AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
APRIL 24, 1996
Registration No. 811-1737
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.
20549 FORM N-1 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 [X]
Amendment No. 21
(Check appropriate box or boxes.)
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
(Exact name of registrant)
8515 E. Orchard Road
Englewood, Colorado 80111
(303) 689-3000
(Address and telephone number of registrant's principal
executive office)
RUTH B. LURIE
Vice-President and Counsel
The Great-West Life Assurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
(Name and address of agent for service)
Copy to:
PAUL J. MASON
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-2404
GREAT-WEST VARIABLE ANNUITY ACCOUNT
CROSS-REFERENCE SHEET
Showing Location in Prospectus of Information Required by Form
N-1
Form N-1 Item Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Summary of Prospectus
3. Condensed Financials Financial Highlights
4. General Information and History Description of
Great-West and Variable Annuity Account A
5. Investment Objectives and
Policies Description of Great-West
and Variable Annuity Account A
6. Tax Status U. S. Federal Tax Status
7. Brokerage Allocation Allocation of Portfolio
Brokerage
8. Pending Legal Proceedings Legal Proceedings
9. Control Persons and Principal Management
Holders of Securities
10. Directors, Officers, and Advisory Management
Board Members
11. Compensation of Directors and Management
Others
12. Custodian, Transfer Agent and Trustee for Assets
Dividend-Paying Agent of Variable Annuity
Account A
13. Investment Advisory and Other The Variable Annuity
Services Contract-Charges and
Experience Rating, Description of Great-West and Variable Annuity
Account A
14. Capital Stock and Other The Variable Annuity
Securities Contract, Voting Rights,
Investment Objectives and Policies
15. Pricing of Registrant's Not Applicable
Securities
16. General Information as to Plan The Variable Annuity
of Distribution Contract, Distribution of
Variable Annuity Contracts
18. Financial Statements Financial Statement
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
OF GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Group Variable Annuity Contracts
Distributed by
THE GREAT-WEST LIFE ASSURANCE COMPANY
8515 E. ORCHARD ROAD, ENGLEWOOD, COLORADO, 80111
TELEPHONE (303) 689-3000
The group variable annuity contract described by this
Prospectus ("Variable Annuity Contract") is no longer being
offered. Effective on May 1, 1989 no additional contributions under
any existing variable annuity contract are being accepted. This
Prospectus contains information necessary to amend Variable Annuity
Account A's registration statement under the Investment Company Act
of 1940.
The Variable Annuity Contract was designed for annuity
purchase plans adopted by public school systems and certain
tax-exempt organizations, whose participating employees may obtain
certain federal income tax benefits under Section 403(b) of the
Internal Revenue Code.
Under a variable annuity the variable annuitant assumes the
risk of investment gain or loss in that the value of his individual
account (before his annuity commencement date) and his monthly
annuity payments (after his annuity commencement date) varies with
the investment income and gains or losses on the assets in a
variable annuity account. In a variable annuity, the insurance
company assumes the mortality risk and expense risk under the
Contract.
The basic objective of the Variable Annuity Contract is to
provide the variable annuitant with lifetime variable annuity
payments under the selected annuity option (see "Annuity Period,"
p. 12) which will tend to reflect changes in the cost of living and
the size of the economy both during the years prior to his annuity
commencement date and the years thereafter. GWL&A seeks to
accomplish this basic objective through Variable Annuity Account A
as a medium for relating annuity payments to the net investment
experience of a selected portfolio of equity investments, which are
deemed to provide long-term growth of capital, primarily common
stocks (see "Investment Objectives and Policies," p. 22 ),
accompanied by a contractual obligation to make annuity payments
for life.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is April 30, 1996 .
This prospectus should be read carefully and retained for
future reference.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Group Variable Annuity Contracts
Distributed by
THE GREAT-WEST LIFE ASSURANCE COMPANY
SUMMARY OF PROSPECTUS
Description of the Securities
The group variable annuity contract described by this
Prospectus ("Variable Annuity Contract" or "Contract" ) is
designed for annuity purchase plans adopted by public school
systems and certain tax-exempt organizations. The Policyholder (as
defined on p. 7) will have to meet underwriting qualifications
related to the number of participating employees and the aggregate
annual premiums for the variable and fixed annuity contracts issued
(see "Transfer From or To Companion Contract", p. 18 for a
description of the fixed annuity). Participating employees may
obtain certain federal income tax benefits under Section 403(b) of
the Internal Revenue Code ("Code") if the plan is carried to
completion.
Effective April 16, 1984, The Great-West Life Assurance
Company ("Great-West") ceased issuing new variable annuity
contracts. On May 1, 1987, Great-West announced that it would not
permit new participants to be enrolled under existing variable
annuity contracts and, with respect to any variable annuity
contracts for which there are fewer than 25 participants, would not
accept additional contributions. On May 1, 1989, Great-West
announced that it would not accept additional contributions on any
variable annuity contract. On December 31, 1991, Great-West
Variable Annuity Account A was transferred to and the Variable
Annuity Contracts were reinsured by Great-West Life & Annuity
Insurance Company (GWL&A).
Variable Annuity Account A is a separate and distinct fund
established for the purpose of funding the Variable Annuity
Contracts and is registered as an open-end diversified management
company under the Investment Company Act of 1940, as amended ("the
1940 Act").
The significant difference between a regular or fixed annuity
and a variable annuity is that under a fixed annuity the insurance
company assumes the risk of investment gain or loss by undertaking
to credit a specified minimum interest rate and by undertaking to
pay a specified minimum monthly annuity payment, whereas under a
variable annuity the variable annuitant assumes the risk of
investment gain or loss in that the value of his individual account
(before his annuity commencement date) and his monthly annuity
payments (after his annuity commencement date) vary with the
investment income and gains or losses on the assets in a variable
annuity account. In both a fixed annuity and a variable annuity the
insurance company assumes the mortality risk and expense risk under
the Contract.
The Variable Annuity Contract includes a contractual
undertaking that, commencing on the selected annuity date,
GWL&A will make variable payments for the lifetime of the
variable annuitant based upon mortality assumption contained in the
Contract at the time the purchase payment to provide such annuity
is received, regardless of the actual mortality experience among
its annuitants. The Contract also provides that in the event of the
death of a participating employee prior to his annuity commencement
date, the benefits payable will be the greater of (a) the
value of the employee's individual account or (b) the sum of 100%
of purchase payments made on behalf of the participating employee
prior to his 65th birthday and 75% of such purchase payments made
thereafter.
Investment Advisor and Underwriter
Great-West acts as investment manager and advisor and was
the distributor in connection with the Variable Annuity
Contracts, and Variable Annuity Account A. GWL&A performs
all administrative functions relative to the Contracts, provides
the minimum death benefit, and assumes the mortality and expense
risks under the Contract (see "Services and Functions for Which
Charges are made," p. 15).
Investment Required
The minimum amount of purchase payments which previously could
be made on behalf of any participating employee was $180 in any
contract year and the minimum amount of any one purchase payment
was $15.
The amount of each purchase payment authorized by a
participating employee less deductions for sales expenses,
administrative expenses, minimum death benefits, and applicable
premium taxes, if any, were credited to such employee's individual
account in the form of Accumulation Units (see Paragraph 2(i) under
"Charges and Experience Rating", p. 15). In determining the net
investment experience of Variable Annuity Account A for a valuation
period, certain deductions from the gross investment experience for
the valuation period are made (see Paragraph 2(ii) under "Charges
and Experience Rating", p. 16 ).
Purchase Payment Charges and Deductions
A deduction of 3.75% (plus any applicable premium taxes--see
"Table of Premium Taxes," p. 31 ) was made from each purchase
payment when received for sales and administrative expenses, and
for the minimum death benefit. An additional deduction of $9 for
sales expenses was made from the first purchase payment in respect
of a participating employee in each contract year (see "Charges and
Experience Rating," p. 15).
A daily deduction of .003285% (an effective annual rate of
1.2064%) is made from the gross investment rate of Variable Annuity
Account A for administrative expenses, mortality risks, and for
investment, management, and advisory services (see "Charges and
Experience Rating," p. 15).
Investment Objectives
The basic objective of the Variable Annuity Contract is to
provide the variable annuitant with lifetime variable annuity
payments under the selected annuity option (see "Annuity Period,"
p. 12) which will tend to reflect changes in the cost of living and
the size of the economy both during the years prior to his annuity
commencement date and the years thereafter. GWL&A seeks to
accomplish this basic objective through Variable Annuity Account A
as a medium for relating annuity payments to the net investment
experience of a selected portfolio of equity investments, primarily
common stocks (see "Investment Objectives and Policies," p.
22 ), accompanied by a contractual obligation to make annuity
payments for life. Although there is no assurance that this
objective will be attained, historically the value of a diversified
portfolio of common stocks held for an extended period of time has
tended to rise during periods of inflation. There has, however,
been no exact correlation, and for some period the prices of
securities have declined while the cost of living was rising. The
value of the investments in Variable Annuity Account A fluctuates.
There is no assurance that the value of an employee's individual
account during the years prior to the annuity commencement date or
the total amount of the variable annuity payments made thereafter,
will equal or exceed the purchase payments made on behalf of a
participating employee.
Withdrawal and Transfer Privileges
A participating employee has (a) certain withdrawal privileges
for 45 days after GWL&A gives the required notice of such right,
and (b) the right to receive within 18 months of acceptance of his
first purchase payment, the value of his account and, in some
cases, a portion of the sales charges paid prior to this withdrawal
(see "Surrender Rights--Redemption", p. 11).
The Variable Annuity Contract was issued as a supplement to a
fixed-dollar annuity contract (the "Companion Contract") and
provides for transfers from and to such Companion Contract under
specified circumstances and conditions (see "Transfer From or To
Companion Contract", p. 18).
Other Pertinent Information
The Variable Annuity Contract provides that GWL&A may modify
the charges, the tables used in determining the first monthly
annuity payment and the benefit payable in case of death prior to
the annuity commencement date provided that such modification shall
apply only with respect to purchase payments received after the
effective date of the modification. Such modification may
materially affect the value of the Variable Annuity Contract to a
participating employee and the risk borne by said participating
employee. (See "Modifications of the Variable Annuity Contract by
Great-West,"p. 17).
The foregoing Summary of information should be read in conjunction
with the detailed information appearing elsewhere in this
Prospectus.
Great-West Variable Annuity Account A
Financial Highlights
Income and Capital Changes per Accumulation Unit
(For an accumulation unit outstanding throughout the year)
For the year ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Income/Expense Income
Operating Expenses (Note B)
Net Investment Income (Note C)
Capital Changes
Accumulation unit value at the beginning of the period (Note
A)
Net Realized and Unrealized gains or (losses) on securities
(Note C)
Accumulation Unit Value at
the End of the Period
Ratio of Expenses
to Average Net Assets
Ratio of Net Investment Income
to Average Net Assets
Portfolio Turnover Rate
Accumulation Units
$0.170 0.081 0.089 6.070 1.342 $7.501 1.18%
2.49% 62.2% 848,519
$0.150 0.077 0.073 6.245 (0.248) $6.070 1.24%
2.42% 30.20% 904,923 $0.118 0.070 0.048 5.397 0.800
$6.245 1.19% 2.02% 23.40% 1,051,813 $0.114 0.062
0.052 5.175 0.170 $5.397 1.21% 2.23% 44.50%
1,145,341 $0.121 0.055 0.066 4.096
1.013 $5.175 1.20% 2.65% 66.20%
1,256,270 $0.165 0.048 0.117 4.167 (0.188) $4.096
1.16% 4.00% 84.30% 1,361,447 $0.163 0.045 0.118 3.246
0.803 $4.167 1.20% 4.37% 92.10% 1,537,600 $0.157
0.037 0.120 2.909 0.217 $3.246 120.00% 5.07% 84.40%
1,665,176 $0.111 0.040 0.071 2.930 (0.092) $2.909
1.21% 3.37% 35.10% 2,099,946 $0.088 0.034 0.054 2.504
0.372 $2.930 1.20% 3.07% 31.50% 2,621,350 Note A
- - Contract purchase payments were first placed in Variable annuity
Account A on January 3, 1969.
Note B - this amount represents the aggregate daily deduction of
.003285% (an effective annual rate of 1.2064%) which is made from
the gross Investment rate of Variable Annuity Account A for
administrative
expenses, mortality risks, expense risks, and Investment
management and advisory services.
Note C - Net Investment Income and realized and unrealized capital
gains (losses) are reflected in the value of the accumulation
units.
Dividends are not declared from Income and capital gains are
not distributed.
TABLE OF CONTENTS
Summary of Prospectus 2
Financial Highlights for an Accumulation Unit 5
Special Terms 7
Description of GWL&A and Variable Annuity Account A 8
The Variable Annuity Contract 8
A. General 8
B. Accumulation Period 10
C. Annuity Period 12
D. Charges and Experience Rating 15
E. Modifications of the Variable Annuity Contract by
Great-West 17
F. Transfer From or To Companion Contract 18
Federal Tax Status 19
Taxation of GWL&A 19
Section 403(b) Tax Sheltered Annuities 19
Investment of Objectives and Policies 22
Allocation of Portfolio Brokerage 24
Portfolio Turnover Rate 25
Voting Rights 25
Management 25
Distribution of Variable Contracts 29
Regulation 30
Trustee for Assets of Variable Annuity Account A 30
Legal Proceedings 30
Legal Advice 30
Independent Auditors 31
Other Variable Annuity Contracts 31
Table of Premium Taxes 31
Appendix 32
SPECIAL TERMS
Variable Annuity--An annuity providing for payments varying in
amount in accordance with the investment experience of a variable
annuity account.
Fixed Dollar Annuity--An annuity providing for payments which
remain fixed throughout the payment period and which do not vary
with investment experience.
Variable Annuitant--Any person receiving or who will receive
annuity payments under the Variable Annuity Contract.
Annuity--A series of payments for life or for a designated period.
Annuity Commencement Date--The date on which annuity payments are
to commence under the Variable Annuity Contract.
Accumulation Unit--An accounting unit of measure used to calculate
the value of a contract before annuity payments begin.
Annuity Unit--An accounting unit of measure used to calculate the
amount of annuity payments.
Contract Anniversary--An anniversary of the date shown as the
register date in the Variable Annuity Contract.
Contract Year--A twelve-month period from the date shown as the
register date in the Variable Annuity Contract.
Participating Employee--An employee participating in the annuity
purchase plan pursuant to which the Variable Annuity Contract is
issued and in respect of whom purchase payments have been made
under the Variable Annuity Contract.
Employee's Individual Account--The sum of the Accumulation Units
credited to a participating employee.
Participants--Participating employees and others credited with
Accumulation Units or Annuity Units under variable annuity
contracts funded by Variable Annuity Account A.
Policyholder--The entity to which the Variable Annuity Contract has
been issued, which is normally an employer or a trust established
by an employer or an employee association.
Purchase Payment--The total amount paid periodically to purchase an
annuity under the Variable Annuity Contract.
Net Purchase Payment--The amount applied to the purchase of
Accumulation Units, which was equal to the purchase payment less
deductions for sales and administrative expenses, minimum death
benefits and applicable premium taxes.
Register Date--The date shown as the register date in the Variable
Annuity Contract, which was generally a date selected by the
Policyholder to coincide with his administrative or accounting
year.
DESCRIPTION OF GWL&A
GWL&A is a stock life insurance company originally organized
under the laws of the State of Kansas as the National Interment
Association. Its name was changed to Ranger National Life Insurance
Company in 1963 and to InsurAmerica Corporation prior to changing
to its current name in February of 1982. In September of 1990,
GWL&A redomesticated and is now organized under the laws of the
State of Colorado.
GWL&A is authorized to engage in the sale of life insurance,
accident and health insurance and annuities. It is qualified to do
business in Puerto Rico , the District of Columbia and 49
states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life
Assurance Company. The Great-West Life Assurance Company is a
subsidiary of Great-West LifeCo Inc., a holding company. Great-West
LifeCo Inc. is in turn a subsidiary of Power Financial Corporation
of Canada, a financial services company. Power Corporation of
Canada, a holding and management company, has voting control of
Power Financial Corporation of Canada. Mr. Paul Desmarais,
through a group of private holding companies, which he
controls, has voting control of Power Corporation of Canada.
On January 17, 1968, by duly adopted resolution the Board of
Directors of Great-West established within Great-West, in
accordance with applicable law, a separate and distinct fund
designated Great-West Variable Annuity Account A. On December 17,
1991, by duly adopted resolution, the Board of Directors of GWL&A
established a separate account within GWL&A in accordance with
Colorado law to facilitate the transfer of Account A from
Great-West to GWL&A. Account A was subsequently transferred on
December 31, 1991. Under the provisions of Colorado law, the assets
of Account A are not chargeable with liabilities arising out of any
other business GWL&A may conduct. A Variable Annuity Account
Committee for Variable Annuity Account A ("Committee") is elected
by Participants under contracts funded by Account A (see
"Management", p. 25 ).
VARIABLE ANNUITY ACCOUNT A
Variable Annuity Account A, although an integral part of
GWL&A, is registered as an open-end diversified management company
under the 1940 Act. The Securities and Exchange Commission has
issued an order under Section 7(d) of the 1940 Act permitting such
registration and permitting the sale of Variable Annuities funded
by Variable Annuity Account A. The order was issued on terms and
conditions designed to provide adequate means to enforce compliance
with the 1940 Act.
Registration with the Securities and Exchange Commission does
not involve supervision of the management or investment practices
or policies of Variable Annuity Account A or GWL&A by the
Commission. However, GWL&A, which includes Variable Annuity Account
A as an integral part thereof, is subject to supervision and
regulation by the Department of Insurance of the State of Colorado,
and the Departments of Insurance of each state in which it is
licensed to do business (see "Regulation", p. 30 ).
THE VARIABLE ANNUITY CONTRACT
A. General
The Variable Annuity Contract, which has been issued to the
Policyholder who owns the Contract, is a master group Contract
which provides benefits for all participating employees, each of
whom received a certificate which summarizes the provisions of the
master Contract and evidences his participation in the annuity
purchase plan adopted by the Policyholder. Certain significant
provisions of the Variable Annuity Contract are discussed below.
1. ANNUITY PAYMENTS
Variable annuity payments are determined on the basis of (a)
a mortality table specified in the Variable Annuity Contract (see,
however, "Modifications of the Variable Annuity Contract by
Great-West", p. 17"), which reflects the age of the variable
annuitant and the type of annuity payment option selected, and (b)
the net investment experience of Variable Annuity Account A. The
variable annuitant will receive the value of a fixed number of
Annuity Units each month. The value of such units, and thus the
amounts of the monthly annuity payments, will reflect investment
gains and losses and investment income occurring both before and
after retirement, and thus the payments will vary with the net
investment experience of the assets of Variable Annuity Account A.
Sex was a factor in the determination of variable annuity payments
prior to August 1, 1983. For contracts issued before that date no
such payments shall be less than those guaranteed under those
contracts.
2. ASSIGNMENT
Assignment of the Variable Annuity Contract or a participating
employee's individual account is prohibited by the terms of the
Contract.
3. PURCHASE LIMITS
The Variable Annuity Contract provides that the amount of any
purchase payments that previously could be made in respect of any
employee could not be less than $180 annually, and the amount of
any one monthly purchase payment in respect of an employee could
not be less than $15.
4. CESSATION OF PURCHASE PAYMENTS
GWL&A reserved the right to refuse to receive further purchase
payments under the Variable Annuity Contract as from the date
stated in written notice to the Policyholder if the Policyholder
failed to comply with any of the terms or conditions of the
Contract or if the number of employees covered under the Variable
Annuity Contract in a contract year was less than 25. The
Policyholder could give written notice to GWL&A that from the date
stated in the notice no further purchase payments would be made.
Upon cessation of purchase payments in respect of an employee for
any reason prior to his annuity commencement date no further
purchase payments would be accepted by GWL&A, and each
participating employee could exercise one of the following options:
(a) If the participating employee was at least 50 years of
age, he could elect to have his individual account applied to
provide variable annuity payments commencing immediately under the
selected annuity option (see "Annuity Period", p. 12).
(b) He could surrender his individual account as explained
under the caption "Surrender Rights--Redemption " , p. 11.
(c) He could elect to leave his individual account in force
under the Variable Annuity Contract, and the account would continue
to reflect the net investment experience of Variable Annuity
Account A. At the selected annuity commencement date, the
participating employee will begin to receive annuity payments under
the selected option (see "Annuity Period", p. 12). At any time in
the interim, the participating employee could surrender his
individual account in accordance with (b) above.
B. Accumulation Period
1. CREDITING ACCUMULATION UNITS: DEDUCTION FOR SALES AND
ADMINISTRATIVE EXPENSES AND MINIMUM DEATH BENEFIT
During the accumulation period--the period before the
commencement of annuity payments--GWL&A deducted from purchase
payments the deductions described in Paragraph 2(i) under "Charges
and Experience Rating", p. 16 . The net purchase payment
remaining after such deductions was credited to the individual
account of the participating employee in the form of Accumulation
Units. The number of Accumulation Units credited to an employee's
individual account was determined as of the valuation period in
which any purchase payment, including the initial payment, is
received. The number of Accumulation Units so determined remains
constant, but the dollar value of an Accumulation Unit may vary
depending upon the net investment experience of Variable Annuity
Account A.
2. VALUE OF AN EMPLOYEE'S INDIVIDUAL ACCOUNT
The value of an employee's individual account at any time
prior to his annuity commencement date can be determined by
multiplying the total number of Accumulation Units credited to his
account by the current Accumulation Unit value. There is no
assurance that the value of an employee's individual account will
equal or exceed total purchase payments made on his behalf. Each
participating employee will be advised periodically of the number
of Accumulation Units credited to his individual account, the
current Accumulation Unit value, and the total value of his
account. A participating employee may at any time obtain, from the
Head Office of GWL&A, the current value of an Accumulation Unit.
3. VALUE OF AN ACCUMULATION UNIT
Accumulation units are valued each day during which the New
York Stock Exchange is open for trading ("valuation date"). A
valuation period is the period beginning immediately after the close
of business of the New York Stock Exchange on a valuation date and
ending at the close of business of the New York Stock Exchange on the
immediately succeeding valuation date. The value of an Accumulation
Unit was set at $1.00 for the valuation period ending January 3,
1969. The value of an Accumulation Unit for any subsequent valuation
period is determined by multiplying the value of an Accumulation Unit
for the preceding period by the net investment factor (described
below) for the current valuation period. See Appendix, p. 32
for an historical record of the values of an Accumulation Unit as of
the last valuation date of each quarter to December 31, 1995 .
4. NET INVESTMENT FACTOR FOR EACH VALUATION PERIOD
At the end of each valuation period a gross investment rate
for the valuation period is determined from the investment
experience of Variable Annuity Account A for the valuation period.
Such rate is (a) the investment income for the valuation period,
plus capital gains and minus capital losses for the period, whether
realized or unrealized, less a deduction for any taxes chargeable
to participating employees or Variable Annuity Account A (under
current tax laws there are no such Federal income taxes) divided by
(b) the value of Variable Annuity Account A at the beginning of the
valuation period. The gross investment rate may be positive or
negative.
In order to determine the net investment rate, the gross
investment rate is reduced by a deduction of the product obtained
by multiplying a daily deduction of .003285% (an effective annual
rate of 1.2064%) by the number of days in a valuation period. This
deduction is made by GWL&A for administrative expenses investment
management and advisory services, and mortality and expense risks
assumed under the Contract (see Paragraph 2(ii) under "Charges and
Experience Rating", p. 16 ).
The net investment rate is added to 1 to determine the net
investment factor.
Since the net investment rate may be negative, the net
investment factor may be less than 1, and the value of an
Accumulation Unit for the valuation period may be less than the
value for the previous valuation period.
See the Appendix, p. 32 , for a hypothetical
illustration of the above computations.
5. VALUE OF VARIABLE ANNUITY ACCOUNT A
The value of Variable Annuity Account A for purposes of the
preceding paragraph shall be the aggregate, in United States
dollars, of the following: (a) the face amount of cash; plus (b)
the total market value for securities listed on an organized
exchange determined (i) by the last board lot sale reported on the
valuation date on the primary trading market, or, (ii) if no such
sale is reported, by the mean between the closing bid and ask
prices on such day, or, (iii) if prices in neither (i) nor (ii) are
reported, then by either (A) the last board lot sale price, or (B)
the mean between the closing bid and ask prices on the last
preceding day on which both bid and ask prices were reported,
whichever is the later; plus (c) the fair market value of any other
asset as determined in good faith by the Committee, which, in the
case of securities actively traded over-the-counter is the closing
bid price; minus (d) an amount for taxes attributable to Variable
Annuity Account A; and minus (e) accrued and unpaid liabilities of
Variable Annuity Account A other than Variable Annuity Contract
liabilities.
6. BENEFITS PAYABLE ON DEATH PRIOR TO THE ANNUITY COMMENCEMENT
DATE
The Variable Annuity Contracts provide that, upon receipt of
due proof of the death of a participating employee prior to his
annuity commencement date, GWL&A will pay to the beneficiary a
death benefit equal in amount to the greater of (a) the value of
the participating employee's individual account determined for the
valuation period in which written notice of death is received by
GWL&A, or (b) the sum of 100% of the total purchase payments made
on behalf of the participating employee prior to his 65th birthday
and 75% of the total purchase payments made thereafter on his
behalf (see the effect of partial withdrawals on calculation of
purchase payment, p. 12).
For providing the minimum death benefit described in (b) of
the preceding sentence, GWL&A deducts .25% from each purchase
payment (see Paragraph 2(i) under "Charges and Experience Rating",
p. 16 ). In lieu of payment of the death benefit in one sum,
a beneficiary over 50 years old may elect variable annuity payments
under any of the options available to a participating employee
except the joint and last survivor annuity, or a beneficiary
regardless of his age may elect to take variable annuity payments
for a specified period not exceeding 25 years. Where the
beneficiary takes the payment in one sum, payment will be made
within seven days of receipt of proof of death, unless subject to
postponement for a reason described in Paragraph 7 below.
7. SURRENDER RIGHTS--REDEMPTION
Within 60 days of acceptance by GWL&A of a participating
employee's first purchase payment, GWL&A mailed to such
participating employee a statement of charges to be deducted under
the Variable Annuity Contract and a notice of his right of
withdrawal and refund under such contract. A participating employee
could, within 45 days of the mailing of such notice, elect to
terminate his participation under the Variable Annuity Contract and
receive in cash the sum of (1) the value of his individual account
and (2) an amount equal to the difference between the gross
purchase payments made and the net purchase payments credited to
the individual account of the participating employee.
A participating employee may also, within 18 months of
acceptance by GWL&A of his first purchase payment elect to
terminate his participation under the Variable Annuity Contract and
receive in cash the sum of (1) the value of his individual account
and (2) an amount, if any, equal to that part of the sales charges
which exceeds 15% of the gross purchase payments which he has made.
Any participating employee who does not so elect to terminate
his participation within the above described periods, may at any
time after the expiration of 18 months of acceptance of his first
purchase payment, surrender a portion or all of his individual
account prior to his annuity commencement date and receive the
value thereof (see "Federal Tax Status", p. 19). Without the
consent of GWL&A, purchase payments may not be made in respect of
a participating employee after he has surrendered all of his
individual account.
If a state or local premium tax was imposed at the time a
purchase payment was made, surrender of a portion or all of an
individual's account may result in a reduction of GWL&A's premium
tax liability to that jurisdiction. In such event, there will be
paid by GWL&A, in addition to any amounts described in the
preceding three paragraphs, an amount equal to the lesser of: (1)
the amount by which GWL&A's premium tax liability is reduced, or
(2) the amount previously deducted from purchase payments for
premium taxes. No representation can be made to any participating
employee that upon surrender of his individual account any such
payment would be made, inasmuch as the state or locality of
residence and their premium tax laws at the time of surrender would
be determinative.
The full amount of surrender benefits received by an employee
who elects to surrender a portion or all of his individual account
will be taxed as ordinary income over and above income otherwise
realized in that year. This could result in the imposition of a
higher rate of tax on amounts received from the Variable Annuity
Contract than would result if the amounts were to be taken in the
form of an annuity after retirement, when participating employees
will generally be in a lower tax bracket due to lower income and
larger deductions.
Payment of any surrender benefit will be made within seven
days after the date of surrender (the date the request for
surrender is received at the Head Office of GWL&A). Payment may be
subject to postponement: (A) for any period during which the New
York Stock Exchange, is closed other than customary weekend and
holiday closing or during which trading on such exchanges is
restricted; (B) for any period during which an emergency exists as
a result of which (i) disposal of securities in Variable Annuity
Account A is not reasonably practicable or (ii) it is not
reasonably practicable for the value of the assets of Variable
Annuity Account A to be fairly determined; or (C) for such periods
as the Securities and Exchange Commission may by order permit. The
conditions under which trading shall be deemed to be restricted or
an emergency shall be deemed to exist shall be determined by rules
and regulations of the Securities and Exchange Commission.
If a participating employee surrenders a portion or all of his
individual account, total purchase payments deemed made on his
behalf for purposes of his death benefit (see p. 11) shall be
reduced in the proportion that the number of surrendered
Accumulation Units bear to the total number of Accumulation Units
in his individual account immediately prior to such surrender.
C. Annuity Period
1. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
A participating employee selects, in accordance with the
annuity purchase plan, an annuity commencement date between ages 50
and 75 (or date of termination of employment, if later) and an
annuity option. Subsequent changes in either may be made up to 30
days prior to the date variable annuity payments are to commence.
Unless otherwise elected, the annuity commencement date will be the
first day of the month on or immediately after the employee's 65th
birthday. The contract provides various option annuity forms
referred to below, which may be elected by a participating
employee. If the participating employee does not elect otherwise,
the option with 120 monthly payments guaranteed will be effective.
If, at any time an annuity payment is or becomes less than $20
GWL&A has the right to make payments, quarterly, semi-annually, or
annually as it may elect. If at the annuity commencement date the
amount to be applied to provide an annuity is less than $1,000, a
participating employee may elect either an annuity payable monthly
during the joint lifetime of the variable annuitant and a
designated second person, and thereafter during the remaining
lifetime of the survivor or an annuity in the form of a life
annuity with 120 monthly payments guaranteed. Special Provisions
Relating to Form of annuity is in connection with the form of
annuity applicable to employees of certain tax-exempt
organizations.
Once annuity payments have commenced, the variable annuitant
cannot surrender his annuity benefit and receive a lump sum
settlement in lieu thereof, except that GWL&A has undertaken, as an
administrative practice, to permit a beneficiary entitled to
variable annuity payments not involving life contingencies (annuity
for a period certain) to elect to receive a commuted lump sum
payment in lieu of receiving further variable annuity payments.
2. SPECIAL PROVISIONS RELATING TO FORM OF ANNUITY
The following special provisions pertaining to the form of
annuity apply to employees of tax-exempt organizations described in
Section 501(c)(3) of the Code.
If variable annuity payments commence before the employee has
attained his 65th birthday, at any time at least 30 days prior to
his variable annuity commencement date, the employee may elect a
qualified joint and survivor variable life annuity. A qualified
joint and survivor variable life annuity is a variable annuity for
the life of the employee with a survivor variable annuity for the
life of his spouse equal to one-half of the amount of the variable
annuity payable during the joint lives of the employee and his
spouse.
If payments commence after the employee has attained his 65th
birthday, the form of variable annuity will be the qualified joint
and survivor variable life annuity for an employee who has been
married throughout the one year period ending on the employee's
variable annuity commencement date. The last payment under this
option will be made in respect of the annuity payment date
occurring immediately preceding the death of the surviving joint
annuitant. At any time 30 days prior to his variable annuity
commencement date, such employee may elect not to take a qualified
joint and survivor variable life annuity and in lieu thereof, may
elect any other form of annuity provided under the contract.
3. OPTIONAL ANNUITY FORMS
Life Annuity. An annuity payable monthly during the lifetime
of the variable annuitant and terminating with the last monthly
payment preceding the death of the variable annuitant. This option
offers the maximum level of monthly payments since there is no
assurance of minimum number of payment or provision for a death
benefit payable to a beneficiary.
Life Annuity with 60, 120, 180, or 240 Monthly Payments
Certain. An annuity payable monthly during the lifetime of the
variable annuitant with the promise that if, at the death of the
variable annuitant, payments have been made for less than 60, 120,
180, or 240 months as elected, annuity payments will be continued
during the remainder of such period to the beneficiary.
Joint and Last Survivor Annuity. An annuity payable monthly
during the joint lifetime of the variable annuitant and a
designated second person, and thereafter during the remaining
lifetime of the survivor.
Other forms of options which a participating employee may
elect are an installment unit refund life annuity, a cash unit
refund life annuity, or any other form of variable annuity which
involves life contingencies and is satisfactory to Great-West.
Under the Life Annuity Option and the Joint and Last Survivor
Annuity Option it would be possible that only one annuity payment
would be made where the annuitant, or in the case of the Joint and
Last Survivor Annuity the annuitant and the designated second
person, died prior to the due date of the second annuity payment,
two if he (they) died before the third annuity payment, etc.
4. VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was set at $1.00 for the
valuation period ending January 31, 1969. All annuity payments are
made as of the first of the month and therefore Annuity Units are
valued only once a month. The value of an Annuity Unit is
determined by multiplying the value of an Annuity Unit for the
preceding month by the annuity change factor (described below) for
the current month.
5. ANNUITY CHANGE FACTOR
The annuity change factor for a month means the product
obtained by multiplying (a) the ratio of the value of an
Accumulation Unit on the first valuation date in the month
preceding such month to the value of an Accumulation Unit on the
first valuation date in the second month preceding such month by
(b) .99713732 (a factor to neutralize the assumed net investment
rate, discussed below, of 3.5% per annum which is built into the
annuity tables contained in the Contract and which is not
applicable because actual net investment experience is credited
instead). The ratio of the value of an Accumulation Unit on the
first valuation date in the preceding month to the value of an
Accumulation Unit on the first valuation date in the second
preceding month is used in order that annuity payments reflect the
net investment experience of Variable Annuity Account A up to one
month prior to the due date of annuity payments. The net investment
experience of Variable Annuity Account A up to one month prior to
the due date is used in order to permit calculation of amounts of
annuity payments and mailing of checks in advance of their due
dates.
6. DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT
When annuity payments commence, the value of the employee's
individual account is determined by multiplying the value of an
Accumulation Unit on the first valuation date in the month
immediately preceding the variable annuity commencement date by the
number of Accumulation Units credited to the employee's individual
account as of the annuity commencement date.
The Contract contains tables indicating the dollar amount of
the first monthly payment under each form of variable annuity for
each $10,000 applied under the option (see, however, "Modifications
of the Variable Annuity Contract by GWL&A", P. 17). The amount of
the first monthly payment depends on the form of annuity and
adjusted age of the annuitant. A formula for determining the
adjusted age is contained in the Contract. The tables are
determined from the Progressive Annuity Table assuming births in
the year 1900 and an interest rate of 3.5% per annum. The total
first monthly annuity payment is determined by multiplying the
benefits per $10,000 of value shown in the tables in the Contract
by the number of tens of thousands of dollars of value of the
employee's individual account (less any applicable premium tax not
deducted when the purchase payment was received--see "Table of
Premium Taxes", p. 31 ).
A 3.5% interest rate is assumed in the tables and would
produce level annuity payments if the net investment rate remained
constant at 3.5%. In fact, as the net investment rate varies up or
down from 3.5%, annuity payments will vary up or down. A higher
interest rate assumption would mean a higher initial payment but a
more slowly rising series of subsequent payments in the event of
favorable investment results (or a more rapidly falling series of
subsequent payments in the event of unfavorable investment
results). A lower assumption would have the opposite effect.
If a greater first monthly payment would result, GWL&A will
compute the first monthly payment on such mortality basis as GWL&A
may determine as being applicable to this class of annuitants.
7. AMOUNTS OF SECOND AND SUBSEQUENT MONTHLY ANNUITY PAYMENTS
The dollar amount of the first monthly annuity payment,
determined as described above, is translated into Annuity Units by
dividing that amount by the value of an Annuity Unit on the annuity
commencement date. This number of Annuity Units remains fixed
during the annuity period, and in each subsequent month the dollar
amount of the annuity payment is determined by multiplying this
fixed number of Annuity Units by the then current value of an
Annuity Unit.
See the Appendix, p. 32 , for a hypothetical
illustration of the above computations.
D. Charges and Experience Rating
1. SERVICES AND FUNCTIONS FOR WHICH CHARGES ARE MADE
Great-West acts as investment manager and advisor in
connection with the Variable Annuity Contracts and Variable Annuity
Account A, performs all administrative functions relative to the
contracts and Variable Annuity Account A, provides the minimum
death benefit, and assumes the mortality and expense risks under
the Contract.
(i)In performing investment management and advisory services,
Great-West continually provides the Committee with an investment
program for its consideration. Upon approval of such an investment
program by the Committee, Great-West executes the program by
placing orders for the purchase or sale of investments. Direct
costs of acquisition or disposition of investments of Variable
Annuity Account A, including brokerage charges, will be borne by
Variable Annuity Account A.
(ii)In performing all administrative functions in connection
with the Variable Annuity Contract and Variable Annuity Account A,
GWL&A bears all administrative expenses involved therewith,
including but not limited to, payment of expenses for salaries,
rent, postage, telephone, travel, legal, actuarial and accounting
services, office equipment and stationery, fees and expenses of
audit of Variable Annuity Account A and fees and expenses of the
Committee.
(iii) GWL&A is providing a minimum death benefit by
undertaking to make a payment on the death of a participating
employee prior to his annuity commencement date, which may be in an
amount exceeding the value of his individual account at the time of
his death (see Paragraph 6 under "Accumulation Period", p. 11).
(iv)GWL&A is assuming an "expense risk" by undertaking never
to change the deductions provided for in the Variable Annuity
Contract for sales and administrative expenses and investment
management and advisory services with respect to purchase payments
made prior to the effective date of a modification of the Contract,
even though such deductions may be insufficient to cover the actual
cost of such items.
(v)GWL&A is assuming a "mortality risk" by its contractual
undertaking, with respect to purchase payments made prior to the
effective date of a modification of the Contract, to continue to
make monthly life annuity payments, determined in accordance with
the annuity tables and other provisions contained in the Contract,
to each variable annuitant regardless of how long he lives and
regardless of how long annuitants as a group live. This undertaking
assures a variable annuitant that neither his own longevity nor an
improvement in life expectancy generally will have an adverse
effect on the monthly annuity payments he will receive under the
Contract and relieves the variable annuitant from the risk that he
will outlive the funds which he has accumulated for retirement.
The extent of the "expense risk" and the "mortality risk"
borne by GWL&A is limited by the modification provisions of the
Contract (see p. 17--"Modifications of the Variable Annuity
Contract by GWL&A").
2. CHARGES
The charges for the services and functions described above are
assessed in two ways: as a deduction from purchase payments, and as
a deduction from the gross investment rate of Variable Annuity
Account A.
(i) Deduction from purchase payments
GWL&A deducted from each purchase payment in respect of a
participating employee 3.75% of such purchase payment, consisting
of 3.0% for sales expenses, .5% for administrative expenses, and
.25% for the minimum death benefit plus premium taxes if imposed at
the time payment was received by GWL&A (see "Table of Premium
Taxes", p. 31 ). In addition, GWL&A deducted a charge of $9
for sales expenses from the first purchase payment in each contract
year in respect of a participating employee. In the case of a $180
minimum purchase payment, the deduction for sales expenses,
administrative expenses and the minimum death benefit amounted to
8.75% (9.59% of amount invested), consisting of 3%, .5% and .25%
respectively (3.29%, .55% and .27% of the amount invested), plus
the additional deduction of $9 (which was the equivalent of 5% of
the $180 minimum). As the amount of the purchase payment increased,
the $9 additional deduction represented a smaller percentage of the
purchase payment, so the total deduction for sales expenses,
expressed as a percentage, would decrease to a minimum approaching
3%. Example: assuming a $1,000 annual purchase payment: 3% x $1,000
= $30.00; $30.00 + $9.00 = $39.00, which is 3.9% of $1,000. During
1993, 1994, and 1995 GWL&A's total deductions from purchase
payments for sales expenses were $0, $0 and $0 respectively.
During 1993, 1994, and 1995 GWL&A's total deductions
from purchase payments for administrative expenses were: $100.00,
$100.00 and $100.00 respectively. During 1993, 1994 and 1995
GWL&A's total deductions from purchase payments for the minimum
death benefit were $0, $0 and $0 respectively.
As the amount of the purchase payment increased, the $9.00
additional deduction would represent a smaller percentage of the
purchase payment, so the total deduction for sales expenses,
expressed as a percentage, would decrease to a minimum approaching
3.0%.
(ii) Deduction from the Gross Investment Rate of Variable
Annuity Account A.
For each day in a valuation period, GWL&A will make a
deduction of .003285% (an effective annual rate of 1.2064%) from
the gross investment rate of Variable Annuity Account A. This
deduction expressed on an annual basis, consists of .2857% for
administrative expenses, .3863% for mortality risks under the
Contract, .0688% for expense risks under the Contract, and .4656%
for investment management and advisory services. The deductions for
mortality risks and expense risks represent GWL&A's present best
judgment of the apportionment of the total risk charges under the
Contract between the mortality risks and the expense risks and
includes an anticipated profit element to be retained by GWL&A.
Such profit is available, if needed, to make up for any deficiency
in any other charges under the Contract. During 1993, 1994 and 1995
GWL&A's total deductions from the gross investment rate for
investment management and advisory services were $32,683.00,
$32,727.00 and $32,411.00 respectively. During 1993, 1994 and 1995
GWL&A's total deductions from the gross investment rate for
administrative expenses were $20,053.00, $20,080.00 and $19,886.00
respectively. During 1993, 1994 and 1995 GWL&A's total deductions
from the gross investment rate for mortality risks under the
Contract were $27,116.00, $27,152.00 and $26,890.00 respectively.
During 1993, 1994 and 1995 GWL&A's total deductions from the gross
investment rate for expense risks were $4,820.00, $4,826.00 and
$4,780.00 respectively.
The deductions from purchase payments and the deductions from
the gross investment rate of Variable Annuity Account A were and
are made pursuant to the terms of the Variable Annuity Contract and
also, in the case of the deductions from purchase payments for
sales expenses and the deductions from the gross investment rate
for investment management and advisory services, were and are made
pursuant to written agreements approved by the Committee; the
agreement for investment management and advisory services has also
been ratified by a majority of the votes available to Participants.
Each of these agreements will continue in full force and effect
from year to year until terminated by GWL&A in accordance with the
terms of the Variable Annuity Contracts (see "Modifications of the
Variable Annuity Contract by GWL&A", below), or by the Committee.
The agreement for investment management and advisory services may
also be terminated by a majority of the votes available to
Participants. Any such termination may be done on 60 days written
notice without payment of any penalty.
Either agreement will terminate automatically:
(a) unless its continuance is specifically approved, at least
annually, either (i) by the affirmative vote of a majority of the
Committee, or (ii) by a majority of the votes available to
Participants; or
(b) upon any assignment thereof.
In addition, each annual renewal of these agreements must be
approved by the vote of a majority of the Members of the Committee
who are not parties to the agreements or interested persons of any
such party, cast in person at a meeting of the Committee called for
the purpose of voting on such approval.
3. EXPERIENCE RATING
Each Variable Annuity Contract provides for experience rating
at the discretion of GWL&A. If the charges made by GWL&A exceed the
expenses incurred, GWL&A in its discretion may allocate all, a
portion, or none of such excess as an experience rating credit. The
experience rating credit, if any, which accrues to any Variable
Annuity Contract will be determined annually upon each contract
anniversary by GWL&A. Application of the credit accruing to any
Variable Annuity Contract will be applied by the crediting of a
number of additional Accumulation Units or Annuity Units, as
applicable, equal in value to the amount of the credit due (such
additional units shall be credited without the deduction imposed on
purchase payments). To date, there have been no experience rating
credits allocated by GWL&A pursuant to the provisions of any
Variable Annuity Contract.
E. Modification of the Variable Annuity contract by GWL&A
The Variable Annuity Contract provides
that GWL&A could
modify the charges (see Paragraph 2 under "Charges and Experience
Rating", p. 16), the tables used in determining the first monthly
annuity payment, and the benefit payable in the case of death prior
to the annuity commencement date (see Paragraph 7 under
"Accumulation Period", p. 11), provided that such modification
could apply only with respect to purchase payments received after
the effective date of the modification. To exercise its
modification rights, GWL&A was required to notify the Policyholder
of such modification in writing. In the case of an employee covered
under the Contract at the time of the notice, or an employee whose
coverage commenced on a date no later than six months after such
notice, such modification would be effective five years after the
contract anniversary on or immediately following the day of such
notice (or at such earlier time as the amount of the purchase
payments made after such notice equalled ten times the purchase
payments made on behalf of such participating employee in the
contract year ending on or immediately before such notice). In the
case of an employer whose coverage commenced more than six months
after such notice, such modification would be effective as of the
date he commenced participation. All of the charges, the annuity
tables, and the benefit payable in the case of death prior to the
annuity commencement date which were provided in the Contract prior
to the notice of a modification would remain permanently in effect
with respect to purchase payments made prior to the effective date
of such modification. Thus, some purchase payments on behalf of a
participating employee may have been made long before an annuity is
effected for him. Since annuity payments may continue long after
that date, the provisions of the Contract in effect before a notice
of modification may extend many years into the future.
While the Variable Annuity Contract may be modified at any
time by agreement between GWL&A and the Policyholder, no such
change shall be applicable to benefits provided by purchase
payments made prior to the effective date of such change unless the
change is made to conform to the Contract, or give the Policyholder
or participating employees the benefit of Section 403 of the Code
or such section or sections as may from time to time revise or
replace said Section 403, or any rules or regulations applicable
thereto.
F. Transfer From or to Companion Contract
The Variable Annuity Contract was issued as a supplement to a
fixed-dollar annuity contract providing fixed annuity payments, and
containing investment, mortality and expense commitments as
specified therein (the "Companion Contract"). The Variable Annuity
Contract permitted the transfer, subject to the rules of GWL&A, to
the Variable Annuity Contract of sums accumulated under the
Companion Contract, without the imposition of any surrender charge
under the Companion Contract. The deductions described in Paragraph
2(i) under "Charges and Experience Rating", p.16, were made from
any amount so transferred and the net amount credited to the
employee's individual account. Under the Companion Contract, no
charges are deducted at the time a premium is paid, and accordingly
the imposition of such charges under the Variable Annuity Contract
did not result in the duplication of charges. Such a transfer could
be effected (1) during a 9 month period commencing with the
register date of the Variable Annuity Contract in which event the
amount so transferred in respect of the employee shall be limited
to the amount paid under the Companion Contract as premiums in
respect of such employee since the date 12 months immediately prior
to such register date, or (2) during the 30-day period commencing
on any anniversary of the register date of the Variable Annuity
Contract in which even the amount so transferred in respect of the
employee was limited to the amount paid under the Companion
Contract as premiums in respect of such employee since the date 12
months immediately prior to such anniversary. In addition, in order
to purchase a variable annuity, sums accumulated under the
Companion Contract could be transferred to the Variable Annuity
Contract, in one sum or a series of semi-annual installments,
during a period of no longer than 3 years which could commence no
earlier than the employee's 50th birthday and end no later than the
employee's variable annuity commencement date.
The Variable Annuity Contract also provides for the transfer,
subject to the rules of GWL&A, of sums accumulated under the
Variable Annuity Contract to the Companion Contract in order to
purchase a fixed annuity with the amounts accumulated under the
Variable Annuity Contract. Such a transfer could only be effected
in one sum or a series of semi-annual installments during a period
of no longer than 3 years which could commence no earlier than the
employee's 50th birthday and end no later than the employee's
variable annuity commencement date.
Contributions under the Companion Contract (the fixed-dollar
annuity contract) and transfers to the Companion Contract become
part of GWL&A's general account which supports insurance and
annuity obligations. Because of exemptive and exclusionary
provisions, and other interpretations, interests in the general
account have not been registered under the Securities Act of 1933
("1933 Act") nor is the general account registered as an investment
company under the Investment Company Act of 1940 ("1940 Act").
Accordingly, neither the general account nor any interests therein
are generally subject to the provisions of the 1933 or 1940 Acts
and GWL&A has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this
prospectus which relate to the Companion Contract. Disclosures
regarding the Companion Contract and the general account, however,
may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.
FEDERAL TAX STATUS
Introduction
The ultimate effect of federal income taxes on the Annuity
Value, on annuity payments and on the economic benefit to the
Employee or Beneficiary depends upon GWL&A's tax status, on the
type of retirement program for which the Contract is purchased, and
upon the tax and employment status of the individual concerned.
Variable Annuity Account A is taxed as a part of GWL&A; not as a
"regulated investment company" under Part I of Subchapter M of the
Code. GWL&A is taxed as a life insurance company as described
below.
TAXATION OF GWL&A
GWL&A is taxed on its insurance business in the United States
as a life insurance company in accordance with Part I of Subchapter
L of the Code. Investment income and realized capital gains on the
assets of Variable Annuity Account A are reinvested and are taken
into account in determining the value of the Accumulation Unit and
the value of the Annuity Unit (see page 8 of the Variable Annuity
Contract). Under existing federal income tax law, such amounts do
not result in any tax on GWL&A which will be chargeable to
participating employees or Variable Annuity Account A. GWL&A
reserves the right to make a deduction from the Participant Annuity
Account for taxes, if any, imposed with respect to such items in
the future.
SECTION 403(b) TAX-SHELTERED ANNUITIES
Set forth below are some general comments concerning
tax-sheltered annuities under Section 72 and Section 403(b) of the
Code. It should be understood that the following discussion is not
exhaustive, and that special rules may apply to certain situations
not discussed here. The discussion is based upon GWL&A's
understanding of current federal income tax law and no
representation is made regarding the likelihood of continuation of
current law or of the current interpretations by the Internal
Revenue Service. No attempt is made to consider state or other tax
laws. The policyholder, participating employees and beneficiaries
are responsible for determining that contributions, distributions
and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax
adviser.
Eligible Employers
Tax-exempt organizations described in Section 501(c)(3) and
public educational organizations are permitted to purchase Section
403(b) tax-sheltered annuities for employees. Amounts contributed
toward the purchase of such annuities are excluded from the gross
income of the employee in the year contributed to the extent that
the contributions do not exceed three separate, yet interrelated
contribution limitations.
Federal Tax Treatment of Contributions
Federal income tax is deferred on contributions to the extent
that the aggregate amount contributed to an annuity per year for an
employee does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and
(3) the elective deferral limitation in Section 402(g) of the Code.
Additionally, the amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a
Section 403(b) annuity contract are subject to FICA and FUTA tax
when contributed.
The net investment gain, if any, reflected in the employee's
individual account is not taxable until received by the
participating employee or his beneficiary.
Amounts contributed in excess of the above described limits,
and the earnings thereon, must be distributed from the plan and
included in the participant's gross income in accordance with IRS
rules and regulations. Excess amounts which are not properly
corrected can have severe adverse consequences to the plan and may
result in additional taxes to the participant.
Portability
Revenue Ruling 90-24 allows participants to transfer funds
from one Section 403(b) annuity or custodial account to another
Section 403(b) annuity contract or custodial account with the same
or more stringent restrictions without incurring current taxation.
If the Section 403(b) plan is employer-sponsored, transfers under
Rev. Rul. 90-24 may be restricted to 403(b) providers approved by
the plan sponsor.
When the participant is eligible to take a distribution from
the plan, eligible rollover distributions may be rolled over to an
IRA or another Section 403(b) annuity contract or custodial account
as provided in the Code. Amounts properly rolled over will not be
included in gross income until a distribution is taken from the IRA
or new Section 403(b) vehicle.
Distribution Restrictions
Pre-1989 contributions to a Section 403(b) annuity contract
may be distributed to an employee at any time, subject to a 10%
penalty on withdrawals prior to age 59 1/2, unless an exception
applies under Section 72(t). Post-1988 contributions and earnings,
and the earnings on the December 31, 1988 account balance, may not
be distributed prior to age 59 1/2, unless the employee dies,
becomes disabled, separates from service or suffers a genuine
financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for
financial hardship.
Required Beginning Date/Required Minimum Distributions
Distributions must begin on or before April 1 of the year
after the employee attains age 70 1/2. For employees of
governmental employers, the required beginning date is the later of
age 70 1/2 or separation from service.
Amounts accruing after December 31, 1986 under tax sheltered
annuities must be distributed in compliance with minimum
distribution requirements. In addition, distributions, regardless
of when the amounts accrued, must satisfy the "incidental benefit"
or "minimum distribution incidental benefit" rule. IRC Section
403(b)(10). If the amount distributed does not meet the minimum
requirements, a 50% penalty tax on the amount which was required to
be, but was not, distributed may be imposed upon the employee by
the IRS under Section 4974. These rules are extremely complex, and
the employee should seek the advise of a competent tax adviser.
Federal Taxation of Distributions
All payments received from a Section 403(b) annuity contract
are normally taxable in full as ordinary income to the employee.
Since premiums derived from salary reduction have not been
previously taxed to the employee, they cannot be treated as a cost
basis for the contract. IRC Section 403(b)(1). The employee will
have a cost basis for the contract only when after-tax
contributions have been made.
If the employee takes the entire value in the contract in a
single sum cash payment, the full amount received will be ordinary
income in the year of receipt unless after-tax contributions were
made. If the distribution includes after-tax contributions, the
amount in excess of the cost basis will be ordinary income.
Section 72(e)(5). No special averaging treatment is currently
available for lump sum distributions.
Amounts received before the annuity starting date by an
employee who has made after-tax contributions are taxed under a
rule that provides for pro rata recovery of cost. Section
72(e)(9). If an employee who has a cost basis for his contract
receives life annuity or installment payments, the cost basis will
be recovered from the payments under the annuity rules of Section
72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section
403(b) annuities. Distributions made before the employee attans
age 59 1/2 are premature distributions and subject to an additional
tax equal to 10% of the amount of the distributions which is
includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1)
made to a beneficiary on or after the death of the employee; (2)
attributable to the employee's being disabled within the meaning of
Code Section 72(m)(7); (3) made as a part of a series of
substantially equal periodic payments (at least annually) for the
life or life expectancy of the employee or the joint lives or life
expectancies of the employee and his designated beneficiary; (4)
made to an employee on account of separation from service after
attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an employee for
medical care, but not in excess of the amount allowable as a
medical expense deduction to the employee for amounts paid during
the taxable year for medical care; (7) timely made to correct an
excess aggregate contribution; or (8) timely made to reduce an
excess elective deferral.
If exception (3) above is applicable at the time of the
distribution but the series of payments is later modified (other
than because of death or disability) before the employee reaches
age 59 1/2 or, if after he reaches age 59 1/2, within five years of
the date of the first payment, the employee's tax for the year the
modification occurs is increased by an amount equal to the tax
which, but for the exception, would have been imposed plus interest
for the deferral period.
If an employee's aggregate retirement distributions from
qualified plans, tax sheltered annuities and individual retirement
plans in a calendar year exceed $150,000, a 15% excise tax may be
imposed on the employee, in addition to any income tax, on the
excess portion of the distributions.
If the amount distributed during a tax year is less than the
minimum required distribution, there is an additional tax imposed
on the employee equal to 50% of the amount that the distribution
made in the year falls short of the required amount.
Distributions on Death of Employee
Distributions made to a beneficiary upon the employee's death
must be made pursuant to the rules contained in Section 401(a)(9)
of the Code and the regulations thereunder. Generally, if the
employee dies while receiving annuity payments or other required
minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest
must be distributed to the beneficiary at least as rapidly as under
the method in effect as of the employee's date of death.
If the employee dies before payments have begun, his entire
interest must generally be distributed within five (5) years after
the date of death. This five year rule applies to all
non-individual beneficiaries. However, if an individual other than
the surviving spouse has been designated as beneficiary, payments
may be made over the life of that individual or over a period not
extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the
year of death. If the beneficiary is the employee's spouse,
distributions are not required to begin until the date the employee
would have attained age 70 1/2. If the spouse dies before
distributions begin, the rules discussed above will apply as if the
spouse were the employee. Participants and beneficiaries should
seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions are defined
as "eligible rollover distributions." Generally, any eligible
rollover distribution is subject to mandatory income tax
withholding at the rate of 20% unless the employee elects to have
the distribution paid as a direct rollover to an IRA or to another
Section 403(b) annuity contract or custodial account. With respect
to distributions other than eligible rollover distributions,
amounts will be withheld from annuity (periodic) payments at the
rates applicable to wage payments and from other distributions at
a flat 10% rate, unless the employee elects not to have federal
income tax withheld from these payments.
INVESTMENT OBJECTIVES AND POLICIES
The objectives and policies in making investments for Variable
Annuity Account A are set forth below:
1. The principal investment objective will be the selection of
investments which are deemed to provide long-term growth of
capital. However, occasional investments, up to a maximum of 15% of
the value of the assets of Variable Annuity Account A at the time
such an investment is made, may be made for the purpose of seeking
short-term profits. It is intended to seek the maximum growth of
capital which is not inconsistent with an investment policy
intended to be sufficiently conservative to achieve at least enough
long-term growth of capital to offset anticipated decreases in the
purchasing power of the dollar. There is no assurance that this
objective will be attained.
2. The assets of Variable Annuity Account A will be invested
primarily in common stocks. A relatively small percentage of such
assets may be invested in preferred stocks, bonds, debentures,
notes and other evidences of indebtedness of a character
customarily acquired by institutional investors, whether or not
publicly distributed. These may or may not be convertible into
common stock or accompanied by warrants to acquire common stock.
There may be times, however, when economic conditions or general
levels of common stock prices are such that, on the basis of
combined considerations of risk, income and capital gains, a larger
than usual portion of the assets of Variable Annuity Account A will
be held in such investments. It is contemplated that investments
will be primarily in securities issued in the United States, but
the right is reserved to invest in securities issued in Canada up
to a maximum of 25% of the value of the assets in Variable Annuity
Account A at the time an investment is made.
3. The assets of Variable Annuity Account A will be kept fully
invested, except that:
(a) sufficient cash will be kept on hand to meet variable
annuity contract payments, and
(b) reasonable amounts of cash and/or United States Government
securities, or other short term securities may be held for
temporary periods pending investment.
4. No investment in the securities of any one issuer may
exceed 5% of the value of the assets of Variable Annuity Account A
at the time the investment is made except obligations of the United
States Government and instrumentalities thereof.
5. No investment in the voting securities of any one issuer
may exceed 5% of its outstanding voting securities.
6. Borrowing is not contemplated, but the right is
reserved to borrow from banks for temporary purposes up to a
maximum of 5% of the value of the assets of Variable Annuity
Account A at the date of borrowing.
7. Securities of other issuers will not be underwritten.
8. Investments in Variable Annuity Account A will not be
concentrated in any particular industry, or groups of industries,
but the right is reserved to invest not more than 25% of the value
of the assets of Variable Annuity Account A at the time of the
investment in any one industry.
9. Investments in real estate will not be a principal
activity, but the right is reserved to invest in real estate or
interests in real estate up to 10% of the value of the assets of
Variable Annuity Account A at the time any such investment is made.
10. No purchases will be made of commodities or commodity
contracts.
11. Loans may be made through the acquisition of bonds,
debentures, notes, or other evidences of indebtedness, of a type
customarily purchased by institutional investors, whether publicly
distributed or not. Except for such acquisitions, loans will not be
made.
12. Investments in securities which cannot be sold to the
public without registration of such securities with the Securities
and Exchange Commission and which have not been so registered will
be limited to 10% of the value of the assets of Variable Annuity
Account A at the time any such investment is made.
13. Short sales, purchases on margin or purchases of put or
call options or combinations thereof, will not be made.
14. Income and realized capital gains derived from the assets
of Variable Annuity Account A will be reinvested.
15. In addition to conforming to the investment policies
described herein, all investments of the assets of Variable Annuity
Account A must be permissible investments under the Colorado
Insurance Code. Pertinent provisions of that Act, not otherwise
reflected in the specific statements of objectives and policies
include, in summary style:
(a) investment is permitted:
(i) in the common shares of a corporation which has, in each
of the five years immediately preceding the investment, paid a
dividend, or had earnings available for the payment of a dividend,
of at least 4% of the average value at which the shares were
carried in the capital account of the corporation during the year
in which the dividend was paid, or in which the earning were
available for payment (the value at which the shares are carried in
the capital account of the corporation does not necessarily bear
any relationship to the market value of that stock);
(ii) in the preferred shares of a corporation which has, in
each of the five years immediately preceding the investment; paid
a dividend at least equal to the specified annual rate on all its
preferred shares, or in the preferred shares of a corporation whose
common shares are a permitted investment.
(b) Investment in specified bonds, debentures or other
evidences of indebtedness is permitted, including investment in
specified government securities, municipal securities, revenue
bonds, bonds secured by mortgage, and equipment trust certificates.
16. Variable Annuity Account a will not issue any senior
securities as that term is defined in the Investment Company Act of
1940.
17. No investments in the securities of a company will be made
for the purpose of exercising control or management over such
company.
18. Investments in securities of other investment companies
are not contemplated, but the right is reserved to purchase such
securities other than from the issuer, up to a maximum of 10% of
the value of the assets of Variable Annuity Account A at the time
any such investment is made, provided that not more than 3% of the
total outstanding voting stock of any one investment company may be
held.
The investment objectives and policies shown in Items 1
through 16 are fundamental, and may not be changed without approval
of a majority of the votes available to Participants.
ALLOCATION OF PORTFOLIO BROKERAGE
Great-West continually provides the Variable Annuity Account
Committee with an investment program for its consideration. Upon
approval of such an investment program by the Committee, Great-West
executes the program by placing orders for the purchase or sale of
investments, Great-West is responsible for making Account A's
portfolio decisions once approval of an investment program by the
Committee has been obtained, and assumes responsibility for placing
Account A's brokerage business and, where applicable, negotiating
the amount of the commission rate paid. If orders for the purchase
or sale of investments at any one time are made by Great-West on
its own behalf and on behalf of Account A, then the over-all
brokerage commissions are allocated between Great-West and Account
A on a basis directly proportionate to the size of the respective
orders of Account A and Great-West.
Great-West has no set formula for the distribution of
brokerage business in connection with the placing of orders for the
purchase and sale of approved investments it being the intention of
Great-West to place such orders with the objective of obtaining the
best price, execution and available data. Brokerage commissions are
negotiated as there are no standard rates. All brokerage firms
provide the service of execution of the order made; some brokerage
firms also provide research and statistical data which can be of
value. In negotiating commissions, Great-West is permitted under
the Investment Management and Advisory Services Agreement to give
consideration to the use and value of such data and to the quality
of execution supplied. In placing orders for the purchase or sale
of approved investments Great-West has not placed portfolio
transactions with any particular brokers, it being Great-West's
intention to place such orders with the objectives of obtaining the
most favorable prices, competent execution and pertinent research
and statistical data. To the extent that Great-West uses research
and statistical data services so obtained, its expenses may be
reduced and such data has therefore been and is one of the factors
considered by Great-West in determining its fee for investment
management and advisory services. When purchasing or selling
securities trading on the over-the-counter market Great-West will
generally execute the transaction with a broker engaged in making
a market for such securities. The amount of commission paid to
brokers in connection with the purchases and sales of investment
assets for Variable Annuity Account A during 1993, 1994 and 1995
aggregate $12,183.75, $7,678.00 and $14,412.75 respectively. During
1995, 85% of the Variable Annuity Account A's brokerage commissions
were paid to brokers who furnish statistical data and research.
PORTFOLIO TURNOVER RATE
During periods of relatively stable market and economic
conditions, it is anticipated that the annual portfolio turnover
rate of Variable Annuity Account A will not exceed 50%. However,
any particular security will be sold and the proceeds re-invested
whenever such action is deemed prudent from the viewpoint of
Variable Annuity Account A's investment objectives, regardless of
the holding period of such security. During any period when
changing economic or market conditions are anticipated, resulting
shifts in portfolio emphasis may significantly increase the rate of
portfolio turnover. High turnover involves correspondingly heavier
brokerage commission expenses which Variable Annuity Account A must
pay. (See "Condensed Financial Information," p. 5, for history of
portfolio turnover rates.) The rate of portfolio turnover for
Variable Annuity Account A for the calendar years 1993, 1994 and
1995 was: 23.4%, 30.2% and 62.2% respectively.
VOTING RIGHTS
Participants will be entitled to vote at the annual meetings
of the Participants as required by the 1940 Act. Under current
requirements Participants are entitled to vote on:
(1) Any change in the fundamental investment objectives or
policies of Variable Annuity Account A (see "Investment Objectives
and Policies" numbers 1 through 16, p. 22 ).
(2) Election of the Members of the Committee.
(3) Ratification of independent auditors for Variable Annuity
Account A.
(4) Any other business which may properly come before the
meeting.
A Participant who had Accumulation Units credited to his
account under a Variable Annuity Contract on the record date may
cast one vote for each such Accumulation Unit. A Participant
receiving annuity payments under a variable Annuity Contract on the
record date may cast a number of votes equal to the dollar amount
of the assets maintained in Variable Annuity Account A on the
record date to meet the annuity obligations relating to such
Participant divided by the value of an Accumulation Unit on the
record date. As a Participant receives annuity payments, the number
of votes to which he will be entitled will decrease.
The record date for determining the number of votes which a
Participant may cast at an annual meeting shall be the last
valuation date in February in each year. Each Participant shall be
sent a notice of the meeting of Participants.
MANAGEMENT
GWL&A is managed by its Board of Directors, at least one-third
of whom are elected by its participating policyholders and the
remainder of whom are elected by its shareholders. The operation of
Variable Annuity Account A is subject to the direction and approval
of a Variable Annuity Account Committee, in accordance with Rules
and Regulations adopted by the Committee. Members of the Committee
are elected by Participants at annual meetings. Such Members are
elected for a one year term . A majority of the Members of
the Committee must be persons who are not otherwise "interested
persons" of GWL&A as that term is defined in the 1940 Act.
Furthermore, a majority of the Members of the Committee must be
citizens of the United States and a majority of such Members who
are United States citizens must be resident in the United States.
A. Members and Officers of the Variable Annuity Account
Committee
Name & Business Address Position Present Position and Principal
Occupation During The Last Five Years
James Motz Member Senior Vice-President, Employee
8515 E. Orchard Road Benefits, of the Investment
Englewood, CO 80111 Adviser (since 1991); Senior
Vice- President, Employee
Benefits of GWL&A (since 1992);
Vice-President, Group, U.S., of the
Investment Adviser
(1983-1990) ; Maxim Series Fund, Inc.
Director (since 1994) .
Rex Jennings Member President Emeritus, Denver Metro
12510 E. Evans Circle #C Chamber of Commerce (since
Aurora, CO 80014 1987); Maxim Series Fund, Inc.
Director (since 1992).
Dennis Low Member Executive Vice-President,
8515 E. Orchard Road Financial Services of the
Englewood, CO 80111 Investment Adviser (since 1991);
Executive Vice-President,
Financial Services of GWL&A (since
1991); Senior Vice-President,
Individual, (U.S. ) (1987-1990);
Maxim Series Fund, Inc. Director
(since 1992).
Sanford Zisman Member Attorney, Zisman & Ingraham,
Suite 250 P.C.; Maxim Series Fund, Inc.
3773 Cherry Creek Dr. N Director (since 1982).
Denver, CO 80209
Richard P. Koeppe, Ph.D. Member Retired Superintendent,
Denver
8679 E. Kenyon Ave Public Schools; Maxim Series
Englewood, CO 80017 Fund, Inc. Director (since
1987).
Ruth B. Lurie Secretary Vice-President and Counsel
8515 E. Orchard Road (U.S.)
of the Investment
Adviser Englewood, CO 80111 (since 1988).
Glen Derback Principal Vice President, Financial
8515 E. Orchard Road Accounting Control of the
Investment
Englewood, CO 80111 Officer Adviser (since 1984).
Messrs. Motz and Low are considered to be "interested persons"
of The Great-West Life Assurance Company, Great-West Life & Annuity
Insurance Company and Variable Annuity Account A, as that term is
defined in Section 2(a)(19) of the 1940 Act. Mr. Motz is Senior
Vice-President Employee Benefits (U.S.) of Great-West. Mr. Low is
Executive Vice-President, Financial Services (U.S.) of
Great-West .
Ms. Lurie (as described above) and Mr. G.R. Derback are
considered to be "affiliated persons" of The Great-West Life
Assurance Company, Great-West Life & Annuity Insurance Company and
Variable Annuity Account A, as that term is defined in Section
2(a)(3) of the 1940 Act. Ms. Lurie is Secretary to the Variable
Annuity Account Committee and is Vice-President and Counsel of The
Great-West Life Assurance Company. Mr. Derback is Principal
Accounting Officer of Variable Annuity Account A and is
Vice-President, Financial Control of The Great-West Life Assurance
Company.
B. Directors and Officers of Great-West
Position and Offices
Name Principal Business Address with Underwriter
James W. Burns, O.C. (4) Chairman
Orest T. Dackow (3) Director
Andrlair, F.C.A. (4) Director
Guy St-Germain, C.M. Placements Laugerma Inc. Director
48 Robert Street
Outremont, Quebec H3S 2P2
Robert D. Bond (3) Senior
Vice-President,Financial Services (U.S.)
Denis J. Devos (1) Senior
Vice-President,IndividualInsurance and Investment(Canada)
James R. Grant (1) Senior
Vice-President,Group (Canada)
Mitchell T.G. Graye (1) Senior
Vice-President,Chief Financial Officer (Canada)
John T. Hughes (3) Senior
Vice-President,Chief InvestmentOfficer (U.S.)
D. Craig Lennox (3) Senior
Vice-President,General Counsel and Secretary
Dennis Low (3) Executive
Vice-President,Financial Services (U.S.)
Alan D. MacLennan (2) Executive
Vice-President,Employee Benefits (U.S.)
David E. Morrison (1) Senior
Vice-President and Actuary (Canada)
James D. Motz (2) Senior
Vice-President,Employee Benefits Operations(U.S.)
Peter G. Munro (1) Senior
Vice-President,Chief InvestmentOfficer (Canada)
Douglas L. Wooden (3) Senior
Vice-President,Chief Financial Officer (U.S.)
________________________________________
(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.
C. Compensation of Members of Variable Annuity Account
Committee
No officer or Member of the Committee and no officer or
Director of GWL&A receives any compensation from Variable Annuity
Account A. GWL&A pays all expenses relative to Variable Annuity
Account A's operations, for which GWL&A deducts certain amounts.
(See Paragraph 2 under "Charges and Experience Rating" p. 16).
The Members of the Committee who are not active employees of
GWL&A are not paid for their services rendered to Variable Annuity
Account A.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Variable Annuity Contracts were sold only in the United
States by life insurance salesmen who represented Great-West and
who were licensed by the state insurance departments, and by
certain employees of Great-West. Effective April 16, 1984, however,
Great-West ceased issuing new variable annuity contracts.
Furthermore, effective May 1, 1987, Great-West will not permit new
participants to be enrolled under existing variable annuity
contracts, and with respect to any variable annuity contracts for
which there are fewer than 25 participants, will not accept
additional contributions. Effective May 1, 1989, GWL&A announced
that it will not accept additional contributions on any variable
annuity.
Great-West is registered under the Securities Exchange Act of
1934 as a broker-dealer. All persons engaged in selling Variable
Annuity Contracts will be required to successfully complete a
securities examination required by the Securities and Exchange
Commission. Where state law requires, such persons will also be
trained or registered as securities salesmen.
REGULATION
As a life insurance company organized and operated under the
laws of Colorado, GWL&A is subject to provisions governing such
companies and to supervision and regulation by the Department of
Insurance of Colorado. GWL&A must also comply with the laws of the
states in which it is licensed to transact business.
The laws of Colorado and of other states in which GWL&A is
licensed to transact business provide for regulation and
supervision of the variable annuity activities of life insurance
companies. Included in such regulation are requirements relating
to mandatory contract provisions, examination and approval of
contract forms and the administration and maintenance of variable
annuity accounts. Such state regulation does not involve any
supervision or control over the investment policy of Variable
Annuity Account A or the selection of investments therefor, except
for verification that any such investments are permissible under
applicable law.
An annual statement in the form prescribed by the National
Association of Insurance Commissioners ("N.A.I.C.") relating to
GWL&A's assets, transactions and affairs with respect to its
business for the preceding year must be filed by GWL&A with the
State of Colorado and with each of the other states in which it
does business on or before March 1, of each year. The books and
records of GWL&A's business are subject to review and examination
by the Colorado Insurance Department, and by the insurance
departments of the other states in which it does business, at all
times. At least once every three years, a full examination of
GWL&A's operations is conducted, under the auspices of the N.A.I.C.
TRUSTEE FOR ASSETS OF VARIABLE ANNUITY ACCOUNT A
The Bank of New York, 48 Wall Street, New York, N.Y. 10015, is
the trustee of the assets of Variable Annuity Account A under a
written trust agreement complying with the requirements imposed by
the insurance laws of various states in which Great-West conducts
business.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which
Variable Annuity Account A or GWL&A is a party.
LEGAL ADVICE
Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue.,
N.W., Washington, D.C. 20004 has provided advice on certain matters
relating to the federal securities laws and regulations. All
matters of Canadian and applicable state law pertaining to the
Variable Annuity Contracts, including GWL&A's right to issue the
Variable Annuity Contracts thereunder, have been passed upon by
Ruth B. Lurie, Vice-President and Counsel.
INDEPENDENT AUDITORS
The statement of assets and liabilities of the Great-West
Variable Annuity Account A, including the statement of investments,
as of December 31, 1995, the related statement of operations for
the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial
highlights for each of the five years in the period ended December
31, 1995 and the consolidated financial statements of Great-West
Life & Annuity at December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995 included in this
prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are
included in reliance upon the reports of such firm given upon their
upon authority as experts in accounting and auditing.
OTHER VARIABLE ANNUITY CONTRACTS
It is contemplated that other forms of group or individual
variable annuity contracts of GWL&A may be sold in the future,
providing benefits which vary in accordance with the net investment
experience of Variable Annuity Account A.
TABLE OF PREMIUM TAXES
State or local premium taxes, if any, may have been imposed at
the time a purchase payment was made or, as is generally the case,
at the annuity commencement date. See "Surrender
Rights--Redemption", p. 11, as to possible refunds of premium
taxes. For plans qualifying under Section 403(b) of the Code, such
premium taxes in the states in which GWL&A does business are as
follows:
Tax as a Percentage of the Amount Applied to Effect an
Annuity
Alabama none Kansas none North Carolina none
Alaska none Kentucky 2.00 North Dakota none
Arizona none Louisiana none Ohio none
Arkansas none Maine none Oklahoma none
California .50 Maryland none Oregon none
Colorado none Massachusetts none Pennsylvania none
Connecticut none Michigan none South Carolina none
Delaware none Minnesota none South Dakota none
District of Columbia none
Mississippi none Tennessee none
Florida none Montana none Texas none
Georgia none Nebraska none Utah none
Hawaii none Nevada none Vermont none
Idaho none New Hampshire none Virginia none
Illinois none New Jersey none Washington
none
Indiana none New Mexico none West Virginia 1.00
Iowa none North Carolina none Wisconsin none
Wyoming none
NOTE: The foregoing rates are subject to amendment by legislative
act and, in cases where the rates shown are different from those
applicable to non-tax benefitted contracts, the applicability of
the stated rates may be subject to administrative interpretation.
APPENDIX
Computation of Accumulation Unit Value
The following hypothetical example illustrates the computation
of the Accumulation Unit value on each valuation date. See
paragraphs 3 and 4 under "Accumulation Period", p. 10.
Assume that the value of the assets of Variable Annuity
Account A at the end of the valuation date of May 15th of some year
was $5,000,000; that the value of an Accumulation Unit for such
valuation date was $1.13500000; and that during the valuation
period terminating at the end of the valuation date of May 16th the
investment income was $1,000, the net realized capital gains were
$6,000 and the net unrealized capital losses were $5,000. The gross
investment rate for the valuation period would thus be equal to (a)
$2,000 ($1,000, plus $6,000, less $5,000) divided by (b) $5,000,000
which produces .0400% (.00040000). The net investment rate for the
valuation period is determined by deducting .003285% (.00003285)
from the gross investment rate, which results in a net investment
rate of .036715% (.00036715). The net investment factor for the
valuation period would be determined as the net investment rate
plus 1.00000000 or 1.00036715.
The value of the Accumulation Unit for the valuation date of
May 16th would be equal to the value for the preceding period
($1.13500000) multiplied by the net investments factor for the
current period (1.00036715) which produces $1.13541672.
Computation of Annuity Unit Value
The following hypothetical example illustrates the computation
of the Annuity Unit value and the amount of the first and
subsequent monthly annuity payments. See paragraphs 3 through 6
under "Annuity Period", p. 13 .
Assume that an employee at the annuity commencement date has
credited to his individual account 30,000 Accumulation Units, and
that the value of an Accumulation Unit on the first valuation date
in the month preceding the annuity commencement date was
$1.15000000, producing a total value of his individual account of
$34,500. Assume also that the employee elects an option for which
the table in the Variable Annuity Contract indicates the first
monthly payment is $65.65 per $10,000 of value applied; the first
monthly annuity payment would thus be 3.4500 multiplied by $65.65
or $226.49.
Assume that the Annuity Unit value on the annuity commencement
date was $1.10000000. When this is divided into the first monthly
payment, the number of Annuity Units represented by that payment is
determined to be 205.900000. The value of this same number of
Annuity Units will be paid in each subsequent month.
Assume further that the Accumulation Unit value on the first
valuation date in the month preceding the month in which the next
annuity payment is due was $1,15600000. The annuity change factor
for the month in which the next annuity payment is due will be the
product obtained by multiplying (a) the ratio of $1.15600000 to
$1.15000000 (the Accumulation Unit value on the first valuation
date of the second preceding month, which was the Accumulation Unit
value used to value the employee's individual account) by (b)
.99713732 (the factor to neutralize the assumed rate of 3.5% per
annum already taken into account in determining the number of
Annuity Units as described above), producing an annuity change
factor of 1.00233978. This is then multiplied by the Annuity Unit
value for the preceding month ($1.10000000) to produce an Annuity
Unit value of $1.10257376.
The current monthly payment is then determined by multiplying
the fixed number of Annuity Units by the current Annuity Unit
value, or 205.900000 times $1.10257376, which produces a current
monthly payment of $227.02.
Historical Record of Accumulation Units
The following is an historical record of the values of an
Accumulation Unit as of the last valuation date of each quarter to
December 31, 1995 .
Date Value Date Value
January 3, 1969 $1.00000000 December 31, 1978 $
.94566769
March 28, 1969 $1.07468400 March 31, 1979 $1.03700469
June 27, 1969 $1.07583259 June 30, 1979 $1.03384794
September 30, 1969 $1.04319336 September 30, 1979
$1.07966980
December 31, 1969 $1.05956294 December 31, 1979
$1.09861144
March 31, 1970 $1.05322327 March 31, 1980 $1.02778990
June 30, 1970 $ .86337212 June 30, 1980 $1.15888482
September 30, 1970 $ .98057690 September 30, 1980
$1.24125856
December 31, 1970 $1.08416020 December 31, 1980
$1.34937658
March 31, 1971 $1.28783953 March 31, 1981 $1.34420316
June 30, 1971 $1.31417688 June 30, 1981 $1.31151501
September 30, 1971 $1.34600160 September 30, 1981
$1.21957549
December 31, 1971 $1.40624309 December 31, 1981
$1.34034823
March 31, 1972 $1.50937876 March 31, 1982 $1.22060069
June 30, 1972 $1.46441659 June 30, 1982 $1.21747890
September 29, 1972 $1.41141921 September 30, 1982
$1.32107048
December 31, 1972 $1.43641768 December 31, 1982
$1.54829628
March 30, 1973 $1.14518173 March 31, 1983 $1.72492408
June 29, 1973 $ .94975920 June 30, 1983 $1.88999803
September 28, 1973 $1.12752636 September 30, 1983 $1.85391985
December 31, 1973 $ .98798465 December 31, 1983
$1.86959830
March 29, 1974 $ .92504974 March 31, 1984 $1.77987261
June 28, 1974 $ .84636772 June 30, 1984 $1.74123169
September 30, 1974 $ .69582357 September 30, 1984 $1.89436321
December 31, 1974 $ .76438983 December 31, 1984
$1.94021457
March 31, 1975 $ .85484991 March 31, 1985 $2.11639231
June 30, 1975 $ .94523691 June 30, 1985 $2.31593116
September 30, 1975 $ .86720026 September 30, 1985 $2.17502453
December 31, 1975 $ .89703274 December 31, 1985
$2.50415588
March 31, 1976 $1.02654318 March 31, 1986 $2.92575544
June 30, 1976 $1.04254066 June 30, 1986 $3.12894373
September 30, 1976 $1.02175714 September 30, 1986 $2.79849885
December 31, 1976 $1.06312535 December 31, 1986
$2.50415588
March 31, 1977 $ .96668709 March 31, 1987 $3.45357315
June 30, 1977 $ .97779837 June 30, 1987 $3.47692861
September 30, 1977 $ .91543186 September 30, 1987 $3.58107036
December 31, 1977 $ .91330430 December 31, 1987
$2.90927633
March 31, 1978 $ .88025820 March 31, 1988 $3.03211290
June 30, 1978 $ .94981303 June 30, 1988 $3.14170371
September 30, 1978 $1.02175412 September 30, 1988 $3.19555027
Date Value Date Value
December 31, 1988 $3.24632490 September 30, 1992
$4.94334533
March 31, 1989 $3.40048089 December 31, 1992 $5.39680799
June 30, 1989 $3.66057985 March 31, 1993 $5.68645911
September 30, 1989 $4.03595925 June 30, 1993 $5.89355715
December 31, 1989 $4.16667314 September 30, 1993
$6.20352631
March 31, 1990 $4.10420565 December 31, 1993 $6.22231381
June 30, 1990 $4.40575331 March 31, 1994 $6.07099873
September 30, 1990 $3.95067300 June 30, 1994 $5.98373289
December 31, 1990 $4.09586804 September 30, 1994
$6.21184797
March 31, 1991 $4.67731834 December 31, 1994 $6.07070336
June 30, 1991 $4.46997251 March 31, 1995 $6.43386353
September 30, 1991 $4.70629835 June 30, 1995 $6.93539739
December 31, 1991 $5.17489662 September 30, 1995
$7.34349110
March 31, 1992 $5.00089395 December 31, 1995
$7.50058268
June 30, 1992 $4.90045709
These historical accumulation units are unaudited.
FINANCIAL STATEMENTS OF VARIABLE ANNUITY ACCOUNT A
The following audited financial statements of Variable Annuity
Account A cover the financial position as of December 31, 1995, the
results of operations for the year ended December 31, 1995, and the
changes in net assets for each of the years ended December 31,
1994, and 1995.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
Financial Statement for the Years
Ended December 31, 1995 and 1994
and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Variable Annuity Account Committee
and the Participants of Great-West
Variable Annuity Account A:
We have audited the accompanying statement of assets and
liabilities of the Great-West Variable Annuity Account A, including
the statement of investments, as of December 31, 1995, the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in
the period ended December 31, 1995. These financial statements and
financial highlights are the responsibility of Variable Annuity
Account A's management. Our responsibility is to express an
opinion on these financial statements and financial highlights
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 and the financial highlights 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, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Great-West Variable Annuity Account A at December 31, 1995, and
the results of its operations, the changes in its net assets and
the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
January 31, 1996
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
Assets:
Investments, at value:
Common stock (cost - $4,980,696) $ 6,288,962
Short-term investment (cost-$948,218) 948,218
Investment income due and accrued 7,392
Cash 19,844
Due from Great-West Life & Annuity Insurance Company 1,029
Total Assets 7,265,445
Liabilities: Due to broker 41,107
Contract benefits payable 234,198
Total Liabilities 275,305
Net Assets $ 6,990,140
Net Assets Represented By (Units at $7.500582): Accumulation
units - 848,519 $ 6,364,386
Reserves for annuities in course of payment - 3,102 units 625,754
Net Assets $ 6,990,140
See notes to financial statements.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A Statement of Operations
Year Ended December 31, 1995
Investment Income:
Dividends $ 112,289
Interest 65,210 177,499
Expenses:
Administration 20,303
Mortality risks 26,890
Investment management and advisory services 32,411
Expense risks 4,780 84,384
Net Investment Income 93,115
Realized and Unrealized Gain on Investments:
Net realized gain on investments 855,627
Net change in unrealized appreciation on investments 568,994
Net Realized and Unrealized Gain on Investments 1,424,621
Net Increase in Net Assets Resulting from Operations $ 1,517,736
See notes to financial statements.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
Statements of Changes in Net Assets Years Ended December 31, 1995
and 1994
From Operations: 1995 1994
Net investment income $ 93,115 $ 80,424
Net realized gain 855,627 630,647
Net change in unrealized appreciation (depreciation) 568,994
(913,802)
Increase (decrease) in net assets resulting from operations
1,517,736 (202,731)
From Unit Share Transactions: Surrenders (299,498) (885,162)
Annuity payments (107,786) (112,364)
Death payments (204,673) (77)
Transfer in respect of mortality guarantees 7,418 41,342
Decrease in net assets derived from unit share transactions
(604,539) (956,261)
Net increase (decrease) in net assets 913,197 (1,158,992)
Net Assets: Beginning of period 6,076,943 7,235,935
End of period $ 6,990,140 $ 6,076,943
See notes to financial statements.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
Notes to Financial Statements Years ended December 31, 1995 and
1994
NOTE 1 - HISTORY
Great-West Variable Annuity Account A (Variable Annuity Account A)
is a separate and distinct investment fund established by The
Great-West Life Assurance Company (Great-West Life). On December
31, 1991, Variable Annuity Account A was transferred to and the
variable annuity contracts were reinsured by Great-West Life &
Annuity Insurance Company (GWL&A), a wholly-owned subsidiary of
Great-West Life. Variable Annuity Account A is registered as an
open-end diversified management investment company under the
Investment Company Act of 1940, and the registration under the
Securities Act of 1933 of the group variable annuity contracts
funded by Variable Annuity Account A became effective on November
27, 1968. Purchase payments were first placed in Variable Annuity
Account A on January 3, 1969.
Effective April 16, 1984, Great-West Life ceased issuing new
variable annuity contracts. Effective May 1, 1987, Great-West Life
has not allowed new participants to be enrolled under existing
variable annuity contracts and, effective May 1, 1989, no
additional contributions under existing variable annuity contracts
are being accepted.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies
of Variable Annuity Account A:
The cost of securities sold is determined on the basis of specific
identification.
Securities traded on national exchanges are valued daily at the
closing price of the securities on these exchanges, and securities
traded on over-the-counter markets are valued daily at the average
between bid and asked prices. Short-term securities are valued at
amortized cost which approximates market value. Security
transactions are recorded at the earlier of trade date or the date
a commitment is made to buy or sell the related investment.
Dividend income is accrued as of the ex-dividend date and interest
income is recorded daily.
NOTE 3 - CHARGES UNDER THE CONTRACTS
GWL&A provides administrative, investment management, and advisory
services to Variable Annuity Account A and has assumed mortality
and expense risks of the contracts. A daily deduction of .003285%
(an effective annual rate of 1.2064%) is made from the gross
investment income of Variable Annuity Account A. This deduction,
expressed on an annual basis, is broken down as follows: .2857%
for administrative expenses, .3863% for mortality risks, .0688% for
expense risks, and .4656% for investment management and advisory
services.
NOTE 4 - INVESTMENTS
The aggregate purchases of investments and the aggregate proceeds
from sales of investments were (excluding short-term securities) as
follows:
1995 1994
Common Stock
Purchases $ 4,018,419 $ 1,728,700
Proceeds from sales 4,643,628 1,797,761
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 5 - FEDERAL INCOME TAXES The Variable Annuity Account A
investment income is automatically applied to increase accumulation
unit values. Under existing federal income tax law, Variable
Annuity Account A investment income is not taxed to the extent that
it is applied to increase accumulation unit values. GWL&A reserves
the right to charge the Variable Annuity Account A if such taxes
are imposed in the future.
NOTE 6 - ACCUMULATION UNITS
A summary of the transactions in accumulation units follows:
1995 1994
Outstanding - January 1 904,823 1,051,813
Redeemed during the year
Surrender (24,716) (146,978)
Death (31,588) (12) (56,304) (146,990)
Outstanding - December 31 848,519 904,823
Net investment income and realized and unrealized gains are
reflected in the value of the accumulation units. Dividends are
not declared from income and gains are not distributed.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
Financial Highlights
Selected data for an accumulation unit for years ended December 31,
1995 1994, 1993, 1992, and 1991 were as follows:
Years Ended December 31,
1995 1994 1993 1992 1991
Unit Value, Beginning of Period $6.070 $6.245 $5.397 $5.175 $4.096
Income From Investment Operations:
Net investment income .089 .073 .048 .052 .066
Net gains (losses) on investments
(realized and unrealized) 1.342 (.248) .800 .170 1.013 Total From
Investment Operations
(Note A) 1.431 (.175) .848 .222 1.079
Unit Value, End of Period $7.501 $6.070 $6.245 $5.397 $5.175
Total Return 23.56% (2.80)% 15.71% 4.29% 26.34%
Net Assets, End of Period
$6,990,140 $6,076,943 $7,235,935 $6,825,451 $7,207,045 Ratio of
Expenses to
Average Net Assets 1.18% 1.24% 1.19% 1.21% 1.20% Ratio of
Net Investment Income
to Average Net Assets 2.49% 2.42% 2.02% 2.23% 2.65% Portfolio
Turnover Rate 62.2% 30.2% 23.4% 44.5% 66.2%
Note A - Net investment income and realized and unrealized gains
(losses) are reflected in the value of the accumulation units.
Dividends are not declared from income and capital gains are not
distributed.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
Accumulation Unit Values (Unaudited)
Accumulation Accumulation Valuation Date Unit Value Valuation
Date Unit Value
January 3, 1969 $1.00000000 June 30, 1981 $1.31151501 March 28,
1969 $1.07468400 September 30, 1981 $1.21957549 June 27, 1969
$1.07583259 December 31, 1981 $1.34034823 September 30, 1969
$1.04319336 March 31, 1982 $1.22060069 December 31, 1969
$1.05956294 June 30, 1982 $1.21747890 March 31, 1970 $1.05322327
September 30, 1982 $1.32107048 June 30, 1970 $ .86337212 December
31, 1982 $1.54829628 September 30, 1970 $ .98057690 March 31,
1983 $1.72492408 December 31, 1970 $1.08416020 June 30, 1983
$1.88999803 March 31, 1971 $1.28783953 September 30, 1983
$1.85391985 June 30, 1971 $1.31417688 December 31, 1983
$1.86959830 September 30, 1971 $1.34600160 March 31, 1984
$1.77987261 December 31, 1971 $1.40624309 June 30, 1984
$1.74123169 March 31, 1972 $1.50937876 September 30, 1984
$1.89436321 June 30, 1972 $1.46441659 December 31, 1984
$1.94021457 September 29, 1972 $1.41141921 March 31, 1985
$2.11639231 December 31, 1972 $1.43641768 June 30, 1985
$2.31593116 March 30, 1973 $1.14518173 September 30, 1985
$2.17502453 June 29, 1973 $ .94975920 December 31, 1985
$2.50415588 September 28, 1973 $1.12752636 March 31, 1986
$2.92575544 December 31, 1973 $ .98798465 June 30, 1986
$3.12894373 March 29, 1974 $ .92504974 September 30, 1986
$2.79849885 June 28, 1974 $ .84636772 December 31, 1986
$2.92996949 September 30, 1974 $ .69582357 March 31, 1987
$3.45357315 December 31, 1974 $ .76438983 June 30, 1987
$3.47692861 March 31, 1975 $ .85484991 September 30, 1987
$3.58107036 June 30, 1975 $ .94523691 December 31, 1987
$2.90927633 September 30, 1975 $ .86720026 March 31, 1988
$3.03211290 December 31, 1975 $ .89703274 June 30, 1988
$3.14170371 March 31, 1976 $1.02654318 September 30, 1988
$3.19555027 June 30, 1976 $1.04254066 December 31, 1988
$3.24632490 September 30, 1976 $1.02175714 March 31, 1989
$3.40048089 December 31, 1976 $1.06312535 June 30, 1989
$3.66057985 March 31, 1977 $ .96668709 September 30, 1989
$4.03595925 June 30, 1977 $ .97779837 December 31, 1989
$4.16667314 September 30, 1977 $ .91543186 March 31, 1990
$4.10420565 December 31, 1977 $ .91330430 June 30, 1990
$4.40575331 March 31, 1978 $ .88025820 September 30, 1990
$3.95067300 June 30, 1978 $ .94981303 December 31, 1990
$4.09586804 September 30, 1978 $1.02175412 March 31, 1991
$4.67731834 December 31, 1978 $ .94566769 June 30, 1991
$4.46997251 March 31, 1979 $1.03700469 September 30, 1991
$4.70629835 June 30, 1979 $1.03384794 December 31, 1991
$5.17489662 September 30, 1979 $1.07966980 March 31, 1992
$5.00089395 December 31, 1979 $1.09861144 June 30, 1992
$4.90045709 March 31, 1980 $1.02778990 September 30, 1992
$4.94334533 June 30, 1980 $1.15888482 December 31, 1992
$5.39680799 September 30, 1980 $1.24125856 March 31, 1993
$5.70268053 December 31, 1980 $1.34937658 June 30, 1993
$5.91443136 March 31, 1981 $1.34420316 September 30, 1993
$6.20352631
GREAT-WEST VARIABLE ANNUITY ACCOUNT A Accumulation Unit Values
(Unaudited) - Concluded Accumulation Valuation Date Unit
Value
December 31, 1993 $6.24551098 March 31, 1994 $6.07099873 June
30, 1994 $5.98373289 September 30, 1994 $6.21184797 December
31, 1994 $6.07070336 March 31, 1995 $6.43386353 June 30, 1995
$6.93539739 September 30, 1995 $7.34349110 December 31, 1995
$7.50058268
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 1995, 1994 AND 1993
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 (a wholly-owned
subsidiary of The Great-West Life Assurance Company) and
subsidiaries as of December 31, 1995 and 1994, 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,
1995. 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, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 19, 1996
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
ASSETS
1995
1994
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost
(fair value $2,158,043 and $4,135,248)
$ 2,054,204
$4,293,985
Available for sale, at fair value
(amortized cost $6,087,969 and $2,997,087)
6,263,187
2,824,703
Common stock
9,440
5,222
Mortgage loans on real estate
1,713,195
2,011,059
Real estate
60,454
43,663
Policy loans
2,237,745
1,905,013
Short-term investments
134,835
706,920
Total Investments
12,473,060
11,790,565
Cash
90,939
131,621
Reinsurance receivable
333,924
295,148
Deferred policy acquisition costs
278,526
297,092
Investment income due and accrued
211,922
195,817
Other assets
40,038
55,579
Premiums in course of collection
85,990
84,478
Deferred income taxes
168,941
210,407
Separate account assets
3,998,878
2,554,836
TOTAL ASSETS
$17,682,218
$15,615,543
See notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDER'S EQUITY
1995
1994
POLICY BENEFIT LIABILITIES:
Policy reserves
$10,845,935
$10,334,456
Policy and contract claims
359,791
338,515
Policyholders' funds
154,872
144,262
Experience refunds
83,562
70,359
Provision for policyholders'dividends
47,760
41,840
GENERAL LIABILITIES:
Due to Parent Corporation
149,974
159,117
Repurchase agreements
372,965
564,160
Commercial paper
84,854
89,686
Other liabilities
453,889
420,154
Undistributed earnings on
participating business
136,617
120,927
Separate account liabilities
3,998,878
2,554,836
Total Liabilities
16,689,097
14,838,312
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 600 shares issued and
outstanding 60,000 60,000
Series B, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 200 shares issued and
outstanding 20,000 20,000
Series C, cumulative,
1500 shares authorized, none outstanding
Series D, cumulative,
1500 shares authorized, none outstanding
Series E, non-cumulative,
2,000,000 shares authorized,
liquidation value of $20.90
41,800 41,800
per share, 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
657,265
657,265
Net unrealized gains (losses) on
securities available-for-sale
58,763
(78,427)
Retained earnings
148,261
69,561
Total Stockholder's Equity
993,121
777,231
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY
$17,682,218
$15,615,543
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
REVENUES:
Annuity contract charges and
premiums
$79,816
$61,122
$63,210
Life, accident, and health premiums
earned (net of premiums ceded totaling
$60,880,
$48,115
and $254,969)
987,611
938,947
632,961
Net investment income
835,046
767,646
791,424
Net realized gains (losses) on
investments
7,465
(71,939)
25,342
1,909,938
1,695,776
1,512,937
BENEFITS AND EXPENSES:
Life and other policy benefits (net
of reinsurance recoveries totaling
$43,574,
$18,937,
and $151,598)
557,469
548,950
390,562
Increase in reserves
98,797
64,834
59,873
Interest paid or credited to
contractholders
562,263
529,118
623,417
Provision for policyholders' share
of earnings (losses)
on participating business
2,027
(725)
(1,498)
Dividends to policyholders
48,150
42,094
34,474
1,268,706
1,184,271
1,106,828
Commissions
122,926
120,058
90,472
Operating expenses
314,810
261,311
196,820
Premium taxes
26,884
27,402
23,129
1,733,326
1,593,042
1,417,249
INCOME BEFORE INCOME TAXES
176,612
102,734
95,688
PROVISION FOR INCOME TAXES:
Current
88,366
65,070
76,672
Deferred
(39,434)
(36,614)
(45,620)
48,932
28,456
31,052
NET INCOME
$127,680
$74,278
$64,636
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993 (Dollars in Thousands)
Net Additional
Unrealized Retained
Preferred Stock
Common Stock
Paid-In
Gains
Earnings
Shares
Amount
Shares
Amount
Capital
(Losses)
(Deficit)
Total
BALANCE, JANUARY 1, 1993
2,000,800
$121,800
7,028,217
$7,028
$647,199
$0
$(7,063)
$768,964
Issuance of common stock
3,783
4
496
500
Capital contributions
9,098
9,098
Dividends
(21,852)
(21,852)
Net income
64,636
64,636
BALANCE, DECEMBER 31, 1993
2,000,800
121,800
7,032,000
7,032
656,793
0
35,721
821,346
Adjustment to beginning
balance for change in
accounting method for investment
securities
6,515
6,515
Change in net unrealized
gains (losses)
(84,942)
(84,942)
Capital contributions
472
472
Dividends
(40,438)
(40,438)
Net income
74,278
74,278
BALANCE, DECEMBER 31, 1994
2,000,800
121,800
7,032,000
7,032
657,265
(78,427)
69,561
777,231
Change in net unrealized
gains (losses)
137,190
137,190
Dividends
(48,980)
(48,980)
Net income
127,680
127,680
BALANCE, DECEMBER 31,
1995
2,000,800
$121,800
7,032,000
$7,032
$657,265
$58,763
$148,261
$993,121
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
OPERATING ACTIVITIES:
Net income
$127,680
$74,278
$64,636
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain (loss) allocated to
par policyholders
2,027
(725)
(1,498)
Amortization of
investments
26,725
36,978
36,782
Realized losses (gains) on
disposal of investments
and write-downs of
mortgage loans and real estate
(7,465)
71,939
(25,342)
Amortization
49,464
29,197
34,115
Deferred income taxes
(39,763)
(38,631)
(56,959)
Changes in assets and
liabilities:
Policy benefit
liabilities
346,975
93,998
438,809
Reinsurance receivable
(38,776)
(25,868)
352,106
Accrued interest and
other receivables
(17,617)
(26,032)
(19,817)
Other, net
8,834
96,950
119,284
Net cash provided by operating activities
458,084
312,084
942,116
INVESTING ACTIVITIES:
Proceeds from sales,
maturities, and redemptions of
investments:
Fixed maturities
4,744,309
Held-to-maturity
Sales
18,821
16,014
Maturities and redemptions
655,993
1,034,324
Available-for-sale
Sales
4,211,649
1,753,445
Maturities and redemptions
253,747
141,299
Mortgage loans
260,960
291,102
339,406
Real estate
4,401
29,868
22,974
Common stock
178
Purchases of investments:
Fixed maturities
(5,494,534)
Held-to-maturity
(490,228)
(673,567)
Available-for-sale
(4,932,566)
(2,606,028)
Mortgage loans
(683)
(9)
(52,917)
Real estate
(5,302)
(9,253)
(14,303)
Common stock
(4,218)
(2,063)
Net cash used in
investing activities
(27,426)
(24,690)
(455,065)
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
FINANCING ACTIVITIES:
Contract withdrawals, net of
deposits
$(217,190)
$(238,166)
$(590,118)
Due to Parent Corporation
(9,143)
(13,078)
(149,510)
Dividends paid
(48,980)
(40,438)
(21,852)
Net commercial paper (repayments)
borrowings
(4,832)
89,686
Net repurchase agreements
(repayments) borrowings
(191,195)
(39,244)
311,937
Net cash used in
financing activities
(471,340)
(241,240)
(449,543)
NET INCREASE IN CASH
(40,682)
46,154
37,508
CASH, BEGINNING OF YEAR
131,621
85,467
47,959
CASH, END OF YEAR
$90,939
$131,621
$85,467
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes
$83,841
$68,892
$87,778
Interest
17,016
12,229
7,438
See notes to consolidated financial
statements.
(Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company
(the Company) is a wholly-owned subsidiary of The Great-West Life
Assurance Company (the Parent Corporation). The Company is an
insurance company domiciled in the State of Colorado. The Company
offers a wide range of life insurance, health insurance, and
retirement and investment products to individuals, businesses,
and other private and public organizations throughout the United
States.
Basis of Presentation - The preparation of financial
statements in conformity with generally accepted accounting
principles equires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
material intercompany transactions and balances have been
eliminated.
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform with the basis of presentation
used in 1995.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed
maturities at the time of purchase. Fixed maturities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost unless
fair value is less than cost and the decline is deemed to be other
than temporary, in which case they are written down to fair
value and a new cost basis is established. Fixed maturities not
classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are carried at
fair value, with the net unrealized gains and losses reported as a
separate component of stockholder's equity. The net unrealized
gains and losses in derivative financial instruments used to hedge
available-for-sale securities is included in the separate component
of stockholderns equity.
The amortized cost of fixed maturities classified as
held-to-maturity or available-for-sale is adjusted for
amortization of premiums and accretion of discounts using the
effective interest method over the life of the related bonds. Such
amortization is included in interest income from investments.
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 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 managementns opinion, is sufficient to
absorb possible credit losses on its impaired loans and to provide
adequate provision for any possible future losses in the portfolio.
Managementns judgement is based on past loss experience, current
and projected economic conditions, and extensive situational
analysis of each individual loan.
Effective January 1, 1995, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosures". In accordance with these standards, a mortgage loan
is considered to be impaired when it is probable that the Company
will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The measurement of
impaired loans is based on the fair value of the collateral. As
the Company was already providing for impairment of loans through
an allowance for credit losses, the implementation of these
statements had no material effect on the Company's financial
statements.
3. Real estate is carried at the lower of cost or fair
value. In March 1995, the FASB issued SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" to be effective for fiscal years beginning after
December 15, 1995. The effect of adopting this statement is not
expected to be material.
4. Policy loans are carried at their unpaid balances.
5. Short-term investments include securities purchased with
initial maturities of one year or less and are carried at amortized
cost. The Company considers short-term investments to be
available-for-sale and amortized cost approximates fair value.
Gains and losses realized on disposal of investments are
determined on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs,
which consist of sales commissions and other costs that vary with
and are primarily related to the production of new and renewal
business, have been deferred to the extent recoverable. Deferred
costs associated with the annuity products are being amortized
over the life of the contracts in proportion to the emergence of
gross profits. Retrospective adjustments of these amounts are made
when the Company revises its estimates of current or future gross
profits. Deferred costs associated with traditional life
insurance are amortized over the premium paying period of the
related policies in proportion to premium revenues recognized.
Amortization of deferred policy acquisition costs totalled $48,054,
$28,199, and $32,611 in 1995, 1994, and 1993, respectively.
Separate Account - Separate account assets and related
liabilities are carried at fair value. The Companyns separate
accounts invest in shares of Maxim Series Fund, Inc., a
diversified, open-end management investment company which is an
affiliate of the Company, shares of other external mutual funds, or
government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and
annuity policy reserves with life contingencies of $4,675,175, and
$3,995,927 at December 31, 1995 and 1994, 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 $6,170,760, and $6,338,529
at December 31, 1995 and 1994, respectively, are established
at the contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance
companies are carried as reinsurance receivable on the balance
sheet (See Note 3).
The cost of reinsurance related to long-duration contracts is
accounted for over the life of the underlying reinsured policies
using assumptions consistent with those used to account for the
underlying policies.
Policy and Contract Claims - Policy and contract claims
include provisions for reported claims in process of settlement,
valued in accordance with the terms of the related policies and
contracts, as well as provisions for claims incurred and unreported
based primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity
policy reserves are $3,339,316 and $2,917,273 at December 31, 1995
and 1994, respectively. Participating business approximates 46%
of the Company's ordinary life insurance in force and 84% of
ordinary life insurance premium income at December 31, 1995.
The liability for undistributed earnings on participating
business was increased by $15,690 in 1995, which represented $2,027
of earnings on participating business and adjustments of $13,663
to reflect the net unrealized gains on securities classified as
available-for-sale, net of certain adjustments to policy reserves
and income taxes.
The amount of dividends to be paid from undistributed earnings
on participating business is determined annually by the Board of
Directors. Amounts allocable to participating policyholders are
consistent with established Company practice.
The Company has established a Participating Policyholder
Experience Account (PPEA) for the benefit of all participating
policyholders which is included in the accompanying consolidated
balance sheet. Earnings associated with the operation of the PPEA
are credited to the benefit of all participating policyholders. In
the event that the assets of the PPEA are insufficient to provide
contractually guaranteed benefits, the Company must provide such
benefits from its general assets.
The Company has also established a Participation Fund Account
(PFA) for the benefit of the participating policyholders previously
transferred to the Company from the Parent under an assumption
reinsurance transaction. The PFA is part of the PPEA. The assets
and liabilities associated with these policies are segregated in
the accounting records of the Company to assure the continuation of
current policyholder dividend expectations. Earnings derived
from the operation of the PFA accrue solely for the benefit of the
acquired participating policyholders.
Recognition of Premium Income and Benefits and Expenses - Life
insurance premiums are recognized as earned. Annuity premiums
with life contingencies are recognized as received. Accident and
health premiums are earned on a monthly pro rata basis. Revenues
for annuity and other contracts without significant life
contingencies consist of contract charges for the cost of
insurance, contract administration, and surrender fees that have
been assessed against the contract account balance during the
period. Benefits and expenses on policies with life contingencies
are associated with premium income by means of the provision for
future policy benefit reserves, resulting in recognition of profits
over the life of the contracts. The average crediting rate on
annuity products was approximately 7.2% in 1995.
Income Taxes - Income taxes are recorded using the asset and
liability approach which requires, among other provisions, the
recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating
future tax consequences, all expected future events (other than the
enactments or changes in the tax laws or rules) are considered.
Deferred tax assets are recorded net of a valuation allowance to
the extent that management estimates that recovery of the asset is
not more likely than not.
Repurchase Agreements - 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.
Derivatives - The Company engages in hedging activities to
manage interest rate and foreign exchange risk (See Note 6).
2. RELATED-PARTY TRANSACTIONS
Reinsurance Transactions - The Company entered into a series
of reinsurance transactions with the Parent Corporation during 1993
and prior years intended to make the Company the underwriter and
administrator of all life and health insurance, annuity products,
and related services with respect to United States policyholders.
A May 1, 1993, reinsurance transaction resulted in the Company
recapturing certain group life and health business previously ceded
to the Parent under a coinsurance agreement, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds
$217,254
Policy reserves
$253,479
Mortgage loans
27,182
Cash and short-term
investments
5,607
Investment income
due & accrued
3,436
$253,479
$253,479
In addition, effective December 31, 1993, the Company
recaptured certain participating life business also previously
ceded to the Parent Corporation, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds
$171,005
Policy reserves
$180,000
Cash and short-term
investments
8,087
Investment income
due & accrued
908
$180,000
$180,000
From 1989 to 1993, the Company has assumed most of the United
States business of the Parent Corporation. During this period, the
Parent Corporation had recorded estimated tax liabilities for
certain United States federal income taxes in its financial
statements. On December 31, 1993 and December 30, 1994, the Parent
Corporation transferred assets with an estimated fair value of
$82,800 and $9,391, respectively, to the Company in exchange for
the Company agreeing to assume the estimated tax liabilities of the
Parent Corporation, and the issuance of shares of the Company's
common stock.
Fees and Expenses - The Company and the Parent Corporation
have a number of service agreements whereby the Parent Corporation
administers, distributes, and underwrites business for the Company
and administers the Company's investment portfolio. Certain
operating expenses represent allocations made by the Parent
Corporation to the Company for services provided pursuant to these
service agreements. These transactions are summarized as follows:
Years Ended December 31,
1995
1994
1993
Investment management expense
(included in net
investment income)
$15,182
$13,841
$17,767
Administrative and underwriting
payments (included
in operating expenses)
301,529
269,020
199,947
Other - At December 31, 1995 and 1994, due to Parent
Corporation includes $27,814 and $35,388 due on demand and $122,160
and $123,729 of notes payable which bear interest and mature at
various dates. These notes may be prepaid in whole or in part at
any time without penalty; the issuer may not demand payment before
the maturity date. The Company also has available an arrangement
to obtain advances from the Parent Corporation to fund short-term
liquidity needs. The due on demand to the Parent Corporation bears
interest at the public bond rate (6.4% and 8.5% at December 31,
1995 and 1994, respectively) while the remainder bear interest at
various rates.
3. REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured and to recover a
portion of benefits paid by ceding risks to other insurance
enterprises under excess coverage and co-insurance contracts. The
Company retains a maximum of $1.5 million of coverage per
individual life.
Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company; consequently,
allowances are established for amounts deemed uncollectible. The
Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of
the reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. At December 31, 1995 and 1994, reinsurance
receivables with a carrying value of $333,924, and $295,148,
respectively, were due primarily from the Parent Corporation.
Total reinsurance premiums assumed from the Parent Corporation
were $1,606 and $2,438, and $0, in 1995, 1994, and 1993,
respectively.
The Company considers all accident and health policies to be
short-duration contracts. The following schedule details life
insurance in force and life and accident/health premiums:
Assumed
Ceded
Primarily
Percentage
Primarily to
From
of
Amount
Gross
the Parent
Other
Net
Assumed
to
Amount
Corporation
Companies
Amount
Net
December 31, 1995:
Life insurance in force:
Individual
$22,388,520
$7,200,882
$3,476,784
$18,664,422
18.6%
Group
48,415,592
1,954,313
50,369,905
3.9%
Total
$70,804,112
$7,200,882
$5,431,097
$69,034,327
Premiums:
Life insurance
$339,342
$51,688
$21,028
$308,682
6.8%
Accident/health
623,626
9,192
64,495
678,929
9.5%
Total
$962,968
$60,880
$85,523
$987,611
December 31, 1994:
Life insurance in force:
Individual
$21,461,590
$7,411,811
$3,415,596
$17,465,375
19.6%
Group
48,948,669
2,102,228
51,050,897
4.1%
Total
$70,410,259
$7,411,811
$5,517,824
$68,516,272
Premiums:
Life insurance
$322,263
$42,946
$22,009
$301,326
7.3%
Accident/health
579,650
5,169
63,140
637,621
9.9%
Total
$901,913
$48,115
$85,149
$938,947
December 31, 1993:
Life insurance in force:
Individual
$17,131,994
$7,797,389
$3,142,723
$12,477,328
25.2%
Group
37,789,859
2,108,314
39,898,173
5.3%
Total
$54,921,853
$7,797,389
$5,251,037
$52,375,501
Premiums:
Life insurance
$283,707
$112,798
$18,753
$189,662
9.9%
Accident/health
524,747
142,171
60,723
443,299
13.7%
Total
$808,454
$254,969
79,476
$632,961
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
1995
1994
1993
Investment income:
Bonds and short-term
investments
$592,062
$555,103
$545,926
Mortgage loans on real
estate
171,008
182,544
220,477
Real estate
3,936
5,700
9,265
Policy loans
163,547
116,060
91,529
930,553
859,407
867,197
Investment expenses,
including interest on
amounts charged by the
Parent Corporation
of $10,778, $11,145, and
$7,250
95,507
91,761
75,773
Net investment income
$835,046
$767,646
$791,424
5. NET REALIZED GAINS (LOSSES) ON
INVESTMENTS
Net realized gains (losses) on
investments are as follows:
Years Ended December 31,
1995
1994
1993
Net realized gains
(losses):
Bonds
$28,166
$(39,775)
$68,884
Mortage loans on real
estate
1,309
2,120
(98)
Real estate
(10)
(102)
(102)
Bond provisions
(5,000)
(3,200)
(4,456)
Mortgage loan provisions
(15,877)
(27,918)
(38,089)
Real estate provisions
(1,123)
(3,064)
(797)
Net realized gains
(losses) on investments
$7,465
$(71,939)
$25,342
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31,
1995 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:
Collateralized
mortgage obligations
$
$
$
$
$
Direct mortgage pass-through
certificates
Other
11,107
1,093
12,200
11,107
Collateralized
mortgage obligations
Public utilities
269,671
22,084
95
291,660
269,671
Corporate bonds
1,732,046
83,583
5,867
1,809,762
1,732,046
Foreign governments
18,596
1,087
12
19,671
18,596
State and
municipalities
22,784
1,966
24,750
22,784
$2,054,204
$109,813
$5,974
$2,158,043
$2,054,204
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$561,475
$9,983
$1,948
$569,510
$569,510
Direct mortgage pass-through
certificates
794,056
11,980
2,233
803,803
803,803
Other
561,736
7,703
39
569,400
569,400
Collateralized
mortgage obligations
490,074
18,044
3,304
504,814
504,814
Public utilities
581,482
16,607
2,425
595,664
595,664
Corporate bonds
2,943,918
121,537
26
3,065,429
3,065,429
Foreign governments
141,362
5,021
5,644
140,739
140,739
State and
municipalities
13,866
22
60
13,828
13,828
$6,087,969
$190,897
$15,679
$6,263,187
$6,263,187
6.SUMMARY OF INVESTMENTS (Continued)
Fixed maturities owned at December 31, 1994 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:
Collateralized
mortgage obligations
$521,408
$389
$33,018
$488,779
$521,408
Direct
mortgage pass-through
certificates
69,559
617
1,001
69,175
69,559
Other
85,406
246
923
84,729
85,406
Collateralized
mortgage obligations
309,869
1,205
14,208
296,866
309,869
Public utilities
457,758
2,898
14,340
446,316
457,758
Corporate bonds
2,757,612
14,701
111,410
2,660,903
2,757,612
Foreign governments
90,690
47
3,950
86,787
90,690
State and
municipalities
1,683
10
1,693
1,683
$4,293,985
$20,113
$178,850
$4,135,248
$4,293,985
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$80,531
$
$3,798
$76,733
$76,733
Direct
mortgage pass-through
certificates
759,815
871
49,462
711,224
711,224
Other
198,651
9
2,654
196,006
196,006
Collateralized
mortgage obligations
203,036
6,379
196,657
196,657
Public utilities
325,383
193
26,379
299,197
299,197
Corporate bonds
1,119,726
3,253
65,398
1,057,581
1,057,581
Foreign governments
298,597
17
21,826
276,788
276,788
State and
municipalities
11,348
831
10,517
10,517
$2,997,087
$4,343
$176,727
$2,824,703
$2,824,703
Most of the collateralized mortgage obligations consist of
planned amortization classes with final stated maturities of three
to thirty years and average lives of less than one to twelve
years. Prepayments on all mortgage-backed securities are monitored
monthly and amortization of the premium and/or the accretion of the
discount associated with the purchase of such securities is
adjusted by such prepayments.
The cumulative effect as of January 1, 1994 of adopting SFAS
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," increased the opening balance of stockholders'
equity by $6,515 to reflect the net unrealized gains on securities
classified as available-for-sale (previously carried at the
lower of aggregate amortized cost or fair value) and the
corresponding adjustments to deferred policy acquisition costs,
policy reserves, and amounts allocable to the liability for
undistributed earnings on participating business, all net of income
taxes.
In November 1995, the Financial Accounting Standards Board
issued a special report entitled nA Guide to Implementation of SFAS
115 on Accounting for Certain Investments in Debt and Equity
Securitiesn. In accordance with the adoption of this guidance, the
Company reassessed the classification of its investment portfolio
in December 1995 and reclassed securities totalling $2,119,814
from held-to-maturity to available-for-sale. In connection with
this reclassification, an unrealized gain, net of related
adjustments (see above), of $23,449 was recognized in stockholderns
equity at the date of transfer.
The estimated fair value of fixed maturities that are publicly
traded are obtained from an independent pricing service. To
determine fair value for fixed maturities not actively traded, the
Company utilized discounted cash flows at determined current market
spread rates on investments of similar quality and term.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1995, by projected maturity, are shown
below. Actual maturities will likely differ from these projections
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Held-to-
Maturity
Available-
for-Sale
Amortized
Estimated
Amortized
Estimated
Cost
Fair Value Cost
Fair Value Due in one year or
less
$287,565
$293,666
$326,032
$337,792
Due after one year
through five years
838,993
877,949
1,452,442
1,495,755
Due after five years
through ten years
537,365
575,896
1,023,894
1,064,871
Due after ten years
159,064
173,487
522,002
542,559
Mortgage-backed
securities
1,845,605
1,878,127
Asset-backed
securities
231,217
237,045
917,994
944,083
$2,054,204
$2,158,043
$6,087,969
$6,263,187
During the years ended December 31, 1995 and 1994,
available-for-sale securities with a fair value at the date of sale
of $4,211,649 and $1,753,445 were sold. The realized gains and
losses on such sales totaled $39,755 and $15,516 for 1995 and
$7,030 and $50,612 for 1994. During 1995 and 1994,
held-to-maturity securities with an amortized cost of $18,087 and
$15,300 were sold due to credit deterioration with insignificant
realized gains and losses. Gains on securities which were called
for redemption by the respective issuers prior to maturity were
$2,990 and $3,093 in 1995 and 1994, respectively.
At December 31, 1995 and 1994, pursuant to fully
collateralized securities lending arrangements, the Company had
loaned $343,351 and $0 of fixed maturities, respectively.
The Company makes limited use of derivative financial
instruments to manage interest rate and foreign exchange risk.
Such hedging activity consists of interest rate swap agreements,
interest rate floors and caps, and foreign currency exchange
contracts. Interest rate floors and caps are interest rate
protection instruments that require the payment by a counter-party
to the Company of an interest differential. This differential
represents the difference between current interest rates and an
agreed-upon rate, the strike rate, applied to a notional principal
amount. Interest rate swap agreements are used to convert the
interest rate on certain fixed maturities from a floating rate to
a fixed rate. Interest rate swap transactions generally involve
the exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying principal
amounts. Foreign currency exchange contracts are used to hedge the
foreign exchange rate risk associated with bonds denominated in
other than U.S. dollars. The differential paid or received on
interest rate and amounts received under interest rate floor and
cap agreements are recognized as an adjustment to net investment
income on the accrual method. Gains and losses on foreign exchange
contracts are deferred and recognized in net investment income when
the hedged transactions are realized.
Although derivative financial instruments taken alone may
expose the Company to varying degrees of market and credit risk
when used solely for hedging purposes, these instruments typically
reduce overall market and interest rate risk. The Company controls
the credit risk of its financial contracts through credit
approvals, limits, and monitoring procedures. As the Company
generally enters nto transactions only with high quality
institutions, no losses associated with non-performance on
derivative financial instruments have occurred or are expected to
occur.
The following table summarizes the financial hedge
instruments:
Notional
Strike/Swap
December 31, 1995
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Cap
100,000
11.0% [CMT]
2000
Interest Rate Swaps
165,000
6.203% to
9.35%
01/98 to
2/2002
Foreign Currency
Exchange Contracts
66,650
N/A
10/96 to
09/98
Notional
Strike
December 31, 1994
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Swaps
150,000
6.275% to
10.644%
01/95 -
01/2000
Foreign Currency
Exchange Contracts
70,991
N/A
10/96 -
09/98
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines
designed to emphasize a diversified and geographically dispersed
portfolio of mortgages collateralized by commercial and industrial
properties located in the United States. The Company's policy is
to obtain collateral sufficient to provide loan-to-value ratios of
not greater than 75% at the inception of the mortgages. At
December 31, 1995 approximately 28% and 11% of the Company's
mortgage loans were collateralized by real estate located in
California and Illinois, respectively.
At December 31, 1995, the recorded investment in loans that
were considered to be impaired under SFAS No. 114 was $23,678
including $3,254 of loans with a related allowance for credit
losses of $654. Additionally, loans totaling $6,481 were on a
non-accrual basis. The average recorded investment in impaired
loans during the year ended December 31, 1995 was approximately
$29,150. For the year ended December 31, 1995, the Company
recognized interest income on those impaired loans of $675.
Interest income received and recorded using the cash basis method
of recognition during 1995 totalled $857.
As part of an active loan management policy and in the
interest of maximizing the future return of each individual loan,
the Company may from time to time alter the original terms of
certain loans. These restructured loans, all performing in
accordance with their modified terms, aggregated $89,160 and
$102,538 at December 31, 1995 and 1994, respectively.
The following table presents changes in the allowance for
credit losses since January 1, 1995 (date of the adoption of SFAS
No. 114):
Balance at January 1, 1995
$57,987
Provision for loan losses
15,877
Direct chargeoffs
(10,480)
Recoveries
610
Balance at December 31, 1995
$63,994
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially
supported by a $50,000 standby letter-of-credit. At December 31,
1995, commercial paper outstanding has maturities ranging from 25
to 160 days and interest rates ranging from 5.7% to 5.9%. At
December 31, 1994, maturities ranged from 40 to 120 days and
interest rates ranged from 5.4% to 6.4%
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all
assets and liabilities and hedge contracts considered to be
financial instruments:
December 31,
1995
1994
Estimated
Carrying
Estimated
Carrying
Fair
Amount
Fair
Value
Amount
Value
ASSETS:
Fixed maturities
and short-term
investments
$8,452,226
$8,556,065
$7,825,608
$7,666,871
Mortgage loans
on real estate
1,713,195
1,749,514
2,011,059
2,037,694
Policy loans
2,237,745
2,237,745
1,905,013
1,905,013
Common stock
9,440
9,440
5,222
5,222
LIABILITIES:
Annuity contract
reserves
without life
contingencies
6,170,760
6,268,749
6,338,529
6,286,966
Policyholders'
funds
154,872
154,872
144,262
144,262
Due to Parent
Corporation
149,974
152,347
159,117
159,334
Repurchase agreements
372,965
372,965
564,160
564,160
Commercial paper
84,854
84,854
89,686
89,686
HEDGE CONTRACTS:
Interest rate
floor
84
1,320
88
76
Interest rate cap
90
90
Interest rate swaps
10,052
10,052
(771)
(771)
Foreign currency
exchange contracts
(4,604)
(4,604)
(4,345)
(4,345)
The estimated fair value of financial instruments has been
determined using available market information and appropriate
valuation methodologies. However, considerable judgement is
necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented
are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Mortgage loans fair value estimates generally are based on a
discounted cash flow basis. A discount rate "matrix" is
incorporated whereby the discount rate used in valuing a specific
mortgage generally corresponds to that mortgage's remaining
term. The rates selected for inclusion in the discount rate
"matrix" reflect rates that the Company would quote if placing
loans representative in size and quality to those currently in the
portfolio.
Policy loans accrue interest generally at variable rates with
no fixed maturity dates and, therefore, estimated fair value
approximates carrying value.
The fair value of annuity contract reserves without life
contingencies is estimated by discounting the cash flows to
maturity of the contracts, utilizing current credited rates for
similar products.
The estimated fair value of policyholder's funds is the same
as the carrying amount as the Company can change the crediting
rates with 30 days notice.
The estimated fair value of due to Parent Corporation is based
on discounted cash flows at current market spread rates on high
quality investments.
The carrying value of repurchase agreements and commercial
paper is a reasonable estimate of fair value due to the short-term
nature of the liabilities.
The estimated fair value of financial hedge instruments, all
of which are held for other than trading purposes, is the
estimated amount the Company would receive or pay to terminate the
agreement at each year-end, taking into consideration current
interest rates and other relevant factors. Included in the net
gain (loss) position for interest rates swaps are $0 and $2,985 of
unrealized losses in 1995 and 1994, respectively. Included in the
net loss position for foreign currencies exchange contracts are
$5,497 and $4,504 loss exposures in 1995 and 1994, respectvely.
See note 6 for additional information on policies regarding
estimated fair value of fixed maturities.
9. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income
tax
rate and the Companyns effective rate:
1995
1994
1993
Federal tax rate
35.0%
35.0%
35.0%
Change in tax rate resulting
from:
Investment income not
subject to federal tax
(0.5)
(1.0)
(1.2)
Effect of tax rate change
on net deferred tax assets
(1.8)
Change in valuation
allowance
(7.8)
(6.9)
1.0
State and environmental
taxes
0.7
0.9
Other, net
0.3
(0.3)
(0.5)
Total
27.7%
27.7%
32.5%
Temporary differences which give rise to the deferred tax
assets
and liabilities as of December 31, 1995 and 1994 are as
follows:
1995
1994
Deferred Tax
Asset
Deferred Tax
Liability
Deferred Tax
Asset
Deferred Tax
Liability
Policyholder
reserves
$162,073
$
$119,764
$
Deferred policy
acquisition costs
55,542
62,040
Deferred acquisition
cost proxy tax
58,481
45,422
Investment assets
16,372
97,249
Net operating loss
carryforwards
17,588
22,666
Tax credits and
other
4,786
2,564
Subtotal
242,928
71,914
287,665
62,040
Valuation allowance
(2,073)
(15,218)
Total Deferred Taxes
$240,855
$71,914
$272,447
$62,040
Amounts related to investment assets above include $33,735 and
$(47,493) related to the unrealized gains (losses) on the Company's
fixed maturities available-for-sale at December 31, 1995 and 1994,
respectively.
The Company files a separate tax return and, therefore, losses
incurred by subsidiaries cannot be offset against operating income
of the Company. At December 31, 1995, the Companyns subsidiaries
have approximately $50,251 of net operating loss carryforwards,
expiring through the year 2010. The tax benefit of subsidiariesn
net operating loss carryforwards, net of a valuation allowance of
$419 are included in the deferred tax assets.
The Company's valuation allowance was decreased in 1995 and
1994 by $13,145 and $6,278, respectively, primarily as a result of
taxable income in subsidiaries which was greater than expected and
the resulting re-evaluation by management of future estimated
taxable income in the subsidiaries.
Under pre-1984 life insurance company income tax laws, a
portion of life insurance company gain from operations was not
subject to current income taxation but was accumulated, for tax
purposes, in a memorandum account designated as "policyholders'
surplus account." The aggregate accumulation in the account is
$7,742 and the Company does not anticipate any transactions which
would cause any part of the amount to become taxable. Accordingly,
no provision has been made for possible future federal income
taxes on this accumulation.
The Internal Revenue Service is currently auditing tax years
1988 to 1991, inclusive. In the opinion of Company management,
amounts paid or accrued are adequate, however, it is possible that
the Companyns estimate may change as a result of the completion of
the IRS audits.
10. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are
owned by the Parent Corporation. The dividend rate on the Series
A Stated Rate Auction Preferred Stock (STRAPS) is 7.3% through
December 30, 2002. The Series A STRAPS are redeemable at the
option of the Company on or after December 29, 2002 at a price of
$100,000 per share, plus accumulated and unpaid dividends.
Through December 30, 1995, the Series B STRAPS had a 7%
dividend rate. Thereafter, the Company will, at its option, select
future dividend periods. Future dividend rates will be fixed by a
market auction process with dividend rates dependent upon the
Company. If auctions are undersubscribed or otherwise
unsuccessful, the dividend rate is fixed by formula. The Company
has the flexibility of specifying, before each auction, the rights
of redemption which it has during the succeeding dividend period.
These redemption rights are factored into the auctions which set
dividend rates.
The Series B STRAPS are redeemable at the option of the
Company at a price of $100,000 per share, plus accumulated and
unpaid dividends.
The Company's Series E 7.5% non-cumulative preferred shares
are redeemable by the Company after April 1, 1999. The shares are
not redeemable at the option of the holder at any time. The
shares are convertible into common shares at the option of the
holder on or after September 30, 1999, at a conversion price
negotiated between the holder and the Company or at a formula
determined conversion price in accordance with the share
conditions.
On December 31, 1993, the Company issued 3,783 shares of
common stock to the Parent Corporation in connection with an
assumption of estimated tax liabilities. The Company also received
$472 and $9,098 of contributed capital in the form of deferred tax
assets from the Parent Corporation during 1994 and 1993,
respectively, in connection with the 1993 reinsurance transactions
(see Note 2).
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:
1995
1994
1993
(Unaudited)
Net Income
$114,931
$70,091
$55,995
Capital and Surplus
653,479
621,589
628,944
The maximum amount of dividends which can be paid to
stockholders by insurance companies domiciled in the State of
Colorado is subject to restrictions relating to statutory surplus
and statutory net gain from operations. Statutory surplus and net
gains from operations at December 31, 1995 were $524,647 and
$119,299 (unaudited), respectively. The Company should be able to
pay up to $119,299 (unaudited) of dividends without regulatory
approval in 1996.
Dividends of $9,217, $7,475, and $9,335, were paid on
preferred stock in 1995, 1994, and 1993, respectively. In
addition, dividends of $39,763, $32,963, and $12,517 were paid on
common stock in 1995, 1994 and 1993, respectively. Dividends are
paid as determined by the Board of Directors.
The Company is involved in various legal proceedings which
arise in the ordinary course of its business. In the opinion of
management, after consultation with counsel, the resolution of
these proceedings should not have a material adverse effect on its
financial position or results of operations.
PART II
OTHER INFORMATION
Item 1. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements of Great-West Variable Annuity
Account A and Great-West Life & Annuity Insurance Company are
contained in the prospectus.
(b) Exhibits:
Exhibit Numbers 1,2,4,5,6,8,10 and 11 are set forth in
previous Post-Effective Amendments filed with the Commission
(Registration No. 2-29033), in particular: Amendment No. 1 filed
November 5, 1968; Amendment No. 2 filed June 3, 1969; and Amendment
No. 3 filed March 9, 1970; which are incorporated by reference
herein.
Exhibit Numbers 3,7,9,12,13,14 and 15 are not applicable
to the Registrant.
Item 2. Persons Controlled by or under Common Control by the
Registrant.
The Registrant is subject to the direction and approval of the
Variable Annuity Account A Committee. The Great-West Life
Assurance Company, a Canadian life insurance corporation, with
Michigan as its U.S. State of Entry, is the investment adviser of
the Registrant. Great-West Life & Annuity Insurance Company, a
Colorado life insurance corporation, is a wholly owned subsidiary
of The Great-West Life Assurance Company.
Item 3. Number of Holders of Securities
As of December 31, 1995, the Registrant had the following
number of record holders of each class of securities:
Title of Class Number of Record Holders
Active Participants 174
Vested Participants 41
Total Participants 215
Item 4. Indemnification
Provisions exist under the Colorado General Corporation
Code and the Bylaws of Great-West Life & Annuity Insurance Company
whereby Great-West Life & Annuity Insurance Company may indemnify
a director, officer, or controlling person of Great-West Life &
Annuity Insurance Company against liabilities arising under the
Securities Act of 1933. The following excerpts contain the
substance of these provisions:
Colorado General Corporation Code
Section 7-3-101.5 - INDEMNIFICATION OF CORPORATE OFFICERS,
EMPLOYEES AND AGENTS.
(1) As used in this section:
(a) "Corporation" includes any domestic or foreign predecessor
entity of the corporation in a merger, consolidation, or other
transaction in which the predecessors's existence ceased upon
consummation of the transaction.
(b) "Director" means an individual who is or was a director of a
corporation and an individual who, while a director of a
corporation, is or was serving at the corporations' request as a
director, officer, partner, trustee, employee, or agent of any
other foreign or domestic corporation or any partnership, joint
venture, trust, other enterprise, or employee benefit plan. A
director shall be considered to be serving an employee benefit plan
at the corporation's request if his duties to the corporation also
impose duties which otherwise involve services by him to the plan,
or to participants in, or to beneficiaries of the plan.
(c) "Expenses" include attorney fees.
(d) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan, or reasonable expense incurred
with respect to a proceeding).
(e) "Official capacity", when used with respect to a director,
means the office of director in the corporation, and, when used
with respect to an individual other than a director, means the
office in the corporation held by the officer or the employment or
agency relationship undertaken by the employee or agent on behalf
of the corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or for any
partnership, joint venture, trust, other enterprise, or employee
benefit plan.
(f) "Party" includes an individual who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(g) "Proceeding means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
(2) (a) Except as provided in paragraph (d) of this subsection
(2), a corporation may indemnify against liability incurred in any
proceeding an individual made a party to the proceeding because he
is or was a director if:
(I) He conducted himself in good faith;
(II) He reasonably believed:
(A) In the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best
interests; or
(B) In all other cases, that his conduct was at least not opposed
to the corporation's best interests; and
(III) In the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
(b) A director's conduct with respect to any employee benefit plan
for a purpose he reasonably believed to be in the interest of the
participants in or beneficiaries of the plan is conduct that
satisfies the requirements of sub-subparagraph (B) of subparagraph
(II) of paragraph (a) of this subsection (2). A director's conduct
with respect to an employee benefit plan for a purpose that he 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 (I) of paragraph (a) of this
subsection (2).
(c) 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 individual did
not meet the standard of conduct set forth in paragraph (a) of this
subsection (2).
(d) A corporation may not indemnify a director under this
subsection (2) either:
(I) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(II) In connection with any proceeding charging improper personal
benefit to the director, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis
that person benefit was improperly received by him.
(e) Indemnification permitted under this subsection (2) in
connection with a proceeding by or in the right of a corporation is
limited to reasonable expenses incurred in connection with the
proceeding.
(3) 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.
(4) Unless limited by 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 subsection (3) of this section, 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 described in paragraph (d) of subsection (2) of this
section, 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 in paragraph (d) of subsection (2) of this
section is limited to reasonable expenses incurred.
(5) (a) A corporation may not indemnify a director under
subsection (2) of this section 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 paragraph (a) of said
subsection.
(b) The determination required to be made by paragraph (a) of this
subsection (5) shall be made:
(I) By the board of directors by a majority vote of a quorum,
which quorum shall consist of directors not parties to the
proceeding; or
(II) If a quorum cannot be obtained, by a majority vote of a
committee of the board designated by the board, 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.
(c) If the quorum cannot be obtained or the committee cannot be
established under paragraph (b) of this subsection (5), or even if
a quorum is obtained or a committee designated if such
quorum or committee so directs, the determination required to be
made by paragraph (a) of this subsection (5) shall be made:
(I) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in
subparagraph (I) or (II) of paragraph (b) of this subsection (5)
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; or
(II) By the shareholders.
(d) 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 evaluation as to reasonableness of expenses shall be made by
the body that selected said counsel.
(6) (a) 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:
(I) The director furnishes the corporation a written affirmation
of his good-faith belief that he has met the standard of conduct
described in subparagraph (I) of paragraph (a) of subsection (2) of
this section;
(II) The director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay the advance if it is
determined that he did not meet such standard of conduct; and
(III) A determination is made that the facts then known to those
making the determination would not preclude indemnification under
this subsection (6).
(b) The undertaking required by subparagraph (II) of paragraph (a)
of this subsection (6) 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.
(7) (a) A provision concerning a corporations' indemnification of
or advance s for expenses to directors contained in its
articles of incorporation, bylaws, a resolution of its shareholders
or directors, or in a contract, except for insurance policies,
shall be valid only if and to the extent the provision is
consistent with this section and, if indemnification is limited by
the articles of incorporation, is consistent with said articles.
(b) This subsection (7) shall not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with
his appearance as a witness in a proceeding at a time when he has
not been made a named defendant or respondent in the proceeding.
(8) Unless limited by the articles of incorporation:
(a) An officer of the corporation who is not a director is
entitled to mandatory indemnification pursuant to subsection (3) of
this section and is entitled to apply for court-ordered
indemnification pursuant to subsection (4) in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses pursuant to
subsection (6) of this section to an officer, employee, or agent of
the corporation who is not a director to the same extent as a
director; and
(c) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation who is not a
director to a greater extent if consistent with law and if provided
for by its articles of incorporation, bylaws, resolution of its
shareholders or directors, or in a contract.
(9) A corporation may purchase and maintain insurance on behalf of
an individual 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 foreign or domestic corporation or of any partnership, joint
venture, trust, other enterprise, or employee benefit plan against
any liability asserted against or incurred by him in any such
capacity or arising out of this status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this section.
(10) Any indemnification of or advance of expenses to a director in
accordance with this section, if arising out of a proceeding by or
on behalf of the corporation, shall be reported in writing to the
shareholders with or before the notice of the next shareholders'
meeting .
Bylaws of Great-West Life & Annuity Insurance Company
Article II, Section 11. Indemnification of Directors.
The corporation may, by resolution of the Board of Directors,
indemnify and save harmless out of the funds of the corporation to
the extent permitted by applicable, law, any Director, Officer, or
employee of the corporation of 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 the
duties of this office or employment with the corporation, in or
about the execution of this duties as a Director, or Officer of
another company which he so serves at the request and on
behalf of the corporation, or in or about the execution of this
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 corporation, the affairs of such other
company which he so serves or the affairs of such Committee, except
such claims, liabilities, costs, charges, or expenses as are
occasioned by his own willful neglect or default. The corporation
may, by resolution of the Board of Directors, indemnify and save
harmless out of the funds of the corporation to the extent
permitted by applicable law, any Director, Officer, or employee of
any subsidiary corporation of the corporation on the same basis and
within the same constraints as described in the preceding sentence.
Item 5. Business and Other Connections of Investment Adviser
The Great-West Life Assurance Company (the "Adviser") is a
life insurance company organized under the laws of Canada. Its
principal business is the conduct of life, health, and accident
insurance in the United States and Canada.
The Adviser serves as the Investment Adviser to the
Registrant. Reference is made to the Adviser's Form ADV
(particularly Schedule F), executed July 27, 1979 (as amended), on
file with the Commission (File No. 801-8173), for a fuller
description of the Adviser's business and other connections.
Substantial business and other connections of the Directors
and Officers of the Adviser other than with the Registrant are set
forth in the Adviser's Form ADV (particularly the Schedule D's)
executed July 27, 1979 (as amended), on file with the Commission
(File No. 801-8173), which is incorporated by reference herein.
Item 6. Principal Underwriters
(a) None
(b) None
(c) None
Item 7. Location of Accounts and Records
Registrant maintains the records required to be
maintained by it under Section 31 (a), and the Rules promulgated
thereunder, of the Investment Company Act of 1940, at the Head
Office of Great-West Life & Annuity Insurance Company, 8515 E.
Orchard Road, Englewood, Colorado 80111.
Item 8. Management Services
None
Item 9. Distribution Expenses
Not Applicable.
Item 10. Undertakings
Registrant represents that it is relying on a no-action
letter dated November 28, 1988, to the American Council of Life
Insurance (Ref. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, in connection with
redeemability restrictions on Section 403(b) policies, and that
paragraphs number (1) through (4) of that letter will be complied
with.
Consents:
Consents of Messrs. Sutherland, Asbill & Brennan, Deloitte &
Touche LLP, and Ms. Ruth B. Lurie of Great-West Life & Annuity
Insurance Company , to the use of their names in the Prospectus to
be filed herewith.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Englewood,
Colorado on the 17 day of April, 1996.
GREAT-WEST VARIABLE ANNUITY ACCOUNT A
By: /s/ D. Low
D. Low
Chairman of the Committee
April 17, 1996
Great-West Life & Annuity Insurance Company and
The Variable Annuity Account Committee of
Great-West Variable Annuity Account A
8515 East Orchard Road
Englewood, Colorado 80111
Dear Gentlemen:
I hereby consent to the use of my name under the caption
"Legal Opinions" in the prospectus contained in Post-Effective
Amendment No. 21 to the registration statement under the Investment
Company Act of 1940 Form N-1 (Sec. File No. 811-1737) to be filed
by Great-West Variable Annuity Account A with the Securities and
Exchange Commission under the Investment Company Act of 1940 and
amendments thereto.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President and Counsel
April 19, 1996
The Great-West Life & Annuity
Insurance Company
8515 E. Orchard Road
Englewood, CO 80111
Re: Great-West Variable Annuity Account A
File No. 811-1737
Gentlemen:
We hereby consent to the reference to our name under the
caption "Legal Advice" in the Prospectus filed as part of Amendment
No. 21 to the Form N-1 Registration Statement for Great-West
Variable Annuity Account A. 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,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Paul J. Mason
Paul J. Mason
INDEPENDENT AUDITOR'S CONSENT
Great-West Variable Annuity Account A:
We consent to the use in this Post-Effective Amendment No. 21 to
Registration Statement No. 811-1737, of our report dated January
31, 1996 on the financial statements of Great-West Variable Annuity
Account A and our report dated January 19, 1996 on the consolidated
financial statements of Great-West Life & Annuity Insurance
Company, and to the reference to us under the heading "Independent
Auditors" appearing in the Prospectus which is included in such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April --, 1996
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