20.72 $ 15.67 $ 11.11 $ 10.71
============================================= ===========================
Ending Unit Value $ 19.98 $ 19.78 $ 15.04 $ 10.82 $ 10.62
============================================= ===========================
Number of Units Outstanding 415,446.66 284,597.25 335,713.57 21,121.89 27,124.38
============================================= ===========================
1993
Beginning Unit Value $ 19.41 $ 19.21 $ 14.16 $ 10.20 $ 10.08
============================================= ===========================
Ending Unit Value $ 20.93 $ 20.72 $ 15.67 $ 11.11 $ 10.71
============================================= ===========================
Number of Units Outstanding 649,198.60 417,423.10 438,337.99 44,619.57 33,951.49
============================================= ===========================
</TABLE>
<PAGE>
6. SELECTED DATA (continued)
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, 1997, 1996 1995, 1994, and 1993, by
investment division:
<TABLE>
INVESCO
Corporate INVESCO INVESCO Small-Cap Money Small-Cap
Maxim Series III Bond Bond ADR Balanced Growth Mid-Cap Market Index
----------------
---------------------------------------------------------------------------------------
(A) (F) (B) (G) (B) (A) (E) (A)
1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Unit Value $ 11.43 $ 13.12 $ 13.46 $ 10.13 $ 16.39 $ 14.12 $ 10.55 $ 13.87
=======================================================================================
Ending Unit Value $ 12.09 $ 14.60 $ 14.90 $ 12.59 $ 19.21 $ 15.75 $ 10.97 $ 16.57
=======================================================================================
Number of Units Outstanding 7,412.56 23,403.30 31,948.04 32,937.69 44,396.72 49,565.38 55,509.88 14,918.01
=======================================================================================
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
=======================================================================================
</TABLE>
(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)
<PAGE>
6. SELECTED DATA (continued)
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, 1997, 1996 1995, 1994, and 1993, by
investment division:
<TABLE>
T. Rowe
Price U.S. VP
Small-Cap Stock Total Equity/ Government VP Capital
Maxim Series III Value Index Return Income Securities Balanced Appreciation
----------------
------------------------------------------------------------------------------
(D) (A) (A) (B) (C) (A) (C)
1997
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Unit Value $ 13.51 $ 15.70 $ 12.94 $ 15.24 $ 11.41 $ 13.06 $ 12.23
====================================================== ======================
Ending Unit Value $ 17.07 $ 20.50 $ 15.78 $ 19.39 $ 12.23 $ 14.94 $ 11.68
====================================================== ======================
Number of Units Outstanding 3,045.87 169,289.23 36,689.11 106,469.26 12,345.78 20,447.27 16,591.59
====================================================== ======================
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
====================================================== ======================
</TABLE>
(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)
<PAGE>
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:
<TABLE>
For the year ended
December 31,
--------------------------
1997 1996
------------ ------------
Maxim Series I
<S> <C> <C>
Maxim Series Fund, - Money Market/Non-Qualified 1,148 (11,832)
Inc.
Maxim Series Fund, - Bond/Non-Qualified 4,016 3,659
Inc.
Maxim Series Fund, - Bond/Qualified (8,218) 600
Inc.
Maxim Series Fund, - Stock Index/Qualified 166 17
Inc.
Maxim Series Fund, - Total Return/Non-Qualified 1,332 2,133
Inc.
Maxim Series II
Maxim Series Fund, - Money Market/Non-Qualified (269,108) (515,801)
Inc.
Maxim Series Fund, - Money Market/Qualified (74,449) (670,956)
Inc.
Maxim Series Fund, - Bond/Non-Qualified (203,925) (238,899)
Inc.
Maxim Series Fund, - Bond/Qualified (653,984) (257,873)
Inc.
Maxim Series Fund, - Stock Index/Non-Qualified 27,647 (197,576)
Inc.
Maxim Series Fund, - Stock Index/Qualified (64,079) (371,549)
Inc.
Maxim Series Fund, - U.S. Government (324,104) (811,859)
Inc. Securities/Non-Qualified
Maxim Series Fund, - U.S. Government (671,370) (734,240)
Inc. Securities/Qualified
Maxim Series Fund, - Total Return/Non-Qualified (6,329) (75,371)
Inc.
American Century - VP Balanced (449) 4,825
VP Funds
American Century - VP Capital Appreciation 5,323 1,939
VP Funds
Maxim Series III
Maxim Series Fund, - Bond 24,697 40,149
Inc.
Maxim Series Fund, - Corporate Bond 144,376 132,764
Inc.
Maxim Series Fund, - INVESCO ADR 171,026 124,589
Inc.
Maxim Series Fund, - INVESCO Balanced 317,094 12,732
Inc.
Maxim Series Fund, - INVESCO Small-Cap Growth 145,977 349,181
Inc.
Maxim Series Fund, - Mid-Cap (319,575) 590,752
Inc.
Maxim Series Fund, - Money Market 291,754 159,940
Inc.
Maxim Series Fund, - Small-Cap Index 73,420 94,971
Inc.
Maxim Series Fund, - Small-Cap Value 40,030 9,228
Inc.
Maxim Series Fund, - Stock Index 308,321 774,415
Inc.
Maxim Series Fund, - Total Return 76,513 203,992
Inc.
Maxim Series Fund, - T. Rowe Price Equity/Income 464,415 516,525
Inc.
Maxim Series Fund, - U.S. Government Securities (29,483) 47,132
Inc.
American Century - VP Balanced 3,312 27,455
VP Funds
American Century - VP Capital Appreciation 1,401 12,712
VP Funds
</TABLE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
- -------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
AND INDEPENDENT AUDITORS' STATEMENT
<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, 1997, 1996, and 1995
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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
January 23, 1998
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS 1997 1996
- ------
-------------- ---------------
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value $2,151,476 and $ 2,082,716 $ 1,992,681
$2,041,064)
Available-for-sale, at fair value (amortized cost $6,541,422 6,698,629 6,206,478
and $6,151,519)
Common stock 39,021 19,715
Mortgage loans on real estate, net 1,235,594 1,487,575
Real estate, net 93,775 67,967
Policy loans 2,657,116 2,523,477
Short-term investments, available-for-sale (cost approximates 399,131 419,008
fair value)
-------------- ---------------
Total Investments 13,205,982 12,716,901
Cash 126,278 125,182
Reinsurance receivable 84,364 196,958
Deferred policy acquisition costs 255,442 282,780
Investment income due and accrued 165,827 198,441
Other assets 121,543 57,244
Premiums in course of collection 77,008 74,693
Deferred income taxes 193,820 214,404
Separate account assets 7,847,451 5,484,631
-------------- ---------------
TOTAL ASSETS $ 22,077,715 $ 19,351,234
============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
- ------------------------------------
-------------- ---------------
POLICY BENEFIT LIABILITIES:
Policy reserves $ 11,102,719 $ 11,022,595
Policy and contract claims 375,499 372,327
Policyholders' funds 165,106 153,867
Experience refunds 84,935 87,399
Provision for policyholders' dividends 62,937 51,279
GENERAL LIABILITIES:
Due to Parent Corporation 126,656 151,431
Repurchase agreements 325,538 286,736
Commercial paper 54,058 84,682
Other liabilities 605,032 488,818
Undistributed earnings on
participating business 141,865 133,255
Separate account liabilities 7,847,451 5,484,631
-------------- ---------------
Total Liabilities 20,891,796 18,317,020
-------------- ---------------
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, issued, and outstanding, 41,800 41,800
liquidation value of $20.90 per share
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 690,748 664,265
Unrealized gains (losses) on securities available-for-sale, net 52,807 14,951
Retained earnings 313,532 226,166
-------------- ---------------
Total Stockholder's Equity 1,185,919 1,034,214
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 22,077,715 $ 19,351,234
============== ===============
</TABLE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
------------- ------------- -------------
REVENUES:
<S> <C> <C> <C>
Annuity contract charges and premiums $ 115,054 $ 91,881 $ 79,816
Life, accident, and health premiums earned (net of
premiums
ceded (recaptured) totaling $(94,646), $(104,250)
and $60,880) 1,163,855 1,107,367 987,611
Net investment income 897,572 836,642 835,046
Net realized gains (losses) on investments 9,800 (21,078) 7,465
------------- ------------- -------------
2,186,281 2,014,812 1,909,938
------------- ------------- -------------
BENEFITS AND EXPENSES:
Life and other policy benefits (net of reinsurance
recoveries totaling $44,871, $52,675,
and $43,574) 543,903 515,750 557,469
Increase in reserves 245,811 229,198 98,797
Interest paid or credited to contractholders 527,784 561,786 562,263
Provision for policyholders' share of earnings
(losses)
on participating business 3,753 (7) 2,027
Dividends to policyholders 63,799 49,237 48,150
------------- ------------- -------------
1,385,050 1,355,964 1,268,706
Commissions 102,150 106,561 122,926
Operating expenses 419,616 336,719 314,810
Premium taxes 23,108 25,021 26,884
------------- -------------
-------------
1,929,924 1,824,265 1,733,326
INCOME BEFORE INCOME TAXES 256,357 190,547 176,612
------------- ------------- -------------
PROVISION FOR INCOME TAXES:
Current 103,794 77,134 88,366
Deferred (6,197) (21,162) (39,434)
------------- ------------- -------------
97,597 55,972 48,932
------------- ------------- -------------
NET INCOME $ 158,760 $ 134,575 $ 127,680
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
Net
Additional Unrealized
Preferred Stock Common Stock Paid-In Gains Retained
---------------------- ---------------------
Shares Amount Shares Amount Capital (Losses) Earnings Total
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 2,000,800 $ 121,800 7,032,000 $ 7,032 $ 657,265 $ (78,427) $ 69,561 $ 777,231
Change in net unrealized
gains (losses) 137,190 137,190
Dividends (48,980) (48,980)
Net income 127,680 127,680
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1995 2,000,800 121,800 7,032,000 7,032 657,265 58,763 148,261 993,121
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
Change in net unrealized
gains (losses) 37,856 37,856
Capital contributions 26,483 26,483
Dividends (71,394) (71,394)
Net income 158,760 158,760
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1997 2,000,800 $ 121,800 7,032,000 $ 7,032 $ 690,748 $ 52,807 $ 313,532 $ 1,185,919
========== ========== =========== ======== ========== =========== ========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
-------------- ------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 158,760 $ 134,575 $ 127,680
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain (loss) allocated to participating 3,753 (7) 2,027
policyholders
Amortization of investments 409 15,518 26,725
Realized losses (gains) on disposal of
investments
and provisions for mortgage loans and (9,800) 21,078 (7,465)
real estate
Amortization 46,929 49,454 49,464
Deferred income taxes (6,224) (20,258) (39,763)
Changes in assets and liabilities:
Policy benefit liabilities 498,114 358,393 346,975
Reinsurance receivable 112,594 136,966 (38,776)
Accrued interest and other receivables 30,299 24,778 (17,617)
Other, net 58,865 (8,076) 8,834
-------------- ------------- -------------
Net cash provided by operating 893,699 712,421 458,084
activities
-------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to-maturity
Sales 18,821
Maturities and redemptions 359,021 516,838 655,993
Available-for-sale
Sales 3,174,246 3,569,608 4,211,649
Maturities and redemptions 771,737 803,369 253,747
Mortgage loans 248,170 235,907 260,960
Real estate 36,624 2,607 4,401
Common stock 17,211 1,888
Purchases of investments:
Fixed maturities
Held-to-maturity (439,269) (453,787) (490,228)
Available-for-sale (4,314,722) (4,753,154) (4,932,566)
Mortgage loans (2,532) (23,237) (683)
Real estate (64,205) (15,588) (5,302)
Common stock (29,608) (12,113) (4,218)
-------------- ------------- -------------
Net cash used in investing (243,327) (127,662) (27,426)
activities
-------------- ------------- -------------
(Continued)
</TABLE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
------------- ------------- -------------
FINANCING ACTIVITIES:
<S> <C> <C> <C>
Contract withdrawals, net of deposits $ (577,538) $ (413,568) $ (217,190)
Due to Parent Corporation (19,522) 1,457 (9,143)
Dividends paid (71,394) (56,670) (48,980)
Net commercial paper repayments (30,624) (172) (4,832)
Net repurchase agreements (repayments) borrowings 38,802 (88,563) (191,195)
Capital contributions 11,000 7,000
------------- ------------- -------------
Net cash used in financing activities (649,276) (550,516) (471,340)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 1,096 34,243 (40,682)
CASH, BEGINNING OF YEAR 125,182 90,939 131,621
------------- ------------- -------------
CASH, END OF YEAR $ 126,278 $ 125,182 $ 90,939
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes $ 86,829 $ 103,700 $ 83,841
Interest 15,124 15,414 17,016
</TABLE>
See notes to consolidated financial statements. (Concluded)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996,
AND 1995 (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.
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 judgement is based on past loss experience, current
and projected economic conditions, and extensive situational
analysis of each individual loan. The measurement of impaired
loans is based on the fair value of the collateral.
<PAGE>
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
$44,298, $47,089, and $48,054 in 1997, 1996, and 1995, 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. and Orchard Series Fund, Inc., both
diversified, open-end management investment companies which are
affiliates of the Company, shares of other external mutual funds, or
government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and annuity policy
reserves with life contingencies of $5,741,596 and $5,242,753, at
December 31, 1997 and 1996, 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
$5,346,516 and $5,766,533, at December 31, 1997 and 1996, 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 $3,901,297 and $3,591,077 at December 31, 1997 and 1996,
respectively. Participating business approximates 50.5% and 50.3% of the
Company's ordinary life insurance in force and 91.1% and 92.2% of
ordinary life insurance premium income at December 31, 1997 and 1996,
respectively.
<PAGE>
The liability for undistributed earnings on participating business was
increased (decreased) by $8,610 and $(3,362) in 1997 and 1996, which
represented $3,753 and $(7) of gains (losses) on participating business,
increases (decreases) of $2,102 and $(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
increases (decreases) of $2,755 and $(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. 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 6.6%, 6.8%, and 7.2% in 1997, 1996,
and 1995.
Income Taxes - Income taxes are recorded using the asset and liability
approach which requires, among other provisions, the recognition of
deferred tax assets and liabilities for expected future tax consequences
of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, all
expected future events (other than the enactments or changes in the tax
laws or rules) are considered. 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 have a material affect on
the Company's financial statements.
<PAGE>
Derivatives - The Company makes limited use of derivative financial
instruments to manage interest rate, market, and foreign exchange risk.
Such hedging activity consists of interest rate swap agreements,
interest rate floors and caps, foreign currency exchange contracts and
equity swaps. The differential paid or received under the terms of these
contracts 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.
Interest rate swap agreements are used to convert the interest rate on
certain fixed maturities from a floating rate to a fixed rate. Interest
rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Interest rate floors and caps are interest
rate protection instruments that require the payment by a counter-party
to the Company of an interest rate differential. The differential
represents the difference between current interest rates and an
agreed-upon rate, the strike rate, applied to a notional principal
amount. Foreign currency exchange contracts are used to hedge the
foreign exchange rate risk associated with bonds denominated in other
than U.S. dollars. Equity swap transactions generally involve the
exchange of variable market performance of a basket of securities for a
fixed interest rate.
Although derivative financial instruments taken alone may expose the
Company to varying degrees of market and credit risk when used solely
for hedging purposes, these instruments typically reduce overall market
and interest rate risk. The Company controls the credit risk of its
financial contracts through credit approvals, limits, and monitoring
procedures. As the Company generally enters into transactions only with
high quality institutions, no losses associated with non-performance on
derivative financial instruments have occurred or are expected to occur.
2. RELATED-PARTY TRANSACTIONS
On June 30, 1997 the Company recaptured all remaining pieces of an
individual participating insurance block of business previously
reinsured to the Parent Corporation on December 31, 1992. The Company
recorded, at estimated fair value, the following at June 30, 1997 as a
result of this transaction:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's
Equity
------- -------------------------------
Cash $ 160,000 Policy reserves $ 155,798
Bonds 17,975 Due to parent corporation 9,373
Other 60 Deferred income taxes 2,719
Undistributed earnings on
participating business (855)
Stockholder's equity 11,000
----------- ----------
$ 178,035 $ 178,035
=========== ==========
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 118 Deferred income taxes 1,283
Undistributed earnings on
participating business (431)
Stockholder's equity 7,000
=========== ==========
$ 181,871 $ 181,871
=========== ==========
</TABLE>
<PAGE>
Effective January 1, 1997 all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. All related employee benefit plan assets and liabilities were
also transferred to the Company (see Note 9). The transfer did not have
a material effect on the Company's operating expenses as the costs
associated with the employees and the benefit plans were charged
previously to the Company under administrative service agreements
between the Company and the Parent Corporation.
Prior to January 1997, the Parent Corporation administered, distributed,
and underwrote business for the Company and administered the Company's
investment portfolio under various administrative agreements. As of
January 1, 1997, the Company performs these services for the U.S.
operations of the Parent Corporation. The following represents
allocations between the two companies for services provided pursuant to
these service agreements:
<TABLE>
Years Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Investment management revenue (expense) $ 801 $ (14,800) $ (15,182)
Administrative and underwriting revenue 6,292 (304,599) (301,529)
(payments)
</TABLE>
At December 31, 1997 and 1996, due to Parent Corporation includes $8,957
and $31,639 due on demand and $117,699 and $119,792 of notes payable
which bear interest and mature at various dates through December 31,
2005. 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
due on demand to the Parent Corporation bears interest at the public
bond rate (7.1% and 7.0% at December 31, 1997 and 1996, respectively)
while the remainder bear interest at various rates ranging from 6.6% to
9.5%.
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, 1997 and
1996, the reinsurance receivable had a carrying value of $84,364 and
$196,958, respectively.
Total reinsurance premiums assumed from the Parent Corporation were
$1,712, $1,693, and $1,606 in 1997, 1996, and 1995, respectively.
<PAGE>
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:
<TABLE>
Assumed
Ceded Primarily Percentage
Primarily From of Amount
to
Gross the Parent Other Net Assumed to
Amount Corporation Companies Amount Net
------------- ------------ ------------ ------------- -----------
December 31, 1997:
Life insurance in
force:
<S> <C> <C> <C> <C> <C>
Individual $ 24,598,679 $ 4,040,398 $ 3,667,235 $ 24,225,516 15.1%
Group 51,179,343 2,031,477 53,210,820 3.8%
------------- ------------ ------------ -------------
Total $ 75,778,022 $ 4,040,398 $ 5,698,712 $ 77,436,336
============= ============ ============ =============
Premiums:
Life insurance $ 361,093 $ (127,291)$ 19,923 $ 508,307 3.9%
Accident/health 628,398 32,645 59,795 655,548 9.1%
------------- ------------ ------------ -------------
Total $ 989,491 $ (94,646)$ 79,718 $ 1,163,855
============= ============ ============ =============
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
============= ============ ============ =============
<PAGE>
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
Investment income:
Fixed maturities and short-term $ 633,975 $ 601,913 $ 591,561
investments
Mortgage loans on real estate 118,274 140,823 171,008
Real estate 20,990 5,292 3,936
Policy loans 194,826 175,746 163,547
Other 22,119 3,321
--------------- --------------- --------------
990,184 927,095 930,052
Investment expenses, including
interest on amounts charged
by the Parent Corporation
of $9,758, $11,282, and $10,778 92,612 90,453 95,006
--------------- --------------- --------------
Net investment income $ 897,572 $ 836,642 $ 835,046
=============== =============== ==============
5. NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
Realized gains (losses):
Fixed Maturities $ 15,966 $ (11,624) $ 28,166
Mortgage loans on real estate 1,081 1,143 1,309
Real estate 363 (10)
Provisions (7,610) (10,597) (22,000)
--------------- --------------- ---------------
Net realized gains (losses) on $ 9,800 $ (21,078) $ 7,465
investments
=============== =============== ===============
<PAGE>
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1997 are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---------- --------- ---------- --------- ----------
Held-to-Maturity:
U.S. Treasury Securities
and obligations
of U.S. Government $ 25,883 $ 1,186 $ 25 $ 27,044 25,883
Agencies - Other:
Collateralized mortgage 5,006 174 5,180 5,006
obligations
Public utilities 245,394 11,214 3 256,605 245,394
Corporate bonds 1,668,710 57,036 3,069 1,722,677 1,668,710
Foreign governments 10,268 659 10,927 10,268
State and municipalities 127,455 1,588 129,043 127,455
--------- ---------- ---------
---------- ----------
$ 2,082,716 $ 71,857 $ 3,097 $ 2,151,476 2,082,716
Available-for-Sale:
U.S. Treasury Securities
and obligations
of U.S. Government
Agencies:
Collateralized $ 652,975 $ 17,339 $ 310 $ 670,004 670,004
mortgage obligations
Direct mortgage
pass-through
certificates 917,216 7,911 2,668 922,459 922,459
Other 297,337 1,794 244 298,887 298,887
Collateralized mortgage 682,158 19,494 1,453 700,199 700,199
obligations
Public utilities 549,435 8,716 1,320 556,831 556,831
Corporate bonds 3,265,039 107,740 4,350 3,368,429 3,368,429
Foreign governments 131,586 4,115 60 135,641 135,641
State and municipalities 45,676 503 46,179 46,179
----------
---------- --------- ---------- ---------
$ 6,541,422 $ 167,612 $ 10,405 $ 6,698,629 6,698,629
========== ========= ========== ========= ==========
<PAGE>
6. SUMMARY OF INVESTMENTS [Continued]
Fixed maturities owned at December 31, 1996 are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---------- --------- ---------- --------- ---------
Held-to-Maturity:
U.S. Treasury Securities
and obligations
of U.S. Government $ 10,935 $ 630 $ 106 $ 11,459 $ 10,935
Agencies - Other:
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 $ 658,612 $ 8,058 $ 3,700 $ 662,970 $ 662,970
mortgage obligations
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 614,773 13,619 3,553 624,839 624,839
obligations
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
========== ========= ========== ========= =========
</TABLE>
The collateralized mortgage obligations consist primarily of sequential
and planned amortization classes with final stated maturities of two to
thirty years and average lives of less than one to fifteen years.
Prepayments on all mortgage-backed securities are monitored monthly and
amortization of the premium and/or the accretion of the discount
associated with the purchase of such securities is adjusted by such
prepayments.
In November 1995, the Financial Accounting Standards Board issued a
special report entitled "A Guide to Implementation of Statement of
Financial Accounting Standards No. 115 (SFAS No. 115) on Accounting for
Certain Investments in Debt and Equity Securities". In accordance with
the adoption of this guidance, the Company reassessed the classification
of its investment portfolio in December 1995 and reclassed securities
totalling $2,119,814 from held-to-maturity to available-for-sale. In
connection with this reclassification, an unrealized gain, net of
related adjustments, of $23,449 was recognized in stockholder's equity
at the date of transfer.
See Note 8 for additional information on policies regarding estimated
fair value of fixed maturities.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1997, by projected maturity, are shown
below. Actual maturities will likely differ from these projections
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<PAGE>
<TABLE>
Held-to-Maturity Available-for-Sale
------------------------- -------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 286,088 $ 290,164 $ 447,703 $ 462,719
Due after one year through five 787,376 809,237 1,182,390 1,209,692
years
Due after five years through ten 718,818 751,753 842,019 865,153
years
Due after ten years 129,957 137,190 447,642 466,949
Mortgage-backed securities 5,006 5,180 2,252,349 2,292,662
Asset-backed securities 155,471 157,952 1,369,319 1,401,454
------------ -----------
=========== ============ ===========
$ 2,082,716 $ 2,151,476 $ 6,541,422 $ 6,698,629
============ =========== ============ ===========
</TABLE>
Proceeds from sales of securities available-for-sale were $3,174,246,
$3,569,608, and $4,211,649 during 1997, 1996, and 1995, respectively.
The realized gains on such sales totaled $20,543, $24,919, and $39,755
for 1997, 1996, and 1995, respectively. The realized losses totaled
$10,643, $40,748, and $15,516 for 1997, 1996, and 1995, respectively.
During 1997, 1996, and 1995 held-to-maturity securities with an
amortized cost of $0, $0, and $18,087 were sold due to credit
deterioration with insignificant realized gains and losses.
At December 31, 1997 and 1996, pursuant to fully collateralized
securities lending arrangements, the Company had loaned $162,817 and
$230,419 of fixed maturities, respectively.
The Company engages in hedging activities to manage interest rate and
exchange risk. The following table summarizes the 1997 financial hedge
instruments:
<TABLE>
Notional Strike/Swap
December 31, 1997 Amount Rate Maturity
--------------------------------- --------------- ---------------------- ---------------
<S> <C> <C> <C>
Interest Rate Floor $ 100,000 4.5% (LIBOR) 1999
Interest Rate Caps 565,000 6.75% to 11.82%(CMT) 1999 to 2002
Interest Rate Swaps 212,139 6.20% to 9.35% 01/98 to
02/2003
Foreign Currency Exchange 57,168 N/A 09/98 to
Contracts 07/2006
Equity Swap 100,000 5.64% 12/98
The following table summarizes the 1996 financial hedge instruments:
Notional Strike/Swap
December 31, 1996 Amount 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 6.20% to 9.35% 01/98 to
02/2003
Foreign Currency Exchange 61,012 N/A 09/98 to
Contracts 03/2003
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
</TABLE>
<PAGE>
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, 1997 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 with respect
to impaired loans:
<TABLE>
1997 1996
----------- -----------
<S> <C> <C> <C>
Loans with related allowance for credit losses of $2,493 and $ 13,193 $ 16,443
$2,793
Loans with no related allowance for credit losses 20,013 31,709
Average balance of impaired loans during the year 37,890 39,064
Interest income recognized [while impaired] 2,428 923
Interest income received and recorded [while impaired] using
the cash
basis method of recognition 2,484 1,130
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 $64,406, and $68,254 at December
31, 1997, and 1996, respectively.
The following table presents changes in the allowance for credit losses:
1997 1996 1995
---------------- ---------------- ----------------
Balance, beginning of year $ 65,242 63,994 $ 57,987 $
Provision for loan losses 4,521 4,470 15,877
Chargeoffs (2,521) (3,468) (10,480)
Recoveries 246 610
================ ================ ================
Balance, end of year $ 67,242 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, 1997, commercial
paper outstanding has maturities ranging from 41 to 99 days and interest
rates ranging from 5.6% to 5.8%. At December 31, 1996, maturities ranged
from 49 to 123 days and interest rates ranged from 5.4% to 5.6%.
<PAGE>
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all assets and
liabilities and hedge contracts considered to be financial instruments:
December 31,
-------------------------------------------------------
1997 1996
---------------------------- --------------------------
Estimated
Carrying Estimated Carrying Fair
Amount Fair Value Amount Value
------------ -------------- ----------- -------------
ASSETS:
Fixed maturities and
short-term
investments $ 9,180,476 $ 9,249,235 $ 8,618,167 $ 8,666,550
Mortgage loans on real 1,235,594 1,261,949 1,487,575 1,506,162
estate
Policy loans 2,657,116 2,657,116 2,523,477 2,523,477
Common stock 39,021 39,021 19,715 19,715
LIABILITIES:
Annuity contract reserves
without life 5,346,516 5,373,818 5,766,533 5,808,095
contingencies
Policyholders' funds 165,106 165,106 153,867 153,867
Due to Parent Corporation 126,656 124,776 151,431 154,479
Repurchase agreements 325,538 325,538 286,736 286,736
Commercial paper 54,058 54,058 84,682 84,682
HEDGE CONTRACTS:
Interest rate floor 25 25 62 124
Interest rate cap 130 130 173 173
Interest rate swaps 4,265 4,265 4,746 4,746
Foreign currency exchange 3,381 3,381 (8,954) (8,954)
contracts
Equity swaps 856 856
</TABLE>
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.
The estimated fair value of fixed maturities that are publicly traded
are obtained from an independent pricing service. To determine fair
value for fixed maturities not actively traded, the Company utilized
discounted cash flows calculated at current market rates on investments
of similar quality and term.
Mortgage loans fair value estimates generally are based on 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 $0 and $160 of unrealized losses in 1997 and 1996,
respectively. Included in the net loss position for foreign currency
exchange contracts are $0 and $8,954 of loss exposures in 1997 and 1996,
respectively.
9. EMPLOYEE BENEFIT PLANS
Effective January 1, 1997, all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. See Note 2 for further discussion.
The Company's defined benefit pension plan (pension plan) covers
substantially all of its employees. The benefits are based on years of
service, age at retirement, and the compensation during the last seven
years of employment. The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned
in the future. Investments of the pension plan are managed by the
Company and invested primarily in investment contracts and separate
accounts.
The Company's Parent had previously accounted for the pension plan under
the Canadian Institute of Chartered Accountants (CICA) guidelines and
had recorded a prepaid pension asset of $19,091. As generally accepted
accounting principles do not materially differ from CICA guidelines and
the transfer is between related parties, the prepaid pension asset was
transferred at cost. As a result, the Company recorded the following
effective January 1, 1997:
<TABLE>
<S> <C> <C>
Prepaid pension cost $ 19,091 Undistributed earnings $ 3,608
on
participating
business
Stockholder's equity 15,483
=============== ==============
$ 19,091 $ 19,091
=============== ==============
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 87, "Employers Accounting for Pensions" effective January 1, 1997,
immediately following the transfer. The following table sets forth the
pension plan's funded status and amounts at December 31, 1997, in
accordance with SFAS No. 87:
Actuarial present value of accumulated benefit obligation,
including vested benefits of $88,235 $ 91,387
Actuarial present value of projected benefit obligation
for service rendered to date 112,331
Plan assets at fair value 162,422
--------------
Plan assets in excess of projected benefit obligation 50,091
Unrecognized net (gain) loss from past experience
different from that assumed (8,595)
Unrecognized net obligation being recognized over 15 years (21,198)
--------------
Prepaid pension cost included in other assets $ 20,298
==============
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 7.0% and 4.5%, respectively.
<PAGE>
Components of net pension cost for the year ended December 31, 1997 were
as follows:
Service cost - benefits earned during the period $ 5,491
Interest accrued on projected benefit obligation 7,103
Return on plan assets (28,072)
Net amortization and deferral 14,271
---------------
Net pension benefit $ (1,207)
===============
The Company also sponsors a post-retirement medical plan (medical plan)
which provides health benefits to employees who have worked for 15 years
and attained age 65 while in service with the Company. The medical plan
is contributory and contains other cost sharing features which may be
adjusted annually for the expected general inflation rate. The Company's
policy will be to fund the cost of the medical plan benefits in amounts
determined at the discretion of management. The Plan as of January 1,
1997 was not funded. The Parent Company was not required under CICA
guidelines to record any liability related to the Plan.
Effective January 1, 1997, on the date of transfer, the Company has
adopted SFAS No. 106, "Post-retirement Benefits Other Than Pensions."
The Company has elected to delay recognition of the unfunded accumulated
post-retirement benefit obligation and has set up a transition
obligation to be amortized over 20 years.
The following table sets forth the medical plan status of December 31,
1997:
Accumulated post-retirement benefit obligation:
Retirees $ 4,985
Fully eligible active plan participants 2,438
Other active plan participants 12,031
---------------
19,454
Unrecognized net gain (loss) from past experience different from (1,500)
that assumed
Unrecognized net transition obligation at December 31, 1997,
being recognized over 20 years (15,352)
---------------
Accrued post-retirement benefit obligation included in other $ 2,602
liabilities
===============
For measurement purposes, a 7.5% annual rate of increase in the per
capita cost of covered health care benefits was assumed. The health care
cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend
rates by 1% in each year would increase the accumulated post-retirement
benefit obligation as of December 31, 1997 by $3,847.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.0%.
Components of net other post-retirement benefit cost for the year ended
December 31, 1997 were as follows:
Service cost - benefits earned during the year $ 1,158
Interest accrued on benefits obligation 1,191
Net amortization and deferral 808
---------------
Net other post-retirement benefit cost $ 3,157
===============
The Company sponsors a defined contribution 401(k) retirement plan which
provides eligible participants with the opportunity to defer up to 15%
of compensation. The Company matches 50% of the first 5% of participant
contributions. Company contributions for the year ended December 31,
1997 totalled $3,475.
</TABLE>
<PAGE>
10. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income tax rate
and the Company's effective rate:
<TABLE>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal tax rate 35.0 % 35.0 % 35.0 %
Change in tax rate resulting from:
Settlement of prior years tax (6.5) (4.7)
Provision for contingencies 8.4
Change in valuation allowance 0.8 (7.8)
Investment income not subject to (0.3) (1.0) (0.5)
federal tax
State and environmental taxes 0.6 0.7 0.7
Other, net 0.9 (1.4) 0.3
======== ======== ========
Total 38.1 % 29.4 % 27.7 %
======== ======== ========
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows:
1997 1996
-------------------------- --------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Asset Liability Tax Asset Liability
----------- ------------- ----------- -------------
Policyholder reserves 163,975 $ $ 151,239 $
Deferred policy acquisition 47,463 57,031
costs
Deferred acquisition cost 79,954 70,413
proxy tax
Investment assets 2,226 35,658
Net operating loss 9,427 12,295
carryforwards
Other 10,729 5,366
----------- ------------- ----------- -------------
Subtotal 255,582 58,192 274,971 57,031
Valuation allowance (3,570) (3,536)
=========== ============= =========== =============
Total Deferred Taxes 252,012 $ 58,192 $ 271,435 $ 57,031
=========== ============= =========== =============
</TABLE>
Amounts related to investment assets above include $30,085 and $8,530
related to the unrealized gains on the Company's fixed maturities
available-for-sale at December 31, 1997 and 1996, 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, 1997, the Company's subsidiaries have
approximately $26,934 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 $3,570 and $3,536
are included in the deferred tax assets at December 31, 1997 and 1996,
respectively.
The Company's valuation allowance was increased/(decreased) in 1997,
1996, and 1995 by $34, $1,463, and $(13,145), respectively, as a result
of the 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.
<PAGE>
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 1997 and 1996 results of operations include a release of
$47,750 and $25,600 from the provision, to reflect the resolution of
certain tax issues related to 1990 - 1991 and 1988 - 1989 audit years,
respectively, with the Internal Revenue Service (IRS). In addition, in
1997 the tax provision was increased for contingent items related to
open tax years. 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.
11. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are owned by
the Parent Corporation. The dividend rate on the Series A Stated Rate
Auction Preferred Stock (STRAPS) is 7.3% through December 30, 2002. The
Series A STRAPS are redeemable at the option of the Company on or after
December 29, 2002 at a price of $100,000 per share, plus accumulated and
unpaid dividends.
Through December 30, 1997, the Series B STRAPS had a dividend rate of
5.8%. Thereafter, short-term dividend periods of approximately 49 days
will be in effect. The dividend rate for each short-term dividend period
will be determined in accordance with a formula set out in the share
conditions. The Series B STRAPS are redeemable at the option of the
Company at the end of any short-term dividend period, 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's net income and capital and surplus, as determined in
accordance with statutory accounting principles and practices for
December 31 are as follows:
<TABLE>
1997 1996 1995
-------------- -------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Net Income $ 181,312 $ 180,634 $ 114,931
Capital and Surplus 759,429 713,324 653,479
</TABLE>
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, 1997 were $759,429 and $180,834 (unaudited), respectively. The
Company should be able to pay up to $180,834 (unaudited) of dividends in
1998.
Dividends of $8,854, $8,587, and $9,217, were paid on preferred stock in
1997, 1996, and 1995, respectively. In addition, dividends of $62,540,
$48,083, and $39,763, were paid on common stock in 1997, 1996 and 1995,
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>
C-10
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, 1997, the related statements of
operations for the year then ended, the statements of changes
in net asset for each of the two years in the period then
ended and the consolidated balance sheets for Great-West Life
& Annuity Insurance Company at December 31, 1997 and 1996 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, 1997, 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) The Underwriting Agreement is incorporated by reference
to Registrant's Post Effective Amendment No. 3 filed
April 24, 1997.
(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) Item (13) is incorporated by reference to registrant's
Post-Effective Amendment No. 3 to Form N-4 registration
statement filed on April 25, 1997.
(14) Not Applicable
<PAGE>
Item 25. Directors and Officers of the Depositor
Position and Offices
Name Principal Business Address with Depositor
James Balog 2205 North Southwinds Boulevard Director
Vero Beach, Florida 39263
James W. Burns, O.C. (4) Director
Orest T. Dackow (3) Director
Andre Desmarais (4) 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
Brian E. Walsh Veritas Capital Management LLC Director
115 Putnam Ave.
Greenwich, Connecticut
John A. Brown (3) Senior Vice-President,
Financial Services, Sales
Position and Offices
Name Principal Business Address with Depositor
Donna A. Goldin (2) Executive Vice-President,
and Chief Operating
Officer,
One Corporation
Mitchell T.G. Graye (3) Senior
Vice-President,
Chief Financial Officer
John T. Hughes (3) Senior Vice-President,
Chief Investment Officer
D. Craig Lennox (3) Senior Vice-President,
General Counsel and
Secretary
Dennis Low (3) Executive Vice-President,
Financial Services
Alan D. MacLennan (2) Executive Vice-President,
Employee Benefits
Steven H. Miller (2) Senior Vice-President,
Employee Benefits, Sales
James D. Motz (2) Executive Vice-President,
Employee Benefits
Charles P. Nelson (3) Senior Vice President,
Financial Services
Public Non-Profit Markets
Martin Rosenbaum (2) Senior Vice-President,
Employee Benefits,
Operations
Robert K. Shaw (3) Senior Vice-President,
Financial Services,
Individual Markets
Douglas L. Wooden (3) Executive Vice-President,
Financial Services
--------------------------------------
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal,
Quebec, Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal,
Quebec, Canada H2Y 2J3.
<PAGE>
Item 26. Persons controlled by or under common control with the Depositor or
Registrant
ORGANIZATIONAL CHART
Power Corporation of Canada
100% - Marquette Communications Corporation
100% - 171263 Canada Inc.
68.1% - Power Financial Corporation
77% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation 100% -
BenefitsCorp Equities, Inc.
100% - Greenwood Property Corporation
94% - Maxim Series Fund, Inc.*
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, 1998, there were 464 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
<TABLE>
Position and Offices
Name Principal Business Address with
Underwriter
<S> <C>
Charles P. Nelson (1) Director and President
Robert K. Shaw (1) Director
John Brown (1) Director
Gregg E. Seller 18101 Von Karman Ave. Vice President
Suite 1460 Major Accounts
Irvine, CA 92715
Jack Baker (1) Vice President, Licensing
and Contracts
Glen R. Derback (1) Treasurer
Grant R. Long (1) Manager, Qualified Plan
Compliance
Beverly A. Byrne (1) Secretary and Compliance
Officer
- ------------
</TABLE>
(1) 8515 E. Orchard Road, Englewood, Colorado 80111
(c) Commissions and other compensation received by Principal Underwriter
during Registrant's last fiscal year:
<TABLE>
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions
Compensation
<S> <C> <C> <C> <C>
BCE -0- -0- -0- -0-
</TABLE>
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 expected to be incurred, and
the risks assumed by GWL&A.
<PAGE>
S-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf, in the City of Denver, State
of Colorado, on this 6 day of April, 1998.
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 Registration Statement
has been signed by the following persons in the capacities with Great-West Life
& Annuity Insurance Company and on the dates indicated:
Signature and Title Date
/s/ Robert Gratton* April 6, 1998
Director and Chairman of the Board
(Robert Gratton)
/s/ William T. McCallum April 6, 1998
- --------------------------------------------- -------
Director, President and Chief Executive
Officer (William T. McCallum)
<PAGE>
Signature and Title Date
/s/ Glen R. Derback April 6, 1998
- ---------------------------------- -------
Vice President and Comptroller
(Glen R. Derback)
/s/ James Balog* April 6, 1998
Director, (James Balog)
/s/ James W. Burns* April 6, 1998
Director, (James W. Burns)
/s/ Orest T. Dackow* April 6, 1998
Director (Orest T. Dackow)
/s/ Andre Desmarais* April 6, 1998
Director Andre Desmarais
/s/ Paul Desmarais, Jr.* April 6, 1998
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham* April 6, 1998
Director (Robert G. Graham)
/s/ N. Berne Hart* April 6, 1998
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* April 6, 1998
Director (Kevin P. Kavanagh)
/s/ William Mackness* April 6, 1998
Director (William Mackness)
<PAGE>
Signature and Title Date
/s/ Jerry E.A. Nickerson* April 6, 1998
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield* April 6, 1998
Director (P. Michael Pitfield)
/s/ Michel Plessis Belair* April 6, 1998
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh* April 6, 1998
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox April 6, 1998 D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed under initial registration
statement on Form N-4; Post-Effective Amendment No. 14under the Investment
Company Act of 1940, as amended filed on January 23, 1998. Power of Attorney for
R.G. Graham is filed herein.
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R.G. Graham, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and Maxim Series Account, a separate
and distinct account of Great-West Life & Annuity Insurance Company governed
under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission ("SEC")
thereunder, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
SEC Form N-4 filings of Great-West Life & Annuity Insurance Company and Maxim
Series Account, and any and all amendments thereto, and I hereby ratify and
confirm that either said attorney and agent shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th, day of
February, 1998.
/s/ R.G. Graham
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/ Robin Graham
Name: Robin Graham
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON, LLP
<PAGE>
April 6, 1998
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 4 to the
Registration Statement on Form N-4 (File No. 33-82610) filed today by Great-West
Life & Annuity Insurance Company and Maxim Series Account 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 Boros Cicchetti Berenson & Johnson LLP
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 4 to Registration
Statement No. 33-82610 of Maxim Series Account of Great-West Life & Annuity
Insurance Company of our report dated February 12, 1998 on the financial
statements of Maxim Series Account and our report dated January 23, 1998 on the
financial statements of Great-West Life & Annuity Insurance Company 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 6, 1998
<PAGE>
EXHIBIT 10 (c)
WRITTEN CONSENT OF RUTH B. LURIE
<PAGE>
March 31, 1998
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Maxim Series Account of
Great-West Life & Annuity Insurance Company
Gentlemen:
I hereby consent to the use of my name under the caption "Legal Matters"
in the Prospectus for Maxim Series Account contained in Post-Effective Amendment
No. 4 to the Registration Statement on Form N-4 (File No. 33-82610) 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
