As filed with the Securities and Exchange Commission on April 26, 2000
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. 3
--
(X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
(X)
Amendment No. 20
----
(X)
(Check appropriate box or boxes)
MAXIM SERIES ACCOUNT
(Exact name of Registrant)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Address of Depositor's Principal Executive 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
8525 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, 2000, 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.
Part A
Information Required in a Prospectus
The AICPA Variable Annuity
A flexible premium deferred variable annuity
Distributed by
BenefitsCorp Equities, Inc.
---------------------------------------------
Issued by
Great-West Life & Annuity Insurance Company
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 Portfolio Franklin Templeton Variable
Insurance Product Trust : Templeton International Securities
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, 2000, 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.
The Securities and Exchange Commission has not approved or disapproved these
securities or 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, 2000.
[PG NUMBER]
3
TABLE OF CONTENTS
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
Making Transfers.........................5
Full and Partial Withdrawals.............5
Payment Options.......................5
Death Benefit............................5
Customer Service.........................6
Fee Table....................................7
Eligible Fund Annual Expenses................7
Great-West Life & Annuity Insurance Company..9
The Series Account...........................9
The Eligible Funds..........................10
Meeting Investment Objectives...........10
Reinvestment............................10
Where to Find More Information
About the Eligible Funds................10
Application and Initial Contribution........11
Ongoing Contributions.......................11
Annuity Account Value.......................11
Transfers...................................12
In General..............................12
Possible Restrictions...................12
Dollar Cost Averaging.......................12
Rebalancer..................................13
Cash Withdrawals............................13
Tax Consequences of Withdrawals.........14
Telephone Transactions......................14
Death Benefit...............................14
Beneficiary.............................15
Contingent Annuitant....................15
Charges and Deductions......................15
Mortality and Expense Risk Charge.......16
Certificate Maintenance Charge..........16
Premium Tax.............................16
Transfer Fee............................16
Other Taxes.............................16
Expenses of the Eligible Funds..........16
Periodic Withdrawals........................16
Periodic Withdrawal Payment Options.....17
Annuity Payment Options.....................17
Annuity Commencement Date...............17
Annuity Payment Options.................17
Annuity Options.........................17
Variable Annuity Payment Options........17
Variable Annuity Payment Provisions.....18
Federal Tax Matters.........................18
Taxation of Annuities...................19
Withdrawals.............................19
Annuity Payments........................19
Penalty Tax.............................19
Taxation of death benefit proceeds......19
Distribution at death...................19
Transfers, Assignments or Exchanges.....20
Multiple Contracts......................20
Withholding.............................20
Section 1035 Exchanges..................20
Seek Tax Advice.............................20
Assignments or Pledges......................20
Performance Data............................20
Distribution of the Contracts...............23
Voting Rights...............................23
Rights Reserved by Great-West...............23
Adding and Discontinuing Investment Options.24
Substitution of Investments.................24
Legal Matters...............................24
Available Information.......................24
Net Investment Factor...............Appendix A
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.
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. Eastern Time) 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. Eastern Time). 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.
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 01.25% of the net assets in your Variable
Sub-Accounts.
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.
9
FEE TABLE1
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 Contract1We 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 as appropriate.1 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 year2) None
Annual Certificate Maintenance Charge2 $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%
<TABLE>
ELIGIBLE FUND ANNUAL EXPENSES4
(as a percentage of Eligible Fund net assets, before reimbursements for the period ended December 31,
1999)
- ------------------------------------------------ -------------- ----------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio Management Other Distrib-uTotal eligible fund
fees expenses (12b-1) expenses
fees
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Maxim Money Market Portfolio 0.46% - -
0.46%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Janus Aspen Flexible Income Portfolio 0.65% 0.07% - 0.72%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Maxim T. Rowe Price Equity/Income Portfolio 0.80% 0.08% - 0.88%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Maxim INVESCO Balanced Portfolio 1.00% - - 1.00%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Dreyfus Stock Index Fund 0.25% 0.01% - 0.26%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Maxim Growth Index Portfolio 0.60% - - 0.60%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Neuberger & Berman AMT Partners Portfolio 0.80% 0.07% - 0.87%
- ------------------------------------------------ -------------- ----------- -------- ---------------------
- ------------------------------------------------ -------------- ----------- -------- ---------------------
Templeton International Securities Fund (Class 0.69% 0.19% - 0.88%
1)
- ------------------------------------------------ -------------- ----------- -------- ---------------------
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 $12 $39 $71 $177
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Janus Aspen Flexible Income Portfolio $15 $48 $87 $214
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim T. Rowe Price Equity/Income Portfolio $16 $53 $96 $237
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim INVESCO Balanced Portfolio $18 $57 $103 $253
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Dreyfus Stock Index Fund $10 $33 $59 $148
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Maxim Growth Index Portfolio $13 $44 $80 $197
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Neuberger & Berman AMT Partners Portfolio $16 $53 $96 $235
- ------------------------------------------------- ----------- ------------- ------------- ----------------
- ------------------------------------------------- ----------- ------------- ------------- ----------------
Templeton International Securities Fund (Class $16 $237
1)* $53 $96
- ------------------------------------------------- ----------- ------------- ------------- ----------------
* Formerly Templeton International Fund (Class 1).
These examples, including the assumed 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.
</TABLE>
21
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
consistent with the preservation of capital. 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
dividend-paying common stocks of established companies.
o the Maxim INVESCO Balanced Portfolio seeks high total return on investment
through capital appreciation and current income. This portfolio invests 50% to
70% in common stocks and at least 25% in fixed income securities.
o the Dreyfus Stock Index Fund's investment objective seeks to match the total
return of the Standard & Poor's 500 Composite Stock Price Index. The fund
generally invests in all 500 stocks in the S&P 500 in proportion to their
weighting in the Index. 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 Portfolio seeks capital growth. This
investment objective is non-fundamental. Neuberger & Berman AMT Partners
Portfolio 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
Securities Fund's investment objective is long-term capital growth. This Fund
invests primarily in stocks of companies outside the United States, including
emerging markets 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 rebalancer
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. Rebalancer
will terminate automatically when you start taking payments from the annuity.
Rebalancer Transfers must meet the following conditions:
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 Rebalancer 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 subject to an additional federal tax of
10%.
. 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 24 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 of any
distribution. 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.
Below is a table of performance related information for the Maxim Money Market
Investment Division for the period ended December 31, 1999.
Investment Yield Effective
Division Yield
Maxim Money Market 4.71% 4.83%
The table on the following page illustrates standardized and non-standardized
average annual total return for one-, , five- and ten-year periods (or since
inception, as appropriate) ended December 31, 1999. 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. . For additional
information regarding yields and total returns calculated using the standard
methodology briefly described herein, please refer to the Statement of
Additional Information.
A
<TABLE>
Average Annual Total Return for the Period Ended December 31, 1999
<S> <C> <C> <C> <C> <C> <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 0.90% 10.12% N/A 0.91% 1/04/99 7.76% 9/13/93
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim T. Rowe Price Equity/Income 2.68% 17.43% N/A 16.49% 11/01/94 16.49% 11/01/94
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim INVESCO Balanced 15.94% N/A N/A 19.48% 10/01/96 19.48% 10/01/96
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Dreyfus Stock Index Fund 19.77% 27.18% 16.88% 19.78% 1/04/99 16.65% 9/29/89
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Maxim Growth Index 26.00% 29.15% N/A 32.76% 1/15/98 23.64% 12/01/93
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Neuberger & Berman AMT Partners 6.63% 20.20% N/A 6.64% 1/04/99 16.66% 3/22/94
Portfolio
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
Templeton International Securities 22.64% 16.38% N/A 22.65% 1/04/99 14.54% 5/01/92
Fund (Class 1)1
- --------------------------------------- --------- --------- --------- ------------------ --------------- -------------- ------------
</TABLE>
1. Previosuly Templeton International Fund.
The Contracts have been offered to the public 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.
RIGHTS RESERVED BY GREAT-WEST
We reserve the right to make certain changes we believe 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.
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.
[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.
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
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, 2000 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, 2000
TABLE OF CONTENTS
Page
GENERAL INFORMATION....................................................B-3
CALCULATION OF ANNUITY PAYMENTS........................................B-3
POSTPONEMENT OF PAYMENTS...............................................B-3
SERVICES...............................................................B-3
- Safekeeping of Series Account Assets.........................B-4
- Experts......................................................B-4
- Principal Underwriter........................................B-4
WITHHOLDING............................................................B-4
CALCULATION OF PERFORMANCE DATA........................................B-5
FINANCIAL STATEMENTS...................................................B-7
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,
1999 and 1998 and for each of the three years in the period ended December 31,
1999, and the statement of assets and liabilities of Maxim Series Account as of
December 31, 1999 and the related statement of operations for the year then
ended and statements of changes in net assets for each of the two years in the
period ended December 31, 1999 included in this SAI have been audited by
Deloitte & Touche LLP, 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.
Yield quotations for these Investment Divisions are based on a
thirty-day periodand 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:
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
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 consolidated financial statements of GWL&A as contained herein
should be considered only as bearing upon GWL&A's ability to meet its
obligations under the Contracts, and they should not be considered as bearing on
the investment performance of the Series Account. The variable interest of
Contract Owners under the Contracts are affected solely by the investment
results of the Series Account.
<PAGE>
MAXIM SERIES ACCOUNT
OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Contract Owners of
Maxim Series Account of
Great-West Life & Annuity Insurance Company
We have audited the accompanying statement 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, 1999, and the related statements of operations for the year then
ended, by investment division, and the statements of 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, 1999, 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, 1999, the results of its operations for the
year then ended, by investment division, and the changes in its net assets for
each of the two years in the period then ended, by investment division, in
conformity with generally accepted accounting principles.
February 22, 2000
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<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 $ $
5,025 6,005 5,739
Maxim Series Fund, Inc. Bond Portfolio/ Non-Qualified
121,647 144,596 138,930
Maxim Series Fund, Inc. Money Market Portfolio /
Non-Qualified 33,864 33,911 33,881
Maxim Series Fund, Inc. Stock Index Portfolio / Qualified
4,393 22,533 17,767
------- ------
Total Investments $
==
207,045 196,317
========
Other assets and liabilities:
Investment Income Due and Accrued
4
Due from Great-West Life & Annuity Insurance Company
280
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $
==
196,601
See notes to financial statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<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 $ $
976,621 1,186,976 1,115,368
Maxim Series Fund, Inc. Bond Portfolio / Non-Qualified
932,015 1,132,911 1,064,424
Maxim Series Fund, Inc. Money Market Portfolio / Qualified
1,049,120 1,054,787 1,049,653
Maxim Series Fund, Inc. Money Market Portfolio / Non-Qualified
1,303,941 1,304,217 1,304,603
Maxim Series Fund, Inc. Stock Index Portfolio / Qualified
3,986,667 9,822,798 16,123,731
Maxim Series Fund, Inc. Stock Index Portfolio / Non-Qualified
2,807,321 6,419,295 11,353,970
Maxim Series Fund, Inc. U.S. Government Securities Portfolio /
Qualified 2,338,461 2,571,803 2,445,824
Maxim Series Fund, Inc. U.S. Government Securities Portfolio /
Non-Qualified 3,791,987 4,146,104 3,966,083
Investments in underlying funds:
American Century VP Funds VP Capital Appreciation Fund / Qualified
36,101 385,300 535,741
-------- -------
Total Investments
$28,024,191 38,959,397
============
Other assets and liabilities:
Investment Income Due and Accrued
299
Due to Great-West Life & Annuity Insurance Company
(22,893)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5)
$38,936,803
See notes to financial statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<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 $ $
66,641 77,204 82,218
Maxim Series Fund, Inc. Ariel MidCap Value Portfolio
693,994 1,073,815 1,069,619
Maxim Series Fund, Inc. Ariel Small-Cap Value Portfolio
117,115 106,506 91,819
Maxim Series Fund, Inc. Bond Portfolio
703,640 848,610 803,605
Maxim Series Fund, Inc. Conservative Profile Portoflio
189,619 195,312 191,780
Maxim Series Fund, Inc. Founders Growth and Income Portfolio
64,073 71,252 79,552
Maxim Series Fund, Inc. Growth Index Portfolio
285,326 736,279 817,002
Maxim Series Fund, Inc. Index 600 Portfolio
456,567 448,630 365,197
Maxim Series Fund, Inc. INVESCO Balanced Portfolio
1,711,675 2,426,016 2,423,323
Maxim Series Fund, Inc. INVESCO International Growth Portfolio (ADR)
269,922 408,387 533,597
Maxim Series Fund, Inc. INVESCO Small-Cap Growth Portfolio
488,341 907,726 1,384,198
Maxim Series Fund, Inc. Loomis Sayles Corporate Bond Portfolio
882,569 1,037,857 939,279
Maxim Series Fund, Inc. Moderate Profile Portfolio
327,908 340,063 368,928
Maxim Series Fund, Inc. Moderately Aggressive Profile Portfolio
352,661 384,908 429,614
Maxim Series Fund, Inc. Moderately Conservative Profile Portfolio
64,757 66,797 68,628
Maxim Series Fund, Inc. Money Market Portfolio
3,333,602 3,335,349 3,335,295
Maxim Series Fund, Inc. Stock Index Portfolio
934,881 2,955,623 3,781,045
Maxim Series Fund, Inc. T Rowe Price Equity/Income Portfolio
1,094,487 1,905,876 1,811,831
Maxim Series Fund, Inc. T Rowe Price MidCap Growth Portfolio
99,365 122,861 157,307
Maxim Series Fund, Inc. U.S. Government Securities Portfolio
275,137 301,800 287,768
Maxim Series Fund, Inc. Value Index Portfolio
21,314 41,431 38,456
Investments in underlying funds:
American Century VP Funds VP Capital Appreciation Fund
10,607 91,859 157,412
Dreyfus Family of Funds Stock Index
11,085 393,670 426,211
Fidelity Investments VIP II Contrafund Portfolio
5,583 140,444 162,744
Janus Aspen Funds Flexible Income Fund
11,785 140,284 134,579
Neuberger & Berman AMT Partners Portfolio
Management 10,237 192,324 201,051
Templeton International Class I Fund
6,065 116,814 134,957
-------- -------
Total Investments $
=
18,867,697 20,277,015
===========
Other assets and
liabilities:
Investment Income Due and Accrued
423
Due to Great-West Life & Annuity Insurance Company
(11,572)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $
==
20,265,866
See notes to financial statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Bond Maxim Bond Maxim Money Maxim Stock
Portfolio Portfolio Market Index Portfolio
Portfolio
Investment Investment Investment Investment Total Maxim
Division Division Division Division Series I
Account
------------------------------------------------------------------------------
Qualified Non-Qualified Non-Qualified Qualified
MAXIM SERIES I
INVESTMENT INCOME $ $ $ $
346 5,486 1,569 977 8,378
EXPENSES - mortality and expense risks
73 1,085 417 203 1,778
--- ------ ---- ---- -----
NET INVESTMENT INCOME (LOSS)
273 4,401 1,152 774 6,600
---- ------ ------ ---- -----
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(1) (3,939) (1) (150) (4,091)
Net change in unrealized appreciation (depreciation) on
investments 361) (2,584) 1 2,117 (827)
---- ------- -- ------ -----
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
362) (6,523) - 1,967 (4,918)
---- ------- -- ------ -------
NET INCREASE (DECREASE) IN ASSETS RESULTING FROM $ $ $ $
===== ============ ============= ============= ==
OPERATIONS (89) (2,122) 1,152 2,741 1,682
==== ======= ====== ====== =====
See notes to financial statements.
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Bond Maxim Bond Maxim Money Maxim Money Maxim Stock
Portfolio Portfolio Market Market Index Portfolio
Portfolio Portfolio
Investment Investment Investment Investment Investment
Division Division Division Division Division
---------------------------------------------------------------------------------
Qualified Non-Qualified Qualified Non-Qualified Qualified
MAXIM SERIES II
INVESTMENT INCOME $ 71,004 71,043 $ 50,092 $ 47,982 901,422
EXPENSES - mortality and expense risks 16,726 16,928 14,898 14,142 222,398
------------- --------- -------------- ------------- ----------
NET INVESTMENT INCOME (LOSS) 54,278 54,115 35,194 33,840 679,024
------------- --------- -------------- ------------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (6,788)
(8,981) (5,063) 360 2,515,922
Net change in unrealized appreciation (depreciation) on (67,529) (66,442) 5,064 (360) (574,663)
------------- --------- -------------- -------------- -----------
investments
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (74,317) (75,423) - 1,941,259
------------- --------- --------------- ---------------- ----------
1
NET INCREASE (DECREASE) IN ASSETS RESULTING FROM $ (20,039) (21,308) $ 35,195 $ 33,840 2,620,283
============ ========= ============= ============ ==========
OPERATIONS
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
American
Maxim U.S. Maxim U.S. Century VP
Government Government Capital
Maxim Stock Securities Securities Appreciation
Index Portfolio Portfolio Portfolio Fund
Investment Investment Investment Investment Total Maxim
Division Division Division Division Series II
Account
--------------------------------------------------------------------------
Non-Qualified Qualified Non-Qualified Qualified
MAXIM SERIES II
INVESTMENT INCOME $ 631,150 149,751 $ 253,207 2,175,651
-
EXPENSES - mortality and expense risks 152,304 37,275 63,999 5,320 543,990
--------------- ------------ --------------- ------------ ----------
NET INVESTMENT INCOME (LOSS) 478,846 112,476 189,208 (5,320) 1,631,661
--------------- ------------ -------------- ------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 1,499,935 3,946,605
(18,248) (25,440) (5,092)
Net change in unrealized appreciation (depreciation) on (171,710) (124,092) (224,971) 221,099 (1,003,604)
--------------- ------------ -------------- ------------ -----------
investments
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: 1,328,225 (142,340) (250,411) 216,007 2,943,001
-------------- ------------ -------------- ------------ ----------
NET INCREASE (DECREASE) IN ASSETS RESULTING FROM $ 1,807,071 (29,864) $ (61,203) $ 210,687 4,574,662
============= ============ ============== ============ ==========
OPERATIONS
See notes to financial statements. (Concluded)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Maxim Maxim Maxim Maxim
Aggressive Ariel Ariel Conservative
Profile MidCap Small-Cap Maxim Bond Profile
Portfolio Value Value Portfolio Portfolio
Portfolio Portfolio
Investment Investment Investment Investment Investment
Division Division Division Division Division
------------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 5,036 $ 190,234 $ 11,290 $ 47,367 $ 11,251
EXPENSES - mortality and expense risks 1,995
--------- ------ ------- ------- ------------
610 14,247 1,184 9,675
---- ------- ------ ------
NET INVESTMENT INCOME (LOSS) 4,426 175,987 10,106 37,692 9,256
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
2,159 13,013 (9,248) (549) 363
Net change in unrealized appreciation
(depreciation) on investments 3,547 (206,561) (7,860) (47,437) (3,091)
------------ ------------ ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS: 5,706 (193,548) (17,108) (47,986) (2,728)
------------ ------------ ---------- ----------- ----------
NET INCREASE (DECREASE) IN ASSETS RESULTING $ 10,132 $ (17,561) $ (7,002) $ (10,294) $ 6,528
=========== =========== ========== ========== ==========
FROM OPERATIONS
See notes to financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Maxim
Founders Maxim
Growth and Growth
Income Index Maxim
Portfolio Portfolio Index 600
Portfolio
Investment
Investment Division Investment
Division Division
-------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 2,354 $ 54,416 $ 32,829
EXPENSES - mortality and expense risks 504 4,177
----------- ------- ----------
7,278
-----
NET INVESTMENT INCOME (LOSS) 1,850 47,138 28,652
---------- ------------ ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(256) 69,416 (24,892)
Net change in unrealized appreciation
(depreciation) on investments 8,339 30,416 31,487
---------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS: 8,083 99,832 6,595
---------- ----------- ----------
NET INCREASE (DECREASE) IN ASSETS RESULTING $ 9,933 $ 146,970 $ 35,247
========= ========== ========
FROM OPERATIONS
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Maxim
INVESCO Maxim Maxim
Maxim International INVESCO Loomis Maxim
INVESCO Growth Small-Cap Sayles Moderate
Balanced Portfolio Growth Corporate Profile
Portfolio (ADR) Portfolio Bond Portfolio
Portfolio
Investment Investment Investment Investment Investment
Division Division Division Division Division
-----------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 408,462 $ 4,260 $ 187,814 $ 86,748 $ 28,577
EXPENSES - mortality and expense risks 12,764 3,392
------- ------- ------ ----------- -----------
26,919 6,553 11,595
------- ------ ------
NET INVESTMENT INCOME (LOSS) (2,293) 176,219 73,984 25,185
----- ------------------------ ------------ ----------
381,543
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
91,713 45,334 71,816 (22,659) 609
Net change in unrealized appreciation
(depreciation) on investments (144,086) 54,567 337,914 (10,200) 19,032
----------- ----------------------- ------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS: (52,373) 99,901 409,730 (32,859) 19,641
------------ ----------------------- ----------- ----------
NET INCREASE (DECREASE) IN ASSETS RESULTING
FROM OPERATIONS $ 329,170 $ 97,608 $ 585,949 $ 41,125 $ 44,826
========== ========== =========== ========== =========
See notes to financial statements.
- ------------------------------------------------------------------------------------
Maxim Maxim
Moderately Moderately Maxim
Aggressive Conservative Money
Profile Profile Market
Portfolio Portfolio Portfolio
Investment Investment
Division Division Investment
Division
--------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 27,175 $ 4,650 $ 120,394
EXPENSES - mortality and expense risks 4,121 891 30,496
---------- ----------- ----------
NET INVESTMENT INCOME (LOSS) 23,054 3,759 89,898
--------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
7,036 (342) (49)
Net change in unrealized appreciation
(depreciation) on investments 38,837 985
---------- ----------
49
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS: 45,873 643 -
---------- ----------- -
NET INCREASE (DECREASE) IN ASSETS RESULTING
FROM OPERATIONS $ 68,927 $ 4,402 $ 89,898
========= ======== =========
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
<TABLE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Maxim T.
Maxim T. Rowe Price Maxim U.S.
Maxim Rowe Price Mid-Cap Government Maxim
Stock Index Equity/Income Growth Securities Value Index
Portfolio Portfolio Portfolio Portfolio Portfolio
Investment Investment Investment Investment Investment
Division Division Division Division Division
-----------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 211,195 $ 186,913 $ $ 18,219 $ 5,192
9,112
EXPENSES - mortality and expense risks 46,849 22,794
----------- ------------------- ------- ---------
1,762 4,084 375
------ ------ ---
NET INVESTMENT INCOME (LOSS) 164,346 164,119 14,135 4,817
---------- ------------------ ------------ ------------
7,350
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
512,630 98,828 2,495 (1,520) (150)
Net change in unrealized appreciation
(depreciation) on investments (45,249) (223,726) 19,868 (15,288) (2,586)
----------- ----------------------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON 467,381 (124,898) 22,363 (16,808) (2,736)
----------- ------------------------ ----------- -----------
INVESTMENTS:
NET INCREASE (DECREASE) IN ASSETS RESULTING $ 631,727 $ 39,221 $ 29,713 $ (2,673) $ 2,081
=========== ============ =========== =========== ==========
FROM OPERATIONS
See notes to financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
American
American Century VP Dreyfus
Century VP Capital Family of
Balanced Appreciation Funds
Fund Fund Stock
Index Fund
Investment Investment
Division Division Investment
Division
--------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 732 $ 5,043
$
-
EXPENSES - mortality and expense risks 22 1,413 1,094
----------- ------------ ----------
NET INVESTMENT INCOME (LOSS) 710 (1,413) 3,949
----------- ------------ ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
(202) (10,977) 3,307
Net change in unrealized appreciation
(depreciation) on investments (432) 73,729 32,541
---------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON (634) 62,752 35,848
---------- ------------ ----------
INVESTMENTS:
NET INCREASE (DECREASE) IN ASSETS RESULTING $ 76 $ 61,339 $ 39,797
========== =========== ==========
FROM OPERATIONS
See notes to financial statements. (Continued)
<PAGE>
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Neuberger
Fidelity & Berman
Investments Management
VIP II Janus AMT Templeton Total
Contrafund Aspen Funds Partners International Maxim
Portfolio Flexible Portfolio Class I Series III
Income Fund Account
Investment Investment Investment Investment
Division Division Division Division
-----------------------------------------------------------------
MAXIM SERIES III
INVESTMENT INCOME $ 2,875 $ 7,715 $ 741 $ 1,511 $
1,672,105
EXPENSES - mortality and expense risks 1,697 345 584 314
---------- ----------- ------------ -----------
217,734
NET INVESTMENT INCOME (LOSS) 1,178 7,370 157 1,197
---------- ---------- ------------ ---------
1,454,371
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments
7,430 (267) 28 (45) 855,021
Net change in unrealized appreciation 22,300 (5,705) 8,727 18,143
---------- ---------- ----------- ----------
(depreciation) on investments
(11,740)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON 29,730 (5,972) 8,755 18,098
---------- ----------- ---------- ----------
INVESTMENTS: 843,281
-------
NET INCREASE (DECREASE) IN ASSETS RESULTING $ 30,908 $ 1,398 $ 8,912 $ 19,295 $
========== ========== ========== =========== ==
FROM OPERATIONS 2,297,652
=========
</TABLE>
See notes to financial statements. (Concluded)
<PAGE>
MAXIM SERIES ACCOUNT GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Bond Maxim Bond Maxim Money Market Maxim Stock Index
Portfolio Portfolio Portfolio Portfolio
Investment Division Investment Division Investment Division Investment Division
Qualified Non-Qualified Non-Qualified Qualified
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES I
FROM OPERATIONS:
Net investment income (loss) $ 273 $ 277 $ 4,401 $ 4,656 $ 1,152 $ 1,284 774 432
Net realized gain (loss) on investments (1)
3 (3,939) 194 (1) - (150) 43
Net change in unrealized appreciation
(depreciation) in investments (361) 2,117 2,480
----------- ---------- ----- ---------- ------------ ----------- ---------------
23 (2,584) 284 1 (5)
--- ------- ---- -- ---
Increase (decrease) in net assets
resulting from operations (2,122) 5,134 1,152 1,279 2,741 2,955
-------- -------- ----------------------- ----------- ----------- ---------------
(89) 303
FROM UNIT TRANSACTIONS (by category):
Purchases: - - - -
- 48,536 - -
Redemptions: - (9,980)
(9) (33) (57) (67) (21) (75)
Net transfers:
- - - - - - - -
-- -- -- -- -- -- -- -
Increase (decrease) in net assets
resulting from unit transactions (9,980) (67) (75)
---------- --------- ----- ------------- ----------- ------------------- ------
(9) (33) 48,536 (57) (21)
--- ---- ------- ---- ----
INCREASE (DECREASE) IN NET ASSETS 46,414 1,212
(98) 270 (4,846) 1,095 2,720 2,880
Contributions from (Distributions to) -
GWLA - (435) - 35 63 - 627
NET ASSETS:
Beginning of period 5,960 6,125 97,241 32,842 31,567 15,238 11,731
---------- ----------- ------ ------------ ------------ ---------- ---------------
92,430
End of period $ 5,862 $ 5,960 $ $ 92,430 $ 33,937 $ 32,842 17,958 15,238
========== =========== ==== =========== =========== ========== ===============
138,844
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Maxim Total Return Portfolio
Investment Division Total Maxim Series I Account
Non-Qualified
1999 1998 1999 1998
----- ----- ----- ----
MAXIM SERIES I (1)
- --------------
FROM OPERATIONS:
Net investment income (loss) $ $
$ $ 6,600 6,638
- (11)
Net realized gain (loss) on investments
- 13,948 (4,091) 14,188
Net change in unrealized appreciation (11,009)
-------------------------- ----------- ---------------
(depreciation) in investments - (13,791) (827)
-- -------- -----
Increase (decrease) in net assets
resulting from operations - 146 1,682 9,817
-- ---- ------ -----
FROM UNIT TRANSACTIONS (by category):
Purchases: - -
48,536 -
Redemptions:
- (55,089) (87) (65,244)
Net transfers:
- - - -
-- -- -- -
Increase (decrease) in net assets (65,244)
-------------------------- -------- ---------------
resulting from unit transactions - (55,089) 48,449
-- -------- ------
INCREASE (DECREASE) IN NET ASSETS
(54,943) 50,131 (55,427)
-
Contributions from (Distributions to)
GWLA
- - - 290
NET ASSETS:
Beginning of period 201,607
--------------------------- ------ --------------
- 54,943 146,470
-- ------- -------
End of period $ 196,601 $ 146,470
= = ============ =============
$ $
================= =
- -
== =
(1) The Investment Division ceased operations on June 22, 1998
See notes to financial statements. (Concluded)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Maxim Bond Maxim Bond Maxim Money Market Maxim Money Market
----------
Portfolio Portfolio Portfolio Portfolio Investment
Investment Division Investment Division Investment Division Division
Qualified Non-Qualified Qualified Non-Qualified
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES II
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ 28,995
54,278 64,098 54,115 60,927 35,194 31,850 33,840
Net realized gain (loss) on investments
(6,788) 3,799 (8,981) 741 (5,063) (6) 360 (8)
Net change in unrealized appreciation
(depreciation) in investments
(67,529) 3,726 (66,442) 3,001 5,064 (129) (360) (122)
-------- ------ -------- ------ ------ ----- ----- -----
Increase (decrease) in net assets
resulting from operations 28,865
----- ----- ------- ------ -------- ------ -------- ----------
(20,039) 71,623 (21,308) 64,669 35,195 31,715 33,840
-------- ------- -------- ------- ------- ------- ------
FROM UNIT TRANSACTIONS (by category):
Purchase Payments:
3,284 3,750 1,814 1,816 257 1,024 217 2,061
Redemptions:
(157,538) (227,425) (171,463) (161,547) (169,651) (166,012) (107,909) (257,080)
Net transfers: 207,155
----- ------ ------- ------- ------ ---- ------ ---------
(30,255) (3,641) (88,096) 98,509 105,666 229,028 532,421
-------- ------- -------- ------- -------- -------- -------
Increase (decrease) in net assets
resulting from unit transactions (47,864)
--- -- ----- ----- ------- ------ ------ ----------
(184,509) (227,316) (257,745) (61,222) (63,728) 64,040 424,729
--------- --------- --------- -------- -------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
(204,548) (155,693) (279,053) 3,447 (28,533) 95,755 458,569 (18,999)
Contributions from (Distributions to) 16,119
GWLA - 25,193 - (22,355) - 33,913
NET ASSETS:
Beginning of period 1,361,214 830,386
-- --- ----------- --- --- ------ -------
1,318,968 1,449,468 1,342,306 1,077,606 965,732 845,300
-------------------- ---------- ---------- -------- -------
End of period $ $ 1,342,306 $ 1,049,073 1,077,606 $ 845,300
= = == ============ ============ ========== == =======
1,114,420 1,318,968 1,063,253 1,303,869
========= =========== ========== =========
</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 statements. (Continued)
MAXIM SERIES ACCOUNT GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Maxim Stock Index Maxim Stock Index Maxim Total Return Maxim U.S. Government
Portfolio Portfolio Portfolio Securities Portfolio
Investment Division Investment Division Investment Division Investment Division
Qualified Non-Qualified Qualified Qualified
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES II (1)
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ $ 123,628
679,024 445,022 478,846 298,105 - 47,580 112,476
Net realized gain (loss) on investments 2,515,922 132,674 (18,248)
1,499,935 145,928 - 1,419,068 11,453
Net change in unrealized appreciation
(depreciation) in investments
(574,663) 2,234,146 (171,710) 1,612,872 - (1,122,822) (124,092) 33,395
--------- ---------- --------- ----------------------- --------- ------
Increase (decrease) in net assets
resulting from operations
2,620,283 2,811,842 1,807,071 2,056,905 - 343,826 (29,864) 168,476
---------- ---------- ---------- ------------ -------- -------- -------
FROM UNIT TRANSACTIONS (by category):
Purchases:
237,892 96,181 20,678 138,826 - 27,755 8,290 15,587
Redemptions: (709,393)
(2,639,500)(1,244,333) (1,335,042)(1,124,432)- (151,462) (446,024)
Net transfers: (5,466,093) (151,888)
-------- --- ----------- --- ------------- ------ --------------
(71,793) 3,829,682 19,545 1,572,751 - (50,433)
-------- ---------- ------- ------------ --------
Increase (decrease) in net assets
resulting from unit transactions (845,694)
--- --- ---- ------ ------- ---- --------------
(2,473,401) 2,681,530 (1,294,819) 587,145 - (5,589,800) (488,167)
----------- ---------- ----------- ------- ------------- ---------
INCREASE (DECREASE) IN NET ASSETS 5,493,372 512,252 2,644,050 (518,031)
146,882 - (5,245,974) (677,218)
Contributions from (Distributions to) - -
GWLA 56,918 (112,890)- 84,837 - 55,803
NET ASSETS:
Beginning of period 10,836,737 3,582,781
--- - ------------------ ----- --- ------------
15,969,031 10,418,741 8,305,577 - 5,161,137 2,961,366
---------------------- ------------ ---------- ---------
End of period $ 16,115,913 $ 11,348,989 $ $ $ 2,961,366
====================== ============== ============= == ===========
15,969,031 10,836,737 - 2,443,335
=========== ============= ===========
(1) The Investment Division cased 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 statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Maxim U.S. Government American Century VP American Century VP
Securities Portfolio Balanced Fund Capital Appreciation Fund
Investment Division Investment Division Investment Division Total Maxim
Series II
Account
Non-Qualified Qualified Qualified
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES II (2)
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ $ 1,631,661
189,208 218,828 - 54,640 (5,320) 11,941 1,385,614
Net realized gain (loss) on investments (5,092) 3,946,605 1,768,675
(25,440) 4,071 - 51,239 (284)
Net change in unrealized appreciation
(depreciation) in investments
(224,971) 66,945 - (67,581) 221,099 (21,564) (1,003,604) 2,741,867
--------- ------- -- -------- -------- -------- ----------- ---------
Increase (decrease) in net assets
resulting from operations 5,896,156
---- ------- ------------------ ----- ---- ---- ----------
(61,203) 289,844 - 38,298 210,687 (9,907) 4,574,662
-------- -------- -- ------- -------- ------- ---------
FROM UNIT TRANSACTIONS (by category):
Purchase Payments: 274,932 441,925
2,500 105,797 23,910 - 25,218
Redemptions: (942,158) (1,182,060) (46,039) (14,611) (13,701) (5,983,896)(5,283,484)
-
Net transfers:
(454,423) 94,599 - (439,193) (21,656) 32,817 (59,024) 3,726
--------- ------- -- --------- -------- ------- -------- -----
Increase (decrease) in net assets
resulting from unit transactions (1,394,081)
-----------
(981,664) - (461,322) (36,267) 44,334 (5,767,988 (4,837,833)
--------- -- --------- -------- ------- ---------- ---------
INCREASE (DECREASE) IN NET ASSETS (1,455,284) (691,820) (423,024) (1,193,326 1,058,323
- 174,420 34,427
Contributions from (Distributions to) - (136) - 111,542
GWLA - (25,894) 34
NET ASSETS:
Beginning of period 423,160 326,531
--- --- ----------------------- ------- --------
5,417,823 6,135,537 - 360,992 40,130,129 38,960,264
---------- ---------- -- -------- ---------- ----------
End of period $ 5,417,823 $ $ $ 360,992 $ 38,936,803 40,130,129
== ========================================== ========= =======================
3,962,539 - - 535,412
========== == == =======
</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 statements. (Concluded)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Maxim Aggressive Maxim Ariel MidCap Value Maxim Ariel Small-Cap
Profile Portfolio Portfolio Value Portfolio Maxim Bond Portfolio
Investment Division Investment Division Investment Division Investment Division
------------------- ------------------- ------------------- -------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ 4,426 44 $ $ $ 10,106 $ 2,172 37,692
175,987 98,828 20,206
Net realized gain (loss) on investments 2,159 (9,248) (360) (549)
111 13,013 4,339 445
Net change in unrealized appreciation
(depreciation) in investments 1,467 (7,860) 2,136 (47,437)
------ -------- ----- ------ ------------ ------------ ---------
3,547 (206,561) 152,701 1,560
------ --------- -------- -----
Increase (decrease) in net assets
resulting from operations 10,132 1,622 (7,002) (10,294)
----------- -------- ------- ------ ----------- ------- ---------
(17,561) 255,868 3,948 22,211
-------- -------- ------ ------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 4,160
6,057 44,766 130,512 20,357 11,541 47,730 77,766
Redemptions: (4,277) (1,698) (53,709) (35,069) (378) (371) (23,043)(11,347)
Net transfers:
46,869 19,305 (23,619) 35,306 38,159 572,340
----------- -------- ----------- ------ ----------- ----------- ----------------
9,458 (45,874)
------ --------
Increase (decrease) in net assets
resulting from unit transactions 46,752 23,664 (3,640) 46,476 62,846 638,759
----------- -------- -------------------- ------------ ------------ ----------------
515 49,569
INCREASE (DECREASE) IN NET ASSETS 56,884 (17,046) (10,642)
25,286 305,437 50,424 52,552 660,970
NET ASSETS:
Beginning of period 25,286 102,406 51,982 750,556 89,586
----------- -------------- ------ ---------- ------------ ----------------
- 1,086,031 780,594
-- ---------- -------
End of period $ 82,170 25,286 $ 1,068,985 $ 1,086,031 $ 91,764 $ 102,406 803,108 750,556
========== ======== ======================== ========== ========== ================
</TABLE>
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998. See notes to financial
statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Maxim Conservative Maxim Founders Growth and Maxim Growth Index Maxim Index 600
Profile Portfolio Income Fund Portfolio Portoflio
Investment Division Investment Division Investment Division Investment Division
---------------- ------------------- ------------------- ------------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ 1,850 $ 480 $ 47,138 $ $ 28,652 $ 101,674
9,256 6,858 22,708
Net realized gain (loss) on investments
363 134 (256) (1) 69,416 38 (24,892) (1,405)
Net change in unrealized appreciation
(depreciation) in investments (39) 30,416 31,487 (112,425)
--- ------- -------- ------------- ------------ ------ ------------- ----------
(3,091) (441) 8,339 50,307
------- ----- ------ ------
Increase (decrease) in net assets
resulting from operations 440 146,970 35,247 (12,156)
------ ------ -------- ------------- ----------- ------ ---------------------
6,528 6,551 9,933 73,053
------ ------ ------ ------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 26,509
- 60,805 5,915 214,823 30,996 45,382 53,076
Redemptions: (1,000)
(3,000) - - (604) - (21,144) (15,915)
Net transfers: 5,679 (175,471) 526,871 34,099
---- --- ------ ------------ ---------- ----------- ---------- ---------
(4,425) 160,499 (3,268) (821)
------- -------- ------- -----
Increase (decrease) in net assets
resulting from unit transactions 11,594 38,748 557,867 23,417 71,260
---- --- ------ ----------- ------------ ----------- ------------- -------
21,084 157,499 57,537
------- -------- ------
INCREASE (DECREASE) IN NET ASSETS 27,612
164,050 67,470 12,034 185,718 630,920 58,664 59,104
NET ASSETS:
Beginning of period 12,034 630,920 306,319 247,215
-- ----------------------- ------------- ----------- -------------- ----------- ------
164,050 - - -
-------- -- -- -
End of period 191,662 164,050 $ 79,504 $ 12,034 $ 816,638 $ 630,920 $ 364,983 $306,319
=================== ========== ========== ========== ========== ======= =========
</TABLE>
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998. See notes to financial
statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Maxim INVESCO
Maxim INVESCO Balanced International Growth Maxim INVESCO Small-Cap Maxim Loomis Sayles
Portfolio Portfolio (ADR) Growth Portfolio Corporate Bond Portfolio
Investment Division Investment Division Investment Division Investment Division
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ---- ----- ----- ----- ----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ (2,353) $ $ 2,035 73,984
381,543 23,194 (2,293) 176,219 91,016
Net realized gain (loss) on investments 91,713 (2,280) (22,659)
26,913 45,334 7,832 71,816 2,053
Net change in unrealized appreciation
(depreciation) in investments 54,567 34,889 128,782 (10,200)
--- ------ ------------ -------- ------ ----------- ---------
(144,086) 133,497 337,914 (90,736)
--------- -------- -------- --------
Increase (decrease) in net assets
resulting from operations 97,608 40,368 128,537 41,125
----- ------ ------------ -------- ------ ----------- --------
329,170 183,604 585,949 2,333
-------- -------- -------- -----
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 155,234
642,416 12,514 16,837 13,530 111,432 8,269 242,753
Redemptions: (166,788) (57,445) (62,192) (27,775) (50,218) (29,370) (47,607) (10,147)
Net transfers: (89,396) 69,405 (66,759) (225,173)
---- ------ ------------ -------- ---- ------------ ---------
(62,967) 983,988 (162,552) 585,461
-------- -------- --------- -------
Increase (decrease) in net assets
resulting from unit transactions (139,074) 58,467 15,303 (264,511)
--- --- ----------- -------- ---- ------------ ---------
(74,521) 1,568,959 (199,240) 818,067
-------- ---------- --------- -------
INCREASE (DECREASE) IN NET ASSETS 254,649 (41,466) (223,386)
1,752,563 98,835 386,709 143,840 820,400
NET ASSETS:
Beginning of period 574,753 475,918 852,860 1,162,089
-- ------ ----------- -------- ------ ----------- --------
2,167,323 414,760 996,700 341,689
---------- -------- -------- -------
End of period $ $ 2,167,323 $ 533,287 574,753 $ 1,383,409 $ 996,700 938,703 $ 1,162,089
== ============ ========== ======== ============ ========== ==== ===========
2,421,972
</TABLE>
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998. See notes to financial
statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Maxim INVESCO
Maxim INVESCO Balanced International Growth Maxim INVESCO Small-Cap
Portfolio Portfolio (ADR) Growth Portfolio
Investment Division Investment Division Investment Division
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- -----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ (2,353) $ $
381,543 23,194 (2,293) 176,219 2,035
Net realized gain (loss) on investments 91,713 (2,280)
26,913 45,334 7,832 71,816
Net change in unrealized appreciation
(depreciation) in investments (144,086) 34,889 128,782
----------- ------- ------ ------------- ------ ------------ -
133,497 54,567 337,914
-------- ------- --------
Increase (decrease) in net assets
resulting from operations 40,368 128,537
----- ------- ------ ------------- ------ ------------ -
329,170 183,604 97,608 585,949
-------- -------- ------- --------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 155,234 111,432
642,416 12,514 16,837 13,530
Redemptions: (166,788) (57,445) (62,192) (27,775) (50,218) (29,370)
Net transfers: (89,396) 69,405 (66,759)
---- ------- ------------ ------------- ----- ------------
(62,967) 983,988 (162,552)
-------- -------- ---------
Increase (decrease) in net assets
resulting from unit transactions (74,521) (139,074) 58,467
----------- ---- ----------- ------------- ----- ------
1,568,959 (199,240) 15,303
---------- --------- -------
INCREASE (DECREASE) IN NET ASSETS 254,649 (41,466)
1,752,563 98,835 386,709 143,840
NET ASSETS:
Beginning of period 574,753 475,918 852,860
--- ------ ------------ ----------- ----- ------------
2,167,323 414,760 996,700
---------- -------- --------
End of period $ 2,421,972 $ 2,167,323 $ 533,287 $ 574,753 $ 1,383,409 $ 996,700
=========== ============ =========== ========== ============ ===========
(1) The Investment Division commenced operations on December 31, 1998.
(2) The Investment Division ceased operations on June 22, 1998
See notes to financial statements.
</TABLE>
- -------------------------------------------------------------------
Maxim Loomis Sayles
Corporate Bond Portfolio
Investment Division
MAXIM SERIES III -------------------
- ---------------- 1999 1998
FROM OPERATIONS: ----- ----
Net investment income (loss)
Net realized gain (loss) on investments
$ 73,984 $
Net change in unrealized appreciation 91,016
(depreciation) in investments (22,659)
2,053
(10,200)
------------
Increase (decrease) in net assets (90,736)
resulting from operations --------
41,125
-----------
FROM UNIT TRANSACTIONS (by category): 2,333
Purchase payments: -----
Redemptions:
8,269 242,753
Net transfers:
(47,607) (10,147)
(225,173)
Increase (decrease) in net assets -----------
resulting from unit transactions 585,461
-------
(264,511)
-----------
INCREASE (DECREASE) IN NET ASSETS 818,067
-------
NET ASSETS: (223,386)
Beginning of period 820,400
1,162,089
End of period ----------
341,689
-------
$ 938,703 $ 1,162,089
=========== ===========
See notes to financial statements.
(Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Maxim Loomis Sayles Maxim Moderate Profile Maxim Moderately
Small-Cap Value Portfolio Aggressive Profile
Portfolio Portfolio
Investment Division Investment Division Investment Division
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- -----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ 25,185 $ $ 23,054 $
- - 3,157 1,778
Net realized gain (loss) on investments
- - 609 (192) 7,036 (20)
Net change in unrealized appreciation
(depreciation) in investments 19,032
------------------------------------- --------- ------ ------- -
- - 9,833 38,837 5,869
-- -- ------ ------- -----
Increase (decrease) in net assets
resulting from operations 44,826
------------------------------------- ------- ------ -------
- - 12,798 68,927 7,627
-- -- ------- ------- -----
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
- - 110,069 148,271 212,153 125,733
Redemptions:
- - (20,201) (3,653) (11,861) -
Net transfers: 12,451 14,329
--------------------------------------------- ------------ -----------
- - - 76,598
-- -- -- -------
Increase (decrease) in net assets
resulting from unit transactions 89,868 221,216 212,743 140,062
------------------------------------- ------------- ------------ -----------
- -
-- -
INCREASE (DECREASE) IN NET ASSETS
- - 134,694 234,014 281,670 147,689
NET ASSETS:
Beginning of period 234,014 147,689
------------------------------------- -------------------------- --------------
- - - -
-- -- -- --
End of period $ $ $ 368,708 $ 234,014 $ 429,359 $ 147,689
========================= ========== =========== ========== ==========
- -
== =
</TABLE>
- ------------------------------------------------------------------------
Maxim Moderately
Conservative Profile
Portfolio
Investment Division
-------------------
1999 1998
----- ----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ 3,759 $ 1,485
Net realized gain (loss) on investment
(342) (387)
Net change in unrealized appreciation
(depreciation) in investments 985 846
----------- -----------
Increase (decrease) in net assets
resulting from operations 4,402 1,944
----------- ----------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
- 82,240
Redemptions:
(10,000) (10,000)
Net transfers:
- -
-- -
Increase (decrease) in net assets
resulting from unit transactions (10,000) 72,240
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
(5,598) 74,184
NET ASSETS:
Beginning of period 74,184
----------
-
-
End of period $ 68,586 $ 74,184
========== =========
See notes to financial statements.
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June22, 1998
See notes to financial statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Maxim Money Market Maxim Stock
Portfolio Index Portfolio
Investment Division Investment Division
------------------- -------------------
1999 1998 1999 1998
----- ----- ----- -----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ 29,146 $ $ $
89,898 164,346 114,966
Net realized gain (loss) on investments (49) (25)
512,630 542,988
Net change in unrealized appreciation
(depreciation) in investments
--------------------- ------ ------ -
49 (103) (45,249) 247,706
--- ----- -------- --------
Increase (decrease) in net assets
resulting from operations 29,018
-------- -----------
89,898 631,727 905,660
------- -------- --------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 1,780,853 492,646
245,958 831,152
Redemptions: (144,418) (65,361) (200,982) (164,873)
Net transfers: (233,974) (1,075,988)
------ ----------- ----- ------------ --
775,955 (863,974)
-------- ---------
Increase (decrease) in net assets
resulting from unit transactions 193,311
--- ----------- ---- ---- --
2,412,390 (818,998) (409,709)
---------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS 2,502,288 222,329 (187,271)
495,951
NET ASSETS:
Beginning of period 609,060
----- ----------- --- --- -
831,389 3,966,038 3,470,087
-------- ---------- ----------
End of period $ 3,333,677 $ 831,389 $ $ 3,966,038
============ =========== == ============
3,778,767
- -----------------------------------------------------------------------------------------------
Maxim T. Rowe Price Maxim T. Rowe Price
Equity/Income Portfolio MidCap Growth Portfolio
Investment Division Investment Division
------------------- -------------------
1999 1998 1999 1998
----- ----- ----- ----
MAXIM SERIES III
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $
164,119 114,201 7,350 (782)
Net realized gain (loss) on investment (2,060)
98,828 229,770 2,495
Net change in unrealized appreciatio
(depreciation) in investments (223,726) (203,409)
-------------------------
19,868 14,578
------- ------
Increase (decrease) in net assets
resulting from operations
39,221 140,562 29,713 11,736
------- -------- ------- ------
FROM UNIT TRANSACTIONS (by category)
Purchase payments:
118,498 375,498 21,484 99,391
Redemptions: (162,684) (46,819) (16,279)
-
Net transfers: (688,015)
---- -------------
(29,774) (3,919) 15,086
-------- ------- ------
Increase (decrease) in net assets
resulting from unit transactions (359,336)
---- -------------
(73,960) 1,286 114,477
-------- ------ -------
INCREASE (DECREASE) IN NET ASSETS (34,739) (218,774)
30,999 126,213
NET ASSETS:
Beginning of period 1,845,535 2,064,309 126,213
------------------------- -----------
-
-
End of period $ 1,810,796 $ 1,845,535 $ 157,212 $ 126,213
======================== ====================
</TABLE>
See notes to financial statements.
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998 See notes to financial
statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Maxim Total Return Maxim U.S. Government Maxim Value Index American Century VP
Portfolio Securities Portfolio Portfolio Balanced Fund
Investment Division Investment Division Investment Division Investment Division
------------------- ------------------- --------------- ---------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES III (2)
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ 15,792 $
- 5,779 14,135 4,817 1,455 710 39,351
Net realized gain (loss) on investments
- 94,172 (1,520) 3,269 (150) (6) (202) 23,681
Net change in unrealized appreciation
(depreciation) in investments (36,793)
------------------- ----- ------- ------ ------ ----- ---------
- (62,690) (15,288) (1,176) (2,586) (389) (432)
-- -------- -------- ------- ------- ----- -----
Increase (decrease) in net assets
resulting from operations 17,885 26,239
-------------------- ------ ------------- ------- ---- -------- ---------
- 37,261 (2,673) 2,081 1,060 76
-- ------- ------- ------ ------ --
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 183,518
- 5,714 2,516 6,945 18,356 - -
Redemptions:
- (5,902) (30,558) (23,809) - - - (4,490)
Net transfers: (50,110) 39,881 (5,355) (322,005)
----------------- ------------------------- ------- ------- -------- ---------
- (615,844) 9,808 182
-- --------- ------ ---
Increase (decrease) in net assets
resulting from unit transactions (78,152) 199,590 16,753 18,538 (5,355) (326,495)
----------------- ------------------------ --------------------- -------- ---------
- (616,032)
INCREASE (DECREASE) IN NET ASSETS
- (578,771) (80,825) 217,475 18,834 19,598 (5,279) (300,256)
NET ASSETS:
Beginning of period 578,771 368,413 150,938 19,598 5,279 305,535
------------------------ ----------- ----------- ----------------------------- --------
- -
-- -
End of period $ $ $ 287,588 $ 368,413 $ 38,432 19,598 $ 5,279
======================== ========== ========== =================== ======== =========
- - -
== == = =
</TABLE>
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998. See notes to financial
statements. (Continued)
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Dreyfus Family of Funds Fidelity Investments VIP Janus Aspen Funds
Capital Appreciation Stock Index Fund II Contrafund Portfolio Flexible Income
Fund fund
Investment Division Investment Division Investment Division Investment Division
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----
MAXIM SERIES III (1) (1) (1)
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ $ 7,370
(1,413) 5,494 3,949 $ 1,178 $ $
-
Net realized gain (loss) on investments (10,977) (7,989) (267)
3,307 7,430 -
Net change in unrealized appreciation
(depreciation) in investments (5,705)
----- -------- ------ -------------- --------------------------
73,729 1,041 32,541 22,300 -
------- ------ ------- ------- --
Increase (decrease) in net assets
resulting from operations 39,797 1,398
----- ------ -------------------------- -------------------------
61,339 (1,454) 30,908 -
------- ------- ------- --
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 803
28,719 19,446 35,547 - 18,372
Redemptions: (16,641) (1,156) (607) (96,270)
- -
Net transfers:
(13,334) (94,807) 367,474 192,460 114,778
----------- ----------- --------------------------------------------------------
-
--
Increase (decrease) in net assets
resulting from unit transactions (29,172) (67,244) 386,313 131,737 133,150
----------- ----------- --------------------------------------------------------
-
--
INCREASE (DECREASE) IN NET ASSETS 32,167 (68,698)
426,110 162,645 - 134,548
NET ASSETS:
Beginning of period 125,156 193,854
----------- ----------
- - - -
-- -- -- --
End of period $ 157,323 $ 125,156 $ 426,110 $ $ 162,645 $ $ 134,548 $
========== ========== ============================================= ========== =
-
== ==
(1) The Investment Division commenced operations on
December 31, 1998.
(2) The Investment Division ceased operations on June 22, 1998.
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MAXIM SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman
Management AMT Partners Templeton International Total Maxim Series III
Portfolio Class I Account
Investment Division Investment Division
1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----
MAXIM SERIES III (1) (1)
- ----------------
FROM OPERATIONS:
Net investment income (loss) $ $ $ $
157 $ 1,197 $ 1,454,371 698,684
- -
Net realized gain (loss) on investments 28 (45) 855,021 921,020
- -
Net change in unrealized appreciation
(depreciation) in investments
8,727 - 18,143 - (11,740) 277,011
------ -- ------- -- -------- -------
Increase (decrease) in net assets
resulting from operations
8,912 - 19,295 - 2,297,652 1,896,715
------ -- ------- -- ---------- ---------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 30,389 3,271,590 3,720,539
- 14,478 -
Redemptions: (606) (604) (1,142,671) (518,200)
- -
Net transfers: 162,309
-----------
- 101,757 - 117,320 (4,237)
-- -------- -- -------- -------
Increase (decrease) in net assets
resulting from unit transactions 192,092
-----------
- 115,631 - 2,246,239 3,198,102
-- -------- -- ---------- ---------
INCREASE (DECREASE) IN NET ASSETS 201,004 4,543,891 5,094,817
- 134,926 -
NET ASSETS:
Beginning of period 10,627,158
------------------------------------------------------- -----------
- - - - 15,721,975
-- -- -- -- ----------
End of period $ $ $ 134,926 $ $ 20,265,866 $
====== ==================================================== =
201,004 - - 15,721,975
======== == == ==========
</TABLE>
(1) The Investment Division commenced operations on December 31, 1998. (2) The
Investment Division ceased operations on June 22, 1998 See notes to financial
statements. (Concluded)
<PAGE>
MAXIM SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------
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.
<PAGE>
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
A wholly owned subsidiary of the Company, GW Capital Management, Inc.,
serves as investment advisor to Maxim Series Fund, Inc. 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 Money Market Maxim Stock Index Maxim Total Return
Maxim Bond Portfolio Maxim Bond Portfolio Portfolio Portfolio Portfolio
Qualified Non-Qualified Non-Qualified Qualified Non-Qualified
---------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT I
1999
Beginning Unit Value 34.10 $ 37.55 $ 23.48 $ 83.56 $ -
====================================================================================================
Ending Unit Value 33.59 $ 36.98 $ 24.31 $ 98.60 $ -
====================================================================================================
Number of Units Outstanding
174.53 3,754.08 1,396.22 182.12 -
====================================================================================================
====================================================================================================
Net Assets (000's) $ 6 $ 139 $ 34 $ 18 $ -
====================================================================================================
1998
Beginning Unit Value 32.41 $ 35.65 $ 22.57 $ 66.97 $ 23.89
====================================================================================================
Ending Unit Value 34.10 $ 37.55 $ 23.48 $ 83.56 $ -
====================================================================================================
Number of Units Outstanding
174.80 2,461.64 1,398.72 182.36 -
====================================================================================================
Net Assets (000's) $ 6 $ 92 $ 33 $ 15 $ -
====================================================================================================
1997
Beginning Unit Value 30.69 $ 33.71 $ 21.71 $ 51.56 $ 19.59
====================================================================================================
Ending Unit Value 32.41 $ 35.65 $ 22.57 $ 66.97 $ 23.89
====================================================================================================
Number of Units Outstanding 188.97 2,727.87 1,398.91 175.18 2,299.93
====================================================================================================
Net Assets (000's) $ 6 $ 97 $ 32 $ 12 $ 55
====================================================================================================
1996
Beginning Unit Value 29.81 $ 32.74 $ 20.92 $ 43.05 $ 17.75
====================================================================================================
Ending Unit Value 30.69 $ 33.71 $ 21.71 $ 51.56 $ 19.59
====================================================================================================
Number of Units Outstanding
521.33 2,729.57 1,402.43 175.85 2,301.42
====================================================================================================
Net Assets (000's) $ 16 $ 92 $ 30 $ 9 $ 45
====================================================================================================
1995
Beginning Unit Value 26.21 $ 28.77 $ 20.04 $ 32.29 $ 14.65
====================================================================================================
Ending Unit Value 29.81 $ 32.74 $ 20.92 $ 43.05 $ 17.75
====================================================================================================
Number of Units Outstanding
523.12 2,732.24 2,022.86 176.42 2,301.96
====================================================================================================
Net Assets (000's) $ 16 $ 89 $ 42 $ 8 $ 41
====================================================================================================
====================================================================================================
</TABLE>
(Continued)
<PAGE>
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim Money Maxim Money Maxim Total
Maxim Bond Maxim Bond Market Market Maxim Stock Maxim Stock Return
Portfolio Portfolio Portfolio Portfolio Index Portfolio Index Portfolio Portfolio
Qualified Non-Qualified Qualified Non-Qualified Qualified Non-Qualified Non-Qualified
---------------------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT II
1999
Beginning Unit Value $ 27.95 $ 27.73 $ 18.26 $ 18.49 $ 68.64 $ 67.64 $ -
======================================================================================================
Ending Unit Value $ 27.49 $ 27.27 $ 18.88 $ 19.12 $ 81.05 $ 79.86
$
-
======================================================================================================
Number of Units Outstanding
40,546.31 38,993.56 55,579.07 68,210.22 198,847.96 142,113.72
======================================================================================================
Net Assets (000's) $ 1,114 $ 1,063 $ 1,049 $ 1,304 $ 16,116 $ 11,349 $ -
======================================================================================================
1998
Beginning Unit Value $ 26.57 $ 26.36 $ 17.61 $ 17.83 $ 54.89 $ 54.09 $ 24.42
======================================================================================================
Ending Unit Value $ 27.95 $ 27.73 $ 18.26 $ 18.49 $ 68.64 $ 67.64
$
-
======================================================================================================
Number of Units Outstanding
47,194.27 48,412.72 59,011.96 45,708.85 232,642.21 160,220.19
======================================================================================================
Net Assets (000's) $ 1,319 $ 1,342 $ 1,078 $ 845 $ 15,969 $ 10,837 $ -
======================================================================================================
1997
Beginning Unit Value $ 25.17 $ 24.97 $ 16.96 $ 17.18 $ 42.10 $ 41.48 $ 20.05
======================================================================================================
Ending Unit Value $ 26.57 $ 26.36 $ 17.61 $ 17.83 $ 54.89 $ 54.09 $ 24.42
======================================================================================================
Number of Units Outstanding 54,547.88 51,635.74 54,854.40 46,577.91 189,804.06 153,561.61 211,352.14
======================================================================================================
Net Assets (000's) $ 1,449 $ 1,361 $ 966 $ 830 $ 10,419 $ 8,306 $ 5,161
======================================================================================================
1996
Beginning Unit Value $ 24.48 $ 24.29 $ 16.37 $ 16.58 $ 35.04 $ 34.53 $ 18.20
======================================================================================================
Ending Unit Value $ 25.17 $ 24.97 $ 16.96 $ 17.18 $ 42.10 $ 41.48 $ 20.05
======================================================================================================
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
=======================================================================================================
Net Assets (000's) $ 2,232 $ 1,602 $ 1,041 $ 1,100 $ 8,520 $ 6,606 $ 4,411
=======================================================================================================
1995
Beginning Unit Value $ 21.54 $ 21.37 $ 15.71 $ 15.90 $ 26.19 $ 25.81 $ 15.04
========================================================================================================
Ending Unit Value $ 24.48 $ 24.29 $ 16.37 $ 16.58 $ 35.04 $ 34.53 $ 18.20
========================================================================================================
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
===========================================================================================================
Net Assets (000's) $ 2,596 $ 1,929 $ 1,714 $ 1,617 $ 7,876 $ 5,927 $ 4,368
============================================================================================================
(Continued)
</TABLE>
<PAGE>
5. SELECTED DATA
<TABLE>
American Century VP
<S> <C> <C> <C> <C> <C> <C>
Maxim U.S. Maxim U.S. Capital
Government Government American Century VP Appreciation Fund
Securities Portfolio Securities Portfolio Balanced Fund
Qualified Non-Qualified Qualified Non-Qualified
--------------------------------------------------------------------------------------
MAXIM SERIES ACCOUNT II
1999
Beginning Unit Value $ 26.14 $ 26.41 $ - $ 12.06
======================================================================================
Ending Unit Value $ 25.86 $ 26.12 $ - $ 19.75
======================================================================================
Number of Units Outstanding
94,489.07 151,710.54 27,111.64
======================================================================================
Net Assets (000's) $ 2,443 $ 3,963 $ - $ 535
======================================================================================
1998
Beginning Unit Value $ 24.83 $ 25.08 $ 16.04 $ 12.58
======================================================================================
Ending Unit Value $ 26.14 $ 26.41 $ - $ 12.06
======================================================================================
Number of Units Outstanding
113,270.37 205,160.13 29,929.91
======================================================================================
Net Assets (000's) $ 2,961 $ 5,418 $ - $ 361
======================================================================================
1997
Beginning Unit Value $ 23.20 $ 23.44 $ 14.04 $ 13.19
======================================================================================
Ending Unit Value $ 24.83 $ 25.08 $ 16.04 $ 12.58
======================================================================================
Number of Units Outstanding 144,275.86 244,602.79 26,379.49 25,957.24
======================================================================================
Net Assets (000's) $ 3,583 $ 6,136 $ 423 $ 327
======================================================================================
1996
Beginning Unit Value $ 22.65 $ 22.88 $ 12.69 $ 14.00
======================================================================================
Ending Unit Value $ 23.20 $ 23.44 $ 14.04 $ 13.19
======================================================================================
Number of Units Outstanding
183,063.52 272,571.17 24,745.20 26,567.31
======================================================================================
Net Assets (000's) $ 4,248 $ 6,389 $ 348 $ 350
======================================================================================
1995
Beginning Unit Value $ 19.78 $ 19.98 $ 10.62 $ 10.82
======================================================================================
Ending Unit Value $ 22.65 $ 22.88 $ 12.69 $ 14.00
======================================================================================
Number of Units Outstanding
228,062.15 325,518.95 24,517.40 25,359.37
======================================================================================
Net Assets (000's) $ 5,165 $ 7,446 $ 311 $ 355
======================================================================================
</TABLE>
<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
Founders
Maxim Maxim Ariel Maxim Ariel Maxim Growth &
Aggressiv MidCap Value Small-Cap Maxim Bond Conservative Income Chip Maxim Growth Maxim Growth
Profile Portfolio Value Portfolio Profile Portfolio Index Index
Portfolio Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------------------------------------------------------
1.25 1.25 1.25 1.25 1.25 1.25 1.25 0.50
MAXIM SERIES ACCOUNT III
Date Commenced Operations 01/05/98 09/19/94 03/09/95 09/19/94 01/05/98 01/15/98 01/15/98 12/31/98
1999
Beginning Unit Value $
$ $ $ $ $ $ $ 10.00
11.35 20.80 18.25 12.73 10.63 11.74 13.75
========================================================================================================
Ending Unit Value $
$ $ $ $ $ $ $ 12.62
13.65 20.60 16.98 12.54 11.01 13.34 17.23
========================================================================================================
Number of Units Outstanding
6,019.04 51,894.51 5,404.94 64,052.67 17,410.97 5,962.03 26,777.65 28,151.03
=========================================================================================================
Net Assets (000's)
$ $ $ $ $ $ $ $
82 1,069 92 803 192 80 461 355
=========================================================================================================
1998
Beginning Unit Value
$ $ $ $ $ $ $
10.00 15.75 17.07 12.09 10.00 10.00 10.00
=================================================================================================
Ending Unit Value
$ $ $ $ $ $ $
11.35 20.80 18.25 12.73 10.63 11.74 13.75
=============================================================================================
Number of Units Outstanding
2,227.92 52,202.19 5,611.10 58,959.10 15,432.21 1,025.12 45,895.99
=================================================================================================
Net Assets (000's)
$ $ $ $ $ $ $
25 1,086 102 751 164 12 631
=================================================================================================
1997
Beginning Unit Value
$ $ $
14.12 13.51 11.43
=======================================
Ending Unit Value
$ $ $
15.75 17.07 12.09
=======================================
Number of Units Outstanding
49,565.38 3,045.87 7,412.56
=======================================
Net Assets (000's)
$ $ $
781 52 90
=======================================
1996
Beginning Unit Value
$ $ $
13.49 11.60 11.10
=======================================
Ending Unit Value
$ $ $
14.12 13.51 11.43
=======================================
Number of Units Outstanding
83,389.90 1,551.40 5,196.46
=======================================
Net Assets (000's)
$ $ $
1,177 21 59
=======================================
1995
Beginning Unit Value
$ $ $
10.80 10.00 9.76
=======================================
Ending Unit Value
$ $ $
13.49 11.60 11.10
=======================================
Number of Units Outstanding
24,467.21 697.92 1,675.00
=======================================
Net Assets (000's) (Continued)
$ $ $
330 8 19
=======================================
</TABLE>
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim INVESCO Maxim INVESCO
Maxim INVESCO Maxim International Small-Cap Maxim Loomis Maxim Loomis
Balanced INVESCO Growth Growth Sayles Sayles Maxim
Maxim Index Portfolio Balanced Portfolio Portfolio Corporate Small-Cap Moderate
600 Portfolio Portfolio (ADR) Bond Value Profile
Portfolio Portfolio Portfolio
----------------------------------------------------------------------------------------------------------------
1.25 1.25 0.50 1.25 1.25 1.25 1.25 1.25
MAXIM SERIES ACCOUNT III
Date Commenced Operations 09/19/94 10/31/96 12/31/98 01/06/95 01/06/95 08/08/95 01/15/98 01/05/98
1999
Beginning Unit Value $
$ $ $ $ $ $ $ 10.98
16.10 14.73 10.00 16.28 22.31 14.91 10.00
==========================================================================================================
Ending Unit Value $
$ $ $ $ $ $ $ 12.63
17.79 16.98 11.62 19.72 39.84 15.45 9.84
==========================================================================================================
Number of Units Outstanding
20,516.87 122,501.82 29,428.25 27,043.80 34,724.35 60,769.47 29,199.60
============================================================================================================
Net Assets (000's)
$ $ $ $ $ $ $ $
365 2,080 342 533 1,383 939 - 369
===========================================================================================================
1998
Beginning Unit Value $
$ $ $ $ $ $ 10.00
16.57 12.59 14.90 19.21 14.60 10.00
============================== ===============================================================
Ending Unit Value $
$ $ $ $ $ $ 10.98
16.10 14.73 16.28 22.31 14.91 10.00
============================== ================================================================
Number of Units Outstanding
19,020.51 147,157.63 35,311.40 44,665.98 77,918.20 - 21,309.48
============================== ===========================================================
Net Assets (000's)
$ $ $ $ $ $ $
306 2,167 575 997 1,162 - 234
============================== =============================================================
1997
Beginning Unit Value
$ $ $ $ $
13.87 10.13 13.46 16.39 13.12
============================== ===========================================
Ending Unit Value
$ $ $ $ $
16.57 12.59 14.90 19.21 14.60
============================== ===========================================
Number of Units Outstanding
14,918.01 32,937.69 31,948.04 44,396.72 23,403.30
============================== ===========================================
Net Assets (000's)
$ $ $ $ $
247 415 476 853 342
============================== ============================================
1996
Beginning Unit Value
$ $ $ $ $
12.18 10.00 11.25 13.09 12.03
============================== ============================================
Ending Unit Value
$ $ $ $ $
13.87 10.13 13.46 16.39 13.12
============================== ============================================
Number of Units Outstanding
10,975.88 1,307.11 15,132.95 33,993.67 12,487.29
============================== ============================================
Net Assets (000's)
$ $ $ $ $
152 13 204 557 164
============================== ============================================
1995
Beginning Unit Value
$ $ $ $
9.77 10.00 10.00 10.00
============================== ============================================
Ending Unit Value
$ $ $ $
12.18 11.25 13.09 12.03
============================== ============================================
Number of Units Outstanding
2,705.63 2,623.01 4,511.19 799.35
============================== ============================================
Net Assets (000's)
$ $ $ $
33 29 59 10
============================== ============================================
(Continued)
</TABLE>
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Maxim Maxim Maxim T. Maxim T. Rowe Maxim T Rowe
Moderately Moderately Maxim Money Maxim Money Rowe Price Price Price MidCap
Aggressive Conservative Market Market Maxim Stock Equity/Income Equity/Income Growth
Profile Profile Portfolio Portfolio Index Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------------------
1.25 1.25 1.25 0.50 1.25 1.25 0.50 1.25
MAXIM SERIES ACCOUNT III
Date Commenced Operations 01/05/98 01/05/98 08/04/95 12/31/98 09/19/94 01/06/95 12/31/98 01/15/98
1999
Beginning Unit Value $ 11.10 $ 10.79 $ 11.40 10.00 $ 25.67 $ 20.86 $ 10.00 $
12.42
==========================================================================================================
Ending Unit Value $ 13.38 $ 11.54 $ 11.80 $ 10.43 $ 30.35 $ 21.30 $ 10.29 $15.29
=========================================================================================================
Number of Units Outstanding
32,079.80 5,941.97 278,852.75 4,193.76 124,499.25 75,493.06 19,743.60 10,284.80
=============================================================================================================
Net Assets (000's) $ 429 $ 69 $ 3,290 $ 44 $ 3,779 $ 1,608 $ 203 $
157
============================================================================================================
1998
Beginning Unit Value $ 10.00 $ 10.00 $ 10.97 $ 20.50 $ 19.39 $
10.00
=========================================== ============================= ===========
Ending Unit Value $ 11.10 $ 10.79 $ 11.40 $ 25.67 $ 20.86 $
12.42
=========================================== ============================= ===========
Number of Units Outstanding
13,300.61 6,875.97 72,949.61 154,519.05 88,483.59 10,160.99
========================================= ============================= ==========
Net Assets (000's) $ 148 $ 74 $ 831 $ 3,966 $ 1,846 $ 126
========================================= ============================= ==========
1997
Beginning Unit Value $ 10.55 $ 15.70 $ 15.24
============== =============================
Ending Unit Value $ 10.97 $ 20.50 $ 19.39
============== =============================
Number of Units Outstanding 55,509.88 169,289.23 106,469.26
============== =============================
Net Assets (000's) $ 609 $ 3,470 $ 2,064
============== =============================
1996
Beginning Unit Value
$ $ $
10.17 13.05 12.92
============== =============================
Ending Unit Value $ 15.24
$ $
10.55 15.70
============== =============================
Number of Units Outstanding
30,070.95 130,996.47 67,415.13
============== =============================
Net Assets (000's) $ $ 2,057 $ 1,027
317
============== =============================
1995
Beginning Unit Value
$ $ $
10.00 9.74 10.00
============== =============================
Ending Unit Value $ 13.05 $ 12.92
$
10.17
============== =============================
Number of Units Outstanding
15,499.45 17,200.32 19,500.37
============== =============================
Net Assets (000's) $ $ 224 $
158 252
============== =============================
(Continued)
</TABLE>
<PAGE>
5. SELECTED DATA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
American Fidelity
Maxim U.S. Century VP Investments
Maxim Total Government American Capital VIP II Janus Aspen
Return Securities Maxim Value Century VP Appreciaiton Dreyfus Contrafund Flexible
Portfolio Portfolio Index Balanced Fund Fund Stock Index Portfolio Income Fund
Portfolio
--------------------------------------------------------------------------------------------------------
1.25 1.25 1.25 1.25 1.25 0.50 1.25 0.50
MAXIM SERIES ACCOUNT III
Date Commenced Operations 09/19/94 01/18/95 01/15/98 09/19/94 01/18/95 12/31/98 11/12/98 12/31/98
1999
Beginning Unit Value $
$ $ $ $ $ $ 10.00
12.95 11.68 17.07 11.29 10.00 11.69
========================================================================================================
Ending Unit Value $
$ $ $ $ $ $ 10.11
12.83 12.85 18.55 18.34 12.00 14.35
========================================================================================================
Number of Units Outstanding
22,422.35 2,991.88 - 8,576.49 35,509.76 11,336.44 13,308.63
====================================================================================================
Net Assets (000's)
$ $ $ $ $ $ $
288 38 - 157 426 163 135
========================================================================================================
1998
Beginning Unit Value
$ $ $ $ $
15.78 12.23 10.00 14.94 11.68 10.00
======================================================================= ===============
Ending Unit Value
$ $ $ $ $
12.95 11.68 17.07 11.29 11.69
======================================================================= ===============
Number of Units Outstanding
28,452.60 1,678.41 309.20 11,087.23 -
===============
=======================================================================
Net Assets (000's)
$ $ $ $ $
368 20 5 125 -
======================================================================= ===============
1997
Beginning Unit Value
$ $ $
12.94 11.41 13.06 12.23
==========================================================================
Ending Unit Value
$ $ $ $
15.78 12.23 14.94 11.68
==========================================================================
Number of Units Outstanding
36,689.11 12,345.78 20,447.27 16,591.59
==========================================================================
Net Assets (000's)
$ $ $ $
579 151 306 194
==========================================================================
1996
Beginning Unit Value
$ $ $ $
11.72 11.12 11.79 12.94
==========================================================================
Ending Unit Value
$ $ $ $
12.94 11.41 13.06 12.23
==========================================================================
Number of Units Outstanding
30,202.42 15,784.10 19,490.47 15,595.65
==========================================================================
Net Assets (000's)
$ $ $ $
391 180 255 191
==========================================================================
1995
Beginning Unit Value
$ $ $ $
9.67 10.00 9.85 10.00
==========================================================================
Ending Unit Value
$ $ $ $
11.72 11.12 11.79 12.94
==========================================================================
Number of Units Outstanding
9,694.71 14,812.67 7,745.10 6,110.86
==========================================================================
Net Assets (000's)
$ $ $ $
114 165 91 79
==========================================================================
(Continued)
</TABLE>
5. SELECTED DATA
Neubergar &
Berman AMT Templeton
Partners International
Portfolio Class I Fund
-------------------------------
0.50 0.50
MAXIM SERIES ACCOUNT III
Date Commenced Operations 12/31/98 12/31/98
1999
Beginning Unit Value $ 10.00 $ 10.00
===============================
Ending Unit Value $ 10.68 $ 12.29
===============================
Number of Units Outstanding
18,814.54 10,980.69
===============================
Net Assets (000's) $ 201 $ 135
===============================
1998
Beginning Unit Value
Ending Unit Value
Number of Units Outstanding
Net Assets (000's)
1997
Beginning Unit Value
Ending Unit Value
Number of Units Outstanding
Net Assets (000's)
1996
Beginning Unit Value
Ending Unit Value
Number of Units Outstanding
Net Assets (000's)
1995
Beginning Unit Value
Ending Unit Value
Number of Units Outstanding
Net Assets (000's)
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, 1999, 1998, and 1997 and
Independent Auditors' Report
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,
1999 and 1998, 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, 1999. 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, 1999 and 1998, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1999, the Company adopted Statement of Position No. 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" and, accordingly, changed its method of accounting for
software development costs.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 31, 2000
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998
---------------------- -----------------------
ASSETS
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value
$2,238,581 and $2,298,936) $ 2,260,581 $ 2,199,818
Available-for-sale, at fair value (amortized cost
$6,953,383 and $6,752,532) 6,727,922 6,936,726
Common stock, at fair value (cost $43,978 and 69,240 48,640
$41,932)
Mortgage loans on real estate, net 974,645 1,133,468
Real estate, net 103,731 73,042
Policy loans 2,681,132 2,858,673
Short-term investments, available-for-sale (cost
approximates fair value) 240,804 420,169
---------------------- -----------------------
Total Investments 13,058,055 13,670,536
Cash 257,840 176,119
Reinsurance receivable
Related party 5,015 5,006
Other 168,307 187,952
Deferred policy acquisition costs 282,295 238,901
Investment income due and accrued 137,810 157,587
Other assets 308,419 311,078
Premiums in course of collection 142,199 84,940
Deferred income taxes 253,323 191,483
Separate account assets 12,780,016 10,099,543
---------------------- -----------------------
TOTAL ASSETS $ 27,393,279 $ 25,123,145
====================== =======================
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
1999 1998
----------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
POLICY BENEFIT LIABILITIES:
Policy reserves
Related party $ 555,783 $ 555,300
Other 11,181,900 11,347,548
Policy and contract claims 391,968 428,798
Policyholders' funds 185,623 181,779
Provision for policyholders' dividends 70,726 69,530
GENERAL LIABILITIES:
Due to Parent Corporation 35,979 52,877
Due to GWL&A Financial 175,035
Repurchase agreements 80,579 244,258
Commercial paper 39,731
Other liabilities 638,469 761,505
Undistributed earnings on participating business 130,638 143,717
Separate account liabilities 12,780,016 10,099,543
----------------- -----------------
Total Liabilities 26,226,716 23,924,586
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value, 50,000,000 shares authorized,
0 shares issued and outstanding
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 700,316 699,556
Accumulated other comprehensive income (loss) (84,861) 61,560
Retained earnings 544,076 430,411
----------------- -----------------
Total Stockholder's Equity 1,166,563 1,198,559
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 27,393,279 $ 25,123,145
================= =================
</TABLE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
REVENUES:
Premiums
Related party (including premiums
recaptured totaling $0,
$0, and $155,798) $ $ 46,191 $ 155,798
Other (net of premiums ceded totaling
$85,803, $86,511 and $61,194) 1,163,183 948,672 677,381
Fee income 635,147 516,052 420,730
Net investment income
Related party (10,923) (9,416) (8,957)
Other 886,869 906,776 890,630
Net realized gains on investments 1,084 38,173 9,800
---------------- ---------------- ----------------
2,675,360 2,446,448 2,145,382
---------------- ---------------- ----------------
BENEFITS AND EXPENSES:
Life and other policy benefits (net of
reinsurance recoveries totaling $80,681,
$81,205, and $44,871) 970,250 768,474 543,903
Increase in reserves
Related party 46,191 155,798
Other 33,631 78,851 90,013
Interest paid or credited to contractholders 494,081 491,616 527,784
Provision for policyholders' share of earnings
on participating business 13,716 5,908 3,753
Dividends to policyholders 70,161 71,429 63,799
---------------- ---------------- ----------------
1,581,839 1,462,469 1,385,050
Commissions 173,405 144,246 102,150
Operating expenses (income):
Related party (768) (5,094) (6,292)
Other 593,575 518,228 431,714
Premium taxes 38,329 30,848 24,153
---------------- ---------------- ----------------
2,386,380 2,150,697 1,936,775
INCOME BEFORE INCOME TAXES 288,980 295,751 208,607
---------------- ---------------- ----------------
PROVISION FOR INCOME TAXES:
Current 72,039 81,770 61,644
Deferred 11,223 17,066 (11,797)
---------------- ---------------- ----------------
83,262 98,836 49,847
---------------- ---------------- ----------------
NET INCOME $ 205,718 $ 196,915 $ 158,760
================ ================ ================
</TABLE>
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(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 (Loss) Earnings Total
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, JANUARY 1, 1997 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
Net income 205,718 205,718
Other comprehensive loss (146,421) (146,421)
------------
Total comprehensive loss 59,297
------------
Capital contributions
Dividends (92,053) (92,053)
Income tax benefit on stock
Compensation 760 760
------------------------ -------------------- --------- ------------------------ ------------
BALANCE, DECEMBER 31, 1999 0 0 7,032,000 7,032 $ 700,316 (84,861) 544,076 $ 1,166,563
======================== ==================== ========= ======================== ============
</TABLE>
See notes to consolidated financial statements.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
OPERATING ACTIVITIES:
Net income $ 205,718 $ 196,915 $ 158,760
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain allocated to participating
policyholders 13,716 5,908 3,753
Amortization of investments (22,514) (15,068) 409
Net realized gains on investments (1,084) (38,173) (9,800)
Depreciation and amortization 47,339 55,550 46,929
Deferred income taxes 11,223 17,066 (11,824)
Changes in assets and liabilities:
Policy benefit liabilities 650,959 938,444 498,114
Reinsurance receivable 19,636 (43,643) 112,594
Accrued interest and other receivables (37,482) 28,467 30,299
Other, net (146,150) (184,536) 64,465
---------------- ---------------- ----------------
Net cash provided by operating activities 741,361 960,930 893,699
---------------- ---------------- ----------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to maturity
Sales 9,920
Maturities and redemptions 520,511 471,432 359,021
Available-for-sale
Sales 3,176,802 6,169,678 3,174,246
Maturities and redemptions 822,606 1,268,323 771,737
Mortgage loans 165,104 211,026 248,170
Real estate 5,098 16,456 36,624
Common stock 18,116 3,814 17,211
Purchases of investments:
Fixed maturities
Held-to-maturity (563,285) (584,092) (439,269)
Available-for-sale (4,019,465) (7,410,485) (4,314,722)
Mortgage loans (2,720) (100,240) (2,532)
Real estate (41,482) (4,581) (64,205)
Common stock (19,698) (10,020) (29,608)
---------------- ---------------- ----------------
Net cash provided by (used in)
investing activities $ 61,587 $ 41,231 $ (243,327)
================ ================ ================
</TABLE>
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
==================================================================================================================================
1999 1998 1997
---------------- ---------------- ----------------
FINANCING ACTIVITIES:
Contract withdrawals, net of deposits $ (583,900) $ (507,237) $ (577,538)
Due to Parent Corporation (16,898) (73,779) (19,522)
Due to GWL&A Financial 175,035
Dividends paid (92,053) (80,036) (71,394)
Net commercial paper repayments (39,731) (14,327) (30,624)
Net repurchase agreements (repayments)
borrowings (163,680) (81,280) 38,802
Capital contributions 8,808 11,000
Purchase of preferred shares (121,800)
Acquisition of subsidiary (82,669)
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net cash used in financing activities (721,227) (952,320) (649,276)
---------------- ---------------- ----------------
NET INCREASE IN CASH 81,721 49,841 1,096
CASH, BEGINNING OF YEAR 176,119 126,278 125,182
---------------- ---------------- ----------------
CASH, END OF YEAR $ 257,840 $ 176,119 $ 126,278
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 76,150 $ 111,493 $ 86,829
Interest 14,125 13,849 15,124
</TABLE>
See notes to consolidated financial statements. (Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Amounts in Thousands, except Share Amounts)
===============================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company (the Company) is
a wholly-owned subsidiary of GWL&A Financial Inc., a holding company formed
in 1998 (GWL&A Financial) and 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 inter-company transactions and balances have been eliminated in
consolidation.
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
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 (loss) 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 (loss).
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 credit losses on its impaired
loans. Management's judgement is based on past loss experience, current and
projected economic conditions, and extensive situational analysis of each
individual loan. The measurement of impaired loans is based on the fair
value of the collateral.
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.
Internal Use Software - Effective January 1, 1999, the Company adopted
Statement of Position (SOP) No. 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 provides
guidance on accounting for costs associated with computer software
developed or obtained for internal use. As a result of the adoption of SOP
98-1, the Company capitalized $18,373 in internal use software development
costs for the year ended December 31, 1999.
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 $43,512, $51,724, and $44,298 in 1999, 1998, and 1997,
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 $7,169,885 and $6,866,478 at December
31, 1999 and 1998, 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 $4,468,685 and $4,908,964
at December 31, 1999 and 1998, 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 $4,297,823 and $4,108,314 at December 31, 1999 and 1998, respectively.
Participating business approximates 31.0%, 32.7%, and 50.5% of the
Company's ordinary life insurance in force and 94.0%, 71.9% and 91.1% of
ordinary life insurance premium income for the years ended December 31,
1999, 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 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 charges, are recognized
when due. Benefits and expenses on policies with life contingencies impact
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 6.2%, 6.3%,
and 6.6% in 1999, 1998, and 1997.
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.
Derivatives - The Company makes limited use of derivative financial
instruments to manage interest rate, market, and foreign exchange risk.
Such hedging activity consists primarily of interest rate swap agreements,
interest rate floors and caps, foreign currency exchange contracts, options
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. Written call
options are stock conversion protection agreements that require the
counter-party to automatically call the bond for cash when the issuer
elects to convert the bond to common stock. 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.
The Financial Accounting Standards Board has issued Statement No. 133,
"Accounting for Derivative Instruments and for Hedging Activities", which,
as amended, is required to be adopted in years beginning after June 15,
2000. This Statement provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
Although management has not completed its analysis of the impact of this
Statement, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial
position of the Company because of the Company's minimal use of
derivatives.
Stock Options - The Company applies the intrinsic value measurement
approach under APB Opinion No. 25 to stock-based compensation awards to
employees.
2. ACQUISITION
On July 8, 1998, the Company paid $82,669 in cash to acquire all of the
outstanding shares of Alta Health & Life Insurance Company (Alta), formerly
known as Anthem Health & Life Insurance Company. The purchase price was
based on Alta's adjusted book value, and was subject to further minor
adjustments. The results of Alta's operations, which had an insignificant
effect on net income in 1998, 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 goodwill representing the purchase price in excess of
fair value of net assets acquired is included in other assets and is being
amortized over 30 years on a straight-line basis.
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
increase in reserves, associated with certain policies, as a result of this
transaction. Of the $137,638 in reserves that was 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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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
============ ============
</TABLE>
===========================================================================
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
increase in reserves as a result of this transaction. Of the $428,152 in
reserves that was 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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
===========================================
===========================================
Bonds $ 147,475 Policy reserves $ 428,152
===========================================
Mortgages 82,637 Due to Parent Corporation 20,820
===========================================
Cash 134,900
===========================================
Deferred policy acquisition costs 9,724
===========================================
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 its 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 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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
====================================
====================================
Cash $ 160,000 Policy reserves $ 155,798
====================================
Bonds 17,975 Due to Parent Corporation 20,373
====================================
Other 60 Deferred income taxes 2,719
====================================
Undistributed earnings on
====================================
participating business (855)
====================================
---------------- ----------------
$ 178,035 $ 178,035
==================================== ================ ================
</TABLE>
In connection with this transaction, the Parent Corporation made a capital
contribution of $11,000 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.
The Company performs administrative services for the U.S. operations of the
Parent Corporation. The following represents revenue from 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>
<S> <C>
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Investment management revenue $ 130 $ 475 $ 801
Administrative and underwriting revenue 768 5,094 6,292
</TABLE>
At December 31, 1999 and 1998, due to Parent Corporation includes $10,641
and $17,930 due on demand and $25,338 and $34,947 of notes payable which
bear interest and mature on October 1, 2006. 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 (6.7% and 6.1% at
December 31, 1999 and 1998, respectively) while the note payable bears
interest at 5.4%.
On May 4, 1999, the Company issued a $175,000 subordinated note to GWL&A
Financial, the proceeds of which were used for general corporate purposes.
The subordinated note bears interest at 7.25% and is due June 30, 2048.
Payments of principal and interest under this subordinated note shall be
made only with prior written approval of the Commissioner of Insurance of
the State of Colorado. Payments of principal and interest on this
subordinated note are payable only out of surplus funds of the Company and
only at such time as the financial condition of the Company is such that at
the time of payment of principal or interest, its surplus after the making
of any such payment would exceed the greater of $1,500 or 1.25 times the
company action level amount as required by the most recent risk based
capital calculations.
Interest expense attributable to these related party obligations was
$11,053, $9,891, and $9,758 for the years ended December 31, 1999, 1998 and
1997, 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, 1999 and 1998, the
reinsurance receivable had a carrying value of $173,322 and $192,958,
respectively.
The following schedule details life insurance in force and life and
accident/health premiums:
<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, 1999:
Life insurance in force:
Individual $ 35,362,934 $ 5,195,961 $ 8,467,877 $ 38,634,850 21.9%
Group 80,717,198 2,212,741 82,929,939 2.7%
--------------- ---------------- ---------------- ----------------
Total $ 116,080,132 $ 5,195,961 $ 10,680,618 $ 121,564,789
=============== ================ ================ ================
Premium Income:
Life insurance $ 306,101 $ 27,399 $ 46,715 $ 325,417 14.4%
Accident/health 801,755 58,247 79,753 823,261 9.7%
--------------- ---------------- ---------------- ----------------
Total $ 1,107,856 $ 85,646 $ 126,468 $ 1,148,678
=============== ================ ================ ================
December 31, 1998:
Life insurance in force:
Individual $ 34,017,379 $ 4,785,079 $ 8,948,442 $ 38,180,742 23.4%
Group 81,907,539 2,213,372 84,120,911 2.6%
--------------- ---------------- ---------------- ----------------
Total $ 115,924,918 $ 4,785,079 $ 11,161,814 $ 122,301,653
=============== ================ ================ ================
Premium Income:
Life insurance $ 352,710 $ 24,720 $ 65,452 $ 393,442 16.6%
Accident/health 571,992 61,689 74,284 584,587 12.7%
--------------- ---------------- ---------------- ----------------
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 insurance $ 320,456 $ (127,388) $ 19,923 $ 467,767 4.3%
Accident/health 341,837 32,645 34,994 344,186 10.2%
--------------- ---------------- ---------------- ----------------
Total $ 662,293 $ (94,743) $ 54,917 $ 811,953
=============== ================ ================ ================
</TABLE>
5. NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income is summarized as follows:
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Investment income:
Fixed maturities and short-term investments $ 636,946 $ 638,079 $ 633,975
Mortgage loans on real estate 88,033 110,170 118,274
Real estate 19,618 20,019 20,990
Policy loans 167,109 180,933 194,826
Other 138 285 18
--------------- --------------- ---------------
911,844 949,486 968,083
Investment expenses, including interest on
amounts charged by the related parties
of $11,053, $9,891, and $9,758 35,898 52,126 86,410
--------------- --------------- ---------------
Net investment income $ 875,946 $ 897,360 $ 881,673
=============== =============== ===============
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
---------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Realized gains (losses):
Fixed maturities $ (7,858) $ 38,391 $ 15,966
Mortgage loans on real estate 1,429 424 1,081
Real estate 513 363
Provisions 7,000 (642) (7,610)
--------------- --------------- ---------------
Net realized gains on investments $ 1,084 $ 38,173 $ 9,800
=============== =============== ===============
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1999 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 $ 63,444 $ 448 $ 687 $ 63,205 $ 63,444
Collateralized mortgage
obligations 115,357 9,360 105,997 115,357
Public utilities 223,705 2,773 3,011 223,467 223,705
Corporate bonds 1,724,915 19,179 30,753 1,713,341 1,724,915
Foreign governments 10,000 213 10,213 10,000
State and municipalities 123,160 738 1,540 122,358 123,160
------------ -------------- ------------- ------------ ------------
$ 2,260,581 $ 23,351 $ 45,351 $ 2,238,581 $ 2,260,581
============ ============== ============= ============ ============
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 $ 752,130 $ 2,342 $ 21,459 $ 733,013 $ 733,013
Direct mortgage pass-
through certificates 304,099 1,419 11,704 293,814 293,814
Other 178,142 77 1,431 176,788 176,788
Collateralized mortgage
obligations 909,105 1,183 39,980 870,308 870,308
Public utilities 468,087 1,106 14,242 454,951 454,951
Corporate bonds 3,929,160 24,287 148,923 3,804,524 3,804,524
Foreign governments 41,224 654 1,256 40,622 40,622
State and municipalities 371,436 108 17,642 353,902 353,902
------------ -------------- ------------- ------------ ------------
$ 6,953,383 $ 31,176 $ 256,637 $ 6,727,922 $ 6,727,922
============ ============== ============= ============ ============
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 U.S.
Government Agencies $ 34,374 $ 1,822 $ $ 36,196 $ 34,374
Collateralized mortgage
obligations 10,135 194 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 10,133 782 10,915 10,133
State and municipalities 121,963 9,298 131,261 121,963
------------ -------------- ------------- ------------ ------------
$ 2,199,818 $ 103,755 $ 4,637 $ 2,298,936 $ 2,199,818
============ ============== ============= ============ ============
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 $ 863,479 $ 39,855 $ 1,704 $ 901,630 $ 901,630
Direct mortgage pass-
through certificates 467,100 4,344 692 470,752 470,752
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 56,505 2,732 59,237 59,237
State and municipalities 226,208 4,588 1,008 229,788 229,788
------------ -------------- ------------- ------------ ------------
$ 6,752,532 $ 207,791 $ 23,597 $ 6,936,726 $ 6,936,726
============ ============== ============= ============ ============
</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, 1999, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity Available-for-Sale
------------------------------------- ------------------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
----------------- ----------------- ----------------- ----------------
Due in one year or less $ 221,172 $ 220,644 $ 323,466 $ 334,701
Due after one year
through five years 945,199 941,685 1,286,402 1,251,690
Due after five years
through ten years 684,729 677,531 716,353 684,513
Due after ten years 118,170 121,921 690,073 650,432
Mortgage-backed
securities 115,357 105,997 1,965,334 1,897,135
Asset-backed securities 175,954 170,803 1,971,755 1,909,451
----------------- ----------------- ----------------- ----------------
$ 2,260,581 $ 2,238,581 $ 6,953,383 $ 6,727,922
================= ================= ================= ================
</TABLE>
Proceeds from sales of securities available-for-sale were $3,176,802,
$6,169,678, and $3,174,246 during 1999, 1998, and 1997, respectively. The
realized gains on such sales totaled $10,080, $41,136, and $20,543 for
1999, 1998, and 1997, respectively. The realized losses totaled $19,720,
$8,643, and $10,643 for 1999, 1998, and 1997, respectively. During the
years 1999, 1998, and 1997, held-to-maturity securities with and amortized
cost of $0, $9,920 and $0 were sold due to deterioration with insignificant
gains and losses.
At December 31, 1999 and 1998, pursuant to fully collateralized securities
lending arrangements, the Company had loaned $0 and $115,168 of fixed
maturities, respectively.
The Company engages in hedging activities to manage interest rate, market
and foreign exchange risk. The following table summarizes the 1999
financial hedge instruments:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Notional Strike/Swap
December 31, 1999 Amount Rate Maturity
----------------------------- --------------- ------------------------------ -------------------------
Interest Rate Caps $ 1,362,000 7.64% - 11.82% (CMT) 6/00 - 12/04
Interest Rate Swaps 217,528 4.94%-6.8% 02/00 - 12/06
Foreign Currency
Exchange Contracts 19,478 N/A 03/00 - 07/06
Equity Swap 104,152 5.15% - 5.93% 01/01
Options 54,100 Various 01/02 - 12/02
The following table summarizes the 1998 financial hedge instruments:
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
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
</TABLE>
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, 1999, approximately 34% 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 mortgage loans:
<TABLE>
<S> <C> <C>
1999 1998
====================================================================== ---------------- ----------------
======================================================================
Loans with related allowance for credit losses of
======================================================================
$14,727 and $2,492 $ 25,877 $ 13,192
======================================================================
Loans with no related allowance for credit losses 17,880 10,420
======================================================================
Average balance of impaired loans during the year 43,866 31,193
======================================================================
Interest income recognized (while impaired) 1,877 2,308
======================================================================
Interest income received and recorded (while impaired)
======================================================================
using the cash basis method of recognition 1,911 2,309
======================================================================
</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, aggregated
$75,691 and $52,913 at December 31, 1999 and 1998, respectively.
The following table presents changes in allowance for credit losses:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
--------------- --------------- ---------------
Balance, beginning of year $ 67,242 $ 67,242 $ 65,242
Provision for loan losses (7,000) 642 4,521
Chargeoffs - (787) (2,521)
Recoveries 1,000 145
--------------- --------------- ---------------
Balance, end of year $ 61,242 $ 67,242 $ 67,242
=============== =============== ===============
</TABLE>
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, 1999, no commercial paper
was outstanding. 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%.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<S> <C>
December 31,
---------------------------------------------------------------------
1999 1998
--------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- -------------- -------------- --------------
ASSETS:
Fixed maturities and
short-term investments $ 9,229,307 $ 9,207,307 $ 9,556,713 $ 9,655,831
Mortgage loans on real
Estate 974,645 968,964 1,133,468 1,160,568
Policy loans 2,681,132 2,681,132 2,858,673 2,858,673
Common stock 69,240 69,240 48,640 48,640
LIABILITIES:
Annuity contract reserves
without life contingencies 4,468,685 4,451,465 4,908,964 4,928,800
Policyholders' funds 185,623 185,623 181,779 181,779
Due to Parent Corporation 35,979 33,590 52,877 52,877
Due to GWL&A Financial 175,035 137,445 - - - -
Repurchase agreements 80,579 80,579 244,258 244,258
Commercial paper - - - - 39,731 39,731
</TABLE>
<TABLE>
<S> <C>
December 31,
---------------------------------------------------------------------
1999 1998
--------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- -------------- -------------- --------------
HEDGE CONTRACTS:
Interest rate floor - - - - 17 17
Interest rate caps 4,140 4,140 971 971
Interest rate swaps (1,494) (1,494) 6,125 6,125
Foreign currency exchange
contracts (10) (10) 689 689
Equity swap (7,686) (7,686) (8,150) (8,150)
Options (6,220) (6,220) - - - -
</TABLE>
The estimated fair values of financial instruments have been determined
using available information and appropriate valuation methodologies.
However, considerable judgement is 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 discounted cash
flows. 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 rates on high quality investments.
The fair value of due to GWL&A Financial reflects the price determined in
the public market at December 31, 1999.
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 loss position for interest rates swaps are $772 and $0
of unrealized losses in 1999 and 1998, respectively. Included in the net
gain position for foreign currency exchange contracts are $518 and $932 of
loss exposures in 1999 and 1998, respectively.
The carrying amounts for receivables and liabilities reported in the
balance sheet approximate fair value due to their short term nature.
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:
<TABLE>
<S> <C> <C>
Prepaid pension cost $ 19,091 Undistributed earnings on $ 3,608
====================================
Participating business
====================================
Stockholder's equity 15,483
====================================
---------------- ----------------
$ 19,091 $ 19,091
==================================== ================ ================
</TABLE>
The following table summarizes changes for the three years December 31,
1999, 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 Alta.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Post-Retirement
Pension Benefits Medical Plan
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ----------- ----------- ---------- ----------
Change in benefit obligation
Benefit obligation at beginning
of year $ 131,305 $ 115,057 $ 96,417 $ 19,944 $ 19,454 $ 16,160
Service cost 7,853 6,834 5,491 2,186 1,365 1,158
Interest cost 8,359 7,927 7,103 1,652 1,341 1,191
Addition of former Alta employees 4,155
Actuarial (gain) loss (22,363) 5,117 9,470 3,616 (1,613) 1,500
Prior service for former Alta
employees 2,471
Benefits paid (3,179) (3,630) (3,424) (641) (603) (555)
----------- ---------- ----------- ----------- ---------- ----------
Benefit obligation at end of year 126,130 131,305 115,057 29,228 19,944 19,454
----------- ---------- ----------- ----------- ---------- ----------
Change in plan assets
Fair value of plan assets at
beginning of year $ 183,136 $ 162,879 $ 138,221 $ $ $
Actual return on plan assets 12,055 23,887 28,082
Addition of former Alta employees
and other adjustments 81
Benefits paid (3,179) (3,630) (3,424)
----------- ---------- ----------- ----------- ---------- ----------
Fair value of plan assets at
end of year 192,093 183,136 162,879
----------- ---------- ----------- ----------- ---------- ----------
Funded status 65,963 51,831 47,822 (29,228) (19,944) (19,454)
Unrecognized net actuarial
(gain) loss (30,161) (11,405) (6,326) 3,464 (113) 1,500
Unrecognized prior service cost 3,614 2,310
Unrecognized net obligation or
(asset) at transition (18,170) (19,684) (21,198) 13,736 14,544 15,352
----------- ---------- ----------- ----------- ---------- ----------
Prepaid (accrued) benefit cost $ 21,246 $ 20,742 $ 20,298 $ (9,718) $ (5,513) $ (2,602)
=========== ========== =========== =========== ========== ==========
Weighted-average
assumptions as of
December 31
Discount rate 7.50% 6.50% 7.00% 7.50% 6.50% 7.00%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 5.00% 4.00% 4.50% 5.00% 4.00% 4.50%
Components of net
periodic benefit
Cost
Service cost $ 7,853 $ 6,834 $ 5,491 $ 2,186 $ 1,365 $ 1,158
Interest cost 8,360 7,927 7,103 1,652 1,341 1,191
Expected return on plan assets (15,664) (13,691) (12,286)
Amortization of transition (1,514) (1,514) (1,514) 808 808 808
obligation
Amortization of unrecognized prior
service cost 541 162
Amortization of gain from earlier
periods (80) 38
----------- ---------- ----------- ---------- ----------
----------- ---------- ----------- ----------- ---------- ----------
Net periodic (benefit) cost $ (504) $ (444) $ (1,206) $ 4,846 $ 3,514 $ 3,157
=========== ========== =========== =========== ========== ==========
</TABLE>
The Company-sponsored post-retirement medical plan (medical plan) provides
health benefits to retired 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. The Company made no contributions to this plan in
1999, 1998, or 1997.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the medical plan. For measurement purposes, a 7.5%
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:
<TABLE>
<S> <C> <C>
1-Percentage 1-Percentage
Point Point
Increase Decrease
-------------------- --------------------
Increase (decrease) on total of service and interest cost
on components $ 1,678 $ (1,285)
Increase (decrease) on post-retirement benefit obligation 7,897 (6,186)
</TABLE>
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. For employees hired after January 1, 1999, the
Company matches 50% of the first 8% of participant pre-tax contributions.
Company contributions for the years ended December 31, 1999, 1998, and 1997
totaled $5,504, $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
$17,367, $16,102, and $13,952 for years ending December 31, 1999, 1998, and
1997, respectively. The participant deferrals earn interest at a rate based
on the average ten-year composite government securities rate plus 1.5%. The
interest expense related to the plan for the years ending December 31,
1999, 1998, and 1997 were $1,231, $1,185, and $1,019, 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 1999, 1998, and 1997 was $3,002, $2,840, and $2,531,
respectively. The total liability of $14,608, $11,323, and $8,828 as of
December 31, 1999, 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:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
------------ ------------- ------------
Federal tax rate 35.0 % 35.0 % 35.0 %
Change in tax rate resulting from:
Settlement of Parent tax exposures (5.9) (20.2)
Provision for contingencies (0.5) 7.7
Policyholder share of earnings 1.7 0.7 0.6
Other, net (1.5) (2.3) 0.8
------------ ------------- ------------
Total 28.8 % 33.4 % 23.9 %
============ ============= ============
</TABLE>
The Company's income tax provision was favorably impacted in 1999 and 1997
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 release recorded
in 1999 reflected the resolution of certain tax issues with the Internal
Revenue Service (IRS) relating to the 1992 - 1993 audit years. The release
recorded in 1997 reflected the resolution of certain tax issues with the
IRS relating to the 1990-1991 audit years. The release totaled $17,150 for
1999 and $42,150 for 1997; however, $8,900 of the 1999 release and $15,100
of the 1997 release 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).
In addition to this release of contingent tax liabilities, the Company's
income tax provision for 1997 also reflects 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. This increase in contingent tax liabilities
has been reflected as a component of the deferred income tax provisions as
the Company does not expect near term resolution of these contingencies.
Excluding the effect of the 1999 and 1997 tax items discussed above, the
effective tax rate for 1999 and 1997 was 35.2% and 36.4%.
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<S> <C> <C>
1999 1998
--------------------------------- ------------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Asset Liability Asset Liability
--------------- --------------- -------------- -------------
Policyholder reserves $ 131,587 $ $ 143,244 $
Deferred policy acquisition costs 49,455 39,933
Deferred acquisition cost proxy
tax 103,529 100,387
Investment assets 69,561 19,870
Net operating loss carryforwards 444 2,867
Other 582 6,566
--------------- --------------- -------------- -------------
Subtotal 305,121 50,037 253,064 59,803
Valuation allowance (1,761) (1,778)
--------------- --------------- -------------- -------------
Total Deferred Taxes $ 303,360 $ 50,037 $ 251,286 $ 59,803
=============== =============== ============== =============
</TABLE>
Amounts included in investment assets above include $58,711 and $(34,556)
related to the unrealized gains/(losses) on the Company's fixed maturities
available-for-sale at December 31, 1999 and 1998, respectively.
The Company will file a consolidated tax return for 1999. Losses incurred
by subsidiaries in prior years cannot be offset against operating income of
the Company. At December 31, 1999, the Company's subsidiaries had
approximately $1,271 of net operating loss carryforwards, expiring through
the year 2014. The tax benefit of subsidiaries' net operating loss
carryforwards are included in the deferred tax assets at December 31, 1999
and 1998, respectively.
The Company's valuation allowance was increased (decreased) in 1999, 1998,
and 1997 by $(17), $(1,792), and $34, 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 established 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 stockholder's 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. The 1997 financial
statements have been reclassified to conform to the requirements of
Statement No. 130.
Other comprehensive loss at December 31, 1999 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 (losses) arising
==================================================
during the period $ (303,033) $ 106,061 $ (196,972)
==================================================
Less: reclassification adjustment for
==================================================
(gains) losses realized in net income (9,958) 3,485 (6,473)
==================================================
---------------- ---------------- -----------------
Net unrealized gains (losses) (312,991) 109,546 (203,445)
==================================================
==================================================
Reserve and DAC adjustment 87,729 (30,705) 57,024
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Other comprehensive loss $ (225,262) $ 78,841 $ (146,421)
================================================== ================ ================ =================
</TABLE>
<TABLE>
<S> <C> <C>
Other comprehensive income at December 31, 1998 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 $ 39,430 $ (13,800) $ 25,630
Less: reclassification adjustment for
(gains) losses realized in net income (14,350) 5,022 (9,328)
---------------- ---------------- -----------------
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 (losses) arising
==================================================
during the period $ 80,821 $ (28,313) $ 52,508
==================================================
Less: reclassification adjustment for
==================================================
(gains) losses realized in net income 2,012 (704) 1,308
==================================================
---------------- ---------------- -----------------
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
================================================== ================ ================ =================
</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. At December 31, 1999 and 1998, the Company has 1,500 authorized
shares each of Series A, Series B, Series C and Series D cumulative
preferred stock; and 2,000,000 authorized shares of non-cumulative
preferred stock.
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:
1999 1998 1997
-------------- --------------- ---------------
(Unaudited)
Net income 253,123 $ 225,863 $ 181,312
Capital and surplus 1,007,245 727,124 759,429
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,
1999 were $1,007,245 and $245,148 (unaudited), respectively. The Company
should be able to pay up to $245,148 (unaudited) of dividends in 2000.
Dividends of $0, $6,692, and $8,854 were paid on preferred stock in 1999,
1998, and 1997, respectively. In addition, dividends of $92,053, $73,344,
and $62,540 were paid on common stock in 1999, 1998, and 1997,
respectively. Dividends are paid as determined by the Board of Directors.
13. STOCK OPTIONS
Great-West Lifeco Inc. (Lifeco) is the parent of the Parent Corporation.
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, 1999, 1998, and 1997, stock available for
award to Company employees under the Lifeco plan aggregated 885,150,
1,424,400, and 3,440,000 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 1998 and
1997 to Company employees totaling 278,000 and 1,832,000, 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 1999
and 1998, 11,250 and 30,000 of these options vested and accordingly, the
Company recognized compensation expense of $23 and $116, respectively. 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 granted to Company employees which are 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>
1999 1998 1997
-------------------------- -------------------------- -------------------------
Options WAEP Options WAEP Options WAEP
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Jan. 1, 6,544,824 $ 8.07 5,736,000 $ 7.71 4,104,000 $ 6.22
Granted 575,500 16.48 988,000 13.90 1,932,000 11.56
Exercised 234,476 5.69 99,176 5.93 16,000 5.95
Expired or canceled 318,750 13.81 80,000 13.05 284,000 6.17
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Dec. 31, 6,567,098 9.04 6,544,824 8.07 5,736,000 7.71
============= ========== ============= ========== ============= =========
Options exercisable
at year-end 2,215,998 $ 6.31 1,652,424 $ 5.72 760,800 $ 5.96
============= ========== ============= ========== ============= =========
Weighted average fair
value of options
granted during year $ 5.23 $ 4.46 $ 2.83
============= ============= =============
The following table summarizes the range of exercise prices for outstanding
Lifeco common stock options granted to Company employees at December 31,
1999:
Outstanding Exercisable
======================== ------------------------------------------------ ---------------------------------
Average Average
========================
Exercise Average Exercise Exercise
========================
Price Range Options Life Price Options Price
------------------------ ---------------- ------------ ------------- ---------------- --------------
$ 5.87 - 7.80 3,554,348 6.63 $ 5.95 2,108,748 $ 5.92
========================
$11.25 - 15.81 2,842,000 7.86 $ 12.37 107,250 $ 14.03
========================
$16.53 - 18.65 170,500 9.18 17.93 - -
========================
</TABLE>
Of the exercisable Lifeco options, 2,174,748 relate to basic option grants
and 41,250 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 in Canada.
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, 1999, 1998 and
1997, stock available for award under the PFC plan aggregated 4,340,800,
4,400,800, and 4,400,800 shares.
Options granted to officers of the Company under the PFC plan became
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
granted to Company officers which remain 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>
1999 1998 1997
-------------------------- -------------------------- -------------------------
Options WAEP Options WAEP Options WAEP
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Jan. 1, 355,054 $ 2.89 1,076,000 $ 3.05 1,329,200 $ 3.14
Exercised 70,000 2.28 720,946 2.98 253,200 2.93
------------- ---------- ------------- ---------- ------------- ---------
Outstanding, Dec. 31, 285,054 3.23 355,054 2.89 1,076,000 3.05
============= ========== ============= ========== ============= =========
Options exercisable
at year-end 285,054 $ 3.23 355,054 $ 2.89 1,076,000 $ 3.05
============= ========== ============= ========== ============= =========
</TABLE>
As of December 31, 1999, the PFC options outstanding have exercise prices
between $2.38 and $3.65 and a weighted-average remaining contractual life
of 1.7 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 $1,039,
$727, and $608, in 1999, 1998, and 1997, 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
assumptions used for those options granted in 1999, 1998, and 1997,
respectively: dividend yields of 3.63%, 3.0% and 3.0%, expected volatility
of 32.4%, 34.05%, and 24.04%, risk-free interest rates of 6.65%, 4.79%, and
4.72%, 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:
<TABLE>
Year ended December 31, 1999
Operations:
<S> <C> <C> <C> <C> <C> <C>
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Revenue:
================================================
Premium income $ 990,449 $ 172,734 $ 1,163,183
================================================
Fee income 548,580 86,567 635,147
================================================
Net investment income 80,039 795,907 875,946
================================================
Realized investment gains (losses) (1,224) 2,308 1,084
================================================ ----------------- ----------------- -----------------
Total revenue 1,617,844 1,057,516 2,675,360
================================================
Benefits and Expenses:
================================================
Benefits 789,084 792,755 1,581,839
================================================
Operating expenses 661,119 143,422 804,541
================================================ ----------------- ----------------- -----------------
Total benefits and expenses 1,450,203 936,177 2,386,380
================================================ ----------------- ----------------- -----------------
----------------- ----------------- -----------------
================================================
================================================
Net operating income before income 167,641 121,339 288,980
taxes
================================================
Income taxes 51,003 32,259 83,262
----------------- ----------------- -----------------
Net income $ 116,638 $ 89,080 $ 205,718
================================================ ================= ================= =================
Assets:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Investment assets $ 1,467,464 $ 11,590,591 $ 13,058,055
================================================
Other assets 646,036 909,172 1,555,208
================================================
Separate account assets 7,244,145 5,535,871 12,780,016
================================================ ----------------- ----------------- -----------------
Total assets $ 9,357,645 $ 18,035,634 $ 27,393,279
================================================ ================= ================= =================
Year ended December 31, 1998
Operations:
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 157,793 137,958 295,751
taxes
================================================
Income taxes 50,678 48,158 98,836
----------------- ----------------- -----------------
Net income $ 107,115 $ 89,800 $ 196,915
================================================ ================= ================= =================
Assets:
Employee Financial Total
================================================
Benefits Services U.S.
================================================ ----------------- ----------------- -----------------
Investment assets $ 1,434,691 $ 12,235,845 $ 13,670,536
================================================
Other assets 567,126 785,940 1,353,066
================================================
Separate account assets 5,704,313 4,395,230 10,099,543
================================================ ----------------- ----------------- -----------------
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 126,972 81,635 208,607
taxes
================================================
Income taxes 28,726 21,121 49,847
----------------- ----------------- -----------------
Net income $ 98,246 $ 60,514 $ 158,760
================================================ ================= ================= =================
The following table, which summarizes premium and fee income by segment, represents supplemental information.
1999 1998 1997
====================================== ---------------- ---------------- -----------------
----------------
Premium Income:
======================================
======================================
Employee Benefits
======================================
Group Life & Health $ 990,449 $ 746,898 $ 465,143
====================================== ---------------- ---------------- -----------------
Total Employee Benefits 990,449 746,898 465,143
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Financial Services
======================================
======================================
Savings 14,344 16,765 22,634
======================================
Individual Insurance 158,390 231,200 345,402
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Financial Services 172,734 247,965 368,036
====================================== ---------------- ---------------- -----------------
Total premium income $ 1,163,183 $ 994,863 $ 833,179
====================================== ================ ================ =================
----------------
Fee Income:
======================================
======================================
Employee Benefits
======================================
Group Life & Health $ 454,071 $ 366,805 $ 305,302
======================================
(uninsured plans)
======================================
401(k) 94,509 77,844 52,703
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Employee Benefits 548,580 444,649 358,005
====================================== ---------------- ---------------- -----------------
---------------- ---------------- -----------------
Financial Services
======================================
======================================
Savings 81,331 71,403 62,725
======================================
Individual Insurance 5,236
---------------- ---------------- -----------------
---------------- ---------------- -----------------
Total Financial Services 86,567 71,403 62,725
====================================== ---------------- ---------------- -----------------
Total fee income $ 635,147 $ 516,052 $ 420,730
====================================== ================ ================ =================
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
On October 6, 1999, the Company entered into a purchase and sale agreement
(the Agreement) with Allmerica Financial Corporation (Allmerica) to acquire
Allmerica's group life and health insurance business on March 1, 2000. This
business primarily consists of administrative services only and stop loss
policies. The in-force business is expected to be underwritten and retained
by the Company upon each policy renewal date. The purchase price, as
defined in the Agreement, will be based on a percentage of the amount
in-force at March 1, 2000 contingent on the persistency of the block of
business through March 2001. Management does not expect the purchase price
to have a material impact on the Company's consolidated financial
statements.
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.
16. SUBSEQUENT EVENTS
Effective January 1, 2000, the Company coinsured the majority of General
American Life Insurance Company's (General American) group life and health
insurance business which primarily consists of administrative services only
and stop loss policies. The agreement is expected to convert to an
assumption reinsurance agreement by January 1, 2001, pending regulatory
approval. The Company assumed approximately $150,000 of policy reserves and
miscellaneous liabilities in exchange for an equal amount of cash and
miscellaneous assets from General American.
C-2
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements for Great-West Life & Annuity Insurance Company
for the years ended December 31, 1999, 1998 and 1997 and the financial
statements for Maxim Series Account for the years ended December 31, 1999 and
1998 are attached to the statement of additional information filed herewith.
(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.
<TABLE>
<S> <C>
Item 25. Directors and Officers of the Depositor
Position and Offices
Name Principal Business Address with
Depositor
James Balog 2205 North Southwinds Boulevard Director
Vero Beach, Florida 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
Michael R. Bracco (2) Senior Vice President,
Employee Benefits
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
Mark S. Hollen (3) Senior Vice President
FASCorp
John T. Hughes (3) Senior
Vice-President,
Chief Investment Officer
D. Craig Lennox (6) 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
Greg E. Seller (3) Senior
Vice-President,
Government Markets
Robert K. Shaw (3) Senior Vice-President
Individual Markets
George D. Webb (3) Senior Vice-President
Public/Non-Profit
Operations
Douglas L. Wooden (3) Executive
Vice-President,
Financial Services
- -------------------------------------
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal, Quebec, Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal, Quebec, Canada H2Y 2J3.
(6) 8525 East Orchard Road, Englewood, Colorado 80111
</TABLE>
<TABLE>
<S> <C>
Item 26. Persons controlled by or under common control with the Depositor or Registrant
------------------------------------------------------------------------------
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.5% - Power Financial Corporation 81.1% -
Great-West Lifeco Inc.
100% - The Great-West Life Assurance Company
100% - GWL&A Financial (Nova Scotia) Co.
100% GWL&A Financial, Inc.
100% - Great-West Life & Annuity Insurance Capital I
100% - Great-West Life & Annuity Insurance Company
100% - Alta Health & Life Insurance Company
100% - Alta Agency, Inc.
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 Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Health Plan, Inc.
100% - One Health Plan of Alaska, Inc.
100% - One Health Plan of Arizona, Inc.
100% - One of Arizona, Inc.
100% - One Health Plan of Maine, Inc.
100% - One Health Plan of Nevada, Inc.
100% - One Health Plan of New Hampshire, Inc.
100% - One Health Plan of New Jersey, Inc.
100% - One Health Plan of South Carolina, Inc.
100% - One Health Plan of Wisconsin, Inc.
100% - One Health Plan of Wyoming, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
100% - Benefits Advisors, Inc.
100% - Greenwood Property Corporation
95% - Maxim Series Fund, Inc.*
100% - GWL Properties Inc.
100% - Great-West Realty Investments, Inc.
50% - Westkin Properties Ltd.
92%- Orchard Series Fund **
100% - Orchard Trust Company
100% - National Plan Coordinators of Delaware, Inc.
100% - NPC Securities, Inc.
100% - Deferred Comp of Michigan, Inc.
100% - National Plan Coordinators of
Washington, Inc.
100% - National Plan Coordinators of
Ohio, Inc.
100% - Renco, Inc.
100% - P.C. Enrollment Services &
Insurance Brokerage, Inc.
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
</TABLE>
Item 27. Number of Contract Owners
As of February 29, 2000, there were 86 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.
Director includes, unless the context requires otherwise, the estate
or personal representative of a director.
(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
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(a) BenefitsCorp Equities, Inc. ("BCE") is the distributor of securities of the
Registrant.
(b) Directors and Officers of BCE
Position and Offices
Name Principal Business Address with Underwriter
Charles P. Nelson (1) Director and
President
John A. Brown (1) Director
Dennis Low (1) Director
Gregory E. Seller 18101 Von Karman Ave., Suite 1460 Director and
Vice-President,
Irvine, CA 92612 Major Accounts
Robert K. Shaw (1) Director
Douglas L. Wooden (1) Director
Jack Baker (1) Vice President,
Licensing and
Contracts
Glen R. Derback (1) Treasurer
Beverly A. Byrne (1) Secretary and Compliance
Officer
</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
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions
Compensation
BCE -0- -0- -0-
-0-
</TABLE>
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder
are maintained by the registrant through GWL&A, 8515 E. Orchard Road,
Englewood, Colorado 80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to
ensure that the audited financial statements in the
Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may
be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a postcard or similar written
communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this form promptly upon written or oral
request.
(d) 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.
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 26th day of April, 2000.
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 26th, 2000
- ------------------- ----------
Director and Chairman of the
Board (Robert Gratton)
Signature and Title Date
/s/ William T. McCallum April 26th, 2000
- ----------------------- ----------
Director, President and Chief Executive
Officer (William T. McCallum)
/s/ Mitchell T.G. Graye April 26th, 2000
- ----------------------- ----------
Executive Vice President, Chief
Financial Officer
(Mitchell T.G. Graye)
/s/ James Balog* April 26th, 2000
- ---------------- ----------
Director, (James Balog)
/s/ James W. Burns* April 26th, 2000
- ------------------- ----------
Director, (James W. Burns)
/s/ Orest T. Dackow* April 26th, 2000
- -------------------- ----------
Director (Orest T. Dackow)
/s/ Andre Desmarais* April 26th, 2000
- -------------------- ----------
Director (Andre Desmarais)
/s/ Paul Desmarais, Jr.* April 26th, 2000
- ------------------------ ----------
Director (Paul Desmarais, Jr.)
Signature and Title Date
/s/ Robert G. Graham* April 26th, 2000
- ---------------------- ----------
Director (Robert G. Graham)
/s/ N. Berne Hart* April 26th, 2000
- ------------------ ----------
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* April 26th, 2000
- ---------------------- ----------
Director (Kevin P. Kavanagh)
/s/ William Mackness* April 26th, 2000
- --------------------- ----------
Director (William Mackness)
/s/ Jerry E.A. Nickerson* April 26th, 2000
- ------------------------- ----------
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield* April 26th, 2000
- ------------------------ ----------
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* April 26th, 2000
- -------------------------- ----------
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh* April 26th, 2000
- ------------------- ----------
Director (Brian E. Walsh)
Signature and Title Date
By: /s/ D.C. Lennox April 26th, 2000
---------------- ----------
D. C. Lennox
* Attorney-in-fact pursuant to Powers of Attorney filed with
Pre-Effective Amendment No. 1 to this Registration Statement.
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 26, 2000
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Maxim Series Account
Post-Effective Amendment No. 3 to the Registration Statement on
Form N-4 File No. 333-44839
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
caption "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
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement No. 333-44839 of Maxim Series Account of Great-West Life & Annuity
Insurance Company of our report dated February 22, 2000 on the financial
statements of Maxim Series Account and our report dated January 31, 2000 on the
financial statements of Great-West Life & Annuity Insurance Company and to the
reference to us under the heading "Experts" in the Statement of Additional
Information, which is part of such Registration Statement.
Deloitte & Touche LLP
Denver, Colorado
April 26, 2000
2There is a $10 fee for each Transfer in excess of twenty-four in any calendar
year. 2The 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.
4The 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.
