As filed with the Securities and Exchange Commission on April 28, 1999
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. 6 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 20 (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 April 30, 1999, pursuant to paragraph (b) of
Rule 485.
60 days after filing pursuant to paragraph (a)(1) of
Rule 485. On May 1, 1999 , 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.
Title of securities being registered: flexible premium deferred variable annuity
contracts
<PAGE>
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 Definitions
3. Synopsis Variable Annuity Fee Table; Key
Features of the Annuity
4. Condensed Financial Information Condensed Financial Information,
Appendix A
5. General Description of Registrant, Depositor and
Portfolio Companies Great-West Life & Annuity
Insurance Company; Maxim Series
Account; Eligible Funds; Voting
Rights
6. Deductions Charges and Deductions;
Distribution of the Contracts
7. General Description of Variable Annuity Contracts Key Features of the Annuity
8. Annuity Period Annuity Commencement Date; Annuity
Payment Options
9. Death Benefit Death Benefit
<PAGE>
FORM N-4 ITEM PROSPECTUS CAPTION
10 Purchases and Contract Value Key Features of the Annuity;
Applications and Contributions;
Annuity Account Value
11. Redemptions Cash Withdrawals, Payment Options;
Free Look
12. Taxes Federal Tax Matters
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>
Maximum Value Plan
An Individual flexible premium deferred variable annuity
Distributed by
BenefitsCorp Equities, Inc.
Issued by
Great-West Life & Annuity Insurance Company
<PAGE>
Overview
This prospectus describes the Maximum Value Plan--an individual flexible premium
deferred annuity contract issued by Great-West Life & Annuity Insurance Company
(we, us, Great-West or GWL&A). The Maximum Value Plan provides an annuity
insurance contract whose value is based on the investment performance of the
Investment Divisions that you select. When you participate in the Maximum Value
Plan you are issued a contract, to which we will refer throughout this
prospectus as the "Contract."
Who Should Invest
The Contract is designed for investors who are seeking long-term, tax-deferred
asset accumulation with a wide range of investment options. The Contract can be
used to provide an Individual Retirement Annuity (IRA) or for other long-term
investment purposes.
Allocating Your Money
You can allocate your money among 22 Investment Divisions of Maxim Series
Account. Each Investment Division invests all of its assets in one of 22
corresponding mutual funds (Eligible Funds). Each Eligible Fund is offered by
one of the following fund families: Maxim Series Fund, Inc., Fidelity Variable
Insurance Products II Fund,.You can also select a fixed option, in which case
your money will be allocated to a Guaranteed Sub-Account. Your interest in a
fixed option is not considered a security and is not subject to review by the
Securities and Exchange Commission.
Payment Options
The Contract offers a variety of annuity payment options. The annuity payment
options you select may be payable on a fixed, variable or a combination basis.
Under a variable annuity payment option, annuity payments will continue to
reflect the investment performance of the Investment Divisions you select.
Payments can be guaranteed for your lifetime, your spouse's and/or
beneficiaries' lifetime or for a specified period of time, depending on your
needs and circumstances.
For more information, please contact:
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
800-228-8706
This Prospectus presents important information you should read before purchasing
the Contract. Please read it carefully and retain it for future reference. You
can find more detailed information about the Contract in the Statement of
Additional Information (SAI) dated April 30, 1999, which has been filed with the
Securities and Exchange Commission. The S AI is incorporated by reference into
this prospectus, which means that it is legally a part of this prospectus. The
SAI may be obtained without charge by contacting Great-West at the above address
or phone number, or, by visiting the Securities and Exchange Commission's web
site at www.sec.gov.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is April 30, 1999.
<PAGE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. No dealer, salesperson or other person
is authorized to give any information or make any representations in connection
with this offering other than those contained in this prospectus, and if given
or made, such other information or representations must not be relied upon.
The contract is not available in all states.
2
<TABLE>
Table of Contents
<S> <C>
Definitions..............................................................................................3
Key Features of the Contract.............................................................................5
Fee Table................................................................................................6
Eligible Fund Annual Expenses...................................................................7
Examples........................................................................................8
Condensed Financial Information..........................................................................9
Great-West Life & Annuity Insurance Company and the Series Account.......................................9
The Eligible Funds......................................................................................10
Application and Initial Contributions...................................................................13
Ongoing Contributions...................................................................................13
Annuity Account Value...................................................................................13
Transfers...............................................................................................14
Automatic Custom Transfers.....................................................................14
Telephone/Internet Transactions................................................................15
Cash Withdrawals........................................................................................16
Death Benefit...........................................................................................17
Charges and Deductions..................................................................................18
Payment Options...........................................................................................20
Periodic Payments..............................................................................20
Annuity Payments........................................................................................21
Annuity Commencement Date......................................................................21
Annuity Options................................................................................21
Annuity Payment Options........................................................................22
Variable Annuity Payment Provisions............................................................22
Federal Tax Matters.....................................................................................23
Assignments or Pledges..................................................................................26
Performance Data........................................................................................26
Distribution of the Contracts...........................................................................28
Voting Rights...........................................................................................28
Year 2000...............................................................................................29
Rights Reserved by Great-West...........................................................................29
Adding and Discontinuing Investment Options.............................................................30
Substitution of Investments.............................................................................30
Legal Matters...........................................................................................30
Available Information...................................................................................30
Appendix A: Condensed Financial Information............................................................31
Appendix B: Net Investment Factor Calculation..........................................................34
</TABLE>
<PAGE>
3
<PAGE>
4
Definitions
Accumulation Period
The period between the Effective Date and the Annuity Commencement Date. During
this period, you are contributing money to the Contract.
Accumulation Unit
An accounting measure used to determine your Variable Account Value during the
Accumulation Period.
Administrative Offices
The administrative offices of Great-West located at 8515 East Orchard Road,
Englewood, Colorado 80111.
Annuitant
The person named in the application upon whose life the payment of an annuity is
based and who will receive annuity payments. Unless you elect otherwise the
Owner will be the Annuitant.
Annuity Commencement Date
The date payments begin under an annuity payment option.
Annuity Account
An account established by us in your name that reflects all account activity
under the Contract.
Annuity Account Value
The sum of the Variable and Guaranteed Sub-Accounts less any withdrawals,
amounts applied to an annuity option, periodic payments, charges deducted under
the Contract and any applicable Premium Tax.
Annuity Payment Period
The period beginning on the Annuity Commencement Date during which we make
annuity payments.
Annuity Unit
An accounting measure used to determine the amount of each variable annuity
payment after the first annuity payment is made.
Automatic Contribution Plan
A plan which allows you to make automatic scheduled Contributions to the
Contract. Contributions will be withdrawn from a designated pre-authorized
account and automatically credited to your Annuity Account.
Beneficiary
The person(s) designated by you to receive any death benefit which may become
payable under the Contract.
Contributions
Amounts you pay to purchase a Contract.
Contingent Owner
The person who becomes entitled to all rights and benefits under the Contract
when the Owner dies, if there is no Joint Owner, as long as the Annuitant is
living.
Effective Date
The date on which the initial Contribution is credited to your Annuity Account.
Eligible Fund
A mutual fund in which an Investment Division invests all of its assets.
Guaranteed Account Value
The sum of the values of the Guaranteed Sub-Accounts credited to the Owner under
the Annuity Account.
Guaranteed Sub-Account
The sub-division(s) of the Annuity Account to which your fixed account
allocations are credited. You receive a fixed rate of return on amounts
allocated to a Guaranteed Sub-Account. Your interest in a fixed option is not
considered a security and is not subject to review by the Securities and
Exchange Commission.
Individual Retirement Annuity
An annuity contract used in a retirement savings program that is intended to
satisfy the requirements of Section 408 of the Internal Revenue Code of 1986.
Investment Division
The Series Account is divided into Investment Divisions, one for each Eligible
Fund. You select one or more Investment Divisions to which you allocate Contract
value - your allocated Contract value will reflect the investment performance of
the corresponding Eligible Funds.
Owner (Joint Owner) or You
The person(s) named in the application who is entitled to exercise all rights
and privileges under the Contract. Joint Owners must be husband and wife on the
date the Contract is issued. The Annuitant will be the Owner unless otherwise
indicated in the application. If a Contract is purchased as an IRA, the Owner
and the Annuitant must be the same individual and no Joint Owner may be named.
Premium Tax
The amount of tax, if any, charged by a state or other governmental authority in
connection with your Contract.
Request
Any request either written, by telephone, or computerized which is in a form
satisfactory to Great-West and received at our Administrative Offices.
Series Account
The segregated investment account established by Great-West to provide the
funding options for the Contract. It is registered as a unit investment trust
under the Investment Company Act of 1940 and consists of the individual
Investment Divisions.
Surrender Charge
A charge you pay upon withdrawing all or a portion of your Annuity Account
Value. This charge is assessed as a percentage of the amount withdrawn based on
the number of years you have held the Contract.
Surrender Value
The Annuity Account Value less any applicable Surrender Charge, less any
applicable Premium Tax, on the effective date of the surrender.
Transaction Date
The date on which any Contribution or Request from you will be processed.
Contributions and Requests received after the close of the New York Stock
Exchange (generally 4:00 p.m. ET) will be deemed to have been received on the
next business day. Requests will be processed and the Variable Account Value
will be determined on each day that the New York Stock Exchange is open for
trading. On the day after Thanksgiving, however, you can only submit Requests
for transactions by automated voice response unit or by fully automated computer
link.
Transfer
When you move your Annuity Account Value between and among the Investment
Division(s) and/or the Guaranteed Sub-Account(s).
Valuation Date
A date on which we calculate the value of the Investment Divisions. This
Calculation is made as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. ET). The day after Thanksgiving is a Valuation Date.
Variable Account Value
The total value of your Variable Sub-Accounts. This is based on the amounts you
have allocated to the Investment Divisions and will reflect the investment
performance of the Eligible Funds, less all applicable charges and taxes.
Variable Sub-Accounts
An account we maintain for you that reflects the value credited to you from an
Investment Division.
<PAGE>
8
<PAGE>
Key features of the Contract
Following are some of the key features of the Contract. These topics are
discussed in more detail throughout the prospectus so please be sure to read
through it carefully.
How to Invest
You must complete an application and pay by check or through an Automatic
Contribution Plan.
The minimum initial Contribution is:
o $5,000
o $2,000 if an IRA
The minimum ongoing Contribution is:
o $500
o $50 if made via Automatic Contribution Plan
Allocation of Your Contributions
Your initial Contribution and any subsequent Contributions will be allocated to
the Investment Divisions based on the instructions you provide in the
application. You can change your allocation instructions at any time by Request.
Free Look Period
The Contract provides for a "free look" period which allows you to cancel your
Contract generally within 10 days (30 days for replacement policies) of your
receipt of the Contract. You can cancel the Contract during the free look period
by delivering or mailing the Contract to our Administrative Offices. The
cancellation is not effective unless we receive a notice which is postmarked
before the end of the free look period. If the Contract is returned, the
Contract will be void from the start and all Contributions, less surrenders, and
withdrawals, will be refunded to you.
A Wide Range of Investment Choices
The Contract gives you an opportunity to select among twenty-two different
Investment Divisions. Each Investment Division invests in shares of an Eligible
Fund. The Eligible Funds cover a wide range of investment objectives.
The distinct investment objectives and policies of each Eligible Fund are fully
described in the individual fund prospectuses. You can obtain the prospectus for
any Eligible Fund by contacting Great-West.
The portion of your Annuity Account Value allocated to an Investment Division
will vary with the investment performance of that Investment Division. You bear
the entire investment risk for all amounts invested in the Investment
Division(s). Your Annuity Account Value could be less than the total amount of
your Contributions.
Charges and Deductions Under the Contract You pay the following charges under
the Contract:
- An annual contract maintenance charge
- A mortality and expense risk charge
You may also have to pay:
- A Surrender Charge (if you withdraw Annuity Account Value within 7 years
after purchasing the Contract)
- A Premium Tax (depending on your state of residence)
In addition, you pay for management fees and other expenses relating to the
Eligible Funds.
Making Transfers
You may Transfer among the Investment Divisions and between the Investment
Divisions and the Guaranteed Sub-Account(s) as often as you likeprior to the
Annuity Commencement Date. There are certain restrictions on Transferring from a
Guaranteed Sub-Account to the Investment Divisions.
Full and Partial Withdrawals
You may withdraw all or part of your Annuity Account Value before the earlier of
the Annuity Commencement Date or the Annuitant's or Owner's death.
Withdrawals may be taxable and if made prior to age 59 1/2 , may be subject to a
10% federal tax early withdrawal penalty.
There is no limit on the number of withdrawals you can make, however, the
withdrawals may be subject to a Surrender charge.
Payment Options
A wide range of annuity options are available to provide flexibility in choosing
an annuity payment schedule that meets your needs. Payments may be made on a
variable, fixed or combination basis. Under a variable payment arrangement, the
annuity payments you receive continue to reflect the performance of the
Investment Divisions you select.
Death Benefit
The amount of the death benefit, if payable before the Annuity Commencement
Date, and before age 75, will be the greater of: o the Annuity Account Value on
the date of death, less any applicable Premium Tax; or o the sum of
Contributions paid, less any withdrawals or periodic payments, and any
applicable Premium
Tax.
The amount of death benefit payable before the Annuity Commencement Date, and
after age 75 will be the amount of the Annuity Account Value on the date of
death, less any applicable Premium Taxes.
<PAGE>
Fee Table
The purpose of this table and the examples that follow is to assist you in
understanding the various costs and expenses that you will bear directly or
indirectly when investing in the Contract. The table and examples reflect
expenses related to the Investment Divisions and the Eligible Funds.
Contract Owner transaction expenses
Sales load None
Surrender Charge 7% maximum
Transfer fee None
Annual contract maintenance charge $27.00
Investment Division annual expenses
(as a percentage of average Variable Sub-Account assets)
Mortality and expense risk charge 1.25%
<PAGE>
Eligible Fund annual expenses
<TABLE>
Eligible Fund annual expenses
(as a percentage of Eligible Fund net assets, before waivers and reimbursements)
Portfolio Management fees Other Total Eligible Fund
expenses expenses
<S> <C> <C> <C>
Maxim INVESCO ADR 1.00% .30% 1.30%
Maxim INVESCO Small-Cap Growth .95% .15% 1.10%
Maxim Small-Cap Index .60% 0% .60%
Maxim Ariel Small-Cap Value1 1.00% .27% 1.27%
Maxim T. Rowe Price MidCap Growth 1.00% .05% 1.05%
Maxim Ariel Mid-Cap Value .95% .07% 1.02%
American Century VP Capital Appreciation 1.00% 0% 1.00%
Maxim Founders Blue Chip 1.00% .15% 1.15%
Maxim Growth Index .60% 0% .60%
Maxim Stock Index .60% 0% .60%
Maxim T. Rowe Price Equity/Income .80% .08% .88%
Maxim Value Index .60% 0% .60%
Fidelity VIP II Contrafund2 .59% .11% .70%
Maxim INVESCO Balanced 1.00% 0% 1.00%
Maxim Loomis-Sayles Corporate Bond .90% 0% .90%
Maxim Bond .60% 0% .60%
Maxim U.S. Government Securities .60% 0% .60%
Maxim Money Market .46% 0% .46%
Aggressive Profile+ .25% 0% .25%
Moderately Aggressive Profile+ .25% 0% .25%
Moderate Profile+ .25% 0% .25%
Moderately Conservative Profile+ .25% 0% .25%
MaximConservative Profile+ .25% 0%
.25%
Minimum Total Maxim Series Fund Maximum Total Maxim Series Fund
Annual Expenses* Annual Expenses**
Aggressive Profile 1.13% 1.47%
Moderately Aggressive Profile 1.06% 1.41%
Moderate Profile 1.00% 1.32%
Moderately Conservative Profile .98% 1.23%
Conservative Profile .85% 1.11%
</TABLE>
+ Each Profile Portfolio will invest primarily in shares of other Maxim
Portfolios ("Underlying Portfolios"). Therefore, each Profile Portfolio will
bear its pro rata share of the fees and expenses incurred by the Underlying
Portfolios in addition to its own 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.
1 When taking voluntary reimbursements and waivers into account, the fees of the
Maxim Ariel Small Cap Value Portfolio were1.26%.
2 A portion of the brokerage commissions was used to reduce the Fund's expenses.
In addition theFund has entered into arrangements with its custodian whereby
credits realized, as a result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, the Total Eligible Fund Expenses
presented in the table would have been .66% for the Fidelity VIP II Contrafund.
<PAGE>
EXAMPLES
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:
<TABLE>
- ------------------------------------------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment Divisions 1 Year 3 Year 5 Year 10 Year
Maxim Money Market $90.05 $112.87 $139.73 $256.00
Maxim Bond, Maxim Stock Index, Maxim U.S. Government $91.40 $117.25 $147.65 $275.09
Securities, Maxim Value Index, Maxim Growth Index
and Maxim Small-Cap Index
Maxim Ariel MidCap Value $95.41 $130.27 $171.11 $330.76
Maxim INVESCO Small-Cap Growth $96.18 $132.74 $175.52 $341.11
American Century VP Capital Appreciation and Maxim $95.22 $129.66 $170.00 $328.17
INVESCO Balanced
Maxim Ariel Small-Cap $97.70 $137.64 $184.29 $361.55
Maxim INVESCO ADR $98.08 $138.87 $186.47 $366.61
Maxim T. Rowe Price Equity/Income $94.08 $125.95 $163.34 $312.46
Maxim Loomis-Sayles Corporate Bond $94.27 $126.57 $164.46 $315.09
Maxim Founders Blue Chip $96.65 $134.27 $178.27 $347.53
Maxim T.Rowe Price MidCap Growth $95.70 $131.20 $172.76 $334.65
Aggressive Profile * $98.08 $138.87 $186.47 $366.61
Moderately Aggressive Profile* $97.42 $136.72 $182.65 $357.74
Moderate Profile * $96.75 $134.58 $178.82 $348.81
MaximModerately Conservative Profile * $96.27 $133.04 $176.07 $342.39
MaximConservative Profile * $95.03 $129.04 $168.89 $325.56
Fidelity VIP II Contrafund $91.97 $119.12 $151.04 $283.18
- ------------------------------------------------------ --------------- --------------- --------------- ---------------
If you do not take a distribution from your Contract, or if you elect to take
annuity payments at the end of the applicable time period, you would pay the
following expenses on a $1,000 investment, assuming a 5% annual return:
- ------------------------------------------------------ --------------- --------------- --------------- ---------------
Investment Divisions 1 Year 3 Year 5 Year 10 Year
Maxim Money Market $17.80 $57.88 $104.58 $256.00
Maxim Bond, Maxim Stock Index, Maxim U.S. Government $19.24 $62.49 $112.75 $275.09
Securities, Maxim Value Index, Maxim Growth Index
and Maxim Small-Cap Index
Maxim Ariel MidCap Value $23.56 $76.20 $136.93 $330.76
Maxim INVESCO Small-Cap Growth $24.38 $78.79 $141.47 $341.11
American Century VP Capital Appreciation and Maxim $23.36 $75.55 $135.79 $328.17
INVESCO Balanced
Maxim Ariel Small-Cap Value $26.02 $83.96 $150.52 $361.55
Maxim INVESCO ADR $26.43 $85.25 $152.77 $366.61
Maxim T. Rowe Price Equity/Income $22.13 $71.65 $128.92 $312.46
Maxim Loomis-Sayles Corporate Bond $22.33 $72.30 $130.07 $315.09
Maxim Founders Blue Chip $240 $80.41 $144.31 $347.53
Maxim T. Rowe Price MidCap Growth $23.87 $77.18 $138.63 $334.65
Aggressive Profile* $26.43 $85.25 $152.77 $366.61
Moderately Aggressive Profile* $25.72 $82.99 $148.83 $357.74
Moderate Profile * $25.00 $80.73 $144.87 $348.81
Moderately Conservative Profile * $24.49 $79.12 $142.04 $342.39
Conservative Profile* $23.15 $74.90 $134.65 $325.56
Fidelity VIP II Contrafund $19.86 $64.46 $116.23 $283.18
</TABLE>
*The average of the minimum and maxim total eligible fund expenses are used in
calculating these examples for the Maxim Profile Portfolios.
These examples, including the performance rate assumed, should not be considered
representations of past or future performance or expenses. Actual performance
achieved or expenses paid may be greater or less than that shown.
42
Condensed Financial Information Attached as Appendix A is a table showing
selected information concerning Accumulation Units for each Investment Division.
The Accumulation Unit values do not reflect the deduction of certain charges
that are subtracted from your Annuity Account Value, such as the Contract
Maintenance Charge. The information in the table is included in the Series
Account's financial statements, which have been audited by Deloitte & Touche
LLP, independent auditors. To obtain a fuller picture of each Investment
Division's finances and performance, you should also review the Series Account's
financial statements, which are contained in the SAI.
Great-West Life & Annuity Insurance Company and the Series Account Great-West
Life & Annuity Insurance Company Great-West is a stock life insurance company
originally organized under the laws of the state of Kansas as the National
Interment Association. Its name was changed to Ranger National Life Insurance
Company in 1963 and to Insuramerica Corporation prior to changing to its current
name in 1982. In September of 1990, Great-West re-domesticated and is now
organized under the laws of the state of Colorado.
Great-West is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in the District
of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam and 49 states in the
United States.
Great-West is an indirect wholly-owned subsidiary of
The Great-West Life Assurance Company ("Great-West
Life"). Great-West Life is a subsidiary of
Great-West Lifeco Inc., a holding company.
Great-West Lifeco Inc. is in turn a subsidiary of
Power Financial Corporation, a financial services
company. Power Corporation of Canada, a holding and
management company, has voting control of Power
Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies which he
controls, has voting control of Power Corporation of
Canada.
The Series Account
Great-West originally established the Series Account under Kansas law on June
24, 1981. The Series Account now exists under Colorado law as a result of our
redomestication. The Series Account consists of the Investment Divisions and is
registered with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940. This registration does not
involve supervision of the management of the Series Account or Great-West by the
Securities and Exchange Commission.
We do not guarantee the investment performance of the Investment Divisions. The
portion of your Annuity Account Value allocated to the Investment Divisions and
the amount of variable annuity payments depend on the investment performance of
the Eligible Funds. Thus, the Owner bears the full investment risk for all
Contributions allocated to the Investment Divisions.
The Series Account and its Investment Divisions are administered and accounted
for as part of the general business of Great-West. However, the income, capital
gains, or capital losses of each Investment Division are credited to or charged
against the assets held in that Investment Division without regard to other
income, capital gains or capital losses of any other Investment Division and
without regard to any other business Great-West may conduct. Under Colorado law,
the assets of the Series Account are not chargeable with liabilities arising out
of any other business Great-West may conduct. Nevertheless, all obligations
arising under the Contracts are generally corporate obligations of Great-West.
The Series Account currently has twenty-two Investment Divisions available for
allocation of Contributions. Each Investment Division invests in shares of one
Eligible Fund. If we decide to make additional Investment Divisions available to
Owners of the Contracts, we may or may not make them available to you based on
our assessment of marketing needs and investment conditions.
The Eligible Funds
Each Eligible Fund is a separate mutual fund having its own investment
objectives and policies. The investment performance of one Eligible Fund has no
effect on the investment performance of any other Eligible Fund.
Each Eligible Fund is registered with the Securities and Exchange Commission as
an open-end management investment company or portfolio thereof. The Securities
and Exchange Commission does not supervise the management or the investment
practices and policies of any of the Eligible Funds.
Some of the Funds have been established by investment advisers which manage
publicly traded mutual funds having similar names and investment objectives.
While some of the Eligible Funds may be similar to, and may in fact be modeled
after publicly traded mutual funds, you should understand that the Eligible
Funds are not otherwise directly related to any publicly traded mutual fund.
Consequently, the investment performance of publicly traded mutual funds and any
corresponding Eligible Funds may differ substantially.
The following sets forth the investment objective of each Eligible Fund and
summarizes its principal investment strategy:
Maxim Series Fund, Inc.
Maxim Money Market Portfolio seeks as high a level of current income as is
consistent with the preservation of capital and liquidity. Investment in the
Maxim Money Market Portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the portfolio
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in this portfolio.
Maxim Bond Portfolio seeks maximum total return consistent with the preservation
of capital. This portfolio invests primarily in bonds issued by the U.S.
Government and its agencies and by domestic or foreign corporations.
Maxim Stock Index Portfolio seeks investment results that track the total return
of the common stocks that comprise Standard & Poor's (S&P) 500 Composite Stock
Price Index and the S&P Mid-Cap Index, weighted according to their respective
pro-rata shares of the market.1
Maxim U.S. Government Securities Portfolio seeks the highest level of return
consistent with preservation of capital and substantial credit protection. This
portfolio invests at least 65% of its total assets in securities issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities.
Maxim Small-Cap Index Portfolio seeks investment results that track the total
return of the common stocks that comprise the S&P Small-Cap 600 Stock Index.1
Maxim Ariel Mid-Cap Value Portfolio seeks long-term capital appreciation. This
portfolio will invest primarily in equity securities of mid-cap companies which
are believed to be undervalued but demonstrate a strong potential for growth.
Maxim INVESCO Balanced Portfolio seeks high total return on investment through
capital appreciation and current income. This portfolio invests 50% to 70% in
common stocks and at least 25% in fixed income securities.
Maxim INVESCO Small-Cap Growth Portfolio seeks to achieve long-term capital
growth. This portfolio will invest primarily 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.
Maxim INVESCO ADR Portfolio seeks a high total return through capital
appreciation and current income, while reducing risk through diversification.
This portfolio invests primarily in foreign securities that are issued in the
form of American Depositary Receipts ("ADRs") or foreign stocks that are
registered with the Securities and Exchange Commission and traded in the U.S.
Maxim T. Rowe Price Equity/Income Portfolio seeks substantial dividend income
and also capital appreciation. This portfolio invests primarily in
dividend-paying common stocks of established companies.
Maxim Loomis-Sayles Corporate Bond Portfolio seeks high total investment return
through a combination of current income and capital preservation. This portfolio
will invest at least 65% of its total assets in corporate debt securities of any
maturity. It may also invest up to 20% of its total assets in preferred stocks
or foreign securities and up to 35% in below investment grade quality
securities.
Maxim Ariel Small-Cap Value Portfolio seeks long term capital appreciation, by
investing primarily in small-cap common stocks. This portfolio will emphasize
small companies that are believed to be undervalued.
Maxim Value Index Portfolio seeks investment results that track the total return
of the common stocks that comprise the Russell 1000 Value Index.2
Maxim Growth Index Portfolio seeks investment results that track the total
return of the common stocks that comprise the Russell 1000 Growth Index.2
Maxim Founders Blue Chip Portfolio seeks long-term growth of capital and income.
This portfolio invests primarily in common stocks of large, well established,
stable and mature companies, commonly known as "Blue Chip" companies.
Maxim T. Rowe Price MidCap Growth Portfolio seeks long-term appreciation. This
portfolio will invest primarily in a diversified portfolio of mid-cap companies
emphasizing companies whose earnings are expected to grow at a faster rate than
the average mid-cap company.
Profile Portfolios
Each of the following five Profile Portfolios seeks to provide an asset
allocation program designed to meet certain investment goals based on an
investor's risk tolerance.
Aggressive Profile Portfolio seeks long-term capital appreciation primarily
through investments in other portfolios of Maxim Series Fund that emphasize
equity investments.
Moderately Aggressive Profile Portfolio seeks long-term capital appreciation
primarily through investments in other portfolios of Maxim Series Fund that
emphasize equity investments, though income is a secondary consideration.
Moderate Profile Portfolio seeks long-term capital appreciation primarily
through investments in other portfolios of Maxim Series Fund with a relatively
equal emphasis on equity and fixed income investments.
Moderately Conservative Profile Portfolio seeks capital appreciation primarily
through investments in other portfolios of Maxim Series Fund that emphasize
fixed income investments, and to a lesser degree equity investments
Conservative Profile Portfolio seeks capital
preservation primarily through investments in other
Maxim Series Fund, Inc. portfolios that emphasize
fixed income investments.
American Century Variable Portfolios, Inc. American Century VP Capital
Appreciation, seeks capital growth. The fund will seek to achieve its investment
objective by investing primarily in common stocks that are considered by
management to have better-than-average prospects for appreciation. This
portfolio is closed to new investments.
Fidelity Variable Insurance Products II Fund Fidelity VIP II Contrafund seeks
long-term capital appreciation by investing primarily in common stocks. The fund
invests its assets in securities of companies whose value its investment advisor
believes is not fully recognized by the public.
Eligible Fund Investment Advisers
Maxim Series Fund, Inc. is advised by GW Capital
Management, LLC. ("GW Capital") 8515 E. Orchard
Road, Englewood, Colorado 80111, a wholly owned
subsidiary of Great-West.
American Century Variable Portfolios, Inc. is
advised by American Century Investment Management,
Inc. American Century Tower, 4500 Main Street,
Kansas City, Missouri, 64111.
Fidelity Variable Insurance Products II Fund is advised by Fidelity Management &
Research Company, 2 Devonshire Street, Boston Massachusetts 02109.
Maxim Series Fund Sub-Advisers
GW Capital hires sub-advisers to manage the investment and reinvestment of the
assets of some of the portfolios of Maxim Series Fund. These sub-advisers are
subject to the review and supervision of G.W. Capital and the board of
directors of Maxim Series Fund.
Ariel Capital Corporation is the sub-adviser to the
Maxim Ariel Mid-Cap Value Portfolio and the Maxim Ariel
Small-Cap Value Portfolio. Ariel is located at 307
N. Michigan Avenue, Chicago, Illinois 60601.
Founders Asset Management, LLC. is the sub-adviser
of the Maxim Founders Blue Chip Portfolio. Founders
is located at 2930 East Third Avenue. Denver, CO
80206.
INVESCO Capital Management, Inc. is the sub-adviser
to the Maxim INVESCO ADR Portfolio. INVESCO Capital
Management, Inc. is located at 1315 Peachtree
Street, Atlanta, Georgia 30309.
INVESCO Funds Group, Inc. is the sub-adviser of the
Maxim INVESCO Small-Cap Growth Portfolio and the
Maxim INVESCO Balanced Portfolio. INVESCO Trust
Company is located at 7800 E. Union Avenue, Denver,
Colorado 80237.
Loomis, Sayles & Company, LP ("Loomis Sayles") is the sub-adviser to the Maxim
Loomis Sayles Corporate Bond Portfolio. Loomis Sayles is located at One
Financial Center, Boston, Massachusetts 02111.
T. Rowe Price Associates, Inc. is the sub-adviser to
the Maxim T. Rowe Price Equity/Income Portfolio and
the Maxim T. Rowe Price MidCap Growth Portfolio. T.
Rowe Price is located at 100 East Pratt Street,
Baltimore, Maryland 21202.
Meeting Investment Objectives Meeting investment objectives depends on various
factors, including, but not limited to, how well the Eligible Fund advisers
anticipate changing economic and market conditions. There is no guarantee that
any of these Eligible Funds will achieve their stated investment objectives.
Reinvestment
All dividend and capital gain distributions made by an Eligible Fund will be
automatically reinvested in shares of the Eligible Fund on the date of the
distribution.
Where to Find More Information About the Eligible Funds Additional information
about the Eligible Funds can be found in the current prospectuses for the
Eligible Funds, which can be obtained by calling Great-West at 800-228-8706, or
by writing to Great-West's Administrative Offices, 8515 East Orchard Road,
Englewood, Colorado 80111. The Eligible Funds' prospectuses should be read
carefully before you make a decision to invest in an Investment Division.
Application and Contributions
The first step to purchasing the Contract is to fill out your application. When
you submit it, you must make your initial Contribution of:
o $5,000
o $2,000 if an IRA
All Contributions should be made by check (payable to Great-West) or via an
Automatic Contribution Plan.
An Automatic Contribution Plan allows you to make automatic scheduled
Contributions. Contributions will be withdrawn from a designated pre-authorized
bank account and automatically credited to your Annuity Account.
If your application is complete and your check for the initial Contribution is
included (or you have made your initial Contribution via the Automatic
Contribution Plan), your Contract will be issued. Your initial Contribution will
be credited within two business days after receipt at Great-West's
Administrative Offices. Acceptance is subject to our receiving sufficient
information in a form acceptable to us and we reserve the right to reject any
application or Contribution.
If your application is incomplete, Great-West will contact you by telephone to
obtain the required information. If your application remains incomplete for five
business days, we will return to you the application and the initial
Contribution unless you consent to our retaining the initial Contribution and
crediting it as soon as we have your completed application.
During the 10 day (or longer where required by law) free look period you may
cancel your Contract. During the free look period, all Contributions will be
allocated according to your written allocation instructions specified in the
application.
Any returned Contracts will be void from the start and all Contributions
received less any withdrawals, will be refunded to you.
If you exercise the free look privilege, you must return the Contract to
Great-West's Administrative Offices. We must receive it in person or postmarked
prior to the end of the free look period.
Ongoing Contributions
You can make additional Contributions at any time
prior to the Annuity Commencement Date, as long as
the Annuitant is living. Additional Contributions
must be at least:
o $500 or
o $50 if made via an Automatic Contribution
Plan.
You may make total Contributions in excess of $1,000,000 with our prior
approval.
Great-West reserves the right to modify the limitations set forth in this
section.
Annuity Account Value
Before the Annuity Commencement Date, your Annuity Account Value is the total
value of your Variable and Guaranteed Sub-Accounts.
Before the Annuity Commencement Date, the Variable Account Value is the total
dollar amount of all Accumulation Units credited to you. When you allocate
Contributions to an Investment Division we credit you with Accumulation Units.
We determine the number of Accumulation Units credited to you by dividing your
Contribution to an Investment Division by that Investment Division's
Accumulation Unit value. We determine the Accumulation Unit value on each
Valuation Date.
We calculate each Investment Division's Accumulation Unit value at the end of
each valuation period by multiplying the value of that unit at the end of the
prior valuation period by the Investment Division's Net Investment Factor for
the valuation period. The formula used to calculate the Net Investment Factor is
set forth in Appendix B. Your Variable Account Value reflects the value of the
Accumulation Units credited to you in each Investment Division.
The value of an Investment Division's assets is determined at the end of each
Valuation Date. A valuation period is the period between two successive
Valuation Dates. On the day after Thanksgiving, transactions submitted other
than by KeyTalk(R), or through the Internet will not be processed.
Your Variable Account Value will reflect the investment performance of the
selected Investment Division(s) which in turn reflect the investment performance
of the corresponding Eligible Funds, which we factor in by using the Net
Investment Factor referred to above.
Transfers
In General
Prior to the Annuity Commencement Date you may Transfer all or part of your
Annuity Account Value among and between the Variable and Guaranteed Sub-Accounts
by telephone, by sending a Request to Great-West's Administrative offices, by
calling KeyTalk(R) - the voice response unit at 1-800-701-8255, or through the
Internet at www.benefitscorp.com.
Your Request must specify:
o the amounts being Transferred,
o the Investment Division(s) or Guaranteed
Sub-Account(s) from which the Transfer is to be
made, and
o the Investment Division(s) or Guaranteed
Sub-Account(s) that will receive the Transfer.
o If a Transfer Request is received by Great-West within 30 days of the
Annuity Commencement Date, Great-West may delay the Annuity Commencement
Date by up to 30 days.
Currently, there is no limit on the number of Transfers you can make among the
Investment Divisions each calendar year. However, we reserve the right to limit
the number of Transfers you make. There is no charge for Transfers.
A Transfer will be effective on the Transaction Date.
A Transfer from the Guaranteed Sub-Account shall be subject to any limitations
or charges set forth in the Contract.
Possible Restrictions
We reserve the right without prior notice to modify, restrict, suspend or
eliminate the Transfer privileges (including telephone and Internet Transfers)
at any time. Transfer restrictions may be necessary to protect investors from
the negative effect large and/or numerous Transfers can have on portfolio
management. Moving large amounts of money may also cause a substantial increase
in Eligible Fund transaction costs which must be borne by you.
Although you are permitted to make Transfers by telephone, or via the Internet,
we reserve the right to require that each Transfer Request be made by a separate
communication to us. We also reserve the right to request that each Transfer
Request be submitted in writing and be signed by you. Transfer Requests by fax
will not be accepted. Transfers among the Investment Divisions may also be
subject to terms and conditions imposed by the Eligible Funds.
Automatic Custom Transfers
Dollar Cost Averaging
Dollar cost averaging allows you to make systematic Transfers from one
Investment Division to another Investment Division. It does not assure a greater
profit, or any profit, and will not prevent or necessarily alleviate losses in a
declining market. It does, however, allow you to buy more units when the price
is lower and fewer units when the price is higher. Over time, your average cost
per unit may be more or less than if you invested all your money at one time.
You can set up automatic dollar cost averaging on the following frequency
periods: monthly, quarterly, semi-annually or annually. Your Transfer will be
initiated on the Transaction Date you select, one frequency period following the
date of the Request. For example, if we receive a Request for quarterly
Transfers on January 9, your first Transfer will be made on April 9 (or the
following business day, as applicable) and every three months thereafter on the
9th. Transfers will continue on that same day each interval unless terminated by
you or for other reasons as set forth in the Contract. There will be no
additional cost for using dollar cost averaging.
If there are insufficient funds in the applicable Variable Sub-Account on the
date your Transfer is scheduled, your Transfer will not be made. However, your
dollar cost averaging Transfers will resume once there are sufficient funds in
the applicable Variable Sub-Account. Dollar cost averaging will terminate
automatically when you start taking payments from the annuity.
Dollar cost averaging Transfers must meet the following conditions:
o The minimum amount that can be Transferred out of an Investment Division is
$100 per month.
o You must: (1) specify the dollar amount to be Transferred, (2) designate
the Investment Division(s) to which the Transfer will be made, and (3) the
percent of the dollar amount to be allocated to each Investment Division
into which you are Transferring money.
You may terminate dollar cost averaging at any time.
Great-West reserves the right to modify, suspend or terminate dollar cost
averaging at any time and for any reason.
Rebalancer
Because the value of your Variable Sub-Accounts will fluctuate with the
investment performance of the Investment Divisions, your asset allocation
percentages may become out of balance over time. Rebalancer allows you to
automatically reallocate your Variable Account Value to maintain your desired
asset allocation. Participation in Rebalancer does not assure a greater profit,
or any profit, nor will it prevent or necessarily alleviate losses in a
declining market.
You can set up Rebalancer as a one-time Transfer or on a quarterly, semi-annual
or annual basis. If you select to rebalance only once, the Transfer will take
place on the Transaction Date of the Request.
If you select to rebalance on a quarterly, semi-annual or annual basis, the
first Transfer will be initiated on the Transaction Date one frequency period
following the date of the Request. For example, if we receive a Request for
quarterly Transfers on January 9, your first Transfer will be made on April 9
(or the following business day, as applicable) and every three months thereafter
on the 9th. Transfers will continue on that same day each interval unless
terminated by you or for other reasons as set forth in the Contract. There will
be no additional cost for using Rebalancer.
On a Rebalancing Transaction Date your money will be automatically reallocated
among the Investment Divisions based on your allocation instructions. You can
change your allocation instructions at any time by Request. The Rebalancer
option will terminate automatically when you start taking payments from the
annuity.
Rebalancer Transfers must meet the following conditions:
o Your entire Variable Account Value must be
included.
o You must specify the percentage of your Variable Account Value you'd like
allocated to each Investment Division and the frequency of rebalancing. You
may modify the allocations or stop the Rebalancer option at any time, by
Request.
You may not participate in dollar cost averaging and Rebalancer at the same
time.
Great-West reserves the right to modify, suspend, or terminate the Rebalancer
option at any time and for any reason.
Telephone/Internet Transactions
You may make Transfer Requests by telephone by using KeyTalk(R) or via the
Internet at www.benefitscorp.com.
We will use reasonable procedures in monitoring and accepting Transfer Requests
such as requiring certain identifying information, tape recording telephone
instructions, and providing written confirmation of a transaction. Telephone
instructions we reasonably believe to be genuine will be your financial
responsibility.
We reserve the right to suspend these privileges at any time, for some or all
Contracts, and for any reason. Withdrawals are not permitted by telephone.
Cash Withdrawals
You may withdraw all or part of your Annuity Account Value at any time during
the life of the Annuitant and prior to the Annuity Commencement Date by
submitting a withdrawal Request to Great-West's Administrative Offices.
Withdrawals are subject to the rules below; and federal and state tax laws may
also apply. The amount payable to you if you withdraw all of your Annuity
Account Value is your Annuity Account Value, less any applicable Surrender
Charge on the effective date of the withdrawal (and any applicable Premium Tax).
The following terms apply to withdrawals:
o No withdrawals may be made after the
Annuity Commencement Date.
o If you Request a partial withdrawal, your Annuity Account Value will be
reduced by the dollar amount Requested (any applicable Surrender Charge
would be subtracted from the amount Requested).
o Partial withdrawals are unlimited. However, you must specify the
Sub-Account(s) from which the withdrawal is to be made, otherwise your
Request will not be processed.
o If your remaining Annuity Account Value, after any partial withdrawal, is
less than $2,000, then we may, at our discretion require you to withdraw
the entire amount.
o If a partial withdrawal is made within 30 days prior to the Annuity
Commencement Date, we may delay the Annuity Commencement Date by 30 days.
o Proceeds will generally be paid in one lump sum within 7 days of the
Transaction Date, though payment of proceeds may be delayed for a period in
excess of 7 days as permitted by the 1940 Act.
Withdrawal Requests must be in writing. If your instructions aren't clear, your
Request will be denied and your withdrawal will not be processed.
After a withdrawal of all of your total Annuity Account Value, or at any time
that your Annuity Account Value is zero, all your rights under the Contract will
terminate.
Tax Consequences of Withdrawals
Withdrawals made for any purpose may be taxable. If your Annuity Account Value
exceeds your investment in the Contract, then you may be subject to income tax
on withdrawals made from your Annuity Account. Additionally, the Internal
Revenue Code states that a 10% penalty tax may be imposed on the taxable
portions of certain early withdrawals.
The Internal Revenue Code generally requires us to withhold federal income tax
from withdrawals and report the withdrawals to the IRS. However, you will be
entitled to elect, in writing, not to have tax withholding apply unless
withholding is mandatory for your Contract. Withholding applies to the portion
of the withdrawal which is included in your income and subject to federal income
tax. The tax withholding rate is 10% of the taxable amount of the withdrawal.
Withholding applies only if the taxable amount of the withdrawal is at least
$200. Some states also require withholding for state income taxes.
If you are interested in this Contract as an IRA, please refer to Section 408 of
the Internal Revenue Code of 1986, as amended, for limitations and restrictions
on cash withdrawals.
Death Benefit
Death Benefit Payments--After Annuity Commencement Date If the Annuitant dies
after the Annuity Commencement Date and before the entire interest has been
distributed, payments will continue to the Beneficiary under the payment option
applicable to the Annuitant on the Annuitant's date of death. The Beneficiary
cannot change the method of distribution in effect on the date of the
Annuitant's death or elect a new payment option.
Death Benefit Payments--Before Annuity Commencement Date If the Owner of the
Contract or the named Annuitant dies before the Annuity Commencement Date, a
death benefit may be payable. The rules applicable in various circumstances are
described below.
Death of Owner-Annuitant Before the Annuity Commencement Date If an
Owner-Annuitant dies before the Annuity Commencement Date, and if the surviving
spouse of the Owner-Annuitant is the sole Beneficiary, then the surviving spouse
will become the new Owner and Annuitant and the Contract will continue in force.
If the Owner-Annuitant dies before the Annuity Commencement Date and the
surviving spouse of the Owner-Annuitant is not the sole Beneficiary, then the
Company will pay the death benefit under the Contract to the Beneficiary.
Death of Non-Annuitant Owner Before the Annuity Commencement Date If the Owner
of the Contract who is not the Annuitant dies before the Annuity Commencement
Date, the Company will pay the death benefit described under the Contract as
follows:
(a) First, to the surviving Joint
Owner.
(b) If there is no surviving Joint
Owner, then to the Contingent
Owner.
(c) If there is no Contingent Owner, then to the Annuitant.
If the Owner's surviving spouse is the person entitled to receive benefits upon
the Owner's death, the surviving spouse shall be treated as the Owner and will
be allowed to continue the Contract. Death of Non-Owner Annuitant Before the
Annuity Commencement Date If a Non-Owner Annuitant dies before the Annuity
Commencement Date, the Company will pay the death benefit under the Contract to
the Beneficiary.
Death Benefit Computation and Procedure If the Owner-Annuitant, Non-Annuitant
Owner, or Non-Owner Annuitant dies before the Annuity Commencement Date and
before reaching age 75, the death benefit will be the greater of:
o the Annuity Account Value as of the date
of death, less any applicable Premium
Tax; or
o the sum of Contributions paid, less partial withdrawals and
periodic payments, less any applicable Premium Tax.
If the Owner-Annuitant, Non-Annuitant Owner, or Non-Owner Annuitant dies before
the Annuity Commencement Date, but after reaching age 75, the death benefit will
be the Annuity Account Value as of the date of death, less any applicable
Premium Tax. No Surrender Charge will apply to the amounts payable to a
Beneficiary.
The death benefit proceeds payable to a Beneficiary will remain invested in
accordance with the allocation instruction given by the Owner until either:
o new allocation instructions are
requested by the Beneficiary; or
o the death benefit is actually paid to
the Beneficiary
The death benefit will become payable following receipt by the Company of the
Beneficiary's request. Unless otherwise specified by the Owner prior to the
Annuitant's death, the Beneficiary may elect, within 60 days after proceeds are
payable, to receive:
o payment in a single sum; or
o payment under any of the payment options
provided under the Contract.
o Any payment of benefits under the Contract
must satisfy the requirements of the Internal
Revenue Code and any other applicable federal
or state laws, rules or regulations. All
distributions of death benefits upon a Contract
Owner's death before the Annuity Commencement
Date (or upon the death of a Non-Owner
Annuitant if the Owner is a non-individual
entity, such as a trust or estate) must be made
pursuant to IRCss.72(s). These requirement
are met if the entire amount is paid on or
before December 31 of the year containing the
fifth anniversary of the Owner's death. This
rule, called the 5-year rule, always applies to
payments due to non-individual entities.
However, if the person entitled to receive
payments required under IRCss.72(s) is an
individual, the 5-year rule will not apply if
an election is made to begin taking
substantially equal periodic payments no later
than one year after the Owner's death.
Payments may be paid over a period not
exceeding the life or life expectancy of such
person.
Beneficiary
You may select one or more Beneficiaries. If more than one Beneficiary is
selected, unless you indicate otherwise, they will share equally in any death
benefit payable.
You may, at any time, while the Annuitant is living, change the Beneficiary by
Request. A change of Beneficiary will take effect as of the date the Request is
processed by Great-West's Administrative Offices, unless a certain date is
specified by the Owner. If the Owner dies before the Request is processed, the
change will take effect as of the date the Request was made, unless we have
already made a payment or otherwise taken action on a designation or change
before receipt or processing of such Request. A Beneficiary designated
irrevocably may not be changed without the written consent of that Beneficiary,
except as allowed by law.
The interest of any Beneficiary who dies before the Owner or the Annuitant will
terminate at the death of the Beneficiary. The interest of any Beneficiary who
dies at the time of, or within 30 days after, the death of an Owner or the
Annuitant will also terminate if no benefits have been paid to such Beneficiary,
unless the Owner otherwise indicates by Request. The benefits will then be paid
as though the Beneficiary had died before the deceased Owner or Annuitant. If no
Beneficiary survives the Owner or Annuitant, as applicable, we will pay the
death benefit proceeds to the Owner's estate.
Charges and Deductions
No amounts will be initially deducted from your Contributions except for any
applicable Premium Tax. As a result, the full amount of your Contributions (less
any applicable Premium Tax) is invested based on your allocation instructions.
You pay the following charges under the Contract:
o a Contract Maintenance Charge, and
o a mortality and expense risk charge.
You may also pay:
o as a Surrender Charge (only for withdrawals
within the first 7 Contract years), and
o deductions for Premium Tax (only if applicable depending on your state of
residence).
You also bear the expenses of the Eligible Funds.
Contract Maintenance Charge
Prior to the Annuity Commencement Date, you will pay a $27 annual Contract
Maintenance Charge from your Annuity Account Value. This charge partially covers
our costs for administering the Contracts and the Series Account.
The Contract Maintenance Charge is deducted on a proportionate basis from all
your Variable and Guaranteed Sub-Accounts.
Mortality and Expense Risk Charge We deduct a Mortality and Expense Risk Charge
from your Variable Sub-Account(s) for our assumption of certain mortality and
expense risks under the Contract.
o The mortality risks assumed by us arise from our contractual obligations to
make annuity payments determined in accordance with the Contract.
o The expense risk assumed is the risk that our actual expenses in
administering the Contract and the Series Account will be greater than
anticipated.
This is a daily charge equal to an effective annual rate of 1.25% of the value
of your Variable Sub-Account(s). We guarantee that this charge will never
increase beyond 1.25%.
The Mortality and Expense Risk Charge is reflected in the unit values of the
Variable Sub-Accounts. This charge will continue to be applicable should you
choose a variable annuity payment option or a periodic payment option.
Premium Tax
We may be required to pay state Premium Taxes currently ranging from 0% to 3.5%
in connection with Contributions or values under the Contracts. Depending upon
applicable state law, we will deduct charges for the Premium Taxes we incur with
respect to your Contributions, from amounts withdrawn, or from amounts applied
on the Annuity Commencement Date.
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 Great-West in
these states when Premium Taxes are incurred.
Surrender Charge
We deduct a Surrender Charge for certain partial or
total withdrawals. The Surrender Charge will cause
the amount received to be less than the amount
requested for withdrawal. A Surrender Charge "Free
Amount" may be applied in some circumstances.
o The Surrender Charge "Free Amount" is an
amount against which the Surrender Charge will
not be assessed.
o The Free Amount is equal to 10% of the
Annuity Account Value at December 31 of the
previous calendar year.
o Only one Free Amount is available in each
calendar year.
o The Free Amount will be applied to the first withdrawal made in each year.
If the Free Amount is not exhausted with the first withdrawal any remainder
is lost for that year.
We will not deduct the Surrender Charge in the
following instances:
o you Request an annuity option with a
payment period of at least 36 months; or
o you Request a periodic payment option (in
accordance with the applicable periodic payment
restrictions); or
o the withdrawal is due to a medical condition requiring your confinement to
an eligible nursing home for 90 consecutive days.
The Surrender Charge is equal to the percentage of the amount distributed less
the Free Amount based on the table below:
Contract Years Completed Percentage of Distribution
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
Expenses of the Eligible Funds
The net asset value of the Eligible Funds reflect the deduction of the Eligible
Funds' fees and deductions. You bear these costs indirectly when you allocate to
an Investment Division.
Other Taxes
Under present laws, we will incur state or local taxes (in addition to the
Premium Tax described above) in several states. No charges are currently made
for taxes other than Premium Tax. However, we reserve the right to deduct
charges in the future for federal, state, and local taxes or the economic burden
resulting from the application of any tax laws that we determine to be
attributable to the Contracts.
Payment Options
Periodic Payments
You may Request that all or part of the Annuity Account Value be applied to a
periodic payment option.
In Requesting periodic payments, you must elect:
o The payment frequency of either 12-, 6-, 3- or 1-month intervals o A payment
amount--a minimum of $50 is required o The calendar day of the month on which
payments will be made o One payment option
o The allocation of payments from the Variable and/or Guaranteed
Sub-Account(s) as follows: 1) Prorate the amount to be paid across all
variable and Guaranteed Sub-Accounts in proportion to the assets in each
sub-account; or 2) Select the Investment Division(s)from which payments
will be made. Once the Investment Division(s) have been depleted,
Great-West will automatically prorate the remaining payments unless you
Request the selection of another Investment Division(s).
While periodic payments are being received:
o You may continue to exercise all contractual rights that are available
prior to electing a payment option, except that no Contributions may be
made.
o You may keep the same investment options as were in force before periodic
payments began.
o Charges and fees under the Contract continue to apply.
o The Surrender Charge does not apply to the periodic payments. However, if a
partial surrender is made during the time you participate in periodic
payments, a Surrender Charge and other Contract charges, as applicable,
will be deducted and the Free Amount will not apply.
Periodic payments will cease on the earlier of:
o the date the amount elected to be paid under the option selected has been
reduced to zero.
o the Annuity Account Value is zero.
o You Request that withdrawals stop.
o You or the Annuitant die.
Periodic Payment Options
If you choose to receive payments from your Contract through periodic payments,
you must select from the following payment options.
Option 1--Income for a specified period (at least 36 months)
You elect the length of time over which payments will be made. The amount paid
will vary based on the duration you choose.
Option 2--Income of a specified amount (at least 36 months)
You elect the dollar amount of the payments. Based on the amount elected, the
duration may vary.
Option 3 -Interest Only
The payments will be based on the amount of the interest credited to the
Guaranteed Sub-Account(s) between each payment. Available only if 100% of the
account value is invested in the Guaranteed Sub-Account.
Option 4 --Minimum distribution
If you are using this Contract as an IRA, you may Request minimum distributions
as specified under Internal Revenue Code Section 401(a)(9).
Option 5 - Any Other Form (at least 36 months)
Any other form of periodic payment which is acceptable to Great-West.
If periodic payments cease, you may resume making Contributions, at which time
the Surrender Charge Free Amount will be in effect. However, we may limit the
number of times you may restart a periodic payment program.
Periodic payments made for any purpose may be taxable, subject to withholding
and to the 10% penalty tax. IRAs are subject to complex rules with respect to
restrictions on and taxation of distributions, including penalty taxes. A
competent tax adviser should be consulted before a periodic payment option is
Requested.
Annuity Payments
Annuity Commencement Date
You choose the date you'd like annuity payments to start when you purchase the
Contract. The Annuity Commencement Date and options available for IRAs may be
controlled by endorsements, or applicable law.
You may change your Annuity Commencement Date at any time prior to 30 days
before an Annuity Commencement Date you already selected. If you have not
elected a payment option within 30 days of the Annuity Commencement Date, the
portion of your Annuity Account Value held in the Guaranteed Sub-Account(s) will
be paid out as a fixed life annuity with a guarantee period of 20 years. The
Annuity Account Value held in the Variable Sub-Account(s) will be paid out as a
variable life annuity with a guarantee period of 20 years
Under the Internal Revenue Code, a Contract purchased and used in connection
with an Individual Retirement Account is subject to complex "minimum
distribution" requirements. Minimum distribution requirements require
distributions to begin under such a plan by a specific date, and that the entire
interest must be distributed within certain specified periods. The application
of the minimum distribution requirements vary according to your age and other
circumstances. If you're using this annuity as an IRA, you should consider
consulting a competent tax adviser regarding the application of the minimum
distribution requirements.
Annuity Options
You can choose your annuity payment option either when you purchase the Contract
or at a later date. You can change your selection at any time up to 30 days
before an Annuity Commencement Date you previously selected.
The amount to be paid out is the Annuity Account Value on the Annuity
Commencement Date. The minimum amount that may be withdrawn from the Annuity
Account Value to purchase an annuity payment option is $2,000. If your Annuity
Account Value is less than $2,000, we may pay the amount in a single sum subject
to the Contract provisions applicable to a cash withdrawal.
Payments to be made under the annuity payment option you select must be at least
$50. We reserve the right to make payments using the most frequent payment
interval which produces a payment of at least $50. The maximum amount that may
be applied under any payment option is $1,000,000, unless prior approval is
obtained from us.
For annuity options involving life income, the actual age and/or sex of the
Annuitant will affect the amount of each payment. We reserve the right to ask
for satisfactory proof of the Annuitant's age. We may delay annuity payments
until satisfactory proof is received. Since payments to older Annuitants are
expected to be fewer in number, the amount of each annuity payment under a
selected annuity form will be greater for older Annuitants than for younger
Annuitants.
If the age of the Annuitant has been misstated, the payments established will be
made on the basis of the correct age. If payments were too large because of
misstatement, the difference with interest may be deducted by us from the next
payment or payments. If payments were too small, the difference with interest
may be added by us to the next payment. This interest is at an annual effective
rate which will not be less than the Guaranteed Interest Rate.
Annuity Payment Options
Option 1--Income of specified amount
(Available as fixed payments only)
The amount applied under this option may be paid in equal annual, semi-annual,
quarterly or monthly installments in the dollar amount elected for not more than
240 months.
Option 2--Income for a specified period
(Available as fixed payments only)
Payments are paid annually, semi-annually, quarterly or monthly, as elected, for
a selected number of years not to exceed 240 months.
Option 3--Life annuity with guaranteed period
This option provides annual, semi-annual, quarterly or monthly payments during a
guaranteed period or for the lifetime of the Annuitant, whichever is longer. The
guaranteed period may be 5, 10, 15 or 20 years. This option is available on
either a variable or fixed dollar payment basis.
Option 4--Life annuity
This option provides for annual, semi-annual, quarterly or monthly payments
during the lifetime of the Annuitant. The annuity terminates with the last
payment due prior to the death of the Annuitant. Since no minimum number of
payments is guaranteed, this option may offer the maximum level of monthly
payments. It is possible that only one payment may be made if the Annuitant died
before the date on which the second payment is due. This option is available on
either a variable or fixed dollar payment basis.
Option 5 - Any other form
Any other form of fixed or variable annuity payment which is acceptable to
Great-West.
Variable Annuity Payment Provisions
Amount of first payment
The first payment under a variable annuity payment option will be based on the
value of the amounts held in each Variable Sub-Account on the 5th valuation date
preceding the Annuity Commencement Date. It will be determined by applying the
appropriate rate to the amount applied under the payment option.
Annuity units
The number of Annuity Units paid for each Variable Sub-Account is determined by
dividing the amount of the first monthly payment by its Annuity Unit Value on
the 5th valuation date preceding the date the first payment is due. The number
of Annuity Units used to calculate each payment for a Variable Sub-Account
remains fixed during the Annuity Payment Period.
Amount of payments after the first payment
After the first payment, future payments will vary depending upon the investment
experience of the Variable Sub-Accounts. The subsequent amount paid from each
sub-account is determined by multiplying (a) by (b) where (a) is the number of
sub-account Annuity Units to be paid and (b) is the sub-account Annuity Unit
value on the 5th valuation date preceding the date the annuity payment is due.
The total amount of each variable annuity payment will be the sum of the
variable annuity payments for each Variable Sub-Account. We guarantee that the
dollar amount of each payment after the first will not be affected by variations
in expenses or mortality experience.
Transfers after the Annuity Commencement Date
Once annuity payments have begun, no Transfers may be made from a fixed annuity
payment option to a variable annuity payment option, or vice versa. However, for
variable annuity payment options, Transfers may continue to be made among the
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 Variable Sub-Account to which the Transfer is made. The
result will be that the next annuity payment, if it were made at that time,
would be the same amount that it would have been without the Transfer.
Thereafter, annuity payments will reflect changes in the value of the new
Annuity Units.Other restrictions Once payments start under the annuity form you
select:
o no changes can be made in the annuity form,
o no additional Contributions will be accepted under the Contract and
o no further withdrawals, other than withdrawals made to provide annuity
benefits, will be allowed.
A portion or the entire amount of the annuity payments may be taxable as
ordinary income. If, at the Annuity Commencement Date, we have not received a
proper written election not to have federal income taxes withheld, we must by
law withhold such taxes from the taxable portion of such annuity payments and
remit that amount to the federal government (an election not to have taxes
withheld is not permitted for certain Contracts). State income tax withholding
may also apply. Please see "Federal Tax Matters" for details.
Federal Tax Matters
Introduction
The following discussion is a general description of federal income tax
considerations relating to the Contract and is not intended as tax advice. This
discussion assumes that the Contract qualifies as an annuity contract for
federal income tax purposes. This discussion is not intended to address the tax
consequences resulting from all situations. If you are concerned about these tax
implications you should consult a competent tax adviser before initiating any
transaction.
This discussion is based upon our understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of the continuation of the present
federal income tax laws or of the current interpretations by the Internal
Revenue Service. Moreover, no attempt has been made to consider any applicable
state or other tax laws.
The Contract may be purchased on a non-tax qualified basis ("Non-Qualified
Contract") or purchased and used in connection with IRAs. The ultimate effect of
federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefit to you, the Owner, or the Beneficiary, may depend on
the type of Contract, and on the tax status of the individual concerned. In
addition, certain requirements must be satisfied in purchasing an IRA and
receiving distributions from an IRA in order to continue receiving favorable tax
treatment. As a result, purchasers of IRAs should seek competent legal and tax
advice regarding the suitability of the Contract for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of the
Contract. The following discussion assumes that an IRA is purchased with
proceeds and/or Contributions that qualify for the intended special federal
income tax treatment.
Taxation of Annuities
In General
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. You, as a "natural person" will not generally be taxed on increases (if
any) in the value of your Annuity Account Value until a distribution occurs by
withdrawing all or part of the Annuity Account Value (for example, withdrawals
or annuity payments under the annuity payment form elected). However, under
certain circumstances, you may be subject to taxation currently. In addition, an
assignment, pledge, or agreement to assign or pledge any portion of the Annuity
Account Value generally will be treated as a distribution. The taxable portion
of a distribution (in the form of a single sum payment or an annuity) is taxable
as ordinary income. An IRA Contract may not be assigned as collateral.
If you are not a natural person (e.g. a corporation), you generally must include
in income any increase in the excess of the Annuity Account Value over the
"investment in the contract" (discussed below) during each taxable year. The
rule does not apply where the non-natural person is the nominal owner of a
Contract and the beneficial owner is a natural person.
The rule also does not apply in the following circumstances:
o Where the annuity Contract is acquired by the estate of a decedent.
o Where the Contract is held under an IRA.
o Where the Contract is a qualified funding asset for a structured
settlement.
o Where the Contract is purchased on behalf of an employee upon termination of a
qualified plan.
If you are a non-natural person, you may wish to discuss these matters with a
competent tax adviser.
The following discussion generally applies to a Contract owned by a natural
person.
Withdrawals
In the case of a withdrawal under an IRA, including withdrawals under the
periodic payment option, a portion of the amount received may be non-taxable.
The amount of the non-taxable portion is generally determined by the ratio of
the "investment in the contract" to the individual's total accrued benefit under
the plan. The "investment in the contract" generally equals the amount of any
nondeductible Contributions paid by or on behalf of any individual. Special tax
rules may be available for certain distributions from an IRA.
With respect to Non-Qualified Contracts; partial withdrawals, including periodic
payment, are generally treated as taxable income to the extent the Annuity
Account Value immediately before the withdrawal exceeds the "investment in the
contract" at that time. Full surrenders are treated as taxable income to the
extent that the amount received exceeds the "investment in the contract." The
taxable portion of any annuity payment is taxed at ordinary income tax rates.
Annuity payments
Although the tax consequences may vary depending on the annuity form elected
under the Contract, in general, only the portion of the annuity payment that
represents the amount by which the Annuity Account Value exceeds the "investment
in the contract" will be taxed. After the investment in the contract is
recovered, the full amount of any additional annuity payments is taxable. For
fixed annuity payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term of the
payments. However, the remainder of each annuity payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional annuity payments is taxable. If the annuity payments stop as a result
of an Annuitant's death before full recovery of the "investment in the
contract," you should consult a competent tax adviser regarding the
deductibility of the unrecovered amount.
Penalty tax
For distributions from a Non-Qualified Contract, there may be a federal income
tax penalty imposed equal to 10% of the amount treated as taxable income. In
general, however, there is no penalty tax on distributions:
o Made on or after the date on which the recipient of payments under the
Contract attains age 59 1/2, o Made as a result of death of the Owner or
disability of the recipient of payments under the Contract, o Received in
substantially equal periodic payments (at least annually) for your life
expectancy or the
joint life expectancies of you and the Beneficiary,
o Received under an immediate annuity
Other exemptions or tax penalties may apply to distributions from a
Non-Qualified Contract or certain distributions from an IRA. For more details
regarding these exemptions or penalties consult a competent tax adviser.
Taxation of death benefit proceeds
Amounts may be distributed from the Contract because of the death of an Owner or
the Annuitant. Generally such amounts are included in the income of the
recipient as follows:
o If distributed in a lump sum, they are taxed in the same manner as a full
surrender, as described above, however, the Surrender Charge will not
apply.
o If distributed under an annuity form, they are taxed in the same manner as
annuity payments, as described above.
Distribution at death
In order to be treated as an annuity contract, the terms of the Contract must
provide the following two distribution rules:
1. If you die on or after the date annuity payments start, and before the
entire interest in the Contract has been distributed, the remainder of your
interest will be distributed on the same or on a more rapid schedule than
that provided for in the method in effect on the date of your death.
2. If you die before the Annuity Commencement Date starts, your entire
interest must generally be distributed within five years after the date of
your death. If payable to a designated Beneficiary, the distributions may
be paid over the life of that designated Beneficiary or over a period not
extending beyond the life expectancy of that Beneficiary, so long as
payments start within one year of your death. If the sole designated
Beneficiary is your spouse, the Contract may be continued in force in the
name of your spouse.
If the Owner is not an individual, then for purposes of the distribution at
death rules, the Primary Annuitant is considered the Owner. In addition, when
the Owner is not an individual, a change in the Primary Annuitant is treated as
the death of the Owner.
Distributions made to a Beneficiary upon the Owner's death from an IRA must be
made pursuant to the rules in Section 401(a)(9) of the Internal Revenue Code.
Transfers, assignments or exchanges
A transfer of ownership of a Contract, the designation of an Annuitant or other
Beneficiary who is not also the Owner, or the exchange of a Contract may result
in adverse tax consequences that are not discussed in this prospectus. If you
are contemplating any these types of changes, you should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Multiple Contracts
All deferred, non-qualified annuity contracts that are issued by Great-West (or
our affiliates) to the same Owner during any calendar year will be treated as
one annuity contract for purposes of determining the taxable amount. You should
consult a tax adviser before purchasing more than one Contract.
Withholding
Annuity distributions generally are subject to withholding at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not to have
tax withheld from distributions. Certain distributions from IRAs are subject to
mandatory federal income tax withholding.
Section 1035 exchanges
Internal Revenue Code Section 1035 provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. Generally,
contracts issued in an exchange for another annuity contract are treated as new
contracts for purposes of the penalty and distribution at death rules.
Prospective Owners wishing to take advantage of a Section 1035 exchange should
consult their tax adviser.
Individual Retirement Annuities
The Contract may be used with IRAs as described in Section 408 of the Internal
Revenue Code. Section 408 of the Internal Revenue Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity. Also, certain kinds of distributions from certain
types of qualified and non-qualified retirement plans may be "rolled over" to an
Individual Retirement Annuity following the rules set out in the Internal
Revenue Code. If you purchase this Contract for use with an IRA, you will be
provided with supplemental information and you have the right to revoke your
purchase within seven days of purchasing the IRA Contract.
If a Contract is purchased to fund an IRA you must be the Annuitant and the
Owner. In addition, if a Contract is purchased to fund an IRA, minimum
distributions must commence not later than April 1st of the calendar year
following the calendar year in which you attain age 70 1/2. You should consult
your tax adviser concerning these matters.
Various tax penalties may apply to Contributions in excess of specified limits,
distributions that do not satisfy specified requirements, and certain other
transactions. The Contract will be amended as necessary to conform to the
requirements of the Internal Revenue Code if there is a change in the law.
Purchasers should seek competent advice as to the suitability of the Contract
for use with IRAs.
When you make your initial Contribution, you must specify whether you are
purchasing a Non-Qualified Contract or an IRA. If the initial Contribution is
made as a result of an exchange or surrender of another annuity contract, we may
require that you provide information with regard to the federal income tax
status of the previous annuity contract.
We will require that you purchase separate Contracts if you want to invest
monies qualifying for different annuity tax treatment under the Internal Revenue
Code. For each separate Contract you will need to make the required minimum
initial Contribution. Additional Contributions under the Contract must qualify
for the same federal income tax treatment as the initial Contribution. We will
not accept an additional Contribution under a Contract if the federal income tax
treatment of the Contribution would be different from the initial Contribution.
Seek Tax Advice
The above discussion of the federal income tax consequences is only a brief
summary and is not intended as tax advice. The federal income tax consequences
discussed here reflect our understanding of current law and the law may change.
Federal estate tax consequences and state and local estate, inheritance, and
other tax consequences of ownership or receipt of distributions under a Contract
depend on your individual circumstances or the circumstances of the recipient of
the distribution. A competent tax adviser should be consulted for further
information.
Assignments or Pledges
Generally, rights in the Contract may be assigned or pledged for loans at any
time during the life of the Annuitant, however, if the Contract is an IRA, you
may not assign the Contract as collateral.
If a non-IRA Contract is assigned, the interest of the assignee has priority
over you and the interest of the Beneficiary. Any amount payable to the assignee
will be paid in a single sum.
A copy of any assignment must be submitted to our Administrative Offices. Any
assignment is subject to any action taken or payment made by Great-West before
the assignment was processed. We are not responsible for the validity or
sufficiency of any assignment.
If any portion of the Annuity Account Value is assigned or pledged for a loan,
it may be treated as a distribution. Please consult a competent tax adviser for
further information.
Performance Data
From time to time, we may advertise yields and average annual total returns for
the Investment Divisions. In addition, we may advertise the effective yield of
the Maxim Money Market Investment Division. We may advertise both standardized
and non-standardized performance data for the Investment Divisions. All
performance information will be based on historical information and is not
intended to indicate future performance.
The yield of the Maxim Money Market Investment Division refers to the annualized
income generated by an investment in that Investment Division over a specified
7-day period. It is calculated by assuming that the income generated for that
seven-day period is generated each 7-day period over a period of 52 weeks and is
shown as a percentage of the investment.
The effective yield is calculated similarly but, when annualized, the income
earned by an investment in that Investment Division is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of the assumed reinvestment.
The yield calculations do not reflect the effect of any Surrender Charge or any
Premium Tax that may be applicable to a particular Contract. To the extent that
any Surrender Charge or Premium Taxes are applicable to a particular Contract,
the yield of that Investment Division will be reduced. For a description of the
methods used to determine yield and total returns, see the Statement of
Additional Information.
Investment Division Yield Effective
Yield
Maxim Money Market 3.26% 3.36%
The following table illustrates standardized and non-standardized average annual
total return for one, five and ten-year periods (or since inception, as
appropriate) ended December 31, 1998. Average annual total return quotations
represent the average annual compounded rate of return that would equate an
initial investment of $1,000 to the redemption value of that investment
(excluding Premium Taxes, if any) as of the last day of each of the periods for
which total return quotations are provided.
Both the standardized and non-standardized data reflect the deduction of all
fees and charges under the Contract including the applicable Surrender Charge.
The standardized data is calculated from the inception date of an Investment
Division. The non-standardized data is calculated from the inception of the
Eligible Fund and includes periods preceding the inception date of the
corresponding Investment Division
Performance information and calculations for any Investment Division are based
only on the performance of a hypothetical Contract under which the Annuity
Account Value is allocated to an Investment Division during a particular time
period. Performance information should be considered in light of the investment
objectives, policies and characteristics of the Eligible Funds invests and the
market conditions during the given time period. It should not be considered as a
representation of future investment performance.
We may from time to time also advertise cumulative (non-annualized) total
returns, yield and standardized and nonstandardized total returns for the
Investment Divisions.
Reports and promotional literature may also contain other information including
(1) the ranking of any Investment Division derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, Morningstar, Value Line, IBC/Donoghue's Money
Fund Report, Financial Planning Magazine, Money Magazine, Bank Rate Monitor,
Standard & Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications or other people who rank separate accounts or
other investment products on overall performance or other criteria, and (2) the
effect of tax-deferred compounding on investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may include
a comparison, at various points in time, of the return from an investment in a
Contract (or returns in general) on a tax-deferred basis (assuming one or more
tax rates) with the return on a currently taxable basis. Other ranking services
and indices may be used.
<PAGE>
Average Annual Total
Return for the period
ended December 31, 1998
<TABLE>
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Eligible Fund Investment One Year Five Ten Years Ten Years
Investment Division Inception Division Years or if less or if less
Inception in orLife of Life of
Separate Account Investment Underlying
Division Eligible Fund
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Maxim Bond 7/1/82 10/14/82 -2.04% 4.11% 6.73% 6.73%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Stock Index 7/1/82 2/24/83 16.45% 20.42% 14.95% 14.95%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim U.S. Government Securities 4/8/85 4/12/85 -1.50% 4.41% 7.34% 7.34%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Small-Cap Index 12/1/93 9/1/94 -9.62% 8.59% 10.47% 8.66%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Ariel MidCap Value 12/31/93 9/1/94 22.85% 15.44% 17.11% 15.43%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Loomis-Sayles Corporate Bond 11/1/94 11/1/94 -5.00% N/A 10.29% 10.29%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
--------------------------------------- ------------- ----------------- ----------- ---------- -------------- ----------------
Maxim MidCap 12/31/93 9/1/94 3.74% N/A 12.60% 11.32%
Maxim(Growth Fund I)
--------------------------------------- ------------- ----------------- ----------- ---------- -------------- ----------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim INVESCO Balanced 11/1/96 11/1/96 8.77% N/A 16.22% 16.22%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Ariel Small-Cap Value 12/1/93 11/1/94 -.55% 10.86% 14.11% 11.38%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim INVESCO Small-Cap Growth 11/1/94 11/1/94 8.03% N/A 20.08% 20.08%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim T. Rowe Price Equity/Income 11/1/94 11/1/94 .04% N/A 18.25% 18.25%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim INVESCO ADR 11/1/94 11/1/94 1.62% N/A 11.32% 11.32%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Value Index 12/1/93 1/15/98 5.14% 17.61% 5.69% 17.58%%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Growth Index 12/1/93 1/15/98 26.08% 22.18% 27.74% 21.93%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim Founders Blue Chip 7/1/97 1/15/98 8.24% N/A 8.94% 7.16%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim T. Rowe Price MidCap Growth 7/1/97 1/15/98 12.25% N/A 13.16% 15.17%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
MaximAggressive Profile 9/8/97 1/15/98 5.60% N/A 6.17% 5.90%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Maxim ModeratelyAggressive Profile 9/8/97 1/15/98 3.35% N/A 3.82% 4.06%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
MaximModerate Profile 9/8/97 1/15/98 2.25% N/A 2.66% 2.97%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
MaximModerately Conservative Profile 9/8/97 1/15/98 .61% N/A .95% 2.18%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
MaximConservative Profile 9/8/97 1/15/98 -.77% N/A -.49% 1.89%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
Fidelity VIP II Contrafund 1/3/95 11/13/98 19.38% N/A 11.02% 25.40%
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
American Century VP Capital 11/20/87 12/1/91 -10.15% 1.39% 4.20% 6.92%
Appreciation
------------------------------------- -------------- ----------------- ------------ ---------- ---------------- ---------------
</TABLE>
<PAGE>
Distribution of the Contracts BenefitsCorp Equities, Inc. (BCE) is the
principal underwriter and distributor of the Contracts. BCE is registered
with the Securities and Exchange Commission as a broker/dealer and is a
member of the National Association of Securities Dealers, Inc. (NASD). Its
principal offices are located at 8515 East Orchard Road, Englewood, Colorado
80111, telephone 800-228-8706.
The maximum commission as a percentage of the Purchase Payment(s) made under
a Contract payable to BCE representatives is 4.0%.
Voting Rights
To the extent required by applicable law, all Eligible Fund shares held in
the Series Account will be voted by Great-West at regular and special
shareholder meetings of the respective Eligible Funds in accordance with
instructions received from Ownerswho have allocated Contract value to the
corresponding Investment Division(s). If, however, the 1940 Act or any
regulation should be amended, or if the present interpretation thereof
should change, or if we determine that we are allowed to vote all Eligible
Fund shares in our own right, we may elect to do so.
Before the Annuity Commencement Date, you have the voting interest. The
number of votes which are available to you will be calculated separately for
each of your Variable Sub-Accounts. That number will be determined by
applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to that Investment
Division. You hold a voting interest in each Investment Division to which
your Annuity Account Value is allocated. If you select a variable annuity
option, the votes attributable to your Contract will decrease as annuity
payments are made.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the respective Eligible
Funds. Shares for which we do not receive timely instructions and shares
held by us as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in the Investment Division. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis to
reduce the votes eligible to be cast.
Contract Owners have no voting rights in Great-West.
Year 2000
We have a number of existing computer programs that use only two digits to
identify a year in the date field, which creates a problem with the upcoming
change in the century. The resources that are being devoted to this effort
are substantial. Management estimates that the total cost to implement these
plans will not be material, and has budgeted the expense as part of its
computer systems operating costs through the year 2000. We have developed
detailed plans that we expect to rectify the year 2000 problem. These plans
include modifying programs where necessary, replacing certain programs with
year 2000 compliant software, and working with vendors and business
partners, including banks, custodians and investment managers, who need to
become year 2000 compliant. We completed this process during the first
quarter of 1999 and will conduct system testing with third parties
throughout 1999. But, there can be no assurance that we will be successful,
or that interaction with other service providers will not impair our
services at that time.
Rights Reserved by Great-West We reserve the right to make certain changes
if, in our judgment, they would best serve the interests of Owners and
Annuitants or would be appropriate in carrying out the purposes of the
Contracts. Any changes will be made only as permitted by applicable laws.
Also, when required by law, we will obtain your approval of the changes and
approval from any appropriate regulatory authority. Approval may not be
required in all cases, however. Examples of the changes we may make include:
o To operate the Series
Account in any form permitted
under the Investment Company Act
of 1940 or in any other form
permitted by law.
o To Transfer any assets in any Investment Division to another Investment
Division, or to one or more separate accounts, or to add, combine or
remove Investment Divisions of the Series Account.
o To substitute, for the Eligible Fund shares in any Investment Division,
the shares of another Eligible Fund or any other investment permitted
by
law.
o To make any changes required by the Internal Revenue Code or by any
other applicable law in order to continue treatment of the Contract as
an annuity.
o To change the time or time of day at which a valuation date is deemed
to have ended.
o To make any other necessary
technical changes in the
Contract in order to conform
with any action the above
provisions permit us to take,
including to change the way we
assess charges, but without
increasing as to any then
outstanding Contract the
aggregate amount of the types of
charges which we have guaranteed.
o To reject any application
for any reason.
Since some of the Eligible Funds are available to registered separate
accounts of other insurance companies offering variable annuity and variable
life products, there is a possibility that a material conflict may arise
between the interests of the Series Account and one or more other separate
accounts investing in the Eligible Funds. If a material conflict arises, the
affected insurance companies are required to take any necessary steps to
resolve the matter, including stopping their separate accounts from
investing in the Eligible Funds. See the Eligible Funds' prospectuses for
more details.
Adding and Discontinuing Investment Options We may, upon 30 days written
notice to you, direct that you may not make any future Contributions or
Transfers to a particular Investment Division or Guaranteed Sub-Account.
When we inform you that we are discontinuing an Investment Division or
Guaranteed Sub-Account to which you are allocating money, we will ask that
you promptly submit alternative allocation instructions. If we do not
receive your changed allocation instructions, we may return all affected
Contributions or allocate those Contributions as indicated in the written
notice provided to you. Contributions and Transfers you make to a
discontinued Investment Division or Guaranteed Sub-Account before the
effective date of the notice may be kept in those Investment Divisions or
Guaranteed Sub-Accounts.
If we determine to make new investment options available under the
Contracts, in our sole discretion we may or may not make those new
investment options available to you.
Substitution of Investments When we determine to discontinue an Investment
Division, in our sole discretion, we may substitute shares of another mutual
fund for the shares of the corresponding Eligible Fund. No substitution may
take place without prior approval of the Securities and Exchange Commission,
and prior notice to you.
Legal Matters Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the Contract has been
provided by Jorden Burt Boros Cicchetti Berenson & Johnson LLP.
Available Information We have filed a registration statement ("Registration
Statement") with the Securities and Exchange Commission ("SEC")under the
1933 Act relating to the Contracts offered by this Prospectus. This
Prospectus has been filed as a part of the Registration Statement and does
not contain all of the information set forth in the Registration Statement
and exhibits thereto. Reference is made to the Registration Statement and
exhibits for further information relating to us and the Contracts.
Statements contained in this Prospectus, regarding the content of the
Contracts and other legal instruments, are summaries. For a complete
statement of the terms thereof, reference is made to the instruments as
filed as exhibits to the Registration Statement. The Registration Statement
and its exhibits may be inspected and copied at the offices of the SEC
located at 450 Fifth Street, N.W., Washington, D.C.
The Statement of Additional Information contains more specific information
relating to the Series Account and Great-West, such as:
o discussion about the Series
Account's Custodian and
Independent Auditors
o discussion about the Series
Account's Underwriter
o discussion about the
calculation of performance data
o the financial statements for
the Series Account and Great-West
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Periods Ended December 31,
<TABLE>
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
Investment Division 1998 1997 1996 1995 1994
--------------- -------------- -------------
- ------------------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
MAXIM BOND a
Value at beginning of period $ 12.09 $ 11.43 $ 11.10 $ 9.76 $ 10.00
Value at end of period $ 12.73 $ 12.09 $ 11.43 $ 11.10 $ 9.76
Increase (decrease) in value of accumulation units $ 0.64 $ 0.66 $ 0.33 $ 1.34 $ (0.24)
Number of accumulation units outstanding at end of 58,959.10 7,412.56 5,196.46 1,675.75 455.62
period
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
MAXIM STOCK INDEXa
Value at beginning of period $ 20.50 $ 15.70 $ 13.05 $ 9.74 $ 10.00
Value at end of period $ 25.67 $ 20.50 $ 15.70 $ 13.05 $ 9.74
Increase (decrease) in value of accumulation units $ 5.17 $ 4.80 $ 2.65 $ 3.31 $ (0.26)
Number of accumulation units outstanding at end of 154,419.05 169,289.23 130,996.47 17,200.32 2,306.48
period
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
MAXIM ARIEL MIDCAP VALUEajk
Value at beginning of period $ 15.75 $ 14.12 $ 13.49 $ 10.80 $ 10.00
Value at end of period $ 20.80 $ 15.75 $ 14.12 $ 13.49 $ 10.80
Increase (decrease) in value of accumulation units $ 5.05 $ 1.63 $ 0.63 $ 2.69 $
0.80
Number of accumulation units outstanding at end of 52,202.19 49,565.38 83,398.90 24,467.21 4,508.26
period
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
MAXIM SMALL-CAP INDEX a
Value at beginning of period $ 16.57 $ 13.87 $ 12.18 $ 9.77 $ 10.00
Value at end of period $ 16.10 $ 16.57 $ 13.87 $ 12.18 $
9.77
Increase (decrease) in value of accumulation units $ (0.47) $ 2.70 $ 1.69 $ 2.41 $
(0.23)
Number of accumulation units outstanding at end of 19,020.51 14,918.01 10,975.88 2,705.63 986.29
period
- ------------------------------------------------------- --------------- --------------- --------------- -------------- -------------
AMERICAN CENTURY VP BALANCED
Value at beginning of period $ 14.94 $ 13.06 $ 11.79 $ 9.85 $ 10.00
Value at end of period $ 17.07 $ 14.94 $ 13.06 $ 11.79 $
9.85
Increase (decrease) in value of accumulation units $ 2.13 $ 1.88 $ 1.27 $ 1.94 $
(0.15)
Number of accumulation units outstanding at end of 309.20 20,447.27 19,490.47 7,745.10 199.55
period
-------------
- ------------------------------------------------------- --------------- --------------- --------------- --------------
MAXIM LOOMIS-SAYLES CORPORATE BOND fj
Value at beginning of period $ 14.60 $ 13.12 $ 12.03 $ 10.00
Value at end of period $ 14.91 $ 14.60 $ 13.12 $ 12.03
Increase (decrease) in value of accumulation units $ 0.31 $ 1.48 $ 1.09 $ 2.03
Number of accumulation units outstanding at end of 77,918.20 23,403.30 12,487.29 799.35
period
- ------------------------------------------------------- --------------- --------------- --------------- --------------
MAXIM INVESCO ADR b
Value at beginning of period $ 14.90 $ 13.46 $ 11.25 $ 10.00
Value at end of period $ 16.28 $ 14.90 $ 13.46 $ 11.25
Increase (decrease) in value of accumulation units $ 1.38 $ 1.44 $ 2.21 $ 1.25
Number of accumulation units outstanding at end of 35,311.40 31,948.04 15,132.95 2,623.01
period
- ------------------------------------------------------- --------------- --------------- --------------- --------------
MAXIM INVESCO SMALL-CAP GROWTH b
Value at beginning of period $ 19.21 $ 16.39 $ 13.09 $ 10.00
Value at end of period $ 22.31 $ 19.21 $ 16.39 $ 13.09
Increase (decrease) in value of accumulation units $ 3.10 $ 2.82 $ 3.30 $ 3.09
Number of accumulation units outstanding at end of 44,665.98 44,396.72 33,993.67 4,511.19
period
- ------------------------------------------------------- --------------- --------------- --------------- --------------
MAXIM MONEY MARKET e
Value at beginning of period $ 10.97 $ 10.55 $ 10.17 $ 10.00
Value at end of period $ 11.40 $ 10.97 $ 10.55 $ 10.17
Increase (decrease) in value of accumulation units $ 0.43 $ 0.42 $ 0.38 $ 0.17
Number of accumulation units outstanding at end of 72,949.61 55,509.88 30,070.95 15,499.45
period
- ------------------------------------------------------- --------------- --------------- --------------- --------------
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Periods Ended December 31,
- ----------------------------------------------------- ---------------- --------------- --------------- ---------------
Investment Division 1998 1997 1996 1995
--------------- ---------------
- ----------------------------------------------------- ---------------- ---------------
MAXIM ARIEL SMALL-CAP VALUE dj
Value at beginning of period $ 17.07 $ 13.51 $ 11.60 $ 10.00
Value at end of period $ 18.25 $ 17.07 $ 13.51 $ 11.60
Increase (decrease) in value of accumulation units $ 1.18 $ 3.56 $ 1.91 $ 1.60
Number of accumulation units outstanding at end of 5,611.10 3,045.87 1,551.40 697.92
period
- ----------------------------------------------------- ---------------- --------------- --------------- ---------------
MAXIM T. ROWE PRICE EQUITY/INCOME b
Value at beginning of period $ 19.39 $ 15.24 $ 12.92 $ 10.00
Value at end of period $ 20.86 $ 19.39 $ 15.24 $ 12.92
Increase (decrease) in value of accumulation units $ 1.47 $ 4.15 $ 2.32 $ 2.92
Number of accumulation units outstanding at end of 88,483.59 106,469.26 67,415.13 19,500.37
period
- ----------------------------------------------------- ---------------- --------------- --------------- ---------------
- ----------------------------------------------------- ---------------- --------------- --------------- ---------------
MAXIM U.S. GOVERNMENT SECURITIES c
Value at beginning of period $ 12.23 $ 11.41 $ 11.12 $ 10.00
Value at end of period $ 12.95 $ 12.23 $ 11.41 $ 11.12
Increase (decrease) in value of accumulation units $ 0.72 $ 0.82 $ 0.29 $ 1.12
Number of accumulation units outstanding at end of 28,452.60 12,345.78 15,784.10 14,812.67
period
- ----------------------------------------------------- ---------------- --------------- --------------- ---------------
AMERICAN CENTURY VP CAPITAL APPRECIATION c
Value at beginning of period $ 11.68 $ 12.23 $ 12.94 $ 10.00
Value at end of period $ 11.29 $ 11.68 $ 12.23 $ 12.94
Increase (decrease) in value of accumulation units $ ( 0.39) $ ( 0.55) $ ( 0.71) $ 2.94
Number of accumulation units outstanding at end of 11,087.23 16,591.59 15,595.65 6,110.86
period
---------------
- ----------------------------------------------------- ---------------- --------------- ---------------
MAXIM INVESCO BALANCED g
Value at beginning of period $ 12.59 $ 10.13 $ 10.00
Value at end of period $ 14.73 $ 12.59 $ 10.13
Increase (decrease) in value of accumulation units $ 2.14 $ 2.46 $ 0.13
Number of accumulation units outstanding at end of 147,157.63 32,937.69 1,307.11
period
- ----------------------------------------------------- ---------------- --------------- ---------------
MAXIM FOUNDERS BLUE CHIPhj
Value at beginning of period $ 10.00
Value at end of period $ 11.74
Increase (decrease) in value of accumulation units $ 1.74
Number of accumulation units outstanding at end of 1,025.12
period
- ----------------------------------------------------- ----------------
MAXIM GROWTH INDEXh
Value at beginning of period $ 10.00
Value at end of period $ 13.75
Increase (decrease) in value of accumulation units $ 3.75
Number of accumulation units outstanding at end of 45,895.99
period
- ----------------------------------------------------- ----------------
MAXIM VALUE INDEXh
Value at beginning of period $ 10.00
Value at end of period $ 11.68
Increase (decrease) in value of accumulation units $ 1.68
Number of accumulation units outstanding at end of 1,678.41
period
- ----------------------------------------------------- ----------------
MAXIM T.ROWE PRICE MIDCAP GROWTHhj
Value at beginning of period $ 10.00
Value at end of period $ 12.42
Increase (decrease) in value of accumulation units $ 2.42
Number of accumulation units outstanding at end of 10,160,99
period
- ----------------------------------------------------- ----------------
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Periods Ended December 31,
- ----------------------------------------------------- ----------------
Investment Division 1998
- ----------------------------------------------------- ----------------
AGGRESSIVE PROFILEh
Value at beginning of period $ 10.00
Value at end of period $ 11.35
Increase (decrease) in value of accumulation units $ 1.35
Number of accumulation units outstanding at end of 2,227.92
period
- ----------------------------------------------------- ----------------
MODERATELY AGGRESSIVE PROFILEh
Value at beginning of period $ 10.00
Value at end of period $ 11.10
Increase (decrease) in value of accumulation units $ 1.10
Number of accumulation units outstanding at end of 13,300.61
period
- ----------------------------------------------------- ----------------
MODERATE PROFILEh
Value at beginning of period $ 10.00
Value at end of period $ 10.98
Increase (decrease) in value of accumulation units $ 0.98
Number of accumulation units outstanding at end of 21,309.48
period
- ----------------------------------------------------- ----------------
MODERATELY CONSERVATIVE PROFILEh
Value at beginning of period $ 10.00
Value at end of period $ 10.79
Increase (decrease) in value of accumulation units $ 0.79
Number of accumulation units outstanding at end of 6,875.97
period
- ----------------------------------------------------- ----------------
CONSERVATIVE PROFILEh
Value at beginning of period $ 10.00
Value at end of period $ 10.63
Increase (decrease) in value of accumulation units $ 0.63
Number of accumulation units outstanding at end of 15,432.21
period
- ----------------------------------------------------- ----------------
FIDELITY VIP II CONTRAFUNDi
Value at beginning of period $ 10.00
Value at end of period $ 11.69
Increase (decrease) in value of accumulation units $ 1.69
Number of accumulation units outstanding at end of
period 0
- ----------------------------------------------------- ----------------
</TABLE>
KEY
Current Accumulation Unit Values can be obtained by calling GWL&A toll-free at
1-800-523-4106 a The Investment Division commenced operations under this
contract on September 19, 1994, at a unit value of $10.00 b The Investment
Division commenced operations under this contract on January 6, 1995, at a unit
value of $10.00. c The Investment Division first commenced operations under this
contract on January 18, 1995, at a unit value of $10.00. d The Investment
Division commenced operations under this contract on March 9, 1995, at a unit
value of $10.00. e The Investment Division commenced operations under this
contract on August 4, 1995, at a unit value of $10.00. f The Investment Division
commenced operations under this contract on August 8, 1995, at a unit value of
$10.00. g The Investment Division commenced operations under this contract on
October 1, 1996, at a unit value of $10.00. h The Investment Division commenced
operations under this contract on January 15, 1998, at a unit value of $10.00. i
The Investment Division commenced operations under this contract on November 5,
1998, at a unit value of $10.00. j On April 7, 1999 the Maxim Series Fund Board
of Directors authorized the name changes of the indicated portfolios to indicate
the name of the sub-adviser managing these funds. The portfolio names which
existed prior to this time were Maxim MidCap Value, Maxim Corporate Bond, Maxim
Small-Cap Value, Maxim Blue Chip and Maxim MidCap Growth, respectively. k. On
February 5, 1999 the Maxim MidCap (Growth Fund1) changed sub-advisers and its
name and objective.
<PAGE>
APPENDIX B - CALCULATION OF THE NET INVESTMENT
FACTOR
The Net Investment Factor for each Variable Sub-Account for any Valuation
Period is determined by dividing (a) by (b), and subtracting (c) from the result
where:
(a) is the net result of:
(i) the net asset value per share of the Eligible Fund shares determined as
of the end of the current Valuation Period, plus
(ii)the per share amount of any dividend (or, if applicable, capital gain
distributions) made by the Eligible Fund on shares if the "ex-dividend"
date occurs during the current Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided for
in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account;
and
(b)is the net asset value per share of the Eligible Fund shares determined as
of the end of the immediately preceding Valuation Period, minus or plus
(c)is an amount representing the Mortality and Expense Risk Charge deducted
from each Variable Sub-Account on a daily basis. Such amount is
equal to 1.25%.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b)
above, reflect the investment performance of the Eligible Fund as well as the
payment of Eligible Fund expenses.
1Standard & Poor's, S&P 500 Composite Index, S&P Mid-Cap Index and S&P Small-Cap
600 Stock Index are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Maxim Series Fund, Inc. and Great-West Life & Annuity
Insurance Company. The Portfolios are not sponsored, endorsed, sold or promoted
by Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of using any index.
2 The Frank Russell Company is not a sponsor of , or in any other way affiliated
with, the Growth Index and Value Index Portfolios or the Maxim Series Fund, Inc.
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 April 30, 1999, 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.
April 30, 1999
<PAGE>
<TABLE>
TABLE OF CONTENTS
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 Eligible Funds.
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 $50 million (Canadian), per occurrence, 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 consolidated financial statements for GWL&A as of December 31, 1998 and
1997 and each of the three years in the period ended December 31, 1998, as well
as the financial statements of the Series Account for the years ended December
31, 1998 and 1997, which are included in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their reports appearing herein and are included in reliance upon
such reports given upon the authority of such firm 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.
BCE received commissions paid by GWL&A in the amount of $26,417.09 for 1998,
$26,005.73 for1997 and $21,131.75 for 1996.
<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, 1998 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, 1998
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, 1998. 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 consolidated 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 variable 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, 1998 AND 1997
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 (the "Series Account") as of
December 31, 1998, and the related statements of operations for the year then
ended, by investment division, and changes in net assets for each of the two
years in the period then ended, by investment division. 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. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the custodian. 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, the financial statements referred to above 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 as of December 31, 1998, the results of their operations for
the year then ended, by investment division, and changes in their net assets for
each of the two years in the period then ended, by investment divisions, in
conformity with generally accepted accounting principles.
March 25, 1999
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
MAXIM SERIES I
ASSETS
Shares Cost Value
Investments in underlying affiliated funds:
Maxim Series Fund, Inc. Bond Portfolio / Qualified $ 5,744 $ 5,839
4,798
Maxim Series Fund, Inc. Bond Portfolio/ Non-Qualified
76,035 95,607 92,525
Maxim Series Fund, Inc. Money Market Portfolio /
Non-Qualified 32,786 32,834 32,803
Maxim Series Fund, Inc. Stock Index Portfolio / Qualified
---------
4,202 21,933 15,050
------- ------
Total Investments $ 156,118
= ==========
146,217
Other assets and
liabilities:
Due from Great-West Life & Annuity Insurance Company
253
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $ 146,470
==========
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
MAXIM SERIES II
ASSETS
Shares Cost Value
Investments in underlying affiliated funds:
Maxim Series Fund, Inc. Bond Portfolio / Qualified
1,085,171 $1,324,589 $1,320,510
Maxim Series Fund, Inc. Bond Portfolio / Non-Qualified
1,104,586 1,346,181 1,344,136
Maxim Series Fund, Inc. Money Market Portfolio / Qualified
1,078,159 1,088,904 1,078,706
Maxim Series Fund, Inc. Money Market Portfolio / Non-Qualified
845,764 845,447 846,193
Maxim Series Fund, Inc. Stock Index Portfolio / Qualified
4,461,664 9,106,527 15,982,123
Maxim Series Fund, Inc. Stock Index Portfolio / Non-Qualified
3,027,538 5,738,556 10,844,941
Maxim Series Fund, Inc. U.S. Government Securities Portfolio /
Qualified 2,683,746 2,967,145 2,965,258
Maxim Series Fund, Inc. U.S. Government Securities Portfolio /
Non-Qualified 4,909,349 5,379,367 5,424,317
Investments in underlying funds:
American Century VP Funds VP Capital Appreciation Fund /
-------
Qualified 40,104 432,396 361,738
-------- -------
Total Investments
=
$28,229,112 40,167,922
============
Other assets and liabilities:
Net Premiums (Redemptions) Due and Accrued
(175)
Due to Great-West Life & Annuity Insurance Company
(37,618)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5)
$40,130,129
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
MAXIM SERIES III
ASSETS
Shares Cost Value
Investments in underlying affiliated funds:
Maxim Series Fund, Inc. Aggressive Profile Portfolio $ 23,916 $ 25,383
23,515
Maxim Series Fund, Inc. Blue Chip Portfolio
10,521 12,084 12,045
Maxim Series Fund, Inc. Bond Portfolio
617,424 748,892 751,324
Maxim Series Fund, Inc. Conservative Profile Portoflio
159,816 165,061 164,620
Maxim Series Fund, Inc. Corporate Bond Portfolio
1,056,461 1,262,985 1,174,607
Maxim Series Fund, Inc. Growth Index Portfolio
260,129 581,170 631,477
Maxim Series Fund, Inc. INVESCO Balanced Portfolio
1,484,994 2,027,867 2,169,260
Maxim Series Fund, Inc. INVESCO ADR Portoflio
353,973 504,644 575,287
Maxim Series Fund, Inc. INVESCO Small-Cap Growth
539,028 858,987 997,545
Maxim Series Fund, Inc. Mid-Cap Portfolio (Growth Fund I)
590,173 884,581 1,086,946
Maxim Series Fund, Inc. MidCap Growth Portfolio
93,769 111,743 126,321
Maxim Series Fund, Inc. Moderate Profile Portfolio
223,699 225,113 234,946
Maxim Series Fund, Inc. Moderately Aggressive Profile
Portfolio 138,929 142,344 148,213
Maxim Series Fund, Inc. Moderately Conservative Profile
Portfolio 71,163 73,660 74,506
Maxim Series Fund, Inc. Money Market Portfolio
831,773 832,298 832,195
Maxim Series Fund, Inc. Small-Cap Index Portfolio
387,174 421,595 306,675
Maxim Series Fund, Inc. Small-Cap Value Portfolio (Ariel
Value) 107,462 109,325 102,498
Maxim Series Fund, Inc. Small-Cap Aggressive Growth
Portfolio - - -
Maxim Series Fund, Inc. Stock Index Portfolio
1,104,476 3,085,673 3,956,344
Maxim Series Fund, Inc. T Rowe Price Equity/Income
Portfolio 1,037,845 1,718,061 1,847,742
Maxim Series Fund, Inc. U.S. Government Securities
Portfolio 333,799 367,558 368,814
Maxim Series Fund, Inc. Value Index Portfolio
10,350 20,005 19,616
Investments in underlying funds:
American Century VP Funds VP Balanced Fund
626 4,792 5,224
American Century VP Funds VP Capital Appreciation Fund
13,887 133,439 125,263
Fidelity Investments VIP II Contrafund Portfolio
- - -
-- -
Total Investments
=
$14,315,793 15,736,851
============
Other assets and
liabilities:
Premiums due and accrued
970
Due to Great-West Life & Annuity Insurance Company
(15,846)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $15,721,975
============
</TABLE>
See notes to financial statements.
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEARD ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Bond Maxim Bond Maxim Money Maxim Stock Maxim Total Total Maxim
Portfolio Portfolio Market Index Portfolio Return Series I
Portfolio Portfolio Account
Investment Investment Investment Investment Investment
Division Division Division Division Division
Qualified Non-Qualified Non-Qualified Qualified Non-Qualified
MAXIM SERIES I
INVESTMENT INCOME 352 $ 5,886 $ 1,687 $ 599 $ - $ 8,524
EXPENSES - mortality and expense risks
------------------- --------------------------------
75 1,230 403 167 11 1,886
--- ------ ---- ---- --- -----
NET INVESTMENT INCOME (LOSS)
277 4,656 1,284 432 (11) 6,638
---- ------ ------ ---- ---- -----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 3 194 - 43 13,948 14,188
Net change in unrealized appreciation
(depreciation) on investments
---------------------- ----------------------------- -----------
23 284 (5) 2,480 (13,791) (11,009)
--- ---- --- ------ -------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
26 478 (5) 2,523 157 3,179
--- ---- --- ------ ---- -----
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS 303 $ 5,134 $ 1,279 $ 2,955 $ 146 $ 9,817
===== = ========== = ========== = ========== = ========= = =========
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
PERIOD TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Money Maxim Money
Maxim Bond Maxim Bond Market Market Maxim Stock Maxim Stock
Portfolio Portfolio Portfolio Portfolio Index Portfolio Index Portfolio
Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division
-----------------------------------------------------------------------------------------------------
Qualified Non-Qualified Qualified Non-Qualified Qualified Non-Qualified
MAXIM SERIES II
INVESTMENT INCOME 84,171 $ 79,160 $ 44,094 $ 40,071 $ 636,503 $ 434,073
EXPENSES - mortality and expense
---- ------------ ------------ ------------ ----------
risks 20,073 18,233 12,244 11,076 191,481 135,968
------- ------- ------- ------- -------- -------
NET INVESTMENT INCOME (LOSS)
---- ------------ ------------ ------------ ----------
64,098 60,927 31,850 28,995 445,022 298,105
------- ------- ------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 3,799 741 (6) (8) 132,674 145,928
Net change in unrealized
appreciation (depreciation) on
----- ------------- --------------- --------------- -------
investments 3,726 3,001 (129) (122) 2,234,146 1,612,872
------ ------ ----- ----- ---------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
----- ------------- --------------- --------------- -------
7,525 3,742 (135) (130) 2,366,820 1,758,800
------ ------ ----- ----- ---------- ---------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS 71,623 $ 64,669 $ 31,715 $ 28,865 $ 2,811,842 $ 2,056,905
======== = =========== = =========== = =========== = ============ = ===========
</TABLE>
See notes to financial statements.
(Continued)
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEARD ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim U.S. Maxim U.S. American
Maxim Total Government Government American Century VP Total Maxim
Return Securities Securities Century VP Capital Series II
Portfolio Portfolio Portfolio Balanced Fund Appreciation Account
Fund
Investment Investment Investment Investment Investment
Division Division Division Division Division
-----------------------------------------------------------------------------------------------------
Qualified Qualified Non-Qualified Qualified Qualified
MAXIM SERIES II
INVESTMENT INCOME $ 71,301 $ 169,832 $ 298,419 $ 56,535 $ 16,298 $ 1,930,457
EXPENSES - mortality and expense
--------- ------------ ------------ ------------- -------------
risks 23,721 46,204 79,591 1,895 4,357 544,843
------- ------- ------- ------ ------ -------
NET INVESTMENT INCOME (LOSS)
--------- ---------- ---------- ------------ ------------
47,580 123,628 218,828 54,640 11,941 1,385,614
------- -------- -------- ------- ------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on 1,419,068 1,768,675
investments 11,453 4,071 51,239 (284)
Net change in unrealized
appreciation (depreciation) on
--- ------------ ------------ ----------- -----------
investments (1,122,822) 33,395 66,945 (67,581) (21,564) 2,741,867
----------- ------- ------- -------- -------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
------- ------------ ------------ ----------- -----------
296,246 44,848 71,016 (16,342) (21,848) 4,510,542
-------- ------- ------- -------- -------- ---------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS $ 343,826 $ 168,476 $ 289,844 $ 38,298 $ (9,907) $ 5,896,156
=========== = =========== = =========== = =========== = =========== = ===========
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
PERIOD TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Maxim Maxim Maxim Maxim
Aggressive Conservative Corporate Growth Maxim INVESCO
Profile Maxim Maxim Bond Profile Bond Index INVESCO Balanced
Portfolio Blue Chip Portfolio Portfolio Portfolio Portfolio ADR Portfolio
Portfolio Portfolio
Investment Investment Investment Investment Investment Investment
Division Investment Division Division Division Division Investment Division
Division Division
--------------------------------------------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME 256 558 $ 24,999 $ 7,539 $ 101,033 $ 25,583 $ 4,479 $ 42,253
EXPENSES - mortality and expense risks
212 78 4,793 681 10,017 2,875 6,832 19,059
---- --- ------ ---- ------- ------ ------ ------
NET INVESTMENT INCOME (LOSS)
---------------------------- ------------------------- ------------ -----------
44 480 20,206 6,858 91,016 22,708 (2,353) 23,194
--- ---- ------- ------ ------- ------- ------- ------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 111 (1) 445 134 2,053 38 7,832 26,913
Net change in unrealized appreciation
(depreciation) on investments
1,467 (39) 1,560 (441) (90,736) 50,307 34,889 133,497
------ ---- ------ ----- -------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 160,410
1,578 (40) 2,005 (307) (88,683) 50,345 42,721
------ ---- ------ ----- -------- ------- ------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS 1,622 440 $ 22,211 $ 6,551 $ 2,333 $ 73,053 $ $ 183,604
======= = ===== ============ = ========== = ========== ============ ===== ===========
40,368
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
PERIOD TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Maxim Maxim Maxim
INVESCO Maxim Maxim Moderately Moderately Small-Cap
Small-Cap Maxim MidCap Moderate Aggressive Conservative Maxim Aggressive
Growth Mid-Cap Growth Profile Profile Profile Money Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Market Portfolio
(Growth Fund Portfolio
I)
Investment Investment Investment Investment Investment Investment Investment
Division Division Investment Division Division Division Division Division
Division
---------------------------------------------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME 13,246 $ 109,621 $ - $ 4,332 $ 2,587 1,880 $ 38,736 $ -
EXPENSES - mortality and
expense risks ------- ------------
11,211 10,793 782 1,175 809 395 9,590 -
------- ------- ---- ------ ---- ---- ------ -
NET INVESTMENT INCOME (LOSS)
--------------------- ------------------------------------------------------------
2,035 98,828 (782) 3,157 1,778 1,485 29,146 -
------ ------- ----- ------ ------ ------ ------- -
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments (2,280) 4,339 (2,060) (192) (20) (387) (25) -
Net change in unrealized appreciation
(depreciation) on investments
128,782 152,701 14,578 9,833 5,869 846 (103) -
-------- -------- ------- ------ ------ ---- ----- -
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
126,502 157,040 12,518 9,641 5,849 459 (128) -
-------- -------- ------- ------ ------ ---- ----- -
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS 128,537 $ 255,868 $ $ 12,798 $ 7,627 1,944 $ 29,018 -
======== = =========== ===== ============ = ========== = ======= ============ = =======
11,736
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
PERIOD TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim T. Maxim U.S. American
Maxim Maxim Maxim Rowe Price Maxim Government Maxim Century VP
Small-Cap Small-Cap Stock Index Equity/Income Total Securities Value Balanced
Index Value Portfolio Portfolio Return Portfolio Index Fund
Portfolio Portfolio Portfolio Portfolio
Investment Investment Investment Investment Investment Investment
Division Investment Division Division Division Division Investment Division
Division Division
-------------------------------------------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME 105,260 $ 3,170 $ 161,829 $ 140,361 $ 8,094 $ 19,766 $ 1,557 40,706
EXPENSES - mortality and
expense risks ---------------------------------- ------------
3,586 998 46,863 26,160 2,315 3,974 102 1,355
------ ---- ------- ------- ------ ------ ---- -----
NET INVESTMENT INCOME (LOSS)
101,674 2,172 114,966 114,201 5,779 15,792 1,455 39,351
-------- ------ -------- -------- ------ ------- ------ ------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments (1,405) (360) 542,988 229,770 94,172 3,269 (6) 23,681
Net change in unrealized appreciation
(depreciation) on investments
(112,425) 2,136 247,706 (203,409) (62,690) (1,176) (389) (36,793)
--------- ------ -------- --------- -------- ------- ----- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
(113,830) 1,776 790,694 26,361 31,482 2,093 (395) (13,112)
--------- ------ -------- ------- ------- ------ ----- --------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS (12,156) $ 3,948 $ 905,660 $ 140,562 $ 37,261 $ 17,885 $ 1,060 $ 26,239
========= =========== ============ ============ ============ ============ =========== ==========
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
PERIOD TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
American Fidelity
Century VP Investments VIP
Capital II Contrafund
Appreciation Portfolio Total Maxim
Fund Series III
Account
Investment Investment
Division Division
-----------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 7,230 $ - $ 865,075
EXPENSES - mortality and expense risks
-------------
1,736 - 166,391
------ -- -------
NET INVESTMENT INCOME (LOSS)
5,494 - 698,684
------ -- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments (7,989) - 921,020
Net change in unrealized appreciation
(depreciation) on investments
1,041 - 277,011
------ -- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
(6,948) - 1,198,031
------- -- ---------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS $ (1,454) $ - $ 1,896,715
= =========== = ========= ============
</TABLE>
See notes to financial statements. (Continued)
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Money Market
Maxim Bond Portfolio Maxim Bond Portfolio Portfolio Maxim Stock Index
Portfolio
Investment Division Investment Division Investment Division Investment Division
Qualified Non-Qualified Non-Qualified Qualified
1998 1997 1998 1997 1998 1997 1998 1997
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES I
FROM OPERATIONS:
Net investment income (loss) $ 277 $ 295 $ $ $ $ $ 432 $ 517
4,656 4,777 1,284 1,203
Net realized gain (loss) on
investments 3 (84) 194 161 - - 43 72
Net change in unrealized
appreciation (depreciation) in
investments 23 116 284 350 (5) - 2,480 2,114
--- ---- ---- ---- --- -- ------ -----
Increase (decrease) in net assets
resulting from operations
303 327 5,134 5,288 1,279 1,203 2,955 2,703
---- ---- ------ ------ ------ ------ ------ -----
FROM UNIT TRANSACTIONS (by category):
Redemptions: (33) (10,200) (9,980) (60) (67) (79) (75) (38)
Net transfers:
- - - - - - - -
-- -- -- -- -- -- -- -
Increase (decrease) in net assets
resulting from unit transactions
(33) (10,200) (9,980) (60) (67) (79) (75) (38)
---- -------- ------- ---- ---- ---- ---- ----
INCREASE (DECREASE) IN NET ASSETS
270 (9,873) (4,846) 5,228 1,212 1,124 2,880 2,665
Contributions from
(Distributions to) GWLA (435) 35 63 627
NET ASSETS:
Beginning of period
6,125 15,998 97,241 92,013 31,567 30,443 11,731 9,066
------ ------- ------- ------- ------- ------- ------- -----
End of period $ $ $ $ $ $ $ $
====== ====== ===== ===== ===== ===== ===== ==
5,960 6,125 92,430 97,241 32,842 31,567 15,238 11,731
====== ====== ======= ======= ======= ======= ======= ======
</TABLE>
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Total Return Total Maxim Series I
Portfolio Account
Investment Division
Non-Qualified
1998 1997 1998 1997
----- ----- ----- ----
MAXIM SERIES I
FROM OPERATIONS:
Net investment income (loss) $ (11) $ 2,055 $ 6,638 $ 8,847
Net realized gain (loss) on
investments 13,948 194 14,188 343
Net change in unrealized
appreciation (depreciation) in
------------
investments (13,791) 7,647 (11,009) 10,227
-------- ------ -------- ------
Increase (decrease) in net assets
resulting from operations
146 9,896 9,817 19,417
---- ------ ------ ------
FROM UNIT TRANSACTIONS (by category):
Redemptions: (55,089) (30) (65,244) (10,407)
Net transfers:
- - - -
-- -- -- -
Increase (decrease) in net assets
resulting from unit transactions
(55,089) (30) (65,244) (10,407)
-------- ---- -------- --------
INCREASE (DECREASE) IN NET ASSETS
(54,943) 9,866 (55,427) 9,010
Contributions from
(Distributions to) GWLA 290 -
NET ASSETS:
Beginning of period
54,943 45,077 201,607 192,597
------- ------- -------- -------
End of period $ - $ 54,943 $ $ 201,607
= ========= = =========== = ==== ============
146,470
</TABLE>
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Money Market Maxim Money Market
Maxim Bond Portfolio Maxim Bond Portfolio Portfolio Portfolio
Investment Division Investment Division Investment Division Investment Division
Qualified Non-Qualified Qualified Non-Qualified
1998 1997 1998 1997 1998 1997 1998 1997
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES II
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ $ $ $ $
64,098 81,610 60,927 70,981 31,850 37,219 28,995 36,761
Net realized gain (loss) on
investments 3,799 (76,854) 741 (17,212) (6) - (8) -
Net change in unrealized
appreciation (depreciation) in
investments 3,726 81,299 3,001 26,710 (129) - (122) -
------ ------- ------ ------- ----- -- ----- -
Increase (decrease) in net assets
resulting from operations
71,623 86,055 64,669 80,479 31,715 37,219 28,865 36,761
------- ------- ------- ------- ------- ------- ------- ------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
3,750 8,847 1,816 2,174 1,024 11,347 2,061 3,719
Redemptions:
(227,425) (564,184) (161,547) (252,043) (166,012) (81,095) (257,080) (260,301)
Net transfers:
--------------------- ---------------------- ----------- ----------------------
(3,641) (312,933) 98,509 (70,940) 229,028 (42,689) 207,155 (49,859)
------- --------- ------- -------- -------- -------- -------- --------
Increase (decrease) in net assets
resulting from unit transactions
--------- --------- -------------------- --------------------- -----------
(227,316) (868,270) (61,222) (320,809) 64,040 (112,437) (47,864) (306,441)
--------- --------- -------- --------- ------- --------- -------- ---------
INCREASE (DECREASE) IN NET ASSETS
(155,693) (782,215) 3,447 (240,330) 95,755 (75,218) (18,999) (269,680)
Contributions from
(Distributions to) GWLA 25,193 (22,355) 16,119 33,913
NET ASSETS:
Beginning of period
-------- -------- -------- -------- ----------- -------- -----------
1,449,468 2,231,683 1,361,214 1,601,544 965,732 1,040,950 830,386 1,100,066
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
End of period $ $ $ $ $ $ $ $
=== === === === === ==== ==== ==
1,318,968 1,449,468 1,342,306 1,361,214 1,077,606 965,732 845,300 830,386
========== ========== ========== ========== ========== ======== ======== =======
(1) The investment Division ceased operations on June 22, 1998
(2) The investment Division is no longer a
Series Account option effective May 1, 1998
and funds were transferred to other
Divisions.
</TABLE>
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim U.S. Government
Maxim Stock Index Maxim Stock Index Maxim Total Return Securities Portfolio
Portfolio Portfolio Portfolio
Investment Division Investment Division Investment Division Investment Division
Qualified Non-Qualified Qualified Qualified
1998 1997 1998 1997 1998 1997 1998 1997
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES II (1)
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ $ $ $ $
445,022 453,675 298,105 361,860 47,580 186,018 123,628 190,585
Net realized gain (loss) on
investments 132,674 503,901 145,928 280,879 1,419,068 125,689 11,453 (24,598)
Net change in unrealized
appreciation (depreciation) in
-------- -------- -------- -------- ------
investments 2,234,146 1,563,542 1,612,872 1,335,382 (1,122,822) 625,603 33,395 90,538
---------- ---------- ---------- ---------- ----------- -------- ------- ------
Increase (decrease) in net assets
resulting from operations
-------- -------- -------- -------- ----------- ----------------------
2,811,842 2,521,118 2,056,905 1,978,121 343,826 937,310 168,476 256,525
---------- ---------- ---------- ---------- -------- -------- -------- -------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
96,181 111,519 138,826 55,239 27,755 151,378 15,587 9,937
Redemptions:
(1,244,333) (995,067) (1,124,432) (452,450) (151,462) (458,152) (709,393) (824,566)
Net transfers:
-------- ----------- -------- ----------- ------ --------------------
3,829,682 260,903 1,572,751 118,562 (5,466,093) 119,510 (151,888) (107,087)
---------- -------- ---------- -------- ----------- -------- --------- ---------
Increase (decrease) in net assets
---------- ---------- ------- ---------- ----------
resulting from unit transactions (622,645) (278,649) (5,589,800) (187,264) (845,694) (921,716)
-------- --------- ----------- --------- ----------- --------- --------- ---------
2,681,530 587,145
---------- -------
INCREASE (DECREASE) IN NET ASSETS
5,493,372 1,898,473 2,644,050 1,699,472 (5,245,974) 750,046 (677,218) (665,191)
Contributions from
(Distributions to) GWLA 56,918 (112,890) 84,837 55,803
NET ASSETS:
Beginning of period
------ -------- -------- -------- -------- -------- --------
10,418,741 8,520,268 8,305,577 6,606,105 5,161,137 4,411,091 3,582,781 4,247,972
----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
End of period $ $ $ $ $ - $ $ $
=== === === === = ========= === === ==
15,969,031 10,418,741 10,836,737 8,305,577 5,161,137 2,961,366 3,582,781
=========== =========== =========== ========== ========== ========== =========
(1) The investment Division ceased operations on June 22, 1998
(2) The investment Division is no longer a
Series Account option effective May 1, 1998
and funds were transferred to other
Divisions.
</TABLE>
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
Maxim U.S. Government American Century VP
Securities Portfolio Balanced Fund
Investment Division Investment Division
Non-Qualified Qualified
1998 1997 1998 1997
----- ----- ----- -----
MAXIM SERIES II (2)
FROM OPERATIONS:
Net investment income (loss) $ 218,828 $ 313,804 $ 54,640 $ 14,742
Net realized gain (loss) on
investments 4,071 (29,726) 51,239 21,377
Net change in unrealized
------------
appreciation (depreciation) in (67,581)
------------- ----------- -------- ------------
investments 66,945 138,013 17,382
------- -------- ------
Increase (decrease) in net assets
resulting from operations
----------- ----------- -------------------------
289,844 422,091 38,298 53,501
-------- -------- ------- ------
FROM UNIT TRANSACTIONS (by category:
Purchase payments:
105,797 3,320 23,910 15,243
Redemptions:
(1,182,060) (679,764) (46,039) (68,363)
Net transfers:
94,599 1,070 (439,193) 75,240
------- ------ --------- -------
Increase (decrease) in net assets
resulting from unit transactions
---------- ---------- ---------- ---------
(981,664) (675,374) (461,322) 22,120
--------- --------- --------- -------
INCREASE (DECREASE) IN NET ASSETS
(691,820) (253,283) (423,024) 75,621
Contributions from
(Distributions to) GWLA (25,894) (136)
NET ASSETS:
Beginning of period
-------- -------- ----------- -----------
6,135,537 6,388,820 423,160 347,539
---------- ---------- -------- --------
End of period $ 5,417,823 $ $ - $ 423,160
============= = == = ========= ============
6,135,537
==========
- -----------------------------------------------------------------------------------------------------------------
American Century VP
Capital Appreciation Fund Total Maxim Series II
Account
Investment Division
Qualified
1998 1997 1998 1997
----- ----- ----- ----
MAXIM SERIES II
FROM OPERATIONS:
Net investment income (loss) $ 11,941 $ 1,455 $ $
1,385,614 1,748,710
Net realized gain (loss) on
investments (284) 3,706 1,768,675 787,162
Net change in unrealized
------------ ------------ -----------
appreciation (depreciation) in (21,564) (25,944) 2,741,867 3,852,525
- -------- -------- ---------- ---------
investments
Increase (decrease) in net assets
------------------------- -----------
resulting from operations (9,907) (20,783) 5,896,156 6,388,397
- ------- -------- ---------- ---------
FROM UNIT TRANSACTIONS (by catego
Purchase payments:
25,218 14,599 441,925 387,322
Redemptions:
(13,701) (25,916) (5,283,484) (4,661,901)
Net transfers:
32,817 8,223 3,726 -
------- ------ ------ -
Increase (decrease) in net assets
resulting from unit transactions
---------------------------------------
44,334 (3,094) (4,837,833) (4,274,579)
------- ------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
34,427 (23,877) 1,058,323 2,113,818
Contributions from
(Distributions to) GWLA 34 111,542 -
NET ASSETS:
Beginning of period
----------- ----------- ------
326,531 350,408 38,960,264 36,846,446
-------- -------- ----------- ----------
End of period $ 360,992 $ 326,531 $ $
============ ============ ===== ==
40,130,129 38,960,264
=========== ==========
</TABLE>
(1) The Investment Division ceased operations on June 22, 1998
(2) The Investment Division is no longer
a Series Account option effective May 1,
1998 and funds were transferred to other
Divisions
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Aggressive Profile Maxim Conservative
Portfolio Maxim Blue Chip Portfolio Maxim Bond Portfolio Profile Portfolio
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III (1) (2) (1)
- ----------------
FROM OPERATIONS:
Net investment income (loss) 44 $ - $ 480 $ - $ $ 4,155 6,858 $ -
20,206
Net realized gain (loss) on
investments 111 - (1) - 445 (217) 134 -
Net change in unrealized
appreciation (depreciation) in
investments 1,467 - (39) - 1,560 1,001 (441) -
------ -- ---- -- ------ ------ ----- -
Increase (decrease) in net assets
resulting from operations
1,622 - 440 - 22,211 4,939 6,551 -
------ -- ---- -- ------- ------ ------ -
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
6,057 - 5,915 - 77,766 35,790 - -
Redemptions:
(1,698) - - - (11,347) (6,161) (3,000) -
Net transfers:
----------------------------------------------------------- ---------------------
19,305 - 5,679 - 572,340 (4,377) 160,499 -
------- -- ------ -- -------- ------- -------- -
Increase (decrease) in net assets
resulting from unit transactions
----------------------------------------------------------- ---------------------
23,664 - 11,594 - 638,759 25,252 157,499 -
------- -- ------- -- -------- ------- -------- -
INCREASE (DECREASE) IN NET ASSETS
25,286 - 12,034 - 660,970 30,191 164,050 -
NET ASSETS:
Beginning of period
- - - - 89,586 59,395 - -
-- -- -- -- ------- ------- -- -
End of period 25,286 $ - $ $ - $ $ 89,586 164,050 $ -
======= = ========= ===== = ========= ==== ============ ========= = ========
12,034 750,556
======= =======
</TABLE>
(1) The Investment Division commenced operations on
January 5, 1998
(2) The Investment Division commenced
operations on January 15, 1998
(3) The Investment Division commenced
operations on November 12, 1998
(4) The Investment Division ceased
operations on June 22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim INVESCO Balanced
Maxim Corporate Bond Maxim Growth Index Maxim INVESCO ADR Portfolio
Portfolio Portfolio Portfolio
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III (2)
FROM OPERATIONS:
Net investment income (loss) 91,016 22,895 $ $ - $ $ 5,772 $ 23,194 $ 12,634
22,708 (2,353)
Net realized gain (loss) on
investments 2,053 898 38 - 7,832 11,495 26,913 296
Net change in unrealized
appreciation (depreciation) in
--------- -----------------------------------------------------------------------
investments (90,736) (690) 50,307 - 34,889 13,460 133,497 8,044
-------- ----- ------- -- ------- ------- -------- -----
Increase (decrease) in net assets
resulting from operations
------------------ --------------------------------------------------------------
2,333 23,103 73,053 - 40,368 30,727 183,604 20,974
------ ------- ------- -- ------- ------- -------- ------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
242,753 138,392 30,996 - 16,837 225,162 642,416 190,216
Redemptions:
(10,147) (4,961) - - (27,775) (8,885) (57,445) (203)
Net transfers:
-------- -------- ----------- --------------------------------------------------
585,461 21,382 526,871 - 69,405 25,246 983,988 190,529
-------- ------- -------- -- ------- ------- -------- -------
Increase (decrease) in net assets
resulting from unit transactions
-------- ------ ----------- ------------------------------------- --------
818,067 154,813 557,867 - 58,467 241,523 1,568,959 380,542
-------- -------- -------- -- ------- -------- ---------- -------
INCREASE (DECREASE) IN NET ASSETS
820,400 177,916 630,920 - 98,835 272,250 1,752,563 401,516
NET ASSETS:
-------- ------ ------------------------------------- ----------- -----------
341,689 163,773 - - 475,918 203,668 414,760 13,244
-------- -------- -- -- -------- -------- -------- ------
Beginning of period $ 341,689 $ $ - $ $ 475,918 $ $ 414,760
== ======== ==== = ========= ==== ============ = == ===========
1,162,089 630,920 574,753 2,167,323
========== ======== ======== =========
End of period
</TABLE>
(1) The Investment Division commenced
operations on January 5, 1998 (2) The
Investment Division commenced operations
on
January 15, 1998
(3) The Investment Division commenced operations on
November 12, 1998
(4) The Investment Division ceased
operations on June 22, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim INVESCO Small-Cap Maxim Mid-Cap Maxim MidCap Maxim Moderate
Growth Portfolio Portfolio (Growth Fund I) Growth Portfolio Profile Portfolio
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III (2) (1)
- ----------------
FROM OPERATIONS:
Net investment income (loss) 2,035 41,205 $ $ 19,702 $ (782) $ - $ 3,157 $ -
98,828
Net realized gain (loss) on
investments (2,280) 7,796 4,339 (19,901) (2,060) - (192) -
Net change in unrealized
appreciation (depreciation) in
-------- --------- ----------- -------------
investments 128,782 58,307 152,701 50,491 14,578 - 9,833 -
-------- ------- -------- ------- ------- -- ------ -
Increase (decrease) in net assets
resulting from operations
128,537 107,308 255,868 50,292 11,736 - 12,798 -
-------- -------- -------- ------- ------- -- ------- -
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
111,432 187,569 130,512 93,958 99,391 - 148,271 -
Redemptions:
(29,370) (9,025) (35,069) (33,886) - - (3,653) -
Net transfers:
(66,759) 9,949 (45,874) (507,078) 15,086 - 76,598 -
-------- ------ -------- --------- ------- -- ------- -
Increase (decrease) in net assets
resulting from unit transactions
----------------- ---------------------- ----------- ------------------------
15,303 188,493 49,569 (447,006) 114,477 - 221,216 -
------- -------- ------- --------- -------- -- -------- -
143,840 295,801 305,437 (396,714) 126,213 - 234,014 -
INCREASE (DECREASE) IN NET ASSETS
NET ASSETS:
852,860 557,059 780,594 1,177,308 - - - -
-------- -------- -------- ---------- -- -- -- -
Beginning of period 996,700 852,860 $ $ 780,594 $ $ - $ 234,014 $ -
========= ========= === = =========== ==== = ========= ============ = ========
1,086,031 126,213
========== =======
</TABLE>
End of period
(1) The Investment Division commenced
operations on January 5, 1998 (2) The
Investment Division commenced operations
on
January 15, 1998
(3) The Investment Division commenced operations on
November 12, 1998
(4) The Investment Division ceased
operations on June 22, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Moderately Maxim Moderately Maxim Money Maxim Small-Cap
Aggressive Profile Conservative Profile Market Portfolio Aggressive Growth
Portfolio Portfolio Portfolio
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III (1) (1) (2)
- ----------------
FROM OPERATIONS:
Net investment income (loss) 1,778 $ - $ $ - $ $ 21,282 $ - $ -
1,485 29,146
Net realized gain (loss) on
investments (20) - (387) - (25) 5 - -
Net change in unrealized
appreciation (depreciation) in
investments 5,869 - 846 - (103) (5) - -
------ -- ---- -- ----- --- -- -
Increase (decrease) in net assets
resulting from operations
7,627 - 1,944 - 29,018 21,282 - -
------ -- ------ -- ------- ------- -- -
FROM UNIT TRANSACTIONS (by category)
Purchase payments:
125,733 - 82,240 - 492,646 342,544 - -
Redemptions:
- - (10,000) - (65,361) (47,563) - -
Net transfers:
14,329 - - - (233,974) (24,558) - -
------- -- -- -- --------- -------- -- -
Increase (decrease) in net assets
resulting from unit transactions
140,062 - 72,240 - 193,311 270,423 - -
-------- -- ------- -- -------- -------- -- -
INCREASE (DECREASE) IN NET ASSETS
147,689 - 74,184 - 222,329 291,705 - -
NET ASSETS:
Beginning of period
- - - - 609,060 317,355 - -
-- -- -- -- -------- -------- -- -
End of period 147,689 $ - $ $ - $ $ 609,060 $ - $ -
======== = ========= ===== = ========= ==== ============ = ========= = ========
74,184 831,389
======= =======
</TABLE>
(1) The Investment Division commenced
operations on January 5, 1998 (2) The
Investment Division commenced operations
on
January 15, 1998
(3) The Investment Division commenced operations on
November 12, 1998
(4) The Investment Division ceased
operations on June 22, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Small-Cap Maxim Small-Cap Maxim Stock Maxim T. Rowe Price
Index Portoflio Value Portfolio Index Portfolio Equity/Income Portfolio
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III
FROM OPERATIONS:
Net investment income (loss) 101,674 35,055 $ $ 21,325 $ $ 156,833 $ 114,201 $ 92,097
2,172 114,966
Net realized gain (loss) on
investments (1,405) 6,399 (360) 94 542,988 80,860 229,770 25,531
Net change in unrealized
appreciation (depreciation) in
------- --------------------------------- ----------- ----------- ----------
investments (112,425) (4,664) 2,136 (12,340) 247,706 485,887 (203,409) 237,954
--------- ------- ------ -------- -------- -------- --------- -------
Increase (decrease) in net assets
resulting from operations
--------- -------- ------------------------------------- ----------- -----------
(12,156) 36,790 3,948 9,079 905,660 723,580 140,562 355,582
-------- ------- ------ ------ -------- -------- -------- -------
FROM UNIT TRANSACTIONS (by category)
Purchase payments:
53,076 55,155 11,541 16,272 831,152 591,844 375,498 469,165
Redemptions:
(15,915) (367) (371) (213) (164,873) (103,538) (46,819) (32,432)
Net transfers:
---------------------------------------------------- ----------- ----------
34,099 3,422 35,306 5,879 (1,075,988) 201,638 (688,015) 244,718
------- ------ ------- ------ ----------- -------- --------- -------
Increase (decrease) in net assets
resulting from unit transactions
------------------ ------------------------- ---------- ----------- ----------
71,260 58,210 46,476 21,938 (409,709) 689,944 (359,336) 681,451
------- ------- ------- ------- --------- -------- --------- -------
INCREASE (DECREASE) IN NET ASSETS
59,104 95,000 50,424 31,017 495,951 1,413,524 (218,774) 1,037,033
NET ASSETS:
Beginning of period
-------- ------- ------------------------- -------- -------- --------
247,215 152,215 51,982 20,965 3,470,087 2,056,563 2,064,309 1,027,276
-------- -------- ------- ------- ---------- ---------- ---------- ---------
End of period 306,319 247,215 $ $ 51,982 $ $ $ $
========= ========= ==== = =========== === = == = == = =
102,406 3,966,038 3,470,087 1,845,535 2,064,309
======== ========== ========== ========== =========
</TABLE>
(1) The Investment Division commenced operations on January 5, 1998
(2) The Investment Division commenced
operations on January 15, 1998 (3) The
Investment Division commenced operations
on
November 12, 1998
(4) The Investment Division ceased operations on June
22, 1998
(4) The Investment Division ceased operations on June
22, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Total Maxim U.S. Government Maxim Value American Century
Return Portfolio Securities Portfolio Index Portfolio VP Balanced Fund
Investment Division Investment Division Investment Division Investment Division
1998 1997 1998 1997 1998 1997 1998 1997
MAXIM SERIES III (4) (2)
- ----------------
FROM OPERATIONS:
Net investment income (loss) 5,779 21,877 $ $ 6,503 $ $ - $ 39,351 $ 11,295
15,792 1,455
Net realized gain (loss) on
investments 94,172 21,955 3,269 (630) (6) - 23,681 2,743
Net change in unrealized
appreciation (depreciation) in
--------- --------- ---------------------------------------------------------------
investments (62,690) 59,714 (1,176) 2,279 (389) - (36,793) 23,884
-------- ------- ------- ------ ----- -- -------- ------
Increase (decrease) in net assets
resulting from operations
37,261 103,546 17,885 8,152 1,060 - 26,239 37,922
------- -------- ------- ------ ------ -- ------- ------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
5,714 154,095 183,518 61,892 18,356 - - 30,157
Redemptions:
(5,902) (3,673) (23,809) (12,877) - - (4,490) (1,230)
Net transfers:
------- -------- ------------------------ -----------------------------------
(615,844) (65,868) 39,881 (86,296) 182 - (322,005) (15,956)
--------- -------- ------- -------- ---- -- --------- -------
Increase (decrease) in net assets
resulting from unit transactions
------- --------- ----------- ------------ -----------------------------------
(616,032) 84,554 199,590 (37,281) 18,538 - (326,495) 12,971
--------- ------- -------- -------- ------- -- --------- ------
INCREASE (DECREASE) IN NET ASSETS
(578,771) 188,100 217,475 (29,129) 19,598 - (300,256) 50,893
NET ASSETS:
Beginning of period
-------- ------- ----------- ----------- ------------------------------------
578,771 390,671 150,938 180,067 - - 305,535 254,642
-------- -------- -------- -------- -- -- -------- -------
End of period $ - 578,771 $ $ 150,938 $ $ - $ 5,279 $ 305,535
========= ========= ==== = =========== ===== = ========= ============ ===========
368,413 19,598
======== ======
</TABLE>
(1) The Investment Division commenced operations on January 5, 1998
(2) The Investment Division commenced
operations on January 15, 1998 (3) The
Investment Division commenced operations
on
November 12, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Fidelity Investments VIP Total Maxim
Capital Appreciation Fund II Contrafund Portfolio Series III Account
Investment Division Investment Division
1998 1997 1998 1997 1998 1997
----- ----- ----- ----- ----- ----
MAXIM SERIES III (3)
FROM OPERATIONS:
Net investment income (loss) $ 5,494 $ 2,718 $ - $ - $ $
698,684 475,348
Net realized gain (loss) on
investments (7,989) (18,558) - - 921,020 118,766
Net change in unrealized
appreciation (depreciation) in
--------------------------
investments 1,041 10,242 - - 277,011 933,564
------ ------- -- -- -------- -------
Increase (decrease) in net assets
resulting from operations
---------------------------------------------------------------
(1,454) (5,598) - - 1,896,715 1,527,678
------- ------- -- -- ---------- ---------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
28,719 95,085 - - 3,720,539 2,687,296
Redemptions:
(1,156) (42,473) - - (518,200) (307,487)
Net transfers:
(94,807) (43,902) - - (4,237) (45,272)
-------- -------- -- -- ------- --------
Increase (decrease) in net assets
resulting from unit transactions
------------ --------------------------------------------------
(67,244) 8,710 - - 3,198,102 2,334,537
-------- ------ -- -- ---------- ---------
INCREASE (DECREASE) IN NET ASSETS
(68,698) 3,112 - - 5,094,817 3,862,215
NET ASSETS:
Beginning of period
----------- ----------- -----------------------------------
193,854 190,742 - - 10,627,158 6,764,943
-------- -------- -- -- ----------- ---------
End of period $ 125,156 $ 193,854 $ - $ - $ $
============ = =========== = ========= = ========= ======= = =
15,721,975 10,627,158
</TABLE>
(1) The Investment Division commenced operations on January 5, 1998
(2) The Investment Division commenced
operations on January 15, 1998 (3) The
Investment Division commenced operations
on
November 12, 1998
(4) The Investment Division ceased operations on June
22, 1998
See notes to financial (Continued)
statements.
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
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.
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 the 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 the
contracts in the Maxim I Series and Maxim II Series (see Note 3) and are
therefore accounted for separately.
In conjunction with a system conversion process during 1998, a balancing
adjustment from (to) GWLA was required to properly reflect contributions
and corresponding unit values by investment division.
2. Significant Accounting Policies
The following is a summary of significant accounting policies of the Series
Account, which are in accordance with the accounting principles generally
accepted in the investment company industry.
Security Transactions - Security transactions are recorded on the trade
date. Cost of investments sold is determined on the basis of identified
cost.
Dividend income is accrued as of the ex-dividend date and expenses are
accrued on a daily basis.
Security Valuation - The investments in shares of the underlying funds are
valued at the closing net asset value per share as determined by the
appropriate fund/portfolio at the end of each day.
The cost of investments represents shares of the underlying funds that 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 fund.
Federal Income Taxes - The Series Account income is automatically applied
to increase contract reserves. Under the existing federal income tax law,
this income is not taxed to the extent that it is applied to increase
reserves under a contract. The Company reserves the right to charge the
Series Account for federal income taxes attributable to the Series Account
if such taxes are imposed in the future.
Net Transfers - Net transfers include transfers between investment
divisions of the Series Account as well as transfers between other
investment options of the Company.
3. CHARGES UNDER THE CONTRACT
Contract Maintenance Charge - On the last valuation date of each contract
year before the retirement date, the Company deducts from each participant
account a maintenance charge of $30 for contracts issued before September
24, 1984 and $35 for contracts issued 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 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.
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.
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 1.40%
(1.00% allocable to mortality risk and .40% allocable to expense risk). For
contracts purchased after September 19, 1994 the annual rate is 1.25% (.85%
allocable to mortality risk and .40% allocable to expense risk). This
charge is designated to compensate the Company for its assumption of
certain mortality, death benefit, and expense risks. The level of the
charge is guaranteed and will not change.
Premium Taxes - The Company currently will pay any applicable premium tax
or other tax, levied by the 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. (an affiliate) 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
affiliated funds to compensate GW Capital Management, Inc. for investment
advisory services.
<PAGE>
5. SELECTED DATA
The following is a summary of selected data for a
unit of capital and net assets for the Series
Account.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim Bond Maxim Bond Maxim Money Maxim Stock Maxim Total
Portfolio Portfolio Market Portfolio Index Portfolio Return Portfolio
Qualified Non-Qualified Non-Qualified Qualified Non-Qualified
-------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT I
1998
Beginning Unit Value $ $ $ 22.57 $ 66.97 $
32.41 35.65 23.89
=====================================================================================
Ending Unit Value $ $ $ 23.48 $ 83.56 $
34.10 37.55 -
=====================================================================================
Number of Units
Outstanding 174.80 2,461.64 1,398.72 182.36 -
=====================================================================================
Net Assets (000's) $ $ $ 33 $ 15 $
6 92 -
=====================================================================================
1997
Beginning Unit Value $ $ $ 21.71 $ 51.56 $
30.69 33.71 19.59
=====================================================================================
Ending Unit Value $ $ $ 22.57 $ 66.97 $
32.41 35.65 23.89
=====================================================================================
Number of Units 188.97 2,727.87 1,398.91 175.18 2,299.93
Outstanding
=====================================================================================
Net Assets (000's) $ $ $ 32 $ 12 $
6 97 55
=====================================================================================
1996
Beginning Unit Value $ $ $ 20.92 $ 43.05 $
29.81 32.74 17.75
Ending Unit Value $ $ $ 21.71 $ 51.56 $
30.69 33.71 19.59
Number of Units
Outstanding 521.33 2,729.57 1,402.43 175.85 2,301.42
Net Assets (000's) $ $ $ 30 $ 9 $
16 92 45
1995
Beginning Unit Value $ $ $ 20.04 $ 32.29 $
26.21 28.77 14.65
=====================================================================================
Ending Unit Value $ $ $ 20.92 $ 43.05 $
29.81 32.74 17.75
=====================================================================================
Number of Units
Outstanding 523.12 2,732.24 2,022.86 176.42 2,301.96
=====================================================================================
Net Assets (000's) $ $ $ 42 $ 8
16 89 41
=====================================================================================
1994
Beginning Unit Value $ $ 19.54 $ 32.65 $
27.18 29.84 15.24
=====================================================================================
Ending Unit Value $ $ $ 20.04 $ 32.29 $
26.21 28.77 14.65
=====================================================================================
Number of Units
Outstanding 2,001.77 2,735.02 2,027.25 1,700.61 2,303.69
=====================================================================================
Net Assets (000's) $ $ $ 41 $ 55 $
52 79 34
=====================================================================================
</TABLE>
(Continued)
5. SELECTED DATA
The following is a summary of selected data for a unit
of capital and net assets for the Series Account.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim U.S. Maxim U.S.
Government Government
Maxim Bond Maxim Bond Maxim Money Maxim Maxim Stock Maxim Stock Maxim Securities Securities
Portfolio Portfolio Market Money Index Index Total Portfolio Portfolio
Portfolio Market Portfolio Portfolio Return
Portfolio Portfolio
Qualified Non-QualifiedQualified Non-QualifiedQualified Non-QualifiedNon-QualifiedQualified Non-Qualified
-----------------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT II
1998
Beginning Unit Value $ 26.57 $ $ $ $ $ $ $ $
26.36 17.61 17.83 54.89 54.09 24.42 24.83 25.08
===============================================================================================================
Ending Unit Value $ 27.95 $ $ $ $ $ $ $
27.73 18.26 18.49 68.64 67.64 26.14 26.41
===============================================================================================================
Number of Units
Outstanding 47,194.27 48,412.72 59,011.96 45,708.85 232,642.21 160,220.19 113,270.37 205,160.13
===============================================================================================================
Net Assets (000's) $ 1,319 $ $ $ $ $ $ - $ $
1,342 1,078 845 15,969 10,837 2,961 5,418
===============================================================================================================
1997
Beginning Unit Value $ 25.17 $ $ $ $ $ $ $ $
24.97 16.96 17.18 42.10 41.48 20.05 23.20 23.44
===============================================================================================================
Ending Unit Value $ 26.57 $ $ $ $ $ $ $ $
26.36 17.61 17.83 54.89 54.09 24.42 24.83 25.08
===============================================================================================================
Number of Units 54,547.88 51,635.74 54,854.40 46,577.91 189,804.06 153,561.61 211,352.14 144,275.86 244,602.79
Outstanding
===============================================================================================================
Net Assets (000's) $ 1,449 $ $ 966 $ $ $ $ $ $
1,361 830 10,419 8,306 5,161 3,583 6,136
===============================================================================================================
1996
Beginning Unit Value $ 24.48 $ $ $ $ $ $ $ $
24.29 16.37 16.58 35.04 34.53 18.20 22.65 22.88
==============================================================================================================
Ending Unit Value $ 25.17 $ $ $ $ $ $ $ $
24.97 16.96 17.18 42.10 41.48 20.05 23.20 23.44
===============================================================================================================
Number of Units
Outstanding 88,677.28 64,147.08 61,373.56 64,049.31 202,398.63 159,266.26 219,989.41 183,063.52 272,571.17
===============================================================================================================
Net Assets (000's) $ 2,232 $ $ $ $ $ $ $ $
1,602 1,041 1,100 8,520 6,606 4,411 4,248 6,389
===============================================================================================================
1995
Beginning Unit Value $ 21.54 $ $ $ $ $ $ $ $
21.37 15.71 15.90 26.19 25.81 15.04 19.78 19.98
===============================================================================================================
Ending Unit Value $ 24.48 $ $ $ $ $ $ $ $
24.29 16.37 16.58 35.04 34.53 18.20 22.65 22.88
===============================================================================================================
Number of Units
Outstanding 106,047.41 79,442.17 104,679.99 97,581.56 224,763.46 171,678.12 239,974.08 228,062.15 325,518.95
===============================================================================================================
Net Assets (000's) $ 2,596 $ $ $ $ $ $ $ $
1,929 1,714 1,617 7,876 5,927 4,368 5,165 7,446
===============================================================================================================
1994
Beginning Unit Value $ $ $ $ $ $ $ $ $
22.38 22.20 15.33 15.53 26.52 26.13 15.67 20.72 20.93
===============================================================================================================
Ending Unit Value $ 21.54 $ $ $ $ $ $ $ $
21.37 15.71 15.90 26.19 25.81 15.04 19.78 19.98
===============================================================================================================
Number of Units
Outstanding 113,313.38 95,366.99 127,897.77 125,420.05 263,158.31 219,588.42 335,713.57 284,597.25 415,446.66
===============================================================================================================
Net Assets (000's) $ 2,441 $ $ $ $ $ $ $ $
2,038 2,009 1,995 6,893 5,667 5,049 5,629 8,299
===============================================================================================================
</TABLE>
(Continued)
5. SELECTED DATA
American
Century VP
American Capital
Century VP Appreciation
Balanced Fund
Fund
-------------------------
Qualified Non-Qualified
-------------------------
MAXIM SERIES ACCOUNT II
1998
Beginning Unit Value $ $
16.04 12.58
=========================
Ending Unit Value $
12.06
=========================
Number of Units
Outstanding 29,929.91
=========================
Net Assets (000's) $ - $
361
=========================
1997
Beginning Unit Value $ $
14.04 13.19
=========================
Ending Unit Value $ $
16.04 12.58
=========================
Number of Units 26,379.49 25,957.24
Outstanding
=========================
Net Assets (000's) $ 423 $
327
=========================
1996
Beginning Unit Value $ $
12.69 14.00
=========================
Ending Unit Value $ $
14.04 13.19
=========================
Number of Units
Outstanding 24,745.20 26,567.31
=========================
Net Assets (000's) $ 348 $
350
=========================
1995
Beginning Unit Value $ $
10.62 10.82
=========================
Ending Unit Value $ $
12.69 14.00
=========================
Number of Units
Outstanding 24,517.40 25,359.37
=========================
Net Assets (000's) $ 311 $
355
=========================
1994
Beginning Unit Value $ $
10.71 11.11
=========================
Ending Unit Value $ $
10.62 10.82
=========================
Number of Units
Outstanding 27,124.38 21,121.89
=========================
Net Assets (000's) $ 288 $
229
=========================
(Continued)
5. SELECTED DATA
The following is a summary of selected data for a unit
of capital and net assets for the Series Account.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim
Maxim INVESCO
Maxim Maxim Maxim Maxim INVESCO Small-Cap
Aggressive Maxim Blue Maxim Bond Conservative Corporate Maxim INVESCO ADR Balanced Growth
Profile Chip Portfolio Profile Bond Growth Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio Portfolio Index
Portfolio
------------------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT III
Date Commenced Operations 01/05/98 01/15/98 09/19/94 01/05/98 08/08/95 01/15/98 01/06/95 10/31/96 01/06/95
1998
Beginning Unit Value $ $ $ $ $ $ $ $ $
10.00 10.00 12.09 10.00 14.60 10.00 14.90 12.59 19.21
============================================================================================================
Ending Unit Value $ $ $ $ $ $ $ $ $
11.35 11.74 12.73 10.63 14.91 13.75 16.28 14.73 22.31
============================================================================================================
Number of Units
Outstanding 2,227.92 1,025.12 58,959.10 15,432.21 77,918.20 45,895.99 35,311.40 147,157.63 44,665.98
============================================================================================================
Net Assets (000's) 25 $ 12 $ 751 $ 164 $ $ 631 $ 575 $ $ 997
1,162 2,167
============================================================================================================
1997
Beginning Unit Value $ $ $ $ $
11.43 13.12 13.46 10.13 16.39
============================================================================================================
Ending Unit Value $ $ $ $ $
12.09 14.60 14.90 12.59 19.21
============================================================================================================
Number of Units 7,412.56 23,403.30 31,948.04 32,937.69 44,396.72
Outstanding
============================================================================================================
Net Assets (000's) $ 90 $ $ 476 $ $ 853
342 415
============================================================================================================
1996
Beginning Unit Value $ $ $ $ $
11.10 12.03 11.25 10.00 13.09
============================================================================================================
Ending Unit Value $ $ $ $ $
11.43 13.12 13.46 10.13 16.39
============================================================================================================
Number of Units
Outstanding 5,196.46 12,487.29 15,132.95 1,307.11 33,993.67
============================================================================================================
Net Assets (000's) $ 59 $ $ 204 $ 13 $ 557
164
============================================================================================================
1995
Beginning Unit Value $ 9.76 $ $ $
10.00 10.00 10.00
============================================================================================================
Ending Unit Value $ $ $ $
11.10 12.03 11.25 13.09
Number of Units
Outstanding 1,675.00 799.35 2,623.01 4,511.19
============================================================================================================
Net Assets (000's) $ 19 $ 10 $ 29 $ 59
============================================================================================================
1994
Beginning Unit Value $
10.00
============================================================================================================
Ending Unit Value $ 9.76
============================================================================================================
Number of Units
Outstanding 455.62
============================================================================================================
Net Assets (000's) $ 4
============================================================================================================
</TABLE>
(Continued)
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim Maxim Maxim
Maxim Maxim Maxim Moderately Moderately Small-Cap Maxim Maxim
Mid-Cap MidCap Moderate Aggressive Conservative Maxim Money Aggressive Small-Cap Small-Cap
Portfolio Growth Profile Profile Profile Market Growth Index Value
(Growth Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Fund I)
------------------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT III
Date Commenced Operations09/19/94 01/15/98 01/05/98 01/05/98 01/05/98 08/04/95 01/15/98 09/19/94 03/09/95
1998
Beginning Unit Value $ $ $ $ $ $ $ $ $
15.75 10.00 10.00 10.00 10.00 10.97 0.00 16.57 17.07
=========================================================================================================
Ending Unit Value $ $ $ $ $ $ $ $ $
20.80 12.42 10.98 11.10 10.79 11.40 0.00 16.10 18.25
=========================================================================================================
Number of Units
Outstanding 52,202.19 10,160.99 21,309.48 13,300.61 6,875.97 72,949.61 - 19,020.51 5,611.10
=========================================================================================================
Net Assets (000's) $ $ $ 234 $ 148 $ 74 $ 831 - $ $ 102
1,086 126 306
=========================================================================================================
1997
Beginning Unit Value $ $ $ $
14.12 10.55 13.87 13.51
=========================================================================================================
Ending Unit Value $ $ $ $
15.75 10.97 16.57 17.07
=========================================================================================================
Number of Units 49,565.38 55,509.88 14,918.01 3,045.87
Outstanding
=========================================================================================================
Net Assets (000's) $ 781 $ 609 $ $ 52
247
=========================================================================================================
1996
Beginning Unit Value $ $ $ $
13.49 10.17 12.18 11.60
=========================================================================================================
Ending Unit Value $ $ $ $
14.12 10.55 13.87 13.51
=========================================================================================================
Number of Units
Outstanding 83,389.90 30,070.95 10,975.88 1,551.40
=========================================================================================================
Net Assets (000's) $ $ 317 $ $ 21
1,177 152
=========================================================================================================
1995
Beginning Unit Value $ $ $ $
10.80 10.00 9.77 10.00
=========================================================================================================
Ending Unit Value $ $ $ $
13.49 10.17 12.18 11.60
=========================================================================================================
Number of Units
Outstanding 24,467.21 15,499.45 2,705.63 697.92
=========================================================================================================
Net Assets (000's) $ 330 $ 158 $ 33 $ 8
=========================================================================================================
1994
Beginning Unit Value $ $
10.00 10.00
=========================================================================================================
Ending Unit Value $ $
10.80 9.77
=========================================================================================================
Number of Units
Outstanding 4,508.26 986.29
=========================================================================================================
Net Assets (000's) $ 49 $ 10
=========================================================================================================
</TABLE>
(Continued)
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
American
Maxim T. Maxim U.S. Century VP Fidelity
Rowe Price Government American Capital Investments
Maxim Stock Equity/IncomMaxim Total Securities Maxim Century VP Appreciation VIP II
Index Portfolio Return Portfolio Value Balanced Fund Contrafund
Portfolio Portfolio Index Fund Portfolio
Portfolio
-----------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT III
Date Commenced Operations 09/19/94 01/06/95 09/19/94 01/18/95 01/15/98 09/19/94 01/18/95 11/12/98
1998
Beginning Unit Value $ 20.50 $ $ 15.78 $ 12.23 $ $ 14.94 $ 11.68 $
19.39 10.00 10.00
=====================================================================================================
Ending Unit Value $ 25.67 $ $ - $ 12.95 $ $ 17.07 $ 11.29 $
20.86 11.68 11.69
=====================================================================================================
Number of Units
Outstanding 154,519.05 88,483.59 - 28,452.60 1,678.41 309.20 11,087.23 -
=====================================================================================================
Net Assets (000's) $ 3,966 $ $ - $ 368 $ 20 $ 5 $ 125 $
1,846 -
=====================================================================================================
1997
Beginning Unit Value $ 15.70 $ $ 12.94 $ 11.41 $ 13.06 $ 12.23
15.24
=====================================================================================================
Ending Unit Value $ 20.50 $ $ 15.78 $ 12.23 $ 14.94 $ 11.68
19.39
=====================================================================================================
Number of Units 169,289.23 106,469.26 36,689.11 12,345.78 20,447.27 16,591.59
Outstanding
=====================================================================================================
Net Assets (000's) $ 3,470 $ $ 579 $ 151 $ 306 $ 194
2,064
=====================================================================================================
1996
Beginning Unit Value $ 13.05 $ $ 11.72 $ 11.12 $ 11.79 $ 12.94
12.92
=====================================================================================================
Ending Unit Value $ 15.70 $ $ 12.94 $ 11.41 $ 13.06 $ 12.23
15.24
=====================================================================================================
Number of Units
Outstanding 130,996.47 67,415.13 30,202.42 15,784.10 19,490.47 15,595.65
=====================================================================================================
Net Assets (000's) $ 2,057 $ $ 391 $ 180 $ 255 $ 191
1,027
=====================================================================================================
1995
Beginning Unit Value $ 9.74 $ $ 9.67 $ 10.00 $ 9.85 $ 10.00
10.00
=====================================================================================================
Ending Unit Value $ 13.05 $ $ 11.72 $ 11.12 $ 11.79 $ 12.94
12.92
=====================================================================================================
Number of Units
Outstanding 17,200.32 19,500.37 9,694.71 14,812.67 7,745.10 6,110.86
=====================================================================================================
Net Assets (000's) $ 224 $ 252 $ 114 $ 165 $ 91 $ 79
=====================================================================================================
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
=====================================================================================================
Net Assets (000's) $ 22 $ 20 $ 2
=====================================================================================================
</TABLE>
(Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
- -------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
AND INDEPENDENT AUDITORS' STATEMENT
<PAGE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(An indirect wholly-owned subsidiary of The Great-West Life Assurance Company)
Consolidated Financial Statements for the Years Ended December 31,
1998, 1997, and 1996 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 (an indirect wholly-owned subsidiary of The
Great-West Life Assurance Company) and subsidiaries as of December 31, 1998 and
1997, 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,
1998. 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, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 25, 1999
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C>
1998 1997
-------------------- ------------------
ASSETS
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value
$2,298,936 and $2,151,476) $ 2,199,818 $ 2,082,716
Available-for-sale, at fair value (amortized
cost
$6,752,532 and $6,541,422) 6,936,726 6,698,629
Common stock, at fair value (cost $41,932 and 48,640 39,021
$34,414)
Mortgage loans on real estate, net 1,133,468 1,235,594
Real estate, net 73,042 93,775
Policy loans 2,858,673 2,657,116
Short-term investments, available-for-sale (cost
approximates fair value) 420,169 399,131
-------------------- ------------------
Total Investments 13,670,536 13,205,982
Cash 176,119 126,278
Reinsurance receivable
Related party 5,006 1,950
Other 187,952 82,414
Deferred policy acquisition costs 238,901 255,442
Investment income due and accrued 157,587 165,827
Other assets 311,078 121,543
Premiums in course of collection 84,940 77,008
Deferred income taxes 191,483 193,820
Separate account assets 10,099,543 7,847,451
-------------------- ------------------
TOTAL ASSETS $ 25,123,145 $ 22,077,715
==================== ==================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
1998 1997
------------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
POLICY BENEFIT LIABILITIES:
Policy reserves
Related party 555,300 17,774
Other 11,284,414 11,084,945
Policy and contract claims 491,932 375,499
Policyholders' funds 181,779 165,106
Provision for policyholders' dividends 69,530 62,937
GENERAL LIABILITIES:
Due to Parent Corporation 52,877 126,656
Repurchase agreements 244,258 325,538
Commercial paper 39,731 54,058
Other liabilities 761,505 689,967
Undistributed earnings on participating business 143,717 141,865
Separate account liabilities 10,099,543 7,847,451
------------- ------------
Total Liabilities 23,924,586 20,891,796
------------- ------------
COMMITMENTS AND CONTINGENCIES
<TABLE>
<S> <C> <C>
1998 1997
STOCKHOLDER'S EQUITY: ------------- ------------
Preferred stock, $1 par value, 50,000,000 shares authorized
Series A, cumulative, 1,500 shares authorized,
liquidation value of $100,000 per share,
0 and 600 shares issued and outstanding 60,000
Series B, cumulative, 1,500 shares authorized,
liquidation value of $100,000 per share,
0 and 200 shares issued and outstanding 20,000
Series C, cumulative, 1,500 shares authorized,
none outstanding
Series D, cumulative, 1,500 shares authorized,
none outstanding
Series E, non-cumulative, 2,000,000 shares
authorized, liquidation value of $20.90 per share,
0 and 2,000,000 shares issued and outstanding 41,800
Common stock, $1 par value; 50,000,000 shares
authorized; 7,032,000 shares issued and outstanding 7,032 7,032
Additional paid-in capital 699,556 690,748
Accumulated other comprehensive income 61,560 52,807
Retained earnings 430,411 313,532
------------- --------------
Total Stockholder's Equity 1,198,559 1,185,919
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 25,123,145 $ 22,077,715
============= ==============
</TABLE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
------------- ------------- -------------
REVENUES:
Premiums
Related party (net of premiums
recaptured totaling $0,
$155,798, and $164,839) $ 46,191 $ 155,798 $ 164,839
Other (net of premiums ceded
totaling $86,409, $61,152, and $60,589) 948,672 677,381 664,610
Fee income 516,052 420,730 347,519
Net investment income
Related party (9,416) (8,957) (26,082)
Other 906,776 890,630 860,719
Net realized gains (losses) on investments 38,173 9,800 (21,078)
------------- ------------- -------------
2,446,448 2,145,382 1,990,527
------------- ------------- -------------
BENEFITS AND EXPENSES:
Life and other policy benefits (net of
reinsurance recoveries totaling $81,205,
$44,871 and $52,675) 768,474 543,903 515,750
Increase in reserves
Related party 46,191 155,798 164,839
Other 78,851 90,013 64,359
Interest paid or credited to contractholders 491,616 527,784 561,786
Provision for policyholders' share of earnings
(losses) on participating business 5,908 3,753 (7)
Dividends to policyholders 71,429 63,799 49,237
------------- ------------- -------------
1,462,469 1,385,050 1,355,964
Commissions 144,246 102,150 106,561
Operating expenses (income):
Related party (4,542) (6,292) 304,599
Other 517,676 431,714 33,435
Premium taxes 30,848 24,153 25,021
------------- ------------- -------------
2,150,697 1,936,775 1,825,580
INCOME BEFORE INCOME TAXES 295,751 208,607 164,947
------------- ------------- -------------
PROVISION FOR INCOME TAXES:
Current 81,770 61,644 45,934
Deferred 17,066 (11,797) (15,562)
------------- ------------- -------------
98,836 49,847 30,372
------------- ------------- -------------
NET INCOME $ 196,915 $ 158,760 $ 134,575
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Comprehensive Retained
-------------------------- -----------------------
Shares Amount Shares Amount Capital Income Earnings Total
------------ ----------- ----------- --------- ------------- ------------- ---------- ------------
BALANCE, JANUARY 1, 1996 2,000,800 121,800 7,032,000 7,032 657,265 58,763 148,261 993,121
Net income 134,575 134,575
Other comprehensive loss (43,812) (43,812)
------------
Total comprehensive income 90,763
------------
Capital contributions 7,000 7,000
Dividends (56,670) (56,670)
------------ ----------- ----------- --------- -------------------------------------- ------------
BALANCE, DECEMBER 31, 1996 2,000,800 121,800 7,032,000 7,032 664,265 14,951 226,166 1,034,214
Net income 158,760 158,760
Other comprehensive income 37,856 37,856
------------
Total comprehensive income 196,616
------------
Capital contributions 26,483 26,483
Dividends (71,394) (71,394)
------------ ----------- ----------- --------- ------------- ------------- ---------- ------------
BALANCE, DECEMBER 31, 1997 2,000,800 121,800 7,032,000 7,032 690,748 52,807 313,532 1,185,919
Net income 196,915 196,915
Other comprehensive income 8,753 8,753
------------
Total comprehensive income 205,668
------------
Capital contributions 8,808 8,808
Dividends (80,036) (80,036)
Purchase of preferred shares (2,000,800) (121,800) (121,800)
------------ ----------- ----------- --------- ------------ -------------- ---------- ------------
BALANCE, DECEMBER 31, 1998 0 0 7,032,000 7,032 699,556 61,560 430,411 1,198,559
============ =========== =========== ========= =========== =============== ========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
87
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
------------- ------------- ------------
OPERATING ACTIVITIES:
Net income $ 196,915 $ 158,760 $ 134,575
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain (loss) allocated to participating
policyholders 5,908 3,753 (7)
Amortization of investments (15,068) 409 15,518
Realized losses (gains) on disposal of
investments and provisions for mortgage
loans and real estate (38,173) (9,800) 21,078
Amortization 55,550 46,929 49,454
Deferred income taxes 17,066 (11,824) (14,658)
Changes in assets and liabilities:
Policy benefit liabilities 938,444 498,114 358,393
Reinsurance receivable (43,643) 112,594 136,966
Accrued interest and other receivables 28,467 30,299 24,778
Other, net (184,536) 64,465 (13,676)
------------- ------------- ------------
Net cash provided by operating activities 960,930 893,699 712,421
------------- ------------- ------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to maturity
Sales 9,920
Maturities and redemptions 471,432 359,021 516,838
Available-for-sale
Sales 6,169,678 3,174,246 3,569,608
Maturities and redemptions 1,268,323 771,737 803,369
Mortgage loans 211,026 248,170 235,907
Real estate 16,456 36,624 2,607
Common stock 3,814 17,211 1,888
Purchases of investments:
Fixed maturities
Held-to-maturity (584,092) (439,269) (453,787)
Available-for-sale (7,410,485) (4,314,722) (4,753,154)
Mortgage loans (100,240) (2,532) (23,237)
Real estate (4,581) (64,205) (15,588)
Common stock (10,020) (29,608) (12,113)
------------- ------------- ------------
Net cash provided by (used in)
investing activities $ 41,231 $ (243,327) $ (127,662)
============= ============= ============
</TABLE>
(Continued)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
-------------- -------------- -------------
FINANCING ACTIVITIES:
Contract withdrawals, net of deposits $ (507,237) $ (577,538) $ (413,568)
Due to Parent Corporation (73,779) (19,522) 1,457
Dividends paid (80,036) (71,394) (56,670)
Net commercial paper repayments (14,327) (30,624) (172)
Net repurchase agreements (repayments)
borrowings (81,280) 38,802 (88,563)
Capital contributions 8,808 11,000 7,000
Purchase of preferred shares (121,800)
Acquisition of subsidiary (82,669)
-------------- -------------- -------------
-------------- -------------- -------------
Net cash used in financing activities (952,320) (649,276) (550,516)
-------------- -------------- -------------
NET INCREASE IN CASH 49,841 1,096 34,243
CASH, BEGINNING OF YEAR 126,278 125,182 90,939
-------------- -------------- -------------
CASH, END OF YEAR $ 176,119 $ 126,278 $ 125,182
============== ============== =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 111,493 $ 86,829 $ 103,700
Interest 13,849 15,124 15,414
</TABLE>
See notes to consolidated financial statements. (Concluded)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997,
AND 1996 (Amounts in Thousands, except Share Amounts)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company (the Company)
is an indirect wholly-owned subsidiary of The Great-West Life Assurance
Company (the Parent Corporation). The Company is an insurance company
domiciled in the State of Colorado. The Company offers a wide range of
life insurance, health insurance, and retirement and investment products
to individuals, businesses, and other private and public organizations
throughout the United States.
Basis of Presentation - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The consolidated financial
statements include the accounts of the Company and its subsidiaries. All
material intercompany transactions and balances have been eliminated in
consolidation.
Certain reclassifications, primarily related to the presentation of
related party transactions and the classification of the release of a
contingent liability (see Note 10) have been made to the 1997 and 1996
financial statements.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed maturities at
the time of purchase. Fixed maturities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost unless fair value is less
than cost and the decline is deemed to be other than temporary,
in which case they are written down to fair value and a new cost
basis is established.
Fixed maturities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the net unrealized gains and
losses reported as accumulated other comprehensive income in
stockholder's equity. The net unrealized gains and losses on
derivative financial instruments used to hedge available-for-sale
securities are also included in other comprehensive income.
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 losses inherent in the loan portfolio.
Management's judgment is based on past loss experience, current
and projected economic conditions, and extensive situational
analysis of each individual loan. The measurement of impaired
loans is based on the fair value of the collateral.
3. Real estate is carried at cost. The carrying value of real estate
is subject to periodic evaluation of recoverability.
4. Investments in common stock are carried at fair value.
5. Policy loans are carried at their unpaid balances.
6. Short-term investments include securities purchased with initial
maturities of one year or less and are carried at amortized cost.
The Company considers short-term investments to be
available-for-sale and amortized cost approximates fair value.
7. Gains and losses realized on disposal of investments are
determined on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs, which
primarily consist of sales commissions related to the production of new
and renewal business, have been deferred to the extent recoverable.
Other costs capitalized include expenses associated with the Company's
group sales representatives. These costs are variable in nature and are
dependent upon sales volume. Deferred costs associated with the annuity
products are being amortized over the life of the contracts in
proportion to the emergence of gross profits. Retrospective adjustments
of these amounts are made when the Company revises its estimates of
current or future gross profits. Deferred costs associated with
traditional life insurance are amortized over the premium paying period
of the related policies in proportion to premium revenues recognized.
Amortization of deferred policy acquisition costs totaled $51,724,
$44,298, and $47,089 in 1998, 1997, and 1996, respectively.
Separate Accounts - Separate account assets and related liabilities are
carried at fair value. The Company's separate accounts invest in shares
of Maxim Series Fund, Inc. and Orchard Series Fund, Inc., both
diversified, open-end management investment companies which are
affiliates of the Company, shares of other external mutual funds, or
government or corporate bonds. Investment income and realized capital
gains and losses of the separate accounts accrue directly to the
contractholders and, therefore, are not included in the Company's
statements of income. Revenues to the Company from the separate accounts
consist of contract maintenance fees, administrative fees, and mortality
and expense risk charges.
Life Insurance and Annuity Reserves - Life insurance and annuity policy
reserves with life contingencies of $6,866,478 and $5,741,596 at
December 31, 1998 and 1997, respectively, are computed on the basis of
estimated mortality, investment yield, withdrawals, future maintenance
and settlement expenses, and retrospective experience rating premium
refunds. Annuity contract reserves without life contingencies of
$4,908,964 and $5,346,516 at December 31, 1998 and 1997, respectively,
are established at the contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance companies are
carried as a reinsurance receivable on the balance sheet (see Note 3).
The cost of reinsurance related to long-duration contracts is accounted
for over the life of the underlying reinsured policies using assumptions
consistent with those used to account for the underlying policies.
Policy and Contract Claims - Policy and contract claims include
provisions for reported life and health claims in process of settlement,
valued in accordance with the terms of the related policies and
contracts, as well as provisions for claims incurred and unreported
based primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity policy
reserves are $4,108,314 and $3,901,297 at December 31, 1998 and 1997,
respectively. Participating business approximates 32.7% and 50.5% of the
Company's ordinary life insurance in force and 71.9% and 91.1% of
ordinary life insurance premium income at December 31, 1998 and 1997,
respectively.
The amount of dividends to be paid from undistributed earnings on
participating business is determined annually by the Board of Directors.
Amounts allocable to participating policyholders are consistent with
established Company practice.
The Company has established a Participating Policyholder Experience
Account (PPEA) for the benefit of all participating policyholders which
is included in the accompanying consolidated balance sheet. Earnings
associated with the operation of the PPEA are credited to the benefit of
all participating policyholders. In the event that the assets of the
PPEA are insufficient to provide contractually guaranteed benefits, the
Company must provide such benefits from its general assets.
The Company has also established a Participation Fund Account (PFA) for
the benefit of the participating policyholders previously transferred to
the Company from the Parent under an assumption reinsurance transaction.
The PFA is part of the PPEA. Earnings derived from the operation of the
PFA net of a management fee paid to the Company accrue solely for the
benefit of the acquired participating policyholders.
Recognition of Premium and Fee Income and Benefits and Expenses - Life
insurance premiums are recognized when due. Annuity premiums with life
contingencies are recognized as received. Accident and health premiums
are earned on a monthly pro rata basis. Revenues for annuity and other
contracts without significant life contingencies consist of contract
charges for the cost of insurance, contract administration, and
surrender fees that have been assessed against the contract account
balance during the period. Fee income is derived primarily from
contracts for claim processing or other administrative services and from
assets under management. Fees from contracts for claim processing or
other administrative services are recorded as the services are provided.
Fees from assets under management, which consist of contract maintenance
fees, administration fees and mortality and expense risk changes, are
recognized when due. Benefits and expenses on policies with life
contingencies impact 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 6.3%, 6.6%, and 6.8% in 1998, 1997, and 1996.
Income Taxes - Income taxes are recorded using the asset and liability
approach, which requires, among other provisions, the recognition of
deferred tax assets and liabilities for expected future tax consequences
of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, all
expected future events (other than the enactments or changes in the tax
laws or rules) are considered. Although realization is not assured,
management believes it is more likely than not that the deferred tax
asset, net of a valuation allowance, will be realized.
Repurchase Agreements and Securities Lending - The Company enters into
repurchase agreements with third-party broker/dealers in which the
Company sells securities and agrees to repurchase substantially similar
securities at a specified date and price. Such agreements are accounted
for as collateralized borrowings. Interest expense on repurchase
agreements is recorded at the coupon interest rate on the underlying
securities. The repurchase fee received or paid is amortized over the
term of the related agreement and recognized as an adjustment to
investment income.
The Company requires collateral in an amount greater than or equal to
102% of the borrowing for all securities lending transactions.
The Company implemented 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. The
implementation of this statement had no material effect on the Company's
financial statements.
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 is recognized as an adjustment to net investment income on the
accrual method. Gains and losses on foreign exchange contracts are
deferred and recognized in net investment income when the hedged
transactions are realized.
Interest rate swap agreements are used to convert the interest rate on
certain fixed maturities from a floating rate to a fixed rate. Interest
rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Interest rate floors and caps are interest
rate protection instruments that require the payment by a counter-party
to the Company of an interest rate differential. The differential
represents the difference between current interest rates and an
agreed-upon rate, the strike rate, applied to a notional principal
amount. Foreign currency exchange contracts are used to hedge the
foreign exchange rate risk associated with bonds denominated in other
than U.S. dollars. 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.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting
for Derivative Instruments and for Hedging Activities". This Statement
provides a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. This Statement is
effective for the Company beginning January 1, 2000, and earlier
adoption is encouraged. The Company has not adopted this Statement as of
December 31, 1998. Management has not determined the impact of the
Statement on the Company's financial position or results of operations.
Stock Options - In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation", which was effective for the
Company beginning January 1, 1996. This Statement requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based
on the fair value of the equity instrument awarded. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company has continued to apply APB Opinion No.
25 to stock-based compensation awards to employees and has disclosed the
required pro forma effect on net income (see Note 13).
2. ACQUISITION
On July 8, 1998, the Company paid $82,669 in cash to acquire all of the
outstanding shares of Anthem Health & Life Insurance Company (AH&L). The
purchase price was based on AH&L's adjusted book value, and is subject
to further minor adjustments. The results of AH&L's operations, which
had an insignificant effect on net income, have been combined with those
of the Company since the date of acquisition.
The acquisition was accounted for using the purchase method of
accounting and, accordingly, the purchase price was allocated to the net
assets acquired based on their estimated fair values. The fair value of
tangible assets acquired and liabilities assumed was $379,934 and
$317,440, respectively. The balance of the purchase price, $20,175, was
recorded as excess cost over net assets acquired (goodwill) and is being
amortized over 30 years on a straight-line basis. Management intends to
finalize its allocation of the purchase price within a year of the
transaction, which will likely result in a reallocation of the purchase
price, which is not expected to be material.
3. RELATED-PARTY TRANSACTIONS
On December 31, 1998, the Company and the Parent Corporation entered
into an Indemnity Reinsurance Agreement pursuant to which the Company
reinsured by coinsurance certain Parent Corporation individual
non-participating life insurance policies. The Company recorded $859 in
premium income and an increase in reserves, associated with certain
policies, as a result of this transaction. Of the $137,638 in reserves
that were recorded as a result of this transaction, $136,779 was
recorded under SFAS No. 97, "Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized Gains
and Losses from the Sale of Investments" ("SFAS No. 97"), accounting
principles. The Company recorded, at the Parent Corporation's carrying
amount, which approximates estimated fair value, the following at
December 31, 1998 as a result of this transaction:
Assets Liabilities and Stockholder's Equity
Cash 24,600 Policy reserves 137,638
Deferred income taxes 3,816
Policy loans 82,649
Due from Parent Corporation 19,753
Other 6,820
----------- -----------
137,638 137,638
In connection with this transaction, the Parent Corporation made a
capital contribution of $5,608 to the Company.
On September 30, 1998, the Company and the Parent Corporation entered
into an Indemnity Reinsurance Agreement pursuant to which the Company
reinsured by coinsurance certain Parent Corporation individual
non-participating life insurance policies. The Company recorded $45,332
in premium income and an increase in reserves as a result of this
transaction. Of the $428,152 in reserves that were recorded as a result
of this transaction, $382,820 was recorded under SFAS No. 97 accounting
principles. The Company recorded, at the Parent Corporation's carrying
amount, which approximates estimated fair value, the following at
September 30, 1998 as a result of this transaction:
Assets Liabilities and Stockholder's Equity
<TABLE>
<S> <C> <C>
Bonds $ 147,475 Policy reserves $ 428,152
Mortgages 82,637 Due to Parent Corporation 20,820
Cash 134,900
Deferred policy acquisition 9,724
costs
Deferred income taxes 15,762
Policy loans 56,209
Other 2,265
---------- -----------
$ 448,972 $ 448,972
</TABLE>
In connection with this transaction, the Parent Corporation made a
capital contribution of $3,200 to the Company.
On September 30, 1998, the Company purchased furniture, fixtures and
equipment from the Parent Corporation for $25,184. In February 1997, the
Company purchased the corporate headquarters properties from the Parent
Corporation for $63,700.
On June 30, 1997, the Company recaptured all remaining pieces of an
individual participating insurance block of business previously
reinsured to the Parent Corporation on December 31, 1992. The Company
recorded $155,798 in premium income and an increase in reserves as a
result of this transaction. The Company recorded, at the Parent
Corporation's carrying amount, which approximates estimated fair value,
the following at June 30, 1997 as a result of this transaction:
Assets Liabilities and Stockholder's Equity
Cash 160,000 Policy reserves 155,798
Bonds 17,975 Due to Parent Corporation 20,373
Other 60 Deferred income taxes 2,719
Undistributed earnings on
participating business (855)
----------- ---------------
178,035 178,035
In connection with this transaction, the Parent Corporation made a
capital contribution of $11,000 to the Company.
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 $164,839 in premium income and an increase in reserves as a
result of this transaction. The Company recorded, at the Parent
Corporation's carrying amount, which approximates estimated fair value,
the following at 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 16,180
Other 118 Deferred income taxes 1,283
Undistributed earnings on
participating business (431)
------------ --------------
181,871 181,871
In connection with this transaction, the Parent Corporation made a
capital contribution of $7,000 to the Company.
Effective January 1, 1997, all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. All related employee benefit plan assets and liabilities were
also transferred to the Company (see Note 9). The transfer did not have
a material effect on the Company's operating expenses as the actual
costs associated with the employees and the benefit plans were charged
previously to the Company under administrative service agreements
between the Company and the Parent Corporation.
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. Since
January 1, 1997, the Company has performed these services for the U.S.
operations of the Parent Corporation. The following represents revenue
from or payments made to the Parent Corporation for services provided
pursuant to these service agreements. The amounts recorded are based
upon management's best estimate of actual costs incurred and resources
expended based upon number of policies and/or certificates in force.
<TABLE>
Years Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------
1998 1997 1996
------------ ------------ ------------
Investment management revenue (expense) $ 475 $ 801 $ (14,800)
Administrative and underwriting revenue
(payments) 4,542 6,292 (304,599)
</TABLE>
At December 31, 1998 and 1997, due to Parent Corporation includes
$17,930 and $8,957 due on demand and $34,947 and $117,699 of notes
payable which bear interest and mature at various dates through June 15,
2008. These notes may be prepaid in whole or in part at any time without
penalty; the issuer may not demand payment before the maturity date. The
amounts due on demand to the Parent Corporation bear interest at the
public bond rate (6.1% and 7.1% at December 31, 1998 and 1997,
respectively) while the remainder bear interest at various rates ranging
from 5.4% to 6.6%. Interest expense attributable to these payables was
$9,891, $9,758, and $11,282 for the years ended December 31, 1998, 1997
and 1996, respectively.
4. REINSURANCE
In the normal course of business, the Company seeks to limit its
exposure to loss on any single insured and to recover a portion of
benefits paid by ceding risks to other insurance enterprises under
excess coverage and co-insurance contracts. The Company retains a
maximum of $1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could
result in losses to the Company. The Company evaluates the financial
condition of its reinsurers and monitors concentrations of credit risk
arising from similar geographic regions, activities, or economic
characteristics of the reinsurers to minimize its exposure to
significant losses from reinsurer insolvencies. At December 31, 1998 and
1997, the reinsurance receivable had a carrying value of $192,958 and
$84,364, respectively.
The following schedule details life insurance in force and life and
accident/health premiums:
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ceded Assumed Percentage
Primarily to Primarily of Amount
Gross the Parent from Other Net Assumed
Amount Corporation Companies Amount to Net
------------- ------------- ------------- ------------- ------------
December 31, 1998:
Life insurance in force:
Individual $ 34,017,379 $ 4,785,079 $ 8,948,442 $ 38,180,742 23.44%
Group 81,907,539 2,213,372 84,120,911 2.63%
============= ============= ============= =============
Total $ 115,924,918 $ 4,785,079 $ 11,161,814 $ 122,301,653
============= ============= ============= =============
Premium Income:
Life $ 352,710 $ 24,720 $ 65,452 $ 393,442 16.6%
insurance
571,992 61,689 74,284 584,587 12.7%
Accident/health
============= ============= ============= =============
Total $ 924,702 $ 86,409 $ 139,736 $ 978,029
============= ============= ============= =============
December 31, 1997:
Life insurance in force:
Individual $ 24,598,679 $ 4,040,398 $ 3,667,235 $ 24,225,516 15.1%
Group 51,179,343 2,031,477 53,210,820 3.8%
============= ============= ============= =============
Total $ 75,778,022 $ 4,040,398 $ 5,698,712 $ 77,436,336
============= ============= ============= =============
Premium Income:
Life $ 320,456 $ (127,388) $ 19,923 $ 467,767 4.1%
insurance
341,837 32,645 34,994 344,186 10.0%
Accident/health
============= ============= ============= =============
Total $ 662,293 $ (94,743) $ 54,917 $ 811,953
============= ============= ============= =============
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
============= ============= ============= =============
Premium Income:
Life $ 307,516 $ (111,743) $ 19,633 $ 438,892 4.2%
insurance
339,284 7,493 34,242 366,033 9.4%
Accident/health
============= ============= ============= =============
Total $ 646,800 $ (104,250) $ 53,875 $ 804,925
============= ============= ============= =============
</TABLE>
<PAGE>
5. NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Net investment income is summarized as follows:
<TABLE>
Years Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------
1998 1997 1996
------------- ------------- -------------
Investment income:
Fixed maturities and short-term $ 638,079 $ 633,975 $ 601,913
investments
Mortgage loans on real estate 110,170 118,274 140,823
Real estate 20,019 20,990 5,292
Policy loans 180,933 194,826 175,746
Other 285 18 1,316
------------- ------------- -------------
949,486 968,083 925,090
Investment expenses, including interest
on
amounts charged by the Parent 52,126 86,410 90,453
Corporation
of $9,891, $9,758, and $11,282
------------- ------------- -------------
Net investment income $ 897,360 $ 881,673 $ 834,637
============= ============= =============
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
-------------------------------------------
1998 1997 1996
------------- ------------ --------------
Realized gains (losses):
Fixed maturities $ 38,391 $ 15,966 $ (11,624)
Mortgage loans on real estate 424 1,081 1,143
Real estate 363
Provisions (642) (7,610) (10,597)
============= ============ ==============
Net realized gains (losses) on investment $ 38,173 $ 9,800 $ (21,078)
============= ============ ==============
<PAGE>
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1998 are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
----------- ------------ ----------- ----------- -----------
Held-to-Maturity:
U.S. Treasury
Securities
and obligations of $ 34,374 $ 1,822 $ $ 36,196 $ 34,374
U.S.
Government Agencies
Collateralized mortgage
obligations 194
10,135 9,941 10,135
Public utilities 213,256 12,999 460 225,795 213,256
Corporate bonds 1,809,957 78,854 3,983 1,884,828 1,809,957
Foreign governments 782
10,133 10,915 10,133
State and 121,963 9,298 131,261 121,963
municipalities
----------- ------------ ----------- ----------- -----------
$ 2,199,818 $ 103,755 $ 4,637 $ 2,298,936 $ 2,199,818
=========== ============ ========= =========== ===========
Available-for-Sale:
U.S. Treasury
Securities
and obligations of
U.S.
Government Agencies:
Collateralized
mortgage
obligations $ 863,479 $ 39,855 $ 1,704 $ 901,630 $ 901,630
Direct mortgage
pass-
through 467,100 4,344 692 470,752 470,752
certificates
Other 191,138 1,765 788 192,115 192,115
Collateralized mortgage
obligations 926,797 16,260 1,949 941,108 941,108
Public utilities 464,096 14,929 36 478,989 478,989
Corporate bonds 3,557,209 123,318 17,420 3,663,107 3,663,107
Foreign governments 2,732
56,505 59,237 59,237
State and 226,208 4,588 1,008 229,788 229,788
municipalities
----------- ------------ ----------- ----------- -----------
$ 6,752,532 $ 207,791 $ 23,597 $ 6,936,726 $ 6,936,726
=========== ============ =========== =========== ===========
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 Agencies $ $ 1,186 $ 25 $ $
25,883 27,044 25,883
Collateralized
mortgage
obligations 174
5,006 5,180 5,006
Public utilities 11,214 3 256,605 245,394
245,394
Corporate bonds 1,668,710 57,036 3,069 1,722,677 1,668,710
Foreign governments 659
10,268 10,927 10,268
State and 1,588 129,043 127,455
municipalities 127,455
----------- ------------ ------------ ----------- -----------
$ 2,082,716 $ 71,857 $ 3,097 $ 2,151,476 $ 2,082,716
=========== ============ ============ =========== ===========
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
------------ ----------- ----------- ----------- -----------
Available-for-Sale:
U.S. Treasury Securities
and obligations of
U.S.
Government Agencies:
Collateralized
mortgage
obligations $ $ 17,339 $ 310 $ 670,004 $ 670,004
652,975
Direct mortgage
pass-
through 7,911 2,668 922,459 922,459
certificates 917,216
Other 1,794 244 298,887 298,887
297,337
Collateralized mortgage
obligations 19,494 1,453 700,199 700,199
682,158
Public utilities 8,716 1,320 556,831 556,831
549,435
Corporate bonds 3,265,039 107,740 4,350 3,368,429 3,368,429
Foreign governments 4,115 60 135,641 135,641
131,586
State and municipalities 503 46,179 46,179
45,676
------------ ----------- ----------- ----------- -----------
$ 6,541,422 $ 167,612 $ 10,405 $ 6,698,629 $ 6,698,629
============ =========== =========== =========== ===========
</TABLE>
The collateralized mortgage obligations consist primarily of sequential
and planned amortization classes with final stated maturities of two to
thirty years and average lives of less than one to fifteen years.
Prepayments on all mortgage-backed securities are monitored monthly and
amortization of the premium and/or the accretion of the discount
associated with the purchase of such securities is adjusted by such
prepayments.
See Note 8 for additional information on policies regarding estimated fair
value of fixed maturities.
The amortized cost and estimated fair value of fixed maturity investments
at December 31, 1998, by projected maturity, are shown below. Actual
maturities will likely differ from these projections because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Held-to-Maturity Available-for-Sale
------------------------------ --------- --------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------- -------------- ------------ --------------
Due in one year or less 316,174 321,228 235,842 252,067
Due after one year
through five years 925,016 961,592 1,279,123 1,309,202
Due after five years
through ten years 675,444 722,685 769,278 803,498
Due after ten years 130,480 138,119 449,273 457,785
Mortgage-backed
securities 10,135 9,941 2,257,376 2,313,490
Asset-backed securities 142,569 145,371 1,761,640 1,800,684
============= ============== ============= =============
2,199,818 2,298,936 6,752,532 6,936,726
============= ============== ============= =============
Proceeds from sales of securities available-for-sale were $6,169,678,
$3,174,246, and $3,569,608 during 1998, 1997, and 1996, respectively. The
realized gains on such sales totaled $41,136, $20,543, and $24,919 for
1998, 1997, and 1996, respectively. The realized losses totaled $8,643,
$10,643, and $40,748 for 1998, 1997, and 1996, respectively. During the
years 1998, 1997, and 1996 held-to-maturity securities with an amortized
cost of $9,920, $0, and $0 were sold due to credit deterioration with
insignificant gains and losses.
At December 31, 1998 and 1997, pursuant to fully collateralized securities
lending arrangements, the Company had loaned $115,168 and $162,817 of
fixed maturities, respectively.
The Company engages in hedging activities to manage interest rate and
exchange risk. The following table summarizes the 1998 financial hedge
instruments:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Notional Strike/Swap
December 31, 1998 Amount Rate Maturity
------------------------ -------------- ------------------------- ---------------------
Interest Rate Floor $ 100,000 4.50% (LIBOR) 11/99
Interest Rate Caps 1,070,000 6.75% - 11.82% (CMT) 12/99 - 10/03
Interest Rate Swaps 242,451 4.95% - 9.35% 08/99 - 02/03
Foreign Currency
Exchange Contracts 34,123 N/A 05/99 - 07/06
Equity Swap 95,652 4.00% 12/99
The following table summarizes the 1997 financial hedge instruments:
Notional Strike/Swap
December 31, 1997 Amount Rate Maturity
------------------------ -------------- -------------------------- ---------------------
Interest Rate Floor $ 100,000 4.5% (LIBOR) 1999
Interest Rate Caps 565,000 6.75% - 11.82% (CMT) 1999 - 2002
Interest Rate Swaps 212,139 6.20% - 9.35% 01/98 - 02/03
Foreign Currency
Exchange Contracts 57,168 N/A 09/98 - 07/06
Equity Swap 100,000 5.64% 12/98
</TABLE>
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines designed to
emphasize a diversified and geographically dispersed portfolio of
mortgages collateralized by commercial and industrial properties located
in the United States. The Company's policy is to obtain collateral
sufficient to provide loan-to-value ratios of not greater than 75% at the
inception of the mortgages. At December 31, 1998, approximately 33% of the
Company's mortgage loans were collateralized by real estate located in
California.
The following represents impairments and other information with respect to
impaired loans:
<TABLE>
<S> <C> <C>
1998 1997
--------------- -------------
Loans with related allowance for credit losses of
$2,492 and $2,493 $ 13,192 $ 13,193
Loans with no related allowance for credit losses 10,420 20,013
Average balance of impaired loans during the year 31,193 37,890
Interest income recognized (while impaired) 2,308 2,428
Interest income received and recorded (while impaired)
using the cash basis method of recognition 2,309 2,484
</TABLE>
As part of an active loan management policy and in the interest of
maximizing the future return of each individual loan, the Company may from
time to time modify the original terms of certain loans. These
restructured loans, all performing in accordance with their modified terms
that are not impaired, aggregated $52,913 and $64,406 at December 31, 1998
and 1997, respectively.
<PAGE>
The following table presents changes in allowance for credit losses:
1998 1997 1996
------------- ------------- --------------
Balance, beginning of year 67,242 65,242 63,994
Provision for loan losses 642 4,521 4,470
Chargeoffs (787) (2,521) (3,468)
Recoveries 145 246
============= ============= ==============
Balance, end of year 67,242 67,242 65,242
============= ============= ==============
7. COMMERCIAL PAPER
The Company has a commercial paper program that is partially supported by
a $50,000 standby letter-of-credit. At December 31, 1998, commercial paper
outstanding had maturities ranging from 69 to 118 days and interest rates
ranging from 5.10% to 5.22%. At December 31, 1997, maturities ranged from
41 to 99 days and interest rates ranged from 5.6% to 5.8%.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
December 31,
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------
1998 1997
---------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------ ------------- ------------- -------------
ASSETS:
Fixed maturities and
short-term investments $ 9,556,713 $ 9,655,831 $ 9,180,476 $ 9,249,235
Mortgage loans on real
estate 1,133,468 1,160,568 1,235,594 1,261,949
Policy loans 2,858,673 2,858,673 2,657,116 2,657,116
Common stock 48,640 48,640 39,021 39,021
LIABILITIES:
Annuity contract reserves
without life contingencies 4,908,964 4,928,800 5,346,516 5,373,818
Policyholders' funds 181,779 181,779 165,106 165,106
Due to Parent Corporation 52,877 52,877 126,656 124,776
Repurchase agreements 244,258 244,258 325,538 325,538
Commercial paper 39,731 39,731 54,058 54,058
HEDGE CONTRACTS:
Interest rate floor 17 17 25 25
Interest rate caps 971 971 130 130
Interest rate swaps 6,125 6,125 4,265 4,265
Foreign currency exchange
contracts 689 689 3,381 3,381
Equity swap (8,150) (8,150) 856 856
</TABLE>
The estimated fair value of financial instruments have been determined
using available information and appropriate valuation methodologies.
However, considerable judgement is necessarily required to interpret
market data to develop estimates of fair value. Accordingly, the estimates
presented are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
The estimated fair value of fixed maturities that are publicly traded are
obtained from an independent pricing service. To determine fair value for
fixed maturities not actively traded, the Company utilized discounted cash
flows calculated at current market rates on investments of similar quality
and term.
Mortgage loans fair value estimates generally are based on 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 crediting rates for similar products.
The estimated fair value of policyholders' funds is the same as the
carrying amount as the Company can change the crediting rates with 30 days
notice.
The estimated fair value of due to Parent Corporation is based on
discounted cash flows at current market 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 of
unrealized losses in 1998 and 1997. Included in the net gain position for
foreign currency exchange contracts are $932 and $0 of loss exposures in
1998 and 1997, 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 3 for further discussion.
The Company's Parent had previously accounted for the pension plan under
the Canadian Institute of Chartered Accountants (CICA) guidelines and had
recorded a prepaid pension asset of $19,091. As U.S. generally accepted
accounting principles do not materially differ from these CICA guidelines
and the transfer was between related parties, the prepaid pension asset
was transferred at carrying value. As a result, the Company recorded the
following effective January 1, 1997:
Prepaid pension cost 19,091 Undistributed earnings on 3,608
participating business
Stockholder's equity 15,483
------------ -----------
19,091 19,091
The following table summarizes changes from 1997 to 1998 and from 1996 to
1997, in the benefit obligations and in plan assets for the Company's
defined benefit pension plan and post-retirement medical plan. There is no
additional minimum pension liability required to be recognized. There were
no amendments to the plans due to the acquisition of AH&L.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Post-Retirement
Pension Benefits Medical Plan
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
Change in benefit obligation
Benefit obligation at beginning of $ 115,057 $ 96,417 $ 19,454 $ 16,160
year
Service cost 6,834 5,491 1,365 1,158
Interest cost 7,927 7,103 1,341 1,191
Actuarial gain (loss) 5,117 9,470 (1,613) 1,500
Benefits paid (3,630) (3,424) (603) (555)
----------- ------------ ----------- -----------
Benefit obligation at end of year 131,305 115,057 19,944 19,454
----------- ------------ ----------- -----------
Change in plan assets
Fair value of plan assets at
beginning of year 162,879 138,221
Actual return on plan assets 23,887 28,082
Benefits paid (3,630) (3,424)
----------- ------------ ----------- -----------
Fair value of plan assets at end of
year 183,136 162,879
----------- ------------ ----------- -----------
Funded status 51,831 47,822 (19,944) (19,454)
Unrecognized net actuarial loss (11,405) (6,326) (113) 1,500
Unrecognized net obligation or
(asset)
at transition (19,684) (21,198) 14,544 15,352
=========== ============ =========== ===========
Prepaid (accrued) benefit cost $ 20,742 $ 20,298 $ (5,513) $ (2,602)
=========== ============ =========== ===========
Weighted-average assumptions as of
December 31
Discount rate 6.50% 7.00% 6.50% 7.00%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 4.00% 4.50% 4.00% 4.50%
Components of net periodic
benefit cost
Service cost $ 6,834 $ 5,491 $ 1,365 $ 1,158
Interest cost 7,927 7,103 1,341 1,191
Expected return on plan assets (13,691) (12,286)
Amortization of transition (1,514) (1,514) 808 808
obligation
----------- ----------- ---------- ----------
=========== =========== ========== ==========
Net periodic (benefit) cost $ (444) $ (1,206) $ 3,514 $ 3,157
=========== =========== ========== ==========
</TABLE>
The Company-sponsored post-retirement medical plan (medical plan) provides
health benefits to employees. The medical plan is contributory and
contains other cost sharing features, which may be adjusted annually for
the expected general inflation rate. The Company's policy will be to fund
the cost of the medical plan benefits in amounts determined at the
discretion of management.
<PAGE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the medical plan. For measurement purposes, a 6.5% annual
rate of increase in the per capita cost of covered health care benefits
was assumed. A one-percentage-point change in assumed health care cost
trend rates would have the following effects:
1-Percentage 1-Percentage
Point Point
Increase Decrease
-------------- ----------------
Effect on total of service and interest cost
on components 649 1,140
Effect on post-retirement benefit obligation 4,129 3,098
The Company sponsors a defined contribution 401(k) retirement plan which
provides eligible participants with the opportunity to defer up to 15% of
base compensation. The Company matches 50% of the first 5% of participant
pre-tax contributions. Company contributions for the years ended December
31, 1998 and 1997 totaled $3,915 and $3,475, respectively.
The Company has a deferred compensation plan providing key executives with
the opportunity to participate in an unfunded, deferred compensation
program. Under the program, participants may defer base compensation and
bonuses, and earn interest on their deferred amounts. The program is not
qualified under Section 401 of the Internal Revenue Code. The total of
participant deferrals, which is reflected in other liabilities, was
$16,102 and $13,952 at December 31, 1998 and 1997, respectively. The
participant deferrals earn interest at a rate based on the average 10-year
composite government securities rate plus 1.5%. The interest expense
related to this plan was $1,185 and $1,019 in 1998 and 1997, respectively.
The Company also provides a supplemental executive retirement plan (SERP)
to certain key executives. This plan provides key executives with certain
benefits upon retirement, disability, or death based upon total
compensation. The Company has purchased individual life insurance policies
with respect to each employee covered by this plan. The Company is the
owner and beneficiary of the insurance contracts. The incremental expense
for this plan for 1998 and 1997 was $2,840 and $2,531, respectively. The
total liability of $9,349 and $6,509 as of December 31, 1998 and 1997 is
included in other liabilities.
10. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income tax rate and
the Company's effective rate after giving effect to the reclassifications
discussed below:
1998 1997 1996
----------- ----------- ---------
Federal tax rate 35.0 % 35.0 % 35.0 %
Change in tax rate resulting from:
Settlement of Parent tax exposures (20.2) (18.9)
Provision for contingencies 7.7 3.4
Prior year tax adjustment (1.5) 0.5 (1.4)
Other, net (0.1) 0.9 0.3
=========== =========== =========
Total 33.4 % 23.9 % 18.4 %
=========== =========== =========
The Company's income tax provision was favorably impacted in 1997 and 1996
by releases of contingent liabilities relating to taxes of the Parent
Corporation's U.S. branch associated with blocks of business that were
transferred from the Parent Corporation's U.S. branch to the Company from
1989 to 1993; the Company had agreed to the transfer of these tax
liabilities as part of the transfer of this business. The releases
recorded in 1997 and 1996 reflected the resolution of certain tax issues
with the Internal Revenue Service (IRS) relating to the 1990-1991 and
1988-1989 audit years, respectively. The releases totaled $42,150 for 1997
and $31,200 for 1996; however, $15,100 of the release in 1997 was
attributable to participating policyholders and therefore had no effect on
the net income of the Company since that amount was credited to the
provision for policyholders' share of earnings (losses).
The 1997 and 1996 releases were recorded in revenues in the Company's
prior financial statements, but have been reclassified in the accompanying
consolidated financial statements as a component of the current income tax
provisions for those years.
In addition to these releases of contingent tax liabilities, the Company's
income tax provisions for 1997 and 1996 also reflect increases for other
contingent items relating to open tax years where the Company determined
it was probable that additional taxes could be owed based on changes in
facts and circumstances. The increase in 1997 was $16,000, of which
$10,100 was attributable to participating policyholders and therefore had
no effect on the net income of the Company. The increase in 1996 was
$5,600. These increases in contingent tax liabilities have been reflected
as a component of the deferred income tax provisions for 1997 and 1996 as
the Company does not expect near term resolution of these contingencies.
Excluding the effect of the 1997 and 1996 tax items discussed above, the
effective tax rates for 1997 and 1996 were 34.1% and 33.9%, respectively.
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<S> <C> <C>
1998 1997
--------------------------- -------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Asset Liability Asset Liability
------------- ------------ ------------ -----------
Policyholder reserves 143,244 159,767
Deferred policy acquisition costs 39,933 47,463
Deferred acquisition cost proxy
tax 100,387 79,954
Investment assets 19,870 5,574
Net operating loss carryforwards 2,867 9,427
Other 6,566 1,279
------------- ------------ ------------ -----------
Subtotal 253,064 59,803 250,427 53,037
Valuation allowance (1,778) (3,570)
============= ============ ============ ===========
Total Deferred Taxes 251,286 59,803 246,857 53,037
============= ============ ============ ===========
</TABLE>
Amounts included in investment assets above include $34,556 and $30,085
related to the unrealized gains on the Company's fixed maturities
available-for-sale at December 31, 1998 and 1997, 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, 1998, the Company's subsidiaries had approximately $8,193 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 $0 and $1,809 are included in the deferred tax
assets at December 31, 1998 and 1997, respectively.
The Company's valuation allowance was increased (decreased) in 1998, 1997,
and 1996 by $(1,792), $34, and $1,463, respectively, as a result of the
re-evaluation by management of future estimated taxable income in its
subsidiaries.
Under pre-1984 life insurance company income tax laws, a portion of life
insurance company gain from operations was not subject to current income
taxation but was accumulated, for tax purposes, in a memorandum account
designated as "policyholders' surplus account." The aggregate accumulation
in the account is $7,742 and the Company does not anticipate any
transactions, which would cause any part of the amount to become taxable.
Accordingly, no provision has been made for possible future federal income
taxes on this accumulation.
11. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130 "Reporting Comprehensive Income". This
Statement establishes new rules for reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no
impact on the Company's net income or stockholders' equity. This Statement
requires unrealized gains or losses on the Company's available-for-sale
securities and related offsets for reserves and deferred policy
acquisition costs, which prior to adoption were reported separately in
stockholder's equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the
requirements of Statement No. 130.
Other comprehensive income at December 31, 1998 is summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
-------------- ------------------------------
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising
during
the period $ 39,430 $ (13,800) $ 25,630
Less: reclassification adjustment
for
(gains) losses realized in net (14,350) 5,022 (9,328)
income
-------------- ---------------- ------------
Net unrealized gains 25,080 (8,778) 16,302
Reserve and DAC adjustment (11,614) 4,065 (7,549)
-------------- ---------------- ------------
============== ================ ============
Other comprehensive income $ 13,466 $ (4,713) $ 8,753
============== ================ ============
Other comprehensive income at December 31, 1997 is summarized as follows:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
-------------- ---------------- --------------
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising
during
the period $ 80,821 $ (28,313) $ 52,508
Less: reclassification adjustment
for
(gains) losses realized in net 2,012 (704) 1,308
income
-------------- ---------------- --------------
Net unrealized gains 82,833 (29,017) 53,816
Reserve and DAC adjustment (24,554) 8,594 (15,960)
============== ================ ==============
Other comprehensive income $ 58,279 $ (20,423) $ 37,856
============== ================ ==============
Other comprehensive loss at December 31, 1996 is summarized as follows:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
-------------- ---------------- --------------
Unrealized gains on available-for-sale securities:
Unrealized holding gains (losses)
arising during the period $ (125,559) $ 43,971 $ (81,588)
Less: reclassification adjustment
for
(gains) losses realized in net 19,381 (6,783) 12,598
income
-------------- ---------------- --------------
Net unrealized gains (losses) (106,178) 37,188 (68,990)
--------------
Reserve and DAC adjustment 38,736 (13,558) 25,178
============== ================ ==============
Other comprehensive loss $ (67,442) $ 23,630 $ (43,812)
============== ================ ==============
</TABLE>
12. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
Effective September 30, 1998, the Company purchased all of its outstanding
series of preferred stock, which were owned by the Parent Corporation, for
$121,800.
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:
1998 1997 1996
--------------- ------------- -------------
(Unaudited)
Net income 225,863 $ 181,312 $ 180,634
Capital and surplus 727,124 759,429 713,324
The maximum amount of dividends which can be paid to stockholders by
insurance companies domiciled in the State of Colorado are subject to
restrictions relating to statutory surplus and statutory net gain from
operations. Statutory surplus and net gains from operations at December
31, 1998 were $727,124 and $225,586 (unaudited), respectively. The Company
should be able to pay up to $225,586 (unaudited) of dividends in 1999.
Dividends of $6,692, $8,854, and $8,587 were paid on preferred stock in
1998, 1997, and 1996, respectively. In addition, dividends of $73,344,
$62,540, and $48,083 were paid on common stock in 1998, 1997, and 1996,
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.
13. STOCK OPTIONS
The Company is an indirect subsidiary of Great-West Lifeco Inc. (Lifeco).
Lifeco has a stock option plan (the Lifeco plan) that provides for the
granting of options for common shares of Lifeco to certain officers and
employees of Lifeco and its subsidiaries, including the Company. Options
may be awarded at no less than the market price on the date of the grant.
Termination of employment prior to vesting results in forfeiture of the
options, unless otherwise determined by a committee that administers the
Lifeco plan. As of December 31, 1998, 1997 and 1996, stock available for
award under the Lifeco plan aggregated 1,424,400, 3,440,000 and 6,244,000
shares.
The plan provides for the granting of options with varying terms and
vesting requirements. The basic options under the plan become exercisable
twenty percent per year commencing on the first anniversary of the grant
and expire ten years from the date of grant. Options granted in 1997 and
1998 totaling 1,832,000 and 278,000, respectively, become exercisable if
certain long-term cumulative financial targets are attained. If
exercisable, the exercise period runs from April 1, 2002 to June 26, 2007.
Additional options granted in 1998 totaling 380,000 become exercisable if
certain sales or financial targets are attained. During 1998, 30,000 of
these options vested and accordingly, the Company recognized compensation
expense of $116. If exercisable, the exercise period runs from the date
that the particular options become exercisable until January 27, 2008.
The following table summarizes the status of, and changes in, Lifeco
options outstanding and the weighted-average exercise price (WAEP) for the
years ended December 31. As the options granted relate to Canadian stock,
the values, which are presented in U.S. dollars, will fluctuate as a
result of exchange rate fluctuations:
<PAGE>
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---------------------- ---------------------- ----------------------
Options WAEP Options WAEP Options WAEP
------------ -------- ----------- -------- ----------- ---------
Outstanding, Jan. 1, 5,736,000 $ 7.71 4,104,000 $ 6.22 0 $ .00
Granted 988,000 13.90 1,932,000 10.82 4,104,000 6.62
Exercised 99,176 6.33 16,000 5.95 0 .00
Expired or canceled 80,000 13.05 284,000 6.12 0 .00
============ ======== =========== ======== =========== =========
Outstanding, Dec. 31, 6,544,824 8.07 5,736,000 7.71 4,104,000 6.22
============ ======== =========== ======== =========== =========
Options exercisable
at year-end 1,652,424 $ 5.72 760,800 $ 5.96 0 $ .00
============ ======== =========== ======== =========== =========
Weighted average fair
value of options
granted during year $ 1.18 $ 2.65 $ 4.46
============ =========== ===========
The following table summarizes the range of exercise prices for
outstanding Lifeco common stock options at December 31, 1998:
Outstanding Exercisable
---------------------------------------- ----------------------------
Average Average
Exercise Average Exercise Exercise
Price Range Options Life Price Options Price
------------------- -------------- ---------- ----------- ------------- ------------
$ 5.54 - $ 7.36 3,804,824 7.62 $ 5.61 1,622,424 $ 5.58
$10.61 - $13.23 2,740,000 8.70 $ 11.48 30,000 $ 13.23
</TABLE>
Of the exercisable Lifeco options, 1,622,424 relate to basic option grants
and 30,000 relate to variable grants.
Power Financial Corporation (PFC), which is the parent corporation of
Lifeco, has a stock option plan (the PFC plan) that provides for the
granting of options for common shares of PFC to key employees of PFC and
its affiliates. Prior to the creation of the Lifeco plan in April 1996,
certain officers of the Company participated in the PFC plan. Under the
PFC plan, options may be awarded at no less than the market price on the
date of the grant. Termination of employment prior to vesting results in
forfeiture of the options, unless otherwise determined by a committee that
administers the PFC plan. As of December 31, 1998, 1997 and 1996, stock
available for award under the PFC plan aggregated 4,400,800, 4,400,800 and
5,440,800 shares.
Options granted to officers of the Company under the PFC plan become
exercisable twenty percent per year commencing on the date of the grant
and expire ten years from the date of grant.
The following table summarizes the status of, and changes in, PFC options
outstanding and the weighted-average exercise price (WAEP) for the years
ended December 31. As the options granted relate to Canadian stock, the
values, which are presented in U.S. dollars, will fluctuate as a result of
exchange rate fluctuations:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
---------------------- ---------------------- ---------------------
Options WAEP Options WAEP Options WAEP
----------- --------- ----------- -------- ----------- --------
Outstanding, Jan. 1, 1,076,000 $ 3.05 1,329,200 $ 3.14 1,436,000 $ 3.17
Exercised 720,946 3.60 253,200 2.68 106,800 2.95
=========== ========= =========== ======== =========== ========
Outstanding, Dec. 31, 355,054 2.89 1,076,000 3.05 1,329,200 3.14
=========== ========= =========== ======== =========== ========
Options exercisable
at year-end 355,054 $ 2.89 1,076,000 $ 3.05 1,301,200 $ 3.15
=========== ========= =========== ======== =========== ========
</TABLE>
As of December 31, 1998, the PFC options outstanding have exercise prices
between $2.25 and $3.44 and a weighted-average remaining contractual life
of 2.99 years.
The Company accounts for stock-based compensation using the intrinsic
value method prescribed by APB No. 25, "Accounting for Stock Issued to
Employees", under which compensation expenses for stock options are
generally not recognized for stock option awards granted at or above fair
market value. Had compensation expense for the Company's stock option plan
been determined based upon fair values at the grant dates for awards under
the plan in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income, would have been reduced by $727,
$608, and $257, in 1998, 1997, and 1996, respectively. The fair value of
each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumption used for those options granted in 1998, 1997, and 1996,
respectively: dividend yield of 3.00%, expected volatility of 34.05%,
24.04%, and 15.61%, risk-free interest rates of 4.79%, 4.72%, and 4.67%,
and expected lives of 7.5 years.
14. SEGMENT INFORMATION
The Company has two reportable segments: Employee Benefits and Financial
Services. The Employee Benefits segment markets group life and health and
401(k) products to small and mid-sized corporate employers. The Financial
Services segment markets and administers savings products to public and
not-for-profit employers and individuals and offers life insurance
products to individuals and businesses.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates performance based on profit or loss from
operations after income taxes.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately as each
segment has unique distribution channels.
The Company's operations are not materially dependent on one or a few
customers, brokers or agents.
Summarized segment financial information for the year ended and as of
December 31 was as follows:
Year ended December 31, 1998
Operations:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Employee Financial Total
Benefits Services U.S.
-------------- -------------- -------------
Revenue:
Premium income $ 746,898 $ 247,965 $ 994,863
Fee income 444,649 71,403 516,052
Net investment income 95,118 802,242 897,360
Realized investment gains (losses) 8,145 30,028 38,173
-------------- -------------- -------------
Total revenue 1,294,810 1,151,638 2,446,448
Benefits and Expenses:
Benefits 590,058 872,411 1,462,469
Operating expenses 546,959 141,269 688,228
-------------- -------------- -------------
Total benefits and expenses 1,137,017 1,013,680 2,150,697
Net operating income before income
taxes 157,793 137,958 295,751
Income taxes 50,678 48,158 98,836
============== ============== =============
Net income $ 107,115 $ 89,800 $ 196,915
============== ============== =============
</TABLE>
<PAGE>
Assets:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Employee Financial Total
Benefits Services U.S.
--------------- -------------- --------------
Investment assets $ 1,434,691 $ 12,235,845 $ 13,670,536
Separate account assets 5,704,313 4,395,230 10,099,543
Other assets 567,126 785,940 1,353,066
=============== ============== ==============
Total assets $ 7,706,130 $ 17,417,015 $ 25,123,145
=============== ============== ==============
Year ended December 31, 1997
Operations:
Employee Financial Total
Benefits Services U.S.
-------------- ------------- -------------
Revenue:
Premium income $ 465,143 $ 368,036 $ 833,179
Fee income 358,005 62,725 420,730
Net investment income 100,067 781,606 881,673
Realized investment gains (losses) 3,059 6,741 9,800
-------------- ------------- -------------
Total revenue 926,274 1,219,108 2,145,382
Benefits and Expenses:
Benefits 371,333 1,013,717 1,385,050
Operating expenses 427,969 123,756 551,725
-------------- ------------- -------------
Total benefits and expenses 799,302 1,137,473 1,936,775
Net operating income before income
taxes 126,972 81,635 208,607
Income taxes 28,726 21,121 49,847
-------------
============== =============
Net income $ 98,246 $ 60,514 $ 158,760
============== =============
===============================================================================================================
Assets:
Employee Financial Total
Benefits Services U.S.
--------------- -------------- --------------
Investment assets $ 1,346,944 $ 11,859,038 $ 13,205,982
Separate account assets 4,533,516 3,313,935 7,847,451
Other assets 355,764 668,518 1,024,282
=============== ============== ==============
Total assets $ 6,236,224 $ 15,841,491 $ 22,077,715
=============== ============== ==============
</TABLE>
<PAGE>
Year ended December 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Operations:
Employee Financial Total
Benefits Services U.S.
--------------- -------------- -------------
Revenue:
Premium income $ 486,565 $ 342,884 $ 829,449
Fee income 321,074 26,445 347,519
Net investment income 87,511 747,126 834,637
Realized investment gains (losses) (2,661) (18,417) (21,078)
--------------- -------------- -------------
Total revenue 892,489 1,098,038 1,990,527
Benefits and Expenses:
Benefits 406,143 949,821 1,355,964
Operating expenses 368,258 101,358 469,616
--------------- -------------- -------------
Total benefits and expenses 774,401 1,051,179 1,825,580
Net operating income before income
taxes 118,088 46,859 164,947
Income taxes 22,874 7,498 30,372
=============== ============== =============
Net income $ 95,214 $ 39,361 $ 134,575
=============== ============== =============
The following table, which summarizes premium and fee income by segment,
represents supplemental information:
1998 1997 1996
------------- ------------- -------------
Premium Income
Employee Benefits
Group Life & Health $ 746,898 $ 465,143 $ 486,565
------------- ------------- -------------
Total Employee Benefits 746,898 465,143 486,565
------------- ------------- -------------
Financial Services
Savings 16,765 22,634 26,655
Individual Insurance 231,200 345,402 316,229
------------- ------------- -------------
Total Financial Services 247,965 368,036 342,884
------------- ------------- -------------
Premium income $ 994,863 $ 833,179 $ 829,449
============= ============= =============
Fee Income
Employee Benefits
Group Life & Health $ 366,805 $ 305,302 $ 276,688
401(k) 77,844 52,703 44,386
------------- ------------- -------------
------------- ------------- -------------
Total Employee Benefits 444,649 358,005 321,074
------------- ------------- -------------
------------- ------------- -------------
Financial Services
Savings 71,403 62,725 26,445
------------- ------------- -------------
Total Financial Services 71,403 62,725 26,445
------------- ------------- -------------
============= ============= =============
Fee income $ 516,052 $ 420,730 $ 347,519
============= ============= =============
</TABLE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The consolidated financial statements for GWL&A as of
December 31, 1998 and 1997 and each of the three years in the
period ended December 31, 1998, as well as the financial
statements of the Series Account for the years ended December 31,
1998 and 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 Boros
Cicchetti Berenson & Johnson, LLP
attached hereto as Exhibit 10(a).
(b) Written Consent of Deloitte & Touche LLP
attached hereto as Exhibit 10(b).
.
(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
<TABLE>
Position and Offices
<S> <C> <C> <C> <C> <C> <C>
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
Donna A. Goldin (2) Executive Vice-President,
and Chief Operating Officer,
One Corporation
Mitchell T.G. Graye (3) Executive 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
Position and Offices
Name Principal Business Address with Depositor
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
Gregg E. Seller (3) Senior Vice President,
Major Accounts
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.
</TABLE>
<PAGE>
Item 26. Persons controlled by or under common control with the Depositor or
Registrant
ORGANIZATIONAL CHART
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.7% - Power Financial Corporation
81.2% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company 100% - GWL&A
Financial (Nova Scotia) Inc.
100% - GWL&A Financial Inc.
100% - Great-West Life & Annuity Insurance Company
100% - First Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Orchard Capital Management, LLC
100% - Greenwood Investments, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Arizona, Inc.
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 South Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Health Plan of Maine, Inc.
100% - One Health Plan of New Jersey, Inc.
100% - One Health Plan of New Hampshire, Inc.
100% - One Health Plan of Pennsylvania, Inc.
100% - One Health Plan, Inc. (Vermont)
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp
Equities, Inc. 95% - Maxim
Series Fund, Inc.* 100% -
Greenwood Property Corporation
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties, Ltd.
92% - Orchard Series Fund**
* New England Life Insurance Company - 5%
** New England Life Insurance Company - 8%
</TABLE>
Item 27. Number of Contract Owners
As of February 26, 1999, there were 553 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
<S> <C> <C> <C> <C> <C> <C>
Name Principal Business Address with Underwriter
Charles P. Nelson (1) Director and President
Robert K. Shaw (1) Director
Dennis Low (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
Beverly A. Byrne (1) Secretary
Teresa Buckley (1) ComplianceOfficer
- ------------
(1) 8515 E. Orchard Road, Englewood, Colorado 80111
(c) Commissions and other compensation received by Principal Underwriter
during Registrant's last fiscal year:
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions Compensation
BCE -0- -0- -0- -0-
</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 hereby certifies that it meets
the requirements for effectiveness under Rule 485(b) and has duly caused this
Registration Statement on Form N-4 to be signed on its behalf, in the City of
Englewood, State of Colorado, on this 27th day of April, 1999.
MAXIM SERIES ACCOUNT
(Registrant)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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 27, 1999
Director and Chairman of the Board
(Robert Gratton)
/s/ William T. McCallum April 27, 1999
- ------------------------------------- ----------------
Director, President and Chief Executive
Officer (William T. McCallum)
/s/ Mitchell T.G. Graye April 27, 1999
- -------------------------------------------- -----------------
Executive Vice President and
Chief Financial Officer
(Mitchell T.G. Graye)
/s/ James Balog* April 27, 1999
Director, (James Balog)
<PAGE>
Signature and Title Date
/s/ James W. Burns* April 27, 1999
Director, (James W. Burns)
/s/ Orest T. Dackow* April 27, 1999
Director (Orest T. Dackow)
/s/Andre Desmarais* April 27, 1999
Director Andre Desmarais
/s/ Paul Desmarais, Jr.* April 27, 1999
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham* April 27, 1999
Director (Robert G. Graham)
/s/ N. Berne Hart* April 27, 1999
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* April 27, 1999
Director (Kevin P. Kavanagh)
/s/ William Mackness* April 27, 1999
Director (William Mackness)
/s/ Jerry E.A. Nicherson* April 27, 1999
Director (Jerry E.A. Nickerson)
/s/ P.Michael Pitfield* April 27, 1999
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* April 27, 1999
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh* April 27, 1999
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox April 27, 1999
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed under initial registration statement on Form N-4;
Post-Effective Amendment No. 14 under the Investment Company Act of 1940, as amended filed on January 23, 1998,
and Post Effective Amendment No. 15 under the Investment Company Act of 1940, as amended filed on April 6, 1998.
</TABLE>
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON, LLP
<PAGE>
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Suite 400E
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
(202) 965-8100
April 28, 1999
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Maxim Series Account
Post-Effective Amendment No. 6 to the Registration Statement on Form N-4
File Nos. 33-82610; 811-3249
Ladies and Gentlemen:
We have acted as counsel to Great-West Life & Annuity Insurance Company, a
Colorado corporation, regarding the federal securities laws applicable to the
issuance and sale of the Contracts described in the above-referenced
registration statement. We hereby consent to the reference to us under the
heading "Legal Matters" in the prospectus filed today with the Securities and
Exchange Commission. In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
<PAGE>
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 6 to Registration
Statement No. 33-82610 of Maxim Series Account of Great-West Life & Annuity
Insurance Company of our report dated March 25, 1999 on the financial statements
of Maxim Series Account of Great-West Life & Annuity Insurance Company and our
report dated January 25, 1999 on the consolidated financial statements of
Great-West Life & Annuity Insurance Company appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the references to us under the headings "Condensed Financial Information"
appearing in the Prospectus, which is also a part of such Registration
Statement, and "Independent Auditors" appearing in the Statement of Additional
Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 28, 1999
