MAXIM SERIES FUND, INC.
8515 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
October 1, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: Maxim Series Fund, Inc.
Maxim INVESCO Balanced Portfolio
File No. 2-75503
Ladies and Gentlemen:
Pursuant to Rule 497 of the Securities Act of 1933, filed
herewith is the
definitive prospectus and Statement of Additional
Information for the above-
captioned registrant.
If you have any questions, please call either Tom Mira,
Jorden Burt Berenson &
Johnson LLP, at (202) 965-8158 or me at (303) 689-3817.
Thank you for your assistance.
Sincerely,
/s/ Beverly A. Byrne
Beverly A. Byrne
Assistant Secretary
MAXIM SERIES FUND, INC.
8515 E. Orchard Rd., Englewood, Colorado 80111
Phone No. (303) 689-3000
Maxim Series Fund, Inc. (the "Fund"), an open-end
management investment
company, includes the following diversified investment
portfolio: the Maxim
INVESCO Balanced Portfolio.
The Maxim INVESCO Balanced Portfolio (the "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).
This Prospectus sets forth concisely the information
about the Fund and the Portfolio that prospective investors
ought to know before investing. Additional information
about the Fund has been filed with the Securities and
Exchange Commission and is available upon request, without
charge by calling or writing the Fund. The "Statement of
Additional Information" bears the same date as this
Prospectus and is incorporated by reference into this
Prospectus in its entirety.
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.
THIS PROSPECTUS SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE.
THE GREAT-WEST LIFE ASSURANCE COMPANY
Investment Adviser
The date of this Prospectus is October 1, 1996.
INTRODUCTION
Maxim Series Fund, Inc. (the "Fund") is an open-end
management investment company (a mutual fund) that sells its
shares to the Maxim Series Account, Retirement Plan Series
Account, FutureFunds Series Account, FutureFunds II Series
Account and Pinnacle Series Account of Great-West Life &
Annuity Insurance Company ("GWL&A") and TNE Series(k)
Account (collectively, the "Series Accounts") of The New
England Mutual Life Insurance Company ("TNE"). The shares
in the Series Accounts are currently used to fund benefits
under certain individual and group variable annuity
contracts and variable life insurance policies (the
"Variable Contracts") issued by GWL&A and TNE. For
information concerning your rights under a variable
contract, see the applicable Series Account prospectus.
Shares of the Fund are, and may in the future be, used to
fund benefits under other contracts issued by GWL&A, its
affiliates, TNE or other insurance companies. The Great-
West Life Assurance Company ("Great-West") is the Investment
Adviser for the Fund.
THE FUND PORTFOLIOS
Each portfolio of the Fund has its own investment
objective and investment strategy. The Maxim INVESCO
Balanced Portfolio is the only Portfolio offered in this
prospectus and is described below. The investment objective
may not be changed without a vote of a majority of the
shares of the Portfolio. A more detailed description of the
Portfolio's investment policies is contained in the
Statement of Additional Information.
Maxim INVESCO Balanced Portfolio
The Maxim INVESCO Balanced Portfolio (the "Portfolio")
seeks to achieve a high total return on investment through
capital appreciation and current income. The Portfolio
pursues this objective by normally investing 50% to 70% of
its total assets in common stocks, and the remainder in
fixed-income securities, including cash reserves. At least
25% of the Portfolio's assets normally will be invested in
fixed income securities issued by the U.S. Government, its
agencies and instrumentalities, or in investment grade
corporate bonds. The capital appreciation component of
total return includes both realized and unrealized
appreciation. There is no guarantee that the Portfolio will
meet its objective.
For the equity holdings, companies with better-than-
average earnings growth potential are sought, as well as
companies within industries identified as well-positioned
for the current and expected economic climate. Because
current income is a component of total return, dividend
payout records are also considered. Most of these holdings
are traded on national stock exchanges or in the over-the-
counter markets; however, securities traded on regional or
foreign exchanges may also be included in the Portfolio. In
addition to common stocks, the Portfolio also may hold
preferred stocks and securities convertible into common
stock.
For the fixed income portion of the Portfolio's
holdings, obligations of the U.S. Government, its agencies
and instrumentalities, or investment grade corporate bonds
are selected. These securities tend to offer lower income
than bonds of lower quality, but are more shielded from
credit risk. Obligations issued by U.S. Government agencies
or instrumentalities may include some supported only by the
credit of the issuer rather than backed by the full faith
and credit of the U.S. Government. The Portfolio may hold
securities of any maturity (from less than one year up to 30
years), with the average maturity varying based upon
economic and market conditions. The Portfolio also may hold
cash and cash equivalent securities as cash reserves.
The amount invested in stocks, bonds and cash
equivalent securities may be varied from time to time
depending upon the assessment of business, economic and
market conditions. When it is believed conditions are
adverse, the Portfolio may assume a defensive position by
temporarily investing up to 100% of its assets in U.S.
Government and agency securities, investment grade corporate
bonds, or cash equivalent securities, such as domestic
certificates of deposit and bankers' acceptances, commercial
paper and repurchase agreements, in an attempt to protect
principal value until conditions stabilize.
Up to 25% of the Portfolio's total assets, measured at the
time of purchase, may be invested directly in foreign equity
or corporate debt securities. Securities of Canadian
issuers and American Depository Receipts ("ADRs") are not
subject to this 25% limitation. ADRs are receipts
representing shares of a foreign corporation held by a U.S.
bank that entitle the holder to all dividends and capital
gains. ADRs are denominated in U.S. dollars and trade in
the U.S. securities markets. Please see "Foreign Investment
Risks" in this prospectus for more information concerning
these securities and their risks.
The Portfolio's investments in fixed income securities
may include investments in zero coupon bonds issued by the
U.S. Government, its agencies or instrumentalities, step-up
bonds, mortgage-backed securities and asset-backed
securities. Please see "Debt Securities" in this prospectus
and the Statement of Additional Information for more
information about these securities.
In order to hedge its holdings, the Portfolio may
purchase and write options on securities and may invest in
futures contracts for the purchase or sale of foreign
currencies, fixed income securities and instruments based on
financial indices (collectively, "futures contracts"),
options on futures contracts and forward contracts. These
practices and their risks are discussed in the Statement of
Additional Information. Please also see "Foreign Currency
Exchange Transactions" in this prospectus.
Illiquid Securities
The Portfolio may invest up to 15% of its total assets
in "illiquid securities" (taken as of the time of
acquisition of an illiquid security). Illiquid securities
are securities that may not be sold in the ordinary course
of business within seven days at approximately the price
used in determining the net asset value of the Portfolio.
This restriction applies to securities for which a ready
market does not exist, such as restricted securities, but
does not necessarily encompass all restricted securities.
Institutional markets for restricted securities have
developed as a result of the promulgation of Rule 144A under
the Securities Act of 1933 (the "1933 Act") which provides a
"safe harbor" from 1933 Act registration requirements for
qualifying sales to institutional investors. When Rule 144A
securities present an attractive investment opportunity and
otherwise meet selection criteria, the Portfolio may make
such investments. Whether or not such securities are
"illiquid" depends on the market that exists for the
particular security.
The staff of the Securities and Exchange Commission has
taken the position that the liquidity of Rule 144A
securities is a question of fact for the board of directors
to determine, such determination to be based on a
consideration of the readily available trading markets and
the review of any contractual restrictions. The staff also
acknowledges that while the board retains ultimate
responsibility, it may delegate this function to an
investment adviser. The Board of Directors of the Fund has
delegated this responsibility to the Investment Adviser.
It is not possible to predict with assurance exactly
how the market for Rule 144A securities or any other
security will develop. A security which when purchased
enjoyed a fair degree of marketability may subsequently
become illiquid and, accordingly, a security which was
deemed to be liquid at the time of acquisition may
subsequently become illiquid. In such event, appropriate
remedies will be considered to minimize the effect on the
Portfolio's liquidity.
Debt Securities
For the debt securities purchased for the Portfolio, an
assessment of an issuer's ability to meet its interest rate
obligations and repay its debt when due is undertaken. Debt
obligations are rated based on their estimated credit risk
by independent services such as Standard & Poor's Rating
Group ("S&P") or Moody's Investors Services, Inc.
("Moody's"). "Market risk" for debt securities principally
refers to sensitivity to changes in interest rate: for
instance, when interest rates go up, the market value of a
bond issued previously generally declines; on the other
hand, when interest rates go down, bonds generally see their
prices increase.
The lower a bond's quality, the more it is subject to
credit risk and market risk and the more speculative it
becomes; this is also true of most unrated debt securities.
Investment grade securities are those rated AAA, AA, A or
BBB by S&P or Aaa, Aa, A or Baa by Moody's or, if unrated,
are judged to be of comparable quality to securities so
rated. These bonds enjoy strong to adequate capacity to pay
principal and interest. Securities rated BBB or Baa are
considered to be of medium grade and may have speculative
characteristics.
Zero coupon bonds are issued by the U.S. government,
its agencies or instrumentalities. Zero coupon bonds
("zeros") make no periodic interest payments. Instead, they
are sold at a discount from their face value. The buyer of
the zero receives the rate of return by the gradual
appreciation in the price of the security, which is redeemed
at face value at maturity. Step up bonds initially make no
(or low) cash interest payments, but begin paying interest
(or a higher rate of interest) at a fixed time after
issuance of the bond. Being extremely responsive to changes
in interest rates, the market prices of both zeros and step-
up bonds may be more volatile than other bonds.
Distribution of income recognized on these bonds may be
required, even though no cash interest payments may be
received, which could reduce the amount of cash available
for investment.
Mortgage-backed securities represent interests in pools
of mortgages. Asset-backed securities generally represent
interests in pools of consumer loans. Both usually are
structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the
underlying loans, although the securities may be supported,
at least in part, by letters of credit or other credit
enhancements, or in the case of mortgage-backed securities,
guarantees by the U.S. government, its agencies or
instrumentalities. The underlying loans are subject to
prepayments that may shorten the weighted average lives of
these securities and may lower their returns.
Reverse Repurchase Agreements
The Portfolio may also enter into reverse repurchase
agreements. Reverse repurchase agreements involve sales by
the Portfolio of assets concurrently with an agreement by
the Portfolio to repurchase the same assets at a later date
at a fixed price. Reverse repurchase agreements carry the
risk that the market value of the securities which the
Portfolio is obligated to repurchase may decline below the
repurchase price. A reverse repurchase agreement may be
viewed as a collateralized borrowing by the Portfolio.
Borrowing magnifies the potential for gain or loss on the
portfolio securities of the Portfolio and, therefore,
increases the possibility of fluctuation in the Portfolio's
net asset value. The Portfolio will establish a segregated
account with the Fund's custodian bank in which the
Portfolio will maintain cash, cash items or liquid
securities equal in value to the Portfolio's obligations in
respect of reverse repurchase agreements.
Borrowings
The Portfolio may borrow from banks in an amount not
exceeding 33 1/3% of its assets (including the amount
borrowed). If the Portfolio borrows money, its share price
may be subject to greater fluctuation until the borrowing is
paid off. If the Portfolio makes additional investments
while borrowings are outstanding, this may be considered a
form of leverage.
Foreign Investment Risks
Investments in foreign securities present risks not
typically associated with investments in comparable
securities of U.S. issuers. Since foreign securities
involve foreign currencies, the value of the assets of the
Portfolio and its net investment income available for
distribution may be affected favorably or unfavorably by
changes in currency exchange rates and exchange control
regulations. Investment will not be made in securities
denominated in a foreign currency that is not fully
exchangeable into U.S. dollars without legal restriction at
the time of investment.
There may be less information publicly available about
a foreign corporate or government issuer than about a U.S.
issuer, and foreign corporate issuers are not generally
subject to accounting, auditing and financial reporting
standards and practices comparable to those in the United
States. The securities of some foreign issuers are less
liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and
securities custody costs are often higher than those in the
United States, and judgements against foreign entities may
be more difficult to obtain and enforce. With respect to
certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation,
political or financial instability and diplomatic
developments that could affect the value of investments in
those countries. The receipt of interest on foreign
government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.
The Portfolio's investments in foreign securities may
include investments in countries whose economies or
securities markets are not yet highly developed. Special
considerations associated with these investments (in
addition to the considerations regarding foreign investments
generally) may include, among others, greater political
uncertainties, an economy's dependence on revenues from
particular commodities or on international aid or
development assistance, currency transfer restrictions,
highly limited numbers of potential buyers for such
securities and delays and disruptions in securities
settlement procedures.
In determining whether to invest in securities of
foreign issuers, the likely impact of foreign taxes on the
net yield available may be considered. Income received from
sources within foreign countries and the U.S. may reduce or
eliminate such taxes. It is impossible to determine the
effective rate of foreign tax in advance since the amount of
assets to be invested in various countries is not known, and
tax laws and their interpretations may change from time to
time and may change without advance notice. While attempts
will be made to minimize such taxes by timing of
transactions and other strategies, there is no assurance
that such efforts will be successful. Any such taxes paid
will reduce net income available for distribution.
Most foreign securities in the Portfolio (other than
ADRs) will be denominated in foreign currencies or traded in
securities markets in which settlements are made in foreign
currencies. Similarly, any income on such securities is
generally paid to the Portfolio in foreign currencies. The
value of foreign currencies relative to the U.S. dollar
varies continually, causing changes in the dollar value of
the Portfolio's investments (even if the price of the
investments is unchanged) and changes in the dollar value of
the Portfolio's income available for distribution to its
shareholders. The effect of changes in the dollar value of
a foreign currency on the dollar value of the Portfolio's
assets and on the net investment income available for
distribution may be favorable or unfavorable.
The Portfolio may incur costs in connection with
conversions between various currencies. In addition, the
Portfolio may be required to liquidate portfolio assets, or
may incur increased currency conversion costs, to compensate
for a decline in the dollar value of a foreign currency
occurring between the time when the Portfolio declares and
pays a dividend, or between the time when the Portfolio
accrues and pays an operating expense in U.S. dollars.
ADRs are receipts, typically issued by a U.S. bank or
trust company, evidencing ownership of the underlying
foreign securities. ADRs are denominated in U.S. dollars
and trade in the U.S. securities markets. ADRs may be
issued in sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its
securities traded in the form of ADRs; in unsponsored
programs, the issuer may not be directly involved in the
creation of the program. Although the regulatory
requirements with respect to sponsored and unsponsored
programs are generally similar, the issuers of unsponsored
ADRs are not obligated to disclose material information in
the United States and, therefore, such information may not
be reflected in the market value of the ADRs. ADRs are
subject to certain of the same risks as direct investments
in foreign securities, including the risk that changes in
the value of the currency in which the security underlying
an ADR is denominated relative to the U.S. dollar may
adversely affect the value of the ADR.
Foreign Currency Exchange Transactions
The Portfolio may engage in foreign currency exchange
transactions in an attempt to protect against uncertainty in
the level of future exchange rates. The Portfolio may also
engage in foreign currency exchange transactions in
connection with the purchase and sale of securities
("transaction hedging") and to protect against changes in
the value of specific positions ("position hedging").
The Portfolio may engage in transaction hedging to
protect against a change in foreign currency exchange rates
between the date on which the Portfolio contracts to
purchase or sell a security and the settlement date, or to
"lock in" the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency. The Portfolio may
purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the
settlement of transactions in securities denominated in that
foreign currency.
If conditions warrant, the Portfolio may also enter
into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell
foreign currency futures contracts as a hedge against
changes in foreign currency exchange rates between the trade
and settlement dates on particular transactions and not for
speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time
at a rate or rates that may be higher or lower than the spot
rate. Foreign currency futures contracts are standardized
exchange-traded contracts and have margin requirements.
For transaction hedging purposes the Portfolio may also
purchase or sell exchange-listed and over-the-counter call
and put options on foreign currency futures contracts and on
foreign currencies.
The Portfolio may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of
the currencies in which its portfolio securities are
denominated or quoted (or an increase in the value of the
currency in which the securities the Portfolio intends to
buy are denominated). For position hedging purposes, the
Portfolio may purchase or sell foreign currency futures
contracts, foreign currency forward contracts and options on
foreign currency futures contracts and on foreign currencies
traded on exchanges or over-the-counter markets. In
connection with position hedging, the Portfolio may also
purchase or sell foreign currency on a spot basis.
The Portfolio's currency hedging transactions may call
for the delivery of one foreign currency in exchange for
another foreign currency and may at times not involve
currencies in which its portfolio securities are then
denominated. The Portfolio could hedge a foreign currency
with forward contracts on another ("proxy") currency of
which changes in value generally correlate with the currency
to be hedged. Such "cross hedging" activities may be
engaged in when it is believed that such transactions
provide significant hedging opportunities. Cross hedging
transactions involve the risk of imperfect correlation
between changes in the values of the currencies to which
such transactions relate and changes in the value of the
currency or other asset or liability which is the subject of
the hedge.
Hedging transactions involve costs and may result in
losses. The Portfolio will engage in over-the-counter
transactions only when appropriate exchange-traded
transactions are unavailable and when it is believed the
pricing mechanism and liquidity are satisfactory and the
participants are responsible parties likely to meet their
contractual obligations. There is no assurance that
appropriate foreign currency exchange transactions will be
available with respect to all currencies in which
investments may be denominated. Hedging transactions may
also be limited by tax considerations. Hedging transactions
may affect the character or amount of distributions.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision
of the Fund rests with the Fund's directors. There are
currently five directors, three of whom are not "interested
persons" of the Fund within the meaning of that term under
the Investment Company Act of 1940. The Board meets
regularly four times each year and at other times as
necessary. By virtue of the functions performed by Great-
West as Investment Adviser, the Fund requires no employees
other than its executive officers, none of whom devotes full
time to the affairs of the Fund. These officers are
employees of Great-West and receive compensation from it.
The Statement of Additional Information contains the names
of, and general background information regarding, each
Director and executive officer of the Fund.
Investment Adviser
Great-West, located at 8515 E. Orchard Rd., Englewood,
Colorado 80111, serves as the Fund's "Investment Adviser."
Through Power Corporation of Canada, a holding and
management company, the Investment Adviser is controlled by
a Canadian investor, Paul Desmarais, and his associates.
The Investment Adviser presently acts as the investment
adviser for Great-West Variable Annuity Account A, a
separate account of GWL&A registered as a management
investment company, and certain non-registered, qualified
corporate pension plan separate accounts of GWL&A. Great-
West is a registered investment adviser with the Securities
and Exchange Commission.
Subject to the supervision and direction of the Fund's
Board of Directors, the Investment Adviser manages the
Portfolio in accordance with its stated investment objective
and policies, makes investment decisions for the Portfolio
and places orders to buy and sell securities on behalf of
the Fund. The Investment Adviser provides investment
advisory services and pays all the expenses of the
Portfolio, except extraordinary expenses. As compensation
for its services to the Portfolio, the Investment Adviser
receives monthly compensation at the annual rate of 1.00% of
the average daily net assets of the Portfolio.
Sub-Adviser
INVESCO Trust Company ("ITC") serves as the sub-advisor
to the Portfolio. As such, ITC is responsible for the daily
management of the investment and reinvestment of assets of
the Portfolio, subject generally to review and supervision
of the Investment Adviser and the Board of Directors. ITC
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
Portfolio.
ITC is a Colorado trust company and an indirect wholly-owned
subsidiary of INVESCO PLC. ITC is registered as an
investment advisor with the Securities and Exchange
Commission. Its principal business address is 7800 E. Union
Avenue, Denver, Colorado 80237.
Donovan J. (Jerry) Paul and Charles P. Mayer are co-
portfolio managers for the Maxim INVESCO Balanced Portfolio.
Mr. Mayer is primarily responsible for the day-to-day
management of the Portfolio's equity holdings. He is also
the co-portfolio manager for the INVESCO Balanced Fund,
since 1996. Mr. Mayer is also co-portfolio manager of the
INVESCO Industrial Income Fund, Inc. and INVESCO VIF-
Industrial Income Fund. Mr. Mayer began his investment
career in 1969 and is now senior vice president of INVESCO
Trust; from 1993 to 1994, he was a vice president of INVESCO
Trust. From 1984 to 1993, he was a portfolio manager with
Westinghouse Pension. Mr. Paul focuses on the fixed income
investments for the Portfolio. Since 1994, he has also
served as co-portfolio manager for the INVESCO Balanced
Portfolio; portfolio manager of INVESCO Select Income Fund,
INVESCO High Yield Fund, and INVESCO VIF-High Yield
Portfolio; co-portfolio manager of INVESCO Industrial Income
Fund and INVESCO VIF-Industrial Income Fund; portfolio
manager and senior vice president of ITC. Formerly, Mr.
Paul was Senior Vice President and Director of Fixed-Income
Research (1989 to 1992) and portfolio manager (1987 to 1992)
with Stein, Roe and Farnham Inc., and President (1993 to
1994) of Quixote Investment Management, Inc.
The Investment Adviser is responsible for compensating
ITC, which receives monthly compensation from the Investment
Adviser at the annual rate of .50% of the average daily net
assets of the Portfolio up to $25 million, .45% on the next
$50 million, .40% on the next $25 million and .35% of such
value in excess of $100 million.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from investment income of the Portfolio shall
be declared and reinvested semi-annually. Distributions of
net realized capital gains, if any, are declared in the
fiscal year in which they have been earned and are
reinvested in additional shares of the Portfolio at net
asset value.
The Fund has qualified, and intends to continue to
qualify, as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code ("Code"). Each
portfolio of the Fund is treated as a separate corporation
for federal income tax purposes. The Portfolio intends to
distribute all of its net income so as to avoid any federal
income tax liability under the RIC provisions. All
dividends and any distributions of any realized capital
gains will be taxable to the Portfolio's shareholders, which
in this case are GWL&A's and TNE's Series Accounts. The
Portfolio also intends to distribute dividends in amounts
sufficient to avoid the imposition of the Code Section 4982
excise tax.
For a discussion of the taxation of GWL&A/TNE and the
Series Accounts, see "Federal Tax Considerations" included
in the applicable Series Account prospectus.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolio are sold and redeemed at their
net asset value next determined after initial receipt of a
purchase order or notice of redemption without the
imposition of any sales commission or redemption charge.
However, certain deferred sales and other charges may apply
to the variable contracts issued through the Series
Accounts. Such charges are described in the applicable
Series Account prospectus.
VALUATION OF SHARES
The Portfolio's net asset value per share is determined
as of 4:00 p.m., EST/EDT once daily Monday through Friday,
except on holidays on which the New York Stock Exchange is
closed.
Net asset value of a portfolio share is computed by
dividing the value of the net assets of the Portfolio by the
total number of portfolio shares outstanding. Portfolio
securities that are traded on the stock exchange are valued
at the last sale price as of the close of business on the
day the securities are being valued, or, lacking any sales,
at the mean between closing bid and asked price. Securities
traded in the over-the-counter market are valued at the mean
between the bid and asked prices or yield equivalent as
obtained from one or more dealers that make markets in the
securities. Portfolio securities that are traded both in
the over-the-counter market and on an exchange are valued
according to the broadest and most representative market.
Securities and assets for which market quotations are not
readily available are valued at fair value as determined in
good faith by or under the direction of the Board of
Directors, including valuations furnished by a pricing
service that may be retained by the Fund. Such a
determination may take into account, for example, quotations
by dealers or issuers for securities of similar type,
quality, and maturity, or valuations furnished by a pricing
service retained by the Fund.
Money market securities held by the Portfolio with 60
days or less remaining to maturity are valued on an
amortized cost basis, which involves valuing a portfolio
instrument at its cost initially and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in
periods during which value, as determined by amortized cost,
is higher or lower than the price the Portfolio would
receive if it sold the security.
THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State
of Maryland on December 7, 1981 and is registered with the
Securities and Exchange Commission as an open-end,
management investment company. The Fund commenced
operations on February 25, 1982.
The Fund offers a separate class of common stock for
each portfolio. All shares will have equal voting rights,
except that only shares of a respective portfolio will be
entitled to vote on matters concerning only that portfolio.
Each issued and outstanding share of the Portfolio is
entitled to one vote and to participate equally in dividends
and distributions declared by the Portfolio and, upon
liquidation or dissolution, to participate equally in the
net assets of the Portfolio remaining after satisfaction of
outstanding liabilities. The shares of the Portfolio, when
issued, will be fully paid and non-assessable, have no
preference, preemptive, conversion, exchange or similar
rights, and will be freely transferable. Shares do not have
cumulative voting rights and the holders of more than 50% of
the shares of the Fund voting for the election of directors
can elect all of the directors of the Fund if they choose to
do so and, in such event, holders of the remaining shares
would not be able to elect any directors.
The Series Accounts, as part of GWL&A or of TNE, and
Great-West, which provided the Fund's initial
capitalization, and the affiliates of Great-West, will be
holders of the shares and be entitled to exercise the rights
directly as described in the applicable Series Account
prospectus.
The Fund offers its shares to the Series Accounts. For
various reasons, it may become disadvantageous for one or
more of the Series Accounts to continue to invest in Fund
shares. In such an event, one or more Series Accounts may
redeem its Fund shares. For further information, see the
Statement of Additional Information.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related
information. Performance information about the Portfolio is
based on the Portfolio's past performance only and is no
indication of future performance.
The Fund may include total return in advertisements or
other sales materials regarding the Portfolio. When the
Fund advertises the total return of the Portfolio, it will
usually 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).
The Portfolio may also advertise its yield in addition
to total return. This yield will be computed by dividing
the net investment income per share earned during a recent
one-month period by the net asset value of a Portfolio share
(reduced by any dividend expected to be paid shortly out of
Portfolio income) on the last day of the period.
GENERAL INFORMATION
Reports to Shareholders
The fiscal year of the Fund ends on December 31 of each
year. The Fund will send to its shareholders, at least
semiannually, reports showing performance of the Portfolio
and other information. An annual report, containing
financial statements, audited by independent certified
public accountants, will be sent to shareholders each year.
Custodian
Morgan Guaranty Trust Company of New York ("Morgan"),
New York City, New York, acts as custodian of the Fund's
assets. Morgan has custody of the Fund's assets held within
and outside the United States. Morgan holds the Fund's
assets in safekeeping and collects and remits the income
thereon subject to the instructions of the Fund.
Independent Auditors
Deloitte & Touche LLP has been selected as the
independent auditors of the Fund. The selection of
independent auditors is subject to annual ratification by
the Fund's shareholders.
Legal Counsel
Jorden Burt Berenson & Johnson, LLP is counsel for the
Fund.
Additional Information
The telephone number or the address of the Fund
appearing on the front page of this prospectus should be
used for requests for additional information.
___________________________________________________________
MAXIM SERIES FUND, INC.
Maxim INVESCO Balanced Portfolio
___________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction
with the Prospectus for the Fund. A copy of the Prospectus
may be obtained from the Fund by writing the Fund at 8515 E.
Orchard Rd., Englewood, Colorado 80111 or by calling the
Fund at (303) 689-3000.
___________________________________________________________
THE GREAT-WEST LIFE ASSURANCE COMPANY
Investment Adviser
___________________________________________________________
The date of the Prospectus to which this Statement
of Additional Information relates and the date of
this Statement of Additional Information is
October 1, 1996.
TABLE OF CONTENTS
Cross-reference
to
page(s) in
Page
Prospectus
Sale of Shares............................. 3
8
The Fund Portfolios........................ 3
2
Description of Investment Securities.. 3
2
Information About Securities Ratings.. 9
- --
Investment Limitations................ 11
2
Lending of Portfolio Securities....... 13
2
Foreign Securities.................... 13
2
Management of the Fund..................... 14
6
Directors and Officers................ 14
- --
The Investment Adviser................ 15
6
The Sub-Adviser....................... 15
7
Portfolio Transactions and Brokerage....... 15
8
Portfolio Turnover.................... 15
- --
Placement of Portfolio Brokerage...... 16
8
Calculation of Yield and Return............ 17
9
Financial Statements........................ 18
- --
SALE OF SHARES
Shares of the Fund are sold to the FutureFunds Series
Account, FutureFunds II Series Account, Retirement Plan
Series Account and the Maxim Series Account, which are
separate accounts established by GWL&A to receive and invest
premiums paid under variable annuity contracts issued by
GWL&A. Shares of the Fund are also sold to TNE Series (K)
Account of The New England Mutual Life Insurance Company
("TNE") to fund benefits under variable annuity contracts.
Shares of the Fund are also sold to the Pinnacle Series
Account, a separate account established by GWL&A to fund
variable life insurance policies. Shares of the Fund are,
and in the future may be, sold to other separate accounts of
GWL&A, its affiliates or other insurance companies. 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 the Fund
simultaneously. Although no such disadvantages are
currently foreseen either to variable life insurance
policyowners or to variable annuity contract owners, the
Fund's Board of Directors intends 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. 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 the
Fund, or (4) differences in voting instructions between
those given by policyowners and those given by contract
owners.
THE FUND PORTFOLIOS
The discussion that follows provides supplemental
information to the discussion captioned "The Fund
Portfolios" in the Prospectus.
The Fund commenced operations as a management investment
company in 1982. The Maxim INVESCO Balanced Portfolio was
added effective October 1, 1996.
Description of Investment Securities
1. Asset-Backed Securities. Asset-backed securities may
be classified as pass-through certificates of collateralized
obligations. They depend primarily on the credit quality of
the assets underlying such securities, how well the entity
issuing the security is insulated from the credit risk of
the originator or any other affiliated entities and the
amount and quality of any credit support provided to the
securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal
payments received on the underlying assets which in turn may
be affected by a variety of economic and other factors. As
a result, the yield on any asset-backed security is
difficult to predict with precision and actual yield to
maturity may be more or less than the anticipated yield to
maturity.
Pass-through certificates are asset-backed securities
which represent an undivided fractional ownership interest
in any underlying pool of assets. Pass-through certificates
usually provide for payments of principal and interest
received to be passed through to their holders, usually
after deduction for certain costs and expenses incurred in
administering the pool. Because pass-through certificates
represent an ownership interest in the underlying assets,
the holders thereof bear directly the risk of any defaults
by the obligors on the underlying assets not covered by any
credit support.
Asset-backed securities issued in the form of debt
instruments, also known as collateralized obligations, are
generally issued as the debt of a special purpose entity
organized solely for the purposes of owning such assets and
issuing such debt. Such assets are most often trade, credit
card or automobile receivables. The assets collateralizing
the debt instrument are pledged to a trustee or custodian
for the benefit of the holders thereof. Such issuers
generally hold no assets other than those underlying the
security and any credit support provided. As a result,
although payments on such securities are obligations of the
issuers, in the event of a default on the underlying assets
not covered by credit support, the issuing entities are
unlikely to have sufficient assets to satisfy their
obligations on the related asset-backed securities.
2. Bankers' Acceptance. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower, usually in
connection with international commercial transactions (to
finance the import, export, transfer or storage of goods).
The borrower is liable for payment as well as the bank,
which unconditionally guarantees to pay the draft at its
face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary
markets prior to maturity. The Fund generally will not
invest in acceptances with maturities exceeding 7 days where
to do so would tend to create liquidity problems.
3. Certificate of Deposit. A certificate of deposit
generally is a short-term, interest bearing negotiable
certificate issued by a commercial bank or savings and loan
association against funds deposited in the issuing
institution.
4. Collateralized Mortgage Obligations. A Collateralized
Mortgage Obligation ("CMO") is a bond which uses
certificates issued by the Government National Mortgage
Association, or the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation as collateral in
trust. The trust then issues several bonds which will be
paid using the cash flow from the collateral. The trust can
redirect cash flow temporarily, first paying one bond before
other bonds are paid. The trust can also redirect
prepayments from one bond to another bond, creating some
stable bonds and some volatile bonds. The proportion of
principal cash flow and interest cash flow from the
collateral flowing to each bond can also be changed,
creating bonds with higher or lower coupons to the extreme
of passing through the interest only to one bond and
principal only to another bond. Variable rate or floating
coupon bonds are also often created through the use of
CMO's.
5. Commercial Paper. Commercial paper is a short-term
promissory note issued by a corporation primarily to finance
short-term credit needs.
6. Covered Options. There are two types of covered
options. A covered call option gives the purchaser the
right to buy the underlying securities from the seller at a
stated exercise price. In writing a covered call option,
the seller must own the underlying securities subject to the
option (or comparable securities satisfying the cover
requirements of securities exchanges). A covered put option
gives the purchaser the right to sell the underlying
securities at a stated price. In the case of a covered put
option, the seller will hold cash and/or high-grade short-
term debt obligations equal to the price to be paid if the
option is exercised. The seller will be considered to have
covered a put or call option if and to the extent that it
holds an option that offsets some or all of the risk of the
option it has written. Combinations of covered puts and
calls may be written on the same underlying security.
Put options may be purchased to protect its portfolio
holdings in an underlying security against a decline in
market value. Such protection is provided during the life
of the put option because the holder of the option is able
to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's
market price. In order for a put option to be profitable,
the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium
and transaction costs. By using put options in this manner,
the seller will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
Premiums are received from writing a put or call
option, which increases the return on the underlying
security in the event the option expires unexercised or is
closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise
price and the current market value of the underlying
security, the volatility of the underlying security, the
amount of time remaining until expiration, current interest
rates, and the effect of supply and demand in the options
market and in the market for the underlying security. By
writing a call option, the seller limits its opportunity to
profit from any increase in the market value of the
underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of
the underlying security. By writing a put option, the
seller assumes the risk that it may be required to purchase
the underlying security for an exercises price higher than
its then-current market value, resulting in a potential
capital loss unless the security subsequently appreciates in
value.
Call options may be purchased to hedge against an
increase in the price of securities that the purchaser wants
ultimately to buy. Such hedge protection is provided during
the life of the call option since the holder of the call
option is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must
rise sufficiently above the exercise price to cover the
premium and transactions costs.
Special risks are presented by internationally-traded
options. Because of time differences, and because different
holidays are observed in different countries, foreign
options markets may be open for trading during hours or on
days when U.S. markets are closed. As a result, option
premiums may not reflect the current prices of the
underlying interest in the United States.
7. Dealer (Over-the-Counter) Options. A dealer option is
an option which is not traded on an exchange and may be
exercised through the dealer from whom it had purchased the
option. If a Portfolio were to purchase a dealer option,
failure by the dealer to perform on the option would result
in the loss of the premium paid as well as loss of the
expected benefit of the transaction.
Dealer options do not have a continuous liquid market
as do exchange-traded options. Consequently, the value of a
dealer option may be realized only be exercising it or
reselling it to the dealer who issued it. Dealer options
will only be entered into with dealers who will agree to and
which are expected to be capable of entering into closing
transactions; however, there can be no assurance the a
dealer option may be liquidated at a favorable price at any
time prior to expiration. In the event of an insolvency of
the contra party, a dealer option may not be liquidated.
The staff of the SEC has taken the position that
purchased dealer options and the assets used to secure the
written dealer options are illiquid securities. The cover
used for written over-the-counter options may be treated as
liquid if the dealer agrees that the over-the-counter option
which the dealer has written may be repurchased for a
maximum price to be calculated by a predetermined formula.
In such cases, the over-the-counter option would be
considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic
value of the option. Accordingly, dealer options will be
treated as subject to the limitation on illiquid securities.
If the SEC changes its position on the liquidity of dealer
options, the Fund will change its treatment of such
instrument accordingly.
8. Eurodollar Certificate of Deposit. A Eurodollar
certificate of deposit is a short-term obligation of a
foreign subsidiary of a U.S. bank payable in U.S. dollars.
9. Floating Rate Note. A floating rate note is debt
issued by a corporation or commercial bank that is typically
several years in term but has a resetting of the interest
rate on a one to six month rollover basis.
10. Forward Contracts. A forward contract is an agreement
between two parties in which one party is obligated to
deliver a stated amount of a stated asset at a specified
time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery.
When used with foreign currency exchange transactions, a
forward contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract.
These contracts may be bought or sold to protect the seller,
to some degree, against a possible loss resulting from an
adverse change in the relationship between foreign
currencies and the U.S. dollar. Forward contracts can be
used to protect the value of a seller's investment
securities by establishing a rate of exchange that the
seller can achieve at some future point in time; they do not
simulate fluctuations in the underlying prices of the
securities. Additionally, although forward contracts tend
to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time, they tend to limit
any potential gains that might result should the value of
such currency increase. Forward contracts generally are
traded in an interbank market conducted directly between
traders (usually large commercial banks) and their
customers. Unlike futures contracts, which are standardized
contracts, forward contracts can be specifically drawn to
meet the need of the parties that enter into them. The
parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated exchange.
11. Hybrid Instruments. Hybrid instruments have recently
been developed and combine the elements of futures contracts
or options with those of debt, preferred equity or a
depository instrument. Often these hybrid instruments are
indexed to the price of a commodity, particular currency, or
a domestic or foreign debt or equity securities index.
Hybrid instruments may take a variety of forms, including,
but not limited to, debt instruments with interest or
principal payments or redemption terms determined by
reference to the value of a currency or commodity or
securities index at a future point in time, preferred stock
with dividend rates determined by reference to the value of
a currency, or convertible securities with the conversion
terms related to a particular commodity. The risks
associated with hybrid instruments reflect a combination of
the risks of investing in securities, options, futures and
currencies, including volatility and lack of liquidity.
Further, the prices of the hybrid instrument and the related
commodity or currency may not move in the same direction or
at the same time.
12. Index Futures Contracts. An index futures contract
obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times
the difference between the value of a specific index at the
close of the last trading day of the contract and the price
at which the agreement is made. No physical delivery of the
underlying security in the index is made. When purchasing
an index futures contract or selling index futures, (1) a
segregated account consisting of cash, U.S. Government
securities, or other liquid high-grade debt securities must
be maintained with the custodian bank (and marked to market
daily) which, when added to any amounts deposited with a
futures commission merchant as margin, are equal to the
market value of the futures contract; or (2) the Fund must
"cover" its position.
13. Interest Rate Transactions. Interest rate swaps and
interest rate caps and floors are types of hedging
transactions which are utilized to attempt to protect the
Portfolio against and potentially benefit from fluctuations
in interest rates and to preserve a return or spread on a
particular investment or portion of the Portfolio's
holdings. These transactions may also be used to attempt to
protect against possible declines in the market value of the
Portfolio's assets resulting from downward trends in the
debt securities markets (generally due to a rise in interest
rates) or to protect unrealized gains in the value of the
Portfolio's holdings, or to facilitate the sale of such
securities.
Interest rate swaps involve the exchange with another
party of commitments to pay or receive interest; e.g., an
exchange of fixed rate payments for variable rate payments.
The purchase of an interest rate cap entitles the purchaser,
to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below
a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party
selling such interest rate floor.
The successful utilization of interest rate
transactions depends on the Portfolio manager's ability to
predict correctly the direction and degree of movements in
interest rates. If the Portfolio manager's judgment about
the direction or extent of movement in interest rates is
incorrect, the Portfolio's overall performance would be
worse than if it had not entered into such transactions.
For example, if the Portfolio purchases an interest rate
swap or an interest rate floor to hedge against the
expectation that interest rates will decline but instead
interest rates rise, the Portfolio would lose part or all of
the benefit of the increased payments it would receive as a
result of the rising interest rates because it would have to
pay amounts to its counterparts under the swap agreement or
would have paid the purchase price of the interest rate
floor.
The swap market has grown substantially in recent years
with a large number of banks and investment banking firms
acting both as principals and as agents utilizing
standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has
not yet been developed and, accordingly, they are less
liquid than swaps. Interest rate swaps, caps and floors are
considered by the Staff of the Securities and Exchange
Commission to be illiquid securities and, therefore, the
Portfolio may not invest more than 15% of its assets in such
instruments. Finally, there can be no assurance that the
Portfolio will be able to enter into interest rate swaps or
to purchase interest rate caps or floors at prices or on
terms the Portfolio manager believes are advantageous to the
Portfolio. In addition, although the terms of interest rate
swaps, caps and floors may provide for termination, there
can be no assurance that the Portfolio will be able to
terminate an interest rate swap or to sell or offset
interest rate caps or floors that it has purchased.
14. Repurchase Agreements. A repurchase agreement is an
instrument under which the purchaser acquires ownership of a
debt security and the seller agrees to repurchase the
obligation at a mutually agreed upon time and price. The
total amount received on repurchase is calculated to exceed
the price paid by the purchaser, reflecting an agreed upon
market rate of interest for the period from the time of
purchase of the security to the settlement date (i.e., the
time of repurchase), and would not necessarily relate to the
interest rate on the underlying securities. A purchaser
will only enter repurchase agreements with underlying
securities consisting of U.S. Government or government
agency securities, certificates of deposit, commercial paper
or bankers' acceptances, and will be entered only with
primary dealers. While investment in repurchase agreements
may be made for periods up to 30 days, it is expected that
typically such periods will be for a week or less. The
staff of the Securities and Exchange Commission has taken
the position that repurchase agreements of greater than 7
days should be limited to an amount not in excess of 10% of
a purchaser's total assets.
Although repurchase transactions usually do not impose
market risks on the purchaser, the purchaser would be
subject to the risk of loss if the seller fails to
repurchase the securities for any reason and the value of
the securities is less than the agreed upon repurchase
price. In addition, if the seller defaults, the purchaser
may incur disposition costs in connection with liquidating
the securities. Moreover, if the seller is insolvent and
bankruptcy proceedings are commenced, under current law, the
purchaser could be ordered by a court not to liquidate the
securities for an indeterminate period of time and the
amount realized by the purchaser upon liquidation of the
securities may be limited.
15. Reverse Repurchase Agreements. Reverse repurchase
agreements involve the sale of securities held by the
seller, with an agreement to repurchase the securities at an
agreed upon price, date and interest payment. The seller
will use the proceeds of the reverse repurchase agreements
to purchase other money market securities either maturing,
or under an agreement to resell, at a date simultaneous with
or prior to the expiration of the reverse repurchase
agreement. The seller will utilize reverse repurchase
agreements when the interest income to be earned from the
investment of the proceeds from the transaction is greater
than the interest expense of the reverse repurchase
transaction.
16. Stripped Treasury Securities. Zero-Coupon Treasury
Securities come in two forms: U.S. Treasury bills issued
directly by the U.S. Treasury and U.S. Treasury bonds or
notes and their unmatured interest coupons which have been
separated by their holder, typically a custodian bank or
investment brokerage firm. A number of securities firms and
banks have stripped the interest coupons from Treasury bonds
and notes and resold them in custodial receipt programs with
a number of different names. The underlying Treasury bonds
and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities,
in trust on behalf of the owners thereof.
Publicly filed documents state that counsel to the
underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities have stated that
for Federal tax and securities purposes, purchasers of such
certificates most likely will be deemed the beneficial
holders of the underlying U.S. Government securities. In
addition, such documents state that the terms of custody for
the custodial receipt programs generally provide that the
underlying debt obligations will be held separate from the
general assets of the custodian and will not be subject to
any right, charge, security interest, lien, or claim of any
kind in favor of the custodian or any person claiming
through the custodian, and the custodian will be responsible
for applying all payments received on these underlying debt
obligations, if any, to the related receipts or certificates
without making any deductions other than applicable tax
withholding. The custodian is required to maintain
insurance in customary amounts to protect the holders of the
receipts or certificates against losses resulting from the
custody arrangement. The holders of receipts or
certificates, as the real parties in interest, are entitled
to the rights and privileges of owners of the underlying
debt obligations, including the right, in the event of
default, to proceed directly and individually against the
U.S. Government without acting in concert with other holders
of such receipts or the custodian.
When U.S. Treasury obligations have been stripped of
their unmatured interest coupons by the holder, the stripped
coupons are sold off separately. The principal or corpus is
sold at a deep discount because the buyer receives only the
right to receive a future fixed payment on the security and
does not receive any rights to periodic interest payments.
Once stripped or separated, the corpus and coupons may be
sold separately. Typically, the coupons are sold separately
or grouped with other coupons with like maturity dates and
sold in bundled form. Purchasers of Stripped Treasury
Securities acquire, in effect, discount obligations that are
economically identical to the "zero coupon bonds" that have
been issued by corporations.
The U.S. Treasury has facilitated transfers of
ownership of Stripped Treasury Securities by accounting
separately for the beneficial ownership of particular
interest coupon and corpus payments on U.S. Treasury
securities through the Federal Reserve book-entry
recordkeeping system. The Federal Reserve program, as
established by the U.S. Treasury Department, is known as
Separate Trading of Registered Interest and Principal of
Securities or "STRIPS". The plan eliminates the need for
the trust or custody arrangements.
17. Swap Deposit. Swap deposits are foreign currency
short-term investments consisting of a foreign exchange
contract, a short-term note in foreign currency and a
foreign exchange forward contract that is totally hedged in
U.S. currency. This type of investment can produce
competitive yield in U.S. dollars without incurring risks of
foreign exchange.
18. Time Deposit. A time deposit is a deposit in a
commercial bank for a specified period of time at a fixed
interest rate for which a negotiable certificate is not
received.
19. Variable Amount Master Demand Note. A variable amount
master demand note is a note which fixes a minimum and
maximum amount of credit and provides for lending and
repayment within those limits at the discretion of the
lender. Before investing in any variable amount master
demand notes, the liquidity of the issuer must be determined
through periodic credit analysis based upon publicly
available information.
20. Warrants. Warrants are pure speculation in that they
have no voting rights, pay no dividends and have no rights
with respect to the assets of the corporation issuing them.
Warrants basically are options to purchase equity securities
at a specific price valid for a specific period of time.
They do not represent ownership of the securities, but only
the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which
may be purchased on their exercise, whereas call options may
be written or issued by anyone. The prices of warrants do
not necessarily move parallel to the prices of the
underlying securities.
21. When-issued Securities. When the purchase of
securities on a "when-issued" or on a "forward delivery"
basis is permitted, it is expected that, under normal
circumstances, delivery of such securities will be taken.
When a commitment to purchase a security on a "when-issued"
or on a "forward delivery" basis is made, procedures are
established for such purchase consistent with the relevant
policies of the Securities and Exchange Commission. Since
those policies currently recommend that assets equal to the
amount of the purchase be held aside or segregated to be
used to pay for the commitment, cash, cash equivalents, or
high quality debt securities sufficient to cover any
commitments or to limit any potential risk are expected to
be held. However, although it is not intended that such
purchases would be made for speculative purposes and
adherence to the provisions of the Securities and Exchange
Commission policies is expected, purchase of securities on
such bases may involve more risk than other types of
purchases. For example, the sale of assets which have been
set aside in order to meet redemptions may be required.
Also, if it is determined that it is advisable as a matter
of investment strategy to sell the "when-issued" or "forward
delivery" securities, the then available cash flow or the
sale of securities would be required to meet the resulting
obligations, or, although it would not normally be expected,
from the sale of the "when-issued" or "forward delivery"
securities themselves (which may have a value greater or
less than the payment obligation).
Information about Securities Ratings
Corporate Bonds - Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may
be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds where are rated B generally lack characteristics
of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Corporate Bonds - Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely
strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from
AAA issues only in a small degree.
A - Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they
normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity for bonds rated BBB than for bonds in
the A category.
BB, B, CCC, and CC - Standard & Poor's describes the BB, B,
CCC and CC rated issues together with issues rated CCC and
CC. Debt in these categories is regarded on balance as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
C - The rating C is reserved for income bonds on which no
interest is being paid.
D - Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Commercial Paper - Moody's Investors Service, Inc.
"Prime-1" - Commercial Paper issuers rated Prime-1 are
judged to be of the best quality. Their short-term debt
obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or
stable with cash flow and asset protection well assured.
Current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements
are generally available. While protective elements may
change over the intermediate or longer term, such changes
are most unlikely to impair the fundamentally strong
position of short-term obligations.
"Prime-2" - Issuers in the Commercial Paper market rated
Prime-2 are high quality. Protection for short-term holders
is assured with liquidity and value of current assets as
well as cash generation in sound relationship to current
indebtedness. They are rated lower than the best commercial
paper issuers because margins of protection may not be as
large or because fluctuations of protective elements over
the near or immediate term may be of greater amplitude.
Temporary increases in relative short and overall debt load
may occur. Alternative means of financing remain assured.
"Prime-3" - Issuers in the Commercial Paper market rated
Prime-3 have an acceptable capacity for repayment of short-
term promissory obligations. The effect of industry
characteristics and market composition may be more
pronounced. Variability in earning and profitability may
result in changes in the level of debt protection
measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is
maintained.
Commercial Paper - Standard & Poor's Corporation
"A" - Issuers assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issuers in
this category are further refined with the designation 1, 2
and 3 to indicate the relative degree of safety.
"A-1" - This designation indicates that the degree of safety
regarding timely payment is very strong.
"A-2" - Capacity for timely payment for issuers with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated "A-
1".
"A-3" - Issuers carrying this designation have a
satisfactory capacity for timely payment. They are,
however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the
higher designation.
Investment Limitations
The Fund has adopted limitations on the investment activity
of the Maxim INVESCO Balanced Portfolio which are
fundamental policies and may not be changed without the
approval of the holders of a majority of the outstanding
voting shares of the Portfolio. "Majority" for this purpose
and under the Investment Company Act of 1940 means the
lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares.
A complete statement of all such limitations are set forth
below.
The Fund (i.e., the Portfolio) will not:
1. Invest more than 25% of its total assets (taken at
market value at the time of each investment) in the
securities of issuers primarily engaged in the same
industry; utilities will be divided according to their
services; for example, gas, gas transmission, electric and
telephone each will be considered a separate industry for
purposes of this restriction; provided that there shall be
no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, or its agencies or
instrumentalities, or of certificates of deposit and
bankers' acceptances.
2. With respect to 75% of its total assets, purchase the
securities of any one issuer (except cash items and
"Government securities" as defined under the 1940 Act), if
the purchase would cause the Portfolio to have more than 5%
of the value of its total assets invested in the securities
of such issuer or to own more than 10% of the outstanding
voting securities of such issuer.
3. Purchase or sell physical commodities other than
foreign currencies unless acquired as a result of ownership
of securities (but this shall not prevent the Portfolio from
purchasing or selling options, futures, swap and forward
contracts or from investing in securities or other
instruments backed by physical commodities).
4. Make loans, except as provided in limitation (5) below
and except through the purchase of obligations in private
placements (the purchase of publicly-traded obligations are
not being considered the making of a loan).
5. Lend its portfolio securities in excess of 33 1/3% of
the total assets of the Portfolio (including the amount
borrowed), taken at market value at the time of the loan,
and provided that such loan shall be made in accordance with
the guidelines set forth under "Lending of Portfolio
Securities", in this Statement of Additional Information.
6. Borrow money, except that the Portfolio may borrow
money as a temporary measure for extraordinary or emergency
purposes (not for leveraging or investment) and may enter
into reverse repurchase agreements in an aggregate amount
not exceeding 33 1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than
borrowings). Any borrowing that comes to exceed 33 1/3% of
the value of the Portfolio's total assets due to a decline
in net assets will be reduced within three days to the
extent necessary to comply with the 33 1/3% limitation.
This restriction shall not prohibit deposits of assets to
margin or guarantee positions in futures, options, swaps or
forward contracts, or the segregation of assets in
connection with such contracts.
7. Underwrite securities of other issuers except insofar
as the Portfolio may be deemed an underwriter under the
Securities Act of 1933 in selling portfolio securities.
8. Invest directly in real estate or interest in real
estate; however, the Portfolio may own debt or equity
securities issued by companies engaged in those businesses.
9. Issue senior securities. For purposes of this
restriction, the issuance of shares of common stock in
multiple classes or series, obtaining of short-term credits
as may be necessary for the clearance of purchases and sales
of portfolio securities, short sales against the box, the
purchase or sale or permissible options and futures
transactions (and the use of initial and maintenance margin
arrangements with respect to futures contracts or related
options transactions), the purchase or sale of securities on
a when issued or delayed delivery basis, permissible
borrowings entered into in accordance with the Portfolio's
investment policies, and reverse repurchase agreements are
not deemed to be issuances of senior securities.
As a fundamental policy in addition to the above, the
Portfolio may, notwithstanding any other investment policy
or limitation (whether or not fundamental), invest all of
its assets in the securities of a single open-end management
investment company with substantially the same fundamental
investment objectives, policies and limitations as the
Portfolio.
Further, the following additional investment
restrictions, which are operating policies of the Portfolio
are applicable. These policies may be changed by the Board
of Directors without shareholder approval.
(a) Investments in warrants, valued at the lower of
cost or market, may not exceed 5% of the value of the
Portfolio's net assets. Included within that amount, but
not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired by the
Portfolio in units or attached to securities shall be deemed
to be without value.
(b) The Portfolio will not (i) enter into futures
contracts or options on futures contracts if immediately
thereafter the aggregate margin deposits on all outstanding
futures contracts positions held by the Portfolio and
premiums paid on outstanding options on futures contracts,
after taking into consideration unrealized profits and
losses, would exceed 5% of the market value of the total
assets of the Portfolio, or (ii) enter into any futures
contracts if the aggregate net amount of the Portfolio's
commitments under outstanding futures contracts positions of
the Portfolio would exceed the market value of the total
assets of the Portfolio.
(c) The Portfolio does not currently intend to sell
securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities
sold short without the payment of any additional
consideration therefor, and provided that transactions in
options, swaps and forward futures contracts are not deemed
to constitute selling securities short.
(d) The Portfolio does not currently intend to
purchase securities on margin, except that the Portfolio may
obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments
and other deposits in connection with transactions in
options, futures, swaps and forward contracts shall not be
deemed to constitute purchasing securities on margin.
(e) The Portfolio does not currently intend to (i)
purchase securities of closed end investment companies,
except in the open market where no commission except the
ordinary broker's commission is paid, or (ii) purchase or
retain securities issued by other open-end management
investment companies. Limitations (i) and (ii) do not apply
to money market funds or to securities received as
dividends, through offers of exchange, or as a result of a
reorganization, consolidation, or merger. If the Portfolio
invests in a money market fund, the investment advisory fee
will be waived on the assets of the Portfolio which are
invested in the money market fund during the time that those
assets are so invested.
(f) The Portfolio may not mortgage or pledge any
securities owned or held by the Portfolio in amounts that
exceed, in the aggregate, 15% of the Portfolio's net asset
value, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets
deposited to margin or guarantee positions in futures,
options, swaps or forward contracts or placed in a
segregated account in connection with such contracts.
(g) The Portfolio does not currently intend to
purchase securities of any issuer (other the U.S. Government
agencies and instrumentalities or instruments guaranteed by
an entity with a record of more than three years' continuous
operation, including that of predecessors) with a record of
less than three years' continuous operation (including that
of predecessors) if such purchase would cause the
Portfolio's investments in all such issuers to exceed 5% of
the Portfolio's total assets taken at market value at the
time of such purchase.
(h) The Portfolio does not currently intend to invest
directly in oil, gas, or other mineral development or
exploration programs or leases; however, the Portfolio may
own debt or equity securities of companies engaged in those
businesses.
(i) The Portfolio may not invest in companies for the
purpose of exercising control or management, except to the
extent that exercise by the Portfolio of its rights under
agreements related to portfolio securities would be deemed
to constitute such control.
Lending of Portfolio Securities
Subject to investment limitation (5) under the caption
"Investment Limitations", above, the Portfolio may from
time-to-time lend securities from its portfolio to brokers,
dealers and financial institutions and receive as collateral
cash, U.S. Treasury securities, or other appropriate high
quality liquid debt securities which, at all times while the
loan is outstanding, will be maintained in amounts equal to
at least 100% of the current market value of the loaned
securities. Any cash collateral will be invested in short-
term securities, which will increase the current income of
the Portfolio. Such loans, which will not have terms longer
than 30 days, will be terminable at any time. The Portfolio
will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting
rights, subscription rights and rights to dividends,
interest or other distributions. The Portfolio may pay
reasonable fees to persons unaffiliated with the Fund for
services in arranging such loans.
Foreign Securities
The Portfolio may purchase certain foreign securities.
Investments in foreign securities, particularly those of
non-governmental issuers, involve considerations which are
not ordinarily associated with investing in domestic
issuers. The following describes certain of these
considerations in addition to those set forth in the
Prospectus. Delays may be encountered in settling
securities transactions in certain foreign markets. Also,
it is possible that market quotations for foreign securities
will not be readily available. In such event, these
securities shall be valued at fair value as determined in
good faith by the Board of Directors. If it should become
necessary, the Fund could encounter greater difficulties in
invoking legal processes abroad than would be the case in
the United States. Transaction costs in foreign securities
may be higher. These and other factors will be considered
before investment is made in foreign securities, and such
investments will not be made unless it is determined that
such investments will meet the standards and objectives of
the Portfolio. In particular, management anticipates that
these considerations will be inapplicable to a variety of
Canadian investments. The Portfolio will not concentrate
its investments in any particular foreign country.
MANAGEMENT OF THE FUND
Directors and Officers
The directors and executive officers of the Fund and their
principal occupations for at least the last five years are
set forth below:
Name, Relationship with Principal
Occupation
the Fund, and Address Past
Five Years
Rex Jennings Economic Development
Consultant
Director2/ (since 1987);
Richard P. Koeppe, Ph.D. Retired
Superintendent, Denver
Director3/ Public Schools
(since 1993)
Dennis Low The Great-West Life
Assurance Director1/ 5/
Company: Executive Vice-President,
Financial
Services (since 1991);
Senior Vice-President,
Individual
(1987-
1990)
James D. Motz The Great-West Life
Assurance
Director1/ 5/ Company: Senior
Vice-President,
Employee Benefits (since
1991);
Vice- President, Group
(1983-1990)
Sanford Zisman Attorney, Zisman &
Ingraham, P.C.
Director4/
Glen R. Derback The Great-West Life
Assurance
Treasurer, Principal Company, Vice-
President,
Financial and Accounting Financial
Control (since 1984);
Officer1/ 5/
Ruth B. Lurie The Great-West Life
Assurance
Secretary1/ 5/ Company, Vice-
President and
Counsel (since 1988)
_________________________________
1/ Interested person as defined in the Investment
Company Act of 1940.
2/ 12501 East Evans Circle, Unit C, Aurora Colorado
80014
3/ 8679 East Kenyon Avenue, Denver, Colorado 80237
4/ 3773 Cherry Creek North Drive, Suite 250, Denver,
Colorado 80209.
5/ The Great-West Life Assurance Company, 8515 E.
Orchard Road, Englewood, Colorado 80111.
As of May 31, 1996, no person owns of record or beneficially
5% of more of the shares outstanding in the Fund or any
Portfolio except the Series Accounts which owned 99% of the
Funds' outstanding shares. As of May 31, 1996, the
directors and officers of the Fund, as a group, had no
ownership in the Fund or any Portfolio.
The Investment Adviser
The information that follows supplements the information
provided about the Investment Adviser under the caption
"Management of the Fund - Investment Adviser" in the
Prospectus.
The Great-West Life Assurance Company (the "Investment
Adviser") serves as the investment adviser to the Fund
pursuant to an Investment Advisory Agreement dated April 1,
1982 with the Fund. The Investment Adviser is a 99.4% owned
subsidiary of Great-West Lifeco Inc., which in turn is an
86.4% subsidiary of Power Financial Corporation, Montreal,
Quebec. A majority of the common stock of Power Financial
Corporation is owned by 171263 Canada Inc. 171263 Canada
Inc is a wholly owned subsidiary of Power Corporation of
Canada, which, in turn, is controlled by a Canadian
investor, Paul Desmarais, and his associates.
The Investment Advisory Agreement, as amended, was
considered by the Fund's Board of Directors, including a
majority of the Directors who are not "interested persons"
(as defined in the Investment Company Act of 1940), on April
8, 1996. The Agreement will remain in effect until April 1,
1997 and will continue in effect from year to year if
approved annually (a) by the Board of Directors of the Fund
or by a majority of the outstanding shares of the Fund,
including a majority of the outstanding shares of each
portfolio, and (b) by a majority of the Directors who are
not parties to such contract or "interested persons" of any
such party. The agreement is not assignable and may be
terminated without penalty on 60 days' written notice at the
option of either party or by the vote of the shareholders of
the Fund.
While the Investment Adviser is at all times subject to the
direction of the Board of Directors of the Fund, the
Investment Advisory Agreement provides that the Investment
Adviser, subject to review by the Board of Directors, is
responsible for the actual management of the Fund and has
responsibility for making decisions to buy, sell or hold any
particular security. The Investment Adviser provides the
portfolio managers for the Fund. Such managers consider
analysis from various sources, make the necessary investment
decisions and effect transactions accordingly. The
Investment Adviser also is obligated to perform certain
administrative and management services for the Fund and is
obligated to provide all the office space, facilities,
equipment and personnel necessary to perform its duties
under the Agreement.
Advisory Fee.
The method of computing the investment advisory fee is fully
described in the Prospectus.
The Sub-Adviser
INVESCO Trust Company
INVESCO Trust Company ("ITC") serves as the sub-adviser to
the Portfolio pursuant to a Sub-Advisory Agreement dated
November 1, 1994 as amended August 2, 1996. ITC is an
indirect wholly-owned subsidiary of INVESCO PLC, a publicly-
traded holding company that, through its subsidiaries,
engages in the business of investment management on an
international basis. INVESCO PLC managed approximately $64
billion for a variety of clients as of June 30, 1994. As
part of that $64 billion, INVESCO PLC manages a family of
mutual funds with assets of approximately $9.3 billion as of
June 30, 1994.
Sub-Advisory Fees
The method of computing the sub-advisory fees are fully
described in the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Portfolio Turnover
Brokerage costs to the Portfolio are commensurate with the
rate of portfolio activity. In computing the portfolio
turnover rate for the Portfolio, certain U.S. Government
securities (long-term for periods before 1986 and short-term
for all periods) and all other securities, the maturities or
expiration dates of which at the time of acquisition are one
year or less, are excluded. Subject to this exclusion, the
turnover rate for a portfolio is calculated by dividing (a)
the lesser of purchases or sales of portfolio securities for
the fiscal year by (b) the monthly average value of
portfolio securities owned by the portfolio during the
fiscal year.
There will be no fixed limitations regarding the portfolio
turnover of Portfolio. Portfolio turnover rates are
expected to fluctuate under constantly changing economic
conditions and market circumstances. Securities initially
satisfying the basic policies and objectives of the
Portfolio may be disposed of when they are no longer deemed
suitable.
A higher portfolio turnover rate may involve correspondingly
greater brokerage commissions and other expenses which might
be borne by the Fund and, thus, indirectly by its
shareholders. It is anticipated that the portfolio turnover
rate would not exceed 100%.
Placement of Portfolio Brokerage
The Fund does not have any obligation to deal with any
broker, dealer or group of brokers or dealers in the
execution of transactions in portfolio securities. Subject
to policy established by the Board of Directors, the
Investment Adviser is primarily responsible for placement of
the Fund's portfolio transactions. In placing orders, it is
the policy of the Fund to obtain the most favorable net
results, taking into account various factors, including
price, dealer spread or commissions, if any, size of the
transaction and difficulty of execution. While the
Investment Adviser generally will seek reasonably
competitive spreads or commissions, the Fund will not
necessarily be paying the lowest spread or commission
available.
In placing portfolio transactions, the Investment Adviser
may give consideration to brokers who provide supplemental
investment research, in addition to such research obtained
for a flat fee, to the Investment Adviser, and pay
commissions to such brokers or dealers furnishing such
services which are in excess of commissions which another
broker or dealer may charge for the same transaction. Such
supplemental research ordinarily consists of assessments and
analyses of the business or prospects of a company,
industry, or economic sector. Supplemental research
obtained through brokers or dealers will be in addition to
and not in lieu of the services required to be performed by
the Investment Adviser. The expenses of the Investment
Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information. The Investment
Adviser may use any supplemental investment research
obtained for the benefit of the Fund in providing investment
advice to its other investment advisory accounts, and may
use such information in managing their own accounts.
Conversely, such supplemental information obtained by the
placement of business for the Investment Adviser will be
considered by and may be useful to the Investment Adviser in
carrying out its obligations to the Fund.
Normally, the Fund will deal directly with the underwriters
or dealers who make a market in the securities involved
unless better prices and execution are available elsewhere.
Such dealers usually act as principals for their own
account. On occasion, securities may be purchased directly
from the issuer. Bonds and money market securities are
generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of
portfolio securities transactions of the Fund that are not
transactions with principals will consist primarily of
brokerage commissions or dealer or underwriter spreads
between the bid and asked price, although purchases from
underwriters of portfolio securities include a commission or
concession paid by the issuer.
Securities held by the Fund may also be held by other
separate accounts or mutual funds for which the Investment
Adviser serves as an adviser, or held by GWL&A, the
Investment Adviser for one or more clients when one or more
clients are selling the same security. If purchases or
sales of securities for the Fund or other entities for which
they act as investment adviser or for their advisory clients
arise for consideration at or about the same time,
transactions in such securities will be made for the
respective entities and clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more
than one client of the Investment Adviser during the same
period may increase the demand for securities being
purchased or the supply of securities being sold, there may
be an adverse effect on price.
On occasions when the Investment Adviser deems the purchase
or sale of a security to be in the best interests of the
Fund as well as other accounts or companies, it may to the
extent permitted by applicable laws and regulations, but
will not be obligated to, aggregate the securities to be
sold or purchased for the Fund with those to be sold or
purchased for such other accounts or companies in order to
obtain favorable execution and lower brokerage commissions.
In that event, allocation of the securities purchased or
sold, as well as the expenses incurred in the transaction,
will be made by the Investment Adviser in the manner it
considers to be most equitable and consistent with its
fiduciary obligations to the Fund and to such other accounts
or companies. In some cases this procedure may adversely
affect the size of the position obtainable for the
Portfolio.
CALCULATION OF YIELD AND RETURN
Yield
As summarized in the Prospectus under the heading
"Performance Related Information," yield of the Portfolio
will be computed by annualizing a recent month's net
investment income, divided by the Portfolio share's net
asset value on the last trading day of that month multiplied
by the average number of outstanding shares for the period.
Net investment income will reflect amortization of any
market value premium or discount of fixed income securities
and may include recognition of a pro rata portion of the
stated dividend rate of dividend paying portfolio
securities. The yield of the Portfolio will vary from time
to time depending upon market conditions and the composition
of the Portfolio. Yield should also be considered relative
to changes in the value of the shares of the Portfolio and
to the relative risks associated with the investment
objectives and policies of the Portfolio.
Total Return
As summarized in the Prospectus under the heading
"Performance Related Information," total return is a measure
of the change in value of an investment in the Portfolio
over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Portfolio
immediately rather than paid to the investor in cash. The
formula for total return used herein includes four steps:
(1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Portfolio all
additional shares which would have been purchased if all
dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the
value of the hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of
shares owned at the end of the period by the net asset value
per share on the last trading day of the period; (3)
assuming redemption at the end of the period and deducting
any applicable contingent deferred sales charge; and (4)
dividing this account value for the hypothetical investor by
the initial $1,000 investment. Total return will be
calculated for one year, five years and ten years or some
other relevant periods if the Portfolio has not been in
existence for at least ten years.
Performance Comparisons
The Portfolio may from time to time include its yield and/or
total return in advertisements or in information furnished
to present or prospective shareholders. The Portfolio may
include in such advertisements the ranking of those
performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services,
relevant indexes and Donoghue Money Fund Report as having
the same or similar investment objectives.
The manner in which total return and yield will be
calculated for public use is described above.
