As filed with the Securities and Exchange Commission on March 27, 1998
Registration No. 2-89550
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. 24 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 18 (X)
(Check appropriate box or boxes)
FUTUREFUNDS SERIES ACCOUNT
(Exact name of Registrant)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Address of Depositor's Principal Executive Officers) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson, LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
It is proposed that this filing will become effective (check
appropriate space)
Immediately upon filing pursuant to paragraph (b) of Rule 485.
X On May 1, 1998 , pursuant to paragraph (b) of Rule 485. 60 days
after filing pursuant to paragraph (a) of Rule 485. On , pursuant to
paragraph (a)(i) of Rule 485. 75 days after filing pursuant to
paragraph (a)(ii) of Rule 485. On , pursuant to paragraph (a)(ii) of
Rule 485.
If appropriate, check the following:
This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page.........................................Cover Page
2. Definitions........................................Glossary of Special
Terms
3. Synopsis...........................................Fee Table; Questions
and Answers about the
Series Account Variable
Annuity
4. Condensed Financial Information....................Condensed Financial
Information
5. General Description of Registrant,.................Great-West Life &
Annuity
Depositor and Portfolio Companies Insurance Company;
FutureFunds Series
Account; Investments of
the Series Account;
Voting Rights
6. Deductions.........................................Administrative Charges;
Risk Charges, Premium
Taxes and Other
Deductions; Appendix
A; Distribution of the
Contracts
7. General Description of.............................The Contracts;
Investments
Variable Annuity Contracts of the Series Account;
Statement of Additional
Information
8. Annuity Period Annuity Options
9. Death Benefit The
Contracts-Accumulation
Period - Death Benefit;
Prior to Retirement
Date; Annuity Payments
FORM N-4 ITEM PROSPECTUS CAPTION
10. Purchases and Contract Value The Contracts-General;
The
Contracts-Accumulation
Period; Distribution of
the Contracts; Cover
Page; Great-West Life &
Annuity Insurance
Company
11. Redemptions.......................................The
Contracts-Accumulation
Period - Total and
Partial Surrenders;
Return Privilege
12. Taxes.............................................Federal Tax Consequences
13. Legal Proceedings.................................Legal Proceedings
14. Table of Contents of..............................Statement of Additional
Statement of Additional Information Information
<PAGE>
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page........................................Cover Page
16. Table of Contents.................................Table of Contents
17. General Information and History...................Not Applicable
18. Services..........................................Custodian and
Accountants
19. Purchase of Securities Being Offered..............Not Applicable
20. Underwriters......................................Underwriter
21. Calculation of Performance Data...................Calculation of
Performance Data
22. Annuity Payments..................................Not Applicable
23. Financial Statements..............................Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
......
<PAGE>
46
20
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
BenefitsCorp Equities, Inc.
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
- ------------------------------------------------------------------------------
The group variable annuity contracts described in this prospectus ("Group
Contracts") are designed and offered to provide retirement programs that qualify
for special federal income tax treatment for employees of certain organizations.
The Group Contracts may be issued in connection with Contributions made by:
o employers or employee organizations (such as non-profit entities defined in
Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"), and
governmental entities defined in Code Section 414(d)) to purchase annuities for
their employees under pension or profit-sharing plans described in Section
401(a) of the Code,
o employers or employee organizations to purchase annuities for their employees
under cash or deferred profit sharing plans described in Section 401(k) of the
Code, state educational organizations and certain tax-exempt organizations to
purchase annuities for their employees under Section 403(b) of the Code, and
o certain state and local governmental entities and, for years beginning after
1986, other non-governmental tax-exempt organizations to purchase annuities for
a select group of management or highly compensated employees under a deferred
compensation plan described in Section 457(b) or (f) of the Code.
o certain state and local governmental entities, for years beginning after 1994,
to purchase annuities for employees whose benefits are limited by the qualified
plan contribution and benefit limits under either Section 415 or Section 457 of
the Code, under a qualified governmental excess benefit plan described in
Section 415(m) of the Code.
o certain employers, other than governmental or tax-exempt employers, to
purchase annuities for a select group of management or highly compensated
employees under a nonqualified deferred compensation plan ("NQDC").
The Group Contracts are issued by Great-West Life & Annuity Insurance Company
("GWL&A"). BenefitsCorp Equities, Inc. ("BCE") is the principal underwriter and
distributor of the Group Contracts. The owner of a Group Contract will be the
employer, or plan trustee, or may also be certain employer associations or
employee associations for contracts issued under Section 401(a), Section 401(k),
Section 403(b), Section 457(b) or (f), Section 415(m) or NQDC retirement
programs. Contributions are made by the employer for employees desiring coverage
under a Group Contract. The amount of the Contributions will be determined by
the employer. A separate record (a "Participant Annuity Account") will be
established in the name of each participating employee (a "Participant") to
reflect the dollar values of Contributions made in each Participant's name. The
Group Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for a
death benefit. An initial Contribution under a Section 403(b) retirement program
may be canceled and returned at the employee's request within fifteen days of
the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can accumulate on a
variable basis, guaranteed basis, or a combination of both. To accumulate on a
variable basis, Contributions will be allocated to the FUTUREFUNDS SERIES
ACCOUNT (the "Series Account"), a segregated investment account of GWL&A. The
value of the Contributions prior to the Annuity Commencement Date and thus the
amount accumulated to provide annuity payments will depend upon the investment
performance of the Series Account.
The amount of annuity payments may also be variable based upon the investment
experience of the Series Account, or may be fixed without regard to such
experience, or may be a combination of both. The Series Account currently has
twenty-six Investment Divisions available for allocation of Contributions.
Twenty-three of the Investment Divisions invest in shares of the portfolios of
Maxim Series Fund Inc. ("Maxim"), an open-end management investment company of
the series type. The Series Account also has one Investment Division which
invests in shares of American Century Variable Portfolios, Inc. and two
Investment Divisions which invest in shares of Fidelity Variable Insurance
Products Fund. The Investment Divisions are more fully described beginning on
page 2.
- ----------------------------------------------------------------------------
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES FOR MAXIM SERIES FUND,
INC., AMERICAN CENTURY VP CAPITAL APPRECIATION, FIDELITY VIP GROWTH AND FIDELITY
VIP II ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE INFORMATION A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND SHOULD BE KEPT FOR FUTURE
REFERENCE. ADDITIONAL INFORMATION ABOUT THE GROUP CONTRACTS HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF ADDITIONAL INFORMATION,
DATED MAY 1, 1998, WHICH IS INCORPORATED HEREIN BY REFERENCE. THE STATEMENT OF
ADDITIONAL INFORMATION, THE TABLE OF CONTENTS OF WHICH IS SET FORTH ON THE LAST
PAGE OF THIS PROSPECTUS, IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING GWL&A AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH ABOVE. THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May 1, 1998
<PAGE>
o the Maxim Money Market Portfolio seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the Maxim
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share.
o the Maxim Bond Portfolio seeks to achieve maximum total return consistent with
the preservation of capital, through investment in an actively managed portfolio
of debt securities.
o the Maxim Stock Index Portfolio seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
Mid-Cap Index, weighted according to their respective pro-rata shares of the
market.
o the Maxim U.S. Government Securities Portfolio seeks the highest level of
return consistent with preservation of capital and substantial credit protection
and seeks to achieve this objective by investing in mortgage-related securities
issued or guaranteed by an agency or instrumentality of the U.S. Government,
other U.S. agency and instrumentality obligations, and in U.S. Treasury
obligations.
o the Maxim Small-Cap Index Portfolio seeks to provide investment results,
before fees, that correspond to the total return of the Standard & Poor's
Small-Cap 600 Index.1
o the Maxim Mid-Cap Portfolio (Growth Fund I Investment Division) seeks to
provide long-term growth of capital through investment of at least 65% of the
Portfolio's assets in medium sized companies.
o the Maxim International Equity Portfolio seeks to achieve long-term capital
growth through a flexible policy of investing in stocks and debt obligations of
companies and governments outside the United States. Any income realized will be
incidental.
o the Maxim Corporate Bond Portfolio seeks high total investment return by
investing primarily in debt securities (including convertibles), although up to
20% of its assets, at the time of acquisition, may be invested in preferred
stocks.
o the Maxim Small-Cap Value Portfolio (Ariel Value Investment Division) seeks to
achieve long-term capital appreciation by investing primarily in common stocks,
although the Portfolio may also invest in other securities, including restricted
and preferred stocks.
o the Maxim INVESCO Small-Cap Growth Portfolio seeks to achieve long-term
capital growth by investing its assets principally in a diversified group of
equity securities of emerging growth companies with market capitalizations of $1
billion or less at the time of initial purchase.
o the Maxim INVESCO ADR Portfolio seeks to achieve a high total return on
investment through capital appreciation and current income, while reducing risk
through diversification by investing substantially all its assets in foreign
securities that are issued in the form of American Depositary Receipts ("ADRs")
or foreign stocks that are registered with the Securities and Exchange
Commission and traded in the U.S.
o the Maxim INVESCO Balanced Portfolio seeks to achieve a high total return on
investment through capital appreciation and current income. The Portfolio
invests in a combination of common stocks (normally 50% to 70% of total assets)
and fixed income securities (normally 25% or more).
o the Maxim T. Rowe Price Equity/Income Portfolio seeks to provide substantial
dividend income and also capital appreciation by investing primarily in
dividend-paying common stocks of established companies.
o the Maxim Value Index Portfolio* seeks to provide investment results, before
fees, that correspond to the total return of the Russell 1000 Value Index. The
Russell 1000 Value Index was developed by the Frank Russell Company to track
stock market performance of stocks from the Russell 1000 Index exhibiting
certain characteristics suggesting value potential.
o the Maxim Growth Index Portfolio* seeks to provide investment results, before
fees, that correspond to the total return of the Russell 1000 Growth Index. The
Russell 1000 Growth Index was developed by the Frank Russell Company to track
stock market performance of stocks from the Russell 1000 Index exhibiting
certain characteristics suggesting growth potential.
o the Maxim Small-Cap Aggressive Growth Portfolio seeks long-term capital growth
by investing in common stocks or their equivalent emphasizing securities
believed to be undervalued by the market.
o the Maxim Blue Chip Portfolio seeks long-term growth of capital and income by
investing primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
o the Maxim MidCap Growth Portfolio seeks long-term appreciation by investing
primarily in common stocks of medium-sized (mid-cap) growth companies. The
Portfolio will normally invest at least 65% of its assets in a diversified
portfolio of mid-cap companies whose earnings are expected to grow at a faster
rate than the average company.
o the Maxim Aggressive Profile Portfolio seeks to achieve a high total return on
investment through long-term capital appreciation by investing in other Maxim
Portfolios. It is designed for an investor who is willing to take on a greater
degree of risk now for the chance of better returns later and places a higher
priority on investment growth than on safety. This investor typically is
comfortable riding out the ups and downs of the markets. This Portfolio would
not be appropriate for an investor with a short investment horizon.
o the Maxim Moderately Aggressive Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation by investing
in other Maxim Portfolios. It is designed for an investor who is willing to take
on a slightly greater degree of risk now for the chance of better returns later
and places a high priority on investment growth but also seeks some safety. This
investor typically is comfortable riding out the ups and downs of the markets
but is not comfortable with the volatility that would be associated with the
Maxim Aggressive Profile Portfolio. This Portfolio would not be appropriate for
an investor with a short investment horizon.
o the Maxim Moderate Profile Portfolio seeks to achieve a high total return on
investment through long-term capital appreciation by investing in other Maxim
Portfolios. This investor likes the potential for higher returns but seeks more
safety than an aggressive or moderately aggressive investor.
o the Maxim Moderately Conservative Profile Portfolio seeks to achieve the
highest possible total return consistent with reasonable risk through a
combination of income and capital appreciation by investing in other Maxim
Portfolios. This Portfolio is designed for an investor who places a priority on
investment safety but is willing to take some risk for a potential higher return
on investment. This investor may be approaching retirement or simply prefers to
take less risk than other investors.
- --------
1 Standard & Poor's Small-Cap 600 Stock Index is a trademark of The McGraw-Hill
Companies, Inc. and has been licensed for use by Maxim Series Fund, Inc. and
Great-West Life & Annuity Insurance Company. The Portfolio is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of using this index. * The Frank
Russell Company is not a sponsor of, or in any other way affiliated with the
Portfolio or the Fund.
<PAGE>
o the Maxim Conservative Profile Portfolio seeks to achieve total return
consistent with preservation of capital by investing in other Maxim Portfolios
which invest primarily in fixed income investments. This Portfolio is designed
for an investor whose highest priority is safety for which the investor is
willing to accept lower potential return on investment. This investor may be
approaching retirement or simply prefers to take less risk than other investors.
The Series Account also has an Investment Division which invests in shares of
American Century Variable Portfolios, Inc. ("American Century"), a diversified,
series, open-end management investment company which is a member of the American
Centurysm Investments group of mutual funds. This Investment Division invests in
shares of the following portfolio of American Century:
o the American Century VP Capital Appreciation Fund seeks capital growth by
investment in common stocks (including securities convertible to common stocks)
and other securities that meet certain fundamental and technical standards and,
in the opinion of American Century's management, have better than average
potential for appreciation; and
The Series Account has two Investment Divisions which invest in shares of
Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These Investment
Divisions invest in shares of one of the following portfolios of Fidelity VIP:
o the Fidelity VIP Growth Portfolio seeks capital appreciation. The Portfolio
normally purchases common stocks, although its investments are not restricted to
any one type of security. Capital appreciation may also be found in other types
of securities including bonds and preferred stocks; and
o the Fidelity VIP II Asset Manager Portfolio seeks high total return with
reduced risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group Policyholder
does not permit investments in any Investment Division of the Series Account,
GWL&A shall restrict the availability of such Investment Division in compliance
with the Group Policyholder's Request.
<PAGE>
TABLE OF CONTENTS
Page
7ee Table
Examples..........................................................8
Glossary of Special Terms.........................................10
Questions and Answers About the Series Account Variable Annuity...12
6inancial Highlights................................1
Performance Related Information...................................19
Great-West Life & Annuity Insurance Company.......................25
25tureFunds Series Account
The Group Contracts...............................................26
Accumulation Period...............................................29
Investments of the Series Account.................................34
Administrative Charges, Risk Premiums and Other Deductions........38
42nuity Options
Federal Tax Consequences..........................................45
Voting Rights.....................................................51
Distribution of the Group Contracts...............................51
Return Privilege..................................................52
State Regulation..................................................52
Restrictions Under the Texas Optional Retirement Program..........52
52ports
Legal Proceedings.................................................52
Legal Matters.....................................................52
Registration Statement............................................52
Statement of Additional Information...............................53
<PAGE>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase payments)......None
Deferred Sales Load (as a percentage of amount distributed).......... 6% maximum
See footnote (1), page 10
Distribution Fees (as a percentage of purchase payments)....None
Exchange Fee................................................None
TOTAL Maximum Contract Owner Transaction Expenses.................6%
(as a percentage of purchase payments)
Annual Contract Fee.........................................$30 maximum
See footnote (2), page 10
Separate Account Annual Expenses (as a percentage of average account value)
(Expenses vary by Contract)1
Mortality Risk Expense Risk Total Separate Account Annual
Expenses
1.00% 0.25% 1.25%
0.76% 0.19% 0.95%
0.60% 0.15% 0.75%
0.52% 0.13% 0.65%
0.44% 0.11% 0.55%
0.00% 0.00% 0.00%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series Fund,
Inc. average net assets)
Maxim Maxim Maxim Maxim Maxim Maxim
MoneyMoney Bond Stock U.S. Small-Cap Value
Market Index Gov't. Index Index
Securities
Management .46% .60% .60% .60% .60% .60%
Fees
Other None None None None None None
Expenses
Total .46% .60% .60% .60% .60% .60%
Expenses
Maxim Maxim Maxim Maxim Maxim Maxim
Growth Corporate T. Rowe Mid-Cap Small-Cap Internat'l
Index Bond Price (Growth Value Equity
Equity/IncoFund I) (Ariel
Value)
Management Fee.60% .90% .80% .95% 1.00% 1.00%
Other None None .11% .11% .28% .20%
Expenses
Total .60% .90% .91% 1.06% 1.28% 1.20%
Expenses
Maxim Maxim Maxim Maxim Maxim Maxim
INVESCO INVESCO INVESCO Small-Cap Blue Chip MidCap
ADR Small-Cap Balanced Aggressive Growth
Growth Growth
Management 1.00% .95% 1.00% 1.00% 1.00% 1.00%
Fees
Other .30% .15% None .11% .15% .05%
Expenses
Other Expenses None None
Total 1.30% 1.10% 1.00% 1.11% 1.15% 1.05%
Expenses
Maxim Maxim Maxim Maxim Maxim
Aggressive Moderately Moderate Moderately Conservative
Profile Aggressive Profile Conservative Profile
Profile Profile
Management .25% .25% .25% .25% .25%
Fees
Other None None None None None
Expenses
Total .25% .25% .25% .25% .25%
Direct
Expenses
1 The table of separate account expenses illustrates the possible mortality and
expense risks available under separate contracts offered by this prospectus.
Please contact your registered representative to determine which charges apply
to your contract.
<PAGE>
Minimum Total Maxim Maximum Total Maxim
Series Fund Annual Series Fund Annual
Expenses* Expenses**
Aggressive Profile+ 1.16% 1.51%
Moderately Aggressive 1.08% 1.44%
Profile+
Moderate Profile+ 1.02% 1.35%
Moderately Conservative 1.00% 1.26%
Profile+
Conservative Profile+ 0.85% 1.11%
+ Each Profile Portfolio will invest in shares of other Maxim Portfolios
("Underlying Portfolios"). Therefore, each Profile Portfolio will, in addition
to its own expenses such as management fees, bear its pro rata share of the fees
and expenses incurred by the Underlying Portfolios and the investment return of
each Profile Portfolio will be net of the Underlying Portfolio's expenses.
* The Minimum Fees are determined by assuming the allocation of each Profile
Portfolio's assets to those Underlying Portfolios (please see the Maxim Series
Fund prospectus for the Profile Portfolios for further information on the
Profile Portfolios) with the lowest Total Annual Expenses.
** The Maximum Fees are determined by assuming the allocation of each Profile
Portfolio's assets to those Underlying Portfolios (please see the Maxim Series
Fund prospectus for the Profile Portfolios for further information on the
Profile Portfolios) with the highest Total Annual Expenses.
American Century Variable Portfolios, Inc. Annual Expenses
(as a percentage the American Century VP's average net assets)
American Century VP
Capital Appreciation
Management Fees 1.00%
Other Expenses None
Total Expenses 1.00%
Fidelity VIP Portfolios
Annual Expenses (as a
percentage of Fidelity VIP
Portfolios' average net
assets)
Fidelity VIP Growth Fidelity VIP II Asset
Manager
Management Fees .60% .55%
Other Expenses .09% .10%
Total Expenses .69% .65%
A portion of the brokerage commissions that the funds pay was used to
reduce funds expenses. In addition, certain funds have entered into arrangements
with their custodian whereby credits realized, as a result of uninvested cash
balances were used to reduce custodian expenses. Including these reductions, the
total operating expenses presented in the table would have been .67% for
Fidelity VIP Growth and .65% for Fidelity VIP II Asset Manager.
EXAMPLES
If you do not take a distribution from your contract, or if you annuitize at the
end of the applicable time period, you would pay the following expenses on a
$1,000 investment, assuming a 5% annual return on assets and an assessment of
the maximum mortality and expense risk charge under any contract:
<TABLE>
Investment Division 1 Year 3 Year 5 Year 10 Year
- -------------------------------------- ------------- ------------- ------- ---------
<S> <C> <C> <C> <C>
Maxim Money Market $17.90 $58.21 $105.16 $257.37
Maxim Bond, Maxim Stock Index, Maxim
U.S. Government Securities, Maxim $19.35 $62.82 $113.33 $276.44
Small-Cap Index, Maxim
Total ReturnValue Index, Maxim
Growth Incdex
Maxim Mid-Cap (Growth Fund I), Maxim $24.49 $79.12 $142.04 $342.39
INVESCO Small-Cap Growth
Maxim International Equity $28.58 $91.98 $164.50 $392.84
Maxim Corporate Bond $22.43 $72.63 $130.64 $316.41
Maxim Small-Cap Value (Ariel Value) $27.05 $87.18 $156.13 $374.16
Maxim INVESCO ADR, Maxim Small-Cap $26.54 $85.57 $153.33 $367.87
Aggressive Growth
Maxim INVESCO Balanced, American $23.46 $75.88 $136.36 $329.47
Century VP Capital Appreciation
Maxim T. Rowe Price Equity/Income $22.95 $74.25 $133.50 $322.95
Fidelity VIP Growth $20.27 $65.77 $118.55 $288.56
Fidelity VIP II Asset Manager $19.86 $64.46 $116.23 $283.18
Maxim Blue Chip $25.00 $80.73 $144.87 $348.81
Maxim MidCap Growth $23.97 $77.50 $139.20 $335.95
Maxim Aggressive Profile $26.95 $86.85 $155.57 $372.90
Maxim Moderately Aggressive Profile $26.13 $84.28 $151.08 $362.81
Maxim Moderate Profile $25.31 $81.70 $146.57 $352.64
Maxim Moderately Conservative Profile $24.80 $80.09 $143.74 $346.25
Maxim Conservative Profile $23.26 $75.23 $135.22 $326.86
</TABLE>
<PAGE>
EXAMPLES (con't)
If you take a distribution, in whole, from your contract at the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets and an assessment of the
maximum mortality and expense risk charge under any contract:
<TABLE>
Investment Division 1 Year 3 Year 5 Year 10 Year
- ----------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Maxim Money Market $77.90 $118.21 $165.16 $257.37
Maxim Bond, Maxim Stock Index, $79.35 $122.82 $173.33 $276.44
Maxim U.S. Government Securities,
Maxim Small-Cap Index, Maxim
Total ReturnValue Index, Maxim
Growth Index
Maxim Mid-Cap (Growth Fund I), $84.49 $139.12 $202.04 $342.39
Maxim INVESCO Small-Cap Growth
Maxim International Equity $88.58 $151.98 $224.50 $392.84
Maxim Corporate Bond $82.43 $132.63 $190.64 $316.41
Maxim Small-Cap Value (Ariel $87.05 $147.18 $216.13 $374.16
Value)
Maxim INVESCO ADR, Maxim $86.54 $145.57 $213.33 $367.87
Small-Cap Aggressive Growth
Maxim INVESCO Balanced, American $83.46 $135.88 $196.36 $329.47
Century VP Capital Appreciation
Maxim T. Rowe Price Equity/Income $82.95 $134.25 $193.50 $322.95
Fidelity VIP Growth $80.27 $125.77 $178.55 $288.56
Fidelity VIP II Asset Manager $79.86 $124.46 $176.23 $283.18
Maxim Blue Chip $85.00 $140.73 $204.87 $348.81
Maxim MidCap Growth $83.97 $137.50 $199.20 $335.95
Maxim Aggressive Profile $86.95 $146.85 $215.57 $372.90
Maxim Moderately Aggressive $86.13 $144.28 $211.08 $362.81
Profile
Maxim Moderate Profile $85.31 $141.70 $206.57 $352.64
Maxim Moderately Conservative $84.80 $140.09 $203.74 $346.25
Profile
Maxim Conservative Profile $83.26 $135.23 $195.22 $326.86
</TABLE>
The above Examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown, subject to
the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums and
Other Deductions" for more information pertaining to these costs and expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied by
any governmental entity, GWL&A reserves the right to, in the future and with
prior notice to Participants, deduct the Premium Tax, if any, from Participant
Annuity Account Values. (See "Administrative Charges, Risk Premiums and Other
Deductions" for more information.)
The Examples illustrate the charges which would be incurred if the maximum
mortality and expense risk charge of 1.25% were applied. This charge is assumed
to remain the same in each period listed but does vary by contract. Please
consult with your employer or BCE representative for the fee that applies to
your contract and a copy of Examples which represent those charges. (See
"Administrative Charges, Risk Premiums and Other Deductions" for more
information.).
- -------
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent deferred
sales load assessed. This charge does, however, vary by contract. Please
consult with your employer or BCE representative for the charge that applies to
your contract and a copy of the Examples that represents those charges. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contingent
Deferred Sales Charge" for more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected during
the year. This charge is assumed to remain the same in each period listed but
does vary by contract. Please consult with your employer or BCE representative
for the fee that applies to your contract. (See "Administrative Charges, Risk
Premiums and Other Deductions: Contract Maintenance Charge.")
<PAGE>
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during
which the Participant is covered under
this Group Contract prior to the
Participant's Annuity Commencement Date.
Accumulation Unit: An accounting
measure used to determine the Variable
Account Value before the Annuity
Commencement Date.
Administrative Offices: The
Administrative Offices of GWL&A are
located at 8515 E. Orchard Rd.,
Englewood, Colorado 80111.
American Century: American Century
Variable Portfolios, Inc., a registered management investment company in which
assets of the Series Account may be invested.
Annuity Commencement Date: The date on
which annuity payments commence under
an Annuity Option.
Annuity Unit: An accounting measure
used to determine the dollar value of
any variable dollar annuity payment
after the first payment.
Contribution(s): The total dollar
amount(s) paid to purchase an annuity
for a Participant.
Fidelity VIP: Fidelity Variable
Insurance Products Fund, a registered
management investment company in which
assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a separate
account.
Group Contract: An agreement between
GWL&A and the Group Policyholder providing a fixed and/or variable deferred
annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, American
Century or Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities
held in a portfolio of Maxim, American
Century or Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a
registered management investment
company in which assets of the Series
Account may be invested.
Participant: An employee who is covered
under a Group Contract.
Participant Annuity Account: A separate
record established in the name of each
Participant which reflects the total of
the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The
sum of the Participant's Guaranteed and
Variable Account Values.
Premium Tax: The amount of tax, if any,
charged by a state or other government
authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by GWL&A at
its Administrative Office, as required by any provision of the Group Contract,
and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life & Annuity
Insurance Company called "FUTUREFUNDS Series Account" existing under Colorado
law and registered as a unit investment trust under the Investment Company Act
of 1940, as amended.
Transfer: The transfers of all or a
portion of a Participant Annuity
Account Value between and among the
Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The
transfer of all or a portion of a
Participant Annuity Account Value to
another company.
Valuation Date: The date on which the net asset value of Maxim, American
Century, or Fidelity VIP is determined, and the date on which any Contribution
or Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on holidays
on which the New York Stock Exchange is closed. Contributions and Requests
received after 4:00 p.m. EST/EDT will be deemed to have been received on the
next business day. On the day after Thanksgiving, however, transactions
submitted other than by automated voice response unit or by fully automated
computer link will not be processed.
Valuation Period: The period between
the ending of two successive Valuation
Dates.
Variable Account: The account
established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the
values of the Variable Sub-Accounts
credited to a Participant Annuity
Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of
the Variable Account containing the
value credited to a Participant from an
Investment Division.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SERIES
ACCOUNT VARIABLE ANNUITY
What is the objective of the Group
Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and certain
employee organizations, such as labor unions, may purchase a Group Contract.
Employers eligible to purchase a Group Contract under Section 403(b) retirement
programs include state educational institutions and certain tax-exempt
organizations that meet the requirements of Section 501(c)(3) of the Code. In
addition, under Section 403(b) programs, (i) certain associations of state
educational employees and associations of employees of tax-exempt organizations
may enter into a Group Contract for the benefit of their members; and (ii)
certain associations of state educational employers and associations of
tax-exempt employers may also enter into a Group Contract for the benefit of
employees or their employer members. Under Code Section 457(b) or (f)
retirement programs, certain state and local governmental entities and, for
years beginning after 1986, other tax-exempt organizations described in Section
457 are also eligible to purchase a Group Contract. (See "The Group Contracts:
Eligible Purchasers.") Under Code Section 415(m) retirement programs, certain
state and local governmental entities, for years beginning after 1994 may
purchase a Group Contract. Certain employers, other than governmental or
tax-exempt employers, may purchase a Group Contract for a NQDC retirement
program.
How can an employee obtain coverage
under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions
determined?
For Group Contracts issued under a Section 401(a) retirement program, the
employer or employee organization will make Contributions pursuant to its
underlying federal or state qualified plan.
For Group Contracts issued under a Section 401(k) retirement program, the
employer will make Contributions pursuant to an underlying Section 401(k) plan
and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b) retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer may make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457(b) or (f) retirement program,
the employer will make Contributions pursuant to an underlying deferred
compensation plan.
For Group Contracts issued under a Section 415(m) retirement program, the
employer will make Contributions pursuant to an underlying excess benefit plan.
For Group Contracts issued under a NQDC retirement program, the employer will
make Contributions pursuant to an underlying NQDC plan.
The employer will report the amount paid as Contributions to GWL&A. There is
no minimum amount or number of Contributions.
<PAGE>
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate of
return, or combination of both. The assets of the Series Account are invested
at net asset value (no sales charge) in shares of Maxim, American Century or
Fidelity VIP. (See "Investments of the Series Account" for the investment
objectives and policies of those portfolios of Maxim, American Century and
Fidelity VIP which are available for Allocation of Contributions to the Series
Account.) They are also described in full in the accompanying prospectuses for
Maxim, American Century and Fidelity VIP.
How will a covered employee know the value of the Contribution made in his/her
name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished, not less frequently than
annually, a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the
Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants and their Beneficiaries to the extent vested. All
elections permitted under the Group Contracts are made directly by the owner.
The underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject to
any limitations in the underlying retirement plan, and the Participant makes
all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the owner
to GWL&A. The underlying retirement plan may, however, permit the Participants
to make certain of these elections indirectly through the owner.
Under the Group Contracts issued pursuant to Section 457(b) or (f)
retirement programs, all Contributions remain property of the employer until
made available to a Participant by the employer's underlying deferred
compensation plan until December 31, 1998, or such earlier date as may be
established by plan amendment. However, amounts deferred under a plan created
on or after August 20, 1996 and amounts deferred under any 457(b) plan after
December 31, 1998, must be held in trust, custodial account or annuity contract
for the exclusive benefit of plan participants and their beneficiaries. All
elections permitted under these Group Contracts are made directly by the owner
to GWL&A. An underlying deferred compensation plan may, however, permit the
Participants to make certain of those elections indirectly through the owner.
Under the Group Contracts issued pursuant to Section 415(m) retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying excess benefit plan.
All elections permitted under the Group Contracts are made directly by the
employer to GWL&A. The underlying excess benefit plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to NQDC retirement programs, all
Contributions remain property of the employer until made available to a
Participant by the employer's underlying NQDC plan. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying NQDC plan may, however, permit the Participants to make certain of
those elections directly through the employer.
What are the charges to Participants
under the Group Contracts?
For administrative expenses, GWL&A deducts a "Contract Maintenance Charge"
of not more than $30.00 annually from each Participant Annuity Account Value.
The Contract Maintenance Charge on Section 403(b) Group Contracts will be
waived for an initial period of no less than 12 months and up to 15 months,
depending on the Participant's effective date. There may also be a charge
associated with the total or partial distribution from a Participant Annuity
Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to any
Participant Annuity Account will not exceed 6% of all Contributions made within
72 months prior to the date of any distribution in whole or in part, or, with
respect to certain Sections 401(a) or 401(k) and 457(b) or (f) retirement
programs, 5% of the amount distributed. Participants in some programs will not
be assessed a Contingent Deferred Sales Charge. (See "Administrative Charges,
Risk Premiums and Other Deductions.") Certain redeemability restrictions apply
to Group Contracts issued under the Texas Optional Retirement Program. (See
"Restrictions Under the Texas Optional Retirement Program.") There may also be
redeemability restrictions applied to Participants in Section 403(b) Group
Contracts. (See "Federal Tax Consequences: Section 403(b) Retirement
Programs.") Upon a total or partial distribution, a penalty tax may be imposed
pursuant to Section 72(t) of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an amount,
computed daily, equal to a maximum annual rate of 1.25% for mortality and
expense risk guarantees. This rate may vary by contract. Applicable mortality
and expense risk charges range from 0 to 1.25%. (See "Administrative Charges,
Risk Premium and Other Deductions.")
GWL&A presently intends to pay any applicable state premium taxes as a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the Participant
Annuity Account Value.
Maxim, American Century, and Fidelity VIP incur a charge against the net
asset value for Investment Advisory Services and may incur other expenses.
What are the distribution rights under
the Group Contracts?
A distribution in whole or in part may be taken from the Participant Annuity
Account up to 30 days prior to the Annuity Commencement Date, subject to any
limitations in the underlying retirement plan and subject to a Contingent
Deferred Sales Charge. (See "Accumulation Period: Total and Partial
Distribution" for a description of distribution procedures.) Under certain
circumstances, a Contingent Deferred Sales Charge will not be charged to
Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and Other
Deductions.")
Can Contributions be Transferred
between the Variable and Fixed
Sub-Accounts?
Yes. Prior to the Annuity Commencement Date transfers can be made between
the Variable and Fixed Sub-Accounts subject to the following limitations. All
or a portion of a Participant Annuity Account Value held in any of the Variable
Sub-Accounts or Daily Interest Guarantee Sub-Account may be Transferred at any
time prior to the Annuity Commencement Date by written or telephone Request.
Transfers of all or a portion of a Participant Annuity Account Value held in
any of the Guaranteed Certificate Funds may be made only at Certificate
maturity. Transfers may be made into the Guaranteed Fixed Fund at any time.
However the percentage available for transferring out of the Guaranteed Fixed
Fund ranges from 20% to 100% of the previous December 31 account balance. (See
"Accumulation Period: Transfers Between Variable and Guaranteed Sub-Accounts.")
However, after the Annuity Commencement Date, no transfers may be made from a
fixed annuity payment option to a variable annuity payment option and vice,
versa. (See "Annuity Options: Transfers After the Annuity Commencement Date.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on the
Annuity Commencement Date under an option providing for a life annuity with 120
monthly payments certain. (See "Annuity Options.")
What are the voting rights under the
Group Contracts?
Participants under Section 403(b) retirement programs and the owner under
Section 401(a), Section 401(k), Section 457(b) or (f), Section 415(m) and NQDC
retirement programs will be entitled to instruct GWL&A to vote shares of Maxim,
American Century or Fidelity VIP held for their Participant Annuity Accounts.
(See "Voting Rights.")
Is there a short-term cancellation
right?
Yes. Within fifteen (15) days after
a Participant Certificate is first
mailed, it may be canceled by the
Participant for any reason by
delivering or mailing it, along with a
Request to cancel, to GWL&A's
Administrative Offices or to an
authorized agent of GWL&A. This
cancellation right only applies to
Group Contracts issued under Section
403(b) retirement programs. (See
"Return Privilege.")
How will the Group Contracts be
distributed?
The Group Contracts will be distributed through BCE and will be sold by duly
licensed insurance agents of Benefits Communication Corporation and GWL&A,
independent insurance brokers, and various other registered broker-dealers. (See
"Distribution of the Group Contracts.")
<PAGE>
1
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units Outstanding Throughout Each Period
For the Years Ended December 31,
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units Outstanding Throughout Each Period
<TABLE>
For the Years Ended December 31,
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT DIVISION 1997 1996 1995 1994 1993 1992
- ------------------------------------------------ ------------ ------------ -------------
------------ ------------ ------------
MAXIM MONEY
MARKET 1
Value at beginning of period $17.60 $16.96 $16.25 $15.84 $15.60 $15.26
Value at end of period Value $18.30 $17.60 $16.96 $16.25 $15.84 $15.60
Increase (decrease) in value of accumulation $0.70 $0.64 $0.71 $0.41 $0.24 $0.34
units
Number of accumulation units outstanding at 3,877,164.14 3,129,281.92 2,880,571.67 2,277,816.08 684,668.93 787,941
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------
1991 1990 1989 1988
------------ ------------
------------ ------------
MAXIM MONEY
MARKET
Value at beginning of period $14.59 $13.71 $12.72 $11.98
Value at end of period Value $15.26 $14.59 $13.71 $12.72
Increase (decrease) in value of accumulation $0.67 $0.88 $0.99 $0.74
units
Number of accumulation units outstanding at 901,603 846,538 723,266 755,640
end of period
MAXIM
BOND
1 1997 1996 1995 1994 1993 1992
Value at beginning of period $26.82 $26.05 $22.89 $23.74 $22.14 $21.10
Value at end of period $28.36 $26.82 $26.05 $22.89 $23.74 $22.14
Increase (decrease) in value of accumulation $1.54 $0.77 $3.16 $(0.85) $1.60 $1.04
units
Number of accumulation units outstanding at 1,688,345.67 1,890,635.84 2,010,468.99 2,102,049.13 2,301,785.20 1,995,291
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------- ------------
1992 1991 1990 1989
Value at beginning of period $18.63 17.43 $15.60 $14.98
Value at end of period $21.10 $18.63 $17.43 $15.60
Increase (decrease) in value of accumulation $2.47 $1.20 $1.83 $0.62
units
Number of accumulation units outstanding at 2,067,966 1,765,573 1,524,813 1,269,165
end of period
MAXIM STOCK
INDEX
1-2
Value at beginning of period $44.00 $36.57 $27.30 $27.61 $25.44 $24.33
Value at end of period $57.44 $44.00 $36.57 $27.30 $27.61 $25.44
Increase (decrease) in value of accumulation $13.44 $7.43 $9.27 $(0.31) $2.17 $1.11
units
Number of accumulation units outstanding at 8,215,445.99 7,884,581.79 7,636,165.40 7,589,448.89 9,325,064.15 8,106,011
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ -------------
1991 1990 1989 1988
Value at beginning of period $19.97 $20.34 $17.88 $15.35
Value at end of period $24.33 $19.97 $20.34 $17.88
Increase (decrease) in value of accumulation $4.36 $(0.37) $2.46 $2.53
units
Number of accumulation units outstanding at 8,262,908 6,501,628 5,369,016 4,400,397
end of period
----------- ------------ ------------ ------------
MAXIM U.S. GOVERNMENT SECURITIES 3
Value at beginning of period $12.61 $12.29 $10.71 $11.21 $10.38 $10.00
Value at end of period $13.51 $12.61 $12.29 $10.71 $11.21 $10.38
Increase (decrease) in value of accumulation $0.90 $0.32 $1.58 $(0.50) $0.83 $0.38
units
Number of accumulation units outstanding at 3,225,407.45 3,234,023.68 3,165,425.83 2,756,894.60 1,892,295.35 251,644
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ -------------
AMERICAN CENTURY VP CAPITAL
APPRECIATION
3
Value at beginning of period $14.11 $14.93 $11.53 $11.82 $10.85 $10.00
Value at end of period $13.48 $14.11 $14.93 $11.53 $11.82 $10.85
Increase (decrease) in value of accumulation $(0.63) $(0.82) $3.40 $(0.29) $0.97 $0.85
units
Number of accumulation units outstanding at 3,207,248.87 4,560,706.32 4,954,474.12 4,420,493.64 2,607,850.29 647,466
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ -------------
MAXIM MID-CAP (GROWTH FUND I)
4
Value at beginning of period $14.34 $13.70 $10.96 $10.00
Value at end of period $15.99 $14.34 $13.70 $10.96
Increase (decrease) in value of accumulation $1.65 $0.64 $2.74 $0.96
units
Number of accumulation units outstanding at 2,495,810.84 2,440,068.07 1,715,174.42 788,758.55
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------
MAXIM SMALL-CAP
INDEX 4
Value at beginning of period $13.46 $11.82 $9.48 $10.00
Value at end of period $16.08 $13.46 $11.82 $9.48
Increase (decrease) in value of accumulation $2.62 $1.64 $2.34 $(0.52)
units
Number of accumulation units outstanding at 711,865.97 477,902.35 296,281.36 152,895.00
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------
MAXIM INTERNATIONAL
EQUITY 4
Value at beginning of period $13.33 $11.29 $10.49 $10.00
Value at end of period $13.43 $13.33 $11.29 $10.49
Increase (decrease) in value of accumulation $0.10 $2.04 $0.80 $0.49
units
Number of accumulation units outstanding at 2,831,592.94 2,249,181.67 1,645,237.34 1,075,821.94
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------
FIDELITY VIP
GROWTH
5
Value at beginning of period $14.57 $12.86 $9.62 $10.00
Value at end of period $17.77 $14.57 $12.86 $9.62
Increase (decrease) in value of accumulation $3.20 $1.71 $3.24 $(0.38)
units
Number of accumulation units outstanding at 3,352,899.82 2,500,808.02 1,502,634.51 559,313.44
end of period
- ------------------------------------------------ ------------ ------------ ------------ ------------
<PAGE>
- ------------------------------------------------ ------------ ------------ ------------ -----------
INVESTMENT DIVISION 1997 1996 1995 1994
- ------------------------------------------------ ------------ ------------ ------------ -----------
- ------------------------------------------------
FIDELITY VIP II ASSET
MANAGER 5
Value at beginning of period $12.17 $10.76 $9.31 $10.00
Value at end of period $14.50 $12.17 $10.76 $9.31
Increase (decrease) in value of accumulation $2.33 $1.41 $1.45 $(0.69)
units
Number of accumulation units outstanding at 2,104,778.43 1,593,034.53 1,202,943.32 768,426.17
end of period
- ------------------------------------------------ ------------ ------------ ------------ -----------
- ------------------------------------------------ ------------ ------------ ------------ -----------
MAXIM T. ROWE PRICE EQUITY/INCOME 6
Value at beginning of period $15.30 $12.98 $9.85 $10.90
Value at end of period $19.47 $15.30 $12.98 $9.85
Increase (decrease) in value of accumulation $4.17 $2.32 $3.13 $(0.15)
units
Number of accumulation units outstanding at 3,595,375.07 1,702,863.67 550,610.66 16,574.29
end of period
- ------------------------------------------------ ------------ ------------ ------------ -----------
- ------------------------------------------------ ------------ ------------ ------------ -----------
MAXIM SMALL-CAP VALUE (ARIEL VALUE) 6
Value at beginning of period $13.48 $11.58 $10.15 $10.00
Value at end of period $17.03 $13.48 $11.58 $10.15
Increase (decrease) in value of accumulation $3.55 $1.90 $1.43 $0.15
units
Number of accumulation units outstanding at 113,566.69 39,184.70 30,919.44 .01
end of period
- ------------------------------------------------ ------------ ------------ ------------ -----------
- ------------------------------------------------ ------------ ------------ ------------ -----------
MAXIM CORPORATE
BOND 6
Value at beginning of period $13.55 $12.44 $10.00
Value at end of period $15.09 $13.55 $12.44
Increase (decrease) in value of accumulation $1.54 $1.11 $2.44
units
Number of accumulation units outstanding at 986,392.61 478,757.71 220,637.10
end of period
- ------------------------------------------------ ------------ ------------ ------------
- ------------------------------------------------ ------------ ------------ ------------
MAXIM INVESCO
ADR
6
Value at beginning of period $13.46 $11.25 $10.00
Value at end of period $14.90 $13.46 $11.25
Increase (decrease) in value of accumulation $1.44 $2.21 $1.25
units
Number of accumulation units outstanding at 314,943.72 126,363.18 23,104.73
end of period
- ------------------------------------------------ ------------ ------------ ------------
- ------------------------------------------------ ------------ ------------ ------------
MAXIM INVESCO SMALL-CAP GROWTH 6
Value at beginning of period $16.38 $13.09 $10.00
Value at end of period $19.21 $16.38 $13.09
Increase (decrease) in value of accumulation $2.83 $3.29 $3.09
units
Number of accumulation units outstanding at 1,340,084.31 776,719.68 210,982.04
end of period
- ------------------------------------------------ ------------ ------------
</TABLE>
- ------------------------------------ ------------ ------------ ------------
MAXIM INVESCO
BALANCED 7
Value at beginning of period $10.13 $10.00
Value at end of period $12.62 $10.13
Increase (decrease) in value of accumulation $2.49 $0.13
units
Number of accumulation units outstanding at 4,925,017.36 22,568.19
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------ ------------
MAXIM VALUE
INDEX
8
Value at beginning of period $10.00
Value at end of period $10.82
Increase (decrease) in value of accumulation $0.82
units
Number of accumulation units outstanding at 55,506.37
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM GROWTH
INDEX 8
Value at beginning of period $10.00
Value at end of period $10.44
Increase (decrease) in value of accumulation $0.44
units
Number of accumulation units outstanding at 47,353.03
end of period
- ------------------------------------------------ ------------
<PAGE>
- ------------------------------------------------ ------------
INVESTMENT DIVISION 1997
- ------------------------------------------------ ------------
MAXIM SMALL-CAP AGGRESSIVE GROWTH 8
Value at beginning of period $10.00
Value at end of period $10.01
Increase (decrease) in value of accumulation $0.01
units
Number of accumulation units outstanding at 70,399.46
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM BLUE
CHIP
8
Value at beginning of period $10.00
Value at end of period $10.45
Increase (decrease) in value of accumulation $0.45
units
Number of accumulation units outstanding at 81,095.13
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM MID-CAP
GROWTH 8
Value at beginning of period $10.00
Value at end of period $10.31
Increase (decrease) in value of accumulation $0.31
units
Number of accumulation units outstanding at 128,683.86
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM AGGRESSIVE
PROFILE 8
Value at beginning of period $10.00
Value at end of period $10.29
Increase (decrease) in value of accumulation $0.29
units
Number of accumulation units outstanding at 58,762.77
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM MODERATELY AGGRESSIVE PROFILE
8
Value at beginning of period $10.00
Value at end of period $10.33
Increase (decrease) in value of accumulation $0.33
units
Number of accumulation units outstanding at 141,839.79
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM MODERATE
PROFILE 8
Value at beginning of period $10.00
Value at end of period $10.22
Increase (decrease) in value of accumulation $0.22
units
Number of accumulation units outstanding at 110,105.33
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM MODERATELY CONSERVATIVE
PROFILE
8
Value at beginning of period $10.00
Value at end of period $10.19
Increase (decrease) in value of accumulation $0.19
units
Number of accumulation units outstanding at 53,608.55
end of period
- ------------------------------------------------ ------------
- ------------------------------------------------ ------------
MAXIM CONSERVATIVE
PROFILE 8
Value at beginning of period $10.00
Value at end of period $10.32
Increase (decrease) in value of accumulation $0.32
units
Number of accumulation units outstanding at 72,034.42
end of period
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------ ------------
Current Accumulation Unit Values can be obtained by calling GWL&A toll-free at 1-800-523-4106
--------------------------------------------------------------------------------------------
1. Inception date for the Maxim Money Market, Maxim Bond and Maxim Stock Index Investment Divisions is October 5,
1984.
2. Prior to December 1, 1992, the Grown Investment Division.
3. Inception date for the Maxim U.S. Government Securities and American Century VP Capital Appreciation Investment
Divisions is August 1,
1992.
4. Inception date for Maxim Mid-Cap (Growth Fund I), Maxim International Equity and Maxim Small-Cap Index Investment
Divisions is
January 3, 1994.
5. Inception date for Fidelity VIP Growth, Fidelity VIP II Asset Manager Investment Divisions is March 1, 1994.
6. Inception date for Maxim Small-Cap Value (Ariel Value), Maxim Corporate Bond, Maxim INVESCO ADR, Maxim INVESCO
Small-Cap
Growth, and Maxim T. Rowe Price Equity/Income Investment Divisions is November 1, 1994.
7. Inception date for Maxim INVESCO Balanced Investment Division is October 31, 1996.
8. Inception date for Maxim Value Index, Maxim Growth Index, Maxim Small-Cap Aggressive Growth, Maxim Blue Chip,
Maxim MidCap
Growth, Maxim Aggressive Profile, Maxim Moderately Aggressive Profile, Maxim Moderate Profile, Maxim Moderately
Conservative Profile,
and Maxim Conservative Profile Investment Divisions is September 11, 1997.
</TABLE>
<PAGE>
27
20
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance related
information concerning its Investment Divisions. Performance information about
an Investment Division is based on the Investment Division's historical
performance only and is not intended to indicate future performance. The
inception dates for each Investment Division and the corresponding Maxim,
American Century, and Fidelity VIP Portfolios are set forth below, following the
total return information.
Below is a table of performance related information for the Maxim Money Market
Investment Division for the period ended December 31, 1997:
INVESTMENT DIVISION Yield Effective Yield
Maxim Money Market 3.96% 4.11%
Yield and effective yield for the Maxim Money Market Investment Division is for
the 7-day period ended December 31, 1997. The yield calculation above takes into
account recurring charges against the Series Account and the Maxim Money Market
Portfolio (but does not take into account the Contingent Deferred Sales Charge).
The yield and effective yield information is annualized.
The following tables illustrate standardized and non-standardized average annual
total return for the one, five and ten year periods (or since inception, as
appropriate) ended December 31, 1997. The standardized data reflect the
deduction of all fees and charges under the Contract, including any withdrawal
charges that would be imposed upon surrender of a Contract, and are calculated
from the inception date of the Investment Division. The non-standardized data
reflect the deductions of all fees and charges under the Contract, and are:
(1) shown without the effect of withdrawal charges imposed upon surrender of a
Contract, and are calculated from the inception date of the Investment Division;
(2) shown with the effect of withdrawal charges imposed upon surrender of a
Contract, and are calculated for periods preceding the inception date of the
corresponding Investment Division; and
(3) shown without the effect of withdrawal charges imposed upon surrender of a
Contract, and are calculated for periods preceding the inception date of the
corresponding Investment Division.
Following the tables is a chart which lists the inception dates of the
Investment Divisions and their corresponding underlying funds and their
portfolios.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS**
<TABLE>
The following table illustrates Average Annual Total Return assuming an
assessment of a 6% Contingent Deferred Sales Charge of all contributions made
within the last 72 months(*) for NQDC, Section 415(m), Section 401(k) and
certain 401(a) and 457 retirement programs.
INVESTMENT After After Before After Before After
DIVISION Before CDSC Before CDSC CDSC CDSC CDSC CDSC
CDSC 1 CDSC 5 10 10 10 Years 10 Years
1 Year 5 Years Years or Years or or or
Year Years Life of Life Life of Life of
of
Investment Underlying Underlying
Division Investment Fund Fund
Portfolio Portfolio
Division
<S> <C> <C> <C> <C> <C> <C>
Maxim Bond -0.27% 4.06% 6.58% 6.58% 6.58% 6.58%
5.73% 5.06%
Maxim Stock Index (1) 24.55% 17.04% 14.10% 14.58% 14.10% 14.10%
30.55% 17.68%
Maxim U.S. Government
Securities 1.16% 4.42% 5.41% 4.52% 7.26% 7.26%
7.16% 5.41%
Maxim Small-Cap Index 13.48% N/A N/A 12.39% 11.32% 12.38% 11.34%
19.48%
Maxim Mid-Cap (Growth
Fund I) 5.54% N/A N/A 12.45% 11.38% 12.42% 11.35%
11.54%
Maxim International
Equity -5.29% N/A N/A 7.60% 6.37% 7.71% 6.52%
0.71%
Maxim Corporate Bond 5.31% N/A N/A 14.45% 13.02% 14.45% 13.02%
11.31%
Maxim Small-Cap
Value (Ariel Value 20.28% N/A N/A 17.97% 16.62% 13.28% 12.26%
26.28%
Maxim INVESCO ADR 4.67% N/A N/A 13.41% 11.95% 13.41% 11.95%
10.67%
Maxim INVESCO Small
- -Cap Growth 11.21% N/A N/A 22.90% 21.67% 22.90% 21.67%
17.21%
Maxim INVESCO Balanced 18.49% N/A N/A 22.02% 17.03% 20.43% 15.82%
24.49%
Maxim T. Rowe Price
Equity/Income 21.23% N/A N/A 23.40% 22.18% 23.40% 22.18%
27.23%
Maxim Value Index 26.40% N/A N/A 8.18% 2.18% 19.59% 18.73%
32.40%
Maxim Growth Index 21.65% N/A N/A 4.41% -1.59% 19.71% 18.86%
27.65%
Maxim Small-Cap
Aggressive Growth 16.94% N/A N/A 0.05% -5.95% 23.94% 22.74%
22.94%
Maxim Blue Chip+ N/A N/A N/A N/A 4.53% -1.47% 4.29% -1.71%
Maxim MidCap Growth+ N/A N/A N/A N/A 3.09% -2.91% 2.85% -3.15%
Maxim Aggressive
Profile+ N/A N/A N/A N/A 2.91% -3.09% 2.91% -3.09%
Maxim Moderately
Aggressive
Profile+ N/A N/A N/A N/A 3.26% -2.74% 3.26% -2.74%
Maxim Moderate Profile+ N/A N/A N/A N/A 2.22% -3.78% 2.22% -3.78%
Maxim Moderately
Conservative
Profile+ N/A N/A N/A N/A 1.89% -4.11% 1.89% -4.11%
Maxim Conservative
Profile+ N/A N/A N/A N/A 2.95% -3.05% 2.95% -3.05%
American Century
VP Capital
Appreciation -10.48% 3.41% 5.31% 4.41% 7.33% 7.33%
-4.48% 4.44%
Fidelity VIP Growth 15.95% 15.68% 16.31% 15.28% 15.63% 15.63%
21.95% 16.34%
Fidelity VIP II Asset Manager 13.08% 10.71% 10.04% 8.83% 11.29% 11.29%
19.08% 11.49%
</TABLE>
(1) Prior to December 1, 1992, the Growth Investment Division.
*The CDSC or Contingent Deferred Sales Charge is deducted only when money is
withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC. (See "Administrative
Charges Risk Premiums and Other Deductions" to determine which CDSC applies to
your contract).
+ See notes after final return table.
The following table illustrates Average Annual Total Return assuming an
assessment of a 5% Contingent Deferred Sales Charge for the first 4 years, 4%
for years 5 through 9, 3% for years 10 through 14 (*) for certain NQDC, and
Section 403(b), 457, and 415(m) retirement programs.
<TABLE>
INVESTMENT After After After Before After
DIVISION Before CDSC Before CDSC Before CDSC CDSC CDSC
CDSC 1 Year CDSC 5 CDSC 10 10 10
1 5 Years 10 Years or Years or Years or
Year Years Years or Life Life Life
Life of of of
of Investment Underlying Underlying
Investment Division Fund Fund
Division Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
Maxim Bond 0.44% 4.21% 6.58% 6.25% 6.58% 6.25%
5.73% 5.06%
Maxim Stock Index (1) 24.03% 16.72% 14.10% 13.75%
30.55% 17.68% 14.10% 13.75%
Maxim U.S. Government Securities 1.80% 4.55% 5.41% 4/62% 7.26% 6.94%
7.16% 5.41%
Maxim Small-Cap Index 13.51% N/A N/A 12.38% 10.98%
19.48% 12.39% 10.96%
Maxim Mid-Cap (Growth Fund I) 5.96% N/A N/A 12.42% 10.99%
11.54% 12.45% 11.02%
Maxim International Equity -4.33% N/A N/A 7.60% 6.23% 7.71% 6.37%
0.71%
Maxim Corporate Bond 5.74% N/A N/A 12.61%
11.31% 14.45% 12.61% 14.45%
Maxim Small-Cap Value (Ariel 19.96% N/A N/A 13.28% 11.86%
Value) 26.28% 17.97% 16.07%
Maxim INVESCO ADR 5.14% N/A N/A 13.41% 11.59%
10.67% 13.41% 11.59%
Maxim INVESCO Small-Cap Growth 11.35% N/A N/A 22.90% 20.92%
17.21% 22.90% 20.92%
Maxim INVESCO Balanced 18.26% N/A N/A 20.43% 15.58%
24.49% 22.02% 16.77%
Maxim T. Rowe Price 20.87% N/A N/A 23.40% 21.41%
Equity/Income 27.23% 23.40% 21.41%
Maxim Value Index N/A 8.18% 2.77% 19.59% 18.10%
32.40% 25.78% N/A
Maxim Growth Index N/A 4.41% 19.71% 18.22%
27.65% 21.27% N/A -0.81%
Maxim Small-Cap Aggressive N/A 0.05% 23.94% 21.95%
Growth 22.94% 16.79% N/A -4.95%
Maxim Blue Chip+ N/A N/A N/A 4.53% 4.29% -0.93%
N/A -0.69%
Maxim MidCap Growth+ N/A N/A N/A 3.09% 2.85% -2.29%
N/A -2.06%
Maxim Aggressive Profile+ N/A N/A N/A 2.91% 2.91% -2.24%
N/A -2.24%
Maxim Moderately Aggressive N/A N/A N/A 3.26% 3.26% -1.91%
Profile+ N/A -1.91%
Maxim Moderate Profile+ N/A N/A N/A 2.22% 2.22% -2.89%
N/A -2.89%
Maxim Moderately Conservative N/A N/A N/A 1.89% 1.89% -3.20%
Profile+ N/A -3.20%
Maxim Conservative Profile+ N/A N/A N/A 2.95% 2.95% -2.19%
N/A -2.19%
American Century VP Capital -9.26% 3.59% 5.31% 4.52% 7.33% 7.00%
Appreciation -4.48% 4.44%
Fidelity VIP Growth 15.86% 15.40% 15.63% 15.27%
21.95% 16.34% 16.31% 14/77%
Fidelity VIP II Asset Manager 13.13% 10.59% 8.58% 11.29% 10.74%
19.08% 11.49% 10.04%
</TABLE>
(1) Prior to December 1, 1992, the Growth Investment Division.
*The CDSC or Contingent Deferred Sales Charge is deducted only when money is
withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC. The CDSC for certain
Section 457 retirement programs diminishes over time. These factors are taken
into consideration in calculating the above returns. (See "Administrative
Charges Risk Premiums and Other Deductions" to determine which CDSC applies to
your contract).
+ See notes after final return
table.
<PAGE>
The following table illustrates Average Annual Total Return assuming an
assessment of a 5% Contingent Deferred Sales Charge effective for the first 5
contract years(*) for certain NQDC and Section 403(b) 457 and 415(m) retirement
programs.
<TABLE>
INVESTMENT After After Before Before After
DIVISION Before CDSC Before CDSC CDSC After CDSC CDSC
CDSC 1 Year CDSC 5 10 CDSC 10 10
1 5 Years Years or 10 Years or Years or
Year Years Life Years Life Life
of or of of
Investment Life of Underlying Underlying
Fund Fund
Division Investment Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Maxim Bond 0.44% 3.99% 6.58% 6.58% 6.58%
5.73% 5.06% 6.58%
Maxim Stock Index (1) 24.03% 16.48% 14.10% 14.10% 14.10%
30.55% 17.68% 14.10%
Maxim Stock Index (1) 20.20% 12.51% 11.52%
Maxim U.S. Government Securities 1.80% 4.33% 5.41% 7.26% 7.26%
7.16% 5.41% 5.41%
Maxim Small-Cap Index 13.51% N/A N/A 12.39% 12.38% 10.98%
19.48% 10.96%
Maxim Small-Cap Index 13.79% N/A 10.15%
Maxim Mid-Cap (Growth Fund I) 5.96% N/A N/A 12.45% 12.42% 10.99%
11.54% 11.02%
Maxim Mid-Cap (Growth Fund I) 4.58% N/A 12.70%
Maxim International Equity -4.33% N/A N/A 7.60% 7.71% 6.37%
0.71% 6.23%
Maxim Corporate Bond 5.74% N/A N/A 14.45% 12.61%
11.31% 12.61% 14.45%
Maxim Corporate Bond 8.91% N/A 15.92%
Maxim Small-Cap Value (Ariel 19.96% N/A N/A 17.97% 13.28% 11.86%
Value) 26.28% 16.07%
Maxim INVESCO ADR 5.14% N/A N/A 13.41% 13.41% 11.59%
10.67% 11.59%
Maxim INVESCO ADR 19.57% N/A 14.69%
Maxim INVESCO Small-Cap Growth 11.35% N/A N/A 22.90% 22.90% 20.92%
17.21% 20.92%
Maxim INVESCO Balanced 18.26% N/A N/A 22.02% 20.43% 15.58%
24.49% 16.77%
Maxim INVESCO Balanced N/A N/A 1.33%
Maxim T. Rowe Price 20.87% N/A N/A 23.40% 23.40% 21.41%
Equity/Income 27.23% 21.41%
Maxim Value Index N/A 8.18% 19.59% 18.10%
32.40% 25.78% N/A 2.77%
Maxim Growth Index N/A 4.41% 19.71% 18.22%
27.65% 21.27% N/A -0.81%
Maxim Small-Cap Aggressive N/A 0.05% 23.94% 21.95%
Growth 22.94% 16.79% N/A -4.95%
Maxim Blue Chip+ N/A N/A N/A 4.53% 4.29% -0.93%
N/A -0.69%
Maxim MidCap Growth+ N/A N/A N/A 3.09% 2.85% -2.29%
N/A -2.06%
Maxim Aggressive Profile+ N/A N/A N/A 2.91% 2.91% -2.24%
N/A -2.24%
Maxim Moderately Aggressive N/A N/A N/A 3.26% 3.26% -1.91%
Profile+ N/A -1.91%
Maxim Moderate Profile+ N/A N/A N/A 2.22% 2.22% -2.89%
N/A -2.89%
Maxim Moderately Conservative N/A N/A N/A 1.89% 1.89% -3.20%
Profile+ N/A -3.20%
Maxim Conservative Profile+ N/A N/A N/A 2.95% 2.95% -2.19%
N/A -2.19%
American Century VP Capital -9.26% 3.37% 5.31% 7.33% 7.33%
Appreciation -4.48% 4.44% 5.31%
Fidelity VIP Growth 15.86% 15.15% 16.31% 15.63% 15.63%
21.95% 16.34% 14.77%
Fidelity VIP II Asset Manager 13.13% 10.35% 10.04% 11.29% 11.29%
19.08% 11.49% 8.58%
</TABLE>
(1) Prior to December 1, 1992, the Growth Investment Division.
*The CDSC or Contingent Deferred Sales Charge is deducted only when money is
withdrawn from the Group Contract, and not when the money is Transferred between
Investment Divisions. Therefore, the Series Account provides total returns both
before and after considering the CDSC. Certain retirement programs are subject
to the 5% CDSC for five years. These factors are taken into consideration in
calculating the above returns. (See "Administrative Charges Risk Premiums and
Other Deductions" to determine which CDSC applies to your contract).
+ See notes after final return table
<PAGE>
The following table illustrates Average Annual Total Return assuming no
Contingent Deferred Sales Charge for certain NQDC, and Section 403(b) 457 and
415(m) retirement programs.
<TABLE>
INVESTMENT DIVISION 1 Year 5 Years 10 Years or Life 10 Year or Life of
of Underlying Fund
Investment Portfolio
Division
<S> <C> <C> <C> <C>
Maxim Bond 5.73% 5.06% 6.58% 6.58%
Maxim Stock Index (1) 30.55% 17.68% 14.10% 14.10%
Maxim U.S. Government Securities 7.16% 5.41% 5.41% 7.26%
Maxim Small-Cap Index 19.48% N/A 12.39% 12.38%
Maxim Mid-Cap (Growth Fund I) 11.54% N/A 12.45% 12.42%
Maxim International Equity 0.71% N/A 7.60% 7.71%
Maxim Corporate Bond 11.31% N/A 14.45% 14.45%
Maxim Small-Cap Value (Ariel 26.28% N/A 17.97% 13.28%
Value)
Maxim INVESCO ADR 10.67% N/A 13.41% 13.41%
Maxim INVESCO Small-Cap Growth 17.21% N/A 22.90% 22.90%
Maxim INVESCO Balanced 24.49% N/A 22.02% 20.43%
Maxim T. Rowe Price Equity/Income 27.23% N/A 23.40% 23.40%
Maxim Value Index 32.40% N/A 8.18% 19.59%
Maxim Growth Index 27.65% N/A 4.41% 19.71%
Maxim Small-Cap Aggressive 22.94% N/A 0.05% 23.94%
Growth
Maxim Blue Chip N/A N/A 4.53% 4.29%
Maxim MidCap Growth N/A N/A 3.09% 2.85%
Maxim Aggressive Profile+ N/A N/A 2.91% 2.91%
Maxim Moderately Aggressive N/A N/A 3.26% 3.26%
Profile+
Maxim Moderate Profile+ N/A N/A 2.22% 2.22%
Maxim Moderately Conservative N/A N/A 1.89% 1.89%
Profile+
Maxim Conservative Profile+ N/A N/A 2.95% 2.95%
American Century VP Capital -4.48% 4.44% 5.31% 7.33%
Appreciation
Fidelity VIP Growth 21.95% 16.34% 16.31% 15.63%
Fidelity VIP II Asset Manager 19.08% 11.49% 10.04% 11.29%
</TABLE>
(1) Prior to December 1, 1992, the Growth Investment Division.
** These returns are illustrated for investments made through contracts which
incur the maximum mortality and expense risk charge of 1.25% This charge is
assumed to remain the same in each period listed but does vary by contract.
Applicable mortality and expense risk charges range from 0 to 1.25%. Please
consult with your employer or BCE representative to obtain average annual total
return information that reflects the charges under your contract. (See
"Administrative Charges Risk Premiums and Other Deductions" for more
information.)
+ These returns are calculated for the period ended 12/31/97 from the date
shown below since the Investment Divisions were not in existence for the full
year.
Investment Division First Day Contributions were Made
Maxim Blue Chip October 8, 1997
Maxim MidCap Growth September 23, 1997
Maxim Aggressive Profile September 16, 1997
Maxim Moderately Aggressive September 16, 1997
Profile
Maxim Moderate Profile September 19, 1997
Maxim Moderately Conservative September 16, 1997
Profile
Maxim Conservative Profile October 2, 1997
<PAGE>
The following table sets forth the inception date of each Investment
Division and the inception date of the corresponding Maxim, American Century,
and Fidelity VIP Portfolio.
<TABLE>
INVESTMENT DIVISION Portfolio Inception Date Investment Division
Inception In
Contract(1)
Maxim Money Market February 25, 1982 October 5, 1984
<S> <C> <C>
Maxim Bond July 1, 1982 October 5, 1984
Maxim Stock Index July 1, 1982 October 5, 1984
Maxim U.S. Government Securities April 4, 1985 August 1, 1992
Maxim Small-Cap Index December 1, 1993 January 3, 1994
Maxim Mid-Cap (Growth Fund I) December 31, 1993 January 3, 1994
Maxim International Equity December 1, 1993 January 3, 1994
Maxim Corporate Bond November 1, 1994 November 1, 1994
Maxim Small-Cap Value (Ariel December 1, 1993 November 1, 1994
Value)
Maxim INVESCO ADR November 1, 1994 November 1, 1994
Maxim INVESCO Small-Cap Growth November 1, 1994 November 1, 1994
Maxim INVESCO Balanced October 1, 1996 October 31, 1996
Maxim T. Rowe Price November 1, 1994 November
Equity/Income 91, 1994
Maxim Value Index December 1, 1993 September 11, 1997
Maxim Growth Index December 1, 1993 September 11, 1997
Maxim Small-Cap Aggressive November 1, 1994 September 11, 1997
Growth
Maxim Blue Chip July 1, 1997 September 11, 1997
Maxim MidCap Growth July 1, 1997 September 11, 1997
Maxim Aggressive Profile September 8, 1997 September 11, 1997
Maxim Moderately Aggressive September 8, 1997 September 11, 1997
Profile
Maxim Moderate Profile September 8, 1997 September 11, 1997
Maxim Moderately Conservative September 8, 1997 September 11, 1997
Profile
Maxim Conservative Profile September 8, 1997 September 11, 1997
American Century VP Capital November 20, 1987 August 1, 1992
Appreciation
Fidelity VIP Growth October 9, 1986 March 1, 1994
Fidelity VIP II Asset Manager September 8, 1989 March 1, 1994
</TABLE>
(1) The Investment Division inception dates correspond to the date the
Portfolios were available under contracts with the maximum mortality and expense
risk charge of 1.25%. Such charge may vary by contract. The inception dates for
Investment Divisions under other contracts may differ. Please contact your BCE
representative for the performance data and inception dates that are relevant to
your contract.
The Series Account may include total return in advertisements or other sales
material regarding each Investment Division available under the Contracts. When
the Series Account advertises the total return of any of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in the
portfolio at the beginning of the relevant period to the value of the investment
at the end of the period (assuming immediate reinvestment of any dividends or
capital gains distributions). Average annual total return for the Investment
Divisions includes all charges under the Group Contracts, including any
Contingent Deferred Sales Charge and, likewise, is lower than total return at
the Maxim, American Century or Fidelity VIP level, which has no comparable
charges.
For the Maxim Money Market Investment Division, "yield" refers to the income
generated by an investment in the Maxim Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the amount
of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" of the Maxim Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an investment
in the Maxim Money Market Investment Division is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. The yield and effective yield
calculations for the Maxim Money Market Investment Division include all
recurring charges under the Group Contracts (but does not include the Contingent
Deferred Sales Charge), and is lower than yield and effective yield for Maxim
which does not have comparable charges.
For more complete information on the methods used to calculate yield,
effective yield, and total return of the respective Investment Divisions, see
the "Statement of Additional Information."
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws of
the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto Rico,
the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance Company. The
Great-West Life Assurance Company is a subsidiary of Great-West Lifeco Inc., a
holding company. Great-West Lifeco Inc. is in turn a subsidiary of Power
Financial Corporation, a financial services company. Power Corporation of
Canada, a holding and management company, has voting control of Power Financial
Corporation. Mr. Paul Desmarais, through a group of private holding companies,
which he controls, has voting control of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group Contracts and
the Series Account. Its Administrative Offices are located at 8515 E. Orchard
Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT
The Series Account was originally established by GWL&A under Kansas law on
November 15, 1983. The Series Account now exists pursuant to Colorado law as a
result of the redomestication of GWL&A. The Series Account has been registered
with the Securities and Exchange Commission as a unit investment trust pursuant
to the provisions of the Investment Company Act of 1940, as amended, and meets
the definition of a "separate account" under the federal securities laws. Such
registration does not involve supervision of the management of the Series
Account or GWL&A by the Securities and Exchange Commission.
The Series Account currently has twenty-six Investment Divisions available
for allocation of Contributions. If, in the future, GWL&A determines that
marketing needs and investment conditions warrant, it may establish additional
Investment Divisions which will be made available to existing Group Contract
owners to the extent and on a basis to be determined by GWL&A. Each Investment
Division invests in shares of Maxim, American Century or Fidelity VIP allocable
to one of twenty-six Portfolios, each having a specific investment objective.
Maxim, American Century and Fidelity VIP also have other portfolios which are
not generally available for investment by the Series Account.
GWL&A does not guarantee the investment performance of the Series Account.
The portion of the Participant Annuity Account Value attributable to the Series
Account and the amount of variable annuity payments depend on the investment
performance of Maxim, American Century and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the general
business of GWL&A; but the income, capital gains, or capital losses of each
Variable Sub-Account are credited to or charged against the assets held in that
Variable Sub-Account in accordance with the terms of the Group Contracts,
without regard to other income, capital gains or capital losses of any other
Variable Sub-Account or arising out of any other business GWL&A may conduct.
Under Colorado law, the assets of the Series Account are not chargeable with
liabilities arising out of any other business GWL&A may conduct. Nevertheless,
all obligations arising under the Group Contracts are generally corporate
obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs.
Employers, including non-profit entities defined in Code Section 501(c) and
governmental entities defined in Code Section 414(d) and Sections 3(32) and 4 of
the Employment Retirement Income Security Act of 1974 ("ERISA"), and certain
employee organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 401(k) Retirement Programs.
Any employer, other than a state or local governmental employer, and certain
employee organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs.
State educational institutions and tax-exempt organizations under Section
501(c)(3) of the Code may purchase a Group Contract. In addition, associations
of state educational employees, associations of state educational employers,
associations of employees of organizations that are tax-exempt under Section
501(c)(3) of the Code, and associations of tax-exempt employers under Section
501(c)(3), may also purchase Group Contracts. In order to be eligible, however,
the association must also meet the requirements of Sections 501(c)(3).
Section 457(b) or (f) Retirement Programs.
State governments, local governments, rural electric cooperatives, political
subdivisions, and agencies, instrumentalities and certain affiliates of such
entities may purchase a Group Contract. For years beginning after 1986,
organizations (other than a governmental unit) which are exempt from tax under
the Code, and which maintain a Section 457(f) Retirement Program for a select
group of management or highly compensated employees, may also purchase a Group
Contract.
Section 415(m) Retirement Programs.
State and local governmental entities may purchase a Group Contract for years
beginning after 1994.
NQDC Retirement Programs.
Any employer, other than a governmental or tax-exempt employer, may purchase a
Group Contract.
Any of the organizations mentioned above wishing to purchase a Group Contract
must complete application forms which selling agents will forward to GWL&A's
Administrative Offices for acceptance. Where the purchaser is an employee
association, any employer of an association member employee can obtain coverage
by completing application forms and agreeing in writing to be bound by the terms
of the Group Contract. Likewise, where the purchaser is an association of
tax-exempt employers, any employer member can obtain coverage by following the
same procedures. GWL&A reserves the right to reject any application.
Employee Coverage
The employer will submit to selling agents an application for any employee
who desires coverage under the Group Contract and is eligible to participate in
the employer's retirement program. GWL&A reserves the right to reject any
application. An employee should consult his/her employer for information
concerning eligibility.
Contributions
Section 401(a) Retirement Programs.
Contributions will be made by the employer or employee organization pursuant to
the employer's or employee organization's underlying pension or profit-sharing
plan.
Section 401(k) Retirement Programs.
Contributions will be made by the employer pursuant to the employer's underlying
profit sharing plan and the Participant's election to execute a salary reduction
agreement or a cash or deferred agreement.
Section 403(b) Retirement Programs.
The employer will make Contributions in accordance with a salary reduction
agreement with its employees or an agreement to forego a salary increase, except
with respect to employer-sponsored plans under which the employer will make
Contributions pursuant to an underlying retirement plan.
Section 457(b) or (f) Retirement Programs.
Contributions will be made by the employer pursuant to the employer's underlying
deferred compensation plan.
Section 415(m) Retirement Programs.
Contributions will be made by the employer pursuant to the employer's underlying
excess benefit plan.
NQDC Retirement Programs.
Contributions will be made by the employer pursuant to the employer's underlying
NQDC plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should be
made payable to the Great-West Life & Annuity Insurance Company. There is no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity Commencement
Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value established
in his/her name.
Ownership
Section 401(a) Retirement Programs.
The employer, plan trustee, or employee organization purchasing a Group Contract
is the owner of the Contract. Employer Contributions vest in accordance with the
terms of the employer's or employee organization's underlying plan. Any employee
Contributions are immediately vested in the Participant. Neither the employer,
plan trustee, employee organization nor the Participants can assign any interest
in the Group Contract or the Participant Annuity Account. All assets in the
Group Contract must be held for the exclusive benefit of Participants and their
beneficiaries.
Section 401(k) Retirement Programs.
The employer, plan trustee or employee organization purchasing a Group Contract
is the owner of the contract. All employer Contributions credited to a
Participant Annuity Account pursuant to the Participant's election to execute a
salary reduction agreement or a cash or deferred agreement are vested in the
Participant. Any matching employer Contributions vest in accordance with the
terms of the employer's underlying plan. Neither the employer, plan trustee,
employee organization nor the Participants can assign any interest in the Group
Contract or the Participant Annuity Account. All assets in the Group Contract
must be held for the exclusive benefit of Participants and their beneficiaries.
Section 403(b) Retirement Programs.
The employer or association purchasing a Group Contract is the owner of the
contract for the benefit of the Participants. Each Participant receives a
Participant Certificate to evidence his/her coverage under the Group Contract.
All Contributions credited to a Participant Annuity Account are vested in the
Participant, subject to any limitations in the underlying retirement plan.
Interests in the Group Contract or the Participant Annuity Accounts cannot be
assigned by the employer, association or the Participants.
Section 457(b) or (f) Retirement Programs.
The employer is the owner of the Group Contract. All Contributions made in the
name of the Participants remain the property of the employer and subject to the
claims of the employer's general creditors until made available to the
Participant in accordance with the terms of the employer's underlying deferred
compensation plan, until December 31, 1998, or such earlier date as may be
established by plan amendment. However, amounts deferred under a plan created on
or after August 20, 1996 and amounts deferred under any 457(b) plan after
December 31, 1998 must be held in trust, custodial account or annuity contract
for the exclusive benefit of plan Participants and their beneficiaries. The
trustee or employer, as deemed trustee, is the owner of the Group Contract. The
employer may assign or transfer a Group Contract to another person as permitted
by applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
Section 415(m) Retirement Program.
The employer is the owner of the Group Contract. All Contributions made in the
name of Participants remain the property of the employer and subject to the
claims of the employer's general creditors until made available to the
Participant in accordance with the terms of the employer's underlying excess
benefit plan. The employer may assign or transfer a Group Contract to another
person as permitted by applicable law and only with the prior written consent of
GWL&A, which assumes no responsibility for the validity or effect of any
assignment.
NQDC Retirement Program.
The employer is the owner of the Group Contract. All Contributions made in the
name of Participants remain the property of the employer and subject to the
claims of the employer's general creditors until made available to the
Participant in accordance with the terms of the employer's underlying NQDC plan.
The employer may assign or transfer a Group Contract to another person as
permitted by applicable law and only with the prior written consent of GWL&A,
which assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL ONLY BE MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION PLAN AS DETERMINED BY THE
EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement Date,
allocation of Contributions, Transfers, distributions in whole or in part, and
the election of annuity payment options. Under Section 403(b) retirement
programs (other than employer-sponsored plans), the Participants make all the
elections permitted under the Group Contracts. Under Section 401(a), Section
401(k), Section 457(b) or (f), 415(m), NQDC and employer-sponsored 403(b)
retirement plans, all elections are made by the owner. The employer's underlying
pension, profit sharing, deferred compensation, excess benefit or nonqualified
deferred compensation plan or Section 403(b) retirement plan may, however,
permit the Participants to make certain of those elections indirectly through
the owner. A Participant should consult his/her employer for information
concerning elections permitted under its profit sharing, deferred compensation,
excess benefit, nonqualified deferred compensation or employer-sponsored 403(b)
plan.
Amendment of Group Contracts
Section 401(a), Section 401(k), Section 457(b) or (f), Section 415(m) and NQDC
Retirement Programs.
The Group Contracts may be modified at any time by written agreement between
GWL&A and the owner, subject to approval of the state insurance department, if
applicable.
Section 403(b) Retirement Programs.
The Group Contracts may be modified at any time by written agreement between
GWL&A and the owner, subject to approval of the state insurance department, if
applicable. No modification will, however, affect the terms of the contract
which are applicable to Contributions paid prior to such modification without
the written consent of the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts without
the consent of any person to meet the requirements of the Investment Company Act
of 1940 or other applicable federal or state laws or regulations, or to modify
the annuity rates for future Contributions. GWL&A will notify the Participants
of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied to the investment divisions pursuant to
instructions in the application after receipt at GWL&A's Administrative Offices
within two business days if the application form is complete or if an Owner has
authorized GWL&A to apply such initial Contributions to a specified investment
option if the application is incomplete. If the Owner has not so advised, the
application must be completed within five business days of receipt at GWL&A's
Administrative Offices or the initial Contributions will be returned to the
Owner. If an incomplete application form is completed within five business days
of GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion.
For 403(b) retirement programs (other than employer-sponsored plans), the
initial Contributions will be applied to the investment divisions pursuant to
instructions in the application after receipt at GWL&A's Administrative Offices
within two business days if the application form is completed. If the
application form is incomplete, GWL&A will immediately place the initial
Contributions in the Maxim Money Market Portfolio investment division for a
maximum of 105 days while GWL&A attempts to obtain complete information. The
initial Contribution will remain in the Maxim Money Market Portfolio investment
division until the application is completed or the 105 days expire. Upon
completion of the application form, the initial Contribution will be
re-allocated as specified in the application form. After the expiration of the
105 days, if the application form remains incomplete it will be returned at
once, with investment earnings (if any) to the prospective purchaser.
Subsequent Contributions will be applied pursuant to the allocation
instructions in the completed application and will be allocated upon receipt by
GWL&A at its Administrative Offices on the day received. There is no minimum
amount or number of Contributions. Contributions for a Participant are allocated
to the Series Account to accumulate on a variable basis, to the Guaranteed
Account to accumulate on a guaranteed rate of return, or a combination of both,
according to the instructions of the Participant under a Section 403(b)
retirement programs (other than employer sponsored plans). The owner makes all
the elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457(b) or (f), Section 415(m), NQDC or employer-sponsored
Section 403(b) retirement programs ("Allocation Instructions"). Allocation
Instructions may be changed at any time and will be effective the later of (1)
the date specified on the form or (2) the date the completed form is received
and recorded by GWL&A at its Administrative Offices. GWL&A will allocate the
Contributions based upon the instructions in the application form. A change of
Allocation Instructions will be effective for Contributions that are received
after GWL&A's receipt and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the Contributions
are converted into Accumulation Units. The number of Accumulation Units credited
with respect to the initial Contribution under a Participant Annuity Account is
determined by dividing the amount allocated to each Variable Sub-Account by the
value of an Accumulation Unit for that Variable Sub-Account on the day following
GWL&A's receipt of the initial Contribution and GWL&A's affirmative
determination to establish that Participant Annuity Account. The number of
Accumulation Units with respect to any additional Contribution to a Participant
Annuity Account is determined by dividing the amount allocated to the
appropriate Variable Sub-Account by the value of an Accumulation Unit for that
Sub-Account on the day the Contribution is accepted. Contributions received
after 4:00 p.m., EST/EDT, shall be deemed to have been received on the next
Valuation Date. The number of Accumulation Units so determined shall not be
changed by any subsequent change in the value of an Accumulation Unit, but the
dollar value of an Accumulation Unit will vary in amount depending upon the
investment experience of the applicable underlying mutual fund.
Custom Transfer: Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from one
Investment Division selected from among those being allowed under this option to
any of the other Investment Divisions at regular intervals. The intervals
between Transfers may be monthly, quarterly, semi-annually or annually. The
Transfer will be initiated one frequency period following the date of the
Request, and thereafter Transfers will continue on the same day each interval
unless terminated by the Participant, or for other reasons as set forth in the
Contract. Transfers can only occur on dates the New York Stock Exchange ("NYSE")
is open. If there are insufficient funds in the applicable Investment Division
on the date of Transfer, no Transfer will be made; however, Custom Transfer:
Dollar Cost Averaging will resume once there are sufficient funds in the
applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected Investment
Division is $100 per month.
2. The Participant must specify the percentage or dollar amount to be
Transferred. The Accumulation Unit Values will be determined on each
Transfer date.
Custom Transfer: Dollar Cost Averaging may be used to purchase Accumulation
Units of the Investment Divisions over a period of time so fewer Accumulation
Units are purchased when prices are greater and more Accumulation Units when
prices are lower. Participation in Custom Transfer: Dollar Cost Averaging does
not, however, assure a greater profit, nor will it prevent or necessarily
alleviate losses in a declining market. The Participant, by Request, may cease
Custom Transfer: Dollar Cost Averaging at any time. The Company reserves the
right to modify, suspend or terminate Custom Transfer: Dollar Cost Averaging at
any time.
Custom Transfer: The Rebalancer Option
The Participant may, by Request, automatically Transfer among the Investment
Divisions on a periodic basis by electing the Custom Transfer: Rebalancer
Option. This option automatically reallocates the Variable Account Value to
maintain a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase or
decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and processed
by the Company as provided in the Contract. Rebalancing may also be set up on a
quarterly, semi-annual or annual basis, in which case the first Transfer will be
initiated one frequency period following the date of the Request. On the
Transfer date for the specified Request, assets will be automatically
reallocated to the selected funds. Rebalancing will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in the
Contract. Transfers can only occur on dates the NYSE is open. In order to
participate in the Custom Transfer: Rebalancer Option, the Participant's entire
Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to be
allocated to each Investment Division and the frequency of rebalancing. The
Participant, by Request, may modify the allocations or cease the Custom
Transfer: Rebalancer Option at any time. Participation in the Custom Transfer:
Rebalancer Option and Custom Transfer: Dollar Cost Averaging at the same time is
not allowed. Participation in the Custom Transfer: Rebalancer Option does not
assure a greater profit, nor will it prevent or necessarily alleviate losses in
a declining market. The Company reserves the right to modify, suspend, or
terminate the Custom Transfer: Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued separately, but
the method used for valuing Accumulation Units in each Variable Sub-Account is
the same. Initially, the value of each Accumulation Unit was set at $10.00.
Thereafter, the value of an Accumulation Unit in any Variable Sub-Account on any
Valuation Date equals the value of an Accumulation Unit in that Sub-Account as
of the immediately preceding Valuation Date multiplied by the "Net Investment
Factor" of that Variable Sub-Account for the current Valuation Period.
Accumulation Unit values are valued once each day that the underlying mutual
fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any Valuation
Period is determined by dividing (a) by (b), and subtracting (c) from the result
where:
(a) is the net result of:
(i)the net asset value per share of the underlying mutual fund shares held
in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
(ii) the per share amount of any dividend (or, if applicable, capital gain
distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided for
in the Variable Sub-Account, which is determined by GWL&A to have resulted
from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i)the net asset value per share of the underlying mutual fund shares held
in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or provided for
in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis. Such amount is equal to 1.25%, 0.95%, 0.75%,
0.65%, 0.55%, or 0.00%, depending upon the Group Policyholder's Contract and
determined on an annual basis of the daily net asset value of each Variable
Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to one.
Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b) (i)
above, reflect the investment performance of the underlying mutual fund as well
as the payment of underlying mutual fund expenses. (See "Investments of the
Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
Prior to the Annuity Commencement Date transfers can be made between the
Variable and Fixed Sub-Accounts subject to the following limitations. All or a
portion of a Participant Annuity Account Value held in any of the Variable
Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account may be transferred
at any time prior to the Participant's Annuity Commencement Date by written or
telephone Request to GWL&A's Administrative Offices. Prior to Participant's
Annuity Commencement Date, transfers of all or a portion of a Participant
Annuity Account Value held in any of the Guaranteed Certificate Funds may be
made only at Certificate maturity by written or telephone Request to GWL&A's
Administrative Offices. Transfers may be made into the Guaranteed Fixed Fund
(GFF) at any time. However, the percentage available for transferring out of the
GFF will range from 20% to 100% of the previous December 31 account balance.
However, after the Annuity Commencement Date, no transfers may be made from a
fixed annuity payment option to a variable annuity payment option and vice,
versa. (See "Annuity Options: Transfers After the Annuity Commencement Date.")
In order for telephone transfers to be accommodated, a Telephone Transfer
Form, signed by both the Contract Owner and the Participant, must be on file
with GWL&A. This form can be obtained at the time the contract is signed, or at
any time thereafter from the Administrative Offices of GWL&A. The Transfer
Request shall be made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored program) or by the employer or the
employee organization under a Section 401(a), Section 401(k), Section 457(b) or
(f), Section 415(m), NQDC or employer-sponsored Section 403(b) retirement
program. A Transfer will take effect on the later of the date designated in the
Request or the date that the Transfer Request is received by GWL&A at its
Administrative Offices. Transfer Requests received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next following Valuation Date. If a
Transfer Request is received by GWL&A within 30 days of the Annuity Commencement
Date, GWL&A may delay the Annuity Commencement Date by not more than 30 days.
Additional Transfer conditions apply to Transfers to or from the Guaranteed
Sub-Accounts.
Loans
Loans are not available under Section 415(m), NQDC or 457(f) retirement
programs. Under Section 401(a), 401(k) or 403(b) retirement plans, loans may be
available under your contract. Currently, loans are not available under Section
457(b) Contracts. Consult your Plan Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant Annuity
Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity Commencement Date
by Request of the Participant. Certain Group Contracts will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a), Section
401(k), Section 457(b) or (f), Section 415(m), NQDC or employer-sponsored
Section 403(b) retirement programs, the right to a total or partial distribution
is subject to any limitations or restrictions contained in the underlying
retirement plan. A Request must be received by GWL&A's Administrative Offices at
least 30 days prior to the Annuity Commencement Date. A Request for partial
distribution must also specify the Variable and/or Guaranteed Sub-Account(s)
from which the partial distribution is to be made. The Participant Annuity
Account Value available for a distribution in whole or in part is the current
value of the Participant Annuity Account at the end of the Valuation Period for
the "effective date" of the Request. The effective date is the later of the date
selected in the Request or the date on which the Request is received by GWL&A's
Administrative Offices. Requests received after 4:00 p.m., EST/EDT, shall be
deemed to have been received on the next following Valuation Date. The partial
or total distribution will be made within seven days after GWL&A receives the
Request. The payment may be postponed as permitted by the Investment Company Act
of 1940. The amount payable upon a total distribution may be applied to an
Annuity Option (See "Annuity Options") instead of a lump-sum payment. There are
additional conditions that apply to a partial or total distribution of a
Participant Annuity Account's Guaranteed Account Value. Restrictions on a
partial or total distribution of a Participant Annuity Account apply to Section
403(b) retirement programs (See "Federal Tax Consequences: Section 403(b)
Retirement Programs.") There are certain charges imposed upon a partial or total
distribution prior to the Annuity Commencement Date (See "Administrative
Charges, Risk Premiums and Other Deductions: Contingent Deferred Sales Charge")
and there may be certain tax consequences (See "Federal Tax Consequences:
Taxation of Annuities in General.")
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further Contributions or
Transfers to certain or all of the Variable and Guaranteed Sub-Accounts should
become inappropriate, either party may, upon 60 days written notice to the
other, direct that no future Contributions or Transfers to such Sub-Account(s)
be made. Where the owner of the Group Contract is an association, the
association may provide such notice with respect to all Participants while the
participating employers may also provide such notice for their employee
Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior to
the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation instructions
must be changed to delete the affected Sub-Account(s). If no change of
allocation instructions is received, GWL&A may return all affected Contributions
or allocate such Contributions to a currently offered Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all Sub-Accounts, no
new Participant Annuity Accounts will be established or Contributions accepted
by GWL&A. In addition, under Section 401(a), Section 401(k), Section 457(b) or
(f), Section 415(m), NQDC or Section 403(b) retirement programs, an employer or
employee organization must, by Request, elect one of the following Cessation
Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity Account
Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the Date of
Cessation of Deposits, the Variable Account Values of the Participant Annuity
Accounts as of the date the Request is received (at such later date as may be
specified in the Request) to either the Employer, the employee organization or a
person designated in writing by the employer or employee organization as the
successor insurer of the employer's deferred compensation plan. GWL&A will pay
the sum of the Guaranteed Contract Values of the Participant Annuity Accounts as
of the Date of Cessation to either the employer, the employee organization or a
person designated in writing by the employer or the employee organization as the
successor insurer of the employer's or employee organization's deferred
compensation plan, in 20 equal quarterly installments. The amount of the
installment will be the amount determined by GWL&A on the date of the first such
payment, but will not be less than $514.80 for each $10,000 of Guaranteed
Contract Value. The first payment will be made thirty (30) days after the date
this Cessation Option is elected.
If the employer or the employee organization has not elected a cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected.
CESSATION OPTION (2) MAY NOT BE AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the effective
date of which shall be the "Contract Termination Date"). After the Contract
Termination Date, no Transfer shall be made, no payment option shall be elected
and no Contributions shall be accepted by GWL&A under the terms of the Group
Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date, the
value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all Contributions
paid less any partial distributions. Where death occurs on or after the
Participant's 70th birthday, but prior to the Annuity Commencement Date, a death
benefit equal to the Participant Annuity Account Value will be paid.
Under a Section 403(b) retirement program (other than an employer-sponsored
plan), the death benefit will be paid to the beneficiary designated by the
Participant. Under a Section 401(a), a Section 401(k), a Section 457(b) or (f),
Section 415(m) or employer-sponsored Section 403(b) retirement program, the
employer or the employee organization will designate to whom the death benefit
will be paid pursuant to the terms of the employer's underlying plan. The
Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or employee's
organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the Annuity
Options, in the form of a lump-sum payment, or in the form of a partial lump-sum
payment with the balance applied toward any of the Annuity Options. This
election must be made within 60 days after GWL&A receives adequate proof of the
Participant's death. If no election is made within the 60 day period, a lump-sum
settlement will be made.
The Participant Annuity Account Value, for purposes of determination of the
death benefit, will be calculated as of the end of the Valuation Period during
which proof of death and an election by the Payee are received at GWL&A's
Administrative Offices. If no election is made, the Participant Annuity Account
Value will be determined as of 60 days after the date on which proof of death is
received.
If a lump-sum or partial lump-sum settlement is Requested, the proceeds will
be paid within seven (7) days of GWL&A's receipt of such election and adequate
proof of death. If any of the Annuity Options are elected, the annuity payment
shall commence thirty (30) days after the receipt of such election and adequate
proof of death. Annuity payments shall commence by the later of fifteen (15)
days or the first day of the month after receipt of such election and adequate
proof of death. The payment of the death benefit will be made in accordance with
any applicable laws and regulations governing payment of death benefits, subject
to postponement in certain circumstances as permitted by the Investment Company
Act of 1940. (See "Federal Tax Consequences: Taxation of Annuities in General"
for certain distribution-on-death rules that may be applicable to the payment of
death benefits.)
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the beneficiary
designation, one of the following procedures will take place on the death of a
beneficiary: (1) if there is more than one primary surviving beneficiary, the
Participant Annuity Account Value will be shared equally among them; (2) if any
primary beneficiary dies before the Participant, that beneficiary's interest
will pass to any other named surviving primary beneficiary or Beneficiaries, to
be shared equally; (3) if there is no surviving primary beneficiary, the
Participant Annuity Account Value shall pass to any surviving contingent
beneficiary and, if more than one contingent beneficiary survives the
Participant, shall be shared equally among them; (4) if no beneficiary survives
the Participant, the Participant Annuity Account Value shall pass to the
Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, American Century and Fidelity
VIP open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, American Century or Fidelity, by the
Securities and Exchange Commission. Shares of Maxim are also sold to the
Pinnacle Series Account, the Maxim Series Account, and the Retirement Plan
Series Account which are separate accounts established by GWL&A to receive and
invest premiums paid under variable life and variable annuity contracts issued
by GWL&A. Shares of Maxim may be sold to other separate accounts of GWL&A or its
affiliates. Shares of American Centur, and Fidelity VIP, are also sold to other
insurance companies to fund the benefits of variable annuity or variable life
insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in Maxim, American Century and Fidelity VIP, simultaneously. Although
GWL&A, Maxim, American Century or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, American Century and
Fidelity VIP intend to monitor events in order to identify any material
conflicts between such policyowners and contract owners and to determine what
action, if any, should be taken in response thereto. Such action could include
the sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of American Century or Fidelity VIP shares by other insurance companies, which
could have adverse consequences. Material conflicts could result from, for
example, (1) changes in state insurance laws, (2) changes in federal income tax
laws, (3) changes in the investment management of any portfolio of Maxim,
American Century or Fidelity VIP, or (4) differences in voting instructions
between those given by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is GW Capital Management, LLC. (the
"Investment Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. The Investment Adviser provides portfolio
management and investment advice to Maxim and administers its other affairs
subject to the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to provide
investment advisory services and to pay all compensation of, and furnish office
space for, officers and employees of the Investment Adviser connected with
investment and economic research, trading and investment management of Maxim.
The Investment Advisory Agreement also obligates the Investment Adviser to pay
all other expenses incurred in its operation and all of Maxim's general
administrative expenses, except extraordinary expenses. As compensation for its
services to Maxim, the Investment Adviser receives monthly compensation at the
annual rate of 0.25% of the average daily net assets of the Maxim Aggressive
Profile Portfolio, the Maxim Moderately Aggressive Profile Portfolio, the Maxim
Moderate Profile Portfolio, the Maxim Moderately Conservative Profile Portfolio
and the Maxim Conservative Profile Portfolio, 0.46% of the average daily net
assets of the Maxim Money Market Portfolio; 0.60% of the average daily net
assets of the Maxim Bond Portfolio, the Maxim Stock Index Portfolio, the Maxim
U.S. Government Securities Portfolio, the Maxim Small Cap-Index Portfolio, the
Maxim Value Index Portfolio, and the Maxim Growth Index Portfolio; 0.80% of the
average daily net assets of the Maxim T. Rowe Price Equity/Income Portfolio;
0.90% of the average daily net assets of the Maxim Corporate Bond Portfolio;
0.95% of the average daily net assets of the Maxim Mid-Cap (Growth Fund I)
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio; 1.00% of the average
daily net assets of the Maxim International Equity Portfolio, the Maxim
Small-Cap Value (Ariel Value) Portfolio, the Maxim INVESCO ADR Portfolio, the
Maxim INVESCO Balanced Portfolio, the Maxim Small-Cap Aggressive Growth
Portfolio, the Maxim Blue Chip Portfolio and the Maxim MidCap Growth Portfolio.
With respect to the Maxim Mid-Cap (Growth Fund I) Portfolio, Maxim
International Equity, Maxim Small-Cap Value (Ariel Value) Portfolio, Maxim
INVESCO Small-Cap Growth, Maxim INVESCO ADR, Maxim T. Rowe Price Equity/Income,
Maxim Small-Cap Aggressive Growth Portfolio, Maxim Blue Chip Portfolio and Maxim
MidCap Growth Portfolios, the Investment Adviser shall be responsible for all
expenses incurred in performing investment advisory services. Each of the
Portfolios shall pay all expenses incurred in its operation with respect to that
Portfolio. However, the Investment Adviser shall pay any expenses of the
Portfolios which exceed an annual rate of 0.95% of the average daily net assets
of the Maxim T. Rowe Price Equity/Income Portfolio; 1.05% of the average daily
net assets of the Maxim MidCap Growth Portfolio; 1.10% of the average daily net
assets of the Maxim Mid-Cap (Growth Fund I) Portfolio and the Maxim INVESCO
Small-Cap Growth Portfolio; 1.15% of the daily net assets of the Maxim Blue Chip
Portfolio; 1.30% of the average daily net assets of the Maxim International
Equity Portfolio, the Maxim INVESCO ADR Portfolio and the Maxim Small-Cap
Aggressive Growth Portfolio; and 1.35% of the average daily net assets of the
Maxim Small-Cap Value (Ariel Value) Portfolio.
American Century Investment Management, Inc. ("ACIMI") is the investment
adviser for American Century. ACIMI has been the investment adviser of American
Centurysm Investments, a group of registered investment companies, since 1958.
Additionally, ACIMI acts as the investment adviser for employee benefit plans
and endowment funds.
ACIMI supervises and manages the investment portfolios of American Century
and directs the purchase and sale of its investment securities, subject only to
any directions of American Century's Board of Directors. ACIMI pays all the
expenses of American Century except brokerage, taxes, interest, fees and
expenses of non-interested directors (including counsel fees) and extraordinary
expenses. American Century Services, Corporation., American Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of American Century.
It provides facilities, equipment and personnel to American Century, and is paid
for such services by ACIMI. Certain administrative services that would otherwise
be performed by American Century Services Corporation may be performed by the
insurance company that purchases American Century shares, and ACIMI may pay it
for such services.
For the foregoing services, ACIMI is paid a fee of 1% of the average net
assets of each series of American Century during the year. The fee is paid and
computed each month by multiplying 1% of the average daily closing net asset
values of the shares of each series of American Century during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most if
not all companies also pay in addition certain of their own expenses, while
American Century's expenses specified above are paid by ACIMI.
ACIMI and American Century Services Corporation are both wholly owned by
American Centurysm Investments. James E. Stowers, Jr., President of American
Century, controls American Centurysm Investments by virtue of his ownership of a
majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment adviser to
Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio and to
Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset Manager
Portfolio. For its investment advisory services, FMR receives a monthly fee from
each of these Portfolios. As of December 31, 1996, the VIP Growth and the VIP II
Asset Manager Portfolios paid FMR the annual fee rate of .61% and .64%,
respectively, of each Portfolio's average daily net assets.
FMR may, from time to time, agree to reimburse a Portfolio for management
fees and other expenses above a specified percentage of average daily net
assets. Reimbursement arrangements, which may be terminated at any time without
notice, will increase a Portfolio's yield. If FMR discontinues a reimbursement
arrangement, the affected Portfolio's expenses will go up and its yield will be
reduced. FMR retains the ability to be repaid by a Portfolio for expense
reimbursements if expenses fall below the limit prior to the end of the fiscal
year. Repayment by a Portfolio will lower its yield. FMR has voluntarily agreed
to temporarily limit the total expenses (including the management fee, but
generally excluding taxes, interest and extraordinary expenses) of the Asset
Manager Portfolio to 1.25% of the Portfolio's average daily net assets. FMR has
voluntarily agreed to reimburse the management fees and all other expenses
(excluding taxes, interest and extraordinary expenses) of the VIP Growth
Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation ("Janus") serves as the sub-adviser to the Maxim
Mid-Cap (Growth Fund I) Portfolio. As such, Janus is responsible for managing
the investment and reinvestment of assets of the Maxim Mid-Cap (Growth Fund I)
Portfolio, subject to review and supervision of the Investment Adviser and the
Board of Directors. Janus bears all expenses in connection with the performance
of its services, such as compensating and furnishing office space for its
officers and employees connected with investment and economic research, trading
and investment management of the Maxim Mid-Cap (Growth Fund I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser with the
Securities and Exchange Commission. Its principal address is 100 Fillmore
Street, Suite 300, Denver, Colorado 80206. The Investment Adviser is responsible
for compensating Janus, which receives monthly compensation from the Investment
Adviser at the annual rate of 0.60% on the first $100 million and 0.55% on all
amounts over $100 million of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc. ("Templeton") serves as the sub-adviser of
the Maxim International Equity Portfolio. As such, Templeton is responsible for
managing the investment and reinvestment of assets of the Maxim International
Equity Portfolio, subject to review and supervision of the Investment Adviser
and the Board of Directors. Templeton bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment management of the Maxim
International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which in
turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc. Templeton
is a Florida corporation with its principal business address at Broward
Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort Lauderdale,
Florida 33394. The Investment Adviser is responsible for compensating Templeton,
which receives monthly compensation from the Investment Adviser at the annual
rate of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the Maxim
International Equity Portfolio assets.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the sub-adviser to
the Maxim T. Rowe Price Equity/Income Portfolio and the Maxim MidCap Growth
Portfolio. T. Rowe Price is a Maryland corporation, registered as an investment
adviser with the Securities and Exchange Commission. Its principal business
address is 100 East Pratt Street, Baltimore, Maryland 21202. For its services
with respect to the Maxim T. Rowe Price Equity/Income Portfolio, T. Rowe Price
receives monthly compensation from the Investment Adviser at the annual rate of
0.50% on the first $20 million of the average daily net assets, 0.40% on the
next $30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million. With respect to the Maxim MidCap
Growth Portfolio, T. Rowe Price receives monthly compensation from the
Investment Adviser at the annual rate of 0.50% of all assets based on the
average daily net assets.
INVESCO Trust Company ("ITC") serves as the sub-adviser of the Maxim INVESCO
Small-Cap Growth Portfolio and the Maxim INVESCO Balanced Portfolio. ITC is a
Colorado Trust Company and an indirect wholly-owned subsidiary of INVESCO PLC.
ITC is registered as an investment trust company. Its principal business address
is 7800 E. Union Avenue, Denver, Colorado 80237. ITC receives monthly
compensation from the Investment Adviser, for its services with respect to the
Maxim INVESCO Small-Cap Growth Portfolio, at the rate of 0.55% on the first $25
million of average daily net assets, 0.50% on the next $50 million of average
daily net assets, 0.40% on the next $25 million of average daily net assets, and
0.35% on all amounts over $100 million of average daily net assets. ITC receives
monthly compensation from the Investment Adviser, for its services with respect
to the Maxim INVESCO Balanced Portfolio at the rate of 0.50% of the average
daily net assets of the Portfolio up to $25 million; 0.45% on the next $50
million; 0.40% on the next $25 million; and 0.35% of such value in excess of
$100 million.
INVESCO Capital Management, Inc. ("ICMI") serves as the sub-adviser to the
Maxim INVESCO ADR Portfolio. ICMI is a Delaware corporation and an indirect
wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an investment
adviser with the Securities and Exchange Commission. Its principal business
address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI receives monthly
compensation from the Investment Adviser at the annual rate of 0.55% on the
first $50 million of average daily net assets, 0.50% on the next $50 million of
average daily net assets, and 0.40% on assets over $100 million of average daily
net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the sub-adviser to
the Maxim Corporate Bond Portfolio and the Maxim Small-Cap Aggressive Growth
Portfolio. Loomis Sayles is a Delaware limited partnership and is an indirect,
majority-owned subsidiary company of Metropolitan Life Insurance Company. Loomis
Sayles is registered as an investment adviser with the Securities and Exchange
Commission. Its principal business address is One Financial Center, Boston,
Massachusetts 02111. Loomis Sayles receives monthly compensation from the
Investment Adviser at the annual rate of 0.30% on all assets of the Maxim
Corporate Bond Portfolio. With respect to the Maxim Small-Cap Aggressive Growth
Portfolio, Loomis Sayles receives monthly compensation from the Investment
Adviser at an annual rate of, based on a percentage of assets of the portfolio,
0.50% on the first $10 million dollars, 0.45% on the next $15 million dollars,
0.40% on the next $75 million dollars and 0.30% on assets over $100 million
dollars.
Ariel Capital Management , Inc. ("Ariel") serves as the sub-adviser to the
Maxim Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307 North
Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly compensation
from the Investment Adviser at the annual rate of 0.40% on assets up to $5
million of average daily net assets, 0.35% on the next $10 million of average
daily net assets, 0.30% on the next $10 million of average daily net assets, and
0.25% on assets over $25 million of average daily net assets of the Maxim
Small-Cap Value (Ariel Value) Portfolio.
Founders Asset Management, Inc. ("Founders") serves as the sub-adviser of the
Maxim Blue Chip Portfolio. Founders is a Delaware corporation registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 2930 East Third Avenue, Denver, CO 80206. Founders receives
monthly compensation from the Investment Adviser at the annual rate based on the
average daily net assets of: 0.425% on the first $250 million dollars, 0.350% on
the next $250 million dollars, 0.325% on the next $250 million dollars and
0.300% on amounts over $750 million dollars.
Reinvestment and Redemption
All dividend distributions of Maxim, American Century or Fidelity VIP will be
automatically reinvested in shares of Maxim, American Century or Fidelity VIP at
their net asset value on the date of distribution; all capital gains
distributions of Maxim, American Century or Fidelity VIP, if any, will likewise
be reinvested at the net asset value on the record date. GWL&A will redeem
Maxim, American Century and Fidelity VIP shares at their net asset values to the
extent necessary to make annuity or other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as currently
applicable or subsequently changed, to make additions to, deletions from or
substitutions for the investments held by the Series Account. In the future,
GWL&A may establish additional Investment Divisions within the Series Account.
These Investment Divisions will be established if, and when, in the sole
discretion of GWL&A, marketing needs and investment conditions warrant, and will
be made available under existing Group Contracts to the extent and on a basis to
be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, American Century or
Fidelity VIP should no longer be available for investment, or if GWL&A, in its
discretion, determines to discontinue a Portfolio, then GWL&A may substitute
shares of another mutual fund for shares already purchased, or to be purchased
in the future under the Group Contracts. No substitution of securities held by
the Series Account may take place without prior approval of the Securities and
Exchange Commission, and 60 days prior written notice to the owners of Group
Contracts, and, in addition, to the Participants under Section 403(b) retirement
programs (other than an employer-sponsored plan).
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs in
providing administrative services, GWL&A may deduct a Contract Maintenance
Charge of not more than $30 annually on the first day of each calendar year from
each Participant Annuity Account. If a Participant Annuity Account is
established after that date, the Contract Maintenance Charge will be deducted on
the first day of the next quarter and will be pro-rated for the year remaining.
The deduction will be pro-rated between the Variable and Guaranteed Contract
Values of each Participant Annuity Account. No refund of this charge will be
made. The Contract Maintenance Charge on Section 403(b) Group Contracts will be
waived for an initial period of no less than 12 months and up to 15 months,
depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge will
be deducted on any total or partial distribution, Transfer to Other Companies or
a lump sum payment. The amount deducted will depend on the type of retirement
program for which the Group Contract was issued. However, a Contingent Deferred
Sales Charge "Free Amount" may be applied in some circumstances. The Contingent
Deferred Sales Charge "Free Amount" is an amount against which the Contingent
Deferred Sales Charge will not be assessed. The "Free Amount" shall not exceed
10% of the Participant Annuity Account Value at December 31 of the previous
calendar year and will be applied on the first distribution, payment or Transfer
to Another Company made in that year. All additional distributions, payments or
Transfers to Another Company during that calendar year will be subject to a
Contingent Deferred Sales Charge without application of any "Free Amount."
1. For NQDC and Section 401(a), 401(k) and 415(m) Retirement Programs.
(a) For Group Contracts issued pursuant to a Section 401(a) and/or 401(k)
retirement program where the employer does not also maintain a Section 403(b) or
Section 457 Group Contract with GWL&A, but which may maintain a NQDC or Section
415(m) agreement issued in connection with the Group Contract, a Contingent
Deferred Sales Charge will be in an amount equal to 6% of the amount Transferred
to Another Company, distributed or paid in excess of the "Free Amount." The
cumulative total of all Contingent Deferred Sales Charges applied to a
Participant Annuity Account will not exceed 6% of all Contributions made within
72 months prior to the date of that partial or total distribution, Transfer or
payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing plan
where the employer also maintains a Section 457(b) or (f) Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For NQDC and Section 403(b) and 415(m) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 pursuant to
Section 403(b) retirement programs other than employer-sponsored plans, as well
as any NQDC or Section 415(m) agreements, if any, issued in connection with the
above, the Contingent Deferred Sales Charge applicable will be in an amount
equal to 6% of the amount distributed, Transferred to Another Company or paid in
excess of the "Free Amount." The cumulative total of all Contingent Deferred
Sales Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or total
distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West Life
Assurance Company, with respect to any partial or total distribution, Transfer
to Another Company or payment, the cumulative total of all Contingent Deferred
Sales Charges applied to a Participant Annuity Account will not exceed an amount
equal to:
(i)6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer
to Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by
the appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section 403(b)
retirement program on or after May 1, 1992, the Contingent Deferred Sales Charge
applicable is as described in paragraph 3 (a) below.
3. For Section 457(b) or (f) Retirement Programs.
(a) For Section 457(b) or (f) Group Contracts issued May 1, 1988 or thereafter
and for Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount," if any,
based on the table below:
Years of Participation
in FutureFunds The percentage shall be:
0-4 5%
5-9 4%
10 -14 3%
15 or more 0%
(b) For Section 457(b) or (f) Group Contracts issued prior to May 1, 1988 which
have not been amended to incorporate the provisions of this paragraph, the
Contingent Deferred Sales Charge will not exceed an amount equal to:
(i)6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72
months prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount," if any, based
on the table below:
If number of years of Coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
Requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to a 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5% of
Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2.
(See "Federal Tax Consequences.")
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses relating
to the sale and distribution of the Group Contracts, including commissions, the
cost of preparing sales literature, and other promotional activities. In certain
circumstances, sales expenses associated with the sale and distribution of a
Group Contract may be reduced or eliminated and, in such event, the Contingent
Deferred Sales Charge applicable to that Group Contract may likewise be reduced.
Whether such a reduction is available will be determined by GWL&A based upon
consideration of the following factors: (1) size of the prospective group, (2)
projected annual Contributions for all Participants in the group, and (3)
frequency of projected distributions. GWL&A will notify a prospective purchaser
of its eligibility for a reduction of the Contingent Deferred Sales Charge prior
to the acceptance of an application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be sufficient
to enable GWL&A to recover all of its distribution expenses. In such case, the
loss will be borne by GWL&A out of its general account assets, which will
include the profit, if any, derived by GWL&A from the mortality and expense risk
charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any governmental
entity as a result of the existence of the Participant Annuity Account or the
Series Account. GWL&A reserves the right to deduct the Premium Tax from
Participant Annuity Account Values instead of GWL&A making the Premium Tax
payments. Notice will be given to all Participants prior to the imposition of
any such deductions from the Participant Annuity Account Values. The applicable
Premium Tax rates that states and other governmental entities impose currently
range from 0% to 3.5% and are subject to change by the respective state
legislatures, by administrative interpretations or by judicial act. Such Premium
Taxes will depend, among other things, on the state of residence of a
Participant and the insurance tax laws and status of GWL&A in these states when
the Premium Taxes are incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an amount,
computed daily, for mortality and expense risk. This charge is designed to
compensate GWL&A for its assumption of certain mortality, death benefit and
expense risks described below. The level of this charge is guaranteed and will
not change. However, the amount charged may vary by Contract. Currently, GWL&A
issues contracts with the following mortality and expense risk charges:
Mortality Expense Total Mortality
Risk Risk and Expense Risk
Charges
1.00% 0.25% 1.25%
0.76% 0.19% 0.95%
0.60% 0.15% 0.75%
0.52% 0.13% 0.65%
0.44% 0.11% 0.55%
0.00% 0.00% 0.00%
GWL&A's assumption of mortality risk guarantees that the annuity payments
made to the Beneficiary or other payee will not be affected by the mortality
experience (life span) of persons receiving such payment or of the general
population. GWL&A assumes this "mortality risk" by virtue of the fact that
annuity rates in effect at the time that any Contributions are made cannot be
changed. In addition, if a Participant should die prior to his/her Annuity
Commencement Date and 70th birthday, GWL&A is at risk to the extent that the
amount of all Contributions made, less any partial distributions, exceed the
Participant Annuity Account Value. (See "Accumulation Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees that if the
charges for administrative expenses, which cannot be increased by GWL&A, will be
insufficient to cover administrative and sales expenses, GWL&A bears that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event, the
mortality and expense risk charge applicable to that Group Contract may likewise
be reduced. Whether such a reduction is available will be determined by GWL&A
based upon consideration of the following factors: (1) size of the prospective
group, (2) projected annual Contributions for all Participants in the group, (3)
frequency of projected distributions, (4) type and frequency of administrative
and sales services provided, and (5) level of Contract Maintenance Charge and
Contingent Deferred Sales Charge. GWL&A will notify a prospective purchaser of
its eligibility for a reduction of the mortality and expense risk charge prior
to the acceptance of an application for coverage.
If the respective mortality and expense risk charge proves insufficient to
cover administrative costs in excess of the Contract Maintenance Charge made for
administrative expenses, plus any losses from the mortality risk, the loss will
be borne by GWL&A; conversely, if the amount deducted proves more than
sufficient, the excess will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments ("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement program
(other than an employer-sponsored plan) or the employer or the employee
organization under a Section 401(a), a Section 401(k), Section 457 or
employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a),
401(k) and 457(b) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the later of either (i) the calendar year
in which the Participant attains age 70 1/2; or (ii) the calendar year in which
the Participant retires. Under all of the above-noted retirement programs, it is
the responsibility of the Participant to file the necessary Request with GWL&A.
Under Section 457(f), 415(m) and NQDC retirement programs, there is no required
Annuity Commencement Date.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by GWL&A
at its Administrative Offices up to 30 days prior to the existing Annuity
Commencement Date. If any Annuity Commencement Date elected would be less than
30 days from the date that the Request is received, GWL&A may delay the date
elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well as
such other Annuity Options as GWL&A may choose to make available in the future.
Except as otherwise noted, the Annuity Options are payable on a variable, fixed
or combination basis. More than one Annuity Option may be elected. If no Annuity
Option is elected, the Group Contracts automatically provide for variable life
annuity (with respect to the variable portion of a Participant Annuity Account)
and/or a fixed life annuity (with respect to the fixed portion of a Participant
Annuity Account) with 120 monthly payments guaranteed.
The level of annuity payments under the following options is based upon the
option selected and, depending on the option chosen, such factors as the age at
which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of the
payee. It would be possible under this option for the Annuitant to receive no
annuity payment if he/she died prior to the date of the first annuity payment,
one annuity payment if the Annuitant died before the second annuity payment,
etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime of
the payee with the guarantee that if, at the death of the payee, payments have
been made for less than the designated period, the Beneficiary will receive
payments for the remainder of the period. The designated period may be 5, 10,
15, or 20 years. The period generally referred to as "Installment Refund" is
available only on a fixed-dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option for
the payee and the Beneficiary to receive no annuity payment if both persons died
prior to the date of the first annuity payment, one annuity payment if both
persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected. This
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is not
less than 36.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected (which
may not be less than 36 months), and a resulting annuity payment amount will be
paid to the payee in equal annual, semiannual, quarterly, or monthly
installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as fixed-
dollar payments)
Under this payment option, the amount, timing and method of payment will be
as elected by the payee and agreed to by GWL&A. Payments may be elected on a
monthly, quarterly, semi-annual or annual basis. The minimum amount initially
applied to this option must be $20,000. There are charges and restrictions which
apply. (See the "Systematic Withdrawal Payment Option Rider") to the Group
Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the amount,
timing and method of payment will be as elected by the payee and agreed to by
GWL&A. Payments may be elected on a monthly, quarterly, semi-annual or annual
basis. There are charges and restrictions which apply. (See the "Access Annuity
Rider" to the Group Contract for additional information.)
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the annuity
tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant receives
the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity Account
is credited with Annuity Units for each Variable Sub-Account on which variable
annuity payments are based. The number of Annuity Units to be credited is
determined by dividing the amount of the first monthly payment by the value of
an Annuity Unit as of the fifth Valuation Period prior to the Annuity
Commencement Date in each Variable Sub-Account selected. Although the number of
Annuity Units is fixed by this process, the value of such units will vary with
the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is determined
by applying the total value of the Accumulation Units credited to a Participant
Annuity Account valued as of the fifth Valuation Period prior to the Annuity
Commencement Date to the annuity tables contained in the Group Contracts.
Amounts shown in the tables are based on a modified 1971 Group Annuity Mortality
Table (set back five years) with an assumed investment return at the rate of
3.5% per annum. The first annuity payment is determined by multiplying the
benefit per $1,000 of value shown in the Group Contract tables by the number of
thousands of dollars of value accumulated under the Variable Account Value of a
Participant Annuity Account. These annuity tables vary according to the form of
annuity selected and according to the age of the Participant and his/her Annuity
Commencement Date.
The 3.5% interest rate stated above is the measuring point for subsequent
annuity payments. If the actual Net Investment Factor (annualized) exceeds 3.5%,
the payment will increase at a rate equal to the amount of such excess.
Conversely, if the actual rate is less than 3.5%, annuity payments will
decrease. If the assumed rate of interest were to be increased, annuity payments
would start at a higher level but would increase more slowly or decrease more
rapidly.
The amount of the second and subsequent payment is determined by multiplying
the credited fixed number of Annuity Units by the appropriate Annuity Unit value
for the fifth Valuation Period preceding the date that payment is due. The
Annuity Unit value at the end of any Valuation Period is determined by
multiplying the Annuity Unit value for the immediately preceding Valuation
Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and
(b) a factor of .999905 to neutralize the assumed investment return of 3.5% per
year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00. The value of the Annuity Units is determined as of a Valuation Period
five (5) days prior to the payment in order to permit calculation of amounts of
annuity payments and mailing of checks in advance of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect the
age of the Participant; and (iii) the type of annuity option(s) elected. The
payment amount may be greater, however, if GWL&A is using a more favorable table
as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination variable
and fixed basis, the Variable Account Value of a Participant Annuity Account
will be applied to the variable annuity option elected and the Guaranteed
Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) or the employer or the employee organization under a
Section 401(a), Section 401(k), Section 457(b) or (f), Section 415(m), NQDC or
employer-sponsored 403(b) retirement program wishes to apply all or part of the
Guaranteed Account Value of the Participant Annuity Account to a variable
annuity option, or all or a part of the Variable Account Value to a fixed
annuity option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also applies
to a Beneficiary or payee who elects to receive a death benefit under any of the
annuity options, and one such Request to Transfer can be submitted by the
Beneficiary or payee after the death of the Participant.
Transfer After the Annuity Commencement Date
Once annuity payments have begun, no Transfers may be made from a fixed
annuity payment option to a variable annuity payment option, or vice versa.
However, for variable annuity payment options, Transfers may be made among
Investment Divisions. Transfers after the Annuity Commencement Date will be made
by converting the number of Annuity Units being Transferred to the number of
Annuity Units of the variable Sub-Account to which the Transfer is made. The
result is the next annuity payment, if it were made at that time, would be the
same amount that it would have been without the Transfer. Thereafter, annuity
payments will reflect changes in the value of the new Annuity Units.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose age or
survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed annuity
payments will be paid annually, semiannually, quarterly or monthly, as
Requested. However, if any payment to be made under any annuity option will be
less than $50, GWL&A may make the payments in the most frequent interval which
produces a payment of at least $50. If the net amount available to apply under
any Annuity Option is less than $2,000, GWL&A may pay it in one lump sum. The
maximum amount that may be applied under any Annuity Option without the prior
written consent of GWL&A is $1,000,000.
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under retirement
programs which may qualify for special tax treatment under a NQDC plan, or under
Section 401(a), Section 401(k), Section 403(b), Section 457(b) or (f) or Section
415(m) of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the tax
and employment status of the individual concerned.
It should be understood that the following discussion is not exhaustive, and
is not intended as tax advice. Special rules may apply to certain situations not
discussed here. GWL&A intends to comply with the diversification requirements of
Code Section 817(h) to assure that the Group Contracts will continue to be
treated as annuity contracts for federal income tax purposes. 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 Group Contractholder, Participants
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.
Taxation of GWL&A
The Series Account is taxed as a part of GWL&A; not as a "regulated
investment company" under Part I of Subchapter M of the Code. 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 Series Account are reinvested and are
taken into account in determining the Series Account Value. Under existing
federal income tax law, such amounts do not result in any tax on GWL&A which
will be chargeable to the Participant Annuity Account or the Series Account.
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.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant is
not taxed on increases (if any) in the value of a Participant Annuity Account
until some form of distribution is made. Under Section 72, a total or partial
distribution from a Participant Annuity Account will be treated as ordinary
income taxable to the extent the amounts held in the Participant Annuity Account
immediately before the distribution exceed the "investment in the contract." The
investment in the contract is that portion of the Contributions to the
Participant Annuity Account which was included in the Participant's gross income
in the year contributed, if any. If the Participant begins receiving annuity
payments, the Participant is taxed on the portion of the payment that exceeds
the investment in the contract. However, because the Participant generally
excludes Contributions from gross income under these retirement programs, there
generally will be no cost basis (investment in the contract) in the Participant
Annuity Account within the meaning of Section 72 of the Code. Thus, the total
amount of all payments received will generally be taxable to the Participant.
Ordinarily, such taxable portion is taxed at ordinary income tax rates, subject
to any income averaging rules applicable to Participants receiving distributions
from a Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457(b) or (f),
Section 415(m) or NQDC plan constitute cost basis in the contract. Thus, all
amounts distributed to Participants from a Section 457(b) or (f), Section 415(m)
or NQDC plan are taxable at ordinary income rates. No special averaging rules
apply to distributions from Section 403(b) plans, Section 457(b) or (f) plans or
Section 415(m) plans.
If a Group Contract is held by a non-natural person (e.g., a corporation),
the investment gain on the contract is includable in the entity's income each
year unless certain exceptions apply. This rule does not apply where the Group
Contract is held under a Section 401(a) plan, a Section 401(k) plan, or a
Section 403(b) plan. If the employer maintaining a Section 457(b) or (f) or
Section 415(m) plan is either a state or local government or a tax-exempt
organization, the employer may not be subject to tax on the gain in the
contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension, profit-sharing and
stock bonus plans established by employers or employee organizations for their
employees. All types of employers, including for-profit organizations,
tax-exempt organizations and state and local governments, are allowed to
establish and maintain Section 401(a) qualified plans. Employer Contributions
and any earnings thereon are currently excluded from the Participant's gross
income. Section 401(a) plans must satisfy numerous qualification requirements,
including limitations on contributions. Generally, the total amount of employer
and employee contributions which can be contributed to all of the employer's
qualified plans is limited to the lesser of $30,000 or 25% of a Participant's
compensation as defined in Section 415. Distributions from the plan are subject
to the restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows employers or employee organizations, rural
cooperatives, Indian tribal governments and rural irrigation and water
conservation entities to offer a cash or deferred arrangement to employees under
a profit-sharing or stock bonus plan. Generally, state and local governments are
not permitted to establish Section 401(k) plans. However, under a grandfather
rule, certain plans adopted before certain dates in 1986 may continue to be
offered by governmental entities. Pre-tax salary reduction Contributions and any
income thereon are currently excluded from the Participant's gross income.
Generally, the maximum elective deferral amount that an individual may defer on
a pre-tax basis to one or more Section 401(k) plans is limited to $7,000 per
year (adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan, to a simplified
employee pension or to a SIMPLE retirement account. For 1998, the total amount
of elective deferrals which can be contributed to all such plans is $10,000. The
contribution limits in Section 415 also apply. 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
401(k) plan are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and the
net investment gain, if any, reflected in the Participant Annuity Account Value
are includable in a Participant's gross income only for the taxable year when
such amounts are paid to the Participant under the terms of the plan. Employee
contributions and earnings may not be distributed prior to age 59 1/2, unless
the Participant 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.
Participants should consult with their employer as to the availability of
benefits under the employer's plan.
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.
Section 403(b) Tax Sheltered Annuities
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 Participant in the year
contributed to the extent that the contributions do not exceed three separate,
yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 403(b) plan per year for a Participant
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. Elective deferrals to a Section 403(b) plan must
also be aggregated with elective deferrals made by the Participant to a Section
401(k) plan or to a simplified employee pension or to a SIMPLE retirement
account. For 1998, the total amount of elective deferrals which can be
contributed to all such plans is $10,000. 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 a Participant Annuity Account
Value is not taxable until received by the Participant 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.
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 as well as all amounts transferred from a Section 403(b)(7) custodial
account, may not be distributed prior to age 59 1/2, unless the Participant
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.
Section 457(b) Deferred Compensation Plans
Section 457(b) allows state and local governmental employers and certain
tax-exempt organizations to establish and maintain an eligible deferred
compensation plan for its employees and independent contractors.
Non-governmental tax-exempt organizations may establish eligible deferred
compensation plans only for a select group of management or highly compensated
employees without violating the funding requirements of ERISA.
Federal income tax is deferred on contributions to a Section 457(b) plan to
the extent that the aggregate amount contributed per year for a Participant does
not exceed the lesser of $7,500 (as adjusted for cost-of-living increases) or 33
1/3% of a Participant's includable compensation. For 1998, the maximum amount
that maybe contributed is $8,000. Any elective deferral amount excluded from
gross income by a Participant under Section 401(k), Section 403(b), a simplified
employee pension, or to a SIMPLE retirement account for the taxable year must be
treated as an amount deferred under the Section 457(b) plan. Amounts contributed
are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity Account
Value is not taxable until received by or made available to the Participant 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. Excess amounts which are not properly corrected can have severe
adverse consequences to the plan and may result in additional taxes to the
Participant.
Contributions and earnings may not be distributed prior to the calendar year
in which the Participant attains age 70 1/2, unless the Participant, separates
from service or suffers a genuine unforeseeable emergency meeting the
requirements of the Code and plan document. Restrictions apply to the amount
which may be distributed for unforeseeable emergency.
Section 457(f) Excess Benefit Plans
Section 457(f) allows state and local governmental employers to establish and
maintain a nonqualified deferred compensation plan, and allows tax-exempt
organizations to establish and maintain a nonqualified deferred compensation
plan for a select group of management or highly compensated employees under Code
Section 457(f).
A Participant in a 457(f) nonqualified deferred compensation plan is not subject
to federal income tax on contributions to the nonqualified plan until the tax
year in which the Contributions are made available to the Participant or his
beneficiary as provided in the underlying plan document.
The net investment gain, if any, reflected in a Participant Annuity Account
Value is not taxable to the Participant until made available to the Participant
or his beneficiary as provided in the underlying plan document.
Distributions from the 457(f) are subject to the provisions of the underlying
plan.
Section 415(m) Excess Benefit Plans
Section 415(m) allows state and local governmental employers to establish and
maintain an excess benefit plan for employees whose benefits are limited by the
qualified plan contribution and benefit limits under either Section 415 or
Section 457 of the Code.
A Participant in a 415(m) excess benefit plan is not subject to federal income
tax on contributions to the excess benefit plan until the tax year in which the
Contributions are made available to the Participant or his beneficiary as
provided in the underlying excess benefit plan document.
The net investment gain, if any, reflected in a Participant Annuity Account
Value is not taxable to the Participant until made available to the Participant
or his beneficiary as provided in the underlying excess benefit plan document.
Distributions from the 415(m) are subject to the provisions of the underlying
excess benefit plan.
NQDC Plans
Any employer other than a governmental or tax-exempt employer may establish and
maintain a NQDC plan for a select group of management or highly compensated
employees under a nonqualified deferred compensation plan ("NQDC").
A Participant in a NQDC plan is not subject to federal income tax on
Contributions to the NQDC plan until the tax year in which the Contributions are
made available to the Participant or his beneficiary as provided in the
underlying nonqualified deferred compensation plan document.
The net investment gain, if any, reflected in a Participant Annuity Account
Value is not taxable to the Participant until made available to the Participant
or his beneficiary as provided in the underlying nonqualified deferred
compensation plan document.
Distributions from the NQDC are subject to the provisions of the underlying NQDC
plan.
Under Section 457(f), 415(m), and NQDC retirement programs, if the employer is
subject to taxation, the employer may not take a deduction for a Contribution
until the year in which Contribution is includible in the gross income of the
employee.
Portability
When the Participant is eligible to take a distribution from a Section 401(a)
plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or 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 subsequent
distribution is made.
For Section 403(b) plans only, 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 Revenue Ruling 90-24 may be
restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a NQDC, Section 457(b) or (f) or Section 415(m) plan
cannot be rolled over to an IRA or a qualified plan or Section 403(b) plan.
Required Beginning Date/Required Minimum Distributions
Distributions from a Section 401(a), Section 401(k), Section 403(b) and
Section 457(b)of these retirement programs must begin no later than April 1 of
the calendar year following the later of (i) the calendar year in which the
Participant attains age 70 1/2; or (ii) the calendar year in which the
Participant retires.
All amounts in a Section 401(a), Section 401(k) and Section 457(b) plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must be
distributed in compliance with the minimum distribution requirements. All
distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. 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 Participant should seek the advice of a competent tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section 403(b)
annuity contract are normally taxable in full as ordinary income to the
Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis for
the contract. The Participant will have a cost basis for the contract only when
after-tax contributions have been made.
If the Participant 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. Special averaging treatment is currently available for lump sum
distributions from only Section 401(a) and Section 401(k) plans for tax years
beginning before December 31, 1999. A "10-year averaging" procedure may also be
available to individuals who attained age 50 before January 1, 1986. For further
information regarding lump sum distributions, a competent tax adviser should be
consulted.
Amounts received before the annuity starting date by a Participant who has
made after-tax contributions are taxed under a rule that provides for pro rata
recovery of cost. Section 72(e)(8). 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.
All amounts received from a Section 457(b) or (f), Section 415(m) or NQDC
plan, whether in the form of total or partial withdrawals or annuity payments
are taxed in full as wages to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a) plans,
Section 401(k) plans and Section 403(b) annuities. Distributions made before the
Participant attains 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 Participant; (2) attributable to the Participant'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 Participant or the joint lives or life expectancies of
the Participant and his designated beneficiary; (4) made to a Participant 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
Participant for medical care, but not in excess of the amount allowable as a
medical expense deduction to the Participant 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 or discontinued (other than because of
death or disability) before the Participant reaches age 59 1/2 or, within five
years of the date of the first payment, whichever is later, the Participant is
liable for the 10% penalty plus interest on all payments received before age 59
1/2. This penalty is imposed in the year the modification or discontinuance
occurs. The premature distribution penalty tax does not apply to distributions
from a Section 457(b) or (f), Section 415(m) or NQDC plans.
If the amount distributed during a tax year is less than the minimum required
distribution, there is an additional tax imposed on the Participant equal to 50%
of the amount that the distribution made in the year falls short of the required
amount. Section 4974.
Distributions on Death of Participant
Distributions made to a beneficiary from a Section 401(a), Section 401(k),
Section 457(b) or Section 403(b) retirement program upon the Participant's death
must be made pursuant to the rules contained in Section 401(a)(9) of the Code
and the regulations thereunder. Distributions from a Section 457(b) retirement
program must also meet the requirements under Section 457(d). Generally, if the
Participant 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
Participant's date of death.
If the Participant 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 Participant'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 from Section 401(a) plans,
Section 401(k) plans and Section 403(b) annuities 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 qualified plan or Section 403(b) annuity contract or custodial
account, as applicable. 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 Participant elects not to have federal income tax
withheld. All amounts distributed are tax reported on Form 1099-R.
Distributions to a Participant from a Section 457, Section 415(m) or NQDC
plan retain their character as wages and are tax reported on Form W-2. Federal
income taxes must be withheld under the wage withholding rules. Participants
cannot elect not to have federal income tax withheld. Payments to beneficiaries
are not treated as wages and are tax reported on Form 1099-MR. Federal income
tax on payments to beneficiaries will be withheld from annuity (periodic)
payments at the rates applicable to wage withholding, and from other
distributions at a flat 10% rate, unless the beneficiary elects not to have
federal income tax withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the Series
Account at regular and special meetings of shareholders of Maxim, American
Century, and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act")
and the regulations thereunder, as presently interpreted, require that the
shares of the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act or any
regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted to
vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(a), Section
401(k), Section 457, Section 415(m) or NQDC retirement program has the voting
interest in the Variable Sub-Accounts. After annuity payments begin under a
variable annuity option, the payee will have the voting interest.
The number of votes which a person has the right to cast will be determined
by applying his/her percentage interest in a Variable Sub-Account to the total
number of votes attributable to the Sub-Account. In determining the number of
votes, fractional shares will be recognized. During the annuity payment period,
the number of votes attributable to a Participant Annuity Account will decrease
as the assets held to fund the annuity payments decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are not
otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to the
voting instructions which are received with respect to all Participant Annuity
Accounts participating in that Sub-Account of this Series Account. Voting
instructions to abstain on any item to be voted upon will be applied on a pro
rata basis to reduce the votes eligible to be cast. Each person having a voting
interest will receive proxy materials, reports and other materials relating to
the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
BCE is the principal underwriter and the distributor of the Group Contracts.
BCE is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Applications for the
Group Contracts will be solicited by duly-licensed insurance agents of Benefits
Communication Corporation and/or GWL&A, as well as by independent registered
insurance brokers who must also be NASD-registered broker-dealers or
representatives thereof.
The maximum commission as a percentage of the Contributions made under a
Group Contract payable to BCE agents, independent registered insurance brokers
and other registered broker-dealers is 8.0%. An expense allowance that will not
exceed 40% of the maximum commission paid may also be paid. Additionally,
effective August 1, 1987, a maximum of 1% of Contributions may also be paid as a
persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law, GWL&A
is subject to provisions governing such companies and to regulation by the
Colorado Commissioner of Insurance. GWL&A's books and accounts are subject to
review and examination by the Colorado Insurance Department at all times and a
full examination of its operations is conducted by the National Association of
Insurance Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits Participants
in the Texas Optional Retirement Program ("ORP") to redeem their interest in a
variable annuity contract issued under the ORP only upon termination of
employment in the Texas public institutions of higher education, retirement or
death. Accordingly, a Participant in the ORP will be required to obtain a
certificate of termination from his/her employer before he/she can redeem
his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations promulgated thereunder,
all Participants will be furnished, at least semi-annually, with reports
containing such information as may be required under the 1940 Act or by any
other applicable law or regulation. In addition, all Participants will be
furnished not less frequently than annually with a statement of the Participant
Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not involved in
any litigation which would have material adverse effect on the ability of GWL&A
to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity contracts
and the validity of the Group Contract have been passed upon by R. B. Lurie,
Vice-President, Counsel and Associate Secretary. Certain legal matters relating
to the federal securities laws have been passed upon for GWL&A by Jorden Burt
Boros Cicchetti Berenson & Johnson LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference is hereby made for
further information concerning the Series Account, GWL&A and the Group
Contracts. Statements contained in this Prospectus as to the content of Group
Contracts and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to the Series Account and GWL&A. The Table of
Contents of the Statement of Additional Information is set forth below:
1.....Custodian and Independent Auditors
2.....Underwriter
3.....Calculation of Performance Data
4.....Financial Statements
Inquiries and Requests for a Statement of Additional Information should be
directed to GWL&A in writing at 8515 E. Orchard Road, Englewood, Colorado 80111,
or by telephoning GWL&A at (800) 468-8661 (U.S.) or (303) 689-3360 (Englewood).
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
B-5
FUTUREFUNDS SERIES ACCOUNT
Group Flexible Premium Variable Annuity Contracts
issued by
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
Telephone: ......(800) 468-8661 (U.S.)
(303) 689-3360 (Englewood)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus, dated May 1, 1998, which is available
without charge by contacting Great-West Life & Annuity Insurance Company
("GWL&A") at the above address or at the above telephone number.
May 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
CUSTODIAN AND INDEPENDENT AUDITORS................................B-3
UNDERWRITER.......................................................B-3
CALCULATION OF PERFORMANCE DATA...................................B-3
FINANCIAL STATEMENTS..............................................B-5
<PAGE>
CUSTODIAN AND INDEPENDENT AUDITORS
......A. Custodian
......The assets of FutureFunds Series Account (the "Series Account") are held
by Great-West Life & Annuity Insurance Company ("GWL&A"). The assets of the
Series Account are kept physically segregated and held separate and apart from
the general account of GWL&A. GWL&A maintains records of all purchases and
redemptions of shares of the Fund. Additional protection for the assets of the
Series Account is afforded by blanket fidelity bonds issued to The Great-West
Life Assurance Company ("Great-West") in the amount of $25 million, which covers
all officers and employees of GWL&A.
......B. Independent Auditors
......The accounting firm of Deloitte & Touche LLP performs certain accounting
and auditing services for GWL&A and the Series Account. The principal business
address of Deloitte & Touche LLP is 555 Seventeenth Street, Suite 3600, Denver,
Colorado 80202-3942.
......The statement of assets and liabilities of FutureFunds Series Account as
of December 31, 1997, the related statement of operation then ended, the
statements of changes in net asset for each of the two years in the period then
ended and the consolidated financial statements of GWL&A at December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
included in this Statement of Additional Information have been audited by
Deloitte & Touche LLP, independent auditors, as set forth in their report
appearing herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
UNDERWRITER
......The offering of the Contracts is made on a continuous basis by
BenefitsCorp Equities, Inc., a wholly owned subsidiary of GWL&A. Previously, the
Contracts were offered through Great-West, an affiliate of GWL&A. No payments
were made to Great-West for the years 1995 through 1996 and no payments were
made to BCE in 1996 or 1997.
CALCULATION OF PERFORMANCE DATA
A.....Yield and Effective Yield Quotations for the Money Market Investment
Division
......The yield quotation for the Money Market Investment Division set forth in
the Prospectus is for the seven-day period ended December 31, 1997 and is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
Accumulation Unit in the Money Market Investment Division at the beginning of
the period, subtracting a hypothetical charge reflecting deductions from
Participant accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to the nearest hundredth of one percent.
......The effective yield quotation for the Money Market Investment Division set
forth in the Prospectus is for the seven-day period ended December 31, 1997 and
is carried to the nearest hundredth of one percent, computed by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit in the Money
Market Investment Division at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Participant accounts, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula:
......EFFECTIVE YIELD = [(BASE PERIOD RETURN +1 365/7]-1.
......For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Participant
accounts in proportion to the length of the base period, and for any fees that
vary with the size of the account, the account size is assumed to be the Money
Market Investment Division's mean account size. The specific percentage
applicable to a particular withdrawal would depend on a number of factors
including the length of time the Contract Owner has participated under the
Contracts. (See Administrative Charges, Risk Charges and Other Deductions in the
Prospectus.) No deductions or sales loads are assessed upon annuitization under
the Contracts. Realized gains and losses from the sale of securities and
unrealized appreciation and depreciation of the Money Market Investment Division
and the Fund are excluded from the calculation of yield.
B.....Total Return Quotations for All Investment Divisions
......The total return quotations for all Investment Divisions set forth in the
Prospectus are average annual total return quotations for the one, five and ten
year periods ended December 31, 1997, or since inception if the portfolio has
not been in existence for at least the above listed period of time. The
quotations are computed by finding the average annual compounded rates of return
over the relevant periods that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
......P(1+T)n = ERV
......Where:......P = a hypothetical initial payment of $1,000
...... ......T = average annual total return
...... ......N = number of years
...... ......ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the particular period at the end of the particular period
For purposes of the total return quotations for these Investment Divisions, the
calculations take into effect all fees that are charged to the Contract Value ,
and for any fees that vary with the size of the account, the account size is
assumed to be the respective Investment Divisions' mean account size. The
calculations also assume a complete redemption as of the end of the particular
period. ......FINANCIAL STATEMENTS
......The consolidated financial statements of GWL&A as contained herein should
be considered only as bearing upon GWL&A's ability to meet its obligations under
the Contracts, and they should not be considered as bearing on the investment
performance of the Series Account. The interest of Contract Owners under the
Contracts are affected solely by the investment results of the Series Account.
<PAGE>
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
- -----------------------------------------------------------------------------
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Contract Owners of
FutureFunds Series Account of
Great-West Life & Annuity Insurance Company
We have audited the accompanying statement of assets and liabilities of
FutureFunds Series Account of Great-West Life & Annuity Insurance Company as of
December 31, 1997, and the related statement of operations for the year then
ended and the statements of changes in net assets for each of the two years in
the period ended, including each of the investment divisions. These financial
statements are the responsibility of the Series Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the FutureFunds Series Account of Great-West
Life & Annuity Insurance Company at December 31, 1997, and the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended, in conformity with generally accepted
accounting principles.
February 12, 1998
<PAGE>
<TABLE>
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------
ASSETS
Shares Cost Value
Investments in underlying
affiliated funds:
<S> <C> <C> <C>
Maxim Series Fund, Inc. Aggressive Profile 733,767 $746,250 $697,434
Maxim Series Fund, Inc. Bond 41,425,675 48,059,557 50,205,219
Maxim Series Fund, Inc. Conservative Profile 266,080 272,767 268,416
Maxim Series Fund, Inc. Corporate Bond 11,860,160 14,114,586 14,209,676
Maxim Series Fund, Inc. Founders Blue Chip 604,520 618,739 618,283
Maxim Series Fund, Inc. Growth Index 230,257 437,737 426,136
Maxim Series Fund, Inc. International Equity 34,628,638 42,555,743 44,275,130
Maxim Series Fund, Inc. INVESCO ADR 4,722,382 6,684,218 6,991,049
Maxim Series Fund, Inc. INVESCO Balanced 50,576,808 64,893,388 63,665,759
Maxim Series Fund, Inc. INVESCO Small-Cap Growth 19,261,317 30,378,224 30,731,550
Maxim Series Fund, Inc. Mid Cap Growth Fund 1 (Janus) 28,427,319 38,487,474 44,153,941
Maxim Series Fund, Inc. Moderate Profile 1,080,669 1,100,043 1,044,081
Maxim Series Fund, Inc. Moderately Aggressive Profile 1,685,584 1,718,041 1,630,969
Maxim Series Fund, Inc. Moderately Conservative Profile 539,907 551,385 534,975
Maxim Series Fund, Inc. Money Market 65,754,369 65,798,871 65,798,865
Maxim Series Fund, Inc. Small-Cap Aggressive Growth 439,262 738,948 672,760
Maxim Series Fund, Inc. Small-Cap Index 10,678,592 13,508,816 13,442,185
Maxim Series Fund, Inc. Small-Cap Value (Ariel) 2,238,433 2,581,636 2,049,036
Maxim Series Fund, Inc. Stock Index 171,124,459 306,854,329 504,369,841
Maxim Series Fund, Inc. T Rowe Price Equity/Income 43,318,928 64,604,309 76,248,785
Maxim Series Fund, Inc. T Rowe Price Mid-Cap Growth 1,072,600 1,161,376 1,187,210
Maxim Series Fund, Inc. Total Return 308 491 485
Maxim Series Fund, Inc. US Government Securities 39,043,122 41,179,006 42,626,035
Maxim Series Fund, Inc. Value Index 318,290 589,113 577,253
Investments in underlying funds:
Fidelity Investments VIP II Asset Manager 1,843,165 28,453,161 33,195,402
Fidelity Investments VIP Growth 1,812,864 54,119,511 67,257,251
American Century VP Funds VP Balanced 9,449 76,859 77,860
American Century VP Funds VP Capiial Appreciation 4,657,336 47,246,704 45,083,016
----------------------------------------
Total Investments $877,531,282 1,112,038,602
====================
Other assets and liabilities:
Premiums due and accrued 64,326,763
Investment income due and accrued 8,934
Due to Great-West Life & Annuity Insurance Company (1,200,989)
--------------------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note 5) $1,175,173,310
====================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
PERIOD TO DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
Aggressive Conservative Corporate Founders
Profile Bond Profile Bond Blue Chip Growth Index
Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $55,485 $3,204,596 $6,936 $1,115,135 $5,229 $12,335
EXPENSES - mortality and expense risks
by category: (Note 3)
0.55 6 113 - 328 22 17
0.75 - 816 - 3 - -
0.95 119 27,070 27 5,505 127 5
1.25 1,288 606,462 363 123,774 1,070 556
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 54,072 2,570,135 6,546 985,525 4,010 11,757
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on (6,820) 543,500 (18) 77,462 (68) (306)
investments
Net change in unrealized appreciation
(depreciation) on investments (48,816) (238,829) (4,351) 29,024 (456) (11,601)
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (55,636) 304,671 (4,369) 106,486 (524) (11,907)
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$(1,564) $2,874,806 $2,177 $1,092,011 $3,486 $(150)
======================================================= ============================
INVESCO
International INVESCO ADR INVESCO Small-Cap
Equity Balanced Growth
Investment Investment Investment Investment
Division Division Division Division
INVESTMENT INCOME $2,322,159 $152,018 $2,250,964 $1,766,793
EXPENSES - mortality and expense risks
by category: (Note 3)
0.55 1,403 1,231 471 3,680
0.75 29 - 28 15
0.95 68,308 14,261 10,072 32,226
1.25 453,155 43,491 163,865 235,283
--------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,799,264 93,035 2,076,528 1,495,589
--------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on 1,153,675 313,123 167,728 351,389
investments
Net change in unrealized appreciation
(depreciation) on investments (3,013,852) 74,489 (1,227,107) 1,481,761
--------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (1,860,177) 387,612 (1,059,379) 1,833,150
--------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$(60,913) $480,647 $1,017,149 $3,328,739
==========================================================
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
<TABLE>
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
PERIOD TO DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Moderately Moderately
Mid-Cap Moderate Aggressive Conservative Money Market
Mid-Cap Growth Profile Profile Profile
Investment Investment Investment Investment Investment Investment
Division Division Division Division Division Division
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $1,698,372 $1,484 $60,773 $108,202 $16,710 $3,567,394
EXPENSES - mortality and expense
risks by category: (Note 3)
0.55 931 20 27 22 - 60,357
0.75 69 - - - - 239
0.95 47,474 127 199 397 34 40,287
1.25 424,550 1,771 1,299 2,341 1,142 678,491
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,225,348 (434) 59,248 105,442 15,534 2,788,020
---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on 1,298,546 (184) (481) 769 244 -
investments
Net change in unrealized
appreciation (depreciation) on 1,803,470 25,834 (55,962) (87,072) (16,410) (1)
investments
---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 3,102,016 25,650 (56,443) (86,303) (16,166) (1)
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$4,327,364 $25,216 $2,805 $19,139 $(632) $2,788,019
=======================================================================================
---------------------------------------------------------
Small-Cap
Aggressive Small-Cap Small-Cap
Growth Index Value Stock Index
Investment Investment Investment Investment
Division Division Division Division
---------------------------------------------------------
INVESTMENT INCOME $60,877 $2,050,711 $848,641 $28,302,889
EXPENSES - mortality and expense
risks by category: (Note 3)
0.55 16 614 196 3,496
0.75 - 42 7 7,296
0.95 88 16,817 466 300,032
1.25 953 106,516 14,154 5,181,923
---------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 59,820 1,926,722 833,818 22,810,142
---------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on (2,079) 294,158 84,918 11,610,075
investments
Net change in unrealized
appreciation (depreciation) on (66,188) (443,226) (593,634) 82,037,335
investments
---------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (68,267) (149,068) (508,716) 93,647,410
---------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$(8,447) $1,777,654 $325,102
$116,457,552
=========================================================
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
PERIOD TO DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
U.S.
T. Rowe Price Government VIP II Asset
Equity/Income Total Return Securities Value Index Manager
Investment Investment Investment Investment Investment
Division Division Division Division Division
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME $4,106,729 $154,305 $2,678,559 $31,553 $2,752,758
EXPENSES - mortality and expense
risks by category: (Note 3)
0.55 4,799 - 121 - 1,517
0.75 32 - 22 - 33
0.95 54,104 3,098 11,283 129 28,922
1.25 599,509 62,570 505,759 754 305,029
------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 3,448,285 88,637 2,161,374 30,670 2,417,257
------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on 613,679 1,389,798 467,148 (6) 316,406
investments
Net change in unrealized
appreciation (depreciation) on 8,955,548 (167,923) 254,146 (11,860) 2,054,831
investments
------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 9,569,227 1,221,875 721,294 (11,866) 2,371,237
------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$13,017,512 $1,310,512 $2,882,668 $18,804 $4,788,494
====================================================================================
Total
FutureFunds
VP Capital Series
VIP Growth VP Balanced Appreciation Account
Investment Investment Investment
Division Division Division
---------------------------------------------------------------
INVESTMENT INCOME $1,590,228 $2,698,986 $1,180,014 $62,800,835
EXPENSES - mortality and expense
risks by category: (Note 3)
0.55 5,338 - 534 85,259
0.75 59 - 10 8,700
0.95 61,091 20,690 35,165 778,123
1.25 593,948 467,548 617,165 11,194,729
------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 929,792 2,210,748 527,140 50,734,024
------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on 671,214 13,000,609 330,567 32,675,046
investments
Net change in unrealized
appreciation (depreciation) on 8,849,437 (7,901,556) (3,873,790) 87,803,241
investments
------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 9,520,651 5,099,053 (3,543,223) 120,478,287
------------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS
RESULTING FROM OPERATIONS
$10,450,443 $7,309,801 $(3,016,083) $171,212,311
============================================================
See notes to financial statements.
</TABLE>
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------
Aggressive Profile Bond Conservative Profile
Investment Division Investment Division Investment Division
1997 1996 1997 1996 1997 1996
----------------------------------------------------------------------------
(1) (1)
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $54,072 $ $2,570,135 $2,592,466 $6,546 $
- -
Net realized gain (loss) on investments (6,820) - 543,500 (3,117,287) (18) -
Net change in unrealized appreciation
(depreciation) in investments (48,816) - (238,829) 2,070,859 (4,351) -
--------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations (1,564) - 2,874,806 1,546,038 2,177 -
--------------------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 (150) - (698) - - -
0.75 - - 23,124 - - -
0.95 17,685 - 164,358 171,050 - -
1.25 22,888 - 2,965,833 4,050,582 1,668 -
Redemptions:
0.55 - - - - - -
0.75 - - (92,337) - - -
0.95 - - (285,163) (230,805) - -
1.25 (202) - (5,048,198) (3,614,353) - -
Net transfers:
0.55 6,234 - 40,598 - - -
0.75 - - 259,793 - - -
0.95 80,628 - (259,569) 954,068 973,245 -
1.25 584,056 - (3,442,458) (3,538,754) 739,731 -
--------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from unit transactions 711,139 - (5,674,717) (2,208,212) 1,714,644 -
--------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 709,575 - (2,799,91) (662,174) 1,716,821 -
NET ASSETS:
Beginning of period - - 53,699,199 54,361,373 - -
--------------------------------------------------------------------------
End of period $709,575 $ $53,699,199 $
- $50,899,288 $1,716,821 -
===============================================================
(1) The Investment Division commenced operations on September 11, 1997
--------------------------------------------------
Corporate Bond Founders Blue Chip
Investment Division Investment Division
1997 1996 1997 1996
--------------------------------------------------
(1)
FROM OPERATIONS:
Net investment income (loss) $985,525 $433,469 $4,010
$
-
Net realized gain (loss) on investments 77,462 43,335 (68) -
Net change in unrealized appreciation -
(depreciation) in investments 29,024 8,927 (456)
----------------------------------------------------
Increase (decrease) in net assets
resulting from operations 1,092,011 485,731 3,486 -
----------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 4,432 - (268) -
0.75 189 - - -
0.95 154,238 85,430 649 -
1.25 1,326,569 1,054,079 7,302 -
Redemptions:
0.55 - - - -
0.75 - - - -
0.95 (27,718) (10,087) - -
1.25 (481,887) (275,907) - -
Net transfers:
0.55 106,099 - 19,923 -
0.75 1,250 - - -
0.95 438,876 335,996 81,383 -
1.25 6,525,532 2,504,821 837,124 -
----------------------------------------------------
Increase (decrease) in net assets
resulting from unit transactions 8,047,580 3,694,332 946,113 -
----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 9,139,591 4,180,063 949,599 -
NET ASSETS:
Beginning of period 6,926,503 2,746,440 - -
----------------------------------------------------
End of period $16,066,094 $949,599
$6,926,503 $
-
======================================
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------------------------------------------------------
Growth Index International Equity INVESCO ADR
Investment Division Investment Division Investment Division
1997 1996 1997 1996 1997 1996
----------------------------------------------------------------------------------
(1)
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $11,757 $1,799,264 $672,932 $93,035 $4,209
$
-
Net realized gain (loss) on investments (306) - 1,153,675 612,767 313,123 51,074
Net change in unrealized appreciation
(depreciation) in investments (11,601) - (3,013,852) 3,632,539 74,489 217,175
---------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations (150) - (60,913) 4,918,238 480,647 272,458
---------------------------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 - - (3,513) - 21,057 -
0.75 - - 3,486 - 137 -
0.95 860 - 575,958 688,928 716,187 356,285
1.25 6,728 - 5,365,137 5,166,924 895,576 309,810
Redemptions:
0.55 - - (867) - (527) -
0.75 - - - - - -
0.95 - - (303,033) (173,765) (42,233) (351)
1.25 - - (2,061,836) (937,886) (131,018) (7,556)
Net transfers:
0.55 16,200 - 414,477 - 354,054 -
0.75 - - 17,506 - (67) -
0.95 17,632 - (151,478) 2,295,108 325,458 467,272
1.25 488,467 - 4,842,360 3,172,831 1,901,078 959,824
---------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions 529,887 - 8,698,197 10,212,140 4,039,702 2,085,284
---------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 529,737 - 8,637,284 15,130,378 4,520,349 2,357,742
NET ASSETS:
Beginning of period - - 36,705,511 21,575,133 2,629,337 271,595
---------------------------------------------------------------------------------
End of period $529,737 $45,342,795 $36,705,511 $7,149,686 $2,629,337
$
-
=================================================================================
(1) The Investment Division commenced operations on September 11, 1997
---------------------------------------------------
INVESCO Balanced INVESCO Small-Cap Growth
Investment Division Investment Division
1997 1996 1997 1996
---------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $2,076,528 $1,136 $1,495,589 $1,507,209
Net realized gain (loss) on investments 167,728 13 351,389 869,697
Net change in unrealized appreciation
(depreciation) in investments (1,227,107) (522) 1,481,761 (1,294,678)
----------------------------------------------------
Increase (decrease) in net assets resulting
from operations 1,017,149 627 3,328,739 1,082,228
----------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 73,716 - 75,127 -
0.75 1,308 - 5,043 -
0.95 177,412 422 1,039,378 461,780
1.25 1,178,392 1,253 4,299,484 2,352,783
Redemptions:
0.55 - - (869) -
0.75 - - - -
0.95 (35,463) - (152,961) (24,167)
1.25 (808,266) - (964,322) (206,098)
Net transfers:
0.55 91,551 - 1,082,305 -
0.75 12,138 - 3,697 -
0.95 4,018,407 42,761 1,198,765 1,355,405
1.25 60,642,781 226,833 6,958,302 6,836,995
----------------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions 65,351,976 271,269 13,543,949 10,776,698
----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 66,369,125 271,896 16,872,688 11,858,926
NET ASSETS:
Beginning of period 271,896 - 14,880,551 3,021,625
----------------------------------------------------
End of period $271,896 $31,753,239
$66,641,021 $14,880,551
====================================================
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Mid-Cap Growth Moderate Profile
Investment Division Investment Division Investment Division
1997 1996 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(1) (1)
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $1,225,348 $(369,250) $(434) $ $59,248 $
- -
Net realized gain (loss) on investments 1,298,546 1,545,637 (184) - (481) -
Net change in unrealized appreciation
(depreciation) in investments 1,803,470 (232,275) 25,834 - (55,962) -
------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 4,327,364 944,112 25,216 - 2,805 -
------------------------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 (4,230) - - - - -
0.75 4,412 - - - - -
0.95 1,005,848 1,012,396 3,509 - 8,226 -
1.25 6,760,918 7,335,055 27,987 - 18,584 -
Redemptions:
0.55 (802) - - - - -
0.75 (1,795) - - - - -
0.95 (322,955) (125,009) - - (1,113) -
1.25 (2,410,094) (1,639,464) (565) - - -
Net transfers:
0.55 347,794 - 17,795 - 23,167 -
0.75 24,525 - - - - -
0.95 (1,795,775) 2,714,802 126,716 - 449,026 -
1.25 (3,199,390) 4,960,718 1,275,531 - 1,105,963 -
------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from unit transactions 408,456 14,258,498 1,450,973 - 1,603,853 -
------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 4,735,820 15,202,610 1,476,189 - 1,606,658 -
NET ASSETS:
Beginning of period 40,712,403 25,509,793 - - - -
==============================================================================
End of period $45,448,223 $40,712,403 $ $1,606,658 $
$1,476,189 - -
==============================================================================
----------------------------------------------------
Moderately Aggressive Moderately Conservative
Profile Profile
Investment Division Investment Division
1997 1996 1997 1996
----------------------------------------------------
(1) (1)
FROM OPERATIONS:
Net investment income (loss) $105,442 $- $15,534 $
-
Net realized gain (loss) on investments 769 - 244 -
Net change in unrealized appreciation
(depreciation) in investments (87,072) - (16,410) -
----------------------------------------------------
Increase (decrease) in net assets
resulting from operations 19,139 - (632) -
----------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 - - - -
0.75 - - - -
0.95 5,464 - 1,493 -
1.25 66,768 - 6,696 -
Redemptions:
0.55 - - - -
0.75 - - - -
0.95 - - - -
1.25 (202) - - -
Net transfers:
0.55 21,359 - - -
0.75 - - - -
0.95 549,126 - 543,542 -
1.25 1,381,305 - 540,236 -
----------------------------------------------------
Increase (decrease) in net assets
resulting from unit transactions 2,023,820 - 1,091,967 -
----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2,042,959 - 1,091,335 -
NET ASSETS:
Beginning of period - - - -
====================================================
End of period $2,042,959 $ $1,091,335
- $
-
====================================================
(1) The investment Division commenced operations on September 11, 1997
</TABLE>
See notes to financial statements (Continuned)
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------------------------------------------------
Small-Cap Aggressive
Money Market Growth Small-Cap Index
Investment Division Investment Division Investment Division
1997 1996 1997 1996 1997 1996
(1)
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $2,788,020 $1,951,644 $59,820 $1,926,722 $556,880
$
-
Net realized gain (loss) on investments - 4,993 (2,079) - 294,158 369,918
Net change in unrealized appreciation
(depreciation) in investments (5,000) (66,188) - (443,226) (128,525)
Increase (decrease) in net assets
resulting from operations 2,788,019 1,951,637 (8,447) - 1,777,654 798,273
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 18,103,038 - - - (717) -
0.75 1,114 - - - 5,574 -
0.95 874,717 477,308 998 - 263,501 295,598
1.25 5,253,578 6,792,919 8,499 - 1,244,112 1,101,199
Redemptions:
0.55 (1,757,149) - - - - -
0.75 (57,999) - - - - -
0.95 (1,791,983) (938,770) - - (108,028) (4,532)
1.25 (13,486,049) - - (330,603) (164,979)
(11,581,496)
Net transfers:
0.55 (7,682,078) - 14,792 - 235,972 -
0.75 175,367 - - - 16,895 -
0.95 12,426,216 2,231,941 97,275 - 49,995 389,964
1.25 21,992,327 9,186,279 703,885 - 2,648,341 1,347,582
Increase (decrease) in net assets
resulting from unit transactions 34,051,099 6,168,181 825,449 - 4,025,042 2,964,832
INCREASE (DECREASE) IN NET ASSETS 36,839,118 8,119,818 817,002 - 5,802,696 3,763,105
NET ASSETS:
Beginning of period 58,676,835 50,557,017 - - 8,017,859 4,254,754
End of period $95,515,953 $817,002 $13,820,555 $8,017,859
$58,676,835 $
-
============================================================================
Small-Cap Value Stock Index
Investment Division Investment Division
1997 1996 1997 1996
FROM OPERATIONS:
Net investment income (loss) $833,818 $(1,151) $22,810,142 $2,691,090
Net realized gain (loss) on investments 84,918 8,216 11,610,075 26,200,811
Net change in unrealized appreciation
(depreciation) in investments (593,634) 56,898 82,037,335 32,068,655
Increase (decrease) in net assets
resulting from operations 325,102 63,963 116,457,552 60,960,556
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 47 - (8,155) -
0.75 752 - 181,616 -
0.95 11,637 6,769 1,954,257 1,160,454
1.25 322,405 167,149 20,974,483 20,179,723
Redemptions:
0.55 (569) - (2,691) -
0.75 - - (330,681) -
0.95 (4,700) (1,835) (1,253,070) (815,701)
1.25 (62,824) (10,398) (24,245,177) (15,974,860)
Net transfers:
0.55 64,567 - 1,097,490 -
0.75 3,729 - 1,822,644 -
0.95 33,458 11,271 3,466,326 11,975,501
1.25 846,108 (47,949) 20,337,807 6,075,912
Increase (decrease) in net assets
resulting from unit transactions 1,214,610 125,007 23,994,849 22,601,029
INCREASE (DECREASE) IN NET ASSETS 1,539,712 188,970 140,452,401 83,561,585
NET ASSETS:
Beginning of period 548,623 359,653 372,447,916 288,886,331
End of period $2,088,335 $548,623 $512,900,317
$372,447,916
=======================================================
(1) The Investment Division commenced operations on September 11, 1997
</TABLE>
See notes to financial statements (Continuned)
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity/Income Total Return U.S. Government
Investment Division Investment Division Securities
Investment Division
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $3,448,285 $726,190 $88,637 $310,515 $2,161,374 $1,994,535
Net realized gain (loss) on investments 613,679 208,029 1,389,798 88,556 467,148 (2,998,214)
Net change in unrealized appreciation
(depreciation) in investments 8,955,548 - - 17,098 254,146 2,046,926
-------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations 13,017,512 2,960,934 1,310,512 416,169 2,882,668 1,043,247
-------------------------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 118,300 - - - (699) -
0.75 4,298 - - - - -
0.95 1,244,476 545,683 75,641 69,934 135,760 118,343
1.25 7,997,368 4,332,217 640,255 811,035 3,213,739 4,307,256
Redemptions:
0.55 (7,347) - - - - -
0.75 - - - - - -
0.95 (183,927) (35,297) (3,698) (21,847) (135,516) (54,935)
1.25 (2,374,302) (377,042) (212,404) (62,676) (3,679,812) (2,952,145)
Net transfers:
0.55 1,418,011 - - - 35,981 -
0.75 13,971 - - - 7,500 -
0.95 3,000,349 2,598,762 (447,133) 175,566 (78,588) 739,238
1.25 26,895,044 12,285,188 1,274,846 478,503 (463,788)
(6,571,730)
-------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions 38,126,241 19,349,511 2,246,858 (23,132) 1,693,969
(6,519,069)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 51,143,753 22,310,445 2,663,027 2,859,536 2,737,216
(5,208,557)
NET ASSETS:
Beginning of period 29,470,168 7,159,723 5,213,039 2,550,012 42,030,240 39,293,024
-------------==================================================================
End of period $29,470,168 $4,482 $5,213,039
$80,613,921 $44,889,776 $42,030,240
==================================================================
==============================================================================
--------------------------------------------
Value Index VIP II Asset Manager
Investment Division Investment Division
1997 1996 1997 1996
----------------------------------------------
(1)
FROM OPERATIONS:
Net investment income (loss) $30,670 $ $2,417,257 $756,883
-
Net realized gain (loss) on investments (6) - 316,406 167,595
Net change in unrealized appreciation
(depreciation) in investments (11,860) - 2,054,831 1,319,288
----------------------------------------------
Increase (decrease) in net assets resulting
from operations 18,804 - 4,788,494 2,243,766
----------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments:
0.55 - - (12,399) -
0.75 - - 3,347 -
0.95 1,220 - 342,784 315,113
1.25 12,673 - 3,673,095 3,762,974
Redemptions:
0.55 - - (1,517) -
0.75 - - - -
0.95 - - (156,746) (200,926)
1.25 - - (1,483,835) (482,689)
Net transfers:
0.55 - - 452,976 -
0.75 - - 9,432 -
0.95 125,491 - 118,814 986,254
1.25 575,600 - 4,742,476 1,213,953
----------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions 714,984 - 7,688,427 5,594,679
----------------------------------------------
----------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 733,788 - 12,476,921 7,838,445
NET ASSETS:
Beginning of period - - 22,016,735 14,178,290
==============================================
End of period $733,788 $ $22,016,735
- $34,493,656
==============================================
=============================================
(1) The investment Division commenced operations on September 11, 1997
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ----------------------------------------------------------------------------------------------------------------
VIP Growth VP Balanced
Investment Division Investment Division
1997 1996 1997 1996
-------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $929,792 $1,210,825 $2,210,748 $1,491,581
Net realized gain (loss) on investments 671,214 943,820 13,000,609 1,338,172
Net change in unrealized appreciation
(depreciation) in investments 8,849,437 1,412,489 (7,901,556) 1,868,291
-------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations 10,450,443 3,567,134 7,309,801 4,698,044
-------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 0.55 77,755 - - -
0.75 14,885 - - -
0.95 1,220,352 926,051 249,863 278,305
1.25 9,036,925 8,049,985 2,715,312 4,601,128
Redemptions:
0.55 (542) - - -
0.75 - - - -
0.95 (370,003) (169,985) (218,523) (85,956)
1.25 (2,927,635) (1,159,369) (3,408,929) (2,842,798)
Net transfers:
0.55 1,644,470 - - -
0.75 22,140 - - -
0.95 702,169 2,349,470 (3,079,614) 1,395,005
1.25 8,045,048 7,036,571 (52,673,411) (574,846)
-------------------------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions 17,465,564 17,032,723 (56,415,302) 2,770,838
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 27,916,007 20,599,857 (49,105,501) 7,468,882
NET ASSETS:
Beginning of period 41,507,262 20,907,405 49,183,341 41,714,459
-------------------------------------------------------------
End of period $69,423,269 $41,507,262 $77,840 $49,183,341
=============================================================
-----------------------------------------------------------------
----------------------------------
VP Capital Appreciation Total FutureFunds Series Account
Investment Division
1997 1996 1997 1996
-----------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $527,140 $7,859,011 $50,734,024 $24,390,174
Net realized gain (loss) on investments 330,567 4,172,683 32,675,046 30,509,815
Net change in unrealized appreciation
(depreciation) in investments (3,873,790) (16,089,361) 87,803,241 28,995,499
------------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations (3,016,083) (4,057,667) 171,212,311 83,895,488
------------------------------------------------------------------
FROM UNIT TRANSACTIONS (by category):
Purchase payments: 0.55 (4,508) - 18,438,135 -
0.75 1,623 - 250,908 -
0.95 487,851 757,115 10,734,322 7,726,964
1.25 5,088,336 8,861,006 83,131,310 83,237,077
Redemptions:
0.55 (5,644) - (1,778,524) -
0.75 - - (482,812) -
0.95 (276,761) (343,302) (5,673,594) (3,237,270)
1.25 (6,577,376) (4,506,609) (70,695,536) (46,796,325)
Net transfers:
0.55 139,256 - (37,007) -
0.75 3,593 - 2,394,113 -
0.95 (2,535,177) 2,530,046 20,475,563 33,548,430
1.25 (16,793,362) (10,278,006) 92,407,254 42,179,010
------------------------------------------------------------------
Increase (decrease) in net assets resulting
from unit transactions (20,472,169) (2,979,750) 149,164,132 116,657,886
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (23,488,252) (7,037,417) 320,376,443 200,553,374
NET ASSETS:
Beginning of period 69,859,449 76,896,866 854,796,867 654,243,493
------------------------------------------------------------------
End of period $46,371,197 $69,859,449 $1,175,173,310 $854,796,867
==================================================================
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
FUTUREFUNDS SERIES ACCOUNT
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ---------------------------------------------------------------------------
1. HISTORY OF THE SERIES ACCOUNT
The FutureFunds Series Account of Great-West Life & Annuity Insurance
Company (the Series Account) is a separate account of Great-West Life &
Annuity Insurance Company (the Company) and was established under Kansas
law on November 15, 1983. In 1990, the Series Account was amended to
conform to and comply with Colorado law in connection with the Company's
redomestication to the State of Colorado. The Series Account is registered
with the Securities and Exchange Commission as a unit investment trust
under the provisions of the Investment Company Act of 1940, as amended.
The Series Account has various investment divisions that invest in shares
of open-end management investment companies as follows:
<TABLE>
FutureFunds Series Account
Investment Division Underlying Fund Investment
---------------------------------- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Profile Maxim Series Fund, Inc. - Aggressive Profile
Bond Maxim Series Fund, Inc. - Bond
Conservative Profile Maxim Series Fund, Inc. - Conservative Profile
Corporate Bond Maxim Series Fund, Inc. - Corporate Bond
Founders Blue Chip Maxim Series Fund, Inc. - Founders Blue Chip
Growth Index Maxim Series Fund, Inc. - Growth Index
International Equity Maxim Series Fund, Inc. - International Equity
INVESCO ADR Maxim Series Fund, Inc. - INVESCO ADR
INVESCO Balanced Maxim Series Fund, Inc. - INVESCO Balanced
INVESCO Small-Cap Growth Maxim Series Fund, Inc. - INVESCO Small-Cap Growth
Mid-Cap Maxim Series Fund, Inc. - Mid-Cap Growth Fund 1 (Janus)
Mid-Cap Growth Maxim Series Fund, Inc. - T. Rowe Price Mid-Cap Growth
Moderate Profile Maxim Series Fund Inc. - Moderate Profile
Moderately Aggressive Profile Maxim Series Fund, Inc. - Moderately Aggressive Profile
Moderately Conservative Profile Maxim Series Fund, Inc. - Moderately Conservative Profile
Money Market Maxim Series Fund, Inc. - Money Market
Small-Cap Aggressive Growth Maxim Series Fund, Inc. - Small-Cap Aggressive Growth
Small-Cap Index Maxim Series Fund, Inc. - Small-Cap Index
Small-Cap Value Maxim Series Fund, Inc. - Small-Cap Value (Ariel)
Stock Index Maxim Series Fund, Inc. - Stock Index
T. Rowe Price Equity/Income Maxim Series Fund, Inc. - T. Rowe Price Equity/Income
Total Return Maxim Series Fund, Inc. - Total Return
U.S. Government Securities Maxim Series Fund, Inc. - U.S. Government Securities
Value Index Maxim Series Fund, Inc. - Value Index
VIP II Asset Manager Fidelity Investments - VIP II Asset Manager
VIP Growth Fidelity Investments - VIP Growth
VP Balanced American Century VP Funds - VP Balanced
VP Capital Appreciation American Century VP Funds - VP Capital Appreciation
</TABLE>
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the
Series Account, which are in accordance with the accounting principles
generally accepted in the investment company industry.
Security Transactions - Security transactions are recorded on the trade
date. Cost of investments sold is determined on the basis of identified cost.
Dividend income is accrued as of the ex-dividend date and expenses are
accrued on a daily basis.
Security Valuation - The investments in shares of the underlying funds are
valued at the closing net asset value per share as determined by the
appropriate portfolio at year-end.
The cost of investments represents shares of the underlying funds that
were purchased by the Series Account. Purchases are made at the net asset
value from net purchase payments or through reinvestment of all
distributions from the underlying fund.
Federal Income Taxes - The Series Account income is automatically applied
to increase contract reserves. Under the existing federal income tax law,
this income is not taxed to the extent that it is applied to increase
reserves under a contract. The Company reserves the right to charge the
Series Account for federal income taxes attributable to the Series Account
if such taxes are imposed in the future.
Net Transfers - Net transfers include transfers between investment
divisions of the Series Account as well as transfers between other investment
options of the Company.
3. CHARGES UNDER THE CONTRACT
Contact Maintenance Charge - To compensate the Company for administrative
services, a contract maintenance charge of not more than $60 is deducted
from each participant's account on the first day of each calendar year. If
the account is established after the beginning of the year, the charge is
deducted on the first day of the next calendar quarter and is prorated for
the portion of the year remaining.
Charges Incurred for Total or Partial Surrenders - Pursuant to the
contract, charges will be made for total or partial surrenders of a
contract in excess of the "free amount" before the retirement date by a
deduction from a participant's account. The "free amount" is an amount
equal to 10% of the participant account value at December 31 of the
calendar year prior to the partial or total surrender.
Deductions for Premium Taxes - The Company presently intends to pay any
premium tax levied by any governmental entity as a result of the existence
of the participant accounts or the Series Account.
Deductions for Assumption of Mortality and Expense Risk - The Company
deducts an amount, computed daily, from the net asset value of the Series
Account investments, equal to an annual rate of 1.25%, .95%, .75%, or
.55%, depending on the size of the contract. This charge is designed to
compensate the Company for its assumption of certain mortality, death
benefit and expense risks. The level of this charge is guaranteed and will
not change.
<PAGE>
4. RELATED PARTY SERVICES
The Company's parent, The Great-West Life Assurance Company, served as
investment advisor to Maxim Series Fund, Inc. through October 31, 1996.
Effective November 1, 1996, a wholly owned subsidiary of the Company, GW
Capital Management, Inc., serves as investment advisor. Fees are assessed
against the average daily net asset value of the Funds to compensate GW
Capital Management, Inc. for investment advisory services.
5. COMPONENTS OF NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL
The following is a summary of the net assets applicable to outstanding
units of capital at December 31, 1997, for each investment division.
<TABLE>
Units Unit Value Total Variable Annuity
Contract Liabilities
-------------------------------------------------------------------------
Investment Division:
Aggressive Profile:
<S> <C> <C> <C> <C>
Category 0.55 594.163243 $ 10.313849 $ 6,128
Category 0.75 - 10.307200 -
Category 0.95 9,576.109013 10.302383 98,657
Category 1.25 58,762.772868 10.292071 604,790
Bond:
Category 0.55 3,958.647601 10.484197 41,503
Category 0.75 19,087.435040 10.382714 198,179
Category 0.95 251,460.216018 11.076624 2,785,330
Category 1.25 1,688,345.669689 28.355731 47,874,276
Conservative Profile:
Category 0.55 - 10.342389 -
Category 0.75 - 10.336103 -
Category 0.95 94,228.092845 10.330076 973,383
Category 1.25 72,034.416178 10.320594 743,438
Corporate Bond:
Category 0.55 10,505.755056 11.210043 117,770
Category 0.75 140.056287 10.545831 1,477
Category 0.95 84,830.685114 12.574739 1,066,724
Category 1.25 986,392.608321 15.085396 14,880,123
Founders Blue Chip:
Category 0.55 1,908.526256 10.476450 19,995
Category 0.75 - 10.470071 -
Category 0.95 7,818.570427 10.463937 81,813
Category 1.25 81,095.131866 10.454281 847,791
</TABLE>
<PAGE>
<TABLE>
Units Unit Value Total Variable Annuity
Contract Liabilities
-------------------------------------------------------------------------
Investment Division:
Growth Index:
<S> <C> <C> <C> <C>
Category 0.55 1,592.272645 $ 10.464452 $ 16,662
Category 0.75 - 10.458151 -
Category 0.95 1,779.768132 10.450771 18,600
Category 1.25 47,353.025744 10.442312 494,475
International Equity:
Category 0.55 39,222.195171 10.142756 397,821
Category 0.75 2,087.937654 9.419831 19,668
Category 0.95 557,569.310775 12.393634 6,910,310
Category 1.25 2,831,592.936632 13.425304 38,014,996
INVESCO ADR:
Category 0.55 34,886.432065 11.145940 388,842
Category 0.75 7.105621 10.006956 71
Category 0.95 149,143.916166 13.876008 2,069,522
Category 1.25 314,943.721621 14.895521 4,691,251
INVESCO Balanced:
Category 0.55 14,831.936166 12.531222 185,862
Category 0.75 1,275.719198 10.634542 13,567
Category 0.95 340,420.995201 12.657379 4,308,838
Category 1.25 4,925,017.356910 12.615743 62,132,754
INVESCO Small-Cap Growth:
Category 0.55 110,005.544069 11.804299 1,298,538
Category 0.75 754.640359 11.112101 8,386
Category 0.95 296,221.154870 15.896580 4,708,903
Category 1.25 1,340,084.310740 19.205815 25,737,412
Mid-Cap:
Category 0.55 34,374.339035 11.233499 386,144
Category 0.75 2,545.660634 10.999129 28,000
Category 0.95 422,167.921917 12.136106 5,123,475
Category 1.25 2,495,810.835736 15.991037 39,910,604
Mid-Cap Growth:
Category 0.55 1,741.247856 10.332079 17,991
Category 0.75 - 10.325744 -
Category 0.95 12,739.097700 10.319561 131,462
Category 1.25 128,683.855171 10.310047 1,326,736
Moderate Profile:
Category 0.55 2,249.508964 10.243391 23,043
Category 0.75 - 10.237009 -
Category 0.95 44,770.910895 10.230956 458,049
Category 1.25 110,105.334181 10.222628 1,125,566
Units Unit Value Total Variable Annuity
Contract Liabilities
-------------------------------------------------------------------------
Investment Division:
Moderately Aggressive Profile:
Category 0.55 2,109.960328 $ 10.348650 $ 21,835
Category 0.75 - 10.342125 -
Category 0.95 53,828.368354 10.336138 556,377
Category 1.25 141,839.791951 10.326763 1,464,747
Moderately Conservative Profile:
Category 0.55 - 10.211819 -
Category 0.75 - 10.205612 -
Category 0.95 53,438.522311 10.199485 545,045
Category 1.25 53,608.553227 10.190337 546,290
Money Market:
Category 0.55 875,612.098927 10.468094 9,165,989
Category 0.75 11,698.042093 10.249984 119,905
Category 0.95 1,402,319.600578 10.892709 15,275,059
Category 1.25 3,877,164.136522 18.300747 70,955,000
Small-Cap Aggressive Growth:
Category 0.55 1,448.498631 10.027189 14,524
Category 0.75 - 10.021173 -
Category 0.95 9,792.139576 10.014227 98,061
Category 1.25 70,399.459585 10.005999 704,417
Small-Cap Index:
Category 0.55 20,427.361161 12.032979 245,802
Category 0.75 1,923.320447 11.137868 21,422
Category 0.95 147,236.048776 14.283906 2,103,106
Category 1.25 711,865.973518 16.084805 11,450,225
Small-Cap Value:
Category 0.55 5,933.431431 12.716591 75,453
Category 0.75 395.115253 11.811794 4,667
Category 0.95 4,787.543292 15.504998 74,231
Category 1.25 113,566.690763 17.029500 1,933,984
Stock Index:
Category 0.55 94,900.396720 13.147603 1,247,713
Category 0.75 167,748.341315 10.948462 1,836,586
Category 0.95 2,328,852.180913 16.274119 37,900,018
Category 1.25 8,215,445.988314 57.442530 471,916,000
T. Rowe Price Equity/Income:
Category 0.55 136,599.233958 12.812439 1,750,169
Category 0.75 1,715.124091 11.140360 19,107
Category 0.95 561,621.667181 15.744916 8,842,686
Category 1.25 3,595,375.074029 19.470002 70,001,959
Units Unit Value Total Variable Annuity
Contract Liabilities
-------------------------------------------------------------------------
Investment Division:
Total Return:
Category 0.95 0.004160 $ 13.785076 $ -
Category 1.25 285.718047 15.688365 4,482
U.S. Government Securities:
Category 0.55 3,531.323159 10.620184 37,503
Category 0.75 739.298000 10.466902 7,738
Category 0.95 112,314.593391 11.229698 1,261,259
Category 1.25 3,225,407.454358 13.512487 43,583,276
Value Index:
Category 0.55 - 10.841692 -
Category 0.75 - 10.835108 -
Category 0.95 12,307.011476 10.828306 133,265
Category 1.25 55,506.370178 10.818960 600,523
VIP II Asset Manager:
Category 0.55 41,233.131448 11.999312 494,769
Category 0.75 1,232.167239 10.744848 13,240
Category 0.95 243,166.128046 14.269010 3,469,740
Category 1.25 2,104,778.426066 14.498394 30,515,907
VIP Growth:
Category 0.55 157,223.900019 12.280241 1,930,747
Category 0.75 3,446.984569 10.816912 37,286
Category 0.95 588,801.028003 13.363369 7,868,365
Category 1.25 3,352,899.816540 17.771742 59,586,871
VP Balanced:
Category 0.95 3,607.778874 12.975488 46,813
Category 1.25 1,890.460847 16.412538 31,027
VP Capital Appreciation:
Category 0.55 14,859.837089 9.621200 142,969
Category 0.75 449.772952 10.094049 4,540
Category 0.95 331,874.619876 9.006924 2,989,169
Category 1.25 3,207,248.867044 13.480251 43,234,519
TOTAL $1,175,173,310
----------------------------------------------------------------------------------===========================
</TABLE>
<PAGE>
FUTUREFUNDS SERIES
6. SELECTED DATA
The following is a summary of selected data for a unit of capital of the Series
Account at the beginning and end of the year and the number of units outstanding
at December 31, 1997, 1996, 1995, 1994, and 1993.
<TABLE>
-------------------------------------------------------------------------------------------------------------
Aggressive Profile Bond
------------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Date Commenced
Operations 09/11/97 09/11/97 09/11/97 09/11/97 01/01/97 06/13/97 12/04/95 11/15/83
1997
Beginning Unit
Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.44 $26.82
=====================================------------=================================================-----------
Ending Unit Value $10.31 $10.31 $10.30 $10.29 $10.48 $10.38 $11.08 $28.36
=====================================------------=================================================-----------
Number of Units
Outstanding 594.16 - 9,576.11 58,762.77 3,958.65 19,087.44 251,460.22 1,688,345.67
=====================================------------=================================================-----------
1996
Beginning Unit Value $10.11 $26.05
==================================================---------------==================--------------
Ending Unit Value $10.44 $26.82
==================================================---------------==================--------------
Number of Units Outstanding 287,152.67 1,890,635.84
==================================================---------------==================--------------
1995
Beginning Unit Value $10.00 $22.89
==================================================---------------==================---------------
Ending Unit Value $10.11 $26.05
==================================================---------------==================---------------
Number of Units Outstanding 197,590.07 2,010,468.99
==================================================---------------==================---------------
1994
Beginning Unit Value $23.74
==============================================================================----------------
Ending Unit Value $22.89
==============================================================================----------------
Number of Units Outstanding 2,102,049.13
==============================================================================----------------
1993
Beginning Unit Value $22.14
==============================================================================----------------
Ending Unit Value $23.74
----------------------------------------------------------------------------------------------
Number of Units Outstanding 2,301,785.20
----------------------------------------------------------------------------------------------
(Continued)
6. SELECTED DATA
--------------------------------------------------------------------------------------------------
Conservative Profile Corporate Bond
-------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 09/11/97 09/11/97 09/11/97 09/11/97 01/01/97 06/13/97 12/04/95 02/02/95
1997
Beginning Unit Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $11.26 $13.55
===========================================--------------=====================================----------
Ending Unit Value $10.34 $10.34 $10.33 $10.32 $11.21 $10.55 $12.57 $15.09
===========================================--------------=====================================----------
Number of Units Outstanding - - 94,228.09 72,034.42 10,505.76 140.06 84,830.69 986,392.61
===========================================--------------=====================================----------
1996
Beginning Unit Value $10.30 $12.44
===========================================--------------=====================================----------
Ending Unit Value $11.26 $13.55
===========================================--------------=====================================----------
Number of Units Outstanding 38,958.69 478,757.71
===========================================--------------=====================================----------
1995
Beginning Unit Value $10.00 $10.00
===========================================--------------=====================================----------
Ending Unit Value $10.30 $12.44
===========================================--------------=====================================----------
Number of Units Outstanding 269.42 220,637.10
===========================================--------------=====================================----------
1994
Beginning Unit Value
===========================================--------------============================-
Ending Unit Value
===========================================--------------============================-
Number of Units Outstanding
===========================================----------------=============================-
1993
Beginning Unit Value
================================================----------------=============================-
Ending Unit Value
================================================----------------=============================-
Number of Units Outstanding
-------------------------------------------------------------------------------
---------------
(Continued)
6. SELECTED DATA
--------------------------------------------------------------------------------
Founders Blue Chip Growth Index
--------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97
1997
Beginning Unit Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
=============================================------------==================================-------------
Ending Unit Value $10.48 $10.47 $10.46 $10.45 $10.46 $10.46 $10.45 $10.44
=============================================------------==================================-------------
Number of Units Outstanding 1,908.53 - 7,818.57 81,095.13 1,592.27 - 1,779.77 47,353.03
=============================================------------==================================-------------
1996
Beginning Unit Value
================================================----------------=================-
Ending Unit Value
================================================----------------=================-
Number of Units Outstanding
================================================----------------=================-
1995
Beginning Unit Value
================================================----------------=================-
Ending Unit Value
================================================----------------=================
Number of Units Outstanding
================================================----------------=================
1994
Beginning Unit Value
================================================----------------=================
Ending Unit Value
================================================----------------=================
Number of Units Outstanding
================================================----------------=================
1993
Beginning Unit Value
================================================----------------=================
Ending Unit Value
================================================----------------=================
Number of Units Outstanding
---------------------------------------------------------------------------------
6. SELECTED DATA
-------------------------------------------------------------------------------------------------------
International Equity INVESCO ADR
-------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 04/13/94 01/01/97 06/13/97 12/04/95 01/05/95
1997
Beginning Unit Value $10.00 $10.00 $12.27 $13.33 $10.00 $10.00 $12.50 $13.46
=======================================----------------=====================================------------
Ending Unit Value $10.14 $9.42 $12.39 $13.43 $11.15 $10.01 $13.88 $14.90
=======================================----------------=====================================------------
Number of Units Outstanding 39,222.20 2,087.94 557,569.31 2,831,592.94 34,886.43 7.11 149,143.92 314,943.72
=======================================----------------=====================================------------
1996
Beginning Unit Value $10.36 $11.29 $10.41 $11.25
=======================================----------------========================================--------
Ending Unit Value $12.27 $13.33 $12.50 $13.46
=======================================----------------========================================--------
Number of Units Outstanding 548,157.84 2,249,181.67 74,310.25 126,363.18
=======================================----------------======================================----------
1995
Beginning Unit Value $10.00 $10.49 $10.00 $10.00
=======================================----------------========================================-------
Ending Unit Value $10.36 $11.29 $10.41 $11.25
=======================================----------------========================================-----
Number of Units Outstanding 290,190.44 1,645,237.34 1,130.83 23,104.73
=======================================----------------========================================
1994
Beginning Unit Value $10.00
=======================================----------------============
Ending Unit Value $10.49
=======================================----------------============
Number of Units Outstanding 1,075,821.94
=======================================----------------============
1993
Beginning Unit Value
=======================================----------------============
Ending Unit Value
=======================================----------------============
Number of Units Outstanding
-------------------------------------------------------------------
6. SELECTED DATA
---------------------------------------------------------------------------------------------
INVESCO Balanced INVESCO Small-Cap Growth
----------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 10/31/96 10/31/96 01/01/97 06/13/97 12/04/95 01/09/95
1997
Beginning Unit Value $10.00 $10.00 $10.14 $10.13 $10.00 $10.00 $13.52 $16.38
=======================================---------------===================================-------------
Ending Unit Value $12.53 $10.63 $12.66 $12.62 $11.80 $11.11 $15.90 $19.21
=======================================---------------===================================-------------
Number of Units Outstanding 14,831.94 1,275.72 340,421.00 4,925,017.36 110,005.54 754.64 296,221.15 1,340,084.31
=======================================---------------===================================-------------
1996
Beginning Unit Value $10.00 $10.00 $10.77 $13.09
================================================----------------===============-------------
Ending Unit Value $10.14 $10.13 $13.52 $16.38
================================================----------------===============-------------
Number of Units Outstanding 4,262.66 22,568.19 159,393.34 776,719.68
================================================----------------===============-------------
1995
Beginning Unit Value $10.00 $10.00
================================================----------------===========================-------------
Ending Unit Value $10.77 $13.09
================================================----------------===========================-------------
Number of Units Outstanding 24,147.18 210,982.04
================================================----------------===========================-------------
1994
Beginning Unit Value
================================================----------------===========================-------------
Ending Unit Value
================================================----------------===========================-------------
Number of Units Outstanding
================================================----------------===========================-------------
1993
Beginning Unit Value
================================================----------------===========================-------------
Ending Unit Value
================================================----------------===========================-------------
Number of Units Outstanding
--------------------------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
------------------------------------------------------------------------------------------------------
Mid-Cap Mid-Cap Growth
------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 04/13/94 09/11/97 09/11/97 09/11/97 09/11/97
1997
Beginning Unit Value $10.00 $10.00 $10.85 $14.34 $10.00 $10.00 $10.00 $10.00
=======================================--------------====================================-------------
Ending Unit Value $11.23 $11.00 $12.14 $15.99 $10.33 $10.33 $10.32 $10.31
=======================================--------------====================================-------------
Number of Units Outstanding 34,374.34 2,545.66 422,167.92 2,495,810.84 1,741.25 - 12,739.10 128,683.86
=======================================--------------====================================-------------
1996
Beginning Unit Value $10.34 $13.70
================================================----------------======-
Ending Unit Value $10.85 $14.34
================================================----------------======-
Number of Units Outstanding 528,556.23 2,440,068.07
================================================----------------======-
1995
Beginning Unit Value $10.00 $10.96
================================================----------------==================
Ending Unit Value $10.34 $13.70
================================================----------------==================
Number of Units Outstanding 194,687.27 1,715,174.42
================================================----------------==================
1994
Beginning Unit Value $10.00
================================================----------------==================
Ending Unit Value $10.96
================================================----------------==================
Number of Units Outstanding 788,758.55
================================================----------------==================
1993
Beginning Unit Value
================================================----------------==================
Ending Unit Value
================================================----------------==================
Number of Units Outstanding
----------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
-------------------------------------------------------------------------------------------------------
Moderate Profile Moderately Aggressive Profile
--------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97 09/11/97
1997
Beginning Unit Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
=======================================-------------=========================================----------
Ending Unit Value $10.24 $10.24 $10.23 $10.22 $10.35 $10.34 $10.34 $10.33
=======================================-------------=========================================----------
Number of Units Outstanding 2,249.51 - 44,770.91 110,105.33 2,109.96 - 53,828.37 141,839.79
=======================================-------------=========================================----------
1996
Beginning Unit Value
=======================================-------------=========================================----------
Ending Unit Value
=======================================-------------========================================---------
Number of Units Outstanding
=======================================-------------========================================---------
1995
Beginning Unit Value
=======================================-------------===============================-------
Ending Unit Value
=======================================-------------===============================-------
Number of Units Outstanding
=======================================-------------===============================-------
1994
Beginning Unit Value
=======================================-------------===============================-------
Ending Unit Value
=======================================-------------===============================-------
Number of Units Outstanding
=======================================-------------===============================-------
1993
Beginning Unit Value
=======================================-------------===============================-------
Ending Unit Value
=======================================-------------===============================-------
Number of Units Outstanding
------------------------------------------------------------------------------------------
(Continued)
6. SELECTED DATA
------------------------------------------------------------------------------------------------------
Moderately Conservative Profile Money Market
------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 09/11/97 09/11/97 09/11/97 09/11/97 01/01/97 06/13/97 12/04/95 11/15/83
1997
Beginning Unit Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.44 $17.60
===================================-------------=====================================-------------
Ending Unit Value $10.21 $10.21 $10.20 $10.19 $10.47 $10.25 $10.89 $18.30
===================================-------------=====================================-------------
Number of Units Outstanding - - 53,438.52 53,608.55 875,612.10 11,698.04 1,402,319.60 3,877,164.14
===================================-------------=====================================-------------
1996
Beginning Unit Value $10.04 $16.96
================================================----------------=====================-------------
Ending Unit Value $10.44 $17.60
================================================----------------=====================-------------
Number of Units Outstanding 343,499.44 3,129,281.92
================================================----------------=====================-------------
1995
Beginning Unit Value $10.00 $16.25
================================================----------------=====================-------------
Ending Unit Value $10.04 $16.96
================================================----------------=====================-------------
Number of Units Outstanding 169,096.04 2,880,571.67
================================================----------------=====================-------------
1994
Beginning Unit Value $15.84
================================================----------------=====================-------------
Ending Unit Value $16.25
================================================----------------=====================-------------
Number of Units Outstanding 2,277,816.08
================================================----------------=====================-------------
1993
Beginning Unit Value $15.60
================================================----------------=====================-------------
Ending Unit Value $15.84
================================================----------------=====================-------------
Number of Units Outstanding 684,668.93
--------------------------------------------------------------------------------------------------
(Continued)
6. SELECTED DATA
-------------------------------------------------------------------------------------------
Small-Cap Aggressive Growth Small-Cap Index
----------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 09/11/97 09/11/97 09/11/97 09/11/97 01/01/97 06/13/97 12/04/95 03/15/94
1997
Beginning Unit Value $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $11.92 $13.46
======================================-------------====================================-------------
Ending Unit Value $10.03 $10.02 $10.01 $10.01 $12.03 $11.14 $14.28 $16.08
======================================-------------====================================-------------
Number of Units Outstanding 1,448.50 - 9,792.14 70,399.46 20,427.36 1,923.32 147,236.05 711,865.97
======================================-------------====================================-------------
1996
Beginning Unit Value $10.43 $11.82
================================================----------------======================-------------
Ending Unit Value $11.92 $13.46
================================================----------------======================-------------
Number of Units Outstanding 132,987.33 477,902.35
================================================----------------======================-------------
1995
Beginning Unit Value $10.00 $9.48
================================================----------------======================-------------
Ending Unit Value $10.43 $11.82
================================================----------------======================-------------
Number of Units Outstanding 72,120.51 296,281.36
================================================----------------======================-------------
1994
Beginning Unit Value $10.00
================================================----------------======================-------------
Ending Unit Value $9.48
================================================----------------======================-------------
Number of Units Outstanding 152,895.00
================================================----------------======================-------------
1993
Beginning Unit Value
================================================----------------======================-------------
Ending Unit Value
================================================----------------======================-------------
Number of Units Outstanding
---------------------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
--------------------------------------------------------------------------------------------------------
Small-Cap Value Stock Index
-------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 11/04/94 01/01/97 06/13/97 12/04/95 11/15/83
1997
Beginning Unit Value $10.00 $10.00 $12.24 $13.48 $10.00 $10.00 $12.43 $44.00
======================================------------========================================-------------
Ending Unit Value $12.72 $11.81 $15.50 $17.03 $13.15 $10.95 $16.27 $57.44
======================================------------========================================-------------
Number of Units Outstanding 5,933.43 395.12 4,787.54 113,566.69 94,900.40 167,748.34 2,328,852.18 8,215,445.99
======================================------------========================================-------------
1996
Beginning Unit Value $10.48 $11.58 $10.30 $36.57
================================================----------------==================-------------
Ending Unit Value $12.24 $13.48 $12.43 $44.00
================================================----------------==================-------------
Number of Units Outstanding 1,652.65 39,184.70 2,057,207.66 7,884,581.79
================================================----------------==================-------------
1995
Beginning Unit Value $10.00 $10.15 $10.00 $27.30
================================================----------------==================-------------
Ending Unit Value $10.48 $11.58 $10.30 $36.57
================================================----------------==================-------------
Number of Units Outstanding 164.60 30,919.44 937,180.75 7,636,165.40
================================================----------------==================-------------
1994
Beginning Unit Value $10.00 $27.61
================================================----------------==========================-------------
Ending Unit Value $10.15 $27.30
================================================----------------==========================-------------
Number of Units Outstanding 0.01 7,589,448.89
================================================----------------==========================-------------
1993
Beginning Unit Value $25.44
================================================----------------==========================-------------
Ending Unit Value $27.61
================================================----------------==========================-------------
Number of Units Outstanding 9,325,064.15
-------------------------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
---------------
------------------------------------------------------------------------------------------------
T. Rowe Price Equity/Income Total Return
------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 11/09/94 12/04/95 04/20/94
1997
Beginning Unit Value $10.00 $10.00 $12.34 $15.30 $11.27 $12.87
================================================----------------=================---------------
Ending Unit Value $12.81 $11.14 $15.74 $19.47 $13.79 $15.69
================================================----------------=================---------------
Number of Units Outstanding 136,599.23 1,715.12 561,621.67 3,595,375.07 - 285.72
================================================----------------=================---------------
1996
Beginning Unit Value $10.43 $12.98 $10.18 $11.66
================================================----------------=================---------------
Ending Unit Value $12.34 $15.30 $11.27 $12.87
================================================----------------=================---------------
Number of Units Outstanding 276,648.63 1,702,863.67 26,145.88 382,179.84
================================================----------------=================---------------
1995
Beginning Unit Value $10.00 $9.85 $10.00 $9.62
================================================----------------=================---------------
Ending Unit Value $10.43 $12.98 $10.18 $11.66
================================================----------------=================---------------
Number of Units Outstanding 1,324.94 550,610.66 4,862.59 214,442.71
================================================----------------=================---------------
1994
Beginning Unit Value $10.00 $10.00
================================================----------------=================---------------
Ending Unit Value $9.85 $9.62
================================================----------------=================---------------
Number of Units Outstanding 16,574.29 58,473.26
================================================----------------=================---------------
1993
Beginning Unit Value
================================================----------------=================---------------
Ending Unit Value
================================================----------------=================---------------
Number of Units Outstanding
------------------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
-------------------------------------------------------------------------------------------------------
U.S. Government Securities Value Index
-------------------------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 04/01/85 09/11/97 09/11/97 09/11/97 09/11/97
1997
Beginning Unit Value $10.00 $10.00 $10.45 $12.61 $10.00 $10.00 $10.00 $10.00
=====================================-------------=====================================------------
Ending Unit Value $10.62 $10.47 $11.23 $13.51 $10.84 $10.84 $10.83 $10.82
=====================================-------------=====================================------------
Number of Units Outstanding 3,531.32 739.30 112,314.59 3,225,407.45 - - 12,307.01 55,506.37
=====================================-------------=====================================------------
1996
Beginning Unit Value $10.15 $12.29
================================================----------------=======================
Ending Unit Value $10.45 $12.61
================================================----------------=======================
Number of Units Outstanding 119,989.13 3,234,023.68
================================================----------------=======================
1995
Beginning Unit Value $10.00 $10.71
================================================----------------=======================
Ending Unit Value $10.15 $12.29
================================================----------------=======================
Number of Units Outstanding 39,695.16 3,165,425.83
================================================----------------=======================
1994
Beginning Unit Value $11.21
================================================----------------=======================
Ending Unit Value $10.71
================================================----------------=======================
Number of Units Outstanding 2,756,894.60
================================================----------------=======================
1993
Beginning Unit Value $10.38
================================================----------------=======================
Ending Unit Value $11.21
================================================----------------=======================
Number of Units Outstanding 1,892,295.35
---------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
--------------------------------------------------------------------------------------------
VIP II Asset Manager VIP Growth
-------------------------------------------------------------------------------------
0.55 0.75 0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 01/01/97 06/13/97 12/04/95 04/21/94 01/01/97 06/13/97 12/04/95 04/21/94
1997
Beginning Unit Value $10.00 $10.00 $11.91 $12.17 $10.00 $10.00 $10.93 $14.57
=======================================-------------====================================-------------
Ending Unit Value $12.00 $10.74 $14.27 $14.50 $12.28 $10.82 $13.36 $17.77
=======================================-------------====================================-------------
Number of Units Outstanding 41,233.13 1,232.17 243,166.13 2,104,778.43 157,223.90 3,446.98 588,801.03 3,352,899.82
=======================================-------------====================================-------------
1996
Beginning Unit Value $10.49 $10.76 $9.62 $12.86
==========================================----------------=======================-----------------
Ending Unit Value $11.91 $12.17 $10.93 $14.57
==========================================----------------=======================-----------------
Number of Units Outstanding 220,279.35 1,593,034.53 463,651.69 2,500,808.02
==========================================----------------=======================-----------------
1995
Beginning Unit Value $10.00 $9.31 $10.00 $9.62
==========================================----------------=======================-----------------
Ending Unit Value $10.49 $10.76 $9.62 $12.86
==========================================----------------=======================-----------------
Number of Units Outstanding 118,138.13 1,202,943.32 164,201.34 1,502,634.51
==========================================----------------=======================-----------------
1994
Beginning Unit Value $10.00 $10.00
==========================================----------------=======================-----------------
Ending Unit Value $9.31 $9.62
==========================================----------------============================------------------
Number of Units Outstanding 768,426.17 559,313.44
==========================================----------------============================------------------
1993
Beginning Unit Value
==========================================----------------============================------------------
Ending Unit Value
==========================================----------------============================------------------
Number of Units Outstanding
--------------------------------------------------------------------------------------------------------
(Continued)
<PAGE>
6. SELECTED DATA
------------------
---------------------------------------------------------------------------------------------------
VP Balanced VP Capital Appreciation
---------------------------------------------------------------------------------------------------
0.95 1.25 0.55 0.75 0.95 1.25
Date Commenced Operations 12/04/95 08/03/92 01/01/97 06/13/97 12/04/95 08/07/92
1997
Beginning Unit Value $11.31 $14.36 $10.00 $10.00 $9.40 $14.11
===============-----------------=================================================------------------
Ending Unit Value $12.98 $16.41 $9.62 $10.09 $9.01 $13.48
===============-----------------=================================================------------------
Number of Units Outstanding 3,607.78 1,890.46 14,859.84 449.77 331,874.62 3,207,248.87
===============-----------------=================================================------------------
1996
Beginning Unit Value $10.18 $12.96 $9.92 $14.93
===============-----------------=================================================------------------
Ending Unit Value $11.31 $14.36 $9.40 $14.11
===============-----------------=================================================------------------
Number of Units Outstanding 237,929.35 3,238,207.89 585,432.85 4,560,706.32
===============-----------------=================================================------------------
1995
Beginning Unit Value $10.00 $10.83 $10.00 $11.53
===============-----------------=================================================------------------
Ending Unit Value $10.18 $12.96 $9.92 $14.93
===============-----------------=================================================------------------
Number of Units Outstanding 84,634.10 3,153,172.39 292,581.15 4,954,474.12
===============-----------------=================================================------------------
1994
Beginning Unit Value $10.90 $11.82
===============-----------------=================================================------------------
Ending Unit Value $10.83 $11.53
===============-----------------=================================================------------------
Number of Units Outstanding 2,877,738.22 4,420,493.64
===============-----------------=================================================------------------
1993
Beginning Unit Value $10.25 $10.85
===============-----------------=================================================------------------
Ending Unit Value $10.90 $11.82
===============-----------------=================================================------------------
Number of Units Outstanding 1,752,730.91 2,607,850.29
---------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
<PAGE>
7. CHANGE IN SHARES
The following is a summary of the net change in total investment shares
held in each of the respective underlying funds:
<TABLE>
For the Year Ended December 31,
----------------------------------------------------------------
1997 1996
----------------------------------------------------------------
<S> <C> <C>
American Century VP Funds - VP Balanced (6,425,711) 774,557
American Century VP Funds - VP Captial Appreciation (2,074,068) 556,746
Fidelity Investments - VIP Growth 523,467 623,502
Fidelity Investments - VIP II Asset Manager 587,289 400,002
Maxim - Aggressive Profile 733,767 -
Maxim - Bond (2,778,122) 723,506
Maxim - Conservative Profile 266,080 -
Maxim - Corporate Bond 6,144,022 3,811,747
Maxim - Founders Blue Chip 604,520 -
Maxim - Growth Index 230,257 -
Maxim - International Equity 7,421,032 9,049,497
Maxim - INVESCO ADR 2,862,605 1,652,269
Maxim - INVESCO Balanced 50,376,146 200,662
Maxim - INVESCO Small-Cap Growth 9,219,267 7,884,395
Maxim - Mid Cap Growth Fund 1 (Janus) 677,464 9,949,156
Maxim - Moderate Aggressive Profile 1,685,584 -
Maxim - Moderate Conservative Profile 539,907 -
Maxim - Moderate Profile 1,080,669 -
Maxim - Money Market 10,456,507 13,156,918
Maxim - Small-Cap Aggressive Growth 439,262 -
Maxim - Small-Cap Index 4,341,209 2,894,941
Maxim - Small-Cap Value (Ariel) 1,816,649 93,128
Maxim - Stock Index 14,926,728 12,694,531
Maxim - T Rowe Price Equity/Income 23,900,703 14,243,969
Maxim - T Rowe Price Mid-Cap Growth 1,072,600 -
Maxim - Total Return (3,703,605) 1,927,590
Maxim - US Government Securities 1,344,428 4,400,340
Maxim - Value Index 318,290 -
</TABLE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY (A
wholly-owned subsidiary of The Great-West Life Assurance
Company)
Consolidated Financial Statements for the
Years Ended December 31, 1997, 1996, and 1995
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying consolidated balance sheets of Great-West Life
& Annuity Insurance Company (a wholly-owned subsidiary of The Great-West Life
Assurance Company) and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Great-West Life & Annuity Insurance
Company and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
January 23, 1998
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS 1997 1996
- ------
-------------- ---------------
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost (fair value $2,151,476 and $ 2,082,716 $ 1,992,681
$2,041,064)
Available-for-sale, at fair value (amortized cost $6,541,422 6,698,629 6,206,478
and $6,151,519)
Common stock 39,021 19,715
Mortgage loans on real estate, net 1,235,594 1,487,575
Real estate, net 93,775 67,967
Policy loans 2,657,116 2,523,477
Short-term investments, available-for-sale (cost approximates 399,131 419,008
fair value)
-------------- ---------------
Total Investments 13,205,982 12,716,901
Cash 126,278 125,182
Reinsurance receivable 84,364 196,958
Deferred policy acquisition costs 255,442 282,780
Investment income due and accrued 165,827 198,441
Other assets 121,543 57,244
Premiums in course of collection 77,008 74,693
Deferred income taxes 193,820 214,404
Separate account assets 7,847,451 5,484,631
-------------- ---------------
TOTAL ASSETS $ 22,077,715 $ 19,351,234
============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
- ------------------------------------
-------------- ---------------
POLICY BENEFIT LIABILITIES:
Policy reserves $ 11,102,719 $ 11,022,595
Policy and contract claims 375,499 372,327
Policyholders' funds 165,106 153,867
Experience refunds 84,935 87,399
Provision for policyholders' dividends 62,937 51,279
GENERAL LIABILITIES:
Due to Parent Corporation 126,656 151,431
Repurchase agreements 325,538 286,736
Commercial paper 54,058 84,682
Other liabilities 605,032 488,818
Undistributed earnings on
participating business 141,865 133,255
Separate account liabilities 7,847,451 5,484,631
-------------- ---------------
Total Liabilities 20,891,796 18,317,020
-------------- ---------------
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
600 shares issued and outstanding 60,000 60,000
Series B, cumulative, 1500 shares authorized,
liquidation value of $100,000 per share,
200 shares issued and outstanding 20,000 20,000
Series C, cumulative, 1500 shares authorized,
none outstanding
Series D, cumulative, 1500 shares authorized,
none outstanding
Series E, non-cumulative, 2,000,000
shares authorized, issued, and outstanding, 41,800 41,800
liquidation value of $20.90 per share
Common stock, $1 par value; 50,000,000 shares authorized;
7,032,000 shares issued and outstanding 7,032 7,032
Additional paid-in capital 690,748 664,265
Unrealized gains (losses) on securities available-for-sale, net 52,807 14,951
Retained earnings 313,532 226,166
-------------- ---------------
Total Stockholder's Equity 1,185,919 1,034,214
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 22,077,715 $ 19,351,234
============== ===============
</TABLE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
------------- ------------- -------------
REVENUES:
<S> <C> <C> <C>
Annuity contract charges and premiums $ 115,054 $ 91,881 $ 79,816
Life, accident, and health premiums earned (net of
premiums
ceded (recaptured) totaling $(94,646), $(104,250)
and $60,880) 1,163,855 1,107,367 987,611
Net investment income 897,572 836,642 835,046
Net realized gains (losses) on investments 9,800 (21,078) 7,465
------------- ------------- -------------
2,186,281 2,014,812 1,909,938
------------- ------------- -------------
BENEFITS AND EXPENSES:
Life and other policy benefits (net of reinsurance
recoveries totaling $44,871, $52,675,
and $43,574) 543,903 515,750 557,469
Increase in reserves 245,811 229,198 98,797
Interest paid or credited to contractholders 527,784 561,786 562,263
Provision for policyholders' share of earnings
(losses)
on participating business 3,753 (7) 2,027
Dividends to policyholders 63,799 49,237 48,150
------------- ------------- -------------
1,385,050 1,355,964 1,268,706
Commissions 102,150 106,561 122,926
Operating expenses 419,616 336,719 314,810
Premium taxes 23,108 25,021 26,884
------------- -------------
-------------
1,929,924 1,824,265 1,733,326
INCOME BEFORE INCOME TAXES 256,357 190,547 176,612
------------- ------------- -------------
PROVISION FOR INCOME TAXES:
Current 103,794 77,134 88,366
Deferred (6,197) (21,162) (39,434)
------------- ------------- -------------
97,597 55,972 48,932
------------- ------------- -------------
NET INCOME $ 158,760 $ 134,575 $ 127,680
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
Net
Additional Unrealized
Preferred Stock Common Stock Paid-In Gains Retained
---------------------- ---------------------
Shares Amount Shares Amount Capital (Losses) Earnings Total
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 2,000,800 $ 121,800 7,032,000 $ 7,032 $ 657,265 $ (78,427) $ 69,561 $ 777,231
Change in net unrealized
gains (losses) 137,190 137,190
Dividends (48,980) (48,980)
Net income 127,680 127,680
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1995 2,000,800 121,800 7,032,000 7,032 657,265 58,763 148,261 993,121
Change in net unrealized
gains (losses) (43,812) (43,812)
Capital contributions 7,000 7,000
Dividends (56,670) (56,670)
Net income 134,575 134,575
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1996 2,000,800 121,800 7,032,000 7,032 664,265 14,951 226,166 1,034,214
Change in net unrealized
gains (losses) 37,856 37,856
Capital contributions 26,483 26,483
Dividends (71,394) (71,394)
Net income 158,760 158,760
---------- ---------- ----------- -------- ---------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1997 2,000,800 $ 121,800 7,032,000 $ 7,032 $ 690,748 $ 52,807 $ 313,532 $ 1,185,919
========== ========== =========== ======== ========== =========== ========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
-------------- ------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 158,760 $ 134,575 $ 127,680
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain (loss) allocated to participating 3,753 (7) 2,027
policyholders
Amortization of investments 409 15,518 26,725
Realized losses (gains) on disposal of
investments
and provisions for mortgage loans and (9,800) 21,078 (7,465)
real estate
Amortization 46,929 49,454 49,464
Deferred income taxes (6,224) (20,258) (39,763)
Changes in assets and liabilities:
Policy benefit liabilities 498,114 358,393 346,975
Reinsurance receivable 112,594 136,966 (38,776)
Accrued interest and other receivables 30,299 24,778 (17,617)
Other, net 58,865 (8,076) 8,834
-------------- ------------- -------------
Net cash provided by operating 893,699 712,421 458,084
activities
-------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities, and
redemptions of investments:
Fixed maturities
Held-to-maturity
Sales 18,821
Maturities and redemptions 359,021 516,838 655,993
Available-for-sale
Sales 3,174,246 3,569,608 4,211,649
Maturities and redemptions 771,737 803,369 253,747
Mortgage loans 248,170 235,907 260,960
Real estate 36,624 2,607 4,401
Common stock 17,211 1,888
Purchases of investments:
Fixed maturities
Held-to-maturity (439,269) (453,787) (490,228)
Available-for-sale (4,314,722) (4,753,154) (4,932,566)
Mortgage loans (2,532) (23,237) (683)
Real estate (64,205) (15,588) (5,302)
Common stock (29,608) (12,113) (4,218)
-------------- ------------- -------------
Net cash used in investing (243,327) (127,662) (27,426)
activities
-------------- ------------- -------------
(Continued)
</TABLE>
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
------------- ------------- -------------
FINANCING ACTIVITIES:
<S> <C> <C> <C>
Contract withdrawals, net of deposits $ (577,538) $ (413,568) $ (217,190)
Due to Parent Corporation (19,522) 1,457 (9,143)
Dividends paid (71,394) (56,670) (48,980)
Net commercial paper repayments (30,624) (172) (4,832)
Net repurchase agreements (repayments) borrowings 38,802 (88,563) (191,195)
Capital contributions 11,000 7,000
------------- ------------- -------------
Net cash used in financing activities (649,276) (550,516) (471,340)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 1,096 34,243 (40,682)
CASH, BEGINNING OF YEAR 125,182 90,939 131,621
------------- ------------- -------------
CASH, END OF YEAR $ 126,278 $ 125,182 $ 90,939
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes $ 86,829 $ 103,700 $ 83,841
Interest 15,124 15,414 17,016
</TABLE>
See notes to consolidated financial statements. (Concluded)
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996,
AND 1995 (Amounts in Thousands, except Share Amounts)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company (the Company)
is a wholly-owned subsidiary of The Great-West Life Assurance Company
(the Parent Corporation). The Company is an insurance company domiciled
in the State of Colorado. The Company offers a wide range of life
insurance, health insurance, and retirement and investment products to
individuals, businesses, and other private and public organizations
throughout the United States.
Basis of Presentation - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The consolidated financial
statements include the accounts of the Company and its subsidiaries. All
material intercompany transactions and balances have been eliminated in
consolidation.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed maturities at
the time of purchase. Fixed maturities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost unless fair value is less
than cost and the decline is deemed to be other than temporary,
in which case they are written down to fair value and a new cost
basis is established.
Fixed maturities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the net unrealized gains and
losses reported as a separate component of stockholder's equity.
The net unrealized gains and losses in derivative financial
instruments used to hedge available-for-sale securities are
included in the separate component of stockholder's equity.
The amortized cost of fixed maturities classified as
held-to-maturity or available-for-sale is adjusted for
amortization of premiums and accretion of discounts using the
effective interest method over the estimated life of the related
bonds. Such amortization is included in net investment income.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net realized gains (losses)
on investments.
2. Mortgage loans on real estate are carried at their unpaid
balances adjusted for any unamortized premiums or discounts and
any valuation reserves. Interest income is accrued on the unpaid
principal balance. Discounts and premiums are amortized to net
investment income using the effective interest method. Accrual of
interest is discontinued on any impaired loans where collection
of interest is doubtful.
The Company maintains an allowance for credit losses at a level
that, in management's opinion, is sufficient to absorb possible
credit losses on its impaired loans and to provide adequate
provision for any possible future losses in the portfolio.
Management's judgement is based on past loss experience, current
and projected economic conditions, and extensive situational
analysis of each individual loan. The measurement of impaired
loans is based on the fair value of the collateral.
<PAGE>
3. Real estate is carried at the lower of cost or fair value, net of
costs of disposal. Effective January 1, 1996, the Company adopted
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". The implementation
of this statement had no material effect on the Company's
financial statements.
4. Investments in common stock are carried at fair value.
5. Policy loans are carried at their unpaid balances.
6. Short-term investments include securities purchased with initial
maturities of one year or less and are carried at amortized cost.
The Company considers short-term investments to be
available-for-sale and amortized cost approximates fair value.
Gains and losses realized on disposal of investments are determined on a
specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs, which
consist of sales commissions and other costs that vary with and are
primarily related to the production of new and renewal business, have
been deferred to the extent recoverable. Deferred costs associated with
the annuity products are being amortized over the life of the contracts
in proportion to the emergence of gross profits. Retrospective
adjustments of these amounts are made when the Company revises its
estimates of current or future gross profits. Deferred costs associated
with traditional life insurance are amortized over the premium paying
period of the related policies in proportion to premium revenues
recognized. Amortization of deferred policy acquisition costs totaled
$44,298, $47,089, and $48,054 in 1997, 1996, and 1995, respectively.
Separate Account - Separate account assets and related liabilities are
carried at fair value. The Company's separate accounts invest in shares
of Maxim Series Fund, Inc. and Orchard Series Fund, Inc., both
diversified, open-end management investment companies which are
affiliates of the Company, shares of other external mutual funds, or
government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and annuity policy
reserves with life contingencies of $5,741,596 and $5,242,753, at
December 31, 1997 and 1996, respectively, are computed on the basis of
estimated mortality, investment yield, withdrawals, future maintenance
and settlement expenses, and retrospective experience rating premium
refunds. Annuity contract reserves without life contingencies of
$5,346,516 and $5,766,533, at December 31, 1997 and 1996, respectively,
are established at the contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance companies are
carried as reinsurance receivable on the balance sheet (See Note 3). The
cost of reinsurance related to long-duration contracts is accounted for
over the life of the underlying reinsured policies using assumptions
consistent with those used to account for the underlying policies.
Policy and Contract Claims - Policy and contract claims include
provisions for reported claims in process of settlement, valued in
accordance with the terms of the related policies and contracts, as well
as provisions for claims incurred and unreported based primarily on
prior experience of the Company.
Participating Fund Account - Participating life and annuity policy
reserves are $3,901,297 and $3,591,077 at December 31, 1997 and 1996,
respectively. Participating business approximates 50.5% and 50.3% of the
Company's ordinary life insurance in force and 91.1% and 92.2% of
ordinary life insurance premium income at December 31, 1997 and 1996,
respectively.
<PAGE>
The liability for undistributed earnings on participating business was
increased (decreased) by $8,610 and $(3,362) in 1997 and 1996, which
represented $3,753 and $(7) of gains (losses) on participating business,
increases (decreases) of $2,102 and $(2,924) to reflect the net change
in unrealized gains on securities classified as available-for-sale, net
of certain adjustments to policy reserves and income taxes, and
increases (decreases) of $2,755 and $(431) due to reinsurance
transactions (See Note 2).
The amount of dividends to be paid from undistributed earnings on
participating business is determined annually by the Board of Directors.
Amounts allocable to participating policyholders are consistent with
established Company practice.
The Company has established a Participating Policyholder Experience
Account (PPEA) for the benefit of all participating policyholders which
is included in the accompanying consolidated balance sheet. Earnings
associated with the operation of the PPEA are credited to the benefit of
all participating policyholders. In the event that the assets of the
PPEA are insufficient to provide contractually guaranteed benefits, the
Company must provide such benefits from its general assets.
The Company has also established a Participation Fund Account (PFA) for
the benefit of the participating policyholders previously transferred to
the Company from the Parent under an assumption reinsurance transaction.
The PFA is part of the PPEA. Earnings derived from the operation of the
PFA accrue solely for the benefit of the acquired participating
policyholders.
Recognition of Premium Income and Benefits and Expenses - Life insurance
premiums are recognized as earned. Annuity premiums with life
contingencies are recognized as received. Accident and health premiums
are earned on a monthly pro rata basis. Revenues for annuity and other
contracts without significant life contingencies consist of contract
charges for the cost of insurance, contract administration, and
surrender fees that have been assessed against the contract account
balance during the period. Benefits and expenses on policies with life
contingencies are associated with premium income by means of the
provision for future policy benefit reserves, resulting in recognition
of profits over the life of the contracts. The average crediting rate on
annuity products was approximately 6.6%, 6.8%, and 7.2% in 1997, 1996,
and 1995.
Income Taxes - Income taxes are recorded using the asset and liability
approach which requires, among other provisions, the recognition of
deferred tax assets and liabilities for expected future tax consequences
of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, all
expected future events (other than the enactments or changes in the tax
laws or rules) are considered. Although realization is not assured,
management believes it is more likely than not that the deferred tax
asset, net of a valuation allowance, will be realized.
Repurchase Agreements and Securities Lending - The Company enters into
repurchase agreements with third-party broker-dealers in which the
Company sells securities and agrees to repurchase substantially similar
securities at a specified date and price. Such agreements are accounted
for as collateralized borrowings. Interest expense on repurchase
agreements is recorded at the coupon interest rate on the underlying
securities. The repurchase fee received or paid is amortized over the
term of the related agreement and recognized as an adjustment to
investment income.
The Company will implement Statement of Financial Accounting Standards
(SFAS) No. 125 "Accounting for Transfer and Servicing of Financial
Assets and Extinguishments of Liabilities" in 1998 as it relates to
repurchase agreements and securities lending arrangements. Management
estimates the effect of the change will not have a material affect on
the Company's financial statements.
<PAGE>
Derivatives - The Company makes limited use of derivative financial
instruments to manage interest rate, market, and foreign exchange risk.
Such hedging activity consists of interest rate swap agreements,
interest rate floors and caps, foreign currency exchange contracts and
equity swaps. The differential paid or received under the terms of these
contracts are recognized as an adjustment to net investment income on
the accrual method. Gains and losses on foreign exchange contracts are
deferred and recognized in net investment income when the hedged
transactions are realized.
Interest rate swap agreements are used to convert the interest rate on
certain fixed maturities from a floating rate to a fixed rate. Interest
rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Interest rate floors and caps are interest
rate protection instruments that require the payment by a counter-party
to the Company of an interest rate differential. The differential
represents the difference between current interest rates and an
agreed-upon rate, the strike rate, applied to a notional principal
amount. Foreign currency exchange contracts are used to hedge the
foreign exchange rate risk associated with bonds denominated in other
than U.S. dollars. Equity swap transactions generally involve the
exchange of variable market performance of a basket of securities for a
fixed interest rate.
Although derivative financial instruments taken alone may expose the
Company to varying degrees of market and credit risk when used solely
for hedging purposes, these instruments typically reduce overall market
and interest rate risk. The Company controls the credit risk of its
financial contracts through credit approvals, limits, and monitoring
procedures. As the Company generally enters into transactions only with
high quality institutions, no losses associated with non-performance on
derivative financial instruments have occurred or are expected to occur.
2. RELATED-PARTY TRANSACTIONS
On June 30, 1997 the Company recaptured all remaining pieces of an
individual participating insurance block of business previously
reinsured to the Parent Corporation on December 31, 1992. The Company
recorded, at estimated fair value, the following at June 30, 1997 as a
result of this transaction:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities and Stockholder's
Equity
------- -------------------------------
Cash $ 160,000 Policy reserves $ 155,798
Bonds 17,975 Due to parent corporation 9,373
Other 60 Deferred income taxes 2,719
Undistributed earnings on
participating business (855)
Stockholder's equity 11,000
----------- ----------
$ 178,035 $ 178,035
=========== ==========
On October 31, 1996 the Company recaptured certain pieces of an
individual participating insurance block of business previously
reinsured to the Parent Corporation on December 31, 1992. The Company
recorded, at estimated fair value, the following at October 31, 1996 as
a result of this transaction:
Assets Liabilities and Stockholder's
Equity
------- -------------------------------
Cash $ 162,000 Policy reserves $ 164,839
Mortgages 19,753 Due to parent corporation 9,180
Other 118 Deferred income taxes 1,283
Undistributed earnings on
participating business (431)
Stockholder's equity 7,000
=========== ==========
$ 181,871 $ 181,871
=========== ==========
</TABLE>
<PAGE>
Effective January 1, 1997 all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. All related employee benefit plan assets and liabilities were
also transferred to the Company (see Note 9). The transfer did not have
a material effect on the Company's operating expenses as the costs
associated with the employees and the benefit plans were charged
previously to the Company under administrative service agreements
between the Company and the Parent Corporation.
Prior to January 1997, the Parent Corporation administered, distributed,
and underwrote business for the Company and administered the Company's
investment portfolio under various administrative agreements. As of
January 1, 1997, the Company performs these services for the U.S.
operations of the Parent Corporation. The following represents
allocations between the two companies for services provided pursuant to
these service agreements:
<TABLE>
Years Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Investment management revenue (expense) $ 801 $ (14,800) $ (15,182)
Administrative and underwriting revenue 6,292 (304,599) (301,529)
(payments)
</TABLE>
At December 31, 1997 and 1996, due to Parent Corporation includes $8,957
and $31,639 due on demand and $117,699 and $119,792 of notes payable
which bear interest and mature at various dates through December 31,
2005. These notes may be prepaid in whole or in part at any time without
penalty; the issuer may not demand payment before the maturity date. The
due on demand to the Parent Corporation bears interest at the public
bond rate (7.1% and 7.0% at December 31, 1997 and 1996, respectively)
while the remainder bear interest at various rates ranging from 6.6% to
9.5%.
3. REINSURANCE
In the normal course of business, the Company seeks to limit its
exposure to loss on any single insured and to recover a portion of
benefits paid by ceding risks to other insurance enterprises under
excess coverage and co-insurance contracts. The Company retains a
maximum of $1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could
result in losses to the Company; consequently, allowances are
established for amounts deemed uncollectible. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of
credit risk arising from similar geographic regions, activities, or
economic characteristics of the reinsurers to minimize its exposure to
significant losses from reinsurer insolvencies. At December 31, 1997 and
1996, the reinsurance receivable had a carrying value of $84,364 and
$196,958, respectively.
Total reinsurance premiums assumed from the Parent Corporation were
$1,712, $1,693, and $1,606 in 1997, 1996, and 1995, respectively.
<PAGE>
The Company considers all accident and health policies to be
short-duration contracts. The following schedule details life insurance
in force and life and accident/health premiums:
<TABLE>
Assumed
Ceded Primarily Percentage
Primarily From of Amount
to
Gross the Parent Other Net Assumed to
Amount Corporation Companies Amount Net
------------- ------------ ------------ ------------- -----------
December 31, 1997:
Life insurance in
force:
<S> <C> <C> <C> <C> <C>
Individual $ 24,598,679 $ 4,040,398 $ 3,667,235 $ 24,225,516 15.1%
Group 51,179,343 2,031,477 53,210,820 3.8%
------------- ------------ ------------ -------------
Total $ 75,778,022 $ 4,040,398 $ 5,698,712 $ 77,436,336
============= ============ ============ =============
Premiums:
Life insurance $ 361,093 $ (127,291)$ 19,923 $ 508,307 3.9%
Accident/health 628,398 32,645 59,795 655,548 9.1%
------------- ------------ ------------ -------------
Total $ 989,491 $ (94,646)$ 79,718 $ 1,163,855
============= ============ ============ =============
December 31, 1996:
Life insurance in
force:
Individual $ 23,409,823 $ 5,246,079 $ 3,482,118 $ 21,645,862 16.1%
Group 47,682,237 1,817,511 49,499,748 3.7%
------------- ------------ ------------ -------------
Total $ 71,092,060 $ 5,246,079 $ 5,299,629 $ 71,145,610
============= ============ ============ =============
Premiums:
Life insurance $ 334,127 $ (111,743)$ 19,633 $ 465,503 4.2%
Accident/health 592,577 7,493 56,780 641,864 8.8%
------------- ------------ ------------ -------------
Total $ 926,704 $ (104,250)$ 76,413 $ 1,107,367
============= ============ ============ =============
December 31, 1995:
Life insurance in
force:
Individual $ 22,388,520 $ 7,200,882 $ 3,476,784 $ 18,664,422 18.6%
Group 48,415,592 1,954,313 50,369,905 3.9%
============= ============ ============ =============
Total $ 70,804,112 $ 7,200,882 $ 5,431,097 $ 69,034,327
============= ============ ============ =============
Premiums:
Life insurance $ 339,342 $ 51,688 $ 21,028 $ 308,682 6.8%
Accident/health 623,626 9,192 64,495 678,929 9.5%
------------- ------------ ------------ -------------
Total $ 962,968 $ 60,880 $ 85,523 $ 987,611
============= ============ ============ =============
<PAGE>
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
Investment income:
Fixed maturities and short-term $ 633,975 $ 601,913 $ 591,561
investments
Mortgage loans on real estate 118,274 140,823 171,008
Real estate 20,990 5,292 3,936
Policy loans 194,826 175,746 163,547
Other 22,119 3,321
--------------- --------------- --------------
990,184 927,095 930,052
Investment expenses, including
interest on amounts charged
by the Parent Corporation
of $9,758, $11,282, and $10,778 92,612 90,453 95,006
--------------- --------------- --------------
Net investment income $ 897,572 $ 836,642 $ 835,046
=============== =============== ==============
5. NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) on investments are as follows:
Years Ended December 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
Realized gains (losses):
Fixed Maturities $ 15,966 $ (11,624) $ 28,166
Mortgage loans on real estate 1,081 1,143 1,309
Real estate 363 (10)
Provisions (7,610) (10,597) (22,000)
--------------- --------------- ---------------
Net realized gains (losses) on $ 9,800 $ (21,078) $ 7,465
investments
=============== =============== ===============
<PAGE>
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1997 are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---------- --------- ---------- --------- ----------
Held-to-Maturity:
U.S. Treasury Securities
and obligations
of U.S. Government $ 25,883 $ 1,186 $ 25 $ 27,044 25,883
Agencies - Other:
Collateralized mortgage 5,006 174 5,180 5,006
obligations
Public utilities 245,394 11,214 3 256,605 245,394
Corporate bonds 1,668,710 57,036 3,069 1,722,677 1,668,710
Foreign governments 10,268 659 10,927 10,268
State and municipalities 127,455 1,588 129,043 127,455
--------- ---------- ---------
---------- ----------
$ 2,082,716 $ 71,857 $ 3,097 $ 2,151,476 2,082,716
Available-for-Sale:
U.S. Treasury Securities
and obligations
of U.S. Government
Agencies:
Collateralized $ 652,975 $ 17,339 $ 310 $ 670,004 670,004
mortgage obligations
Direct mortgage
pass-through
certificates 917,216 7,911 2,668 922,459 922,459
Other 297,337 1,794 244 298,887 298,887
Collateralized mortgage 682,158 19,494 1,453 700,199 700,199
obligations
Public utilities 549,435 8,716 1,320 556,831 556,831
Corporate bonds 3,265,039 107,740 4,350 3,368,429 3,368,429
Foreign governments 131,586 4,115 60 135,641 135,641
State and municipalities 45,676 503 46,179 46,179
----------
---------- --------- ---------- ---------
$ 6,541,422 $ 167,612 $ 10,405 $ 6,698,629 6,698,629
========== ========= ========== ========= ==========
<PAGE>
6. SUMMARY OF INVESTMENTS [Continued]
Fixed maturities owned at December 31, 1996 are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---------- --------- ---------- --------- ---------
Held-to-Maturity:
U.S. Treasury Securities
and obligations
of U.S. Government $ 10,935 $ 630 $ 106 $ 11,459 $ 10,935
Agencies - Other:
Public utilities 284,954 12,755 320 297,389 284,954
Corporate bonds 1,634,745 41,195 7,360 1,668,580 1,634,745
Foreign governments 12,577 556 3 13,130 12,577
State and municipalities 49,470 1,051 15 50,506 49,470
--------- ---------- ---------
---------- ---------
$ 1,992,681 $ 56,187 $ 7,804 $ 2,041,064$ 1,992,681
========== ========= ========== ========= =========
Available-for-Sale:
U.S. Treasury Securities
and obligations
of U.S. Government
Agencies:
Collateralized $ 658,612 $ 8,058 $ 3,700 $ 662,970 $ 662,970
mortgage obligations
Direct mortgage
pass-through
certificates 844,291 5,093 10,908 838,476 838,476
Other 359,220 596 2,686 357,130 357,130
Collateralized mortgage 614,773 13,619 3,553 624,839 624,839
obligations
Public utilities 628,382 6,523 5,375 629,530 629,530
Corporate bonds 2,907,875 56,551 5,250 2,959,176 2,959,176
Foreign governments 110,013 1,762 5,673 106,102 106,102
State and municipalities 28,353 21 119 28,255 28,255
---------
---------- --------- ---------- ---------
$ 6,151,519 $ 92,223 $ 37,264 $ 6,206,478$ 6,206,478
========== ========= ========== ========= =========
</TABLE>
The collateralized mortgage obligations consist primarily of sequential
and planned amortization classes with final stated maturities of two to
thirty years and average lives of less than one to fifteen years.
Prepayments on all mortgage-backed securities are monitored monthly and
amortization of the premium and/or the accretion of the discount
associated with the purchase of such securities is adjusted by such
prepayments.
In November 1995, the Financial Accounting Standards Board issued a
special report entitled "A Guide to Implementation of Statement of
Financial Accounting Standards No. 115 (SFAS No. 115) on Accounting for
Certain Investments in Debt and Equity Securities". In accordance with
the adoption of this guidance, the Company reassessed the classification
of its investment portfolio in December 1995 and reclassed securities
totalling $2,119,814 from held-to-maturity to available-for-sale. In
connection with this reclassification, an unrealized gain, net of
related adjustments, of $23,449 was recognized in stockholder's equity
at the date of transfer.
See Note 8 for additional information on policies regarding estimated
fair value of fixed maturities.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1997, by projected maturity, are shown
below. Actual maturities will likely differ from these projections
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<PAGE>
<TABLE>
Held-to-Maturity Available-for-Sale
------------------------- -------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 286,088 $ 290,164 $ 447,703 $ 462,719
Due after one year through five 787,376 809,237 1,182,390 1,209,692
years
Due after five years through ten 718,818 751,753 842,019 865,153
years
Due after ten years 129,957 137,190 447,642 466,949
Mortgage-backed securities 5,006 5,180 2,252,349 2,292,662
Asset-backed securities 155,471 157,952 1,369,319 1,401,454
------------ -----------
=========== ============ ===========
$ 2,082,716 $ 2,151,476 $ 6,541,422 $ 6,698,629
============ =========== ============ ===========
</TABLE>
Proceeds from sales of securities available-for-sale were $3,174,246,
$3,569,608, and $4,211,649 during 1997, 1996, and 1995, respectively.
The realized gains on such sales totaled $20,543, $24,919, and $39,755
for 1997, 1996, and 1995, respectively. The realized losses totaled
$10,643, $40,748, and $15,516 for 1997, 1996, and 1995, respectively.
During 1997, 1996, and 1995 held-to-maturity securities with an
amortized cost of $0, $0, and $18,087 were sold due to credit
deterioration with insignificant realized gains and losses.
At December 31, 1997 and 1996, pursuant to fully collateralized
securities lending arrangements, the Company had loaned $162,817 and
$230,419 of fixed maturities, respectively.
The Company engages in hedging activities to manage interest rate and
exchange risk. The following table summarizes the 1997 financial hedge
instruments:
<TABLE>
Notional Strike/Swap
December 31, 1997 Amount Rate Maturity
--------------------------------- --------------- ---------------------- ---------------
<S> <C> <C> <C>
Interest Rate Floor $ 100,000 4.5% (LIBOR) 1999
Interest Rate Caps 565,000 6.75% to 11.82%(CMT) 1999 to 2002
Interest Rate Swaps 212,139 6.20% to 9.35% 01/98 to
02/2003
Foreign Currency Exchange 57,168 N/A 09/98 to
Contracts 07/2006
Equity Swap 100,000 5.64% 12/98
The following table summarizes the 1996 financial hedge instruments:
Notional Strike/Swap
December 31, 1996 Amount Rate Maturity
--------------------------------- --------------- ---------------------- ---------------
Interest Rate Floor $ 100,000 4.5% [LIBOR] 1999
Interest Rate Caps 260,000 11.0% to 11.82%[CMT] 2000 to 2001
Interest Rate Swaps 187,847 6.20% to 9.35% 01/98 to
02/2003
Foreign Currency Exchange 61,012 N/A 09/98 to
Contracts 03/2003
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
</TABLE>
<PAGE>
The Company has established specific investment guidelines designed to
emphasize a diversified and geographically dispersed portfolio of
mortgages collateralized by commercial and industrial properties located
in the United States. The Company's policy is to obtain collateral
sufficient to provide loan-to-value ratios of not greater than 75% at
the inception of the mortgages. At December 31, 1997 approximately 32%
and 10% of the Company's mortgage loans were collateralized by real
estate located in California and Michigan, respectively.
The following represents impairments and other information with respect
to impaired loans:
<TABLE>
1997 1996
----------- -----------
<S> <C> <C> <C>
Loans with related allowance for credit losses of $2,493 and $ 13,193 $ 16,443
$2,793
Loans with no related allowance for credit losses 20,013 31,709
Average balance of impaired loans during the year 37,890 39,064
Interest income recognized [while impaired] 2,428 923
Interest income received and recorded [while impaired] using
the cash
basis method of recognition 2,484 1,130
As part of an active loan management policy and in the interest of
maximizing the future return of each individual loan, the Company may
from time to time alter the original terms of certain loans. These
restructured loans, all performing in accordance with their modified
terms that are not impaired, aggregated $64,406, and $68,254 at December
31, 1997, and 1996, respectively.
The following table presents changes in the allowance for credit losses:
1997 1996 1995
---------------- ---------------- ----------------
Balance, beginning of year $ 65,242 63,994 $ 57,987 $
Provision for loan losses 4,521 4,470 15,877
Chargeoffs (2,521) (3,468) (10,480)
Recoveries 246 610
================ ================ ================
Balance, end of year $ 67,242 65,242 $ 63,994 $
================ ================ ================
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially supported
by a $50,000 standby letter-of-credit. At December 31, 1997, commercial
paper outstanding has maturities ranging from 41 to 99 days and interest
rates ranging from 5.6% to 5.8%. At December 31, 1996, maturities ranged
from 49 to 123 days and interest rates ranged from 5.4% to 5.6%.
<PAGE>
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all assets and
liabilities and hedge contracts considered to be financial instruments:
December 31,
-------------------------------------------------------
1997 1996
---------------------------- --------------------------
Estimated
Carrying Estimated Carrying Fair
Amount Fair Value Amount Value
------------ -------------- ----------- -------------
ASSETS:
Fixed maturities and
short-term
investments $ 9,180,476 $ 9,249,235 $ 8,618,167 $ 8,666,550
Mortgage loans on real 1,235,594 1,261,949 1,487,575 1,506,162
estate
Policy loans 2,657,116 2,657,116 2,523,477 2,523,477
Common stock 39,021 39,021 19,715 19,715
LIABILITIES:
Annuity contract reserves
without life 5,346,516 5,373,818 5,766,533 5,808,095
contingencies
Policyholders' funds 165,106 165,106 153,867 153,867
Due to Parent Corporation 126,656 124,776 151,431 154,479
Repurchase agreements 325,538 325,538 286,736 286,736
Commercial paper 54,058 54,058 84,682 84,682
HEDGE CONTRACTS:
Interest rate floor 25 25 62 124
Interest rate cap 130 130 173 173
Interest rate swaps 4,265 4,265 4,746 4,746
Foreign currency exchange 3,381 3,381 (8,954) (8,954)
contracts
Equity swaps 856 856
</TABLE>
The estimated fair value of financial instruments has been determined
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
The estimated fair value of fixed maturities that are publicly traded
are obtained from an independent pricing service. To determine fair
value for fixed maturities not actively traded, the Company utilized
discounted cash flows calculated at current market rates on investments
of similar quality and term.
Mortgage loans fair value estimates generally are based on a discounted
cash flow basis. A discount rate "matrix" is incorporated whereby the
discount rate used in valuing a specific mortgage generally corresponds
to that mortgage's remaining term. The rates selected for inclusion in
the discount rate "matrix" reflect rates that the Company would quote if
placing loans representative in size and quality to those currently in
the portfolio.
Policy loans accrue interest generally at variable rates with no fixed
maturity dates and, therefore, estimated fair value approximates
carrying value.
The fair value of annuity contract reserves without life contingencies
is estimated by discounting the cash flows to maturity of the contracts,
utilizing current credited rates for similar products.
The estimated fair value of policyholders' funds is the same as the
carrying amount as the Company can change the crediting rates with 30
days notice.
The estimated fair value of due to Parent Corporation is based on
discounted cash flows at current market spread rates on high quality
investments.
The carrying value of repurchase agreements and commercial paper is a
reasonable estimate of fair value due to the short-term nature of the
liabilities.
The estimated fair value of financial hedge instruments, all of which
are held for other than trading purposes, is the estimated amount the
Company would receive or pay to terminate the agreement at each
year-end, taking into consideration current interest rates and other
relevant factors. Included in the net gain position for interest rates
swaps are $0 and $160 of unrealized losses in 1997 and 1996,
respectively. Included in the net loss position for foreign currency
exchange contracts are $0 and $8,954 of loss exposures in 1997 and 1996,
respectively.
9. EMPLOYEE BENEFIT PLANS
Effective January 1, 1997, all employees of the U.S. operations of the
Parent Corporation and the related benefit plans were transferred to the
Company. See Note 2 for further discussion.
The Company's defined benefit pension plan (pension plan) covers
substantially all of its employees. The benefits are based on years of
service, age at retirement, and the compensation during the last seven
years of employment. The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned
in the future. Investments of the pension plan are managed by the
Company and invested primarily in investment contracts and separate
accounts.
The Company's Parent had previously accounted for the pension plan under
the Canadian Institute of Chartered Accountants (CICA) guidelines and
had recorded a prepaid pension asset of $19,091. As generally accepted
accounting principles do not materially differ from CICA guidelines and
the transfer is between related parties, the prepaid pension asset was
transferred at cost. As a result, the Company recorded the following
effective January 1, 1997:
<TABLE>
<S> <C> <C>
Prepaid pension cost $ 19,091 Undistributed earnings $ 3,608
on
participating
business
Stockholder's equity 15,483
=============== ==============
$ 19,091 $ 19,091
=============== ==============
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 87, "Employers Accounting for Pensions" effective January 1, 1997,
immediately following the transfer. The following table sets forth the
pension plan's funded status and amounts at December 31, 1997, in
accordance with SFAS No. 87:
Actuarial present value of accumulated benefit obligation,
including vested benefits of $88,235 $ 91,387
Actuarial present value of projected benefit obligation
for service rendered to date 112,331
Plan assets at fair value 162,422
--------------
Plan assets in excess of projected benefit obligation 50,091
Unrecognized net (gain) loss from past experience
different from that assumed (8,595)
Unrecognized net obligation being recognized over 15 years (21,198)
--------------
Prepaid pension cost included in other assets $ 20,298
==============
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 7.0% and 4.5%, respectively.
<PAGE>
Components of net pension cost for the year ended December 31, 1997 were
as follows:
Service cost - benefits earned during the period $ 5,491
Interest accrued on projected benefit obligation 7,103
Return on plan assets (28,072)
Net amortization and deferral 14,271
---------------
Net pension benefit $ (1,207)
===============
The Company also sponsors a post-retirement medical plan (medical plan)
which provides health benefits to employees who have worked for 15 years
and attained age 65 while in service with the Company. The medical plan
is contributory and contains other cost sharing features which may be
adjusted annually for the expected general inflation rate. The Company's
policy will be to fund the cost of the medical plan benefits in amounts
determined at the discretion of management. The Plan as of January 1,
1997 was not funded. The Parent Company was not required under CICA
guidelines to record any liability related to the Plan.
Effective January 1, 1997, on the date of transfer, the Company has
adopted SFAS No. 106, "Post-retirement Benefits Other Than Pensions."
The Company has elected to delay recognition of the unfunded accumulated
post-retirement benefit obligation and has set up a transition
obligation to be amortized over 20 years.
The following table sets forth the medical plan status of December 31,
1997:
Accumulated post-retirement benefit obligation:
Retirees $ 4,985
Fully eligible active plan participants 2,438
Other active plan participants 12,031
---------------
19,454
Unrecognized net gain (loss) from past experience different from (1,500)
that assumed
Unrecognized net transition obligation at December 31, 1997,
being recognized over 20 years (15,352)
---------------
Accrued post-retirement benefit obligation included in other $ 2,602
liabilities
===============
For measurement purposes, a 7.5% annual rate of increase in the per
capita cost of covered health care benefits was assumed. The health care
cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend
rates by 1% in each year would increase the accumulated post-retirement
benefit obligation as of December 31, 1997 by $3,847.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.0%.
Components of net other post-retirement benefit cost for the year ended
December 31, 1997 were as follows:
Service cost - benefits earned during the year $ 1,158
Interest accrued on benefits obligation 1,191
Net amortization and deferral 808
---------------
Net other post-retirement benefit cost $ 3,157
===============
The Company sponsors a defined contribution 401(k) retirement plan which
provides eligible participants with the opportunity to defer up to 15%
of compensation. The Company matches 50% of the first 5% of participant
contributions. Company contributions for the year ended December 31,
1997 totalled $3,475.
</TABLE>
<PAGE>
10. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income tax rate
and the Company's effective rate:
<TABLE>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal tax rate 35.0 % 35.0 % 35.0 %
Change in tax rate resulting from:
Settlement of prior years tax (6.5) (4.7)
Provision for contingencies 8.4
Change in valuation allowance 0.8 (7.8)
Investment income not subject to (0.3) (1.0) (0.5)
federal tax
State and environmental taxes 0.6 0.7 0.7
Other, net 0.9 (1.4) 0.3
======== ======== ========
Total 38.1 % 29.4 % 27.7 %
======== ======== ========
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows:
1997 1996
-------------------------- --------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Asset Liability Tax Asset Liability
----------- ------------- ----------- -------------
Policyholder reserves 163,975 $ $ 151,239 $
Deferred policy acquisition 47,463 57,031
costs
Deferred acquisition cost 79,954 70,413
proxy tax
Investment assets 2,226 35,658
Net operating loss 9,427 12,295
carryforwards
Other 10,729 5,366
----------- ------------- ----------- -------------
Subtotal 255,582 58,192 274,971 57,031
Valuation allowance (3,570) (3,536)
=========== ============= =========== =============
Total Deferred Taxes 252,012 $ 58,192 $ 271,435 $ 57,031
=========== ============= =========== =============
</TABLE>
Amounts related to investment assets above include $30,085 and $8,530
related to the unrealized gains on the Company's fixed maturities
available-for-sale at December 31, 1997 and 1996, respectively.
The Company files a separate tax return and, therefore, losses incurred
by subsidiaries cannot be offset against operating income of the
Company. At December 31, 1997, the Company's subsidiaries have
approximately $26,934 of net operating loss carryforwards, expiring
through the year 2011. The tax benefit of subsidiaries' net operating
loss carryforwards, net of a valuation allowance of $3,570 and $3,536
are included in the deferred tax assets at December 31, 1997 and 1996,
respectively.
The Company's valuation allowance was increased/(decreased) in 1997,
1996, and 1995 by $34, $1,463, and $(13,145), respectively, as a result
of the re-evaluation by management of future estimated taxable income in
the subsidiaries.
Under pre-1984 life insurance company income tax laws, a portion of life
insurance company gain from operations was not subject to current income
taxation but was accumulated, for tax purposes, in a memorandum account
designated as "policyholders' surplus account." The aggregate
accumulation in the account is $7,742 and the Company does not
anticipate any transactions which would cause any part of the amount to
become taxable. Accordingly, no provision has been made for possible
future federal income taxes on this accumulation.
<PAGE>
Pursuant to a December 31, 1993 agreement between the Company and its
Parent whereby the Company assumed responsibility for the Parent
Corporation's income tax liability for fiscal years prior to 1994, the
Company had previously recorded a contingent liability provision. The
Company's 1997 and 1996 results of operations include a release of
$47,750 and $25,600 from the provision, to reflect the resolution of
certain tax issues related to 1990 - 1991 and 1988 - 1989 audit years,
respectively, with the Internal Revenue Service (IRS). In addition, in
1997 the tax provision was increased for contingent items related to
open tax years. The IRS is currently auditing tax years 1992 and 1993.
In the opinion of Company management, the amounts paid or accrued are
adequate; however, it is possible that the Company's accrued amounts may
change as a result of the completion of the IRS audits.
11. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are owned by
the Parent Corporation. The dividend rate on the Series A Stated Rate
Auction Preferred Stock (STRAPS) is 7.3% through December 30, 2002. The
Series A STRAPS are redeemable at the option of the Company on or after
December 29, 2002 at a price of $100,000 per share, plus accumulated and
unpaid dividends.
Through December 30, 1997, the Series B STRAPS had a dividend rate of
5.8%. Thereafter, short-term dividend periods of approximately 49 days
will be in effect. The dividend rate for each short-term dividend period
will be determined in accordance with a formula set out in the share
conditions. The Series B STRAPS are redeemable at the option of the
Company at the end of any short-term dividend period, at a price of
$100,000 per share, plus accumulated and unpaid dividends.
The Company's Series E 7.5% non-cumulative, non-redeemable preferred
shares are redeemable by the Company after April 1, 1999. The shares are
convertible into common shares at the option of the holder on or after
September 30, 1999, at a conversion price negotiated between the holder
and the Company or at a formula determined conversion price in
accordance with the share conditions.
The Company's net income and capital and surplus, as determined in
accordance with statutory accounting principles and practices for
December 31 are as follows:
<TABLE>
1997 1996 1995
-------------- -------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Net Income $ 181,312 $ 180,634 $ 114,931
Capital and Surplus 759,429 713,324 653,479
</TABLE>
The maximum amount of dividends which can be paid to stockholders by
insurance companies domiciled in the State of Colorado is subject to
restrictions relating to statutory surplus and statutory net gain from
operations. Statutory surplus and net gains from operations at December
31, 1997 were $759,429 and $180,834 (unaudited), respectively. The
Company should be able to pay up to $180,834 (unaudited) of dividends in
1998.
Dividends of $8,854, $8,587, and $9,217, were paid on preferred stock in
1997, 1996, and 1995, respectively. In addition, dividends of $62,540,
$48,083, and $39,763, were paid on common stock in 1997, 1996 and 1995,
respectively. Dividends are paid as determined by the Board of
Directors.
The Company is involved in various legal proceedings which arise in the
ordinary course of its business. In the opinion of management, after
consultation with counsel, the resolution of these proceedings should
not have a material adverse effect on its financial position or results
of operations.
C-11
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The statements of assets and liabilities of FutureFunds Series
Account as of December 31, 1997, the related statements of
operations for the year then ended, the statements of changes in
net assets for each of the two years then ended and the
consolidated balance sheets for Great-West Life & Annuity
Insurance Company at December 31, 1997, 1996 and the related
consolidated statements of income, stockholders equity and cash
flows for each of the three years in the period ended December
31, 1997, are included in Part B.
(b) Exhibits
Items (1), (2), (6) and (8) are incorporated by reference to
registrant's Form S-6 Registration Statement filed February 21,
1984 and Pre-Effective Amendment No. 1 thereto filed June 29,
1984.
Item (9) is incorporated by reference to registrant's
Post-Effective Amendment No. 7 to Form N-4 registration statement
filed on April 30, 1987.
Items (4), (5) and (13) are incorporated by reference to
registrant's Post-Effective Amendment No. 11 to Form N-4
registration statement filed on May 1, 1989.
Item (3) is incorporated by reference to registrant's
Post-Effective Amendment No. 23 to Form N-4 registration
statement filed on May 1, 1997.
(7) Not Applicable
(10) (a) Written Consent of Jorden Burt Berenson & Johnson, LLP
(b) Written Consent of Deloitte & Touche LLP
(c) Written Consent of Ruth B. Lurie
(11) Not Applicable
(12) Not Applicable
Example Calculations of Performance Data is attached hereto
as Exhibit (13) (14) Financial Data Schedule is attached hereto
as Exhibit (14)Item (13) is incorporated by reference to
registrant's Post-Effective Amendment No. 23 to Form N-4
registration statement filed on May 1, 1997.
(14) Not Applicable
<PAGE>
Item 25. Directors and Officers of the Depositor
Position and Offices
Name Principal Business Address with Depositor
James Balog 2205 North Southwinds Boulevard Director
Vero Beach, Florida 39263
James W. Burns, O.C. (4) Director
Orest T. Dackow (3) Director
Andre Desmarais (4) Director
Paul Desmarais, Jr. (4) Director
Robert G. Graham 574 Spoonbill Drive Director
Sarasota, FL 34236
Robert Gratton (5) Chairman
N. Berne Hart 2552 East Alameda Avenue Director
Denver, Colorado 80209
Kevin P. Kavanagh (1) Director
William Mackness 61 Waterloo Street Director
Winnipeg, Manitoba R3N 0S3
William T. McCallum (3) Director, President and
Chief Executive Officer
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited Director
P.O. Box 130
275 Commercial Street
North Sydney, Nova Scotia B2A 3M2
P. Michael Pitfield, P.C., Q.C. (4) Director
Michel Plessis-Belair, F.C.A. (4) Director
Brian E. Walsh Veritas Capital Management LLC Director
115 Putnam Ave.
Greenwich, Connecticut
John A. Brown (3) Senior Vice-President,
Financial Services, Sales
<PAGE>
Donna A. Goldin (2) Executive Vice-President,
and Chief Operating Officer,
One Corporation
Mitchell T.G. Graye (3) Senior Vice-President,
Chief Financial Officer
John T. Hughes (3) Senior Vice-President,
Chief Investment Officer
D. Craig Lennox (3) Senior Vice-President,
General Counsel and
Secretary
Dennis Low (3) Executive Vice-President,
Financial Services
Alan D. MacLennan (2) Executive Vice-President,
Employee Benefits
Steven H. Miller (2) Senior Vice-President,
Employee Benefits, Sales
James D. Motz (2) Executive Vice-President,
Employee Benefits
Charles P. Nelson (3) Senior Vice President,
Financial Services
Public Non-Profit Markets
Martin Rosenbaum (2) Senior Vice-President,
Employee Benefits, Operations
Robert K. Shaw (3) Senior Vice-President,
Financial Services,
Individual Markets
Douglas L. Wooden (3) Executive Vice-President,
Financial Services
--------------------------------------
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
<PAGE>
Item 26. Persons controlled by or under common control with the Depositor or
Registrant ORGANIZATIONAL CHART
Power Corporation of Canada
100% - Marquette Communications Corporation
100% - 171263 Canada Inc.
68.1% - Power Financial Corporation
77% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation 100% -
BenefitsCorp Equities, Inc.
100% - Greenwood Property Corporation
94% - Maxim Series Fund, Inc.*
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
100% - Orchard Series Fund
Item 27. Number of Contractowners
On February 27, 1998, there were 24 owners of non-qualified contracts and 51,271
of qualified contracts offered by Registrant.
Item 28. Indemnification
Provisions exist under the Colorado General Corporation Code and the
Bylaws of GWL&A whereby GWL&A may indemnify a director, officer, or
controlling person of GWL&A against liabilities arising under the
Securities Act of 1933. The following excerpts contain the substance of
these provisions:
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) "Corporation" includes any domestic or foreign entity that is
a predecessor of the corporation by reason of a merger,
consolidation, or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, fiduciary or agent
of another domestic or foreign corporation or other person or
employee benefit plan. A director is considered to be serving an
employee benefit plan at the corporation's request if his or her
duties to the corporation also impose duties on or otherwise
involve services by, the director to the plan or to participants
in or beneficiaries of the plan.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine,
including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a
director, the office of director in the corporation and, when
used with respect to a person other than a director as
contemplated in Section 7-109-107, means the office in the
corporation held by the officer or the employment, fiduciary, or
agency relationship undertaken by the employee, fiduciary, or
agent on behalf of the corporation. "Official capacity" does not
include service for any other domestic or foreign corporation or
other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
Section 7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to the proceeding
because the person is or was a director against liability
incurred in any proceeding if:
(a) The person conducted himself or herself in good faith;
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity
with the corporation, that his or her conduct was in
the corporation's best interests; or
(II) In all other cases, that his or her conduct was
at least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the person had
no reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed to be in the
interests of the participants in or beneficiaries of the plan is
conduct that satisfies the requirements of subparagraph (II) of
paragraph (b) of subsection (1) of this section. A director's
conduct with respect to an employee benefit plan for a purpose
that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan
shall be deemed not to satisfy the requirements of subparagraph
(a) of subsection (1) of this section.
(3) The termination of any proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or
its equivalent, is not, of itself, determinative that the
director did not meet the standard of conduct described in this
section.
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable
to the corporation; or
(b) In connection with any proceeding charging that the
director derived an improper personal benefit, whether or
not involving action in his official capacity, in which
proceeding the director was adjudged liable on the basis
that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in connection
with a proceeding by or in the right of a corporation is limited
to reasonable expenses incurred in connection with the
proceeding.
Section 7-109-103. Mandatory Indemnification of Directors.
Unless limited by the articles of incorporation, a
corporation shall be required to indemnify a person who is or was
a director of the corporation and who was wholly successful, on
the merits or otherwise, in defense of any proceeding to which he
was a party, against reasonable expenses incurred by him in
connection with the proceeding.
Section 7-109-104. Advance of Expenses to Directors.
(1) A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in
advance of the final disposition of the proceeding if:
(a) The director furnishes the corporation a written
affirmation of his good-faith belief that he has met the
standard of conduct described in Section 7-109-102;
(b) The director furnishes the corporation a written
undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately determined
that he or she did not meet such standard of conduct; and
(c) A determination is made that the facts then know to
those making the determination would not preclude
indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1)
of this section shall be an unlimited general obligation of the
director, but need not be secured and may be accepted without
reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in Section
7-109-106.
Section 7-109-105. Court-Ordered Indemnification of Directors.
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court
considers necessary, may order indemnification in the following
manner:
(a) If it determines the director is entitled to mandatory
indemnification under section 7-109-103, the court shall
order indemnification, in which case the court shall also
order the corporation to pay the director's reasonable
expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director met the
standard of conduct set forth in section 7-109-102 (1) or
was adjudged liable in the circumstances described in
Section 7-109-102 (4), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances
described Section 7-109-102 (4) is limited to reasonable
expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered
indemnification.
Section 7-109-106. Determination and Authorization of Indemnification of
Directors.
(1) A corporation may not indemnify a director under Section
7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the director
is permissible in the circumstances because he has met the
standard of conduct set forth in Section 7-109-102. A corporation
shall not advance expenses to a director under Section 7-109-104
unless authorized in the specific case after the written
affirmation and undertaking required by Section 7-109-104(1)(a)
and (1)(b) are received and the determination required by Section
7-109-104(1)(c) has been made.
(2) The determinations required to be made subsection (1) of this section shall
be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only
those directors not parties to the proceeding shall be
counted in satisfying the quorum.
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board
of directors, which committee shall consist of two or more
directors not parties to the proceeding; except that
directors who are parties to the proceeding may participate
in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph
(a) of subsection (2) of this section, and the committee cannot
be established under paragraph (b) of subsection (2) of this
section, or even if a quorum is obtained or a committee
designated, if a majority of the directors constituting such
quorum or such committee so directs, the determination required
to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner specified
in paragraph (a) or (b) of subsection (2) of this section
or, if a quorum of the full board cannot be obtained and a
committee cannot be established, by independent legal
counsel selected by a majority vote of the full board of
directors; or
(b) By the shareholders.
(4) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible; except
that, if the determination that indemnification is permissible is
made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the body
that selected such counsel.
Section 7-109-107. Indemnification of Officers, Employees, Fiduciaries, and
Agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for
court-ordered indemnification under section 7-109-105, in
each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation
to the same extent as a director; and
(c) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a
director to a greater extent, if not inconsistent with
public policy, and if provided for by its bylaws, general
or specific action of its board of directors or
shareholders, or contract.
Section 7-109-108. Insurance.
A corporation may purchase and maintain insurance on behalf
of a person who is or was a director, officer, employee,
fiduciary, or agent of the corporation and who, while a director,
officer, employee, fiduciary, or agent of the corporation, is or
was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of any
other domestic or foreign corporation or other person or of an
employee benefit plan against any liability asserted against or
incurred by the person in that capacity or arising out of his or
her status as a director, officer, employee, fiduciary, or agent
whether or not the corporation would have the power to indemnify
the person against such liability under the Section 7-109-102,
7-109-103 or 7-109-107. Any such insurance may be procured from
any insurance company designated by the board of directors,
whether such insurance company is formed under the laws of this
state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock
ownership or otherwise.
Section 7-109-109. Limitation of Indemnification of Directors.
(1) A provision concerning a corporation's indemnification of, or
advance of expenses to, directors that is contained in its
articles of incorporation or bylaws, in a resolution of its
shareholders or board of directors, or in a contract, except for
an insurance policy or otherwise, is valid only to the extent the
provision is not inconsistent with Sections 7-109-101 to
7-109-108. If the articles of incorporation limit indemnification
or advance of expenses, indemnification or advance of expenses
are valid only to the extent not inconsistent with the articles
of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a
time when he or she has not been made a named defendant or
respondent in the proceeding.
Section 7-109-110. Notice to Shareholders of Indemnification of Director.
If a corporation indemnifies or advances expenses to a
director under this article in connection with a proceeding by or
in the right of the corporation, the corporation shall give
written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders'
meeting. If the next shareholder action is taken without a
meeting at the instigation of the board of directors, such notice
shall be given to the shareholders at or before the time the
first shareholder signs a writing consenting to such action.
Bylaws of GWL&A
Article II, Section 11. Indemnification of Directors.
The Company may, by resolution of the Board of Directors,
indemnify and save harmless out of the funds of the Company to the
extent permitted by applicable law, any director, officer, or employee
of the Company or any member or officer of any committee, and his
heirs, executors and administrators, from and against all claims,
liabilities, costs, charges and expenses whatsoever that any such
director, officer, employee or any such member or officer sustains or
incurs in or about any action, suit, or proceeding that is brought,
commenced, or prosecuted against him for or in respect of any act,
deed, matter or thing whatsoever made, done, or permitted by him in or
about the execution of his duties of his office or employment with the
Company, in or about the execution of his duties as a director or
officer of another company which he so serves at the request and on
behalf of the Company, or in or about the execution of his duties as a
member or officer of any such Committee, and all other claims,
liabilities, costs, charges and expenses that he sustains or incurs, in
or about or in relation to any such duties or the affairs of the
Company, the affairs of such Committee, except such claims,
liabilities, costs, charges or expenses as are occasioned by his own
willful neglect or default. The Company may, by resolution of the Board
of Directors, indemnify and save harmless out of the funds of the
Company to the extent permitted by applicable law, any director,
officer, or employee of any subsidiary corporation of the Company on
the same basis, and within the same constraints as, described in the
preceding sentence.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
(a) BenefitsCorp Equities, Inc. (BCE") currently distributes securities
of Great-West Variable Annuity Account A, Maxim Series Account and
Pinnacle Series Account in addition to those of the Registrant.
(b) Directors and Officers of BCE
Position and Offices
Name Principal Business Address with Underwriter
Charles P. Nelson (1) Director and President
Robert K. Shaw (1) Director
John Brown (1) Director
Gregg E. Seller 18101 Von Karman Ave. Vice President
Suite 1460 Major Accounts
Irvine, CA 92715
Jack Baker (1) Vice President, Licensing
and Contracts
Glen R. Derback (1) Treasurer
Grant R. Long (1) Manager, Qualified Plan
Compliance
Beverly A. Byrne (1) Secretary and Compliance
Officer
- ------------
(1) 8515 E. Orchard Road, Englewood, Colorado 80111
(c) Commissions and other compensation received by Principal Underwriter
during registrant's last fiscal year:
<PAGE>
<TABLE>
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
BCE -0- -0- -0- -0-
</TABLE>
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained by the registrant through GWL&A, 8515 E. Orchard Road,
Englewood, Colorado 80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a
space that an applicant can check to request a Statement of
Additional Information, or (2) a postcard or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this form promptly upon written or oral request.
(d) Registrant represents that in connection with its offering of
Group Contracts as funding vehicles for retirement plans meeting
the requirement of Section 403(b) of the Internal Revenue Code of
1986, as amended, Registrant is relying on the no-action letter
issued by the Office of Insurance Products and legal Compliance,
Division of Investment Management, to the American Council of
Life Insurance dated November 28, 1988 (Ref. No. IP-6-88), and
that the provisions of paragraphs (1) - (4) thereof have been
complied with.
(e) Registrant represents that in connection with its offering of
Group Contracts as funding vehicles under the Texas Optional
Retirement Program, Registrant is relying on the exceptions
provided in Rule 6c-7 of the Investment Company Act of 1940 and
that the provisions of paragraphs (a) -(d) thereof have been
complied with.
(f) GWL&A represents the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses to be incurred and the risks
assumed by GWL&A..
<PAGE>
S-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf, in the City of Denver, State
of Colorado, on this 24 day of March, 1998.
FUTUREFUNDS SERIES ACCOUNT
(Registrant)
By: /s/ W. McCallum
William T. McCallum, President
and Chief Executive Officer of
Great-West Life & Annuity
Insurance Company
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By: /s/ W. McCallum
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities with Great-West Life &
Annuity Insurance Company and on the dates indicated:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Signature and Title Date
/s/ Robert Gratton* March 26 , 1998
- -------------------------------------------------- ------------
Director and Chairman of the Board
(Robert Gratton)
/s/ W. McCallum March 24 , 1998
- ------------------------------------- ------------
Director, President and Chief Executive
Officer (William T. McCallum)
Signature and Title Date
/s/ G.R. Derback March 24 , 1998
- -------------------------------------------------- ------------
Vice President and Comptroller
(Glen R. Derback)
/s/James Balog* March 26 , 1998
- --------------------------------------------------- ------------
Director, (James Balog)
/s/ James W. Burns* March 26 , 1998
- ------------------------------------------------- ------------
Director, (James W. Burns)
/s/ Orest T. Dackow* March 26 , 1998
- ------------------------------------------------- ------------
Director (Orest T. Dackow)
March , 1998
Director Andre Desmarais
/s/ Paul Desmarais, Jr.* March 26 , 1998
- ------------------------------------------------ ------------
Director (Paul Desmarais, Jr.)
March , 1998
Director (Robert G. Graham)
/s/ N. Berne Hart* March 26 , 1998
- ------------------------------------------------- ------------
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh* March 26 , 1998
- -------------------------------------------- ------------
Director (Kevin P. Kavanagh)
March , 1998
Director (William Mackness)
<PAGE>
Signature and Title Date
/s/ Jerrry E.A. Nickerson* March 26 , 1998
- --------------------------------------------- ------------
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield* March 26 , 1998
- ------------------------------------------------ ------------
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* March 26 , 1998
- ----------------------------------------------- ------------
Director (Michel Plessis-Belair)
/s/ Brian E. Walsh* March 26 , 1998
- -------------------------------------------------- ------------
Director (Brian E. Walsh)
*By: /s/ D. C. Lennox March 26 , 1998
----------------------------------------- ------------
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed under Post-Effective Amendment Nos. 14, 20 and 22 to
this Registration Statement.
</TABLE>
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON, LLP
<PAGE>
March 27, 1998
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 24 to the
Registration Statement on Form N-4 (File No. 2-89550) filed today by Great-West
Life & Annuity Insurance Company and FutureFunds Series Account with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 24 to Registration
Statement No. 2-89550 of FutureFunds Series Account of Great-West Life & Annuity
Insurance Company of our report dated February 12, 1998 on the financial
statements of FutureFunds Series Account and our report dated January 23, 1998
on the financial statements of Great-West Life & Annuity Insurance Company and
to the reference to us under the heading "Independent Auditors" appearing in the
Statement of Additional Information, which is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
March 27, 1998
EXHIBIT 10 (c)
WRITTEN CONSENT OF RUTH B. LURIE
<PAGE>
March 24, 1998
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: FutureFunds Series Account
Gentlemen:
I hereby consent to the use of my name under the caption "Legal Matters"
in the Prospectus for FutureFunds Series Account contained in Post-Effective
Amendment No. 24 to the Registration Statement on Form N-4 (File No. 2-89550)
filed by Great-West Life & Annuity Insurance Company and FutureFunds Series
Account with the Securities and Exchange Commission under the Securities Act of
1933, the Investment Company Act of 1940 and the amendments thereto.
Sincerely,
/s/ Ruth Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary
