As filed with the Securities and Exchange Commission on April 28, 1999
Registration No. 333-44839
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(X)
PRE-EFFECTIVE AMENDMENT NO. ( )
-----
POST-EFFECTIVE AMENDMENT NO. 2
------
(X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
(X)
Amendment No. 19
(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 Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Title of Securities Being Registered: Flexible Premium Deferred Annuity
Contracts.
It is proposed that this filing will become effective (check appropriate space):
_____ Immediately upon filing pursuant to paragraph (b) of Rule 485.
__X__ On May 1, 1999, pursuant to paragraph (b) of Rule 485.
____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
_____ On ____________, pursuant to paragraph (a)(1) of Rule 485.
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
_____ On ____________, pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following:
_____ This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<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............................ Overview; Fee
Table; Key
Features of the Contract
4. Condensed Financial Information..... Not Applicable
5. General Description of Registrant,
Depositor and Portfolio Companies............... Great-West Life &
Annuity
Insurance Company; the
Series Account; Account; The
Eligible Funds;
Voting Rights
6. Deductions and Expenses............ Charges and Deductions;
Appendix A A; Distribution of
the Contracts
7. General Description of Variable
Annuity Contracts........ Key Features of the
Contract; The
Eligible Funds; Application
and
Initial Contribution;
Ongoing Contributions; Transfers; Death
Benefit; Annuity Payment
Options; Rights
Reserved by Great-West;
Statement of Additional
Information
8. Annuity Period...................... Annuity
Payment Options
9. Death Benefit....................... Death Benefit
10. Purchases and Contract Value........ Application and
Initial Contribution;
Ongoing Contributions;
Annuity Account Value
11. Redemptions......................... Cash
Withdrawals; Payment
Options; Key Features of
the Contract
12. Taxes............................... Federal Tax
Matters
13. Legal Proceedings................... Not Applicable
14. Table of Contents of Statement
of Additional Information....................... Available
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...........................
General Information
18. Services............................ Services
19. Purchase of Securities
Being Offered..................... Not Applicable
20. Underwriters........................ Services -
Principal Underwriter
21. Calculation of
Performance Data.................. Calculation
of Performance
Data
22. Annuity Payments.................... Calculation
of Annuity Payments
23. Financial Statements................ Financial
Statements
</TABLE>
<PAGE>
Part A
Information Required in a Prospectus
<PAGE>
The AICPA Variable Annuity
A flexible premium deferred variable annuity
Distributed by
BenefitsCorp Equities, Inc.
---------------------------------------------
Issued by
Great-West Life & Annuity Insurance Company
<PAGE>
OVERVIEW
This Prospectus describes The AICPA Variable Annuity--a flexible premium
deferred annuity contract designed to help you in long-term financial planning.
The Contract provides an annuity insurance contract whose value is based on the
investment performance of Investment Divisions that you select. It is issued as
a group contract by Great-West Life & Annuity Insurance Company (we, us,
Great-West or GWL&A) and is issued to the American Institute of Certified Public
Accountants. Depending on your state, members, spouses of members and employees
of AICPA may be eligible to participate in The AICPA Variable Annuity. When you
participate in The AICPA Variable Annuity, you will be issued a certificate
showing your interest under the group contract--both the group contract and the
certificate will be referred to as the "Contract" throughout this prospectus.
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. It is intended for
individuals who are affiliated with the American Institute of Certified Public
Accountants.
Allocating Your Money
You can allocate your money among 8 Investment Divisions of the Maxim Series
Account - each Investment Division invests all of its assets in one of 8
corresponding mutual funds ("Eligible Funds"). The Eligible Funds are:
Maxim Series Fund, Inc.: Maxim Money Market Portfolio; Maxim T. Rowe Price
Equity/Income Portfolio; Maxim INVESCO Balanced Portfolio; Maxim Growth Index
Portfolio Dreyfus Stock Index Fund: Dreyfus Stock Index Fund Janus Aspen Series:
Janus Aspen Flexible Income Portfolio Neuberger & Berman Advisers Management
Trust: Neuberger & Berman AMT Partners Investments Templeton Variable Product
Series Fund: Templeton International Fund - Class 1
Payment Options
You may choose from a wide range of annuity options to provide flexibility in
choosing an annuity payment schedule that meets your needs. These annuity
options include alternatives designed to provide payments for life (for either a
single or joint life), with or without a guaranteed minimum number of payments.
For more information, please contact the Annuity Service Center.
This prospectus presents important information you should read before purchasing
the Contract. Please read it carefully and keep it for future reference. You can
find more detailed information about the Contract in the Statement of Additional
Information dated May 1, 1999, and filed with the Securities and Exchange
Commission. The Statement of Additional Information is incorporated by reference
into this prospectus, which means it is legally a part of this prospectus, and
may be obtained without charge by contacting the Annuity Service Center at
800-355-1608, or P.O. Box 1700, Denver, Colorado 80201. Or, you can obtain it 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 this Prospectus. Any representation to the contrary is a
criminal offense. Please read this Prospectus and keep it for future reference.
The date of this Prospectus is May 1, 1999.
<PAGE>
[PG NUMBER]
3
TABLE OF CONTENTS
<PAGE>
6
Definitions..................................3
Key Features of the Contract.................5
How to Invest............................5
Allocation of Your Contributions.........5
Free Look Period.........................5
A Wide Range of Investment Choices.......5
Charges and Deductions Under the Contract5
Full and Partial Withdrawals.............5
Making Transfers.........................5
Payment Options..........................5
Death Benefit............................5
Customer Service.........................6
Fee Table....................................7
Eligible Fund Annual Expenses................7
Great-West Life & Annuity Insurance Company..8
The Series Account...........................8
The Eligible Funds...........................9
Meeting Investment Objectives............9
Reinvestment.............................9
Where to Find More Information
About the Eligible Funds.................9
Application and Initial Contribution........10
Ongoing Contributions.......................10
Annuity Account Value.......................10
Transfers...................................11
In General..............................11
Possible Restrictions...................11
Dollar Cost Averaging.......................11
Rebalancer..................................12
Cash Withdrawals............................13
Tax Consequences of Withdrawals.........13
Telephone Transactions......................13
Death Benefit...............................13
Beneficiary.............................14
Contingent Annuitant....................15
Charges and Deductions......................15
Mortality and Expense Risk Charge.......15
Certificate Maintenance Charge..........15
Premium Tax.............................15
Transfer Fee............................15
Other Taxes.............................15
Expenses of the Eligible Funds..........15
Periodic Withdrawals........................15
Periodic Withdrawal Payment Options.....16
Annuity Payment Options.....................16
Annuity Commencement Date...............16
Annuity Payment Options.................16
Annuity Options.........................16
Variable Annuity Payment Options........17
Variable Annuity Payment Provisions.....17
Federal Tax Matters.........................17
Taxation of Annuities...................18
Withdrawals.............................18
Annuity Payments........................18
Penalty Tax.............................18
Taxation of death benefit proceeds......19
Distribution at death...................19
Transfers, Assignments or Pledges.......19
Multiple Transfers......................19
Withholding.............................19
Section 1035 Exchanges..................19
Seek Tax Advice.............................19
Assignments or Pledges......................19
Performance Data............................20
Distribution of the Contracts...............22
Voting Rights...............................22
Year 2000...................................23
Rights Reserved by Great-West...............23
Adding and Discontinuing Investment Options.23
Substitution of Investments.................23
Legal Matters...............................23
Available Information.......................23
Net Investment Factor...............Appendix A
<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 on.
The Contract is not available in all states.
<PAGE>
DEFINITIONS
Accumulation Period
The period between the Effective Date and the Annuity Commencement Date. During
this period, you are making Contributions to the Contract.
Accumulation Unit
An accounting measure used to determine the Annuity Account Value before the
date annuity payments commence.
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. If a Contingent Annuitant is named, the Annuitant
will be considered the Primary Annuitant.
Annuity Account
An account established by us in your name that reflects all account activity
under this Contract.
Annuity Account Value
The total value of your Variable Sub-Accounts--less any withdrawals, amounts
applied to an annuity option, charges deducted under the Contract, and any
applicable Premium Tax.
Annuity Commencement Date
The date on which annuity payments commence under a payment option. The Annuity
Commencement Date must be at least one year after the Effective Date. If you do
not indicate an Annuity Commencement Date on your application or written Request
to us and are not exercising a periodic withdrawal option, annuity payments will
commence on the first day of the month of the Annuitant's 91st birthday. You may
change the Annuity Commencement Date within 60 days prior to commencement of
annuity payments or your Beneficiary may change it upon your death.
Payments made after the Annuity Commencement Date are referred to as annuity
payments. Contractual rights that were available prior to electing an annuity
option are no longer applicable after the Annuity Commencement Date.
Annuity Payment Period
The period beginning on the Annuity Commencement Date during which we make
annuity payments.
Annuity Service Center
P.O. Box 1700, Denver, Colorado 80201, telephone 800-355-1608.
Annuity Unit
An accounting measure we use to determine the amount of any 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 under the terms of
the Contract.
Contingent Annuitant
The person named in the application who becomes the Annuitant when the Primary
Annuitant dies. The Contingent Annuitant must be designated before the death of
the Primary Annuitant.
Contract Anniversary Date
The anniversary of the Effective Date of your Contract.
Contributions
Amounts you pay to purchase a Contract.
Eligible Fund
A mutual fund in which an Investment Division invests all of its assets.
Effective Date
The date on which the initial Contribution is credited to your Annuity Account.
Investment Division
The Series Account is divided into Investment Divisions, one for each Eligible
Fund. Each Investment Division invests all of its assets in the corresponding
Eligible Fund. You select one or more Investment Divisions to which you allocate
Annuity Account Value - your allocated Annuity Account 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.
Payment Commencement Date
The date on which periodic withdrawals begin under a payout option. The Payment
Commencement Date must be at least one year after the Effective Date.
While you are receiving periodic withdrawals you may continue to exercise all
contractual rights that are available prior to electing an annuity option,
except that no Contributions may be made. You may request that periodic
withdrawals stop and you may change the withdrawal option and/or frequency once
each calendar year.
Premium Tax
A tax charged by a state or other governmental authority. The range of Premium
Taxes currently is 0% to 3.50% and may be assessed at the time you make a
Contribution or when you make withdrawals or annuitize.
Request
Any written, telephoned, or computerized instruction in a form satisfactory to
Great-West and received at the Annuity Service Center (or other annuity service
center subsequently named) from you, your designee (as specified in a form
acceptable to Great-West) or the Beneficiary (as applicable).
Series Account
The segregated 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 various Investment Divisions.
Surrender Value
The Annuity Account Value 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 at the Annuity Service Center after the
close of the New York Stock Exchange (generally 4:00 p.m. EST/EDT) will be
deemed to have been received on the next business day. Transaction Requests will
be processed and the Annuity 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 submit transaction Requests only by automated voice response
unit or by fully automated computer link.
Transfer
When you move money from and among the Investment Divisions.
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.
EST/EDT). The day after Thanksgiving is a Valuation Date.
Variable Sub-Accounts
An account we maintain for you that reflects the value credited to you from an
Investment Division.
<PAGE>
KEY FEATURES OF THE CONTRACT
Following are some of the key features of The AICPA Variable Annuity. 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 Automatic Contribution
Plan.
The minimum initial investment is:
o $2,000
o $1,000 if Contributions are made via Automatic Contribution Plan
The minimum ongoing Contribution:
o $250
o $100 per month if made via Automatic Contribution Plan
Allocation of Your Contributions
Your initial Contribution will be allocated to the Maxim Money Market Investment
Division until the Transaction Date following the end of the free look period.
At that time, your Annuity Account Value will be allocated to the Investment
Divisions based on the instructions specified in your 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 of your receipt of the Contract. You can
cancel the Contract during the free look period by delivering or mailing the
Contract to the Annuity Service Center. The cancellation is not effective unless
we receive the Contract in person or post-marked before the end of the free look
period. If the Contract is returned, the Contract will be void from the start
and the greater of the following will be refunded:
o Contributions received, less surrenders, withdrawals and distributions, or
o The Annuity Account Value.
A Wide Range of Investment Choices
The Contract gives you an opportunity to select among eight different Investment
Divisions. Each Investment Division invests in shares of an Eligible Fund. The
Eligible Funds cover a wide range of investment choices. The distinct investment
objectives and policies for each Eligible Fund are more fully described in the
individual fund prospectuses. You can obtain the prospectuses 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 will pay no sales charges, redemption, or withdrawal charges. You will,
however, pay the following annual charges:
o A mortality and expense risk charge of 0.50% of the net assets in the
Variable Sub-Account.
o A Certificate Maintenance Charge of up to $30 will be deducted annually from
your Annuity Account Value. This charge is waived if your Annuity Account
Value equals or exceeds $25,000.
o A Transfer fee of $10 for each Transfer in excess of twenty-four Transfers
per calendar year.
Depending on your state of residence, we may be required to deduct a charge for
Premium Tax from Contributions or amounts withdrawn or at the Annuity
Commencement Date.
Making Transfers
You can Transfer among the Investment Divisions as often as you like. Each
Transfer in excess of 24 in a calendar year will be subject to a $10 charge.
Full and Partial Withdrawals
You may withdraw all or part of your Annuity Account Value before the earlier of
the Annuity Commencement Date you selected 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 penalty tax. There is no limit on the number of withdrawals you can
make.
Payment Options
You may choose from a wide range of annuity options to provide flexibility in
choosing an annuity payment schedule that meets your needs. These annuity
options include alternatives designed to provide payments for life (for either a
single or joint life), with or without a guaranteed minimum number of payments.
Death Benefit
The amount of the death benefit, if payable before annuity payments commence,
will be the greater of:
o the Annuity Account Value as of the date a Request for payment is received,
less Premium Tax, if any; or
o the sum of Contributions paid, less partial withdrawals, periodic
withdrawals, any charges deducted under the Contract and Premium Tax, if
any.
Customer Service
Professional representatives are available toll-free to assist you. If you have
any questions about your Contract, please telephone the Annuity Service Center
at 800-355-1608 or write to the Annuity Service Center at:
P.O. Box 1700
Denver, Colorado 80201
All inquiries should include the Contract number and your name as Owner. As an
Owner, you will receive statements confirming any transactions relating to your
Contract, as well as a quarterly statement and annual reports.
<PAGE>
9
FEE TABLE 1
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.2 The table and examples reflect
expenses related to the Investment Divisions and the Eligible Funds.
Owner transaction expenses
Sales load None
Surrender fee None
Transfer fee (first 24 per year)3 None
Annual Certificate Maintenance Charge4 $30.00
Investment Division annual expenses (as a percentage of average account assets)
Mortality and expense risk charge 0.50% Administrative expense charge 0.00%
Total Investment Division annual expenses 0.50%
1 The Eligible Fund Annual Expenses and the examples are based on data provided
by the Eligible Funds. Great-West has no reason to doubt the accuracy or
completeness of that data, but Great-West has not verified the Eligible Funds'
figures, other than the portfolios of Maxim Series Fund, Inc.
2 We may be required to pay state Premium Taxes currently ranging from 0% to
3.50% in connection with Contributions or values under the Contracts. Depending
upon applicable state law, we will deduct charges for the Premium Taxes we incur
at the time you make a Contribution, from amounts withdrawn, or from amounts
applied on the Annuity Commencement Date. 3There is a $10 fee for each Transfer
in excess of twenty-four in any calendar year. 4The Certificate Maintenance
Charge is currently waived for Contracts with an Annuity Account Value of at
least $25,000 on a Contract Anniversary Date. If your Annuity Account Value
falls below $25,000 on your Contract Anniversary Date due to withdrawals or
charges, the Certificate Maintenance Charge will be reinstated until such time
as your Annuity Account Value equals or exceeds $25,000.
<TABLE>
ELIGIBLE FUND ANNUAL EXPENSES
(as a percentage of Eligible Fund net assets, before waivers and reimbursements)
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Portfolio Management Other Distrib-uTotal eligible fund
fees expenses (12b-1) expenses
fees
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
<S> <C>
Maxim Money Market Portfolio 0.46% - -
0.46%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
0.65% 0.08% -
Janus Aspen Flexible Income Portfolio 0.73%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
0.80% 0.08% -
Maxim T. Rowe Price Equity/Income 0.88%
Portfolio
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
1.00% - -
Maxim INVESCO Balanced Portfolio 1.00%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
0.25% 0.01% -
Dreyfus Stock Index Fund 0.26%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
0.60% - -
Maxim Growth Index Portfolio 0.60%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
0.78% 0.06% -
Neuberger & Berman AMT Partners 0.84%
Investments
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Templeton International Fund (Class 1) 0.69% 0.17% -
0.86%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Examples If you retain, annuitize or surrender the Contract
at the end of the applicable time period, you would pay the following fees and
expenses on a $1,000 investment, assuming a 5% annual return. These examples
assume that no Premium Taxes have been assessed.
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Investment Divisions 1 year 3 years 5 years 10 years
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim Money Market Portfolio $5 $16 $29 $73
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Janus Aspen Flexible Income Portfolio $8 $25 $46 $115
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim T. Rowe Price Equity/Income Portfolio $9 $30 $55 $137
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim INVESCO Balanced Portfolio $11 $34 $62 $155
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Dreyfus Stock Index Fund $3 $9 $16 $42
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim Growth Index Portfolio $6 $21 $38 $95
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Neuberger & Berman AMT Partners Investments $9 $29 $52 $131
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Templeton International Fund (Class 1) $9 $29 $54 $134
- ------------------------------------------------- ----------- ------------- ------------- ----------------
</TABLE>
These examples, including the assume rate of return, should not be considered
representations of past or future expenses or performance. Actual expenses paid
and performance achieved may be greater or less than those shown.
<PAGE>
22
GREAT-WEST LIFE ANNUITY INSURANCE COMPANY Great-West is a stock life insurance
company that was originally organized under the laws of the state of Kansas as
the National Interment Association. Our name was changed to Ranger National Life
Insurance Company in 1963 and to Insuramerica Corporation prior to changing to
our current name in 1982. In September of 1990, we re-domesticated under the
laws of the state of Colorado.
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, Jr. through a group of private
holding companies, which he controls, has voting control of Power Corporation of
Canada.
We are authorized to do business in 49 states, the District of Columbia, Puerto
Rico, the U.S.
Virgin Islands and Guam.
THE SERIES ACCOUNT
We established the Maxim Series Account in accordance with Kansas law on June
24, 1981. The Series Account now exists pursuant to Colorado law as a result of
the redomestication of Great-West.
The Series Account consists of the Investment Divisions and is registered with
the Securities and Exchange. Commission (the "SEC") as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). This registration
does not involve supervision by the SEC of the Series Account or Great-West.
The Series Account is organized as a "separate account" of Great-West under
Colorado law. The Series Account and its Investment Divisions are administered
and accounted for as part of the general business of Great-West. However, the
income, gains, or losses of each Investment Division are credited to or charged
against the assets held in that Investment Division in accordance with the terms
of the Contracts, without regard to other income, gains or losses arising out of
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.
We do not guarantee the investment performance of the Investment Divisions. Your
Annuity Account Value and the amount of variable annuity payments depend on the
investment performance of the Eligible Funds. Therefore, Owners bear the full
investment risk for all Contributions allocated to the Investment Divisions.
The Series Account currently has 8 Investment Divisions available for allocation
of Contributions. Each Investment Division invests exclusively in shares of one
Eligible Fund. If we decide to make additional Investment Divisions available in
the future, we may or may not make them available to existing Owners, based on
our assessment of marketing needs and investment conditions.
THE ELIGIBLE FUNDS
Each Investment Division invests in a single Eligible Fund. Each Eligible Fund
is a separate mutual fund having its own investment objectives and policies. The
Eligible Funds are each registered with the SEC under the 1940 Act. This
registration does not involve supervision of the management or investment
practices of the Eligible Funds by the SEC.
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: o the Maxim Money Market Portfolio
seeks as high a level of current income as is consistent with the preservation
of capital and liquidity. Shares of the Maxim Money Market Portfolio are neither
insured nor guaranteed by the U.S. Government. 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. o the Janus Aspen Flexible Income
Portfolio seeks to obtain maximum total return, from a combination of income and
capital appreciation. The Portfolio pursues its objective primarily through
investments in income-producing securities. o the Maxim T. Rowe Price
Equity/Income Portfolio seeks substantial dividend income and also capital
appreciation. This portfolio invests primarily in divdend-paying common stocks
of established companies. o the Maxim INVESCO Balanced Portfolio seeks high
total return on investment through capital apprecation and current income. This
portfolio invests 50% to 70% in common stocks and at least 25% in fixed income
securities. o the Dreyfus Stock Index Fund's investment objective is to provide
investment results that correspond to the price and yield performance of
publicly traded common stocks in the aggregate, as represented by the Standard &
Poor's 500 Composite Stock Price Index. The Dreyfus Stock Index Fund is neither
sponsored by nor affiliated with Standard & Poor's Corporation. o the Maxim
Growth Index Portfolio seeks investment results that, before fees, track the
total return of the common stocks that comprise the Russell 1000 Growth Index.
The Russell 1000 Growth Index was developed by the Frank Russell Company to
track stock market performance of stocks from the Russell 1000 Index exhibiting
certain characteristics suggesting growth potential. The Frank Russell Company
is not a sponsor of, or in any other way affiliated with the Portfolio or the
Fund. o the Neuberger & Berman AMT Partners Investments seeks capital growth.
This investment objective is non-fundamental. Neuberger & Berman AMT Partners
Investments invests principally in common stocks of medium to large
capitalization established companies using the value-oriented investment
approach. The Portfolio seeks capital growth through an investment approach that
is designed to increase capital with reasonable risk. o the Templeton
International Fund's investment objective is long-term capital growth. This Fund
invests primarily in stocks of companies outside the United States. Any income
realized will be incidental.
Meeting Investment Objectives The ability of the Eligible Funds to meet their
investment objectives depends on various factors, including, but not limited to,
how well the Eligible Fund managers anticipate changing economic and market
conditions. There is no guarantee that any of the Eligible Funds will achieve
their stated 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 the Annuity Service Center at
800-355-1608, or by writing to the Annuity Service Center, P.O. Box 1700,
Denver, Colorado 80201. The Eligible Funds' Prospectuses should be read
carefully before you make a decision to invest in an Investment Division.
APPLICATION AND INITIAL CONTRIBUTION
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 $2,000
o $1,000 if you are setting-up an
Automatic Contribution Plan
All checks should be made payable to Great-West. When you sign up for an
Automatic Contribution Plan, we take the amount of money you designate for your
ongoing Contributions directly from your bank or savings account. You can
designate the date you would like your ongoing Contributions deducted from your
account each month.
If your application is complete, including your initial Contribution, generally,
your Contract will be issued and your Contribution will be credited within two
business days after our receipt. Acceptance is subject to our receipt of
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 your initial Contribution and application
unless you consent to our retaining the initial Contribution and crediting it as
soon as we have your completed application.
During the ten-day (or longer where required by law) free look period, you may
cancel your Contract within ten days after your receipt of the Contract. During
the free look period, all Contributions will be processed as follows:
o Amounts you allocate to the Investment Divisions will first be allocated to
the Maxim Money Market Investment Division until the Transaction Date
following the end of the free look period. On that date, the Annuity
Account Value held in the Maxim Money Market Investment Division will be
allocated to the Investment Division(s) you selected.
o During the free look period, you may change the Investment Divisions in
which you'd like to invest as well as your allocation percentages. Any
changes you make during the free look period will take effect after the free
look period has expired.
Any returned Contracts will be void from the start and the greater of the
following will be refunded:
o Contributions received less surrenders and withdrawals, or
o The Annuity Account Value.
If you exercise the free look privilege, you must return the Contract. We must
receive it in person or post-marked 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. Subsequent Contributions
must be at least $250 or $100 per month if made via an Automatic Contribution
Plan. Subsequent Contributions will be credited on the Transaction Date. You can
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
dollar amount of all Accumulation Units in your Variable Sub-Accounts.
Each Variable Sub-Account's value prior to the Annuity Commencement Date is
equal to:
o net Contributions allocated to the corresponding Investment Division,
o plus or minus any increase or decrease in the value of the assets of the
Variable Sub-Account due to investment results,
o minus the daily mortality and expense risk charge,
o minus reductions for the Certificate Maintenance Charge deducted on each
Contract Anniversary Date,
o minus any applicable Transfer fees and
o minus any withdrawals or Transfers from the Variable Sub-Account.
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.
Your Annuity Account Value reflects the investment performance of the selected
Investment Division(s).
Upon allocating Contributions to an Investment Division you will be credited
with variable accumulation units in that Investment Division. The number of
Accumulation Units credited to you is determined by dividing the portion of each
Contribution allocated to the Investment Division by the value of an
Accumulation Unit. The value of the Accumulation Unit is determined and credited
at the end of the valuation period during which the Contribution was received.
We calculate each Investment Division's Accumulation Unit value at the end of
each valuation period. It is calculated by multiplying the value of that unit at
the end of the prior valuation period by the Investment Division's Net
Investment Factor for the valuation period. The formula used to calculate the
Net Investment Factor is discussed in Appendix A.
TRANSFERS
In General
Prior to the Annuity Commencement Date you may Transfer all or part of your
Annuity Account Value among and between the Investment Divisions by telephone or
by sending a Request to the Annuity Service Center or by calling KeyTalkTM - the
voice response unit - at 800-355-1608. Your Request must specify: o the amounts
being transferred, o the Investment Division(s) from which
the Transfer is to be made, and
o the Investment Division(s) that will
receive the Transfer.
Currently, there is no limit on the number of Transfers you can make among the
Investment Divisions during any calendar year. However, we reserve the right to
limit the number of Transfers you make. Transfers will be effective on the
Transaction Date.
There is no charge for the first twenty-four Transfers each calendar year, but
there will be a charge of $10 for each additional Transfer made. The charge will
be deducted from the amount transferred. All Transfers made on a single
Transaction Date will count as only one Transfer toward the twenty-four free
Transfers. However, if a one-time rebalancing Transfer also occurs on the
Transaction Date, it will be counted as a separate and additional Transfer.
Transfers will result in the purchase and cancellation of Accumulation Units
having a total value equal to the dollar amount being transferred. The purchase
and cancellation of such units is made using the Annuity Account Value as of the
end of the Valuation Date on which the Transfer is effective.
Possible Restrictions
We reserve the right without prior notice to modify, restrict, suspend or
eliminate the Transfer privileges (including telephone 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.
Although you can Request a Transfer by telephone, we reserve the right to
require 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 any terms and conditions imposed by the
Eligible Funds.
DOLLAR COST AVERAGING Dollar cost averaging allows you to make systematic
Transfers from one available Investment Division to another Investment Division.
Dollar cost averaging allows 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. However, dollar
cost averaging does not assure a greater profit, or any profit, and will not
prevent or necessarily alleviate losses in a declining market.
You can set up automatic dollar cost averaging on a monthly, quarterly,
semi-annual or annual basis. Your Transfer will be initiated on the Transaction
Date one frequency period following the date of the Request. For example, if we
receive a Request for quarterly Transfers on January 9, your first Transfer will
be made on April 9 and every three months on the 9th thereafter (if the 9th is
not a Valuation Date, on the next immediately following Valuation Date).
Transfers will continue on that same day each interval unless terminated by you
or for other reasons as set forth in the Contract.
If there are insufficient funds in the applicable Variable Sub-Account on the
date your Transfer is scheduled, your Transfer will not be made. However, your
dollar cost averaging Transfers will resume as of the next frequency period 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. There is no fee associated with dollar cost averaging. Dollar cost
averaging Transfers are not counted against the twenty-four free Transfers
allowed in a calendar year.
Dollar cost averaging Transfers must meet the following conditions:
o The minimum amount that can be
transferred out of the selected 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 not participate in dollar cost averaging and rebalancer at the same
time.
Great-West reserves the right to modify, suspend or terminate dollar cost
averaging at any time and for any reason.
- ------------------------------------------------
Dollar cost averaging permits you to Transfer your Variable Account Value at
regular intervals from one or more Investment Divisions to other Investment
Divisions. Doing so allows 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. Please note
that dollar cost averaging does not assure a greater profit or any profit, and
will not prevent or necessarily alleviate losses in a declining market.
- ------------------------------------------------
REBALANCER
Over time, differences in the investment results of the Investment Divisions
will cause the actual allocation of your assets to differ from your selected
asset allocation percentages. Rebalancer allows you to automatically reallocate
your Variable Account Value to maintain your desired asset allocation.
Participation in Rebalancer does not assure a greater profit, or any profit, nor
will it prevent or necessarily alleviate losses in a declining market.
You can set up Rebalancer as a one-time Transfer or on a quarterly, semi-annual
or annual basis. If you select to Rebalance only once, the Transfer will take
place on the Transaction Date of the Request. There is no charge associated with
Rebalancer. However, one-time Rebalancer Transfers count toward the twenty-four
free Transfers allowed in a calendar year. As a result, you would only incur a
charge in connection with a one-time Rebalancer Transfer if you made more than
twenty-three other Transfers in the same calendar year.
If you select to Rebalance on a quarterly, semi-annual or annual basis, the
first Transfer will be initiated on the Transaction Date one frequency period
following the date of the Request. For example, if we receive a Request for
quarterly Transfers on January 9, your first Transfer will be made on April 9
and every three months on the 9th thereafter (if the 9th is not a Valuation
Date, on the next immediately following Valuation Date). Transfers will continue
on that same day each interval unless terminated by you or for other reasons as
set forth in the Contract. Quarterly, semi-annual and annual Transfers will not
count toward the 24 free Transfers.
On a Rebalancing Transaction Date, your money will be automatically reallocated
among the Investment Divisions based on your allocation instructions. The
Rebalancer option will terminate automatically when you start taking
payments from the annuity.
Rebalancer Transfers must meet the following conditions:
o In order to participate in the Rebalancer option, your entire Annuity
Account Value must be included.
o You must specify the percentage of your Annuity 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.
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.
- ------------------------------------------------
Rebalancer permits you to rebalance your
Variable Account Value so that you may maintain
your chosen percentage allocation among
Investment Divisions. Please note,
Participation in Rebalancer does not assure a
greater profit, or any profit, nor will it
prevent or necessarily alleviate losses in a
declining market.
- ------------------------------------------------
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 the Annuity Service Center. Withdrawals are
subject to the rules below and federal or state laws, rules or regulations may
also apply. The amount payable to you if you surrender your Contract is your
Annuity Account Value, on the effective date of surrender, less any applicable
Premium Tax. No withdrawals may be made after the Annuity Commencement Date.
If you request a partial withdrawal, your Annuity Account Value will be reduced
by the dollar amount withdrawn.
Partial withdrawals are unlimited. However, you must specify the Investment
Division(s) from which the withdrawal is to be made. After any partial
withdrawal, if your remaining Annuity Account Value is less than $2,000 we may
require a full surrender. The minimum partial withdrawal is $250.
Withdrawal Requests must be in writing. If your instructions are not clear, your
Request for a withdrawal will be denied.
After a withdrawal of all 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.
In addition, the Internal Revenue Code may require us to withhold federal income
taxes from withdrawals and report such withdrawals to the IRS.
You may elect, in writing, to have us not withhold federal income tax from
withdrawals, unless withholding is mandatory for your Contract. If you are
younger than 59 1/2, the taxable portion of any withdrawal is generally
considered to be an early withdrawal and is subject to an additional federal tax
of 10%.
Withholding applies only if the taxable amount of the withdrawal is at least
$200. Some states also require withholding for state income taxes. For details
about state withholding, please see "Federal Tax Matters."
TELEPHONE TRANSACTIONS
You may make Transfer Requests by telephone or by using KeyTalkTM. The cut off
time for telephone Transfer Requests is 4:00 p.m. Eastern time. Requests made
via telephone are effective on the Transaction Date.
We will use reasonable procedures to confirm that instructions communicated by
telephone are genuine, such as:
o requiring some form of personal
identification prior to acting on
instructions,
o providing written confirmation of the
transaction and/or
o tape recording the instructions given
by telephone.
If we follow such procedures we will not be liable for any losses due to
unauthorized or fraudulent instructions.
We reserve the right to suspend telephone
transaction privileges at any time, for some or
all Contracts, and for any reason. Withdrawals
are not permitted by telephone.
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 there is a Joint Owner who is the surviving spouse of the deceased Owner and
a Contingent Annuitant, the Joint Owner will become the Owner and the
Beneficiary, the Contingent Annuitant will become the Annuitant, and the
Contract will continue in force. If there is a Joint Owner who is the surviving
spouse of the deceased Owner but no Contingent Annuitant, the Joint Owner will
become the Owner, Annuitant and Beneficiary and may elect to take the death
benefit or continue the Contract in force.
In all other cases, we will pay the death benefit to the Beneficiary, unless the
sole Beneficiary is the deceased Owner's surviving spouse and the Beneficiary
requests to become the Owner and Annuitant and to continue the Contract in
force.
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:
o First, to the surviving Joint Owner.
o If there is no surviving Joint Owner,
then to the Contingent Owner.
o 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, and if no Contingent
Annuitant has been named and is then living, the Company will pay the death
benefit under the Contract to the Beneficiary. If a Contingent Annuitant has
been named prior to the Annuitant's death and is living at the time the
Annuitant dies, then no death benefit will be payable by reason of the
Annuitant's death and the Contingent Annuitant will become the Annuitant.
Death Benefit Computation and Procedure If the Owner-Annuitant, Non-Annuitant
Owner, or Non-Owner Annuitant (where there is no Contingent Annuitant) dies
before the Annuity Commencement Date, the death benefit will be
the greater of:
o the Annuity Account Value as of the
date of the Request, less Premium Tax, if
any; or
o the sum of Contributions paid, less
partial withdrawals, periodic payments, and
Premium Tax, if any.
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.
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, where there is no Contingent Annuitant, if the Owner is a
non-individual entity, such as a trust or estate) must be made pursuant to
Section 72(s) of the Internal Revenue Code. These requirements 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 Section 72(s) of the Internal
Revenue Code 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, they will share equally in any death benefit payable unless you
indicate otherwise. You may change the Beneficiary any time before the
Annuitant's death.
You may, 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 the Annuity Service Center, 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.
Contingent Annuitant
While the Annuitant is living, the Owner(s) may, by Request, designate or change
a Contingent Annuitant from time to time. A change of Contingent Annuitant will
take effect as of the date the Request is processed at the Annuity Service
Center, unless a certain date is specified by the Owner(s).
CHARGES AND DEDUCTIONS
You will not pay any charges at the time you make a Contribution except for any
applicable Premium Tax. As a result, the full amount of your Contributions (less
any applicable Premium Tax) are invested in the Contract.
You pay the following charges under your
Contract:
o charges for our assumption of mortality
and expense risks
o a Certificate Maintenance Charge
You may also pay the following:
o deductions for Premium Tax, if
applicable (depending on your state of
residence), and
o deductions for Transfers (only if you
exceed 24 in a calendar year).
Mortality and Expense Risk Charge We deduct a Mortality and Expense Risk Charge
from your Variable Sub-Account(s) at the end of each Valuation Period to
compensate us for bearing certain mortality and expense risks under the
Contract. This is a daily charge equal to an effective annual rate of 0.50% of
the value of the net assets in your Variable Sub-Account(s). We guarantee that
this charge will never increase. 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.
The Mortality and Expense Risk Charge is reflected in the unit values for each
of your Variable Sub-Accounts.
Certificate Maintenance Charge We currently deduct a $30 annual Certificate
Maintenance Charge from the Annuity Account Value on each Contract Anniversary
Date. This charge partially covers our costs for administering the Contracts and
the Series Account. This charge will cease to apply after the Annuity
Commencement Date.
The Certificate Maintenance Charge is deducted from the portion of your Annuity
Account Value allocated to the Money Market Investment Division. If you do not
have sufficient Annuity Account Value allocated to the Money Market Investment
Division to cover the Certificate Maintenance Charge, then the charge or any
portion of it will be deducted on a pro rata basis from all your Variable
Sub-Accounts.
The Certificate Maintenance Charge is currently waived for Contracts with an
Annuity Account Value of at least $25,000 on your Contract Anniversary Date. If
your Annuity Account Value falls below $25,000 due to withdrawals or charges,
the Certificate Maintenance Charge will be reinstated until such time as your
Annuity Account Value is equal to or greater than $25,000.
Premium Tax
We may be required to pay state Premium Taxes currently ranging from 0% to 3.50%
in connection with Contributions or values under the Contracts. Depending upon
applicable state law, we will deduct charges for the Premium Taxes we incur at
the time you make a Contribution, from amounts withdrawn, or from amounts
applied on the Annuity Commencement Date.
Transfer Fee
There will be a $10 charge for each Transfer in excess of twenty-four Transfers
in any calendar year.
Other Taxes
Under present laws, we will incur state or local taxes (in addition to the
Premium Tax described above) in several states. No charges are currently made
for taxes other than Premium Tax. However, we reserve the right to deduct
charges in the future for federal, state, and local taxes or the economic burden
resulting from the application of any tax laws that we determine to be
attributable to the Contract.
Expenses of the Eligible Funds The net asset value of the Eligible Funds reflect
the deduction of the Eligible Fund's fees and deductions. You bear these costs
indirectly when you allocate to an Investment Division.
PERIODIC WITHDRAWALS
You may request that all or part of the Annuity Account Value be applied to a
periodic withdrawal option.
In requesting periodic withdrawals, you must
elect:
o The withdrawal frequency of either 12-,
6-, 3- or 1-month intervals
o A withdrawal amount--a minimum of $100
is required
o The calendar day of the month on which
withdrawals will be made
o One withdrawal option
o To allocate your withdrawals from your
Variable Sub-Account(s) by a) prorating the amount to be paid across all
Variable Sub-Accounts in proportion to the assets in each sub-account or b)
selecting the Variable Sub-Account(s) from which withdrawals will be made.
Once the Variable Sub-Accounts have been depleted, we will automatically
prorate the remaining withdrawals against all remaining available Variable
Sub-Accounts unless you request the selection of another Variable
Sub-Account.
You may change the withdrawal option and/or the frequency once each calendar
year.
While periodic withdrawals are being received:
o You may continue to exercise all contractual rights that are available prior
to electing an annuity option, except that no Contributions may be made.
o You may keep the same investment options as were in force before periodic
withdrawals began.
o Charges and fees under the Contract
continue to apply.
Periodic withdrawals will cease on the earlier
of
the date:
o the amount elected to be paid under the option selected has been reduced to
zero.
o the Annuity Account Value is zero.
o You request that withdrawals stop.
o You or the Annuitant dies.
Periodic Withdrawal Payment Options If you choose to receive payments from your
annuity through periodic withdrawals, you may select from the following payment
options:
Income for a specified period (at least 36 months) You elect the length of time
over which withdrawals will be made. The amount paid will vary based on the
duration you choose.
Income of a specified amount (at least 36
months)
You elect the dollar amount of the withdrawals.
Based on the amount elected, the duration may
vary.
Any other form for a period of at least 36 months Any other form of periodic
withdrawal
acceptable to Great-West.
If periodic withdrawals stop, you may resume making Contributions. However, we
may limit the number of times you may restart a periodic withdrawal program.
Periodic withdrawals made for any purpose may be taxable, subject to withholding
and to the 10% penalty for early withdrawal. A competent tax adviser should be
consulted before a periodic withdrawal option is requested.
ANNUITY PAYMENT OPTIONS
Annuity Commencement Date
You can choose the date you would like annuity payments to start either when you
purchase the Contract or at a later date. The date you choose must be at least
one year after your initial Contribution. If you do not select an annuity start
date, payments will begin on the first day of the month of the Annuitant's 91st
birthday.
If you have not elected a payment option within 30 days of the Annuity
Commencement Date, your 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.
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 the Annuity Commencement Date you 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.
Under an annuity payment option, you can receive payments monthly, quarterly,
semi-annually or annually. 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 gender 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 minimum interest rate allowed by law.
If you elect to receive a single sum payment, the amount paid is the Surrender
Value.
If you elect a variable annuity, then the amount to be paid out is the Annuity
Account Value held in the Variable Sub-Account(s), as of the Annuity
Commencement Date, less any applicable Premium Tax.
Variable Annuity Payment Options Variable life annuity with guaranteed period
This option provides for 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. Upon the death of the Annuitant, the amounts payable under
this payment option will be paid to the Beneficiary until the guaranteed period
has expired.
Variable life annuity This option provides for 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. Upon the death of the Annuitant, all
payments stop and no amounts are payable to the Beneficiary.
Any Other Form
Any other form of variable annuity which is acceptable to us.
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 to the Annuitant 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 Payments after the first will vary
depending upon the investment experience of the Investment Divisions. 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,
Transfers may be made within the variable annuity payment option 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 payment
option you select:
o no changes can be made in the payment
option,
o no additional Contributions will be
accepted under the Contract and
o no further withdrawals, other than withdrawals made to provide annuity
benefits, will be allowed.
A portion or the entire amount of the annuity payments may be taxable as
ordinary income. If, at the time the annuity payments begin, we have not
received a proper written election not to have federal income taxes withheld, we
must by law withhold such taxes from the taxable portion of such annuity
payments and remit that amount to the federal government. State income tax
withholding may also apply. Please see "Federal Tax-Matters" below for details.
FEDERAL TAX MATTERS 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 tax implications relating to the ownership or use of the Contracts 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") only. 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
Annuitant, or the Beneficiary may depend on the type of Contract, and on the tax
status of the individual concerned.
- ------------------------------------------------
Because tax laws, rules and regulations are constantly changing, we do not make
any guarantees about the Contract's tax status.
- ------------------------------------------------
Taxation of Annuities
In General
Section 72 of the Internal Revenue Code governs taxation of annuities. You, as a
"natural person" will not generally be taxed on increases, if any, in the value
of your Annuity Account Value until a distribution occurs by withdrawing all or
part of the Annuity Account Value (for example, withdrawals or annuity payments
under the annuity payment option 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.
If you are not a natural person (for example, a corporation), you generally must
include in income any increase in the excess of the Annuity Account Value over
the "investment in the Contract" during each taxable year. The rule does not
apply where the non-natural person is the stated owner of a Contract and the
beneficial owner is a natural person.
The rule also does not apply where:
o The annuity Contract is acquired by the
estate of a decedent.
o The Contract is a qualified funding
asset for a structured settlement.
o 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
With respect to Non-Qualified Contracts, partial withdrawals, including periodic
withdrawals, are generally treated as taxable income to the extent that the
Annuity Account Value immediately before the withdrawal exceeds the "investment
in the Contract" at that time. 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. 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.
Other exemptions or tax penalties may apply to distributions from a
Non-Qualified Contract. For more details regarding these exemptions or penalties
consult a competent tax adviser.
Taxation of death benefit proceeds
Amounts may be distributed from the Contract
because of the death of an Owner or the
Annuitant. Generally such amounts are included
in the income of the recipient as follows:
o If distributed in a lump sum, they are
taxed in the same manner as a full
surrender, as described above.
o If distributed under an annuity form, they are taxed in the same manner as
annuity 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:
o If the Owner dies 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 death.
o If the Owner dies before the date
annuity payments start, your entire
interest must generally be distributed
within five years after the date of your
death. If payable to a designated
Beneficiary, the distributions may be paid
over the life of that designated
Beneficiary or over a period not extending
beyond the life expectancy of that
Beneficiary, so long as payments start
within one year of your death. If the sole
designated Beneficiary is your spouse, the
Contract may be continued in the name of
your spouse as Owner.
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.
Transfers, Assignments or Exchanges A Transfer of ownership of a Contract, the
designation of an Annuitant, Payee or other Beneficiary who is not also the
Owner, or the exchange of a Contract may result in adverse tax consequences that
are not discussed in this Prospectus. If you are considering any of 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.
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
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.
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 person who
receives 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.
If a Contract is assigned, the interest of the assignee has priority over your
interest and the interest of the Beneficiary. Any amount payable to the assignee
will be paid in a single sum.
A copy of any assignment must be submitted to the Annuity Service Center. All
assignments are 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 Money Market Investment Division. These figures will be based on historical
information and are not intended to indicate future performance.
The yield of the 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 of a non-Money Market Investment Division refers to the annualized
income generated by an investment in that Investment Division over a specified
thirty-day period. The yield is calculated by assuming that the income generated
by the investment during that thirty-day period is generated each 30-day period
over a period of 12 months and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any Premium Tax that may be
applicable to a particular Contract. To the extent that Premium Taxes are
applicable to a particular Contract, the yield of that Contract will be reduced.
Investment Yield Effective
Division Yield
Maxim Money Market 4.03% 4.14%
The table on the following page illustrates standardized and non-standardized
average annual total return for one-, three-, five- and ten-year periods (or
since inception, 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. The standardized data is calculated from
the inception date of the Investment Division and the non-standardized data is
calculated from the inception of the Eligible Fund and includes periods
preceding the inception date of the Investment Division. Certain Investment
Divisions currently have no annualized standardized performance data. Such data
will be provided when it becomes available. For additional information regarding
yields and total returns calculated using the standard methodology briefly
described herein, please refer to the Statement of Additional Information.
<TABLE>
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
<S> <C> <C> <C>
Investment Division 1 5 10 Since Inception Since Inception
year years years Inception of Date of Inception of Date of
Investment Investment Underlying Underlying
Division Division Fund Fund
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Janus Aspen Flexible Income Portfolio 8.38% 9.58% N/A N/A 1/04/99 9.11% 9/13/93
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim T. Rowe Price Equity/Income 8.18% N/A N/A 20.07% 11/01/94 20.07% 11/01/94
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim INVESCO Balanced 17.61% N/A N/A 21.09% 10/01/96 21.09% 10/01/96
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Dreyfus Stock Index Fund 27.33% 22.71% N/A N/A 1/04/99 16.31% 9/29/89
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim Growth Index 36.34% 23.62% N/A 38.18% 1/15/98 23.36% 12/01/93
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Neuberger & Berman AMT Partners 3.50% N/A N/A N/A 1/04/99 17.32% 3/22/94
Investments
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Templeton International Fund (Class 1) 8.58% 11.07% N/A N/A 1/04/99 13.38% 5/01/92
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
</TABLE>
<PAGE>
The Contracts have been offered to the public only since September 1, 1998. The
results for any period prior to the Contracts being offered is calculated as if
the Contracts had been offered during that period (which they were not),
deducting all recurring charges assessed under the Contracts, including the
annual Certificate Maintenance Charge, and the daily mortality and expense risk
charge of 0.50%.
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 and policies and characteristics of the Eligible Funds in which the
Investment Division invests and the market conditions during the given time
period. It should not be considered as a representation of what may be achieved
in the future.
Reports and promotional literature may also contain other information including:
o the ranking of 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 o the effect of tax-deferred compounding on
investment returns, or returns in general, which may be
illustrated by graphs, charts, or otherwise, and which may
include a comparison, at various points in time, of the
return from an o investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax
rates) with the return on a currently taxable basis. Other
ranking services and indices may be used.
We may from time to time also disclose cumulative (non-annualized) total
returns, yield and standardized and non-standardized total returns for the
Investment Divisions.
We may also advertise performance figures for the Investment Divisions based on
the performance of an Eligible Fund prior to the time the Series Account
commenced operations.
For additional information regarding the calculation of performance data, please
refer to the Statement of Additional Information.
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. BCE is an indirect wholly owned subsidiary of
GWL&A. There are no commissions paid to dealers.
VOTING RIGHTS
In general, you do not have a direct right to vote the Eligible Fund shares held
in the Series Account. However, under current law, you are entitled to give us
instructions on how to vote the shares of an Eligible Fund to which you have
allocated Annuity Account Value. We will vote the shares according to those
instructions at regular and special shareholder meetings. If the law changes and
we can vote the shares in our own right, we may elect to do so.
Before the Annuity Commencement Date, you have the voting interest. The number
of votes available to you will be calculated separately for each of your
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 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 by us in proportion to the voting
instructions received for all Contracts participating in the Investment
Division. If you indicate in your instructions that you do not wish to vote an
item, we will apply your instructions on a pro rata basis to reduce the votes
eligible to be cast.
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. 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.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 completed this
process during the first quarter of 1999 and will conduct system testing
with third parties throughout 1999. However, 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 we
feel would best serve the interests of Owners and Annuitants or would be
appropriate in carrying out the purposes of the Contracts. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, we will obtain your approval of the changes and approval
from any appropriate regulatory authority. Approval may not be required in all
cases, however. Examples of the changes we may make include:
o To operate the Series Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by
law.
o To Transfer any assets in any 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 shares of another investment company 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 changing the way we assess
charges, without increasing them for any outstanding Contract beyond the
aggregate amount guaranteed.
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.
When we inform you that we are discontinuing an Investment Division 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 before the
effective date of the notice may be kept in those Investment Divisions, unless
we substitute shares of one mutual fund for shares of the corresponding Eligible
Fund.
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 Commission under the 1933
Act relating to the Contracts offered by this Prospectus. This Prospectus has
been filed as a part of the Registration Statement and does not contain all of
the information contained in the Registration Statement and its exhibits.
Additionally, statements in this Prospectus about the content of the Contract
and other legal instruments are summaries. Please refer to the Registration
Statement and its exhibits for further information. You can review the
Registration Statement and its exhibits at the offices of the Commission located
at 450 Fifth Street, N.W., Washington, D.C.
The Statement of Additional Information is incorporated in this prospectus in
its entirety, which means that it is legally part of this prospectus.
<PAGE>
APPENDIX A The following formula is what we use to calculate the
value of an Accumulation Unit. The Net Investment Factor 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; and
(c) is an amount representing the Mortality and Expense Risk Charge deducted
from each Variable Sub-Account on a daily basis. The effective annual rate of
this charge
is 0.50%.
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.
<PAGE>
[Back Cover]
The Securities and Exchange Commission maintains an Internet web site
(http://www.sec.gov) that contains additional information about Great-West Life
& Annuity Insurance Company, the Contract and the Series Account which may be of
interest to you. The web site also contains additional information about the
Eligible Funds.
<PAGE>
PART B
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PART B
MAXIM SERIES ACCOUNT
Contracts Under
Flexible Premium Deferred
Variable Annuity Contracts
issued by
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
Telephone: (800)
468-8661 (Outside Colorado)
(800) 547-4957 (Colorado)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Prospectus, dated May, 1, 1999, which is
available without charge by contacting the Annuity Service Center, P.O. Box
1700, Denver Colorado 80201 or at 800-355-1608.
May 1, 1999
<PAGE>
PART B
TABLE OF CONTENTS
Page
GENERAL INFORMATION..............B-III
CALCULATION OF ANNUITY PAYMENTS..B-III
POSTPONEMENT OF PAYMENTS..........B-IV
SERVICES..........................B-IV
- Safekeeping of Series
Account Assets....................B-IV
- Experts.................B-IV
- Principal Underwriter....B-V
WITHHOLDING........................B-V
CALCULATION OF PERFORMANCE DATA....B-V
FINANCIAL STATEMENTS.............B-VII
<PAGE>
VII
PART B
GENERAL INFORMATION
In order to supplement the description in the Prospectus, the following provides
additional information about the Contracts and other matters which may be of
interest to you. Terms used in this Statement of Additional Information have the
same meanings as are defined in the Prospectus under the heading "Definitions."
CALCULATION OF ANNUITY PAYMENTS
The Company converts the Accumulation Units for each of the
Owner's Variable Sub-Accounts into Annuity Units for each Variable Sub-Account
at their values determined as of the end of the Valuation Period which contains
the Payment Commencement Date. The number of Annuity Units paid for each
Variable Sub-Account is determined by dividing the amount of the first monthly
payment by the sub-account's Annuity Unit Value on the fifth Valuation Date
preceding the date the first payment is due. The number of Annuity Units used to
calculate each payment for a Variable Sub-Account remains fixed during the
annuity payment period.
The first payment under a variable annuity payment option will be
based on the value of each Variable Sub-Account on the fifth Valuation Date
preceding the Payment Commencement Date. It will be determined by applying the
appropriate rate to the amount applied under the Payment Option. Payments after
the first will vary depending upon the investment experience of the 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 fifth Valuation
Date preceding the date the annuity payment is due. The total amount of each
Variable Annuity Payment will be the sum of the Variable Annuity Payments for
each Variable Sub-Account.
POSTPONEMENT OF PAYMENTS
With respect to amounts allocated to the Series Account, payment
of any amount due upon a total or partial surrender, death or under an annuity
option will ordinarily be made within seven days after all documents required
for such payment are received by the Annuity Service Center. However, the
determination, application or payment of any death benefit, Transfer, full
surrender, partial withdrawal or annuity payment may be deferred to the extent
dependent on Accumulation or Annuity Unit Values, for any period during which
the New York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission, for any period during which any
emergency exists as a result of which it is not reasonably practicable for the
Company to determine the investment experience, of such Accumulation or Annuity
Units or for such other periods as the Securities and Exchange Commission may by
order permit for the protection of investors.
SERVICES
A. Safekeeping of Series
Account Assets
The assets of Maxim Series Account (the "Series Account") are
held by Great-West Life & Annuity Insurance Company ("GWL&A"). The assets of the
Series Account are kept physically segregated and held separate and apart from
the general account of GWL&A. GWL&A maintains records of all purchases and
redemptions of shares of the underlying funds. Additional protection for the
assets of the Series Account is afforded by blanket fidelity bonds issued to The
Great-West Life Assurance Company in the amount of $50 million (Canadian), which
covers all officers and employees of GWL&A.
B. Experts
Deloitte & Touche LLP performs certain accounting and auditing
services for GWL&A and the Series Account. The principal business address of
Deloitte & Touche LLP is 555 Seventeenth Street, Suite 3600, Denver, Colorado
80202.
The consolidated financial statements of GWL&A 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 LP,
independent auditors, as set forth in their reports appearing therein and
are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
C. Principal Underwriter
The offering of the Contracts is made on a continuous basis by BenefitsCorp
Equities, Inc. ("BCE"). BCE is a Delaware corporation and is a member of the
National Association of Securities Dealers ("NASD"). The Company does not
anticipate discontinuing the offering of the Contract, although it reserves the
right to do so. The Contract generally will be issued for Annuitants from birth
to age ninety.
WITHHOLDING
Annuity payments and other amounts received under the Contract
are subject to income tax withholding unless the recipient elects not to have
taxes withheld. The amounts withheld will vary among recipients depending on the
tax status of the individual and the type of payments from which taxes are
withheld.
Notwithstanding the recipient's election, withholding may be
required with respect to certain payments to be delivered outside the United
States and, with respect to certain distributions from certain types of
qualified retirement plans, unless the proceeds are transferred directly to
another qualified retirement plan. Moreover, special "backup withholding" rules
may require the Company to disregard the recipient's election if the recipient
fails to supply the Company with a "TIN" or taxpayer identification number
(social security number for individuals), or if the Internal Revenue Service
notifies the Company that the TIN provided by the recipient is incorrect.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield
Quotations for the Money
Market Investment Division
The yield quotation for the Money Market Investment Division will be for
the seven-day period and is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one Accumulation Unit in the Money Market 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
will be for the seven-day period and is carried to the nearest hundredth of one
percent, computed by determining the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
Accumulation Unit in the Money Market 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 "Charges and Deductions" in the Prospectus.) No deductions or
sales loads are assessed upon annuitization under the Contracts. Realized gains
and losses from the sale of securities and unrealized appreciation and
depreciation of the Money Market Investment Division and the Fund are excluded
from the calculation of yield.
B. Total Return and Yield
Quotations for All Investment
Divisions (Other than Money
Market)
The total return quotations for all Investment Divisions, other than the
Money Market, will be average annual total return quotations for the one-year
period. The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a
hypothetical initial payment of $1,000
T = average
annual total return
N = number
of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the particular period at the end of the particular period
For purposes of the total return quotations for these Investment Divisions, the
calculations take into effect all fees that are charged to the Contract Value,
and for any fees that vary with the size of the account, the account size is
assumed to be the respective Investment Divisions' mean account size. The
calculations also assume a complete redemption as of the end of the particular
period.
The yield quotations for these Investment Divisions set forth in the
Prospectus are based on the thirty-day period ended on December 31, 1998, and
are computed by dividing the net investment income per Accumulation Unit earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
YIELD = 2[((a-b)cd +1)6 -1]
Where: a = net investment income earned during the period by the corresponding
portfolio of the Fund attributable to shares owned by the Investment
Division.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Accumulation Units outstanding during the
period.
d = the maximum offering price per Accumulation Unit on the last day of
the period.
For purposes of the yield quotations for these Investment Divisions, the
calculations take into effect all fees that are charged to the Contract Value,
and for any fees that vary with the size of the account, the account size is
assumed to be the respective Investment Divisions' mean account size.
FINANCIAL STATEMENTS
The financial statements of GWL&A as contained herein should be
considered only as bearing upon GWL&A's ability to meet its obligations under
the Contracts, and they should not be considered as bearing on the investment
performance of the Series Account. The interest of Contract Owners under the
Contracts are affected solely by the investment results of the Series Account.
<PAGE>
MAXIM SERIES ACCOUNT
OF
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
- --------------------------------------
FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997
AND INDEPENDENT AUDITOR'S 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
<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 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)
<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>
<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>
<PAGE>
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
(1) Certified copy of resolution of Board of Directors or
Depositor establishing Registrant is incorporated by
reference to Registrant's Registration Statement.
(2) Not applicable.
(3) Exhibit 3 is incorporated by reference to Registrant's
Registration Statement filed on August 14, 1998.
(4) Exhibit 4 is incorporated by reference to Registrant's
Registration Statement filed on August 14, 1998.
(5) Exhibit 5 is incorporated by reference to Registrant's
Registration Statement filed on August 14, 1998.
(6) Copy of Articles of Incorporation and Bylaws of Depositor
are incorporated by reference to Amendment No. 2 to the
Registration Statement filed by Depositor on Form N-4 on
October 29, 1996, Registration No. 333-01153.
(7) Not applicable.
(8) Exhibit 8 is incorporated by reference to Registrant's
Registration Statement filed on August 14, 1998.
(9) Exhibit 9 is incorporated by reference to Registrant's
Registration Statement filed on August 14, 1998.
(10)(a)Consent of
Jorden Burt
Boros Cicchetti
Berenson &
Johnson LLP is
attached as
Exhibit 10a.
(b) Written Consent of Deloitte & Touche LLP is attached as
Exhibit 10b.
(11) Not Applicable.
(12) Not Applicable.
(13) Exhibit 13 is incorporated by reference to Registrant's
Registration Statement filed on August 24, 1998.
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 32963
James W. Burns, O.C. (4) Director
Orest T. Dackow (3) Director
Andre Desmarais (4) Director
Paul Desmarais, Jr. (4) Director
Robert G. Graham 574 Spoonbill Drive Director
Sarasota, Florida 34236
Robert Gratton (5) Chairman
N. Berne Hart 2552 East Alameda Avenue, #99 Director
Denver, Colorado 80209
Kevin P. Kavanagh (1) Director
William Mackness 61 Waterloo Street Director
Winnipeg, Manitoba R3N 0S3
William T. McCallum (3) Director, President
and
Chief Executive
Officer
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited Director
P.O. Box 130
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 East Putnam Avenue
Greenwich, Connecticut 06830
John A. Brown (3) Senior
Vice-President,
Sales, Financial Services
Donna A. Goldin (2) Executive
Vice President,
Chief Operating Officer,
One Corporation
Mitchell T. 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
Dennis Low (3) Executive
Vice-President,
Financial Services
Alan D. MacLennan (2) Executive
Vice-President,
Employee Benefits
Steven H. Miller (2) Senior Vice
President,
Employee Benefits,
Sales
Position and Offices
James D. Motz (2) Executive
Vice-President,
Employee Benefits
Charles P. Nelson (3) Senior
Vice-President
Public Non-Profit
Markets
Martin L. Rosenbaum (2) Senior
Vice-President,
Employee Benefits
Operations
Douglas L. Wooden (3) Executive
Vice-President,
Financial Services
Greg E. Seller (3) Senior Vice
President, Major
Accounts
Robert K. Shaw (3) Senior Vice-President
Individual Markets
______________________________________
(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>
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 27 Contract Owners.
Item 28. Indemnification
Provisions exist under the Colorado Business Corporation Act and
the Bylaws of GWL&A whereby GWL&A may indemnify a director, officer, or
controlling person of GWL&A against liabilities arising under the Securities Act
of 1933. The following excerpts contain the substance of these provisions:
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of the corporation by reason of a merger, consolidation,
or other transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director,
officer, partner, trustee, employee, fiduciary or agent of another
domestic or foreign corporation or other person or employee benefit
plan. A director is considered to be serving an employee benefit plan
at the corporation's request if his or her duties to the corporation
also impose duties on or otherwise involve services by, the director
to the plan or to participants in or beneficiaries of the plan.
(3) "Expenses" includes
counsel fees.
(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.
(5) "Official capacity" means, when used with respect to a director,
the office of director in the corporation and, when used with respect
to a person other than a director as contemplated in Section
7-109-107, means the office in the corporation held by the officer or
the employment, fiduciary, or agency relationship undertaken by the
employee, fiduciary, or agent on behalf of the corporation. "Official
capacity" does not include service for any other domestic or foreign
corporation or other person or employee benefit plan.
(6) "Party" includes a
person who was, is, or is
threatened to be made a
named defendant or
respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 7-109-102. Authority to
indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to the proceeding
because the person is or was a director against liability incurred in
any proceeding if:
(a) The person
conducted himself or herself in
good faith;
(b) The person
reasonably believed:
(I) In the case of conduct in an official capacity with
the corporation, that his or her conduct was in the
corporation's best interests; or
(II) In all other cases, that his or her conduct was at
least not opposed to the corporation's best interests;
and
(c) In the case of any criminal proceeding, the person had
no reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of
the participants in or beneficiaries of the plan is conduct that
satisfies the requirements of subparagraph (II) of paragraph (b) of
subsection (1) of this section. A director's conduct with respect to
an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the
requirements of subparagraph (a) of subsection (1) of this section.
(3) The termination of any proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent,
is not, of itself, determinative that the director did not meet the
standard of conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to
the corporation; or
(b) In connection with any proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in his official capacity, in which proceeding
the director was adjudged liable on the basis that he or she
derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of a corporation is limited to
reasonable expenses incurred in connection with the proceeding.
Section 7-109-103. Mandatory
Indemnification of Directors.
Unless limited by the articles of incorporation, a
corporation shall be required to indemnify a person who is
or was a director of the corporation and who was wholly
successful, on the merits or otherwise, in defense of any
proceeding to which he was a party, against reasonable
expenses incurred by him in connection with the proceeding.
Section 7-109-104. Advance of
Expenses to Directors.
(1) A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a
proceeding in advance of the final disposition of the
proceeding if:
(a) The director furnishes the corporation a written
affirmation of his good-faith belief that he has met the
standard of conduct described in Section 7-109-102;
(b) The director furnishes the corporation a written
undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately determined
that he or she did not meet such standard of conduct; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification
under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the
director, but need not be secured and may be accepted without
reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in Section
7-109-106.
Section 7-109-105. Court-Ordered
Indemnification of Directors.
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:
(a) If it determines the director is entitled to mandatory
indemnification under section 7-109-103, the court shall
order indemnification, in which case the court shall also
order the corporation to pay the director's reasonable
expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director met the
standard of conduct set forth in section 7-109-102 (1) or was
adjudged liable in the circumstances described in Section
7-109-102 (4), the court may order such indemnification as the
court deems proper; except that the indemnification with
respect to any proceeding in which liability shall have been
adjudged in the circumstances described Section 7-109-102 (4)
is limited to reasonable expenses incurred in connection with
the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
Section 7-109-106. Determination
and Authorization of Indemnification
of Directors.
(1) A corporation may not indemnify a director under Section
7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the director is
permissible in the circumstances because he has met the standard of
conduct set forth in Section 7-109-102. A corporation shall not
advance expenses to a director under Section 7-109-104 unless
authorized in the specific case after the written affirmation and
undertaking required by Section 7-109-104(1)(a) and (1)(b) are
received and the determination required by Section 7-109-104(1)(c)
has been made.
(2) The determinations required to be made under subsection (1) of
this section shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only
those directors not parties to the proceeding shall be counted
in satisfying the quorum.
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board
of directors, which committee shall consist of two or more
directors not parties to the proceeding; except that
directors who are parties to the proceeding may participate
in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of subsection (2) of this section, and the committee cannot be
established under paragraph (b) of subsection (2) of this section, or
even if a quorum is obtained or a committee designated, if a majority
of the directors constituting such quorum or such committee so
directs, the determination required to be made by subsection (1) of
this section shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner specified in
paragraph (a) or (b) of subsection (2) of this section or, if
a quorum of the full board cannot be obtained and a committee
cannot be established, by independent legal counsel selected
by a majority vote of the full board of directors; or
(b) By the
shareholders.
(4) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible;
except that, if the determination that indemnification is
permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses
shall be made by the body that selected such counsel.
Section 7-109-107.
Indemnification of Officers,
Employees, Fiduciaries, and Agents.
(1) Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for
court-ordered indemnification under section 7-109-105, in
each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to
the same extent as a director; and
(c) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director
to a greater extent, if not inconsistent with public policy,
and if provided for by its bylaws, general or specific action
of its board of directors or shareholders, or contract.
Section 7-109-108. Insurance.
A corporation may purchase and maintain insurance on behalf of
a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation and who, while a director, officer,
employee, fiduciary, or agent of the corporation, is or was serving
at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary, or agent of any other domestic or
foreign corporation or other person or of an employee benefit plan
against any liability asserted against or incurred by the person in
that capacity or arising out of his or her status as a director,
officer, employee, fiduciary, or agent whether or not the corporation
would have the power to indemnify the person against such liability
under the Section 7-109-102, 7-109-103 or 7-109-107. Any such
insurance may be procured from any insurance company designated by
the board of directors, whether such insurance company is formed
under the laws of this state or any other jurisdiction of the United
States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock
ownership or otherwise.
Section 7-109-109. Limitation of
Indemnification of Directors.
(1) A provision concerning a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles
of incorporation or bylaws, in a resolution of its shareholders or
board of directors, or in a contract, except for an insurance policy
or otherwise, is valid only to the extent the provision is not
inconsistent with Sections 7-109-101 to 7-109-108. If the articles of
incorporation limit indemnification or advance of expenses,
indemnification or advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.
Section 7-109-110. Notice to
Shareholders of Indemnification of
Director.
If a corporation indemnifies or advances expenses to a
director under this article in connection with a proceeding by or in
the right of the corporation, the corporation shall give written
notice of the indemnification or advance to the shareholders with or
before the notice of the next shareholders' meeting. If the next
shareholder action is taken without a meeting at the instigation of
the board of directors, such notice shall be given to the
shareholders at or before the time the first shareholder signs a
writing consenting to such action.
Bylaws of GWL&A
Article II, Section 11.
Indemnification of
Directors.
The Company may, by resolution of the Board of Directors,
indemnify and save harmless out of the funds of the Company to the
extent permitted by applicable law, any director, officer, or
employee of the Company or any member or officer of any committee,
and his heirs, executors and administrators, from and against all
claims, liabilities, costs, charges and expenses whatsoever that any
such director, officer, employee or any such member or officer
sustains or incurs in or about any action, suit, or proceeding that
is brought, commenced, or prosecuted against him for or in respect of
any act, deed, matter or thing whatsoever made, done, or permitted by
him in or about the execution of his duties of his office or
employment with the Company, in or about the execution of his duties
as a director or officer of another company which he so serves at the
request and on behalf of the Company, or in or about the execution of
his duties as a member or officer of any such Committee, and all
other claims, liabilities, costs, charges and expenses that he
sustains or incurs, in or about or in relation to any such duties or
the affairs of the Company, the affairs of such Committee, except
such claims, liabilities, costs, charges or expenses as are
occasioned by his own wilful neglect or default. The Company may, by
resolution of the Board of Directors, indemnify and save harmless out
of the funds of the Company to the extent permitted by applicable
law, any director, officer, or employee of any subsidiary corporation
of the Company on the same basis, and within the same constraints as,
described in the preceding sentence.
Item 29. Principal Underwriter
(a) BenefitsCorp Equities, Inc. ("BCE") is the distributor
of securities 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
- ------------
</TABLE>
(1) 8515 East Orchard Road, Englewood, CO 80111
(c) Commissions and other compensation received by Principal Underwriter during
registrant's last fiscal year:
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions
Compensation
BCE -0- -0- -0-
-0-
Item 30. Location of Accounts and
Records
All accounts, books, or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder
are maintained by the registrant through GWL&A, 8515 E. Orchard Road,
Englewood, Colorado 80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any application
to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information,
or (2) a postcard or similar written communication affixed to or
included in the Prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this form promptly upon written or oral request.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(e) GWL&A represents that the fees and charges deducted under
the Contracts, in the aggregate, are reasonable in relation
to the services rendered, the expenses to be incurred, and
the risks assumed by GWL&A.
C-4
<PAGE>
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)
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 27th, 1999
Director and Chairman of the
Board (Robert Gratton)
/s/ William T. McCallum
April 27th, 1999
Director, President and Chief
Executive
Officer (William T. McCallum)
Signature and Title
Date
/s/ Mitchell T.G. Graye
April 27th, 1999
Executive Vice President, Chief
Financial Officer
(Mitchell T.G. Graye)
/s/ James Balog*
April 27th, 1999
Director, (James Balog)
/s/ James W. Burns*
April 27th, 1999
Director, (James W. Burns)
/s/ Orest T. Dackow*
April 27th, 1999
Director (Orest T. Dackow)
/s/ Andre Desmarais*
April
27th, 1999
Director (Andre Desmarais)
/s/ Paul Desmarais, Jr.*
April
27th, 1999
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham*
April 27th, 1999
Director (Robert G. Graham)
/s/ N. Berne Hart*
April 27th, 1999
Director (N. Berne Hart)
Signature and Title
Date
/s/ Kevin P. Kavanagh*
April 27th, 1999
Director (Kevin P. Kavanagh)
/s/ William Mackness*
April 27th, 1999
Director (William Mackness)
/s/ Jerry E.A. Nickerson*
April 27th, 1999
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield*
April 27th, 1999
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair*
April 27th, 1999
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh*
April 27th, 1999
Director (Brian E. Walsh)
By: /s/ D.C. Lennox
April 27th, 1999
D. C. Lennox
* Attorney-in-fact pursuant to Powers of Attorney filed with Pre-Effective
Amendment No. 1 to this Registration Statement.
<PAGE>
EXHIBIT 10a
Consent of Jorden Burt Boros
Cicchetti Berenson and Johnson, LLP
Jorden Burt Boros Cicchetti Berenson
& Johnson LLP
Suite 400E
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 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. 2 to the Registration
Statement on Form N-4
File Nos. 333-44839;
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
EXHIBIT 10b
Consent of Deloitte & Touche, LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to Registration
Statement No. 33-44839 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 part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Statement of Additional
Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 28, 1999
