As filed with the Securities and Exchange Commission on
February 14, 1997
Registration No. 2-75503
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 49 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 49 (X)
MAXIM SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
8515 E. Orchard Road
Englewood, Colorado 80111
Registrant's Telephone Number, including Area Code: (303)
689-3000
W. T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copies of Communications to:
James F. Jorden, Esquire
Jorden Burt Berenson & Johnson, LLP
1025 Thomas Jefferson St. N. W.
Suite 400 East
Washington, D. C. 20007-0805
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph
(b) of Rule 485
on September 25, 1996 pursuant to paragraph
(b)(1)(v) of Rule 485
60 days after filing pursuant to paragraph
(a)(1) of Rule 485
on pursuant to paragraph (a)(1) of
Rule 485
X 75 days after filing pursuant to paragraph
(a)(2) of Rule 485
on pursuant to paragraph (a)(2) of
Rule 485.
If appropriate, check the following:
this post-effective amendment designates a new
effective date for
a previously filed post-effective amendment
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Rule 24F-2 Notice for
Registrant's fiscal year was filed February , 1997. <PAGE>
MAXIM SERIES FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS-REFERENCE SHEET
PART A
Form N-1A Item Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Introduction; Fund
Portfolios;
The Fund and Its
Shares
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Securities The Fund and Its
Shares
7. Purchase of Securities Being Offered Introduction; Purchase
and
Redemption of Shares;
Valuation
of Shares
8. Redemption or Repurchase Purchase and
Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
PART B
Statement of
Additional
Form N-1A Item Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies The Fund Portfolios
14. Management of the Registrant Management of the Fund
15. Control Persons and Principal Purchase and
Holders of Securities Redemption of
Shares
16. Investment Advisory and Other Services Management of Fund
17. Brokerage Allocation Portfolio Transactions
and
Brokerage
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemption and Price of Being Purchase and
Offered Redemption of
Shares
20. Tax Status Taxes
21. Underwriters Not Applicable
22. Calculation of Yield Quotations of Calculation of Yields
Performance Data and Total Return
23. Financial Statements Financial Statements
PART C
Form N-1A Item Part C Caption
24. Financial Statements and Exhibits Financial Statements
and Exhibits
25. Persons Controlled by or Under Common Persons Controlled by
Control or Under
Common Control
26. Number of Holders of Securities Number of Holders of
Securities
27. Indemnification Indemnification
28. Business and Other Connections of Business and Other
Investment Adviser Connections of
Investment Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts
and Records
31. Management Services Management Services
32. Undertakings Undertakings
33. Signatures Signatures
<PAGE>
MAXIM SERIES FUND, INC.
8515 E. Orchard Road, 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 portfolios: the Money Market
Portfolio, the Bond Portfolio, the Stock Index
Portfolio, the U.S. Government Securities Portfolio, the Total
Return Portfolio, the Small-Cap Index Portfolio,
the International Equity Portfolio, the MidCap Portfolio, the Maxim
T. Rowe Price Equity/Income Portfolio,
the Maxim INVESCO Small-Cap Growth Portfolio, the Maxim INVESCO ADR
Portfolio, the Small-Cap
Value Portfolio, Maxim INVESCO Balanced Portfolio and the Corporate
Bond Portfolio.
The investment objective of the Money Market Portfolio is
preservation of capital, liquidity and the
highest possible current income consistent with the foregoing
objectives, through investments in short-term
money market securities. Shares of the Money Market Portfolio are
neither insured nor guaranteed by the
U.S. Government. Further, there is no assurance that the Portfolio
will be able to maintain a stable net asset
value of $1.00 per share.
The investment objective of the Bond Portfolio is to seek to
achieve maximum total return, consistent
with the preservation of capital, through investment in an actively
managed portfolio of debt securities.
The principal objective of the Stock Index Portfolio is to
provide investment results, before fees, that
correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their
pro rata share of the market.
The investment objective of the U.S. Government Securities
Portfolio is to seek the highest level of
return consistent with preservation of capital and substantial
credit protection. The Portfolio seeks to achieve
this objective by investing primarily in mortgage-related
securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and
instrumentality obligations, and in U.S.
Treasury obligations.
The objective of the Total Return Portfolio is to seek to
obtain the highest possible total return, a
combination of income and capital appreciation, consistent with
reasonable risk.
The objective of the Small-Cap Index Portfolio is to provide
investment results, before fees, that
correspond to the total return of the Russell 2000 Index.
The investment objective of the International Equity Portfolio
is long-term capital growth, which it
seeks to achieve through a flexible policy of investing in stocks
and debt obligations of companies outside the
United States.
The investment objective of the MidCap Portfolio is long-term
growth of capital by normally investing
at least 65% of its assets in securities issued by medium-sized
companies.
The investment objective of the Maxim T. Rowe Price
Equity/Income Portfolio is to seek to provide
substantial dividend income and also capital appreciation by
investing primarily in dividend-paying common
stocks of established companies. In pursuing its objective, the
Portfolio will emphasize companies with
favorable prospects for increasing dividend income and secondarily,
capital appreciation.
The investment objective of the Maxim INVESCO Small-Cap Growth
Portfolio is to seek long-term
capital growth. The Portfolio seeks to achieve this objective by
investing its assets principally in a diversified
group of equity securities of emerging growth companies with market
capitalizations of $1 billion or less at
the time of initial purchase ("small-cap companies.")
2 The investment objective of the Maxim INVESCO ADR Portfolio is
to seek to achieve a high total
return on investment through capital appreciation and current
income, while reducing risk through
diversification. In pursuing this objective, substantially all of
the Portfolio's assets will be invested in foreign
securities that are issued in the form of American Depository
Receipts ("ADRs") or foreign stocks that are
registered with the Securities and Exchange Commission ("SEC") and
traded in the U.S.
The investment objective of the Small-Cap Value Portfolio is
to achieve long-term capital appreciation
by investing primarily in common stocks, although the Portfolio
also may invest in other securities, including
restricted and preferred stocks.
The investment objective of the Corporate Bond Portfolio is
high total investment return. The
Corporate Bond Portfolio seeks to achieve its investment objective
by investing primarily in debt securities
(including convertibles), although up to 20% of its total assets at
the time of acquisition may be invested in
preferred stocks.
The investment objective of the Maxim INVESCO Balanced
Portfolio is to seek 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
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.
G W CAPITAL MANAGEMENT, INC.
Investment Adviser
The date of this Prospectus is May 1, 1997. <PAGE>
FINANCIAL
HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Money Market Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.0007 $1.0007
$1.0007 $1.0006 $1.0005 $1.0027 $1.0014 $1.0002
$0.9988
Income from Investment Operations
Net investment income 0.0555 0.0394 0.0278
0.0343 0.0565 0.0766 0.0870 0.0711 0.0635
Net Gains or Losses on Securities (realized and unrealized)
- - -
0.0001 0.0001 (0.0022) 0.0013 0.0018 0.0014
Total from Investment Operations 0.0555 0.0394 0.0278
0.0344 0.0566 0.0744 0.0883 0.0729 0.0649
Less Distributions
Dividends (from net investment income) (0.0555) (0.0394)
(0.0278) (0.0343) (0.0565) (0.0766) (0.0870) (0.0711)
(0.0635)
Distributions (from capital gains) - - - - -
- - - (0.0006) -
Initial Capitalization - -
- -
- - -
- -
Returns of Capital Total Distributions (0.5550) (0.0394)
(0.0278) (0.0343) (0.0565) (0.0766) (0.0870) (0.0717)
(0.0635)
Net Asset Value End of Period $1.0007 $1.0007 $1.0007
$1.0007 $1.0006 $1.0005 $1.0027 $1.0014 $1.0002
"Net Assets, End of Period" "277,257,289" "186,587,262"
"96,997,973" "64,220,562" "52,118,377" "36,738,618"
"28,749,125" "24,590,994" "18,947,848"
Ratio of Expenses to Average Net Assets 0.46% 0.46%
0.46% 0.46% 0.48% 0.50% 0.50% 0.50% 0.50%
Ratio of Net Income to Average Net Assets 5.55%
3.96% 2.82% 3.43% 6.15% 8.14% 9.18%
7.61% 6.85%
Portfolio Turnover Rate - - - - - - -
- - -
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Stock Index Portfolio*
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.4978 $1.5575
$1.4506 $1.5206 $1.3191 $1.3947 $1.2986 $1.1788
$1.2743
Income from Investment Operations
Net investment income 0.0334 0.0350 0.0320
0.0383 0.0563 0.0682 0.0769 0.0605 0.0563
Net Short-Term realized gain 0.0010
Net Gains or Losses on Securities (realized and unrealized)
0.4953 (0.0335) 0.1097 0.0502 0.2492 (0.0756) 0.1213
0.1518 0.0412
Total from Investment Operations 0.5297 0.0015 0.1417
0.0885 0.3055 (0.0074) 0.1982 0.2123 0.0975
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0344) (0.0350) (0.0320) (0.0382) (0.0542)
(0.0682) (0.0769) (0.0608) (0.0559)
Distributions (from capital gains) (0.0135) (0.0262)
(0.0028) (0.1203) (0.0498) - (0.0252) (0.0317) (0.1371)
Initial Capitalization - -
- - -
- - - -
Returns of Capital Total Distributions (0.0479) (0.0612)
(0.0348) (0.1585) (0.1040) (0.0682) (0.1021) (0.0925)
(0.1930)
Net Asset Value End of Period $1.9796 $1.4978 $1.5575
$1.4506 $1.5206 $1.3191 $1.3947 $1.2986 $1.1788
Total Return (1) 35.60% 0.14% 9.84% 5.87%
23.33% -0.58% 15.21% 17.91% 5.85%
"Net Assets, End of Period" "707,459,637" "497,339,992"
"562,189,394" "462,539,021" "359,177,318" "223,661,178"
"182,730,744" "134,553,151" "97,806,067"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 1.91%
2.23% 2.14% 2.49% 4.33% 5.70% 6.15%
5.29% 4.61%
Portfolio Turnover Rate 5.25% 11.98% 1.68%
118.83% 24.28% 26.41% 37.96% 44.65% 47.66%
"* From September 24, 1984 until December 1, 1992, the Portfolio's
name was the Growth Portfolio, and prior to September 24, 1984 the
Portfolio's name was the Income/Equity Portfolio. "
"During these periods, the Portfolio's investment policies differed
from its current policies."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, 1987, and 1986*"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Total Return Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.1238 $1.2065
$1.1327 $1.1156 $1.0017 $1.0279 $0.9018 $0.8750 -
Income from Investment Operations
Net investment income 0.0421 0.0382 0.0326
0.0424 0.0979 0.0541 0.0542 0.0536 0.0180
Net Short-Term realized gain 0.0139
Net Gains or Losses on Securities (realized and unrealized)
0.1960 (0.0704) 0.1025 0.0165 0.1177 (0.0262) 0.1261
0.0271 (0.3738)
Total from Investment Operations 0.2520 (0.0322) 0.1351
0.0589 0.2156 0.0279 0.1803 0.0807 (0.3558)
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0560) (0.0382) (0.0326) (0.0375) (0.0543)
(0.0541) (0.0542) (0.0539) (0.0178)
Distributions (from capital gains) (0.0229) (0.0123)
(0.0287) (0.0043) (0.0474) - -
- -
Initial Capitalization - -
- - -
- - -
1.2486
Returns of Capital Total Distributions (0.0789) (0.0505)
(0.0613) (0.0418) (0.1017) (0.0541) (0.0542) (0.0539) 1.2308
Net Asset Value End of Period $1.2969 $1.1238 $1.2065
$1.1327 $1.1156 $1.0017 $1.0279 $0.9018 $0.8750
Total Return (1) 22.70% -2.68% 12.19% 5.45%
22.04% 2.92% 20.48% 9.34% -
"Net Assets, End of Period" "55,176,028" "41,348,517"
"39,297,459" "18,696,606" "11,783,118" "11,875,970"
"13,205,175" "10,992,865" "9,644,569"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 3.41%
3.30% 2.88% 3.56% 5.52% 5.98% 6.17%
6.56% 5.35%
Portfolio Turnover Rate 44.70% 74.85% 58.02%
29.26% 92.80% 59.96% 59.25% 92.15% 67.24%
"* The Total Return Portfolio was established effective July 29,
1987."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, and 1993**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Small-Cap Value Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $0.9974 $1.0330
$1.0000
Income from Investment Operations
Net investment income 0.0286 0.0068 0.0012
Net Short-Term realized gain 0.0350
Net Gains or Losses on Securities (realized and unrealized)
0.0884 (0.0356) 0.0330
Total from Investment Operations 0.1520 (0.0288) 0.0342
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0636) (0.0068) (0.0012)
Distributions (from capital gains) (0.0189) -
-
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0825) 0.0068
(0.0012)
Net Asset Value End of Period $1.0669 $0.9974 $1.0330
Total Return (1) 15.51% -2.78% 3.42%
"Net Assets, End of Period" "20,769,579" "9,721,848"
"3,007,882"
Ratio of Expenses to Average Net Assets 1.35%# 1.33%#
1.33%*#
Ratio of Net Income to Average Net Assets 2.51%
0.80% 1.52%*
Portfolio Turnover Rate 17.78% 16.81% -
*Annualized
"** The Small-Cap Value Portfolio was established effective
December 1, 1993."
# Percentages are shown net of expenses reimbursed by The
Great-West Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994 and 1993**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Small-Cap Index Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $0.9540 $1.0112
$1.0000
Income from Investment Operations
Net investment income 0.0102 0.0097 0.0009
Net Short-Term realized gain 0.0095
Net Gains or Losses on Securities (realized and unrealized)
0.2298 (0.0572) 0.0112
Total from Investment Operations 0.2495 (0.0475) 0.0121
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0197) (0.0097) (0.0009)
Distributions (from capital gains) (0.0158) -
-
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0355) (0.0097)
(0.0009)
Net Asset Value End of Period $1.1680 $0.9540 $1.0112
Total Return (1) 26.24% -4.69% 1.21%
"Net Assets, End of Period" "51,610,284" "22,336,944"
"5,936,716"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60%*
Ratio of Net Income to Average Net Assets 1.00%
1.20% 1.24%*
Portfolio Turnover Rate 30.17% 53.44% 0.72%
*Annualized
"** The Small-Cap Index was established effective December 1,
1993."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Corporate Bond Portfolio
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9716 $1.0000
Income from Investment Operations
Net investment income 0.0842 0.0137
Net Short-Term realized gain 0.0159
Net Gains or Losses on Securities (realized and unrealized)
0.1835 (0.0284)
Total from Investment Operations 0.2836 (0.0147)
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.1001) (0.0137)
Distributions (from capital gains) (0.0030) -
Initial Capitalization - -
Returns of Capital Total Distributions 0.1031 (0.0137)
Net Asset Value End of Period $1.1521 $0.9716
Total Return (1) 30.19% -1.47%
"Net Assets, End of Period" "45,530,190" "13,713,195"
Ratio of Expenses to Average Net Assets 0.90% 1.08%*
Ratio of Net Income to Average Net Assets 7.89% 8.64%*
Portfolio Turnover Rate 24.70% 9.45%
*Annualized
"** The Corporate Bond Portfolio was established effective November
1, 1994."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Bond Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.1352 $1.2274
$1.2259 $1.2929 $1.2312 $1.2297 $1.1725 $1.2002
$1.2640
Income from Investment Operations
Net investment income 0.0736 0.0634 0.0632
0.0831 0.0939 0.0946 0.0918 0.0916 0.0851
Net Gains or Losses on Securities (realized and unrealized)
(0.0949) (0.0922) 0.0326 (0.0053) 0.0798 0.0015 0.0572
(0.0275) (0.0495)
Total from Investment Operations 0.1685 (0.0288) 0.0958
0.0778 0.1737 0.0961 0.1490 0.0641 0.0356
Less Distributions
Dividends (from net investment income) (0.0736) (0.0634)
(0.0632) (0.0760) (0.0884) (0.0946) (0.0918) (0.0918)
(0.0850)
Distributions (from capital gains) - (0.0311) (0.0311)
(0.0688) (0.0236) - - -
Initial Capitalization - -
- -
- - - (0.0144)
Returns of Capital Total Distributions (0.0736) (0.0634)
(0.0943) (0.1448) (0.1120) (0.0946) (0.0918) (0.0918)
(0.0994)
Net Asset Value End of Period $1.2301 $1.1352 $1.2274
$1.2259 $1.2929 $1.2312 $1.2297 $1.1725 $1.2002
Total Return (1) 15.21% -2.36% 8.56% 6.24%
14.70% 8.21% 13.11% 5.40% 2.82%
"Net Assets, End of Period" "80,025,099" "68,965,299"
"84,696,187" "69,974,484" "88,545,656" "62,311,336"
"47,442,300" "35,806,047" "27,251,255"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 6.16%
5.33% 5.02% 5.93% 7.64% 8.41% 8.21%
8.27% 7.64%
Portfolio Turnover Rate 191.58% 60.85% 164.32%
157.97% 168.18% 89.91% 79.68% 80.62% 151.78%
(1) The performance shown does not reflect fees or expenses at the
separate account level. <PAGE>
FINANCIAL
HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, and 1993**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
International Equity Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $1.0673 $1.0110
$1.0000
Income from Investment Operations
Net investment income 0.0190 0.0049 0.0009
Net Short-Term realized gain 0.0034
Net Gains or Losses on Securities (realized and unrealized)
0.0722 0.0563 0.0110
Total from Investment Operations 0.0946 0.0612 0.0119
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0224) (0.0049) (0.0009)
Distributions (from capital gains) -
- -
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0224) (0.0049)
(0.0009)
Net Asset Value End of Period $1.1395 $1.0673 $1.0110
Total Return (1) 8.93% 6.06% 1.19%
"Net Assets, End of Period" "55,017,668" "32,180,949"
"3,126,038"
Ratio of Expenses to Average Net Assets 1.50%# 1.49%#
1.48%*#
Ratio of Net Income to Average Net Assets 1.70%
1.25% 1.09%*
Portfolio Turnover Rate 20.28% 11.49%
*Annualized
"** The International Equity Portfolio was established effective
December 1, 1993."
# Percentages are shown net of expenses reimbursed by The
Great-West Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Maxim INVESCO ADR
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9859 $1.0000
Income from Investment Operations
Net investment income 0.0120 0.0026
Net Gains or Losses on Securities (realized and unrealized)
0.1396 (0.0141)
Total from Investment Operations 0.1516 (0.0115)
Less Distributions
Dividends (from net investment income) (0.0120) (0.0026)
Distributions (from capital gains) -
-
Initial Capitalization - -
Returns of Capital Total Distributions (0.0120) (0.0026)
Net Asset Value End of Period $1.1255 $0.9859
Total Return (1) 15.48% -1.16%
"Net Assets, End of Period" "2,681,969" "1,976,834"
Ratio of Expenses to Average Net Assets 1.50%# 1.50%*#
Ratio of Net Income to Average Net Assets 1.17%
1.56%*
Portfolio Turnover Rate 5.88% 2.42%
*Annualized
"** The Maxim INVESCO ADR fund was established effective November
1, 1994."
# Percentage is shown net of expenses reimbursed by The Great-West
Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Year Ended December 31, 1996 **"
The following tables should be read in
conjunction with the financial statements
and related notes included in the Statement of
Additional Information.
Maxim INVESCO Balanced Portfolio
"Year Ended December 31,"
1996
"Net Asset Value, Beginning of Period"
Income from Investment Operations
Net investment income
Net Short-Term realized gain
Net Gains or Losses on Securities (realized and unrealized)
Total from Investment Operations
Less Distributions
Dividends (from net investment income and Short-Term realized
gains)
Distributions (from capital gains)
Initial Capitalization
Returns of Capital Total Distributions
Net Asset Value End of Period
Total Return (1)
"Net Assets, End of Period"
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
* Annualized
"** The Maxim INVESCO Balanced Portfolio was established effective
October 1, 1996."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Maxim INVESCO Small-Cap Growth
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $1.0054 $1.0000
Income from Investment Operations
Net investment income 0.0069 0.0030
Net Short-Term realized gain 0.0272
Net Gains or Losses on Securities (realized and unrealized)
0.2846 0.0054
Total from Investment Operations 0.3187 0.0084
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0341) (0.0030)
Distributions (from capital gains) (0.0166) -
Initial Capitalization - -
Returns of Capital Total Distributions (0.0507) (0.0030)
Net Asset Value End of Period $1.2734 $1.0054
Total Return (1) 31.79% 0.84%
"Net Assets, End of Period" "6,385,180" "2,022,380"
Ratio of Expenses to Average Net Assets 1.10%# 1.08%*#
Ratio of Net Income to Average Net Assets 0.58%
1.86%*
Portfolio Turnover Rate 266.64% -
*Annualized
"** The Maxim INVESCO Small-Cap fund was established effective
November 1, 1994."
# Percentage is shown net of expenses reimbursed by The Great-West
Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Maxim T. Rowe Price Equity/Income
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9805 $1.0000
Income from Investment Operations
Net investment income 0.0345 0.0061
Net Short-Term realized gain 0.0051
Net Gains or Losses on Securities (realized and unrealized)
0.2841 (0.0195)
Total from Investment Operations 0.3237 (0.0134)
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0396) (0.0061)
Distributions (from capital gains) (0.0013) -
Initial Capitalization - -
Returns of Capital Total Distributions (0.0409) (0.0061)
Net Asset Value End of Period $1.2633 $0.9805
Total Return (1) 33.42% -1.34%
"Net Assets, End of Period" "10,950,195" "2,110,302"
Ratio of Expenses to Average Net Assets 0.95%# 0.95%*#
Ratio of Net Income to Average Net Assets 3.46% 3.90%*
Portfolio Turnover Rate 14.00% 2.74%
*Annualized
"** The Maxim T. Rowe Price Equity/Income fund was established
effective November 1, 1994."
# Percentage is shown net of expenses reimbursed by The Great-West
Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Mid-Cap Portfolio
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $1.1003 $1.0000
Income from Investment Operations
Net investment income 0.0018 0.0076
Net Short-Term realized gain 0.0299
Net Gains or Losses on Securities (realized and unrealized)
0.2594 0.1003
Total from Investment Operations 0.2911 0.1079
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0317) (0.0076)
Distributions (from capital gains) (0.0059) -
Initial Capitalization - -
Returns of Capital Total Distributions (0.0376) (0.0076)
Net Asset Value End of Period $1.3538 $1.1003
Total Return (1) 26.50% 10.86%
"Net Assets, End of Period" "148,264,194" "81,088,654"
Ratio of Expenses to Average Net Assets 1.10%# 1.07%*#
Ratio of Net Income to Average Net Assets 0.13% 1.26%
Portfolio Turnover Rate 167.21% 166.12%
*Annualized
"** The Mid-Cap Portfolio was established effective January 3,
1994."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
# Percentages are shown net of expenses reimbursed by The
Great-West Life Assurance Company.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
U.S. Government Securities Portfolio*
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.0138 $1.1061
$1.1141 $1.1206 $1.0779 $1.0708 $1.0292 $1.0473
$1.0934
Income from Investment Operations
Net investment income 0.0723 0.0572 0.0881
0.1037 0.0775 0.0901 0.0869 0.0867 0.0800
Net Gains or Losses on Securities (realized and unrealized)
0.0863 (0.0924) (0.0006) (0.0069) 0.0709 0.0071 0.0416
(0.0179) (0.0382)
Total from Investment Operations 0.1586 (0.0352) 0.0875
0.0968 0.1484 0.0972 0.1285 0.0688 0.0418
Less Distributions
Dividends (from net investment income) (0.0723) (0.0571)
(0.0887) (0.0581) (0.0839) (0.0901) (0.0869) (0.0869)
(0.0879)
Distributions (from capital gains) -
- (0.0068) (0.0452) (0.0218) -
- - (0.0079)
Initial Capitalization - -
- -
- - -
- -
Returns of Capital Total Distributions (0.0723) (0.0571)
(0.0955) (0.1033) (0.1057) (0.0901) (0.0869) (0.0869)
(0.0800)
Net Asset Value End of Period $1.1001 $1.0138 $1.1061
$1.1141 $1.1206 $1.0779 $1.0708 $1.0292 $1.0473
Total Return (1) 16.09% -3.20% 9.35% 8.94%
14.34% 9.70% 13.10% 6.78% 3.96%
"Net Assets, End of Period" "62,473,959" "56,338,235"
"51,424,663" "30,350,801" "32,730,440" "39,727,586"
"44,046,887" "47,866,066" "49,577,136"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
0.60%
Ratio of Net Income to Average Net Assets 6.76%
5.47% 8.49% 4.96% 8.09% 9.11% 8.88%
8.84% 8.16%
Portfolio Turnover Rate 185.57% (2) 308.47% 27.28%
42.15% 213.79% 138.07% 52.55% 36.83% 116.66%
"*From July 29, 1987 until May 1, 1990 the Portfolio's name was the
Government and High Quality Securities Portfolio and from April 8,
1985 to July 29, 1987 the Portfolio's name was the Government
Guaranteed Portfolio. "
"During these periods, the Portfolio's investment policies differed
from its current policies."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
"(2) In 1994, the Portfolio turnover rate was higher than in past
years due to the impact of rising interest rates with respect to
the reverse dollar repurchase (""dollar roll"") strategy utilized
for this Portfolio. "
High Portfolio turnover rates may occur in the future if similar
economic conditions occur.
<PAGE>
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,
FutureFunds Series Account and Pinnacle Series
Account of Great-West Life & Annuity Insurance Company ("GWL&A")
and to the 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
provided herewith. 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. G W Capital Management, Inc.
("GW Capital Management")is the Investment Adviser for the Fund.
The day-to-day management of certain
Portfolios of the Fund is carried out by sub-advisers which are not
affiliated with GW Capital Management.
THE FUND PORTFOLIOS
Each portfolio has its own investment objective and investment
strategy. The investment objective of
any portfolio may not be changed without a vote of a majority of
the shares of that portfolio. A more detailed
description of the Fund's investment policies and a glossary
further describing certain investment securities
mentioned in the discussions that follow are contained in the
Statement of Additional Information.
Money Market Portfolio
The investment objectives of the Money Market Portfolio are to
preserve shareholder capital, to
maintain liquidity and to achieve the highest possible current
income consistent with the foregoing objectives
by investing in short-term money market securities.
The assets of the Money Market Portfolio are invested in money
market instruments with remaining
maturities not exceeding 13 months. The Money Market Portfolio also
maintains a dollar-weighted average
portfolio maturity of ninety days or less. The money market
instruments in which the Portfolio may invest
include the following:
1. U.S. government securities and government agency
securities. U.S. government securities
consist of various types of marketable securities by the United
States Treasury, such as bills, notes and bonds.
Such securities are direct obligations of the United States
Government. U.S. government agency securities are
debt securities issued by government-sponsored enterprises, federal
agencies and international institutions.
Such securities are not direct obligations of the U.S. Treasury but
involve government sponsorship or
guarantees. Among the agencies whose debt securities may be
purchased are: the Government National
Mortgage Association and Federal Housing Administration, whose
instruments are supported by the full faith
and credit of the United States; the Farm Credit Bank, whose
instruments are not direct obligations of the
United States, although the Farm Credit Bank is supported by its
ability to borrow from the U.S. Treasury;
and the Federal Land Bank, Federal Home Loan Bank and Federal Home
Loan Mortgage Corporation, whose
instruments are not supported by the U.S. Treasury, but only by the
credit of the issuing agency;
2. Certificates of deposit, time deposits, swap deposits and
bankers' acceptances of (i) U.S.
commercial banks or savings and loan associations having total
assets in excess of $1 billion, or (ii) other U.S.
commercial banks or savings and loan associations, foreign branches
of U.S. banks, and U.S. branches of
foreign banks if such bank obligations are fully insured by the
Federal Deposit Insurance Corporation;
3. Commercial paper, including variable amount master demand
notes;
4. Repurchase and reverse repurchase agreements. A
repurchase agreement is an instrument
under which the purchaser (e.g., the Fund) acquires ownership of
the obligation (debt security) and the seller
agrees at the time of the sale to repurchase the obligation at a
mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This
results in a fixed rate of return insulated
from market fluctuations during such period. Reverse repurchase
agreements involve the sale of securities held
by the Portfolio, with an agreement to repurchase the securities at
an agreed upon price, date and interest
payment. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other
party to the agreement, including possible delays or restrictions
upon the Portfolio's ability to dispose of the
underlying securities. The Investment Adviser, acting under the
supervision of the Board of Directors, reviews
the credit worthiness of those dealers with whom the Portfolio
enters into repurchase agreements; and
5. Other money market instruments that the Portfolio may
from time-to-time invest in include
floating rate notes and Eurodollar certificates of deposit if
denominated in U.S. currency.
The Money Market Portfolio generally invests in instruments
(other than U.S. government securities)
that have received the highest rating by at least one nationally
recognized statistical rating organization
("NRSRO"), securities whose issuer has received such ratings with
respect to a class of short-term debt
obligations that is comparable in priority and security with the
instrument acquired, or securities which are
determined or ratified by the Fund's Board of Directors as being
comparable to the foregoing securities. The
Money Market Portfolio only enters into repurchase agreements that
are collateralized entirely by U.S.
government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the
highest rating categories by at least one NRSRO.
In addition to following the foregoing guidelines, the Money
Market Portfolio intends otherwise to
comply with the requirements of Rule 2a-7 under the Investment
Company Act of 1940, as applicable to the
Portfolio.
Bond Portfolio
The investment objective of the Bond Portfolio is to seek to
achieve maximum total return, consistent
with the preservation of capital, through investment in an actively
managed portfolio of debt securities.
The Portfolio will normally consist of securities with various
maturities but the weighted average
maturity will be 2 to 10 years.
Under normal circumstances, the Portfolio intends to invest at
least 65% of its net assets in debt
securities of the U.S. Government and its agencies; foreign
governments, agencies and supra-national
organizations; and, domestic or foreign corporations. The Portfolio
may also invest in mortgage related and
other asset-backed securities, domestic and foreign commercial
banks and money markets including commercial
paper, bankers acceptances, certificates of deposit, time deposit
and repurchase agreements.
Foreign debt exposure will be limited to a maximum of 40% of
total assets at the time of acquisition
in foreign debt, with a maximum of 20% of total assets at the time
of acquisition in non-U.S. dollar
denominated foreign debt. No more than 25% of the total assets (at
the time of acquisition) may be invested
in securities of issuers located in a single country, other than
the U.S. See "Foreign Investment Risks" in this
prospectus.
Foreign currency exchange transactions may be utilized in an
attempt to protect against uncertainty
in the level of future exchange rates. See "Foreign Currency
Exchange Transactions" in this prospectus.
The Portfolio may invest in up to 10% of its total assets at
the time of acquisition in securities of
below investment grade quality, commonly referred to as "junk
bonds." Lower rated fixed-income securities
generally provide higher yields, but are subject to greater credit
and market risk than higher quality fixed-
income securities and are considered predominately speculative with
respect to the ability of the issuer to meet
principal and interest payments. In addition, the secondary market
may be less liquid for lower-rated fixed-
income securities which may make the valuation and sale of these
securities more difficult. Securities in the
lowest investment grade category BBB by Standard & Poor's
Corporation ("S&P") or Baa by Moody's Investor
Service, Inc. ("Moody's) have some speculative characteristics.
The Portfolio will also be able to invest in when-issued
securities or forward commitments, engage
in securities lending, reverse repurchase agreements and have the
ability to borrow money for temporary
administrative or emergency purposes. Securities may be purchased
on a when-issued basis and may be
purchased or sold on a forward commitment basis in order to hedge
against anticipated changes in interest
rates and prices and/or secure a favorable rate of return. The
Statement of Additional Information contains
more detailed information about these investment practices.
In order to shorten/lengthen or hedge the duration of the
Portfolio and for the purpose of both
hedging the foreign currency and interest-rate risks associated
with the Portfolio securities and increasing the
total return of the Portfolio, active interest rate management
techniques through options, futures contracts,
options on certain futures contracts, interest rate swaps and
interest rate caps and floors may be utilized in
the Portfolio. The Statement of Additional Information contains
more detailed information about these
investment practices.
U.S. Government Securities Portfolio
The investment objective of the U.S. Government Securities
Portfolio is to seek the highest level of
return consistent with preservation of capital and substantial
credit protection. The Portfolio seeks to achieve
this objective by investing at least 65% of its total assets in
securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities.
Investment by the U.S. Government Securities Portfolio in U.S.
government securities will include
direct pass-through mortgage certificates issued by those
government agencies whose obligations are backed
by the full faith and credit of the United States Government, such
as the Government National Mortgage
Association ("GNMA") or the Federal Housing Administration. Such
pass-through certificates represent
individual interests in pools of mortgages insured by the Veterans
Administration, the Farmers' Home
Association, Federal Housing Administration or any other government
agency. Owners of pass-through
certificates are entitled to receive a pro-rata share of the net
payments received on the underlying mortgages,
hence such payments are "passed through" to the owner. Accordingly,
the amount and frequency of payments
on such pass-through certificates depends on the rate of
prepayments on the underlying mortgages, which
may vary based upon a variety of economic factors.
The Portfolio may also invest in other U.S. government
securities, such as U.S. Treasury bills, notes
and bonds, or in certificates representing individual interests in
pools of such U.S. Treasury securities. The
payment of principal and interest to the Portfolio on such
certificates is fully backed by the U.S. Government.
The Portfolio also may invest in securities issued by the
Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA and FHLMC both issue mortgage-backed securities that are
similar to GNMAs in that they
represent interests in pools of mortgage loans. FNMA guarantees
timely payment of interest and principal on
its certificates.
FHLMC guarantees timely payment of interest and ultimate
payment of principal. The FNMA and
FHLMC guarantees are backed only by those agencies and not by the
full faith and credit of the United States.
The Portfolio also may invest in private mortgage pass-through
securities and collateralized mortgage
obligations ("CMOs"). These CMOs may take the form of those issued
by private issuers and collateralized
by securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
The Portfolio may also enter into reverse dollar repurchase
agreements ("dollar rolls") of
mortgage-backed securities in which the Portfolio sells securities
for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on
a specified future date. During the roll period, the Portfolio
forgoes principal and interest paid on the
mortgage-backed securities. The Portfolio is compensated by the
difference between the current sales price
and the lower forward price for proceeds of the initial sale. Cash
or high quality liquid securities equal to the
value of the outstanding repurchase commitments are segregated from
general investible funds and will be
marked to market daily. The risk associated with dollar roll
transactions is that the securities may not be
delivered and the Portfolio may incur a loss or will have lost the
opportunity to otherwise invest the amount
set aside for such transaction in the segregated asset account. As
of December 31, 1996, 8.53% of the Portfolio
was comprised of investments subject to dollar roll transactions.
The Portfolio may purchase securities on a when-issued basis
and may purchase or sell securities on
a forward commitment basis in order to hedge against anticipated
changes in interest rates and prices and/or
secure a favorable rate of return. The Statement of Additional
Information contains more information about
these investment practices.
The market value of securities held by the Portfolio can be
expected to decline when interest rates
rise. Thus, the U.S. Government Securities Portfolio will generally
shorten the average maturity of the
Portfolio when interest rates are rising and lengthen the average
maturity when interest rates are falling in
order to optimize the total return of the Portfolio.
The Portfolio also may hold money market instruments as it
believes is advisable to maintain liquidity
or for temporary defensive purposes.Total Return Portfolio
The investment objective of the Total Return Portfolio is to
seek to obtain the highest possible total
return, a combination of income and capital appreciation,
consistent with reasonable risk.
In seeking its investment objective, the Total Return
Portfolio invests in three market segments: equity
securities, fixed income securities and money market instruments.
The Portfolio invests in equity securities
consisting primarily of common stock of domestic issuers and any
warrants or rights which may be attached
to such common stock. The Portfolio also may, from time to time,
purchase convertible common stock of such
issuers or common stock of foreign issuers. Fixed income securities
in which the Portfolio may invest primarily
include obligations of domestic corporations and governments
(federal, state or municipal obligations) and
agencies thereof. Occasionally, the Portfolio may invest in debt
obligations of foreign governments. See
"Investment Limitations" for certain limitations applicable to
investment in securities of foreign issuers.
The Investment Adviser places primary emphasis on the mix of
investments among the three market
segments in accordance with the Adviser's appraisal of investments
most likely to achieve the highest return
based upon its judgment as to economic prospects and the outlook
for interest rates and the equity markets.
The selection of an individual security within a market segment by
the Investment Adviser will be based on
the Adviser's view of the relative attractiveness of the security.
There are no minimum or maximum
percentages as to the amount of the Portfolio's assets which may be
invested in each of the market segments.
Major changes in investment mix may occur several times a year or
over several years, depending upon
perceived market and economic conditions.
Except for restrictions noted herein and under "Investment
Restrictions" in the Statement of
Additional Information, the Investment Adviser has complete
flexibility in determining the amount and nature
of equity securities, fixed income securities or money market
instruments in which the Portfolio may invest.
The Portfolio normally invests for long-term gains. It may,
however, invest for short-term gain when,
in the view of the Investment Adviser, evolving economic, business
and market conditions so warrant.MidCap
Portfolio
The Portfolio's investment objective is long-term growth of
capital. The Portfolio will normally invest
at least 65% of its assets in securities issued by medium-sized
companies. Medium-sized companies are those
whose market capitalizations fall within the range of companies in
the S&P MidCap 400 Index (the "S&P
MidCap"). Companies whose capitalization falls outside this range
after the Portfolio's initial purchase
continue to be considered medium-sized companies for purposes of
this policy. As of December 31, 1996, the
S&P MidCap included companies with capitalizations between
approximately $191 million to $6.5 billion. The
range of the S&P MidCap is expected to change on a regular basis.
Janus Capital Corporation serves as sub-
adviser to this Portfolio. As such it is responsible for the
day-to-day management of the Portfolio, subject to
the overall supervision of the Fund's Board of Directors and the
Investment Adviser.
Medium-sized companies may suffer more significant losses as
well as realize more substantial growth
than larger capitalized, more established issuers. Thus,
investments in such companies tend to be more volatile
and somewhat speculative.
The Portfolio invests substantially all of its assets in
common stock when it is believed that the
relevant market environment favors profitable investing in those
securities. Common stock investments are
selected in industries and companies that are believed to be
experiencing favorable demand for their products
and services, and which operate in a favorable competitive and
regulatory climate. The process of analysis and
selection focuses on earnings growth potential. In particular, the
Portfolio intends to buy stocks with earnings
growth potential that may not be recognized by the market.
Securities are selected solely for their capital
growth potential; investment income is not a consideration.
The Portfolio may also purchase securities of foreign
issuers pursuant to the same selection criteria
applicable to domestic issuers. In addition, factors such as
expected levels of inflation, government policies
influencing business conditions, the outlook for currency
relationships, and prospects for relative economic
growth amongst countries, regions or geographic areas may warrant
greater consideration in selecting foreign
stocks. If appropriate, the Portfolio may purchase foreign
securities through dollar-denominated American
Depository Receipts, which do not involve the same direct currency
and liquidity risks as securities
denominated in foreign currency and which are issued by domestic
banks and publicly traded in the United
States. The Portfolio may invest up to 25% of its total assets at
the time of acquisition in foreign securities
denominated in foreign currency and not publicly traded in the
United States.
Investments in foreign securities involve risks that differ in
some respects from investment in securities
of U.S. issuers. These risks include the risk of fluctuations in
the value of the currencies in which they are
denominated, the risk of adverse political and economic
developments and, with respect to certain countries,
the possibility of expropriation, nationalization or confiscatory
taxation or limitations on the removal of funds
or other assets of the Portfolio. Securities of some foreign
companies are less liquid and more volatile than
securities of comparable domestic companies. There also may be less
publicly available information about
foreign issuers than domestic issuers, and foreign issuers
generally are not subject to the uniform accounting,
auditing and financial reporting standards, practices and
requirements applicable to domestic issuers. Delays
may be encountered in settling securities transactions in certain
foreign markets and the Portfolio will incur
costs in converting foreign currencies to U.S. dollars. Custody
charges are generally higher for foreign
securities.
The Portfolio may invest in "special situations" from time to
time. A special situation arises when it
is believed that the securities of a particular company will be
recognized and appreciate in value due to a
specific development at that company. Developments creating a
special situation might include a new product
or process, a management change or a technological breakthrough.
Investment in special situations may carry
an additional risk of loss in the event that the anticipated
development does not occur or does not result in
the anticipated economic impact on the value of a company's
securities.
The Portfolio may also purchase and write options on
securities (including index options) and options
on foreign currencies, and may invest in futures contracts for the
purchase or sale of instruments based on
financial indices, including interest rates or an index of U.S.
Government or foreign government securities or
equity or fixed income securities futures contracts on foreign
currencies and fixed income securities ("futures
contracts"), options on futures contracts, forward contracts and
swaps and swap-related products. These
instruments will be used primarily to hedge the Portfolio's
positions, i.e., to attempt to reduce the overall level
of investment risk that normally would be expected to be associated
with the Portfolio's assets and to attempt
to protect the Portfolio against market movements that might
adversely affect the value of the Portfolio's
securities or the price of securities that the Portfolio is
considering purchasing.
The use of futures, options, forward contracts and swaps
exposes the Portfolio to additional investment
risks and transaction costs. If these techniques are utilized to
protect the Portfolio against potential adverse
movements in the securities, foreign currency or interest rate
markets using these instruments, and such
markets do not move in a direction adverse to the Portfolio, the
Portfolio could be left in a less favorable
position than if such strategies had not been used. Risks inherent
in the use of futures, options, forward
contracts and swaps include (1) the risk that interest rates,
securities prices and currency markets will not
move in the directions anticipated; (2) imperfect correlation
between the price of the securities or currencies
being hedged; (3) the fact that skills needed to use these
strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any
time; and (5) the possible need to defer closing out certain hedged
positions to avoid adverse tax
consequences.
The Portfolio may invest in securities that are considered
illiquid because of the absence of a readily
available market or due to legal or contractual restrictions.
However, certain restricted securities that are not
registered for sale to the general public but that can be resold to
institutional investors may not be considered
illiquid, provided that a dealer or institutional trading market
exists. See "Illiquid Securities" in this prospectus.
Although the Portfolio may normally invest primarily in equity
securities, it may increase its cash
position when investment opportunities with desirable risk/reward
characteristics cannot be located. The
Portfolio may also invest in preferred stocks, warrants, government
securities, corporate bonds and debentures,
high-grade commercial paper, certificates of deposit or other debt
securities when it is believed there is an
opportunity for capital growth for such securities or so that the
Portfolio may receive a return on idle cash.
When the Portfolio invests in such securities, investment income
will increase and may constitute a large
portion of the return on the Portfolio. Consequently, the Portfolio
may not participate in market advances
or declines to the extent that it would if it remained fully
invested in common stocks.
The Portfolio may also invest in money market securities for
defensive purposes or as a cash reserve.
International Equity Portfolio
The Portfolio's investment objective is long-term capital
growth, which it seeks to achieve through a
flexible policy of investing in stocks and debt obligations of
companies and governments outside the United
States. Any income realized will be incidental. Templeton
Investment Counsel, Inc. serves as sub-adviser to
this Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio subject to the overall
supervision of the Fund's Board of Directors and the Investment
Adviser.
Although the Portfolio will generally invest in common stock
and certain debt securities, rated or
unrated, such as convertible bonds and bonds selling at a discount,
whenever, in the judgment of the
sub-adviser, market or economic conditions warrant, the Portfolio
may, for temporary defensive purposes,
invest without limitation in U.S. government securities, money
market instruments, bank time deposits in the
currency of any major nation and commercial paper.
The investments of the Portfolio in foreign issuers may
involve special risks in addition to those
normally associated with investments in the securities of U.S.
issuers. For example, there may be less publicly
available information about foreign issuers than is available for
U.S. issuers, and foreign auditing, accounting,
and financial reporting practices may differ from U.S. practices.
Also, foreign securities markets may be less
active than U.S. markets, trading may be thin and consequently
securities prices may be more volatile.
Generally, all foreign investments are subject to risks of foreign
political and economic instability, adverse
movements in foreign exchange rates, the imposition or tightening
of exchange controls or other limitations,
the repatriation of foreign capital, and changes in foreign
governmental attitudes towards private investment,
possibly leading to nationalization, increased taxation, or
confiscation of underlying fund assets. Also, there
is the risk of possible losses through the holding of securities by
custodians and securities depositories in
foreign countries.
The Portfolio is authorized to invest in medium quality or
high risk, lower quality debt securities that
are rated between BBB and as low as CCC by Standard & Poor's
Corporation ("S&P") and between Baa and
as low as Caa by Moody's Investors Service, Inc. ("Moody's"),
commonly known as "high yield" (or "junk")
bonds, or, if unrated, are of an equivalent investment quality, as
determined by the sub-adviser. As an
operating policy, which may be changed by the Board of Directors
without shareholder approval, the Portfolio
will not invest more than 10% of its total assets in debt
securities rated BBB or lower by S&P or Baa or lower
by Moody's; however, this limitation is inapplicable to unrated
foreign convertible bonds which are convertible
at any time into equity securities suitable for investment by the
Portfolio. The Board may consider a change
in this operating policy if, in its or the sub-adviser's judgment,
economic conditions change such that a higher
level of investment in high risk, lower quality debt securities
would be consistent with the interest of the
Portfolio and its shareholders. The Portfolio usually effects
currency exchange transactions on a spot (i.e., cash)
basis or on a forward commitment basis at the spot rate prevailing
in the foreign exchange market. However,
some price spread on currency exchange (to cover service charges)
will be incurred when the Portfolio converts
assets from one currency to another.
The Portfolio may purchase and write options on securities and
certain futures contracts and invest
in certain futures contracts. The Statement of Additional
Information contains more detail about these
investment practices. For temporary defensive purposes, the
Portfolio may invest in cash, money market
instruments and may also purchase from banks or broker/dealers
Canadian or U.S. government securities with
a simultaneous agreement by the seller to repurchase them within
more than seven days at the original
purchase price, plus accrued interest.
Stock Index Portfolio
The investment objective of the Stock Index Portfolio is to
provide investment results, before fees,
that correspond to the total return of the S&P 500 Index and the
S&P MidCap Index, weighted according to
their pro rata share of the market. The Portfolio will pursue this
objective by investing in common stocks
traded on the New York Stock Exchange and the American Stock
Exchange and, to a limited extent, in the
over-the-counter markets.
Standard & Poor's Corporation ("S&P") chooses the 500 stocks
comprising the S&P 500 Index on
the basis of market values and industry diversification. Most of
the stocks in the S&P 500 Index are issued by
the 500 largest companies, in terms of the aggregate market value
of their outstanding stock, and such
companies are generally listed on the New York Stock Exchange.
Additional stocks that are not among the
500 largest market value stocks are included in the S&P 500 Index
for diversification purposes.
The S&P MidCap Index is market-weighted and consists of 400
stocks of domestic companies, having
a median market capitalization of approximately $1.6 billion. The
stocks included in the S&P 500 Index and
the S&P MidCap Index do not overlap.
Because smaller capitalized companies, regardless of their
shares outstanding, sometimes exhibit
illiquidity in the market, minimum trading volume constraints are
placed on issues selected for the S&P
MidCap Index. For this reason, the S&P MidCap Index includes a
small number of lesser known companies
in well known industries whose shares are more liquid.
S&P is not a sponsor of, or in any other way affiliated with,
the Portfolio or the Fund.
The Portfolio will attempt to duplicate the performance of the
S&P 500 Index and the S&P MidCap
Index while keeping transaction costs low and minimizing Portfolio
turnover. To achieve its investment
objective, the Portfolio will purchase equity securities that, in
the Adviser's opinion, will reflect, as a group,
the composite price performance of the S&P 500 Index and the S&P
MidCap Index. Like these indices, the
Portfolio will hold both dividend-paying and non-dividend paying
common stocks. Under normal
circumstances, a minimum of 65% of the Portfolio's total assets
will be invested in securities included on the
S&P 500 Index and the S&P MidCap Index.
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.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
Small-Cap Index Portfolio
The investment objective of the Small-Cap Index Portfolio
is to provide investment results, before fees,
that correspond to the total return of the Russell 2000 Index. The
Russell 2000 Index was developed in 1979
by the Frank Russell Company to track the stock market performance
of a broadly diversified group of small
capitalization domestic stocks. As of December 31, 1996, the median
market capitalization of issues comprising
the Russell 2000 Index was approximately $360 million.
The Portfolio intends to pursue this objective by investing
primarily in common stocks issued by
corporations domiciled in the U.S. and its territories traded on
the various U.S. stock exchanges and, to a
limited extent, in the over-the-counter markets. The Portfolio may
not hold all of the approximately 2,000
securities in the Russell 2000 Index because of the administrative
costs involved and the expenses associated
with trading less active securities. Instead, the Portfolio may
hold a representative sample of securities included
in the Russell 2000 Index.
The Frank Russell Company is not a sponsor of, or in any other way
affiliated with, the Portfolio or the Fund.
The Russell 2000 Index is a subset of the larger Russell 3000
Index. The Russell 3000 Index consists
of the largest 3000 publicly traded stocks of corporations
domiciled in the U.S. and its territories and includes
large, medium and small capitalization stocks. The Russell 3000
Index represents approximately 98% of the
total market capitalization of all U.S. stocks that trade on the
New York and American Stock Exchanges and
in the NASDAQ (National Association of Securities Dealers Automated
Quotations) National Market System
over-the-counter market. The Russell 2000 Index consists of the
2000 smallest stocks within the Russell 3000,
representing approximately 6% of the Russell 3000 Index total
market capitalization.
The Russell 2000 Index is reconstituted annually to reflect
changes in the marketplace. The Portfolio
will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May
31 total market capitalizations, with the actual reconstitution
effective June 30. As well, securities that leave
the Russell 2000 Index for any reason between reconstitution dates
will not be replaced. As a result, the
number of securities held in the Portfolio over the year will
fluctuate.
The annual turnover rate of the Russell 2000 Index is
significant, often as high as 25% per year of
the total market capitalization of the Index. This investment
strategy will be implemented only to the extent
it is consistent with maintaining the Fund's qualification as a
regulated investment company under the Internal
Revenue Code (see "Dividends, Distributions and Taxes). The Fund's
strategy may be limited, in particular,
by the requirement for such qualification that less than 30% of the
Fund's annual gross income be derived
from the sale or other disposition of stocks or securities
(including options and futures contracts) held for less
than three months.
Historically, small capitalization stocks, which constitute
the Portfolio's primary investments, have
been more volatile in price than the larger capitalization stocks
included in the S&P 500 Index. Among the
reasons for the greater price volatility of these small company
stocks are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for
such stocks, and the greater sensitivity of small
companies to changing economic conditions. Besides exhibiting
greater volatility, small company stocks may,
to a degree, fluctuate independently of larger company stocks.
Small company stocks may decline in price as
large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect
that the Portfolio may be more volatile than, and may fluctuate
independently of, broad stock market indices
such as the S&P 500 Index.
The Portfolio intends that, under normal circumstances, at
least 65% of its total assets will be invested
in securities included in the Russell 2000 Index.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
Maxim T. Rowe Price Equity/Income Portfolio
The investment objective of the Maxim T. Rowe Price
Equity/Income Portfolio is to seek to provide
substantial dividend income and also capital appreciation by
investing primarily in dividend-paying common
stocks of established companies. In pursuing its objective, the
Portfolio will emphasize companies with
favorable prospects for increasing dividend income and secondarily,
capital appreciation. T. Rowe Price
Associates, Inc. serves as sub-adviser of this Portfolio. As such,
it is responsible for the day-to-day management
of the Portfolio subject to the overall supervision of the Fund's
Board of Directors and the Investment
Adviser.
Over time, the income component (dividends and interest
earned) of the Portfolio's investments is
expected to be a significant contributor to the Portfolio's total
return. Total return will consist primarily of
dividend income and secondarily of capital appreciation (or
depreciation).
The investment program of the Portfolio is based on several
premises. First, it is believed that, over
time, dividend income can account for a significant component of
the total return from equity investments.
Second, dividends are normally a more stable and predictable source
of return than capital appreciation. While
the price of a company's stock generally increases or decreases in
response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Finally,
it is believed that stocks which distribute a high
level of current income tend to have less price volatility than
those which pay below-average dividends.
To achieve its objective, the Portfolio, under normal
circumstances, will invest at least 65% of its total
assets in income-producing common stocks, whose prospects for
dividend growth and capital appreciation are
considered favorable. To enhance capital appreciation potential,
the Portfolio will also use a value-oriented
approach, which means it will invest in stocks believed to be
currently undervalued in the marketplace. The
Portfolio's investments will generally be made in companies which
share some of the following characteristics:
established operating histories; above-average current dividend
yields relative to the Standard & Poor's 500
Stock Index ("S&P 500"); low price/earnings ratios relative to the
S&P 500; sound balance sheets and other
financial characteristics; and, low stock price relative to a
company's underlying value as measured by assets,
earnings, cash flow, or business franchises.
The Portfolio may also invest its assets in fixed income
securities (corporate and government bonds
of various maturities). The Portfolio may also invest in municipal
bonds when the expected total return from
such bonds appears to exceed the total returns obtainable from
corporate or government bonds of similar
credit quality.
Debt securities in which the Portfolio may invest may include
high yield/high risk bonds, commonly
referred to as "junk bonds." The total return and yield of lower
quality bonds can be expected to fluctuate
more than the total return and yield of higher quality,
shorter-term bonds, but not as much as common stocks.
Junk bonds are regarded as predominantly speculative with respect
to the issuer's continuing ability to meet
principal and interest payments. The Portfolio will not purchase a
non-investment grade debt security (or "junk
bond"), if immediately after such purchase the Portfolio would have
more than 10% of its total assets at the
time of acquisition invested in such securities.
The Portfolio may invest up to 10% of its total assets at the
time of acquisition in hybrid instruments.
These instruments combine the characteristics of securities,
futures and options. For example, the principal
amount, redemption or conversion terms of a security could be
related to the market price of some
commodity, currency or securities index. Such securities may bear
interest or pay dividends at below market
(or even relatively nominal) rates. Under certain conditions, the
redemption value of such an investment could
be zero. Hybrids can have volatile prices and limited liquidity
and their use by the Portfolio may not be
successful.
Although the Portfolio will invest primarily in U.S. common
stocks, it may also purchase other types
of securities. For example, the Portfolio may invest up to 25% of
its total assets at the time of acquisition in
securities issued by foreign issuers, including non-dollar
denominated securities traded outside the U.S. and
dollar denominated securities traded in the U.S. (such as ADRs).
See "Foreign Investment Risks" in this
prospectus.
The Portfolio also may invest in convertible securities and
warrants. Convertible securities may include
debt or preferred equity securities convertible into or
exchangeable for equity securities. Traditionally,
convertible securities have paid dividends or interest at rates
higher than common stocks but lower than non-
convertible securities. They generally participate in appreciation
or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. Warrants are
options to buy a stated number of shares of
common stock at a specified price any time during the life of the
warrants (generally, two or more years).
The Portfolio may also engage in a variety of investment
management practices, such as buying and
selling futures and options. The Statement of Additional
Information contains more detailed information about
these practices.
Maxim INVESCO Small-Cap Growth Portfolio
The investment objective of the Maxim INVESCO Small-Cap Growth
Portfolio is to seek long-term
capital growth. The Portfolio seeks to achieve this objective by
investing at least 65% of assets in a diversified
group of equity securities of emerging growth companies with market
capitalizations of $1 billion or less at
the time of initial purchase ("small-cap companies"). INVESCO Trust
Company serves as sub-adviser to this
Portfolio. As such, it is responsible for the day-to-day management
of the Portfolio, subject to the overall
supervision of the Fund's Board of Directors and the Investment
Adviser.
In selecting investments, the Portfolio will seek to identify
small-cap companies that are undervalued
in the marketplace and/or have earnings that may be expected to
grow faster than the U.S. economy in general.
Under normal circumstances, the Portfolio intends to invest at
least 65% of its total assets in equity securities
of small-cap companies, consisting of common and preferred stocks,
convertible debt securities, and other
securities having equity features. The remainder of the Portfolio's
assets may be invested in equity securities
of companies with market capitalizations in excess of $1 billion,
debt securities and short-term investments,
as described below.
In selecting the small-cap companies in which the Portfolio
will invest, an attempt will be made to
identify companies in any industry that are thought to have the
best opportunity for capital appreciation within
their industry grouping, subject to the additional requirement that
the companies are determined to be in the
developing stages of their life cycle, and have demonstrated, or
are expected to achieve, long-term earnings
growth. In selecting investments in equity securities of companies
with market capitalizations in excess of $1
billion at the time of initial purchase, the Portfolio will seek
securities that are consistent with the objective
of long-term capital growth. Equity securities purchased for the
Portfolio are traded principally in the over-the-
counter ("OTC") market, although securities traded on national,
regional or foreign stock exchanges may also
be purchased.
The Portfolio may also invest in debt securities including
U.S. Government and corporate debt
securities. Investment in U.S. government securities may consist of
securities issued or guaranteed by the U.S.
Government and any agency or instrumentality of the U.S.
Government. The Portfolio may invest in both
investment grade and lower-rated corporate debt securities.
However, the Portfolio will not invest more than
5% of its total assets (measured at the time of purchase) in
corporate debt securities that are rated below BBB
by Moody's or, if unrated, are securities judged to be equivalent
in quality to debt securities having such
ratings. In no event will the Portfolio invest in a debt security
rated below CCC by S&P or Caa by Moody's.
The short-term investments of the Portfolio may consist of
U.S. government and agency securities,
domestic bank certificates of deposit and bankers' acceptances, and
commercial paper rated A-1 by S&P or
P-1 by Moody's, as well as repurchase agreements with banks and
registered broker-dealers and registered
government securities dealers with respect to the foregoing
securities. The Portfolio's assets invested in U.S.
government securities and short-term investments will be used to
maintain liquidity. As well, when market
conditions are believed to warrant such action, the Portfolio may
invest all or a portion of its assets
temporarily in high grade corporate bonds or notes, U.S. government
securities or equity securities of larger,
more established companies, or hold its assets in cash or cash
equivalents, for defensive purposes. While the
Portfolio is in a temporary defensive position, the opportunity to
achieve capital growth will be limited, and,
to the extent that this assessment of market conditions is
incorrect, the Portfolio will be foregoing the
opportunity to benefit from capital growth resulting from increases
in the value of equity investments;
however, the ability to maintain a temporary defensive investment
position provides the flexibility for the
Portfolio to seek to avoid capital loss during market down turns.
The Portfolio may invest in equity securities and corporate
debt obligations which may consist of
securities issued by foreign issuers. Up to 25% of the Portfolio's
total assets, measured at the time of purchase,
may be invested directly in foreign securities. Securities of
Canadian issuers and securities purchased by means
of American Depository Receipts ("ADRs") are not subject to this
25% limitation. Foreign investments can
involve risks, however, that may not be present in domestic
securities. See "Foreign Investment Risks" in this
prospectus.
The Portfolio may make commitments in an amount of up to 10%
of the value of its total assets at
the time any commitment is made to purchase or sell securities on
a when-issued or delayed delivery basis (i.e.,
securities may be purchased or sold by the Portfolio with
settlement taking place in the future, often a month
or more later). The Statement of Additional Information contains
more detailed information about these
investment practices.
The Portfolio also may invest in securities which are illiquid
because they are subject to restrictions
on their resale ("restricted securities") or because, based upon
their nature or the market for such securities,
they are not readily marketable. Investments in illiquid securities
involve certain risks to the extent that the
Portfolio may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition,
in order to resell a restricted security, the Portfolio might have
to bear the expense and incur the delays
associated with effecting registration. See "Illiquid Securities"
in the prospectus.
The Portfolio may purchase and write options on securities and
certain futures contracts and invest
in futures contracts. The Statement of Additional Information
contains more detail about these investment
practices.
Maxim INVESCO ADR Portfolio
The investment objective of the Maxim INVESCO ADR Portfolio is
to achieve a high total return
on investment through capital appreciation and current income,
while reducing risk through diversification.
In pursuing this objective, substantially all of the Portfolio's
assets will be invested in foreign securities that
are issued in the form of American Depository Receipts ("ADRs") or
foreign stocks that are registered with
the Securities and Exchange Commission ("SEC") and traded in the
U.S. INVESCO Trust Company serves
as sub-adviser to this Portfolio. As such, it is responsible for
the day-to-day management of the Portfolio,
subject to the overall supervision of the Fund's Board of Directors
and the Investment Adviser.
ADRs are negotiable certificates, issued by a U.S. depository
bank, which represent an ownership
interest in shares of non-U.S. companies that are being held by a
U.S. depository bank. Each ADR may
represent one ordinary share (or a fraction or multiple of an
ordinary share) on deposit at the depository bank.
The foreign shares held by the depository bank are known as
American Depository Shares (ADSs). Although
there is a technical distinction between ADRs and ADSs, market
participants often use the two terms
interchangeably. ADRs are traded freely on U.S. exchanges or in the
U.S. over-the-counter market. ADRs
can be issued under different types of ADR programs, and, as a
result, some ADRs may not be registered with
the SEC.
The stocks in the ADR Portfolio will be selected from a
universe of approximately 2,200 stocks of
large and medium-sized capitalization, non-U.S. companies for which
a computer database of accounting data
has been developed. These stocks are subjected to a computer
analysis that compares the current stock price
to measures such as book value, historical return on equity, the
company's ability to reinvest capital, dividends
and dividend growth. This analysis is based on a proprietary model
developed by the sub-adviser which ranks
securities by relative value.
Once companies with a favorable relative valuation are
identified, they are subject to fundamental
analysis by the sub-adviser to try to determine whether the
historical record that contributed to the favorable
ranking can be extended. Factors considered in this analysis
include the company's business strategy,
competitive position and business environment. Based on this
fundamental analysis, the number of potential
investment securities is reduced to form a group of securities that
the sub-adviser uses to build the Portfolio.
The country and industry weightings are a by-product of the stock
selection process.
ADRs are a convenient alternative to direct purchases of
shares on foreign stock exchanges. Although
they offer investment characteristics that are virtually identical
to the underlying ordinary shares, they are often
as easy to trade as stocks of U.S. domiciled companies. A high
level of geographic and industry diversification
can be achieved using ADRs, with all transactions and dividends
being in U.S. dollars and annual reports and
shareholder literature printed in English. On occasion, the
sub-adviser may decide that it is economical to have
additional ADRs created or cause a bank to issue ADRs for companies
that have not previously had an ADR
facility.
The ADR Portfolio's investment return and the value of the
assets in the Portfolio primarily will be
dependent upon changes in the market value of its equity
investments, which will fluctuate based upon the
growth and earnings of the companies in which it invests, general
conditions affecting the markets for equity
securities and exchange rate movements between the U.S. dollar and
overseas currencies. The Portfolio also
may hold cash or cash equivalents to maintain liquidity or for
temporary defensive purposes.
The Portfolio may purchase and write options on securities and
certain futures contracts and invest
in futures contracts. The Statement of Additional Information
contains more detail about these investment
practices.
Foreign investments can involve risks, however, that may not
be present in domestic securities. See
"Foreign Investment Risks" in this prospectus.
Although the Portfolio invests in U.S. dollar denominated
shares of foreign companies, the
Portfolio's share value is affected by changes in currency exchange
rates. As one way of managing exchange
rate risk, the Portfolio may enter into forward foreign currency
exchange contracts. See "Foreign Currency
Exchange Transactions" in this prospectus.
Small-Cap Value Portfolio
The investment objective of the Small-Cap Value Portfolio is
to achieve long-term capital appreciation
by investing primarily in common stocks, although the Portfolio may
also invest in other securities, including
restricted, preferred stock or foreign securities. In seeking
capital appreciation, consideration will be given to
undervalued small and medium sized companies in industries that
demonstrate a strong potential for growth,
financially strong companies with distinct market niches offering
quality products or services, outstanding
management teams and a proven record of success. Ariel Capital
Management serves as sub-adviser to this
Portfolio. As such, it is responsible for the day-to-day management
of the Portfolio, subject to the overall
supervision of the Fund's Board of Directors and the Investment
Adviser.
As a means of controlling risk, industries that are believed
to be inherently unpredictable --
specifically, cyclical, commodity-based and start-up industries --
will be avoided. The Portfolio will be
constructed on a stock by stock basis with little attention devoted
to the macro-economic outlook of a
particular industry.
The Portfolio will adhere to a disciplined investment
philosophy which incorporates strict guidelines
regarding individual securities. When initiating a position, the
Portfolio will focus on issuers generally ranging
in market capitalization from $50 million to $1.5 billion. As these
companies may be less widely followed by
market analysts, it is believed that they present greater
opportunity for exceptional returns.
Additionally, in keeping with a value approach, the Portfolio
will invest in companies whose equities
are trading at an expected price/earnings ratio of 13-1 or less
over the next 12 months earnings estimate and
at a low price relative to book value, current sales and total
assets. Expected earnings may represent
normalized earnings or be adjusted for amortization of non-cash
charges. When executing this philosophy,
assets of the Portfolio will not trade or time the market for quick
gains. Rather, a fully invested portfolio is
maintained by following a conservative philosophy of investing for
the long-term. A security will be sold if it
is believed that its price/earnings multiple reflects that the
security may be over-valued and/or that it is no
longer perceived as having strong potential for growth.
Specifically, when a stock is trading at a price of 19-20
times its forward 12 months earnings estimates, it is believed
such stock reflects popular interest. In keeping
with a long-term approach, a security will not be sold because of
a short-term earnings disappointment.
However, a holding will be sold if it is believed that the
company's business has undergone fundamental
changes that will negatively affect its stock price or if there is
a loss of faith in a management's ability to
execute the company's stated goals and objectives.
The Portfolio may invest in foreign securities offering
potential for growth. Investments in foreign
securities involve risks that differ in some respects from
investment in securities of U.S. issuers. These risks
include the risk of fluctuations in the value of the currencies in
which they are denominated, the risk of
adverse political and economic developments and, with respect to
certain countries, the possibility of
expropriation, nationalization or confiscatory taxation or
limitations on the removal of funds or other assets
of the Portfolio. Securities of some foreign companies are less
liquid and more volatile than securities of
comparable domestic companies. There also may be less publicly
available information about foreign issuers
than domestic issuers, and foreign issuers generally are not
subject to the uniform accounting, auditing and
financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be
encountered in settling securities transactions in certain foreign
markets and the Portfolio will incur costs in
converting foreign currencies to U.S. dollars. Custody charges are
generally higher for foreign securities.
The Portfolio also may invest in money market securities for
temporary or emergency purposes or
solely as a cash reserve. The Portfolio may purchase and write
options on securities and certain futures
contracts and invest in certain futures contracts. The Statement of
Additional Information contains more detail
about these investment practices.
The Portfolio currently observes the following operating
policies, which may be changed without
shareholder approval: (1) the Portfolio actively seeks to invest in
companies that achieve excellence in both
financial return and environmental soundness, selecting issuers
that take positive steps toward preserving our
environment and avoiding companies with a poor environment; and (2)
the Portfolio will not invest in issuers
primarily engaged in the manufacture of weapons systems, the
production of nuclear energy, or the
manufacture of equipment to produce nuclear energy.
It is believed that there are long-term benefits inherent in
an investment philosophy that demonstrate
concern for the environment, human rights, economic priorities and
international relations.
The sub-adviser has engaged the services of Franklin Research
and Development Corporation of
Boston to provide environmental screening for all issuers selected
for the Portfolio. Franklin provides
information and opinions on the companies' environmental histories.
However, Franklin does not make
recommendations or provide investment advice concerning the
purchase or sale of securities for the Portfolio.
Corporate Bond Portfolio
The investment objective of the Corporate Bond Portfolio is
high total investment return through a
combination of current income and capital appreciation. The
Corporate Bond Portfolio seeks to achieve its
investment objective by investing in debt securities (including
convertibles), although up to 20% of its total
assets at the time of acquisition may be invested in preferred
stocks. In achieving high total investment returns
through a combination of current income and capital appreciation,
the Portfolio will normally invest at least
65% of its total assets in bonds. A limited portion of its assets
may also be invested in securities of foreign
issuers and up to 35% of its total assets at the time of
acquisition in securities of below investment grade
quality. The Portfolio may also hold a portion of its assets in
cash or money market instruments. Loomis,
Sayles & Company serves as sub-adviser to this Portfolio. As such,
it is responsible for the day-to-day
management of the Portfolio, subject to the overall supervision of
the Fund's Board of Directors and the
Investment Adviser.
The Portfolio may invest in fixed income securities of any
maturity. Fixed-income securities pay a
specified rate of interest or dividends, or a rate that is adjusted
periodically by reference to some specified
index or market rate. Fixed-income securities include securities
issued by federal, state, local and foreign
governments and related agencies, and by a wide range of private
issuers. Because interest rates vary, it is
impossible to predict the income in fixed-income securities for any
particular period. Therefore, the net asset
value of the Portfolio's shares will vary as a result of changes in
the value of the securities held. Fixed-income
securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result
of changes in interest rates. In general, the values of fixed
income securities increase when prevailing interest
rates fall and decrease when interest rates rise. Credit risk
relates to the ability of the issuer to make payments
of principal and interest.
The Portfolio may invest a portion of its assets in securities
rated below investment grade (that is,
below BBB by S&P or Baa by Moody's), including securities in the
lowest rating categories and comparable
unrated securities. The Portfolio may invest up to 35% of its total
assets at the time of acquisition in such
securities. For purposes of this percentage, a security will be
treated as being of investment grade quality if
at the time it is acquired at least one major rating agency has
rated the security in its top four rating categories
(even if another agency has issued a lower rating), or if the
security is unrated but it is otherwise determined
to be of comparable quality. Lower rated fixed- income securities
generally provide higher yields, but are
subject to greater credit and market risk than higher quality
fixed-income securities. Lower rated fixed-income
securities are considered predominately speculative with respect to
the ability of the issuer to meet principal
and interest payments. Achievement of the investment objective of
the Portfolio investing in lower rated fixed-
income securities may be more dependent on credit analysis than is
the case with higher quality bonds. The
market for lower rated fixed-income securities may be more severely
affected than some other financial
markets by economic recession or substantial interest rate
increases, by changing public perceptions of this
market or by legislation that limits the ability of certain
categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid
for lower rated fixed-income securities. This
lack of liquidity at certain times may affect the values of these
securities and may make the valuation and sale
of these securities more difficult. Securities of below investment
grade quality are commonly referred to as
"junk bonds." Securities in the lowest rating categories may be in
poor standing or in default. Securities in the
lowest investment grade category (BBB by S&P or Baa by Moody's)
have some speculative characteristics.
The Portfolio also may invest in "zero coupon" fixed-income
securities. These securities accrue interest
at a specified rate, but do not pay interest in cash on a current
basis. If the Portfolio invests in zero coupon
securities, it is required to distribute the income on these
securities as the income accrues, even though the
Portfolio is not receiving the income and cash on a current basis.
Thus, the Portfolio may have to sell other
investments to obtain cash to make income distributions. The market
value of zero coupon securities is often
more volatile than that of non-zero coupon fixed-income securities
of comparable quality and maturity.
The Portfolio also may invest in securities of issuers
organized or headquartered outside of the United
States. The Portfolio will not purchase a foreign security if, as
a result, its holdings of foreign securities would
exceed 20% of its total assets at the time of acquisition; however,
the Portfolio may invest any portion of its
assets in securities of Canadian issuers. Foreign investments can
involve risk, however, that may not be present
in domestic securities. See "Foreign Investment Risks" in this
prospectus.
The Portfolio may engage in foreign currency exchange
transactions to protect the value of specific
positions or in anticipation of changes in relative values of
currencies in which current or future holdings are
denominated or quoted. See "Foreign Currency Exchange Transactions"
in this prospectus.
The Portfolio may purchase Rule 144A securities. These are
privately offered securities that can be
resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless it has
been determined that the particular issue of Rule 144A securities
is liquid. See "Illiquid Securities" in this
prospectus.
The Portfolio may purchase and write options on securities and
certain futures contracts and invest
in certain futures contracts. The Portfolio may also engage in the
following investment practices each of which
involves certain special risks: collateralized mortgage
obligations, when-issued securities and repurchase
agreements. The Statement of Additional Information contains more
detailed information about these
practices.
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 money market instruments. 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.
In selecting equity investments, the Portfolio will seek to
identify 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. 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 U.S. Treasury
bonds, zero coupon bonds issued by the U.S. Government, its
agencies or instrumentalities, step-up bonds,
mortgage-backed securities and asset-backed securities.
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.
Index Portfolio Management
All index styled portfolios may utilize futures as a
substitute for a comparable market position in the
underlying securities, or for hedging purposes. A stock 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 stock 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
stocks in the index is made. The intent is to
purchase and sell futures contracts so as to obtain the best price
with consideration also given to liquidity.
Stock index futures contracts may be purchased or sold to the
extent that such activities would be
consistent with the requirements of Section 4.5 of the regulations
under the Commodity Exchange Act, under
which the portfolios would be excluded from the definition of a
"commodity pool operator." Accordingly,
each portfolio may enter into futures positions in such futures
contracts to the extent that the aggregate initial
margins and premiums required to establish such positions do not
exceed 5% of the liquidation value of the
respective portfolio.
Risks associated with the use of futures contracts are: (i)
imperfect correlation between the change
in value of securities included on the index and the prices of
futures contracts; and (ii) possible lack of a liquid
secondary market for a futures position when desired. The risk that
a portfolio will be unable to close out a
futures position will be minimized by entering into such
transactions on a national exchange with an active
and liquid secondary market. In addition, because of the low margin
deposits normally required in futures
trading, a high degree of leverage is typical of a futures trading
account. As a result, a relatively small price
movement in a futures contract may result in substantial losses to
the trader (i.e., the Portfolio).
Traditional methods of securities analysis are not used by the
Investment Adviser in making
investment decisions for index styled portfolios. Rather a
statistical selection technique is utilized to determine
which securities it will purchase or sell in order to track the
performance of the relevant index(es) to the
extent feasible. In addition, from time to time, adjustments may be
made in a portfolio's holdings due to
change in the composition of the relevant index(es). Each index
styled portfolio will attempt to achieve a
correlation between its performance and that of the relevant
index(es) of at least 0.95, without taking into
account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when a
portfolio's net asset value, including the value of its dividends
and capital gains distributions, increases or
decreases, is in exact proportion to change in the relevant
index(es). The Investment Adviser will attempt to
minimize any "tracing error" (that statistical measure of the
difference between the investment results of a
portfolio and that of the relevant index(es)) in making investments
for a portfolio. However, brokerage and
other transaction costs, as well as potential tracking errors, will
tend to cause a portfolio's return to be lower
than the return of the relevant index(es). There can be no
assurance, however, as to how closely a portfolio's
performance will correspond to the performance of the relevant
index(es). Moreover, the index itself may not
perform favorably in which case a Portfolio's performance would
similarly be unfavorable.
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 a
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 generally 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 judgments 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.
A 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 a 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 a Portfolio in foreign
currencies. With respect to all Portfolios, the value
of foreign currencies relative to the U.S. dollar varies
continually, causing changes in the dollar value of a
Portfolio's investments (even if the price of the investments is
unchanged) and changes in the dollar value of
a 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 a Portfolio's assets and
on the net investment income available for
distribution may be favorable or unfavorable.
For Portfolios other than the Maxim INVESCO ADR Portfolio, a
Portfolio may incur costs in
connection with conversions between various currencies. In
addition, a 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 a
Portfolio declares and pays a dividend, or
between the time when a Portfolio accrues and pays an operating
expense in U.S. dollars.
The Maxim INVESCO ADR Portfolio may invest in ADRs. 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
Portfolios which engage in foreign currency exchange
transactions do so in an attempt to protect
against uncertainty in the level of future exchange rates. Some
Portfolios may 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.")
A 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. A 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, a 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 a 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.
A Portfolio may engage in position hedging to protect against
the decline in the 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, when the Portfolio
holds cash or short-term investments). For position hedging
purposes, a Portfolio may purchase or sell foreign
currency futures contracts, foreign currency forward contracts and
options on foreign currency futures contracts
and on foreign currencies on exchanges or over-the-counter markets.
In connection with position hedging, the
Portfolio also may purchase or sell foreign currency on a spot
basis.
A 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. A 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.
A 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 also may be limited by tax considerations. Hedging
transactions may affect the character or
amount of distributions.
Illiquid Securities
Each Portfolio, other than the Money Market Portfolio, may
invest up to 15% of its total assets in
"illiquid securities" (taken as of the time of acquisition of an
illiquid security). The Money Market Portfolio
may invest up to 10% of its total assets in illiquid securities.
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 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 Portfolios 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 a board of directors to
determine, such determination is 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, and with respect to those Portfolios having a sub-adviser,
the sub-adviser is responsible for
determining the liquidity of Rule 144A securities.
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 a Portfolio's liquidity.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the
Fund rests with the Fund's directors.
There currently are 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 GW Capital Management 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 GW Capital
Management 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
GW Capital Management, 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. GW
Capital Management 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 Fund's portfolios in accordance with each Portfolio's
stated investment objectives and policies,
makes investment decisions for the Portfolios and places orders to
buy and sell securities on behalf of the
Fund or delegates these functions to a sub-adviser, as discussed
below. The Investment Adviser provides
investment advisory services and pays all the expenses, except
extraordinary expenses, incurred for providing
such services for the Portfolios described herein. As compensation
for its services to the Fund, the Investment
Adviser receives monthly compensation at the annual rate of 0.46%
of the average daily net assets of the
Money Market Portfolio; 0.60% of the average daily net assets of
the Bond, Stock Index, U.S. Government
Securities, Total Return Portfolio, Small-Cap Index Portfolios;
0.80% of the average daily net assets of the
Maxim T. Rowe Price Equity/Income Portfolio; 0.90% of the average
daily net assets of the Corporate Bond
Portfolio; 0.95% of the average daily net assets of the MidCap and
Maxim INVESCO Small-Cap Growth
Portfolios; and 1.00% of the average daily net assets of the
Small-Cap Value, International Equity, Maxim
INVESCO ADR and Maxim INVESCO Balanced Portfolios.
With respect to the MidCap, International Equity, Small-Cap
Value, Maxim T. Rowe Price
Equity/Income, Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR
Portfolios, the Investment
Adviser pays all compensation of, and furnishes office space for,
officers and employees of the Investment
Adviser connected with investment management of these Portfolios,
as well as the fees of all directors of the
Fund who are affiliated persons of the Investment Adviser or any of
its subsidiaries. All other expenses
incurred in the operation of these Portfolios, including general
administrative expenses, are borne by these
Portfolios, respectively. Accounting services are provided for
these Portfolios by the Investment Adviser and
these Portfolios reimburse the Adviser for its costs in connection
with such services. However, the Adviser has
agreed to pay any expenses of the Fund which exceed an annual rate
of 0.95% of the average daily net assets
of the Maxim T. Rowe Price Equity/Income Portfolio; 1.10% of the
average daily net assets of the MidCap
and Maxim INVESCO Small-Cap Growth Portfolios; 1.30% of the average
daily net assets of the Maxim
Invesco ADR Portfolio; 1.35% of the average daily net assets of the
Small-Cap Value Portfolio; and, 1.50%
of the average daily net assets of the International Equity
Portfolio.
The day-to-day lead portfolio manager for the Bond Portfolio
is B.G. Masters. Mr. Masters is
Manager, Public Bond Investments, Great-West, 1993 to Present;
Manager, Bond, Investment Grade Corporate
Bond and Short-Term Maturity Bond Portfolios of Maxim Series Fund,
June 1994 to Present. He was Assistant
Manager, Public Bond Investments, Great-West, 1987 to 1993.
The day-to-day lead portfolio manager for the U.S. Government
Securities Portfolio is C.S. Tocher.
Ms. Tocher is Manager, Public Bond Investments, Securities
Great-West, 1993 to Present; Manager, U.S.
Government Securities and U.S. Government Mortgage Securities
Portfolio of Maxim Series Fund; June 1994
to Present. She was Associate Manager, Public Bond Investments,
Great-West, 1990 to 1993; Manager, Bond,
Investment Grade Corporate Bond and Zero Coupon Treasury Portfolios
of Maxim Series Fund, 1990 to June
1994.
The day-to-day lead portfolio manager for the Total Return
Portfolio is B.D. Squair, C.F.A., Assistant
Manager, Capital Markets Group, Great-West; Manager, Total Return
Portfolio of Maxim Series Fund;
Manager, Great-West Variable Annuity Account A; 1988 to Present.
Sub-Advisers
Janus Capital Corporation ("Janus") serves as the Sub-Adviser
to the MidCap Portfolio. As such,
Janus is responsible for daily managing the investment and
reinvestment of assets of the MidCap Portfolio,
subject generally to review and supervision of the Investment
Adviser and the Board of Directors. Janus bears
all expenses in connection with the performance of its services,
such as compensating and furnishing office
space for its officers and employees connected with investment and
economic research, trading and investment
management of the MidCap Portfolio.
Janus is a Colorado corporation, registered as an investment
adviser with the Securities and Exchange
Commission. Its principal business address is 100 Fillmore Street,
Denver, Colorado 80206.
The day-to-day manager of the MidCap Portfolio is James P.
Goff, Portfolio Manager for the Janus
Enterprise Fund. Mr. Goff joined Janus in 1988 and has managed the
Janus Enterprise Fund since its
inception in September 1992.
"The Investment Adviser is responsible for compensating Janus,
which receives monthly compensation
from the Investment Adviser at the annual rate of .60% on the first
$100 million; .55% on next $400 million;
and .45% on all assets over $500 million."
Templeton Investment Counsel, Inc. ("TICI") serves as the
Sub-Adviser of the International Equity
Portfolio. As such, TICI is responsible for daily managing the
investment and reinvestment of assets of the
International Equity Portfolio, subject generally to review and
supervision of the Investment Adviser and the
Board of Directors.
TICI 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 International Equity Portfolio.
The day-to-day manager of the International Equity Portfolio
is Mark Beveridge, Vice President, TICI
(since 1985).
TICI is an indirect subsidiary of Templeton Worldwide, Inc.,
which in turn is a direct, wholly-owned
subsidiary of Franklin Resources, Inc. TICI is a Florida
corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100,
Fort Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating TICI,
which receives monthly compensation
from the Investment Adviser at the annual rate of .70% on the first
$25 million, .55% on the next $25 million,
.50% on the next $50 million, and .40% on all amounts over $100
million.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price
Equity/Income Portfolio. As such, T. Rowe Price is responsible for
daily managing the investment and
reinvestment of assets of the Portfolio, subject generally to
review and supervision of the Investment Adviser
and the Board of Directors. T. Rowe Price 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 the
investment and economic research, trading and investment management
of the Maxim T. Rowe Price
Equity/Income Portfolio.
T. Rowe Price is a Maryland corporation, registered as an
investment adviser with the Securities and
Exchange Commission. Its principal business address is 100 East
Pratt Street, Baltimore, Maryland 21202.
The Maxim T. Rowe Price Equity/Income Portfolio is managed by
an Investment Advisory Committee
composed of the following members: Brian C. Rogers, Chairman,
Thomas H. Broadus, Jr., Richard P. Howard
and William J. Stromberg. The Committee Chairman has day-to-day
responsibility for managing the Portfolio.
Mr. Rogers has been Chairman of the Committee since 1993. He joined
T. Rowe Price in 1982 and has been
managing investments since 1983.
The Investment Adviser is responsible for compensating T. Rowe
Price, which receives monthly
compensation from the Investment Adviser at the annual rate of .50%
on the first $20 million, .40% on the
next $30 million and .40% on all assets once total assets exceed
$50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser to the
Maxim INVESCO Small-Cap
Growth Portfolio, Maxim INVESCO Balanced Portfolio and Maxim
INVESCO ADR Portfolio. As such, ITC
is responsible for daily managing the investment and reinvestment
of assets of the Maxim INVESCO Small
Cap Growth Portfolio and Maxim INVESCO ADR 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 Portfolios.
ITC is a Colorado Trust Company and an indirect wholly-owned
subsidiary of INVESCO PLC. ITC
is registered as an Investment Adviser with the Securities and
Exchange Commission. Its principal business
address is 7800 E. Union Avenue, Denver, Colorado, 80237.
The day-to-day management of the Maxim INVESCO Small-Cap
Growth Portfolio is provided by a
team of individuals, led by Timothy J. Miller (since 1997). Mr.
Miller also serves as the co-portfolio manager
of the INVESCO Small Company Growth Fund (since 1997); co-portfolio
manager of the INVESCO Growth
Fund (since 1996); portfolio manager of the INVESCO Dynamics Fund
(since 1993); senior vice president
(1995 to present), vice president (1993-1995) and portfolio manager
(1992 to present) of ITC. Formerly (1979
to 1992), Mr. Miller was analyst and portfolio manager with
Mississippi Valley Advisors. Trent E. May is a
co-portfolio manager of the Maxim INVESCO Small-Cap Growth
Portfolio and INVESCO Small Company
Growth Fund (since 1997); co-portfolio manager of the INVESCO
Growth Fund (since 1996); portfolio
manager (since 1996) of ITC. Formerly, Mr. May was senior equity
fund manager/equity analyst at Munder
Capital Management in Detroit. Stacie Cowell is a co-portfolio
manager of the Maxim INVESCO Small-Cap
Growth Portfolio and INVESCO Small Company Growth Fund (since
1997); portfolio manager (since 1996)
of ITC. Formerly, Ms. Cowell was senior equity analyst with
Founders Asset Management; and was capital
markets and trading analyst with Chase Manhattan Bank in New York.
The Investment Adviser is responsible for compensating ITC,
which receives monthly compensation
from the Investment Adviser at the annual rate of .55% on the first
$25 million, .50% on the next $50 million,
.40% on the next $25 million and .35% on assets over $100 million
of the Maxim INVESCo Small-Cap
Growth Portfolio.
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 of the Maxim INVESCO Balanced Portfolio.
The day-to-day manager of the Maxim INVESCO ADR Portfolio is
W. Lindsay Davidson, who also
serves as portfolio manager for the INVESCO ADR International
Equity Management Fund. Mr. Davidson
has been with INVESCO PLC since 1984 and in 1989 he assumed
responsibility for global and international
portfolios. Mr. Davidson began his investment career in 1974 and
previously worked for both insurance and
reinsurance companies in England. He holds an M.A. (Honours) degree
in Economics from Edinburgh
University.
The Investment Adviser is responsible for compensating ITC,
which receives monthly compensation
from the Investment Adviser at the annual rate of .55% on the first
$50 million, .50% on the next $50 million,
and .40% on assets over $100 million of the Maxim INVESCO ADR
Portfolio.
Ariel Capital Management, Inc. (Ariel) is a privately held
minority-owned money manager registered
with the Securities and Exchange Commission as an investment
adviser. It is an Illinois corporation with its
principal business address at 307 North Michigan Avenue, Chicago,
Illinois 60601. Subject generally to review
and supervision by the Investment Adviser and the Board of
Directors of the Fund, Ariel is responsible for
the actual daily management of the Small-Cap Value Portfolio and
for making decisions to buy, sell or hold
any particular security.
Ariel 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 Small-Cap Value Portfolio.
The day-to-day manager for the Small-Cap Value Portfolio is
John W. Rogers, Jr. Mr. Rogers'
business experience during the past five years is as Chief
Investment Officer, Ariel Capital Management and
Portfolio Manager, Calvert-Ariel Growth Fund.
The Investment Adviser is responsible for compensating Ariel,
which receives monthly compensation
from the Investment Adviser at the annual rate of .40% of the
average daily net asset value of the Small-Cap
Value Portfolio up to $5 million, .35% on the next $10 million,
.30% on the next $10 million, and .25% of
such value in excess of $25 million.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
sub-adviser of the Corporate Bond Portfolio.
As such, Loomis Sayles is responsible for daily managing the
investment and reinvestment of assets of the
Portfolio, subject generally to review and supervision of the
Investment Adviser and the Board of Directors.
Loomis Sayles 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 the investment and economic research,
trading and investment management of the Portfolio.
Loomis Sayles is a Delaware limited partnership, registered as
an investment adviser with the
Securities and Exchange Commission. Its principal business address
is One Financial Center, Boston,
Massachusetts 02111.
The day-to-day manager of the Corporate Bond Portfolio is
Daniel J. Fuss, Executive Vice President
of Loomis Sayles who also serves as the fund manager of the Loomis
Sayles Bond Fund. Mr. Fuss has served
as the portfolio manager of the Loomis Sayles Bond Fund since its
inception in 1991.
The Investment Adviser is responsible for compensating Loomis
Sayles, which receives monthly
compensation from the Investment Adviser at the annual rate of .30%
on all assets of the Corporate Bond
Portfolio.
The Board of Directors has authorized each sub-adviser to
utilize certain brokers affiliated with the
sub-advisers, respectively, in connection with the execution of
transactions in the Portfolios for which the sub-
adviser provides sub-advisory services.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from investment income of the Money Market
Portfolio shall be declared daily and
reinvested monthly in additional shares of the Portfolio at net
asset value. Dividends from net investment
income of the Bond and U.S. Government Securities Portfolios shall
be declared and reinvested quarterly.
Dividends from investment income, if any, of the Stock Index,
Small-Cap Index, Small-Cap Value, Total
Return, MidCap, Maxim T. Rowe Price Equity/Income, Maxim INVESCO
Balanced and Maxim INVESCO
Small-Cap Growth Portfolios will be declared and reinvested
semi-annually. Dividends from net investment
income of the International Equity and Maxim INVESCO ADR Portfolios
shall be declared and reinvested
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 Fund at
net asset value.
The Fund has qualified, and intends to continue to qualify, as
a registered investment company under
Subchapter M of the Internal Revenue Code ("Code"). Each Portfolio
of the Fund will be treated as a
separate corporation for federal income tax purposes. The Fund
intends to distribute all of its net income so
as to avoid any Fund-level tax. Therefore, dividends derived from
interest and distributions of any realized
capital gains will be taxable, under Subchapter M, to the Fund's
shareholders, which in this case are GWL&A's
and TNE's Series Accounts. The Fund also intends to distribute
sufficient income 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 Fund 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. Such charges
are described in the applicable Series Account prospectus.
VALUATION OF SHARES
A 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.
Market quotations of foreign securities in foreign currency
are translated to U.S. dollars at the
prevailing rate of exchange. Securities for which market quotations
are not readily available, and other assets,
are valued at fair value as determined in good faith by the Board
of Directors. 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 Fund 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 Fund 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 a portfolio is
entitled to one vote and to participate equally
in dividends and distributions declared by that portfolio and, upon
liquidation or dissolution, to participate
equally in the net assets of such portfolio remaining after
satisfaction of outstanding liabilities. The shares of
each 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 The
Great-West Life Assurance Company,
which provided the Fund's initial capitalization, 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
Fund is based on the Fund'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 Portfolios.
When the Fund advertises the total return of one of these
portfolios, it will usually be calculated for one year,
five years, and ten years or some other relevant period if the Fund
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).
Some of the Portfolios also may advertise their 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 Fund share (reduced by any dividend expected
to be paid shortly out of Fund income) on
the last day of the period.
The Money Market Portfolio may advertise its yield and
effective yield. The yield of the Money Market
Portfolio is based upon the income earned by the Portfolio over a
seven-day period and then annualized, i.e.,
the income earned in the period is assumed to be earned every seven
days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated
similarly but, when annualized, the income
earned by the investment is assumed to be reinvested in portfolio
shares and thus compounded in the course
of a 52-week period.
YIELDS
Yield (and effective yield, in the case of the Money Market
Portfolio) will fluctuate, and publication of yield
information may not provide a basis for comparison with bank
deposits, securities of other investment
companies or other investments which are insured and/or pay a fixed
yield for a stated period of time. In
addition, the yield and effective yield information may be of
limited use for comparative purposes because it
does not reflect charges imposed at the Series Account level which,
if included, would decrease the yield.
Moreover, the yields shown reflect past performance of the
Portfolios only and, as such, are not intended to
indicate, predict or guarantee future performance.
Yield** Effective
Yield**
MONEY MARKET PORTFOLIO 4.95% 5.08%
Comparison Information (1) 5.02%
BOND PORTFOLIO 6.12%
STOCK INDEX PORTFOLIO 1.48%
U.S. GOVERNMENT SECURITIES PORTFOLIO7.91%
TOTAL RETURN PORTFOLIO 2.57%
SMALL-CAP INDEX PORTFOLIO 1.54%
INTERNATIONAL EQUITY PORTFOLIO -0.67%
MIDCAP PORTFOLIO -1.08%
MAXIM T. ROWE PRICE
EQUITY/INCOME PORTFOLIO 2.56%
MAXIM INVESCO SMALL-CAP
GROWTH PORTFOLIO 0.68%
MAXIM INVESCO ADR PORTFOLIO 0.65%
SMALL-CAP VALUE PORTFOLIO 1.78%
CORPORATE BOND PORTFOLIO 7.31%
MAXIM INVESCO BALANCED PORTFOLIO 2.75%
**Yield and effective yield for the Money Market Portfolio is for
the 7-day period ended December 31,1996. Yield for the other
Portfolios
is for the month ended December 31,1996. All the yield and
effective yield calculations above take into account charges
against the
Portfolio. All yield and effective yield information is
annualized.
(1) The Donoghue MONEY FUND AVERAGE lists 772 taxable money funds
that are available to individual investors.TOTAL
RETURNS
All total return calculations assume the full redemption of
the Portfolio at the end of the period for
which the calculation was made. These returns also reflect annual
returns over the period indicated. For
information on the method used to calculate the above returns see
the Statement of Additional Information.
The performance shown reflects only past performance of the
Portfolios and is not intended to be an
indication, prediction or guarantee of future performance. Total
return information, however, may be of
limited use for comparative purposes because it does not reflect
charges imposed at the Series Account level
which, if included, would decrease the total return.
One Five Ten Since
Year Year Year Inception+++
BOND PORTFOLIO 4.26% 6.23% 7.48%
Comparison Information (2)4.05% 6.53% 7.91%
STOCK INDEX PORTFOLIO+ 21.81% 13.98% 12.99%
Comparison Information (3)22.96% 15.22% 15.29%
U.S. GOVERNMENT
SECURITIES PORTFOLIO++ 3.92% 6.83% 8.16%
Comparison Information (7)5.35% 6.71% 8.78%
TOTAL RETURN PORTFOLIO 11.76% 9.56% N/A 9.37%
Comparison Information (4)13.01% 11.13% 11.19%
SMALL-CAP INDEX PORTFOLIO15.30% N/A N/A 11.64%
Comparison Information (5)16.49% 15.64% 12.41%
INTERNATIONAL EQUITY
PORTFOLIO 19.59% N/A N/A 11.48%
Comparison Information (6)6.36% 8.48% 8.74%
MIDCAP PORTFOLIO 5.96% N/A N/A 14.11%
Comparison Information (9)19.20% 13.93% 15.94%
MAXIM T. ROWE PRICE
EQUITY/INCOME PORTFOLIO 19.39% N/A N/A 23.20%
Comparison Information (3)22.96% 15.22% 15.29%
MAXIM INVESCO SMALL-
CAP GROWTH PORTFOLIO 26.74% N/A N/A 27.20%
Comparison Information (5)16.49% 15.64% 15.94%
MAXIM INVESCO
ADR PORTFOLIO 21.17% N/A N/A 16.15%
Comparison Information (6)6.36% 8.48% 8.74%
SMALL-CAP VALUE PORTFOLIO17.95% N/A N/A 10.74%
Comparison Information (3)22.96% 15.22% 15.29%
CORPORATE BOND PORTFOLIO 10.37% N/A N/A 17.39%
Comparison Information (8)2.91% 7.23%
MAXIM INVESCO
BALANCED PORTFOLIO N/A N/A N/A 19.70%
Comparison Information (3)22.96% 15.22% 15.29%
(2) The Lehman Brothers Intermediate Government/Corporate Bond
Index is an index of all investment grade publicly traded issues of
at least $50 million outstanding with a four year average maturity.
(3 The S&P 500 Index is an index comprised of 500 stocks chosen for
their general representation of the stock market composition by
Standard & Poor's Corporation.
(4) The Lipper Analytical Services Inc. Balanced Fund Survey is a
survey of approximately 61 balanced funds.
(5) The Russell 2000 Index is an index which tracks a broadly
diversified group of small capitalization domestic stocks.
(6) The Morgan Stanley Capital International EAFE Index is an index
which tracks stocks from Europe, Australia and the Far East.
(7) The Lehman Brothers Mortgage-Backed Securities Index is an
index of 15 and 30-year fixed rate securities backed by mortgage
pools
of GNMAS, FNMA and FHLMC. Balloons are also included in the Index.
(8) The Merrill Lynch Government/Corporate Index is a broad-based
bond index of investment grade publicly traded issues.
(9) The S&P MidCap 400 Index is market-weighted and consists of
stocks, each having a median market capitalization of $1.6
billion.
+From September 24, 1984, until December 1, 1992, the Stock Index
Portfolio was named the Growth Portfolio and prior to September
24, 1984, was named the Income/Equity Portfolio. During these
periods, the Portfolio's investment policies differed from the
Stock Index
Portfolio's current policies.
++From July 29, 1987, until May 1, 1990, the U.S. Government
Securities Portfolio's name was the Government and High Quality
Securities Portfolio and from April 8, 1985, until July 29, 1987,
the Portfolio's name was the Government Guaranteed Portfolio.
During
these periods the Portfolio's investment policies differed from the
U.S. Government Securities Portfolio's current policies.
+++The Total Return Portfolio was established effective July 29,
1987. The Small-Cap Index, Small-Cap Value and International Equity
Portfolios were established effective December 1, 1993. The MidCap
Portfolio was established effective January 3, 1994. The Maxim
INVESCO Small-Cap Growth, Corporate Bond, Maxim INVESCO ADR and
Maxim T. Rowe Price Equity/Income Portfolios were
established November 1, 1994. The Maxim INVESCO Balanced Portfolio
was established effective October 1, 1996.
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 Fund's
portfolios 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, New York City
("Morgan"), 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.<PAGE>
[Qualified Prospectus]
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 investment portfolios: the Money Market Portfolio, the
Investment Grade Corporate Bond Portfolio,
the Stock Index Portfolio, the U.S. Government Mortgage Securities
Portfolio, the Total Return Portfolio,
the Small-Cap Index Portfolio, the Value Index Portfolio, the
Growth Index Portfolio, the Small-Cap Value
Portfolio, the Small-Cap Aggressive Growth Portfolio, the Corporate
Bond Portfolio, the Foreign Equity
Portfolio, the Short-Term Maturity Bond Portfolio, the Maxim
Founders Blue Chip Portfolio and the Maxim
T. Rowe Price MidCap Growth Portfolio.
The investment objective of the Money Market Portfolio is
preservation of capital, liquidity and the
highest possible current income consistent with the foregoing
objectives, through investments in short-term
money market securities. Shares of the Money Market Portfolio are
neither insured nor guaranteed by the
U.S. Government. Further, there is no assurance that the Portfolio
will be able to maintain a stable net asset
value of $1.00 per share.
The Investment Grade Corporate Bond Portfolio seeks the
highest possible current income within the
confines of the primary goal of insuring the protection of capital
by investing primarily in investment grade
corporate debt securities and in debt securities issued by the U.S.
Government and its agencies.
The principal objective of the Stock Index Portfolio is to
provide investment results, before fees, that
correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their
pro rata share of the market.
The investment objective of the U.S. Government Mortgage
Securities Portfolio is to seek the highest
level of return consistent with preservation of capital and
substantial credit protection. The Portfolio seeks
to achieve this objective by investing primarily in mortgage
related securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities.
The objective of the Total Return Portfolio is to seek to
obtain the highest possible total return, a
combination of income and capital appreciation, consistent with
reasonable risk.
This Prospectus sets forth concisely the information about the
Fund 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.
G W CAPITAL MANAGEMENT, INC.
Investment Adviser
The date of this Prospectus is May 1, 1997.
The objective of the Small-Cap Index Portfolio is to provide
investment results, before fees, that
correspond to the total return of the Russell 2000 Index.
The objective of the Value Index Portfolio is to provide
investment results, before fees, that
correspond to the total return of the Russell 1000 Value Index.
The objective of the Growth Index Portfolio is to provide
investment results, before fees, that
correspond to the total return of the Russell 1000 Growth Index.
The objective of the Small-Cap Value Portfolio is to achieve
long-term capital appreciation by
investing primarily in common stocks, although the Portfolio may
also invest in other securities, including
restricted and preferred stocks.
The investment objective of the Small-Cap Aggressive Growth
Portfolio is long-term capital growth.
The Small-Cap Aggressive Growth Portfolio seeks to achieve its
objective by investing in common stocks or
their equivalent emphasizing securities believed to be undervalued
by the market.
The investment objective of the Corporate Bond Portfolio is
high total investment return. The
Corporate Bond Portfolio seeks to achieve its investment objective
by investing primarily in debt securities
(including convertibles), although up to 20% of its total assets at
the time of acquisition may be invested in
preferred stocks.
The investment objective of the Foreign Equity Portfolio is
total return from long-term growth of
capital and dividend income. The Foreign Equity Portfolio seeks to
achieve its objective by investing primarily
in international equity securities. Although the Portfolio seeks to
invest primarily in common stocks, it may
also invest in any type of equity security.
The investment objective of the Short-Term Maturity Bond
Portfolio is preservation of capital,
liquidity, and maximum total return through investment in an
actively managed portfolio of debt securities.
The investment objective of the Maxim Founders Blue Chip
Portfolio is long-term growth of capital
and income. To achieve its objective, the Portfolio normally will
invest primarily in common stocks of large,
well-established, stable and mature companies, commonly known as
"Blue Chip" companies.
The investment objective of the Maxim T. Rowe Price MidCap
Growth Portfolio is to provide long-
term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To
achieve this objective, the Portfolio will invest at least 65% of
its assets in a diversified portfolio of mid-cap
companies who earnings are expected to grow at a faster rate than
the average company.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Money Market Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.0007 $1.0007
$1.0007 $1.0006 $1.0005 $1.0027 $1.0014 $1.0002
$0.9988
Income from Investment Operations
Net investment income 0.0555 0.0394 0.0278
0.0343 0.0565 0.0766 0.0870 0.0711 0.0635
Net Gains or Losses on Securities (realized and unrealized)
- - -
0.0001 0.0001 (0.0022) 0.0013 0.0018 0.0014
Total from Investment Operations 0.0555 0.0394 0.0278
0.0344 0.0566 0.0744 0.0883 0.0729 0.0649
Less Distributions
Dividends (from net investment income) (0.0555) (0.0394)
(0.0278) (0.0343) (0.0565) (0.0766) (0.0870) (0.0711)
(0.0635)
Distributions (from capital gains) - - - - -
- - - (0.0006) -
Initial Capitalization - -
- -
- - -
- -
Returns of Capital Total Distributions (0.5550) (0.0394)
(0.0278) (0.0343) (0.0565) (0.0766) (0.0870) (0.0717)
(0.0635)
Net Asset Value End of Period $1.0007 $1.0007 $1.0007
$1.0007 $1.0006 $1.0005 $1.0027 $1.0014 $1.0002
"Net Assets, End of Period" "277,257,289" "186,587,262"
"96,997,973" "64,220,562" "52,118,377" "36,738,618"
"28,749,125" "24,590,994" "18,947,848"
Ratio of Expenses to Average Net Assets 0.46% 0.46%
0.46% 0.46% 0.48% 0.50% 0.50% 0.50% 0.50%
Ratio of Net Income to Average Net Assets 5.55%
3.96% 2.82% 3.43% 6.15% 8.14% 9.18%
7.61% 6.85%
Portfolio Turnover Rate - - - - - - -
- - -
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, and 1987"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Stock Index Portfolio*
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.4978 $1.5575
$1.4506 $1.5206 $1.3191 $1.3947 $1.2986 $1.1788
$1.2743
Income from Investment Operations
Net investment income 0.0334 0.0350 0.0320
0.0383 0.0563 0.0682 0.0769 0.0605 0.0563
Net Short-Term realized gain 0.0010
Net Gains or Losses on Securities (realized and unrealized)
0.4953 (0.0335) 0.1097 0.0502 0.2492 (0.0756) 0.1213
0.1518 0.0412
Total from Investment Operations 0.5297 0.0015 0.1417
0.0885 0.3055 (0.0074) 0.1982 0.2123 0.0975
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0344) (0.0350) (0.0320) (0.0382) (0.0542)
(0.0682) (0.0769) (0.0608) (0.0559)
Distributions (from capital gains) (0.0135) (0.0262)
(0.0028) (0.1203) (0.0498) - (0.0252) (0.0317) (0.1371)
Initial Capitalization - -
- - -
- - - -
Returns of Capital Total Distributions (0.0479) (0.0612)
(0.0348) (0.1585) (0.1040) (0.0682) (0.1021) (0.0925)
(0.1930)
Net Asset Value End of Period $1.9796 $1.4978 $1.5575
$1.4506 $1.5206 $1.3191 $1.3947 $1.2986 $1.1788
Total Return (1) 35.60% 0.14% 9.84% 5.87%
23.33% -0.58% 15.21% 17.91% 5.85%
"Net Assets, End of Period" "707,459,637" "497,339,992"
"562,189,394" "462,539,021" "359,177,318" "223,661,178"
"182,730,744" "134,553,151" "97,806,067"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 1.91%
2.23% 2.14% 2.49% 4.33% 5.70% 6.15%
5.29% 4.61%
Portfolio Turnover Rate 5.25% 11.98% 1.68%
118.83% 24.28% 26.41% 37.96% 44.65% 47.66%
"* From September 24, 1984 until December 1, 1992, the Portfolio's
name was the Growth Portfolio, and prior to September 24, 1984 the
Portfolio's name was the Income/Equity Portfolio. "
"During these periods, the Portfolio's investment policies differed
from its current policies."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989, 1988, 1987, and 1986*"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Total Return Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
"Net Asset Value, Beginning of Period" $1.1238 $1.2065
$1.1327 $1.1156 $1.0017 $1.0279 $0.9018 $0.8750 -
Income from Investment Operations
Net investment income 0.0421 0.0382 0.0326
0.0424 0.0979 0.0541 0.0542 0.0536 0.0180
Net Short-Term realized gain 0.0139
Net Gains or Losses on Securities (realized and unrealized)
0.1960 (0.0704) 0.1025 0.0165 0.1177 (0.0262) 0.1261
0.0271 (0.3738)
Total from Investment Operations 0.2520 (0.0322) 0.1351
0.0589 0.2156 0.0279 0.1803 0.0807 (0.3558)
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0560) (0.0382) (0.0326) (0.0375) (0.0543)
(0.0541) (0.0542) (0.0539) (0.0178)
Distributions (from capital gains) (0.0229) (0.0123)
(0.0287) (0.0043) (0.0474) - -
- -
Initial Capitalization - -
- - -
- - -
1.2486
Returns of Capital Total Distributions (0.0789) (0.0505)
(0.0613) (0.0418) (0.1017) (0.0541) (0.0542) (0.0539) 1.2308
Net Asset Value End of Period $1.2969 $1.1238 $1.2065
$1.1327 $1.1156 $1.0017 $1.0279 $0.9018 $0.8750
Total Return (1) 22.70% -2.68% 12.19% 5.45%
22.04% 2.92% 20.48% 9.34% -
"Net Assets, End of Period" "55,176,028" "41,348,517"
"39,297,459" "18,696,606" "11,783,118" "11,875,970"
"13,205,175" "10,992,865" "9,644,569"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Income to Average Net Assets 3.41%
3.30% 2.88% 3.56% 5.52% 5.98% 6.17%
6.56% 5.35%
Portfolio Turnover Rate 44.70% 74.85% 58.02%
29.26% 92.80% 59.96% 59.25% 92.15% 67.24%
"* The Total Return Portfolio was established effective July 29,
1987."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, and 1993**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Small-Cap Value Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $0.9974 $1.0330
$1.0000
Income from Investment Operations
Net investment income 0.0286 0.0068 0.0012
Net Short-Term realized gain 0.0350
Net Gains or Losses on Securities (realized and unrealized)
0.0884 (0.0356) 0.0330
Total from Investment Operations 0.1520 (0.0288) 0.0342
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0636) (0.0068) (0.0012)
Distributions (from capital gains) (0.0189) -
-
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0825) 0.0068
(0.0012)
Net Asset Value End of Period $1.0669 $0.9974 $1.0330
Total Return (1) 15.51% -2.78% 3.42%
"Net Assets, End of Period" "20,769,579" "9,721,848"
"3,007,882"
Ratio of Expenses to Average Net Assets 1.35%# 1.33%#
1.33%*#
Ratio of Net Income to Average Net Assets 2.51%
0.80% 1.52%*
Portfolio Turnover Rate 17.78% 16.81% -
*Annualized
"** The Small-Cap Value Portfolio was established effective
December 1, 1993."
# Percentages are shown net of expenses reimbursed by The
Great-West Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994 and 1993**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Small-Cap Index Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $0.9540 $1.0112
$1.0000
Income from Investment Operations
Net investment income 0.0102 0.0097 0.0009
Net Short-Term realized gain 0.0095
Net Gains or Losses on Securities (realized and unrealized)
0.2298 (0.0572) 0.0112
Total from Investment Operations 0.2495 (0.0475) 0.0121
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.0197) (0.0097) (0.0009)
Distributions (from capital gains) (0.0158) -
-
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0355) (0.0097)
(0.0009)
Net Asset Value End of Period $1.1680 $0.9540 $1.0112
Total Return (1) 26.24% -4.69% 1.21%
"Net Assets, End of Period" "51,610,284" "22,336,944"
"5,936,716"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60%*
Ratio of Net Income to Average Net Assets 1.00%
1.20% 1.24%*
Portfolio Turnover Rate 30.17% 53.44% 0.72%
*Annualized
"** The Small-Cap Index was established effective December 1,
1993."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Corporate Bond Portfolio
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9716 $1.0000
Income from Investment Operations
Net investment income 0.0842 0.0137
Net Short-Term realized gain 0.0159
Net Gains or Losses on Securities (realized and unrealized)
0.1835 (0.0284)
Total from Investment Operations 0.2836 (0.0147)
Less Distributions
Dividends (from net investment income and Net Short-Term realized
gains) (0.1001) (0.0137)
Distributions (from capital gains) (0.0030) -
Initial Capitalization - -
Returns of Capital Total Distributions 0.1031 (0.0137)
Net Asset Value End of Period $1.1521 $0.9716
Total Return (1) 30.19% -1.47%
"Net Assets, End of Period" "45,530,190" "13,713,195"
Ratio of Expenses to Average Net Assets 0.90% 1.08%*
Ratio of Net Income to Average Net Assets 7.89% 8.64%*
Portfolio Turnover Rate 24.70% 9.45%
*Annualized
"** The Corporate Bond Portfolio was established effective November
1, 1994."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994 and 1993 **"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Value Index Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $0.9614 $1.0118
$1.0000
Income from Investment Operations
Net investment income 0.0305 0.0253 0.0014
Net Short-Term realized gain 0.0054
Net Gains or Losses on Securities (realized and unrealized)
0.3144 (0.0504) 0.0119
Total from Investment Operations 0.3503 (0.0251) 0.0133
Less Distributions
Dividends (from net investment income and net Short-Term realized
gain) (0.0359) (0.0253) (0.0014)
Distributions (from capital gains) (0.0135) - (0.0001)
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0494) (0.0253)
(0.0015)
Net Asset Value End of Period $1.2623 $0.9614 $1.0118
Total Return (1) 36.80% -2.49% 1.32%
"Net Assets, End of Period" "65,183,898" "25,610,474"
"4,337,142"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.59% *
Ratio of Net Income to Average Net Assets 2.87%
3.18% 2.11% *
Portfolio Turnover Rate 18.11% 16.88% 8.99%
* Annualized
"** The Value Index Portfolio was established effective December 1,
1993."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993 and
1992**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
US Government Mortgage Securities Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992
"Net Asset Value, Beginning of Period" $1.0917 $1.1813
$1.1503 $1.0000
Income from Investment Operations
Net investment income 0.0781 0.0620 0.0788
0.0029
Net Short-Term realized gain
Net Gains or Losses on Securities (realized and unrealized)
0.0869 (0.0869) 0.0315 0.1598
Total from Investment Operations 0.1650 (0.0276) 0.1103
0.1627
Less Distributions
Dividends (from net investment income) (0.0781) (0.0620)
(0.0788) (0.0029)
Distributions (from capital gains) - - (0.0005)
(0.0095)
Initial Capitalization - -
- -
Returns of Capital Total Distributions (0.0781) (0.0620)
(0.0793) (0.0124)
Net Asset Value End of Period $1.1786 $1.0917 $1.1813
$1.1503
Total Return (1) 15.55% -2.34% 9.65% 15.03%
"Net Assets, End of Period" "129,549,680" "93,386,366"
"77,052,883" "28,107,848"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% 0.59% *
Ratio of Net Income to Average Net Assets 6.84%
5.67% 8.12% 3.16% *
Portfolio Turnover Rate 188.04% (2) 331.42%
17.78% 33.52%
* Annualized
"** The U.S. Government Mortgage Securities Portfolio was
established effective December 1, 1992."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
"(2) In 1994, the Portfolio turnover rate was higher than in past
years due to the impact of rising interest rates with respect to
the reverse dollar repurchase (""dollar roll"") strategy utilized
for this Portfolio. "
High Portfolio turnover rates may occur in the future if the
similar economic conditions occur.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995 and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Small-Cap Aggressive Growth Portfolio
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9755 $1.0000
Income from Investment Operations
Net investment income 0.0075 (0.0016)
Net Short-Term realized gain 0.0878
Net Gains or Losses on Securities (realized and unrealized)
0.1962 (0.0229)
Total from Investment Operations 0.2915 (0.0245)
Less Distributions
Dividends (from net investment income and net Short-Term realized
gain) (0.0945) -
Distributions (from capital gains) (0.0120) -
Initial Capitalization - -
Returns of Capital Total Distributions (0.1065) -
Net Asset Value End of Period $1.1605 $0.9755
Total Return (1) 29.96% -2.46%
"Net Assets, End of Period" "28,594,611" "12,963,409"
Ratio of Expenses to Average Net Assets 1.30% # 1.26% * #
Ratio of Net Income to Average Net Assets 0.65%
- -1.08%
Portfolio Turnover Rate 99.48% 8.84%
* Annualized
"** The Small-Cap Aggressive Portfolio was established effective
November 1, 1994."
#Percentage is shown net of expenses reimbursed by The Great-West
Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, and 1995**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Short-Term Maturity Bond Portfolio
"Years Ended December 31,"
1996 1995
"Net Asset Value, Beginning of Period" $1.0000
Income from Investment Operations
Net investment income 0.0194
Net Short-Term realized gain 0.0013
Net Gains or Losses on Securities (realized and unrealized)
0.0092
Total from Investment Operations 0.0299
Less Distributions
Dividends (from net investment income and net Short-Term realized
gain) (0.0207)
Distributions (from capital gains) -
Initial Capitalization -
Returns of Capital Total Distributions (0.0207)
Net Asset Value End of Period $1.0092
Total Return (1) 3.02%
"Net Assets, End of Period" 15.618.670
Ratio of Expenses to Average Net Assets 0.53% *
Ratio of Net Income to Average Net Assets 4.61% *
Portfolio Turnover Rate 97.87%
* Annualized
" ** The Short-Term Maturity Bond Portfolio was established
effective August 1, 1995."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994, 1993 and
1992**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Investment Grade Corporate Bond Portfolio
"Years Ended December 31,"
1996 1995 1994 1993 1992
"Net Asset Value, Beginning of Period" $1.2019 $1.3090
$1.2957 $1.0000
Income from Investment Operations
Net investment income 0.0794 0.0665 0.0691
0.0058
Net Short-Term realized gain 0.0022
Net Gains or Losses on Securities (realized and unrealized)
0.1142 (0.1071) 0.0452 0.2957
Total from Investment Operations 0.1958 (0.0406) 0.1143
0.3015
Less Distributions
Dividends (from net investment income) (0.0816) (0.0665)
(0.0686) (0.0058)
Distributions (from capital gains) - - (0.0324) -
Initial Capitalization - -
- -
Returns of Capital Total Distributions (0.0816) (0.0665)
(0.1010) (0.0058)
Net Asset Value End of Period $1.3161 $1.2019 $1.3090
$1.2957
Total Return (1) 16.71% -3.15% 8.95% 29.57%
"Net Assets, End of Period" "95,210,404" "71,276,294"
"63,585,296" "49,607,522"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.60% * 0.59%*
Ratio of Net Income to Average Net Assets 6.30%
5.37% 5.13% * 4.71%
Portfolio Turnover Rate 159.21% 51.66% 151.14% 23.91%
* Annualized
"** The Investment Grade Corporate Bond Portfolio was established
effective December 1, 1992."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995, 1994 and 1993 **"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Growth Index Portfolio
"Years Ended December 31,"
1996 1995 1994 1993
"Net Asset Value, Beginning of Period" $1.0120 $1.0064
$1.0000
Income from Investment Operations
Net investment income 0.0127 0.0133 0.0015
Net Short-Term realized gain 0.0038
Net Gains or Losses on Securities (realized and unrealized)
0.3394 0.0056 0.0064
Total from Investment Operations 0.3359 0.0189 0.0079
Less Distributions
Dividends (from net investment income and net Short-Term realized
gains) (0.0165) (0.0133) (0.0015)
Distributions (from capital gains) -0.0055 - -
Initial Capitalization - -
-
Returns of Capital Total Distributions (0.0220) (0.0133)
(0.0015)
Net Asset Value End of Period $1.3459 $1.0120 $1.0064
Total Return (1) 35.29% 1.93% 0.79%
"Net Assets, End of Period" "43,515,299" "14.171,307"
"3,099,916"
Ratio of Expenses to Average Net Assets 0.60% 0.60%
0.59% *
Ratio of Net Income to Average Net Assets 1.15%
1.57% 1.98% *
Portfolio Turnover Rate 17.90% 18.50% 0.06%
* Annualized
"** The Growth Index Portfolio was established effective December
1, 1993."
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
"For the Years Ended December 31, 1996, 1995 and 1994**"
The following tables should be read in conjunction with the
financial statements
and related notes included in the Statement of Additional
Information.
Foreign Equity Portfolio
"Years Ended December 31,"
1996 1995 1994
"Net Asset Value, Beginning of Period" $0.9515 $1.0000
Income from Investment Operations
Net investment income 0.0073 -0.0019
Net Short-Term realized gain
Net Gains or Losses on Securities (realized and unrealized)
0.0398 -0.0466
Total from Investment Operations 0.0471 (0.0485)
Less Distributions
Dividends (from net investment income and net Short-Term realized
gain) (0.0115)
Distributions (from capital gains) -
Initial Capitalization - -
Returns of Capital Total Distributions (0.0115)
Net Asset Value End of Period $0.9871 $0.9515
Total Return (1) 5.02% -4.85%
"Net Assets, End of Period" "64,403,868" "42,760,613"
Ratio of Expenses to Average Net Assets 1.50% # 1.50% * #
Ratio of Net Income to Average Net Assets 0.69%
- -1.26%
Portfolio Turnover Rate 119.98% 19.85%
* Annualized
"** The Foreign Equity Portfolio was established effective November
1, 1994."
#Percentage is shown net of expenses reimbursed by The Great-West
Life Assurance Company.
(1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
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,
FutureFunds Series Account and Pinnacle Series
Account of Great-West Life & Annuity Insurance Company ("GWL&A")
and TNE Series(k) Account and
TNE Retirement Plan Series 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. G W
Capital Management, Inc. ("GW Capital Management") is the
Investment Adviser for the Fund. The day-to-
day management of certain Portfolios of the Fund is carried out by
sub-advisers which are not affiliated with
GW Capital Management.
THE FUND PORTFOLIOS
Each portfolio has its own investment objective and investment
strategy. The investment objective
of any portfolio may not be changed without a vote of a majority of
the shares of that portfolio. A more
detailed description of the Fund's investment policies and a
glossary further describing certain investment
securities mentioned in the discussions that follow are contained
in the Statement of Additional Information.
Following is a description of each of the Portfolios.
Money Market Portfolio
The investment objectives of the Money Market Portfolio are to
preserve shareholder capital, to
maintain liquidity and to achieve the highest possible current
income consistent with the foregoing objectives
by investing in short-term money market securities.
The assets of the Money Market Portfolio are invested in money
market instruments with remaining
maturities not exceeding 13 months. The Money Market Portfolio also
maintains a dollar-weighted average
portfolio maturity of ninety days or less. The money market
instruments in which the Portfolio may invest
include the following:
1. U.S. government securities and government agency
securities. U.S. government securities
consist of various types of marketable securities by the United
States Treasury, such as bills, notes and bonds.
Such securities are direct obligations of the United States
government. U.S. government agency securities are
debt securities issued by government-sponsored enterprises, federal
agencies and international institutions.
Such securities are not direct obligations of the U.S. Treasury but
involve government sponsorship or
guarantees. Among the agencies whose debt securities may be
purchased are: the Government National
Mortgage Association and Federal Housing Administration, whose
instruments are supported by the full faith
and credit of the United States; the Farm Credit Bank, whose
instruments are not direct obligations of the
United States, although the Farm Credit Bank is supported by its
ability to borrow from the U.S. Treasury;
and the Federal Land Bank, Federal Home Loan Bank and Federal Home
Loan Mortgage Corporation, whose
instruments are not supported by the U.S. Treasury, but only by the
credit of the issuing agency;
2. Certificates of deposit, time deposits, swap deposits and
bankers' acceptances of (i) U.S.
commercial banks or savings and loan associations having total
assets in excess of $1 billion, or (ii) other U.S.
commercial banks or savings and loan associations, foreign branches
of U.S. banks, and U.S. branches of
foreign banks if such bank obligations are fully insured by the
Federal Deposit Insurance Corporation;
3. Commercial paper, including variable amount master demand
notes;
4. Repurchase and reverse repurchase agreements. A
repurchase agreement is an instrument
under which the purchaser (e.g., the Fund) acquires ownership of
the obligation (debt security) and the seller
agrees at the time of the sale to repurchase the obligation at a
mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This
results in a fixed rate of return insulated
from market fluctuations during such period. Reverse repurchase
agreements involve the sale of securities held
by the Portfolio, with an agreement to repurchase the securities at
an agreed upon price, date and interest
payment. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other
party to the agreement, including possible delays or restrictions
upon the Portfolio's ability to dispose of the
underlying securities. The Investment Adviser, acting under the
supervision of the Board of Directors, reviews
the credit worthiness of those dealers with whom the Portfolio
enters into repurchase agreements; and
5. Other money market instruments that the Portfolio may
from time-to-time invest in include
floating rate notes and Eurodollar certificates of deposit if
denominated in U.S. currency.
The Money Market Portfolio generally invests in instruments
(other than U.S. government securities)
that have received the highest rating by at least one nationally
recognized statistical rating organization
("NRSRO"), securities whose issuer has received such ratings with
respect to a class of short-term debt
obligations that is comparable in priority and security with the
instrument acquired, or securities which are
determined or ratified by the Fund's Board of Directors as being
comparable to the foregoing securities. The
Money Market Portfolio only enters into repurchase agreements that
are collateralized entirely by U.S.
government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the
highest rating categories by at least one NRSRO.
In addition to following the foregoing guidelines, the Money
Market Portfolio intends otherwise to
comply with the requirements of Rule 2a-7 under the Investment
Company Act of 1940, as applicable to the
Portfolio.
Investment Grade Corporate Bond Portfolio
The investment objective of the Investment Grade Corporate
Bond Portfolio is to seek the highest
possible current income within the confines of the primary goal of
insuring the protection of capital by
investing primarily in investment grade corporate debt securities
and in debt securities issued by the U.S.
government and its agencies. Generally, the Investment Grade
Corporate Bond Portfolio intends to invest in
corporate debt securities having a rating within the two highest
grades as determined by Moody's Investors
Service Inc. (Aaa or Aa) or Standard & Poor's Corporation (AAA or
AA). The Investment Grade Corporate
Bond Portfolio may, however, also invest in debt securities within
the third or fourth highest grades as
determined by Moody's Investors Services Inc. (A or Baa) or
Standard & Poor's Corporation (A or BBB), if
the Fund determines such investment meets the standard of the
Portfolio's investment objectives and the debt
securities ratings are supported by an internal credit review that
the Fund will conduct in each such instance.
Bonds rated Baa by Moody's or BBB by Standard & Poor's are
considered medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments
and principal security for such bonds 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. Adverse changes in economic conditions
are more likely to lead to a weakened
capacity to make principal and interest payments under such bonds
than in the case of higher grade bonds.
The Portfolio will not retain any bond of this type should its
rating drop below a Baa rating by Moody's or
a BBB rating by Standard & Poor's.
The Investment Grade Corporate Bond Portfolio may invest in
money market securities solely for
defensive purposes or as a cash reserve.
The Investment Grade Corporate Bond Portfolio is classified as
non-diversified . This means that the
proportion of the Portfolio's assets that may be invested in the
securities of a single issuer is not limited by
the Investment Company Act of 1940. Because a relatively high
percentage of the Portfolio's assets may be
invested in the securities of a limited number of issuers,
primarily within the same industry or economic
sector, the Portfolio's securities may be more susceptible to any
single economic, political or regulatory
occurrence than that experienced by a diversified portfolio.
U.S. Government Mortgage Securities Portfolio
The investment objective of the U.S. Government Mortgage
Securities Portfolio is to seek the highest
level of return consistent with preservation of capital and
substantial credit protection. The Portfolio seeks
to achieve this objective by investing primarily (at least 65% of
its total assets) in mortgage related securities
issued or guaranteed by the U.S. government or one of its agencies
or instrumentalities.
Investment by the U.S. Government Mortgage Securities
Portfolio in U. S. government securities will
include direct pass-through mortgage certificates issued by those
government agencies whose obligations are
backed by the full faith and credit of the United States
government, such as the Government National
Mortgage Association ("GNMA") or Federal Housing Administration.
Such pass-through certificates represent
individual interests in pools of mortgages insured by the Veterans
Administration, the Farmers' Home
Association, Federal Housing Administration or other government
agencies. Owners of pass-through
certificates are entitled to receive a pro-rata share of the net
payments received on the underlying mortgages,
hence such payments are passed through to the owner. Accordingly,
the amount and frequency of payments
on such pass-through certificates depends on the rate of
prepayments on the underlying mortgages, which may
vary based upon a variety of economic factors.
The Portfolio may also invest in other U.S. government
securities, such as U.S. Treasury bills, notes
and bonds, or in certificates representing individual interests in
pools of such U.S. Treasury securities. The
payment of principal and interest to the Portfolio on such
certificates is fully backed by the U.S. government.
The Portfolio may additionally invest in securities issued by
the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA and FHLMC
both issue mortgage-backed securities that are similar to GNMAs in
that they represent interests in pools of
mortgage loans. FNMA guarantees timely payment of interest and
principal on its certificates. FHLMC
guarantees timely payment of interest and ultimate payment of
principal. The FNMA and FHLMC guarantees
are backed only by those agencies and not by the full faith and
credit of the United States. The Portfolio may
also invest in private mortgage pass-through securities and
collateralized mortgage obligations ("CMOs").
These CMOs may take the form of those issued by private issuers and
collateralized by securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities.
The Portfolio may also enter into reverse dollar repurchase
agreements ("dollar rolls") of
mortgage-backed securities in which the Portfolio sells securities
for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on
a specified future date. During the roll period, the Portfolio
forgoes principal and interest paid on the
mortgage-backed securities. The Portfolio is compensated by the
difference between the current sales price
and the lower forward price for the future purchase as well as the
interest earned on the cash proceeds of the
initial sale. Cash or high quality liquid securities equal to the
value of the outstanding repurchase
commitments are segregated from general investible funds and will
be marked to the market daily. The risk
associated with dollar roll transactions is that the securities may
not be delivered and the Portfolio may incur
a loss or will have lost the opportunity to otherwise invest the
amount set aside for such transaction in the
segregated asset account. As of December 31, 1996, 12.98% of the
Portfolio was comprised of investments
subject to dollar roll transactions.
The Portfolio may purchase securities on a when-issued basis
and may purchase or sell securities on
a forward commitment basis in order to hedge against anticipated
changes in interest rates and prices and/or
secure a favorable rate of return. The Statement of Additional
Information contains more detailed information
about these investment practices.
The market value of securities held by the Portfolio can be
expected to decline when interest rates
rise. Thus, the U.S. Government Mortgage Securities Portfolio will
generally shorten the average maturity of
the Portfolio when interest rates are rising and lengthen the
average maturity when interest rates are falling
in order to optimize the total return of the Portfolio.
The Portfolio may also hold money market instruments as it
believes is advisable to maintain liquidity
or for temporary defensive purposes.
The U.S. Government Mortgage Securities Portfolio is
classified as non-diversified . This means that
the proportion of the Portfolio's assets that may be invested in
the securities of a single issuer is not limited
by the Investment Company Act of 1940. Because a relatively high
percentage of the Portfolio's assets may
be invested in the securities of a limited number of issuers,
primarily within the same industry or economic
sector, the Portfolio's securities may be more susceptible to any
single economic, political or regulatory
occurrence than that experienced by a diversified portfolio.
Short-Term Maturity Bond Portfolio
The investment objective of the Short-Term Maturity Bond
Portfolio is preservation of capital,
liquidity, and maximum total return through investment in an
actively managed portfolio of debt securities.
It is classified as a non-diversified portfolio.
The Portfolio will pursue its objectives primarily through
investment in a portfolio of investment grade
bonds and other debt securities of similar quality. The weighted
average quality of the Portfolio will be A
rated or higher. The Portfolio will consist only of individual
securities with maturities of no longer than three
years.
Other debt securities in which the Portfolio may invest
include securities of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities, corporate debt
obligations, asset-backed securities (including
mortgage-related securities), commercial paper, certificates of
deposits, bankers' acceptances and other short-
term instruments relating to such securities. Securities may be
issued by both domestic and foreign entities
but may be denominated in U.S. dollars only.
U.S. Government securities are issued or guaranteed by the
U.S. Treasury or by an agency or
instrumentality of the U.S. Government. Not all U.S. Government
securities are backed by the full faith and
credit of the United States. Some are supported only by the credit
of the agency that issued them.
The Portfolio may invest in repurchase agreements relating to
the securities in which it may invest.
In a repurchase agreement, the Portfolio buys a security at one
price and simultaneously agrees to sell it back
at a higher price. Delays or losses could result if the party to
the agreement defaults or becomes bankrupt.
The Portfolio may purchase securities on a when-issued or
forward delivery basis. When-issued and
forward delivery transactions are trading practices wherein payment
for and delivery of the securities take place
at a future date. The market value of a security could change
during this period, which could effect the market
value of the Portfolio's assets. See the Statement of Additional
Information for further information about
when-issued and forward delivery securities.
In order to generate additional income, the Portfolio may lend
up to one-third of its portfolio
securities to financial borrowers of securities. This practice
could cause the Portfolio to experience a loss or
a delay in recovering its securities. The Statement of Additional
Information contains more information
regarding the lending of securities.
The Portfolio can use various techniques to increase or
decrease its exposure to changing security
prices, interest rates, commodity prices, or other factors that
effect securities values. These techniques include
buying and selling options and certain futures contracts, entering
into swap agreements and purchasing index
securities. Further information regarding such techniques is
contained in the Statement of Additional
Information. These techniques will be used for hedging purposes
only.
Generally, the Portfolio intends to invest in investment grade
securities. An investment grade security
is one rated in one of the top four categories by one or more
nationally recognized security rating
organizations or which is deemed by the Investment Adviser to be of
comparable creditworthiness. However,
if a security's rating were to drop below investment grade
(commonly referred to as "junk bonds"), the
Portfolio may determine to retain the security until such time as
it is deemed appropriate to sell the security,
which could mean that the security may be held to maturity. Lower
rated fixed-income securities generally
provide higher yields, but are subject to greater credit and market
risks than higher quality fixed-income
securities and are considered predominately speculative with
respect to the ability of the issuer to meet
principal and interest payments. In addition, the secondary market
may be less liquid for lower-rated fixed-
income securities which may make the valuation and sale of the
securities more difficult. The Statement of
Additional Information contains more information about securities
ratings.
The Portfolio may invest in money market securities as part of
the ongoing investment strategy or as
a cash reserve.
It is estimated that the portfolio turnover rate will be in
excess of 100%, but generally is not expected
to exceed 300%. Turnover rates in excess of 100% generally result
in higher transaction costs (which are
borne directly by the Portfolio).
The Portfolio is classified as non-diversified. This means
that the proportion of the Portfolio's assets
that may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940.
Because a relatively high percentage of the Portfolio's assets may
be invested in the securities of a limited
number of issuers, primarily within the same industry or economic
sector, the Portfolio's securities may be
more susceptible to any single economic, political or regulatory
occurrence than that experience by a
diversified portfolio.
Total Return Portfolio
The investment objective of the Total Return Portfolio is to
seek to obtain the highest possible total
return, a combination of income and capital appreciation,
consistent with reasonable risk.
In seeking its investment objective, the Total Return
Portfolio invests in three market segments: equity
securities, fixed income securities and money market instruments.
The Portfolio invests in equity securities
consisting primarily of common stock of domestic issuers and any
warrants or rights which may be attached
to such common stock. The Portfolio may also, from time to time,
purchase convertible common stock of such
issuers or common stock of foreign issuers. Fixed income securities
in which the Portfolio may invest primarily
include obligations of domestic corporations and governments
(federal, state or municipal obligations) and
agencies thereof. Occasionally, the Portfolio may invest in debt
obligations of foreign governments. (See
"Investment Limitations" for certain limitations applicable to
investment in securities of foreign issuers.)
The Investment Adviser places primary emphasis on the mix of
investments among the three market
segments in accordance with the Adviser's appraisal of investments
most likely to achieve the highest return
based upon its judgment as to economic prospects and the outlook
for interest rates and the equity markets.
The selection of an individual security within a market segment by
the Investment Adviser will be based on
the Adviser's view of the relative attractiveness of the security.
There are no minimum or maximum
percentages as to the amount of the Portfolio's assets which may be
invested in each of the market segments.
Major changes in investment mix may occur several times a year or
over several years, depending upon
perceived market and economic conditions.
Except for restrictions noted herein and under "Investment
Restrictions" in the Statement of
Additional Information, the Investment Adviser has complete
flexibility in determining the amount and nature
of equity securities, fixed income securities or money market
instruments in which the Portfolio may invest.
The Portfolio normally invests for long-term gains. It may,
however, invest for short-term gain when,
in the view of the Investment Adviser, evolving economic, business
and market conditions so warrant.
Stock Index Portfolio
The investment objective of the Stock Index Portfolio is to
provide investment results, before fees,
that correspond to the total return of the S&P 500 Index and the
S&P MidCap Index, weighted according to
their pro rata share of the market. The Portfolio will pursue this
objective by investing in common stocks
traded on the New York Stock Exchange and the American Stock
Exchange and, to a limited extent, in the
over-the-counter markets.
Standard & Poor's Corporation ("S&P") chooses the 500 stocks
comprising the S&P 500 Index on the
basis of market values and industry diversification. Most of the
stocks in the S&P 500 Index are issued by the
500 largest companies, in terms of the aggregate market value of
their outstanding stock, and such companies
are generally listed on the New York Stock Exchange. Additional
stocks that are not among the 500 largest
market value stocks are included in the S&P 500 Index for
diversification purposes.
The S&P MidCap Index is market-weighted and consists of 400
stocks of domestic companies, having
a median market capitalization of approximately $1.6 billion. The
stocks included in the S&P 500 Index and
the S&P MidCap Index do not overlap.
Because smaller capitalized companies, regardless of their
shares outstanding, sometimes exhibit
illiquidity in the market, minimum trading volume constraints are
placed on issues selected for the S&P
MidCap Index. For this reason, the S&P MidCap Index includes a
small number of lesser known companies
in well known industries whose shares are more liquid.
S&P is not a sponsor of, or in any other way affiliated with,
the Portfolio or the Fund.
The Portfolio will attempt to duplicate the performance of the
S&P 500 Index and the S&P MidCap
Index while keeping transaction costs low and minimizing Portfolio
turnover. To achieve its investment
objective, the Portfolio will purchase equity securities that, in
the Adviser's opinion, will reflect, as a group,
the composite price performance of the S&P 500 Index and the S&P
MidCap Index. Like these indices, the
Portfolio will hold both dividend-paying and non-dividend paying
common stocks. Under normal
circumstances, a minimum of 65 % of the Portfolio's total assets
will be invested in securities included on the
S&P 500 Index and the S&P MidCap Index.
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.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
S&P does not endorse, sell, promote or sponsor the Portfolio
or the Fund, and is not in any other way
affiliated with the Portfolio, the Fund or the Investment Adviser.
Small-Cap Index Portfolio
The investment objective of the Small-Cap Index Portfolio is
to provide investment results, before fees,
that correspond to the total return of the Russell 2000 Index. The
Russell 2000 Index was developed in 1979
by the Frank Russell Company to track the stock market performance
of a broadly diversified group of small
capitalization domestic stocks. As of December 31, 1996, the
median market capitalization of issues
comprising the Russell 2000 Index was approximately $360 million.
The Portfolio intends to pursue this objective by investing
primarily in common stocks issued by
corporations domiciled in the U.S. and its territories traded on
the various U.S. stock exchanges and, to a
limited extent, in the over-the-counter markets. The Portfolio may
not hold all of the approximately 2,000
securities in the Russell 2000 Index because of the administrative
costs involved and the expenses associated
with trading less active securities. Instead, the Portfolio may
hold a representative sample of securities included
in the Russell 2000 Index.
The Frank Russell Company is not a sponsor of, or in any other way
affiliated with, the Portfolio or the Fund.
The Russell 2000 Index is a subset of the larger Russell 3000
Index. The Russell 3000 Index consists
of the largest 3000 publicly traded stocks of corporations
domiciled in the U.S. and its territories and includes
large, medium and small capitalization stocks. The Russell 3000
Index represents approximately 98% of the
total market capitalization of all U.S. stocks that trade on the
New York and American Stock Exchanges and
in the NASDAQ (National Association of Securities Dealers Automated
Quotations) National Market System
over-the-counter market. The Russell 2000 Index consists of the
2000 smallest stocks within the Russell 3000,
representing approximately 6% of the Russell 3000 Index total
market capitalization.
The Russell 2000 Index is reconstituted annually to reflect
changes in the marketplace. The Portfolio
will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May
31 total market capitalizations, with the actual reconstitution
effective June 30. As well, securities that leave
the Russell 2000 Index for any reason between reconstitution dates
will not be replaced. As a result, the
number of securities held in the Portfolio over the year will
fluctuate.
The annual turnover rate of the Russell 2000 Index is
significant, often as high as 25% per year of
the total market capitalization of the Index. This investment
strategy will be implemented only to the extent
it is consistent with maintaining the Fund's qualification as a
regulated investment company under the Internal
Revenue Code (see "Dividends, Distributions and Taxes). The Fund's
strategy may be limited, in particular,
by the requirement for such qualification that less than 30% of the
Fund's annual gross income be derived
from the sale or other disposition of stocks or securities
(including options and futures contracts) held for less
than three months.
Historically, small capitalization stocks, which constitute
the Portfolio's primary investments, have
been more volatile in price than the larger capitalization stocks
included in the S&P 500 Index. Among the
reasons for the greater price volatility of these small company
stocks are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for
such stocks, and the greater sensitivity of small
companies to changing economic conditions. Besides exhibiting
greater volatility, small company stocks may,
to a degree, fluctuate independently of larger company stocks.
Small company stocks may decline in price as
large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect
that the Portfolio may be more volatile than, and may fluctuate
independently of, broad stock market indices
such as the S&P 500 Index.
The Portfolio intends that, under normal circumstances, at
least 65% of its total assets will be invested
in securities included in the Russell 2000 Index.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
Value Index Portfolio
The investment objective of the Maxim Russell 1000 Value Index
Portfolio is to provide investment
results, before fees, that correspond to the total return of the
Russell 1000 Value Index. The Russell 1000
Value Index was developed by the Frank Russell Company to track
stock market performance of stocks from
the Russell 1000 Index exhibiting certain characteristics
suggesting value potential.
The Portfolio intends to pursue this objective by investing
primarily in common stocks with greater
than average value orientation, as determined by the formula set
forth below, issued by corporations domiciled
in the U.S. and its territories traded on the various U.S. stock
exchanges and, to a limited extent, in the
over-the-counter markets. The Portfolio may not hold all of the
securities in the Russell 1000 Value Index
because of administrative costs involved and the expenses
associated with trading less active securities. Instead,
the Portfolio will hold a representative sample of securities
included in the Russell 1000 Value Index.
The Frank Russell Company is not a sponsor of, or in any other way
affiliated with, the Portfolio or the Fund.
The Russell 1000 Value Index is a subset of the Russell 1000
Index which in turn is a subset of the
Russell 3000 Index. The Russell 3000 Index consists of the largest
3000 publicly traded stocks of corporations
domiciled in the U.S. and its territories and includes large,
medium and small capitalization stocks.
The Russell 3000 Index represents approximately 98% of the
total market capitalization of all U.S.
stocks that trade on the New York and American Stock Exchanges and
in the NASDAQ (National Association
of Securities Dealers Automated Quotations) National Market System
over-the-counter market. The Russell
1000 consists of the 1000 largest stocks within the Russell 3000
Index, representing approximately 94% of the
Russell 3000 Index total market capitalization.
The Russell 1000 Value Index is comprised of stocks from the
Russell 1000 Index with
greater-than-average value orientation. A stock is determined to
have greater-than-average value orientation
if it falls in the bottom 50% of the Russell 1000 Index based on
cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell
1000 Value Index typically have low
price-to-book and price-earnings ratios, higher dividend yields and
lower forecasted growth rates than more
growth- oriented securities.
The Russell 1000 Value Index is reconstituted annually to
reflect changes in the marketplace. At each
reconstitution, the Russell 1000 Index constituents are ranked by
their price-to-book ratio. Once ranked by
this ratio, a breakpoint is determined by the median market
capitalization of the Russell 1000 Index. As of
May 31, 1996, the price-to-book breakpoint was 3.413.
The Portfolio will similarly reconstitute itself on an annual
basis. The reconstituted list of securities
are ranked based on May 31 total market capitalizations, with the
actual reconstitution effective June 30. As
well, securities that leave the Index for any reason between
reconstitution dates will not be replaced. As a
result, the number of securities held in the Portfolio over the
year will fluctuate. As of May 31, 1996, the
corporations included in the Russell 1000 Value Index had an
average market capitalization of $2.89 billion.
As discussed above, the Portfolio may not invest in all the
stocks that comprise the Russell 1000 Value
Index. Thus, the Portfolio holdings may be invested differently by
industry segment or by weighting than the
Russell 1000 Value Index. The Portfolio may compensate for the
omission from its holdings that are included
in the Russell 1000 Value Index or for purchasing stocks in
proportions that differ from their weightings in
that Index, by purchasing stocks that may or may not be included in
the Russell 1000 Value Index, but which
have characteristics similar to omitted stocks (such as stocks from
the same or similar industry group having
similar market capitalizations and investment characteristics). The
Portfolio will not adopt a temporary or
defensive investment posture in times of generally declining market
conditions. Therefore, investors in the
Portfolio will bear the risk of such market conditions.
The Portfolio intends that, under normal circumstances, a
minimum of 65% of the Portfolio's total
assets will be invested in securities included in the Russell 1000
Value Index.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
Growth Index Portfolio
The investment objective of the Growth Index Portfolio is to
provide investment results, before fees,
that correspond to the total return of the Russell 1000 Growth
Index. The Russell 1000 Growth Index was
developed by the Frank Russell Company to track stock market
performance of stocks from the Russell 1000
Index exhibiting certain characteristics suggesting growth
potential.
The Portfolio intends to pursue this objective by investing
primarily in common stocks with greater
than average growth orientation, as determined by the formula set
forth below, issued by corporations
domiciled in the U.S. and its territories traded on the various
U.S. stock exchanges and, to a limited extent,
in the over-the-counter markets. The Portfolio may not hold all of
the securities in the Russell 1000 Growth
Index because of administrative costs involved and the expenses
associated with trading less active securities.
Instead, the Portfolio will hold a representative sample of
securities included in the Russell 1000 Growth
Index.
The Frank Russell Company is not a sponsor of, or in any other way
affiliated with, the Portfolio or the Fund.
The Russell 1000 Growth Index is a subset of the Russell 1000
Index which in turn is a subset of the
Russell 3000 Index. The Russell 3000 Index consists of the largest
3000 publicly traded stocks of corporations
domiciled in the U.S. and its territories and includes large,
medium and small capitalization stocks.
The Russell 1000 Growth Index is comprised of stocks from the
Russell 1000 Index with
greater-than-average growth orientation. A stock is determined to
have greater-than-average growth orientation
if it falls in the top 50% of the Russell 1000 Index based on
cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell
1000 Growth Index typically have high
price-to-book and price-earnings ratios, lower dividend yields and
higher forecasted growth rates than more
value-oriented securities.
The Russell 1000 Growth Index is reconstituted annually to
reflect changes in the marketplace. At
each reconstitution, the Russell 1000 Index constituents are ranked
by their price-to-book ratio. Once ranked
by this ratio, a breakpoint is determined by the median market
capitalization of the Russell 1000 Index. As
of May 31, 1996, the price-to-book breakpoint was 3.413.
The Portfolio will similarly reconstitute itself on an annual
basis. The reconstituted list of securities
are ranked based on May 31 total market capitalizations, with the
actual reconstitution effective June 30. As
well, securities that leave the Index for any reason between
reconstitution dates will not be replaced. As a
result, the number of securities held in the Portfolio over the
year will fluctuate. As of May 31, 1996, the
corporations included in the Russell 1000 Growth Index had an
average market capitalization of $2.67 billion.
As discussed above, the Portfolio may not invest in all the
stocks that comprise the Russell 1000
Growth Index. Thus, the Portfolio holdings may be invested
differently by industry segment or by weighting
than the Russell 1000 Growth Index. The Portfolio may compensate
for the omission from its holdings that
are included in the Russell 1000 Growth Index or for purchasing
stocks in proportions that differ from their
weightings in that Index, by purchasing stocks that may or may not
be included in the Russell 1000 Growth
Index, but which have characteristics similar to omitted stocks
(such as stocks from the same or similar
industry group having similar market capitalizations and investment
characteristics). The Portfolio will not
adopt a temporary or defensive investment posture in times of
generally declining market conditions.
Therefore, investors in the Portfolio will bear the risk of such
market conditions.
The Portfolio intends that, under normal circumstances, a
minimum of 65% of the Portfolio's total
assets will be invested in securities included in the Russell 1000
Growth Index.
See also "Index Portfolio Management" in this Prospectus for
more information on management
practices and risks associated with index-type portfolios.
Small-Cap Value Portfolio
The investment objective of the Small-Cap Value Portfolio is
to achieve long-term capital appreciation
by investing primarily in common stocks, although the Portfolio may
also invest in other securities, including
restricted, preferred stock or foreign securities. In seeking
capital appreciation, consideration will be given
to undervalued small and medium sized companies in industries that
demonstrate a strong potential for
growth, financially strong companies with distinct market niches
offering quality products or services,
outstanding management teams and a proven record of success. Ariel
Capital Management serves as sub-
adviser to this Portfolio. As such, it is responsible for the
day-to-day management of the Portfolio subject to
the overall supervision of the Fund's Board of Directors and the
Investment Adviser.
As a means of controlling risk, industries that are believed
to be inherently unpredictable--specifically,
cyclical, commodity-based and start-up industries--will be avoided.
The Portfolio will be constructed on a stock
by stock basis with little attention devoted to the macro-economic
outlook of a particular industry.
The Portfolio will adhere to a disciplined investment
philosophy which incorporates strict guidelines
regarding individual securities. When initiating a position, the
Portfolio will focus on issuers generally ranging
in market capitalization from $50 million to $1.5 billion. As
these companies may be less widely followed by
market analysts, it is believed that they present greater
opportunity for exceptional returns.
Additionally, in keeping with a value approach, the Portfolio
will invest in companies whose equities
are trading at an expected price/earnings ratio of 13-1 or less
over the next 12 month's earnings estimate and
at a low price relative to book value, current sales and total
assets. Expected earnings may represent
normalized earnings or be adjusted for amortization of non-cash
charges. When executing this philosophy,
assets of the Portfolio will not trade or time the market for quick
gains. Rather, a fully invested portfolio is
maintained by following a conservative philosophy of investing for
the long-term. A security will be sold if
it is believed that its price/earnings multiple reflects that the
security may be over-valued and/or that it is not
longer perceived as having strong potential for growth.
Specifically, when a stock is trading at a price of 19-20
times its forward 12 months earnings estimates, it is believed such
stock reflects popular interest. In keeping
with a long-term approach, a security will not be sold because of
a short-term earnings disappointment.
However, a holding will be sold if it is believed that the
company's business has undergone fundamental
changes that will negatively affect its stock price or if there is
a loss of faith in a management's ability to
execute the company's stated goals and objectives.
The Portfolio may invest in foreign securities offering
potential for growth. Investments in foreign
securities involve risks that differ in some respects from
investment in securities of U.S. issuers. These risks
include the risk of fluctuations in the value of the currencies in
which they are denominated, the risk of
adverse political and economic developments and, with respect to
certain countries, the possibility of
expropriation, nationalization or confiscatory taxation or
limitations on the removal of funds or other assets
of the Portfolio. Securities of some foreign companies are less
liquid and more volatile than securities of
comparable domestic companies. There also may be less publicly
available information about foreign issuers
than domestic issuers, and foreign issuers generally are not
subject to the uniform accounting, auditing and
financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be
encountered in settling securities transactions in certain foreign
markets and the Portfolio will incur costs in
converting foreign currencies to U.S. dollars. Custody charges are
generally higher for foreign securities.
The Portfolio may also invest in money market securities for
temporary or emergency purposes or
solely as a cash reserve.
The Portfolio may purchase and write options on securities and
certain futures contracts and invest
in certain futures contracts. The Statement of Additional
Information contains more detailed information
about these investment practices.
The Portfolio currently observes the following operating
policies, which may be changed without
shareholder approval: (1) the Portfolio actively seeks to invest in
companies that achieve excellence in both
financial return and environmental soundness, selecting issuers
that take positive steps toward preserving our
environment and avoiding companies with poor environmental records;
and (2) the Portfolio will not invest
in issuers primarily engaged in the manufacture of weapons systems,
the production of nuclear energy, or the
manufacture of equipment to produce nuclear energy.
It is believed that there are long-term benefits inherent in
an investment philosophy that demonstrates
concerns for the environment, human rights, economic priorities and
international relations.
The sub-adviser has engaged the services of Franklin Research
and Development Corporation of
Boston to provide environmental screening for all issuers selected
for the Portfolio. Franklin provides
information and opinions on the companies' environmental histories.
However, Franklin does not make
recommendations or provide investment advice concerning the
purchase or sale of securities for the Portfolio.
Small-Cap Aggressive Growth Portfolio
The investment objective of the Small-Cap Aggressive Growth
Portfolio is long-term capital growth.
The Small-Cap Aggressive Growth Portfolio seeks to achieve its
objective by investing in common stocks or
their equivalent, emphasizing securities believed to be undervalued
by the market. The Portfolio may also hold
a portion of its assets in cash or money market instruments.
Loomis, Sayles & Company serves as sub-adviser
to this Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio subject to the
overall supervision of the Fund's Board of Directors and the
Investment Adviser.
Loomis Sayles seeks to build a core small-cap portfolio of
solid growth companies' stock with a
smaller emphasis on special situations and turnarounds (companies
that have experienced significant business
problems but which are believed to have favorable prospectus for
recovery), as well as unrecognized stocks.
In seeking long-term capital growth, the Portfolio will
normally invest at least 65% of its total assets
in companies with market capitalization of less than $1 billion and
may invest up to 35% of its total assets
at the time of acquisition in larger companies. Current income is
not a consideration in selecting investments
for the Portfolio. Equity securities of companies with relatively
small market capitalization may be more
volatile than the securities of larger, more established companies
and the broad equity market indexes.
The Portfolio may invest a limited portion of its assets in
securities of issuers organized or
headquartered outside the United States. However, such investments
cannot exceed 10% of the Portfolio's
total assets at the time of acquisition. Foreign investments can
involve risk, however, that may not be present
in domestic securities. Please see "Foreign Investment Risks" in
this prospectus and the Statement of
Additional Information.
The Portfolio may purchase and write options on
securities and certain futures contracts and
invest in certain futures contracts. The Portfolio may also engage
in the following investment practices each
of which may involve certain special risks: when issued securities
and repurchase agreements. The Statement
of Additional Information contains more detailed information about
these practices.
Corporate Bond Portfolio
The investment objective of the Corporate Bond Portfolio is
high total investment return through a
combination of current income and capital appreciation. The
Corporate Bond Portfolio seeks to achieve its
investment objective by investing in debt securities (including
convertibles), although up to 20% of its total
assets at the time of acquisition may be invested in preferred
stocks. In achieving high total investment returns
through a combination of current income and capital appreciation,
the Portfolio will normally invest at least
65% of its total assets in bonds. A limited portion of its total
assets at the time of acquisition may also be
invested in securities of foreign issuers and up to 35% of its
total assets at the time of acquisition in securities
of below investment grade quality. The Portfolio may also hold a
portion of its assets in cash or money
market instruments. Loomis, Sayles & Company serves as sub-adviser
to this Portfolio. As such, it is
responsible for the day-to-day management of the Portfolio subject
to the overall supervision of the Funds'
Board of Directors and the Investment Adviser.
The Portfolio may invest in fixed income securities of any
maturity. Fixed-income securities pay a
specified rate of interest or dividends, or a rate that is adjusted
periodically by reference to some specified
index or market rate. Fixed-income securities include securities
issued by federal, state, local and foreign
governments and related agencies, and by a wide range of private
issuers. Because interest rates vary, it is
impossible to predict the income in fixed-income securities for any
particular period. Therefore, the net asset
value of the Portfolio's shares will vary as a result of changes in
the value of the securities held. Fixed-income
securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result
of changes in interest rates. In general, the values of fixed
income securities increase when prevailing interest
rates fall and decrease when interest rates rise. Credit risk
relates to the ability of the issuer to make
payments of principal and interest.
The Portfolio may invest a portion of its assets in securities
rated below investment grade (that is,
below BBB by S&P or Baa by Moody's), including securities in the
lowest rating categories and comparable
unrated securities. The Portfolio may invest up to 35% of its
total assets at the time of acquisition in such
securities. For purposes of this percentage, a security will be
treated as being of investment grade quality if
at the time it is acquired at least one major rating agency has
rated the security in its top four rating categories
(even if another agency has issued a lower rating), or if the
security is unrated but it is otherwise determined
to be of comparable quality. Lower rated fixed- income securities
generally provide higher yields, but are
subject to greater credit and market risk than higher quality
fixed-income securities. Lower rated fixed-income
securities are considered predominately speculative with respect to
the ability of the issuer to meet principal
and interest payments. Achievement of the investment objective of
the Portfolio investing in lower rated fixed-
income securities may be more dependent on credit analysis than is
the case with higher quality bonds. The
market for lower rated fixed-income securities may be more severely
affected than some other financial
markets by economic recession or substantial interest rate
increases, by changing public perceptions of this
market or by legislation that limits the ability of certain
categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid
for lower rated fixed-income securities. This
lack of liquidity at certain times may affect the values of these
securities and may make the valuation and sale
of these securities more difficult. Securities of below investment
grade quality are commonly referred to as
"junk bonds." Securities in the lowest rating categories may be in
poor standing or in default. Securities in
the lowest investment grade category (BBB by S&P or Baa by Moody's)
have some speculative characteristics.
The Portfolio may also invest in "zero coupon" fixed-income
securities. These securities accrue interest
at a specified rate, but do not pay interest in cash on a current
basis. If the Portfolio invests in zero coupon
securities, it is required to distribute the income on these
securities as the income accrues, even though the
Portfolio is not receiving the income and cash on a current basis.
Thus, the Portfolio may have to sell other
investments to obtain cash to make income distributions. The
market value of zero coupon securities is often
more volatile than that of non-zero coupon fixed-income securities
of comparable quality and maturity.
The Portfolio may also invest in securities of issuers
organized or headquartered outside of the United
States. The Portfolio will not purchase a foreign security if, as
a result, its holdings of foreign securities would
exceed 20% of its total assets at the time of acquisition; however,
the Portfolio may invest any portion of its
assets in securities of Canadian issuers. Foreign investments can
involve risk, however, that may not be
present in domestic securities. Please see "Foreign Investment
Risks" in this prospectus.
The Portfolio may engage in foreign currency exchange
transactions to protect the value of specific
positions or in anticipation of changes in relative values of
currencies in which current or future holdings are
denominated or quoted. Please see "Foreign Currency Exchange
Transactions" in this prospectus.
The Portfolio may purchase Rule 144A securities. These are
privately offered securities that can be
resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless it has
been determined that the particular issue of Rule 144A securities
is liquid. Please see "Illiquid Securities" in
this prospectus.
The Portfolio may purchase and write options on
securities and certain futures contracts and
invest in certain futures contracts. The Portfolio may also engage
in the following investment practices each
of which involves certain special risks: collateralized mortgage
obligations, when issued securities and
repurchase agreements. The Statement of Additional Information
contains more detailed information about
these practices.
Foreign Equity Portfolio
The investment objective of the Foreign Equity Portfolio is
total return from long-term growth of
capital and dividend income. The Foreign Equity Portfolio seeks to
achieve its objective by investing primarily
in international equity securities. Although the Portfolio seeks to
invest primarily in common stocks, it may
also invest in any type of equity security. Loomis Sayles &
Company L.P. serves as sub-adviser to this
Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio subject to the overall
supervision of the Funds' Board of Directors and the Investment
Adviser.
In seeking to achieve its investment objective, the Portfolio
will normally invest 65% of its total assets
in equity securities of issuers headquartered outside of the United
States. Under normal conditions, the
Portfolio will contain equity securities of issuers from at least
three countries outside the United States. The
Portfolio may also hold a portion of its assets in cash or money
market instruments.
The Portfolio will not limit its investments to any particular
type of company. Countries will be
selected where it is anticipated sustainable growth will exceed
current market expectations. Within the selected
countries, economic sectors will be identified that appear to
present the most potential for risk adjusted
growth and, finally, within the chosen economic sectors, securities
will be selected that are expected to offer
the best value.
The Portfolio may also invest in closed-end investment
companies domiciled in the United States but
which invest primarily in securities issued by foreign companies.
Foreign investments can involve risk, however, that may not be
present in domestic securities. Please
see "Foreign Investment Risks" in this prospectus.
The Portfolio may also, from time to time, invest up to 20% of
its assets in fixed-income securities
issues or guaranteed by foreign governments (including their
political subdivisions, agencies and authorities,
and/or instrumentalities), issued by supranational agencies or
issued by foreign companies, including but not
limited to convertible debt and less than investment grade or
non-rated debt. The net asset value of the
Portfolio will vary as a result of changes in the value of bonds
and other fixed-income securities held by the
Portfolio. Fixed-income securities are subject to market and credit
risk. Market risk relates to changes in a
security's value as a result of changes in interest rates
generally. Credit risk relates to the ability of the issuer
to make payments of principal and interest. Securities with a
rating which is less than investment grade are
commonly referred to as "junk bonds." Lower rated fixed-income
securities generally provide higher yields,
but are subject to greater credit and market risks than higher
quality fixed-income securities and are considered
predominately speculative with respect to the ability of the issuer
to meet principal and interest payments.
In addition, the secondary market may be less liquid for
lower-rated fixed-income securities which may make
the valuation and sale of the securities more difficult. The
Statement of Additional Information contains more
information about securities ratings.
The Portfolio may invest in convertible securities, including
corporate bonds, notes or preferred stocks
that can be converted into common stocks or other equity
securities. Convertible securities include other
securities, such as warrants, that provide an opportunity for
equity participation. Because convertible securities
can be converted into equity securities, their values will normally
vary in some proportion with those of the
underlying equity securities. Convertible securities usually
provide a higher yield than the underlying equity,
however, so that the price decline of a convertible security may
sometimes be less substantial than that of the
underlying equity security. The value of convertible securities
that pay dividends or interest, like the value of
all fixed-income securities, generally fluctuates inversely with
changes in interest rates. Warrants have no voting
rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. They
do not represent ownership of the securities for which they are
exercisable, but only the right to buy such
securities at a particular price. All convertible securities
purchased by the Portfolio will, at the time of
purchase, either be rated investment grade by at least one major
rating agency or will be unrated securities
which are determined to be of comparable quality.
The Portfolio may also engage in the following investment
practices each of which involves certain
special risks: transactions in options and certain futures
contracts and repurchase agreements. The Statement
of Additional Information contains more detailed information about
these practices.
The Portfolio may engage in foreign currency exchange
transactions to protect against uncertainty in
the level of future exchange rates. Please see "Foreign Currency
Exchange Transactions" in this prospectus.
The Portfolio may invest up to 10% of its assets at the time
of acquisition in securities of investment
companies. As such, the Portfolio may indirectly bear investment
management fees of such investment
companies, which are in addition to the management fees the
Portfolio pays its adviser.
The Portfolio may purchase "illiquid securities," that is,
securities which are not readily marketable,
which includes securities whose disposition is restricted by
federal securities laws. See "Illiquid Securities" in
this prospectus.
Maxim Founders Blue Chip Portfolio
The investment objective of the Maxim Founders Blue Chip
Portfolio is long-term growth of capital
and income. To achieve its objective, the Portfolio normally will
invest primarily in common stocks of large,
well-established, stable and mature companies, commonly known as
"Blue Chip" companies.
"Blue Chip" companies typically have long records of financial
success and dividend payments and a
reputation for quality management, products and services. The
Portfolio normally invests at least 65% of its
total assets (measured at the time of investment) in "Blue Chip"
stocks that (1) are included in a widely
recognized index of stock market performance such as the Dow Jones
Industrial Average, the Standard &
Poor's 500 Index, or the New York Stock Exchange Index; (2)
generally pay regular dividends; and (3) have
a market capitalization of at least $1 billion. The Portfolio may
also invest in non-dividend paying companies
if it is determined they offer favorable prospects for capital
appreciation. The Portfolio may also invest up
to 30% of its total assets (measured at the time of investment) in
foreign securities and may invest, without
limitation, in ADRs. Such investments may enhance return, but also
involve some special risks. See "Foreign
Investment Risks" in this prospectus.
The Portfolio may purchase and write call and put options and
enter into certain futures contracts
on securities and financial indices. Such transactions may be
entered into for any number of reasons,
including: to manage its exposure to changes in securities prices
and foreign securities; as an efficient means
of adjusting its overall exposure to certain markets; in an effort
to enhance income; and to protect the value
of portfolio securities. See the Statement of Additional
Information for more detailed information about these
investment practices.
The Portfolio may engage in foreign currency exchange
transactions to protect the value of specific
positions or in anticipation of changes in relative values of
currencies in which current or future holdings are
denominated or quoted. See "Foreign Currency Exchange
Transactions" in this prospectus and the Statement
of Additional Information for more detailed information about these
practices.
The Portfolio may purchase "illiquid securities," that is,
securities which are not readily marketable,
which includes securities whose disposition is restricted by
federal securities laws. See "Illiquid Securities" in
this prospectus.
The Portfolio may also invest in bonds, debentures and other
corporate obligations when it is
determined that these investments may offer opportunities for
capital appreciation. The Portfolio will invest
in bonds, debentures, and corporate obligations only if they are
rated investment grade (BBB or higher) at the
time of purchase. The Portfolio may also invest in convertible
securities and preferred stocks which are rated
in medium and lower categories by Moody's or S&P (Ba or lower by
Moody's and BB or lower by S&P), but
none may be rated lower than B. Securities rated B generally are
less desirable investments and are deemed
speculative as far as the issuer's capacity to pay interest and
repay principal over a long period of time.
Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but
lower than non-convertible securities. They generally participate
in the appreciation or depreciation of the
underlying stock into which they are convertible, but to a lesser
degree. The Portfolio may also invest in
unrated convertible securities and preferred stocks if they are
deemed to be equivalent in quality to the rated
securities that the Portfolio may buy. The Portfolio will not
invest more than 5% of its total assets (measured
at the time of investment) in unrated fixed-income securities or
those rated below investment grade either at
the time of purchase or as a result of a rating reduction after
purchase.
All or part of the Portfolio's assets may be invested
temporarily in U.S. and foreign-dollar
denominated money market securities, including repurchase
agreements, commercial paper, bank obligations,
certificates of deposit, bankers's acceptances, other cash
equivalents and government securities if it is
determined to be appropriate for purposes of enhancing liquidity or
preserving capital in light of prevailing
market or economic conditions. While in such a defensive position,
the opportunity to achieve capital growth
will be limited, and, to the extent that this assessment of market
conditions is incorrect, the Portfolio will be
foregoing the opportunity to benefit from capital growth resulting
from increases in the value of equity
investments.
Maxim T. Rowe Price MidCap Growth Portfolio
The investment objective of the Maxim T. Rowe Price MidCap
Growth Portfolio is to provide long-
term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To
achieve this objective, the Portfolio will invest at least 65% of
its assets (measured at the time of investment)
in a diversified portfolio of mid-cap companies whose earnings are
expected to grow at a faster rate than the
average mid-cap company.
A mid-cap company is defined as one whose market
capitalization (number of shares outstanding
multiplied by share price) falls within the capitalization range of
companies included in the Standard & Poor's
400 MidCap Index - generally, between $191 million and $6.5
billion. Mid-cap growth companies are often
in the early, more dynamic phase of their life cycles, but are no
longer considered new or emerging. Mid-cap
companies tend to offer higher growth prospects than larger
companies. At the same time, mid-cap companies
tend to have greater resources, and therefore represent less risk,
than smaller companies. In addition, mid-cap
companies generally have sufficient financial resources and access
to capital to finance their growth.
The Portfolio will attempt to invest primarily in companies
that offer proven products or services; have
a historical record of above-average earnings growth; demonstrate
the potential to sustain earnings growth;
operate in industries experiencing increasing demands; or are
believed to be undervalued in the market place.
Mid-cap growth stocks entail greater risk and are usually more
volatile than the shares of larger, more
established companies. Since mid-cap companies usually reinvest a
high portion of earnings in their own
businesses, they tend to pay a lesser dividend than larger
companies. Also, since investors buy mid-cap growth
stocks because of their expected superior earnings growth, earnings
disappointments often result in sharp price
declines.
The Portfolio may invest in preferred equity, warrants and
debt securities convertible into or
exchangeable for equity securities. Traditionally, convertible
securities have paid dividends or interest at rates
higher than common stocks but lower than non-convertible
securities. They generally participate in the
appreciation or depreciation of the underlying stock into which
they are convertible, but to a lesser degree.
Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during
the life of the warrants (generally, two or more years).
The Portfolio may invest up to 25% (measured at the time of
investment) in foreign securities. These
include non-dollar denominated securities traded outside of the
U.S. and dollar denominated securities of
foreign issuers traded in the U.S. Such investments may enhance
return, but also involve some special risks.
See "Foreign Investment Risks" in this prospectus.
The Portfolio may, for non-hedging purposes, invest 10% of its
total assets in hybrid instruments.
These instruments (a type of potentially high-risk derivative) can
combine the characteristics of securities,
futures and options. For example, the principal amount, redemption
or conversion terms of a security could
be related to the market price of a commodity, currency, or
securities index. Such securities may bear interest
or pay dividends at low market (or even relatively nominal) rates.
Under certain conditions, the redemption
value of such an investment could be zero. See also the Statement
of Additional Information for more
information about these types of transactions.
The Portfolio may purchase "illiquid securities," that is,
securities which are not readily marketable,
which includes securities whose disposition is restricted by
federal securities laws. See "Illiquid Securities" in
this prospectus.
The Portfolio may purchase and write call and put options and
enter into certain futures contracts
on securities and financial indices. Such transactions may be
entered into for any number of reasons,
including: to manage its exposure to changes in securities prices
and foreign securities; as an efficient means
of adjusting its overall exposure to certain markets; in an effort
to enhance income; and to protect the value
of portfolio securities. See the Statement of Additional
Information for more detailed information about these
investment practices.
The Portfolio may engage in foreign currency exchange
transactions to protect the value of specific
positions or in anticipation of changes in relative values of
currencies in which current or future holdings are
denominated or quoted. See also "Foreign Currency Exchange
Transactions" in this prospectus.
The Portfolio may hold a certain portion of its assets in U.S.
and foreign-dollar denominated money
market securities, including repurchase agreements, high quality
corporate bonds or notes and government
securities.
Index Portfolio Management
All index styled portfolios may utilize futures as a
substitute for a comparable market position in the
underlying securities, or for hedging purposes. A stock 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 stock 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
stocks in the index is made. The intent is to
purchase and sell futures contracts so as to obtain the best price
with consideration also given to liquidity.
Stock index futures contracts may be purchased or sold to the
extent that such activities would be
consistent with the requirements of Section 4.5 of the regulations
under the Commodity Exchange Act, under
which the portfolios would be excluded from the definition of a
"commodity pool operator." Accordingly,
each portfolio may enter into futures positions in such futures
contracts to the extent that the aggregate initial
margins and premiums required to establish such positions do not
exceed 5% of the liquidation value of the
respective portfolio.
Risks associated with the use of futures contracts are: (i)
imperfect correlation between the change
in value of securities included on the index and the prices of
futures contracts; and (ii) possible lack of a liquid
secondary market for a futures position when desired. The risk that
a portfolio will be unable to close out a
futures position will be minimized by entering into such
transactions on a national exchange with an active
and liquid secondary market. In addition, because of the low margin
deposits normally required in futures
trading, a high degree of leverage is typical of a futures trading
account.
As a result, a relatively small price movement in a futures
contract may result in substantial losses to
the trader (i.e., the Portfolio). Traditional methods of securities
analysis are not used by the Investment
Adviser in making investment decisions for index styled portfolios.
Rather a statistical selection technique is
utilized to determine which securities it will purchase or sell in
order to track the performance of the relevant
index(es) to the extent feasible. In addition, from time to time,
adjustments may be made in a portfolio's
holdings due to change in the composition of the relevant
index(es). Each index styled portfolio will attempt
to achieve a correlation between its performance and that of the
relevant index(es) of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate
perfect correlation, which would be achieved
when a portfolio's net asset value, including the value of its
dividends and capital gains distributions, increases
or decreases, is in exact proportion to change in the relevant
index(es). The Investment Adviser will attempt
to minimize any tracing error (that statistical measure of the
difference between the investment results of
a portfolio and that of the relevant index(es)) in making
investments for a portfolio. However, brokerage and
other transaction costs, as well as potential tracking errors, will
tend to cause a portfolio's return to be lower
than the return of the relevant index(es). There can be no
assurance, however, as to how closely a portfolio's
performance will correspond to the performance of the relevant
index(es). Moreover, the index itself may not
perform favorably in which case a Portfolio's performance would
similarly be unfavorable.
Foreign Investment Risks
Investments in foreign securities present risks not typically
associated with investments in comparable
securities of U.S. issuers.
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.
A 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, delays and disruptions in securities settlement
procedures.
Most foreign securities in a Portfolio 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 a Portfolio in foreign currencies. The value of
these foreign currencies relative to the U.S.
dollar varies continually, causing changes in the dollar value of
a Portfolio's investments (even if the price of
the investments is unchanged) and changes in the dollar value of a
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 a
Portfolio's assets and on the net investment income available for
distribution may be favorable or unfavorable.
A Portfolio may incur costs in connection with conversions
between various currencies. In addition,
a 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 a Portfolio
declares and pays a dividend, or between the time when a Portfolio
accrues and pays an operating expense in
U.S. dollars.
Foreign Currency Exchange Transactions
Portfolios which engage in foreign currency exchange
transactions do so in an attempt to protect
against uncertainty in the level of future exchange rates. Some
Portfolios may 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").
A 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. A 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, a 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 a 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.
A Portfolio may engage in position hedging to protect against the
decline in the 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, when the Portfolio holds
cash or short-term investments). For position hedging purposes, a
Portfolio may purchase or sell foreign
currency futures contracts, foreign currency forward contracts and
options on foreign currency futures contracts
and on foreign currencies 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.
A 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. A 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.
A 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.
Illiquid Securities
Each Portfolio, other than the Money Market Portfolio, may
invest up to 15% of its total assets in
"illiquid securities" (taken as of the time of acquisition of an
illiquid security). The Money Market Portfolio
may invest up to 10% of its total assets in illiquid securities.
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 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 Portfolios 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 a board of directors to
determined, 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, and with respect to those Portfolios having a sub-adviser,
the sub-adviser is responsible for
determining the liquidity of Rule 144A securities.
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 a Portfolio's liquidity.
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 GW Capital Management 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 GWL&A 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
GW Capital Management, 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. GW
Capital Management 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 Fund's portfolios in accordance with each Portfolio's
stated investment objectives and policies,
makes investment decisions for the Portfolios and places orders to
buy and sell securities on behalf of the
Fund or delegates these functions to a sub-adviser, as discussed
below. The Investment Adviser provides
investment advisory services and pays all the expenses, except
extraordinary expenses, of the Portfolios
described herein. As compensation for its services to the Fund,
the Investment Adviser receives monthly
compensation at the annual rate of 0.46% of the average daily net
assets of the Money Market Portfolio;
0.60% of the average daily net assets of the Investment Grade
Corporate Bond, Stock Index, Small-Cap Index,
Value Index, Growth Index, U.S. Government Mortgage Securities and
Total Return Portfolios; 0.90% of the
average daily net assets of the Corporate Bond Portfolio; and,
1.00% of the average daily net assets of the
Small-Cap Value, Small-Cap Aggressive Growth, Foreign Equity, Maxim
Founders Blue Chip and Maxim T.
Rowe Price MidCap Growth Portfolios.
With respect to the Small-Cap Value, Small-Cap Aggressive
Growth, Foreign Equity, Maxim T. Rowe
Price MidCap Growth and Maxim Founders Blue Chip Portfolios, the
Investment Adviser pays all
compensation of, and furnishes office space for, officers and
employees of the Investment Adviser connected
with investment management of these Portfolios, as well as the fees
of all directors of the Fund who are
affiliated persons of the Investment Adviser or any of its
subsidiaries. All other expenses incurred in the
operation of these Portfolios, including general administrative
expenses are borne by these Portfolios,
respectively. Accounting services are provided for these
Portfolios by the Investment Adviser and these
Portfolios reimburse the Adviser for its costs in connection with
such services. However, the Adviser shall
pay any expenses of the Fund which exceed an annual rate of 1.05%
of the average daily net assets of the
Maxim T. Rowe Price MidCap Growth Portfolio; 1.15% of the average
daily net assets of the Maxim Founders
Blue Chip Portfolio; 1.30% of the average daily net assets of the
Small-Cap Aggressive Growth Portfolio;
1.35% of the average daily net assets of the Small-Cap Value
Portfolio; and 1.50% of the Foreign Equity
Portfolio.
The day-to-day lead portfolio manager for the Investment Grade
Corporate Bond Portfolio and the
Short-Term Maturity Bond Portfolio is B.G. Masters. Mr. Masters is
Manager, Public Bond Investments,
GWL&A, 1993 to Present; Manager, Bond, Investment Grade Corporate
Bond and Short-Term Maturity Bond
Portfolios of Maxim Series Fund, June 1994 to Present. He was
Assistant Manager, Public Bond Investments,
GWL&A, 1987 to 1993.
The day-to-day lead portfolio manager for the U.S. Government
Mortgage Securities Portfolio is C.S.
Tocher. Ms. Tocher is Manager, Public Bond Investments, GWL&A,
1993 to Present; Manager, U.S.
Government Securities and U.S. Government Mortgage Securities
Portfolio of Maxim Series Fund; June 1994
to Present. She was Associate Manager, Public Bond Investments,
GWL&A, 1990 to 1993; Manager, Bond,
Investment Grade Corporate Bond and Zero-Coupon Treasury Portfolios
of Maxim Series Fund, 1990 to June
1994.
The day-to-day lead portfolio manager for the Total Return
Portfolio is B.D. Squair, C.F.A., Assistant
Manager, Capital Markets Group, The Great-West Life Assurance
Company; Manager, Total Return Portfolio
of Maxim Series Fund; Manager, Great-West Variable Annuity Account
A.
Sub-Advisers
Ariel Capital Management, Inc. ( Ariel ) is a privately held
minority-owned money manager registered
with the Securities and Exchange Commission as an investment
adviser. It is an Illinois corporation with its
principal business address at 307 North Michigan Avenue, Chicago,
Illinois 60601. Subject generally to review
and supervision by the Investment Adviser and the Board of
Directors of the Fund, Ariel is responsible for
the actual daily management of the Small-Cap Value Portfolio and
for making decisions to buy, sell or hold
any particular security.
Ariel 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 Small-Cap Value Portfolio.
The day-to-day manager for the Small-Cap Value Portfolio is
John W. Rogers, Jr. Mr. Rogers'
business experience during the past five years is as Chief
Investment Officer, Ariel Capital Management and
Portfolio Manager, Calvert-Ariel Growth Fund.
The Investment Adviser is responsible for compensating Ariel,
which receives monthly compensation
from the Investment Adviser at the annual rate of .40% of the
average daily net asset value of the Small-Cap
Value Portfolio up to $5 million, .35% on the next $10 million,
.30% on the next $10 million, and .25% of
such value in excess of $25 million.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
sub-adviser of the Small-Cap Aggressive
Growth, Corporate Bond and Foreign Equity Portfolios. As such,
Loomis Sayles is responsible for daily
managing the investment and reinvestment of assets of the
Portfolio, subject generally to review and
supervision of the Investment Adviser and the Board of Directors.
Loomis Sayles 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 the investment and economic
research, trading and investment
management of the Portfolios
Loomis Sayles is a Delaware limited partnership, registered as
an investment adviser with the
Securities and Exchange Commission. Its principal business address
is One Financial Center, Boston,
Massachusetts 02111.
Jeffrey C. Petherick, Vice President of Loomis, Sayles &
Company, L.P. ("Loomis Sayles") and New
England Zenith Fund, and Mary Champagne, Vice President of Loomis
Sayles, have day-to-day management
responsibility for the Small-Cap Aggressive Growth Portfolio. Mr.
Petherick has co-managed the Portfolio
since the Portfolio's inception. Mr. Petherick was an investment
manager at Masco Corporation prior to
joining Loomis Sayles in 1990. Ms. Champagne has co-managed the
Portfolio since July 1995. Prior to joining
Loomis Sayles in 1993, Ms. Champagne served as a portfolio manager
at NBD Bank for 10 years.
The day-to-day manager of the Corporate Bond Portfolio is
Daniel J. Fuss, Executive Vice President
of Loomis Sayles and who also serves as the fund manager of the
Loomis Sayles Bond Fund. Mr. Fuss has
served as the portfolio manager of the Loomis Sayles Bond Fund
since its inception in 1991.
The day-to-day manager of the Foreign Equity Portfolio is Paul
Drexler, Vice President of Loomis
Sayles and who also serves as the fund manager of the Loomis Sayles
International Equity Fund (since 1996)
and the New England International Fund (since 1997).
The Investment Adviser is responsible for compensating Loomis
Sayles, which receives monthly
compensation from the Investment Adviser at the annual rate of .50%
on the first $10 million, .45% on the
next $15 million, .40% on the next $75 million and .30% on all
amounts over $100 million of the Small-Cap
Aggressive Growth Portfolio; .30% on all assets of the Corporate
Bond Portfolio; and, .60% on the first $10
million, .50% on the next $40 million, and .35% on amounts over $50
million on the Foreign Equity Portfolio.
Founders Asset Management, Inc. ("Founders") serves as the
sub-adviser to the Maxim Founders Blue
Chip Portfolio. As such, Founders is responsible for daily
management of the investment and reinvestment
of assets of the Maxim Founders Blue Chip Portfolio, subject
generally to review and supervision of the
Investment Adviser and the Board of Directors. Founders 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 for the Maxim
Founders Blue Chip Portfolio.
Founders is a Delaware corporation, registered as an
investment adviser with the Securities and
Exchange Commission. Its principal business address is 2930 East
Third Avenue, Denver, Colorado 80206.
The day-to-day manager of the Maxim Founders Blue Chip
Portfolio is Brian F. Kelly. Mr. Kelly also
serves as the lead portfolio manager for the Founders Blue Chip
and Balanced Funds. Mr. Kelly joined
Founders in 1996. Prior to joining Founders, Mr. Kelly served as
a portfolio manager (1993 - 1996) for
INVESCO Trust Company, and as a senior equity investment analyst
for Sears Investment Management
Company (1986 - 1993).
The Investment Adviser is responsible for compensating
Founders, which receives monthly
compensation from the Investment Adviser at the annual rate of
.425% on the first $250 million, .35% on the
next $250 million, .325% on the next $250 million and .30% on all
amounts over $750 million.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as
the sub-adviser to the Maxim T. Rowe
Price MidCap Growth Portfolio. As such, T. Rowe Price is
responsible for daily managing the investment and
reinvestment of assets of the Portfolio, subject generally to
review and supervision of the Investment Adviser
and the Board of Directors. T. Rowe Price 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 the
investment and economic research, trading and investment management
of the Maxim T. Rowe Price MidCap
Growth Portfolio.
T. Rowe Price is a Maryland corporation, registered as an
investment adviser with the Securities and
Exchange Commission. Its principal address is 100 East Pratt
Street, Baltimore, Maryland 21202.
The Maxim T. Rowe Price MidCap Growth Portfolio is managed by
an investment advisory committee
comprised of the following members: Brian W. H. Berghuis,
Chairman, Marc L. Baylin, James A. C. Kennedy,
and John S. Wakeman. The committee chairman has day-to-day
responsibility for managing the Portfolio and
works with the committee in developing and executing the
Portfolio's investment program. This investment
committee also serves as the investment committee for the T. Rowe
Price MidCap Growth Portfolio. Mr.
Berghuis has been Chairman of the T. Rowe Price MidCap Growth Fund
since 1992. He has been managing
investments since joining T. Rowe Price in 1985.
The Investment Adviser is responsible for compensating T. Rowe
Price, which receives monthly
compensation from the Investment Adviser at the annual rate of .50%
on all assets of the Maxim T. Rowe
Price MidCap Growth Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from investment income of the Money Market Portfolio
shall be declared daily and
reinvested monthly in additional shares of the Portfolio at net
asset value. Dividends from investment income
of the Investment Grade Corporate Bond, U.S. Government Mortgage
Securities and Short-Term Maturity
Bond Portfolios shall be declared and reinvested quarterly.
Dividends from net investment income of the
Stock Index, Small-Cap Index, Growth Index, Value Index, Small-Cap
Value, Total Return, Maxim Founders
Blue Chip, Maxim T. Rowe Price MidCap Growth and Corporate Bond
Portfolios shall be declared and
reinvested semi-annually. Dividends from net investment income of
the Small-Cap Aggressive Growth and
Foreign Equity Portfolios shall be declared and reinvested
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 Fund at net asset value.
The Fund has qualified, and intends to continue to qualify, as
a registered investment company under
Subchapter M of the Internal Revenue Code ("Code"). Each Portfolio
of the Fund will be treated as a
separate corporation for federal income tax purposes. The Fund
intends to distribute all of its net income so
as to avoid any Fund-level tax. Therefore, dividends derived from
interest and distributions of any realized
capital gains will be taxable, under Subchapter M, to the Fund's
shareholders, which in this case are GWL&A's
and TNE's Series Accounts. The Fund also intends to distribute
sufficient income 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 Fund 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. Such charges
are described in the applicable Series Account prospectus.
VALUATION OF SHARES
A 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.
Market quotations of foreign securities in foreign currency
are translated to U.S. dollars at the
prevailing rate of exchange. Securities for which market
quotations are not readily available and other assets
are valued at fair value as determined in good faith by the Board
of Directors. 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 Fund 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 Fund 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 a portfolio is
entitled to one vote and to participate equally
in dividends and distributions declared by that portfolio and, upon
liquidation or dissolution, to participate
equally in the net assets of such portfolio remaining after
satisfaction of outstanding liabilities. The shares
of each 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 The
Great-West Life Assurance Company,
which provided the Fund's initial capitalization, 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 Fund is based on the Fund'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 Portfolios.
When the Fund advertises the total return of one of these
portfolios, it will usually be calculated for one year,
five years, and ten years or some other relevant period if the Fund
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).
Some of the Portfolios may also advertise their 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 Fund share (reduced by any dividend expected
to be paid shortly out of Fund income) on
the last day of the period.
The Money Market Portfolio may advertise its yield and
effective yield. The yield of the Money Market
Portfolio is based upon the income earned by the Portfolio over a
seven-day period and then annualized, i.e.,
the income earned in the period is assumed to be earned every seven
days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated
similarly but, when annualized, the income
earned by the investment is assumed to be reinvested in portfolio
shares and thus compounded in the course
of a 52-week period.
<PAGE>
YIELDS
Yield (and effective yield, in the case of the Money Market
Portfolio) will fluctuate, and publication
of yield information may not provide a basis for comparison with
bank deposits, securities of other investment
companies or other investments which are insured and/or pay a fixed
yield for a stated period of time. In
addition, the yield and effective yield information may be of
limited use for comparative purposes because it
does not reflect charges imposed at the Series Account level which,
if included, would decrease the yield.
Moreover, the yields shown reflect past performance only and are
not intended to indicate, predict or
guarantee future performance.
Yield** Effective Yield**
MONEY MARKET PORTFOLIO 4.95% 5.08%
Comparison Information (1) 5.02%
Yield**
INVESTMENT GRADE CORPORATE
BOND PORTFOLIO 5.99%
U.S. GOVERNMENT MORTGAGE
SECURITIES PORTFOLIO 9.69%
TOTAL RETURN PORTFOLIO 2.57%
STOCK INDEX PORTFOLIO 1.48%
SMALL-CAP INDEX PORTFOLIO 1.54%
GROWTH INDEX PORTFOLIO 1.32%
VALUE INDEX PORTFOLIO 1.83%
SMALL-CAP VALUE PORTFOLIO 1.78%
CORPORATE BOND PORTFOLIO 7.31%
SMALL-CAP AGGRESSIVE
GROWTH PORTFOLIO 1.74%
FOREIGN EQUITY PORTFOLIO 0.73%
SHORT-TERM MATURITY
BOND PORTFOLIO 5.28%
**Yield and effective yield for the Money Market Portfolio is for
the 7-day period ended December 31, 1996. Yield for the other
Portfolios
is for the month ended December 31, 1996. All the yield and
effective yield calculations above take into account charges
against the
Portfolio. All yield and effective yield information is annualized.
(1) The Donoghue MONEY FUND AVERAGE lists 772 taxable money funds
that are available to individual investors.
TOTAL RETURNS
All total return calculations assume the full redemption of
the Portfolio at the end of the period for
which the calculation was made. These returns also reflect annual
returns over the period indicated. For
information on the method used to calculate the above returns see
the Statement of Additional Information.
The performance shown reflects past performance only and is not
intended to indicate, predict or guarantee
future performance. Total return information, however, may be of
limited use for comparative purposes
because it does not reflect charges imposed at the Series Account
level which, if included, would decrease total
return.
<PAGE>
One Five Ten Since++
Year Year Year
Inception
INVESTMENT GRADE CORPORATE
BOND PORTFOLIO 3.14% N/A N/A 6.36%
Comparison Information (2) 3.97% 7.87% 8.70%
U.S. GOVERNMENT MORTGAGE
SECURITIES PORTFOLIO 4.30% N/A N/A 6.93%
Comparison Information (6) 5.35% 6.71% 8.78%
TOTAL RETURN PORTFOLIO 11.76% 9.56% N/A 9.37%
Comparison Information (4) 13.01% 11.13% 11.19%
STOCK INDEX PORTFOLIO+ 21.81% 13.98% 12.99%
Comparison Information (3) 22.96% 15.22% 15.29%
SMALL-CAP INDEX PORTFOLIO 15.30% N/A N/A 11.64%
Comparison Information (5) 16.49% 15.64% 12.41%
GROWTH INDEX PORTFOLIO 22.09% N/A N/A 18.71%
Comparison Information (7) 23.12% 13.38% 15.43%
VALUE INDEX PORTFOLIO 17.18% N/A N/A 20.64%
Comparison Information (8) 21.37% 19.17% 13.67%
SMALL-CAP VALUE PORTFOLIO 17.95% N/A N/A 10.74%
Comparison Information (3) 22.96% 15.22% 15.29%
CORPORATE BOND PORTFOLIO 10.37% N/A N/A 17.39%
Comparison Information (10) 2.91% 7.23% x.xx%
FOREIGN EQUITY PORTFOLIO 7.62% N/A N/A 3.41%
Comparison Information (9) 6.36% 8.48% 8.74%
SMALL-CAP AGGRESSIVE
GROWTH PORTFOLIO 30.09% N/A N/A 25.97%
Comparison Information (5) 16.49% 15.64% 12.41%
SHORT-TERM MATURITY
BOND PORTFOLIO 4.70% N/A N/A 5.48%
Comparison Information (11) 5.08% 5.56% 7.18%
(2) The Lehman Brothers Intermediate Corporate Bond Index is an
index of all investment grade publicly traded issues of at least
$100
million outstanding with maturities ranging from 1 to 10 years
(3) The S&P 500 Index is an index comprised of 500 stocks chosen
for their general representation of the stock market composition by
Standard & Poor's Corporation.
(4) The Lipper Analytical Services Inc. Balanced Fund Survey is a
survey of approximately 61 balanced funds.
(5) The Russell 2000 Index is an index which tracks a broadly
diversified group of small capitalization domestic stocks.
(6) The Lehman Brothers Mortgage-Backed Index is an index of 15-
and 30-year fixed rate mortgages backed by mortgage pools of GNMA,
FNMA and FHLMC. Balloons are also included in the Index.
(7) The Russell 1000 Growth Index is comprised of stocks from the
Russell 1000 Index with greater-than average growth orientation.
The
Russell 1000 Index consists of the 1000 largest stocks with the
Russell 3000 Index. The Russell 3000 Index is an index which
represents
approximately 98% of the total market capitalization of all U.S.
stocks that trade on the New York and American Stock Exchanges and
in the NASDAQ over-the-counter market.
(8) The Russell 1000 Value Index is comprised of stocks from the
Russell 1000 Index with greater-than average value orientation. The
Russell 1000 Index consists of the 1000 largest stocks with the
Russell 3000 Index.
(9) The Morgan Stanley Capital International EAFE Index is an index
which tracks stocks from Europe, Australia and the Far East.
(10) The Merrill Lynch Government/Corporate Index is a broad-based
bond index of investment grade publicly traded issues.
(11) The Lehman Brothers (1-3 Year) Government/Corporate Bond Index
is an index of all investment grade government/corporate issues
of at least $100 million outstanding with maturities of 1 to 3
years.
+From September 24, 1984 until December 1, 1992, the Stock
Index Portfolio was named the Growth Portfolio and prior to
September 24, 1984, was named the Income/Equity Portfolio. During
these periods, the Portfolio's investment policies differed from
the
Stock Index Portfolio's current policies.
++The Total Return Portfolio was established effective July
29, 1987. The Investment Grade Corporate Bond, U.S. Government
Mortgage Securities were established effective December 1, 1992.
The Small-Cap Index, Growth Index and Value Index, and Small-Cap
Value Portfolios were established effective December 1, 1993. The
Small-Cap Aggressive Growth, Corporate Bond and Foreign Equity
Portfolios were established effective November 1, 1994. The
Short-Term Maturity Bond Portfolio was established effective August
1, 1995.
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 Fund's Portfolios 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.
<PAGE>
___________________________________________________________
MAXIM SERIES FUND, INC.
___________________________________________________________
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.
___________________________________________________________
G W CAPITAL MANAGEMENT, INC.
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
May 1, 1997 <PAGE>
TABLE OF CONTENTS
Cross-reference
to page(s)
in
Page Prospectus
Sale of Shares............................. 3 38/35
The Fund Portfolios........................ 3 16/16
Description of Investment Securities.. 3 16-33/16-31
Information About Securities Ratings.. 9 16-33/16-31
Investment Limitations................ 12 16-33/16-31
Lending of Portfolio Securities....... 14 16-33/16-31
Foreign Securities.................... 15 16-33/16-31
Management of the Fund..................... 16 34/32
Directors and Officers................ 16 --
The Investment Adviser................ 17 34/32
The Sub-Advisers...................... 17 35/33
Portfolio Transactions and Brokerage....... 21 34/32
Portfolio Turnover.................... 21 --
Placement of Portfolio Brokerage...... 22 34/32
Purchase and Redemption of Shares.......... 23 38/35
Calculation of Yield and Return............ 30 39/36
Price Make-Up Sheets....................... 62 --
Financial Statements........................ 83 --
SALE OF SHARES
Shares of the Fund are sold to the FutureFunds 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 with three portfolios, the Money
Market, Bond and Income/Equity Portfolios. Pursuant to
shareholders' approval, the investment objectives of the
Income/Equity Portfolio were changed to that of a growth-type
portfolio and it was renamed the Growth Portfolio
effective September 24, 1984. Subsequently, the investment
objectives of the Growth Portfolio were again changed
to that of an index-type portfolio and it was renamed the Stock
Index Portfolio effective December 1, 1992. The
Government Guaranteed Portfolio was added effective January 30,
1985. Subsequently, pursuant to approval of
the shareholders, the investment objectives of the Government
Guaranteed Portfolio were changed and it was
renamed the Government and High Quality Securities Portfolio
effective July 29, 1987. Pursuant to approval of the
shareholders, the investment objectives of the Government and High
Quality Securities Portfolio were changed and
it was renamed the U.S. Government Securities Portfolio effective
May 1, 1990. The Total Return Portfolio was
added July 29, 1987. The Investment Grade Corporate Bond and the
U.S. Government Mortgage Securities
Portfolios were added effective December 1, 1992. The Small-Cap
Index, Value Index, Growth Index, Small-Cap
Value and International Equity Portfolios were added effective
December 1, 1993. The Mid-Cap Portfolio was added
effective January 3, 1994. The Corporate Bond, Small-Cap
Aggressive Growth, Foreign Equity, Maxim T. Rowe Price
Equity/Income, Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR
Portfolios were added effective
November 1, 1994. The Short-Term Maturity Bond Portfolio was added
effective August 1, 1995. The Maxim
INVESCO Balanced Portfolio was added effective October 1, 1996. The
Maxim T. Rowe Price MidCap Growth and
Maxim Founders Blue Chip Portfolios were added effective May 1,
1997.
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 15%
(together with other illiquid investments) 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 which 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.
<PAGE>
Investment Limitations
The Fund has adopted limitations on the investment activity of
its Portfolios 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 Fund,
including a majority of the shares of each Portfolio affected by
the change. These limitations apply to all Portfolios
except the Maxim T. Rowe Price Equity/Income, Maxim T. Rowe Price
MidCap Growth, Maxim INVESCO Balanced,
and Maxim Founders Blue Chip Portfolios. Please see descriptions
starting on page 14 of the investment limitations
applicable to these Portfolios. If only one Portfolio is affected,
only shares of that Portfolio are entitled to vote.
"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., each Portfolio) will not:
1. (a) Invest more than 15% of its total assets (taken at market
value at the time of each investment) in obligations
(excluding repurchase agreements) of any one bank, or, with
respect to 75% of its assets, invest more than
5% of such assets in the securities (other than United States
Government or government agency securities)
of any one issuer other than a bank (but including repurchase
agreements with any one bank); and (b)
purchase more than either (i) 10% in principal amount of the
outstanding debt securities of an issuer, or (ii)
10% of the outstanding voting securities of an issuer, except
that such restrictions shall not apply to securities
issued or guaranteed by the United States Government or its
agencies, bank money instruments or bank
repurchase agreements. Under the diversification requirements
of the Investment Company Act of 1940
applicable to diversified investment companies, such as the
Fund, the Fund may not invest more than 5% of
the value of its total assets in the securities of any one
issuer (except that this statutory restriction does not
apply with respect to 25% of the value of an investment
company's total assets). Under the Fund's current
interpretation of the statutory diversification tests, bank
obligations of the type in which the Fund invests are
not subject to this 5% limitation and thus the Fund's only
limitation in this regard is the 15% limitation set forth
above. The staff of the Securities and Exchange Commission,
however, has taken the position that certain
bank obligations are subject to the statutory 5% limitation, and
further action by the Commission may make
it necessary that the Fund revise its investments in bank
obligations so as not to exceed the 5% limitation in
order for the Fund to maintain its status as a diversified
company. This investment restriction does not apply
to the Investment Grade Corporate Bond, U.S. Government Mortgage
Securities or Short-Term Maturity Bond
Portfolios.
2. 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.
3. Alone or together with any other investor make investments for
the purpose of exercising control over, or
management of any issuer.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the open market
of securities of closed-end investment
companies where no underwriter or dealer's commission or profit,
other than customary broker's commission,
is involved, and only if immediately thereafter not more than
10% of such Fund's total assets, taken at market
value, would be invested in such securities; and except that the
Foreign Equity Portfolio may invest up to 10%
of its total assets at the time of acquisition in securities of
any investments companies. This investment
restriction does not apply to the Short-Term Maturity Bond
Portfolio.
5. Purchase or sell interests in commodities, commodities
contracts, oil, gas or other mineral exploration or
development programs, or real estate, except that the Fund may
purchase securities of issuers which invest
or deal in any of the above; provided, however, that the Bond,
Stock Index, Small-Cap Index, Growth Index,
Value Index, MidCap, International Equity, Small-Cap Value,
Corporate Bond, Foreign Equity, Small-Cap
Aggressive Growth, Maxim INVESCO Small-Cap Growth, Maxim INVESCO
ADR and Short-Term Maturity Bond
Portfolios may invest in futures contracts based on financial
indices, foreign currency transactions and options
on permissible futures contracts.
6. Purchase securities for the Fund which cannot be sold without
registration or the filing of a notification under
federal or state securities laws if, as a result, such
investments would exceed 10% of the value of such Fund's
net assets (15% for the Maxim INVESCO Small-Cap Growth and Maxim
INVESCO ADR Portfolios). This
investment restriction does not apply to the Short-Term Maturity
Bond Portfolio.
7. Purchase any securities on margin (except that the Fund may
obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio
securities, and the Bond, Stock Index, Small-
Cap Index, Value Index, Growth Index, International Equity,
Small-Cap Value, MidCap, Corporate Bond, Short-
Term Maturity Bond, Small-Cap Aggressive Growth, Foreign Equity,
Maxim INVESCO Small-Cap Growth and
Maxim INVESCO ADR Portfolios may make margin payments in
connection with transactions in currency
futures contracts) or make short sales of securities or maintain
a short position.
8. Make loans, except as provided in limitation (9) 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).
9. Lend its portfolio securities in excess of 20% of its total
assets, 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 (33 1/3% for the Short-Term Maturity Bond
Portfolio).
10.Borrow amounts in excess of 10% of its total assets, taken at
market value at the time of the borrowing, and
then only from banks as a temporary measure for extraordinary or
emergency purposes. In the event the Fund
borrows in excess of 5% of its total assets, at the time of such
borrowing it will have an asset coverage of at
least 300%. As a matter of policy, all borrowings will be
repaid before any investments are made.
11.Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned
or held by the Fund except as may be necessary in connection
with borrowings mentioned in limitation (10)
above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets,
taken at market value at the time thereof. The Fund will not,
as a matter of operating policy, mortgage, pledge
or hypothecate its portfolio securities to the extent that at
any time the percentage of the value of pledged
securities will exceed 10% of the value of the Fund's shares.
This restriction does not apply to segregated
accounts.
12.Underwrite securities of other issuers except insofar as the
Fund may be deemed an underwriter under the
Securities Act of 1933 in selling portfolio securities.
13.Write, purchase or sell puts, calls or combinations thereof,
except that the Bond, Small-Cap Index, Value Index,
Growth Index, MidCap, International Equity, Small-Cap Value,
Corporate Bond, Small-Cap Aggressive Growth,
Foreign Equity, Short-Term Maturity Bond, Maxim INVESCO
Small-Cap Growth and Maxim INVESCO ADR
Portfolios may buy and sell put and call options (and any
combination thereof) on securities (including index
options), on index futures contracts, on securities indices, and
on foreign currencies (to the extent a Portfolio
may invest in foreign currencies) and may buy and sell put and
call warrants, the values of which are based
upon securities indices. In addition, the Bond Portfolio may
buy and sell put and call options ( and any
combination thereof) on permissible futures contracts.
14.Sell securities short or purchase securities on margin.
15.Invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at
market value at the time of investment, would be invested in
such securities. However, up to 25% of the total
assets of a Portfolio may be invested in securities (i) issued,
assumed or guaranteed by foreign governments,
or political subdivisions or instrumentalities thereof, (ii)
assumed or guaranteed by domestic issuers, including
Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities
listed for trading on the New York Stock Exchange or on a major
Canadian exchange. See "Foreign
Securities", below. This investment limitation will not apply
to the International Equity, MidCap, Bond, Small-
Cap Value, Corporate Bond, Short-Term Maturity Bond, Small-Cap
Aggressive Growth, Foreign Equity, Maxim
INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios.
Following are investment limitations applicable to the Maxim T.
Rowe Price Equity/Income and Maxim T. Rowe
Price MidCap Growth Portfolios. These 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.
The Portfolios will not:
1. (a) Invest more than 15% of its total assets (taken at market
value at the time of each investment) in obligations
(excluding repurchase agreements) of any one bank, or, with
respect to 75% of its assets, invest more than
5% of such assets in the securities (other than United States
Government or government agency securities)
of any one issuer other than a bank (but including repurchase
agreements with any one bank); and (b)
purchase more than either (i) 10% in principal amount of the
outstanding debt securities of an issuer, or (ii)
10% of the outstanding voting securities of an issuer, except
that such restrictions shall not apply to securities
issued or guaranteed by the United States Government or its
agencies, bank money instruments or bank
repurchase agreements. Under the diversification requirements
of the Investment Company Act of 1940
applicable to diversified investment companies, such as the
Fund, the Fund may not invest more than 5% of
the value of its total assets in the securities of any one
issuer (except that this statutory restriction does not
apply with respect to 25% of the value of an investment
company's total assets). Under the Fund's current
interpretation of the statutory diversification tests, bank
obligations of the type in which the Fund invests are
not subject to this 5% limitation and thus the Fund's only
limitation in this regard is the 15% limitation set forth
above. The staff of the Securities and Exchange Commission,
however, has taken the position that certain
bank obligations are subject to the statutory 5% limitation, and
further action by the Commission may make
it necessary that the Fund revise its investments in bank
obligations so as not to exceed the 5% limitation in
order for the Fund to maintain its status as a diversified
company. This investment restriction does not apply
to the Investment Grade Corporate Bond, U.S. Government Mortgage
Securities or Short-Term Maturity Bond
Portfolios.
2. 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.
3. Purchase or sell interests in commodities, commodities
contracts, oil, gas or other mineral exploration or
development programs, or real estate, except that the Portfolio
may purchase securities of issuers which invest
or deal in any of the above; provided, however, that the
Portfolio may invest in futures contracts, forward
currency contracts, and options on futures.
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 its total
assets, 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" of this Statement of Additional
Information.
6. Borrow, except that the Portfolios may (i) borrow for
non-leveraging, temporary or emergency purposes and
(ii) engage in reverse repurchase agreements and make other
investments or engage in other transactions
which may involve a borrowing, in a manner consistent with the
Portfolio's investment objective and program,
provided that the combination of (i) and (ii) shall not exceed
33 1/3% of the value of the Portfolio's total assets
(including the borrowed amount) less liabilities (other than
borrowings) or such other percentage permitted
by law. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law.
Reverse repurchase agreements and other investments which are
"covered" by a segregated account or an
offsetting position in accordance with applicable SEC
requirements do not constitute borrowings for purposes
of any asset coverage requirement.
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. Purchase or sell real estate including limited partnership
interests therein, unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the Portfolio from investing in securities
or other instruments backed by real estate or in securities of
companies engaged in the real estate business).
9. Issue senior securities except in compliance with the
Investment Company Act of 1940.
Notes
The following notes should be read in connection with the
above-described investment limitations. The notes are
not fundamental policies.
With respect to investment limitation (3), the Portfolios do not
consider currency contracts or hybrid investments
to be commodities.
For purposes of investment limitation (2), U.S., state or local
governments, or related agencies or instrumentalities,
are not considered an industry. Industries are determined by
reference to the classifications of industries set forth
in the Portfolio's semi-annual and annual reports.
For purposes of investment limitations (4) and (5), the Portfolios
will consider the acquisition of a debt security to
include the execution of a note or other evidence of an extension
of credit with a term of more than nine months.
Operating Policies
As a matter of operating policy, the Portfolios may not:
Will not purchase additional securities when money borrowed exceeds
5% of its total assets.
Invest in companies for the purpose of exercising management or
control.
Purchase a futures contract or an option thereon if, with respect
to positions in futures or options on futures which
do not represent bona fide hedging, the aggregate initial margin
and premiums on such options would exceed 5%
of the Portfolio's net asset value.
Purchase securities of open-end or closed-end investment companies
except in compliance with the Investment
Company Act of 1940 and applicable state law. Duplicate fees may
result from such purchases.
Purchase securities on margin, except (i) to obtain short-term
credit necessary for clearance of purchases of
portfolio securities and (ii) to make margin deposits in connection
with futures contracts or other permissible
investments.
Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the Portfolios as security for
indebtedness except as may be necessary in connection with
permissible borrowings or investments and then
such mortgaging, pledging or hypothecating may not exceed 33 1/3%
of the Portfolio's total assets at the time of
borrowing or investment.
Purchase participation or other direct interests in or enter into
leases with respect to, oil, gas, or other mineral
exploration or development programs.
Effect short sales of securities, unless a Portfolio 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.
Purchase a security (other than obligations issued or guaranteed by
the U.S., any foreign, state or local
government, their agencies or instrumentalities) if, as a result,
more than 5% of the value of the Portfolio's total
assets would be invested in the securities of issuers which at the
time of purchase had been in operation for less
than three years (for this purpose, the period of operation of any
issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer). This
restriction does not apply to securities of pooled
investment vehicles or mortgage or asset-backed securities.
Invest in warrants if, as a result thereof, more than 2% of the
value of the net assets of the Portfolio would be
invested in warrants which are not listed on the New York Stock
Exchange, the American Stock Exchange, or a
recognized foreign exchange, or more than 5% of the value of the
net assets of the Portfolio would be invested in
warrants whether or not so listed. For purposes of these
percentage limitations, the warrants will be valued at the
lower of cost or market and warrants acquired by the Portfolio in
units or attached to securities may be deemed
to be without value.
Following are investment limitations applicable to the Maxim
Founders Blue Chip Portfolio. The policies
designated as 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. The policies designated as
non-fundamental may be changed by the Fund's Board of Directors
without shareholder approval.
Fundamental Policies
The Portfolio will not:
1. Make loans to other persons; the purchase of a portion of an
issue of publicly or privately distributed bonds,
debentures or other securities is not considered the making of
a loan by the Portfolio. The Portfolio may also
enter into repurchase agreements.
2. Underwrite the securities of other issuers except insofar as the
Portfolio may be deemed an underwriter under
the Securities Act of 1933 in selling portfolio securities.
3. Invest directly in physical commodities (other than foreign
currencies), real estate or interests in real estate;
provided that the Portfolio may invest in securities of issuers
that invest in physical commodities, real estate
or interests in real estate; and, provided further, that this
shall not prevent the Portfolio from purchasing or
selling options, futures, swaps and forward contracts or from
investing in securities or other instruments
backed by physical commodities, real estate or interests in real
estate.
4. Make any investment if, as a result, 25% or more of the
Portfolio's total assets would be invested in securities
of issuers having their principal business activities in the
same industry; provided that, this limitation does not
apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
5. Issue any senior securities except in compliance with the
Investment Company Act of 1940.
8. Borrow money, except for extraordinary or emergency purposes,
and then only from banks in amounts up to
33 1/3% of the Portfolio's total assets.
Non-Fundamental Policies
Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although the Portfolio
may invest in the securities of issuers which invest in or sponsor
such programs or leases.
Purchase any securities on margin except to obtain such short-term
credits as may be necessary for the clearance
of transactions.
Sell securities short, unless the Portfolio 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.
Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting
securities of any single issuer.
Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors
have a continuous operating record of less than three years.
Invest in companies for the purpose of exercising control or
management.
Pledge, mortgage or hypothecate its assets except to secure
permitted borrowings, and then only in an amount
up to 15% of the value of the Portfolio's net assets taken at the
lower of cost or market value at the time of such
borrowings.
Purchase warrants, valued at the lower of cost or market, in excess
of 5% of total assets, except that the purchase
of warrants not listed on the New York or American Stock Exchanges
is limited to 2% of net assets.
Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States government, its
agencies or instrumentalities) if, as a result, more than 5% of the
value of the Portfolio's total assets would be
invested in securities of that issuer.
Following are investment limitations applicable to the Maxim
INVESCO Balanced Portfolio. These 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.
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.
Foreign Securities
Any Portfolio of the Fund 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. The Investment Adviser will consider these
and other factors before investing in foreign securities, and will
not make such investments unless, in its opinion,
such investments will meet the standards and objectives of the
Fund. In particular, management anticipates that
these considerations will be inapplicable to a variety of Canadian
investments. The Portfolios will not concentrate
its investments in any particular foreign country, and will
purchase only securities issued in dollar denominations.
Notwithstanding the foregoing, the following Portfolios may invest
in non-dollar denominated foreign equity
securities: International Equity, Mid-Cap, Small-Cap Value, Bond,
Corporate Bond, Small-Cap Aggressive Growth,
Foreign Equity, Maxim T. Rowe Price Equity/Income, Maxim T. Rowe
Price MidCap Growth, Maxim Founders Blue
Chip, Maxim INVESCO Balanced, Maxim INVESCO Small-Cap Growth and
Maxim INVESCO ADR Portfolios.
Lending of Portfolio Securities
Subject to Investment Limitations described above for all
Portfolios, each Portfolio of the Fund from time-to-time may
lend securities from its portfolio to brokers, dealers and
financial institutions and receive as collateral cash or U.S.
Treasury 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 Fund.
Such loans, which will not have terms longer than
30 days, will be terminable at any time. The Fund 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 Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging
such loans. <PAGE>
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 President Emeritus, Denver
Metro Chamber
Director2/ of Commerce (since 1987)
Richard P. Koeppe, Ph.D. Retired Superintendent, Denver
Public
Director3/ Schools (1988-1990)
Douglas L. Wooden Great-West Life & Annuity
Insurance Company,
Director1/ 5/ Senior Vice President, Financial
Services
(since 1996); Senior
Vice-President,
Chief Financial Officer
(1991-1996)
James D. Motz Great-West Life & Annuity
Insurance Company,
Director1/ 5/ Senior Vice-President, Employee
Benefits
(since 1991); Vice- President,
Group (1983-1990)
Sanford Zisman Attorney, Zisman & Ingraham, P.C.
Director4/
Glen R. Derback Great-West Life & Annuity
Insurance Company,
Treasurer, Principal Vice-President, Financial Control
(since 1984)
Financial and Accounting
Officer1/ 5/
Ruth B. Lurie Great-West Life & Annuity
Insurance Company,
Secretary1/ 5/ Vice-President and Counsel (since
1988)
_________________________________
1/ Interested person as defined in the Investment Company Act
of 1940 and affiliated person of
Investment Adviser.
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/ Great-West Life & Annuity Insurance Company, 8515 E.
Orchard Road, Englewood, Colorado 80111.
Compensation
The Fund pays no salaries or compensation to any of its officers or
Directors affiliated with the Investment Adviser
or its affiliates. The chart below sets for the annual fees paid
to non-interested Directors in 1996.
R.P. Koeppe R. Jennings S. Zisman
Compensation received from the Fund$ $ $
Pension or retirement benefits
accrued as a Fund expense $0 $0 $0
Total compensation received from the
Fund and all affiliated funds**$ $ $
- ------------------------
** As of December 31, 1996, there were twenty-nine funds for which
the Directors serve as Directors or Trustees
of which twenty-three are Portfolios of the Fund. The total
compensation paid is comprised of the amount paid
during 1996 by the Fund and all affiliated investment
companies.
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.
G W Capital Management, Inc. (the "Investment Adviser") serves
as the investment adviser to the Fund pursuant
to an Investment Advisory Agreement with the Fund. The Investment
Adviser is a wholly owned subsidiary of Great-
West Life & Annuity Insurance Company ("GWL&A"). GWL&A is in turn
a wholly owned subsidiary of The Great-
West Life Assurance Company ("Great-West") which 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, will be
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 10, 1997. If approved, the Agreement will remain in
effect until April 1, 1998 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 (please note, however,
that prior to September 24, 1984, the investment advisory fee was
at the annual rate of 0.25% of the aggregate daily
net asset value of each portfolio of the Fund).
The Sub-Advisers
Janus Capital Corporation
Janus Capital Corporation serves as the sub-adviser to the MidCap
Portfolio pursuant to a Sub-Advisory Agreement
dated December 1, 1993. Janus Capital Corporation has served as
investment adviser to Janus Investment Fund
since 1969 and also serves as adviser and sub-adviser to other
mutual funds, and individual, corporate, charitable
and retirement accounts. Kansas City Southern Industries, Inc.
("KCSI") owns approximately 83% of the outstanding
voting stock of Janus Capital. KCSI is a publicly traded holding
company whose primary subsidiaries are engaged
in transportation, financial services and real estate.
Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI") serves as the
sub-adviser to the International Equity Portfolio pursuant
to a Sub-Advisory Agreement dated December 1, 1993. TICI is an
indirect subsidiary of Templeton Worldwide, Inc.,
which in turn is a direct, wholly-owned subsidiary of Franklin
Resources, Inc.
Ariel Capital Management, Inc.
Ariel Capital Management, Inc. ("Ariel") serves as the sub-adviser
to the Small-Cap Value Portfolio pursuant to a
Sub-Advisory Agreement dated December 1, 1993. Ariel is a
privately held minority-owned money manager.
The Sub-Advisers provides investment advisory assistance and
portfolio management advice to the Investment
Adviser for the respective Portfolios. Subject to review and
supervision by the Investment Adviser and the Board
of Directors of the Fund, the sub-advisers are responsible for the
actual management of the respective Portfolios
and for making decisions to buy, sell or hold any particular
securities. The Sub-Advisers bear all expenses in
connection with the performance of their services, such as
compensating and furnishing office space for their
officers and employees connected with investment and economic
research, trading and investment management
for the Portfolios.
T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. serves as the sub-adviser to the
Maxim T. Rowe Price Equity/Income and Maxim T.
Rowe Price MidCap Growth Portfolios pursuant to a Sub-Advisory
Agreement dated November 1, 1994 as amended.
T. Rowe Price serves as investment manager to a variety of
individual and institutional investors, including limited
and real estate partnerships and other mutual funds.
INVESCO Trust Company
INVESCO Trust Company serves as the sub-adviser to the Maxim
INVESCO Small-Cap Growth, Maxim INVESCO
ADR and Maxim INVESCO Balanced Portfolios pursuant to Sub-Advisory
Agreements dated November 1, 1994 and
August , 1996. INVESCO Trust Company is an indirect
wholly-owned subsidiary of INVESCO PLC, a financial
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.
Loomis, Sayles, & Company L.P.
Loomis, Sayles & Company L.P. serves as the sub-adviser
to the Corporate Bond, Small-Cap Aggressive Growth
and Foreign Equity Portfolios pursuant to a Sub-Advisory Agreement
dated August 30, 1996, as amended. Loomis
Sayles serves as investment manager to a variety of individual
investors, including other mutual funds. Loomis
Sayles is an indirect, majority-owned subsidiary of New England
Mutual Life Insurance Company.
Founders Asset Management, Inc.
Founders Asset Management, Inc. serves as the sub-adviser to the
Maxim Founders Blue Chip Portfolio pursuant
to a Sub-Advisory Agreement dated May 1, 1997. Founders serves as
investment manager to a variety of individual
and institutional investors, including other mutual funds.
Sub-Advisory Fees
The method of computing the sub-advisory fees are fully described
in the Prospectus.
For the past three fiscal years, the Investment Adviser was paid
a fee for its services to the Fund as follows:
Portfolio 1996 1995 1994
Money Market $1,566,842 $1,094,639 $ 672,768
Bond $ 470,658 $ 450,783 $ 456,146
Stock Index1/ $4,887,975 $3,630,287 $3,273,683
U.S. Government Securities2/$ 360,629 $ 377,523 $ 345,124
Zero-Coupon Treasury3/ N/A $ 4,195 $ 4,959
Total Return4/ $ 364,049 $ 293,890 $ 236,951
Investment Grade
Corporate Bond5/ $ 575,853 $ 511,001 $ 396,105
U.S. Government
Mortgage Securities6/ $ 791,813 $ 679,091 $ 507,835
Small-Cap Index7/ $ 404,890 $ 218,365 $ 82,060
Growth Index7/ $ 371,758 $ 172,719 $ 49,266
Value Index7/ $ 552,296 $ 264,392 $ 92,658
International Equity7/ $ 756,318 $ 459,104 $ 119,822
Small-Cap Value7/ $ 274,316 $ 148,789 $ 62,566
MidCap8/ $1,794,155 $1,049,333 $ 155,648
Corporate Bond9/ $ 574,728 $ 250,744 $
22,771Small-Cap Aggressive
Growth9/ $ 469,293 $ 202,999 $ 19,599
Foreign Equity9/ $ 711,998 $ 581,443 $ 66,960
Maxim T. Rowe Price
Equity/Income9/ $ 257,708 $ 44,411 $ 2,664
Maxim INVESCO Small-
Cap Growth9/ $ 178,001 $ 34,500 $ 3,085
Maxim INVESCO ADR9/ $ 45,589 $ 22,375 $ 3,255
Short-Term Maturity
Bond10/ $ 179,920 $ 22,401 N/A
Maxim INVESCO
Balanced11/ $ 26,984 N/A N/A
1/ For the period commencing September 24, 1984. The name and
investment objective of this portfolio
was changed effective December 1, 1992.
2/ Formed April 6, 1985. The name and the investment
objective of this portfolio was changed effective
July 29, 1987, and renamed and the investment objective
changed effective May 1, 1990.
3/ Formed October 1, 1985.
4/ Formed July 29, 1987.
5/ Formed December 1, 1992.
6/ Formed December 1, 1992.
7/ Formed December 1, 1993.
8/ Formed January 3, 1994.
9/ Formed November 1, 1994.
10/ Formed August 1, 1995.
11/ Formed October 1, 1996.
Payment of Expenses.
Prior to May 1, 1992, the Investment Adviser provided investment
advisory services and paid all compensation of
and furnished office space for officers and employees of the
Investment Adviser connected with investment and
economic research, trading and investment management of the Fund,
as well as the fees of all directors
of the Fund who are affiliated persons of GW Capital Management or
any of its affiliates. The Fund paid all other
expenses incurred in its operation and all of the Fund's general
administrative expenses.
Expenses that were borne directly by the Fund included
redemption expenses, expenses of portfolio transactions,
shareholder servicing costs, expenses of registering the shares
under federal and state securities laws, pricing costs
(including the daily calculation of net asset value), interest,
certain taxes, charges of the Custodian and Transfer
Agent, directors' fees, legal expenses, state franchise taxes,
costs of auditing services, costs of printing proxies and
stock certificates, Securities and Exchange Commission fees,
advisory fees, certain insurance premiums, costs of
corporate meetings, costs of maintenance of corporate existence,
investor services (including allocable telephone
and personnel expenses), extraordinary expenses, and other expenses
properly payable by the Fund. Accounting
services were provided for the Fund by the Investment Adviser and
the Fund reimbursed the Investment Adviser
for its costs in connection with such services. The amounts of
such expense reimbursements for the Fund's fiscal
years ended December 31, 1996, 1995 and 1994 were $266,446, $
236,850 and $111,944 respectively. Depending
upon the nature of the lawsuit, litigation costs may be borne by
the Fund.
The Investment Adviser has agreed that it will waive all or a part
of its management fee to the extent normal
operating expenses (excluding interest, taxes, brokerage fees,
commissions and extraordinary charges) of the
Portfolios listed below. With respect to these Portfolios, the
Fund shall pay all expenses incurred with operations,
including extraordinary expenses, however, the Investment Adviser
shall pay all expenses which exceed an annual
rate of 0.95% of the average daily net assets of the Maxim T. Rowe
Price Equity/Income Portfolio; 1.10% of the
average daily net assets of the MidCap and Maxim INVESCO Small-Cap
Growth Portfolios; 1.30% of the average
daily net assets of the Small-Cap Aggressive Growth and Maxim
INVESCO ADR Portfolios; 1.35% of the average
daily net assets of the Small-Cap Value Portfolio; and 1.50% of the
average daily net assets of the International
Equity and Foreign Equity Portfolios.
Expenses paid by the Investment Adviser for 1995 and 1996 were:
Portfolio 1995 1996
Foreign Equity $ 1,759 $ 32,547
International Equity $ 8,822 $ 16,011
Maxim INVESCO ADR $ 28,646 $ 43,582
Maxim INVESCO
Small-Cap Growth $ 43,637 $ 68,725
MidCap $ 47,589 $ 16,270
Small-Cap Aggressive Growth$ 31,883 $ 81,373
Small-Cap Value $ 25,798 $ 4,231
Maxim T. Rowe Equity/Income$ 48,716 $ 3,707
PORTFOLIO TRANSACTIONS AND BROKERAGE
Portfolio Turnover
Brokerage costs to each Portfolio of the Fund are commensurate with
the rate of portfolio activity. In computing
the portfolio turnover rate for each 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 Portfolios of the Fund. Portfolio turnover rates
are expected to fluctuate under constantly changing economic
conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of each
Portfolio may be disposed of when they are no longer
deemed suitable.
Based upon the formulation for calculating the portfolio
turnover rate, as stated above, for each Portfolio (other than
the Money Market Portfolio) is as follows:
1995 1996
Portfolio Turnover Rate Turnover Rate
Bond 191.58% %
Stock Index 5.25% %
U.S. Government Securities185.57% %
Total Return 44.70% %
Corporate Bond 24.70% %
Small-Cap Index 30.17% %
1995 1996
Portfolio Turnover Rate Turnover Rate
Small-Cap Value 17.78% %
International Equity 20.28% %
Maxim INVESCO ADR 5.88% %
Maxim INVESCO Small-Cap Growth266.64%%
MidCap 167.21% %
Maxim T. Rowe Price Equity/Income14.00%%
Foreign Equity 119.98% %
Growth Index 17.90% %
Investment Grade Corporate Bond159.21%%
Short-Term Maturity Bond 97.87% %
Small-Cap Aggressive Growth99.48% %
U.S. Government Mortgage Securities188.04%%
Value Index 18.11% %
Maxim INVESCO Balanced N/A %*
* Annualized
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.
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. For the year ended
December 31, 1996 the Fund paid out $ in
commissions on transactions that aggregated $
to brokers who supplied such supplemental research.
Purchases and sales of securities for the Money Market Portfolio
usually are principal transactions, and normally,
for all portfolios, 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 a
Portfolio.
No brokerage commissions have been paid by the Money Market,
Bond, Investment Grade Corporate Bond, U.S.
Government Securities, U.S. Government Mortgage Securities, the
Zero-Coupon Treasury or the Short-Term Maturity
Bond Portfolios for the years ended December 31, 1994 through
December 31, 1996. The Stock Index Portfolio
(prior to December 1, 1992, the Growth Portfolio) paid commissions
in the amount of $3,029,948.57, $80,466.92 and
$ for the years ended December 31, 1994, 1995 and 1996.
The Total Return Portfolio paid commissions
in the amount of $105,116.75, $51,369.25 and $ for the
years ended December 31, 1994, 1995 and 1996,
respectively. The International Equity portfolio paid commissions
in the amount of $126,520.83, $126,601.19 and
$ in 1994, 1995 and 1996, respectively. The Small-Cap
Index Portfolio paid commissions in the amount of
$86,862.57, $63,610.97 and $ in 1994, 1995 and 1996,
respectively. The Value Index Portfolio paid
commissions in the amount of $43,591.00, $38,182.86 and $
in 1994, 1995 and 1996, respectively. The
Growth Index Portfolio paid commissions in the amount of
$20,103.30, $25,946.14 and $ in 1994, 1995 and
1996, respectively. The Small-Cap Value Portfolio paid commissions
in the amount of $18,944.32, $29,174.82 and
$ in 1994, 1995 and 1996, respectively. The MidCap
Portfolio paid commissions in the amount of
$211,599.85, $468,104.15 and $ in 1994, 1995 and 1996,
respectively. The Small-Cap Aggressive Growth
Portfolio paid commissions in the amount of $5,150.00, $60,792.00
and $ in 1994, 1995 and 1996,
respectively. The Foreign Equity Portfolio paid commissions in the
amount of $35,585.90, $456,623.10 and $
in 1994, 1995 and 1996, respectively. The Maxim T. Rowe Price
Equity/Income Portfolio paid commissions in
the amount of $3,188.42, $7,073.61 and $ in 1994, 1995
and 1996, respectively. The Maxim INVESCO Small-
Cap Growth Portfolio paid commissions in the amount of $1,755.00,
$11,195.26 and $ in 1994, 1995 and
1996, respectively. The Maxim INVESCO ADR Portfolio paid
commissions in the amount of $1,902.00, $931.50 and
$ in 1994, 1995 and 1996, respectively. The Corporate
Bond Portfolio paid commissions in the amount of
$1,064.10 in 1995 and $ in 1996. The Short-Term
Maturity Bond Portfolio paid commissions in the amount
of $ in 1995 and $ in 1996. The Maxim INVESCO
Balanced Portfolio paid commissions in the amount
of $ in 1996.
PURCHASE AND REDEMPTION OF SHARES
As of December 31, 1996, all of the outstanding shares of the
Fund were presently held of record by Maxim Series
Account, Pinnacle Series Account, Retirement Plan Series Account,
FutureFunds Series Account, FutureFunds
Series Account II and Qualified Series Account of GWL&A, by TNE
Series (k) Account of TNE, and by Great-West,
which provided the initial capitalization for certain
Portfolios.
The following tables show the allocations of shares of the Fund
among the Series Accounts as of December 31,
1996.
Money Market Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 2,490,288 0.63%
FutureFunds Series Account 55,297,862 13.96%
FutureFunds Series Account II 313,718,098 79.18%
Pinnacle Series Account 353,080 0.09%
Qualified Series Account 943,596 0.24%
TNE Series (k) Account 22,344,012 5.64%
Retirement Plan Series Account 1,038,148 0.26%
TOTAL 396,185,085 100.00%
Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 3,321,573 5.13%
FutureFunds Series Account 44,203,798 68.26%
FutureFunds Series Account II 16,666,145 25.73%
Pinnacle Series Account 490,722 0.76%
Qualified Series Account 77,457 0.12%
TOTAL 64,759,695 100.00%
International Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account 27,207,607 37.43%
FutureFunds II Series Account45,489,363 62.57%
TOTAL72,696,970100.00%
Stock Index Portfolio*
Series Account No. of Shares Percentage
Maxim Series Account 7,277,98 91.84%
FutureFunds Series Account 156,197,730 39.43%
FutureFunds Series Account II 220,890,516 55.76%
Pinnacle Series Account 620,634 0.16%
Qualified Series Account 2,360,763 0.60%
TNE Series (K) Account 7,298,796 1.84%
Retirement Plan Series Account 1,457,333 0.37%
TOTAL 396,116,761 100.00%
* Prior to December 1, 1992, the Growth Portfolio.
U.S. Government Securities Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 10,086,010 16.90%
FutureFunds Series Account 37,698,695 63.18%
FutureFunds Series Account II 10,677,688 17.89%
Pinnacle Series Account 1,210,909 2.03%
TOTAL 59,673,302 100.00%
Total Return Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 3,618,241 7.51%
FutureFunds Series Account II 38,304,639 79.45%
Pinnacle Series Account 297,1140.62%
FutureFunds Series Account3,703,9137.68%
TNE Series (K) Account1,704,2433.53%
Retirement Plan Series Account584,0991.21%
TOTAL48,212,249100.00%
Investment Grade Corporate Bond Portfolio
Series Account No. of Shares Percentage<PAGE>
FutureFunds
Series Account II72,223,57991.60%
Qualified Series Account320,8070.40%
TNE Series (K) Account6,083,6407.72%
Retirement Plan Series Account222,3340.28%
TOTAL 78,850,360100.00%
U.S. Government Mortgage Securities Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II112,088,11993.25%
TNE Series (K) Account7,739,6486.44%
Retirement Plan Series Account377,0920.31%
TOTAL120,204,859100.00%
Growth Index Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account48,358,18485.77%
TNE Series (K) Account6,478,66011.49%
Retirement Plan Series Account1,546,7642.74%
TOTAL56,383,608100.00%
Value Index Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account72,781,36386.53%
TNE Series (K) Account10,119,44012.03%
Retirement Plan Series Account1,231,4231.44%
TOTAL84,114,226100.00%
Small-Cap Index Portfolio
Series Account No. of Shares Percentage
Maxim Series Account123,1860.19%
FutureFunds Series Account 6,337,3839.70%
FutureFunds II Series Account51,612,24179.03%
TNE Series (K) Account5,616,0638.60%
Retirement Plan Series Account859,6151.32%
Great-West759,0491.16%
TOTAL65,307,537100.00%
Small-Cap Value Portfolio
Series Account No. of Shares Percentage
Maxim Series Account16,8170.06%
FutureFunds Series Account421,7841.44%
FutureFunds II Series Account22,953,99278.27%
TNE Series (K) Account3,406,20411.61%
Retirement Plan Series Account345,7361.18%
Great-West2,181,6677.44%
TOTAL29,326,200100.00%
Corporate Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account141,1210.20%
FutureFunds Series Account5,716,1397.94%
FutureFunds II Series Account57,795,01780.27%
TNE Series (K) Account7,932,11911.02%
Retirement Plan Series Account412,8930.57%
TOTAL71,997,289100.00%
Small-Cap Aggressive Growth Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account49,619,51987.07%
TNE Series (K) Account6,305,92111.06%
Retirement Plan Series Account1,065,0241.87%
TOTAL56,990,464100.00%
Foreign Equity Growth Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account65,702,86486.77%
TNE Series (K) Account9,577,56412.65%
Retirement Plan Series Account438,0240.58%
TOTAL75,718,452100.00%
Maxim INVESCO Small-Cap Growth Portfolio
Series Account No. of Shares Percentage
Maxim Series Account389,1431.76%
FutureFunds Series Account10,042,05045.21%
FutureFunds II Series Account9,428,58342.45%
Great-West2,350,59710.58%
TOTAL22,210,373100.00%
Maxim T.Rowe Price Equity/Income Portfolio
Series Account No. of Shares Percentage
Maxim Series Account709,6511.48%
FutureFunds Series Account19,418,22540.47%
FutureFunds II Series Account27,206,79256.70%
Great-West649,1881.35%
TOTAL47,983,856100.00%
MidCap Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account121,297,09080.93%
Maxim Series Account822,6970.55%
FutureFunds Series Account27,749,85618.52%
TOTAL149,869,643100.00%
Maxim INVESCO ADR Portfolio
Series Account No. of Shares Percentage
Maxim Series Account150,8022.65%
FutureFunds Series Account1,859,77632.65%
FutureFunds II Series Account1,638,00328.75%
Great-West2,047,78235.95%
TOTAL5,696,363100.00%
Short-Term Maturity Bond Portfolio
Series Account No. of Shares Percentage
FutureFunds II Series Account31,212,45179.52%
TNE Series (K) Account5,013,89312.78%
Great-West 32,1140.08%
TOTAL2,990,423100.00%
Maxim INVESCO Balanced Portfolio
Series Account No. of Shares Percentage
Maxim Series Account12,7320.08%
FutureFunds Series Account200,6621.31%
FutureFunds II Series Account12,632,00682.24
Great-West 2,515,42016.37%
TOTAL15,360,820100.00%
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Portfolio
As summarized in the Prospectus under the heading "Performance
Related Information," the yield of the Money
Market Portfolio for a seven-day period (the "base period") will be
computed by determining the "net change in
value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of
the period, dividing the net change in account value by the value
of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period
return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in
value of a hypothetical account will include the
value of additional shares purchased with dividends from the
original share and dividends declared on both the
original share and any such additional shares, but will not include
realized gains or losses or unrealized
appreciation or depreciation on portfolio investments. Yield may
also be calculated on a compound basis (the
"effective yield") which assumes that net income is reinvested in
Portfolio shares at the same rate as net income
is earned for the base period.
The Money Market Portfolio's yield and effective yield will vary in
response to fluctuations in interest rates and in
the expenses of the Portfolio.
The following is an example of this yield calculation for the
Money Market Portfolio based on a seven-day period
ending December 31, 1996.
Assumptions:
Value of a hypothetical pre-existing
account with exactly one share at the
beginning of the period: $1.00067671
Value of the same account* (excluding
capital changes) at the end of the
seven-day period: $1.00162761
* This value would include the value of
any additional shares purchased with
dividends from the original share, and
all dividends declared on both the
original share and any such additional
shares.
Calculation:
Ending account value $1.00162761
Less beginning account value 1.00067671
Net change in account value 0.00095090
Base period return:
$.0.00095026/$1.00067671 (adjusted
change/beginning account value) =$0.00095026
Current yield = Base period return
x (365/7) = 4.95%
Effective yield = (1 + Base period
return) to the power of 365/7 = 5.08%
Yields of the Bond, Stock Index*, U.S. Government Securities,
Total Return, Investment Grade Corporate Bond, U.S.
Government Mortgage Securities, Small-Cap Index, Growth Index,
Value Index, Small-Cap Value, International
Equity, Corporate Bond, Small-Cap Aggressive Growth, Foreign
Equity, Maxim T. Rowe Price Equity/Income, Maxim
INVESCO Small-Cap Growth, Maxim INVESCO ADR and Maxim INVESCO
Balanced Portfolios
As summarized in the Prospectus under the heading "Performance
Related Information," yields of these Portfolios
will be computed by annualizing a recent month's net investment
income, divided by a 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 yields of the Portfolios will vary from time to time depending
upon market conditions and the composition of
the Portfolios. Yield should also be considered relative to
changes in the value of the shares of the Portfolios and
to the relative risks associated with the investment objectives and
policies of the Portfolios.
* Prior to December 1, 1992, the Growth Portfolio.
Bond Portfolio
The following is an example of this yield calculation for the Bond
Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b)+ 1)6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 426,770.52
b = 38,626.67
c = 63,920,655.78
d = 1.20589062
Therefore 1 month yield as of December 31, 1996 is : 6.12%
<PAGE>
Investment Grade Corporate Bond Portfolio
The following is an example of this yield calculation for the
Investment Grade Corporate Bond Portfolio based on
a 30-day period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 538,233.23
b = 49,734.43
c = 77,586,867.98
d = 1.27738355
Therefore 1 month yield as of December 31, 1996 is : 5.99%
- -----------------------------------------------------------------
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- ---------------------------------------
Stock Index Portfolio
The following is an example of this yield calculation for the Stock
Index Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 1,600,060.41
b = 464,476.81
c = 391,141,680.30
d = 2.36497531
Therefore 1 month yield as of December 31, 1996 is : 1.48%
<PAGE>
U.S. Government Securities Portfolio
The following is an example of this yield calculation for the U. S.
Government Securities Portfolio based on a 30-day
period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 444,876.70
b = 32,030.38
c = 59,305,260.72
d = 1.07381125
Therefore 1 month yield as of December 31, 1996 is : 7.91%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----------------------------------------
U.S. Government Mortgage Securities Portfolio
The following is an example of this yield calculation for the U. S.
Government Mortgage Securities Portfolio based
on a 30-day period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 1,142.381.99
b = 68,085.56
c = 117,746,665.35
d = 1.15191607
Therefore 1 month yield as of December 31, 1996 is : 9.69%
<PAGE>
Total Return Portfolio
The following is an example of this yield calculation for the Total
Return Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 162,957,.64
b = 31,792.96
c = 45,955,210.13
d = 1.34116963
Therefore 1 month yield as of December 31, 1996 is : 2.57%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Small-Cap Index Portfolio
The following is an example of this yield calculation for the
Small-Cap Index Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 133,623.89
b = 38,719.26
c = 59,928.786.98
d = 1.2369735
Therefore 1 month yield as of December 31, 1996 is : 1.54%
<PAGE>
Growth Index Portfolio
The following is an example of this yield calculation for the
Growth Index Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 126,244.67
b = 40,931.01
c = 52,543,858.75
d = 1.48524035
Therefore 1 month yield as of December 31, 1996 is : 1.32%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Value Index Portfolio
The following is an example of this yield calculation for the Value
Index Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 244,029.82
b = 59,286.53
c = 83,677,521.27
d = 1.45377343
Therefore 1 month yield as of December 31, 1996 is : 1.83%
<PAGE>
Small-Cap Value Portfolio
The following is an example of this yield calculation for the
Small-Cap Value Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 85,082.20
b = 32,024.40
c = 28,793,409.83
d = 1.24801888
Therefore 1 month yield as of December 31, 1996 is : 1.78%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
International Equity Portfolio
The following is an example of this yield calculation for the
International Equity Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 27,022.31
b = 78,870.94
c = 70,623,655.14
d = 1.32291689
Therefore 1 month yield as of December 31, 1996 is : -0.67%
<PAGE>
Corporate Bond Portfolio
The following is an example of this yield calculation for the
Corporate Bond Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 530,714.06
b = 60,646.31
c = 67,460,744.31
d = 1.16178024
Therefore 1 month yield as of December 31, 1996 is : 7.31%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Small-Cap Aggressive Growth Portfolio
The following is an example of this yield calculation for the
Small-Cap Aggressive Growth Portfolio based on a 30-
day period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 172,517.61
b = 65,609.09
c = 52,758,430.21
d = 1.40277724
Therefore 1 month yield as of December 31, 1996 is : 1.74%
<PAGE>
Foreign Equity Portfolio
The following is an example of this yield calculation for the
Foreign Equity Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 123,233.22
b = 75,021.26
c = 74,933,271.34
d = 1.05795162
Therefore 1 month yield as of December 31, 1996 is : 0.73%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Maxim T. Rowe Price Equity/Income Portfolio
The following is an example of this yield calculation for the Maxim
T. Rowe Price Equity/Income Portfolio based on
a 30-day period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 195,691.84
b = 54,148.95
c = 46,003,785.59
d = 1.44915205
Therefore 1 month yield as of December 31, 1996 is : 2.56%
<PAGE>
Maxim INVESCO Small-Cap Growth Portfolio
The following is an example of this yield calculation for the Maxim
INVESCO Small-Cap Growth Portfolio based on
a 30-day period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 43,712.56
b = 27,969.09
c = 19,387,426.81
d = 1.43301411
Therefore 1 month yield as of December 31, 1996 is : 0.68%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Maxim INVESCO ADR Portfolio
The following is an example of this yield calculation for the Maxim
INVESCO ADR Portfolio based on a 30-day period
ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 12,646.07
b = 8,744.16
c = 5,321,887.70
d = 1.35083696
Therefore 1 month yield as of December 31, 1996 is : 0.65%
<PAGE>
MidCap Portfolio
The following is an example of this yield calculation for the
MidCap Portfolio based on a 30-day period ending
December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 16,942.62
b = 209,269.29
c = 149,256,535.86
d = 1.43265039
Therefore 1 month yield as of December 31, 1996 is : -1.08%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---------------------------------------
Short-Term Maturity Bond Portfolio
The following is an example of this yield calculation for the
Short-Term Maturity Bond Portfolio based on a 30-day
period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 186,979.64
b = 19,196.57
c = 38,296,680.29
d = 1.00647746
Therefore 1 month yield as of December 31, 1996 is : 5.28%
Maxim INVESCO Balanced Portfolio
The following is an example of this yield calculation for the Maxim
INVESCO Balanced Portfolio based on a 30-day
period ending December 31, 1996.
Formula: YIELD = 2[ (a-b +1)6-1]
cd
Where: a = dividend and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield as of December 31, 1996:
a = 48,622.95
b = 12,921.83
c = 15,071,714.79
d = 1.04077551
Therefore 1 month yield as of December 31, 1996 is : 2.75%
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no
assurance that any historical results will continue.
Calculation of 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 a Portfolio over the
period covered, which assumes any dividends or
capital gains distributions are reinvested in that 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 a Portfolio has not been in
existence for at least ten years.
<PAGE>
BOND PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
10 year total return as of December 31, 1996:
ERV =4.21713
N = 10.0 (Dec/86 to Dec/96)
P = 2.04932
Therefore 10 year total return as of December 31, 1996 is 7.48%
compounded annually.
5 year total return as of December 31, 1996:
ERV =4.21731
N = 5.00 (Dec/91 to Dec/96)
P = 3.11798
Therefore 5 year total return as of December 31, 1996 is 6.23%
compounded annually.
1 year total return as of December 31, 1996:
ERV =4.21731
N = 1.00 (Dec/95 to Dec/96)
P = 4.04477
Therefore 1 year total return as of December 31, 1996 is 4.26%
compounded annually.
<PAGE>
INVESTMENT GRADE CORPORATE BOND PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.65320
N = 4.08333 (Dec/92 to Dec/96)
P = 1.28513
Therefore inception total return as of December 31, 1996 is 6.36%
compounded annually.
1 year total return as of December 31, 1996:
ERV =1.65320
N = 1.00 (Dec/95 to Dec/96)
P = 1.60293
Therefore 1 year total return as of December 31, 1996 is 3.14%
compounded annually.<PAGE>
STOCK INDEX PORTFOLIO*
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
10 year total return as of December 31, 1996:
ERV =6.4931
N = 10.0 (Dec/86 to Dec/96)
P = 1.91478
Therefore 10 year total return as of December 31, 1996 is 12.99%
compounded annually.
5 year total return as of December 31, 1996:
ERV =6.4931
N = 5.00 (Dec/91 to Dec/96)
P = 3.37588
Therefore 5 year total return as of December 31, 1996 is 13.98%
compounded annually.
1 year total return as of December 31, 1996:
ERV =6.4931
N = 1.00 (Dec/95 to Dec/96)
P = 5.3306
Therefore 1 year total return as of December 31, 1996 is 21.81%
compounded annually.
* Prior to December 1, 1992, the Growth Portfolio.
<PAGE>
U.S. GOVERNMENT SECURITIES PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Ten year total return as of December 31, 1996:
ERV =2.75589
N = 10.0 (Dec/86 to Dec/96)
P = 1.25798
Therefore ten year total return as of December 31, 1996 is 8.16%
compounded annually.
5 year total return as of December 31, 1996:
ERV =2.75589
N = 5.00 (Dec/91 to Dec/96)
P = 1.98088
Therefore 5 year total return as of December 31, 1996 is 6.83%
compounded annually.
1 year total return as of December 31, 1996:
ERV =2.75589
N = 1.00 (Dec/95 to Dec/96)
P = 2.65189
Therefore 1 year total return as of December 31, 1996 is 3.92%
compounded annually.
<PAGE>
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.50046
N = 4.08 (Dec/92 to Dec/96)
P = 1.14152
Therefore inception total return as of December 31, 1996 is 6.93%
compounded annually.
1 year total return as of December 31, 1996:
ERV =1.50046
N = 1.00 (Dec/95 to Dec/96)
P = 1.43872
Therefore 1 year total return as of December 31, 1996 is 4.30%
compounded annually.
<PAGE>
TOTAL RETURN PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =2.32435
N = 9.41667 (Aug/87 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is 9.37%
compounded annually.
5 year total return as of December 31, 1996:
ERV =2.32435
N = 5.00 (Dec/91 to Dec/96)
P = 1.47227
Therefore 1 year total return as of December 31, 1996 is 9.56%
compounded annually.
1 year total return as of December 31, 1996:
ERV =2.32435
N = 1.00 (Dec/95 to Dec/96)
P = 2.07986
Therefore 1 year total return as of December 31, 1996 is 11.76%
compounded annually.
<PAGE>
SMALL-CAP INDEX PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.40417
N = 3.08333 (Dec/93 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
11.64% compounded annually.
1 year total return as of December 31, 1996:
ERV =1.40417
N = 1.00 (Dec/95 to Dec/96)
P = 1.21781
Therefore 1 year total return as of December 31, 1996 is 15.30%
compounded annually.<PAGE>
GROWTH INDEX PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.69712
N = 3.08333 (Dec/93 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
18.71% compounded annually.
1 year total return as of December 31, 1996:
ERV =1.60712
N = 1.00 (Dec/95 to Dec/96)
P = 1.38992
Therefore 1 year total return as of December 31, 1996 is 22.09%
compounded annually.
<PAGE>
VALUE INDEX PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.63053
N = 3.08333 (Dec/93 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
17.18% compounded annually.
1 year total return as of December 31, 1996:
ERV =1.63053
N = 1.00 (Dec/95 to Dec/96)
P = 1.35158
Therefore 1 year total return as of December 31, 1996 is 20.64%
compounded annually.
<PAGE>
SMALL-CAP VALUE PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.36977
N = 3.08333 (Dec/93 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
10.74% compounded annually.
1 year total return as of December 31, 1996:
ERV =1.36977
N = 1.00 (Dec/95 to Dec/96)
P = 1.16136
Therefore 1 year total return as of December 31, 1996 is 17.95%
compounded annually.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.39788
N = 3.08333 (Dec/93 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
11.48% compounded annually.
1 year total return as of December 31, 1996:
ERV =1.39788
N = 1.00 (Dec/95 to Dec/96)
P = 1.16901
Therefore 1 year total return as of December 31, 1996 is 19.59%
compounded annually.
<PAGE>
CORPORATE BOND PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.41547
N = 2.16667 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
17.39% compounded annually.
One year total return as of December 31, 1996:
ERV =1.41547
N = 1.00 (Dec/95 to Dec/96)
P = 1.28272
Therefore one year total return as of December 31, 1996 is 10.37%
compounded annually.
<PAGE>
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.64912
N = 2.16667 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
25.97% compounded annually.
One year total return as of December 31, 1996:
ERV= 1.64912
N= 1.00 (Dec/95 to Dec/96)
P= 1.26769
Therefore one year total return as of December 31, 1996 is 30.09%
compounded annually.
<PAGE>
FOREIGN EQUITY PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.07529
N = 2.16667 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is 3.41%
compounded annually.
One year total return as of December 31, 1996:
ERV =1.07529
N= 1.00 (Dec/95 to Dec/96)
P = 0.99927
Therefore one year total return as of December 31, 1996 is 7.62%
compounded annually.
<PAGE>
MAXIM T. ROWE PRICE EQUITY/INCOME PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.57155
N = 2.16677 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
23.20% compounded annually.
One year total return as of December 31, 1996:
ERV =1.57155
N = 1.00 (Dec/95 to Dec/96)
P = 1.31635
Therefore one year total return as of December 31, 1996 is 19.39%
compounded annually.
<PAGE>
MAXIM INVESCO SMALL-CAP GROWTH PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.68422
N = 2.16667 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
27.20% compounded annually.
One year total return as of December 31, 1996:
ERV =1.68422
N = 1.00 (Dec/95 to Dec/96)
P = 1.32897
Therefore one year total return as of December 31, 1996 is 26.74%
compounded annually.
<PAGE>
MAXIM INVESCO ADR PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.38311
N = 2.16667 (Nov/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
16.15% compounded annually.
One year total return as of December 31, 1996:
ERV =1.38311
N = 1.00 (Dec/95 to Dec/96)
P = 1.14143
Therefore one year total return as of December 31, 1996 is 21.17%
compounded annually.
<PAGE>
MIDCAP PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.48591
N = 3.00 (Jan 1/94 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
14.11% compounded annually.
One year total return as of December 31, 1996:
ERV =1.48591
N = 1.00 (Dec/95 to Dec/96)
P = 1.40233
Therefore one year total return as of December 31, 1996 is 5.96%
compounded annually.
<PAGE>
SHORT-TERM MATURITY BOND PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.07858
N = 1.41667 (Aug 1/95 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is 5.48%
compounded annually.
One year total return as of December 31, 1996:
ERV =1.07858
N = 1.00 (Dec/95 to Dec/96)
P = 1.03019
Therefore one year total return as of December 31, 1996 is 4.70%
compounded annually.
<PAGE>
MAXIM INVESCO BALANCED PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA:P(1+T) to the power of N = ERV
WHERE:
T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being
measured
ERV = Ending redeemable value of a hypothetical $1.00 payment
made a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment
made at the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
Inception total return as of December 31, 1996:
ERV =1.04597
N = 0.25000 (Oct 1/96 to Dec/96)
P = 1.00000
Therefore inception total return as of December 31, 1996 is
19.70% compounded annually.
<PAGE>
Performance Comparisons
Each Portfolio may from time to time include its yield and/or total
return in advertisements or in information furnished
to present or prospective shareholders. Each 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. The table in the
Prospectus under the heading "Performance Related Information",
summarizes the calculation of total return and
yield for each Portfolio, where applicable, through December 31,
1996.
<PAGE>
Price Make-up Sheet
Money Market Portfolio
Year Ended 12/31/96 Per Share
Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Bond Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Realized Long-Term Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Investment Grade Corporate Bond Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Stock Index Portfolio*
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
* Prior to December 1, 1992, the Growth Portfolio
<PAGE>
Price Make-up Sheet
U.S. Government Securities Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
U.S. Mortgage Government Securities Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Total Return Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Small-Cap Index Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Growth Index Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Value Index Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Small-Cap Value Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
International Equity Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments and Net Unrealized Appreciation
(Depreciation) on translation of assets and
liabilities denominated in foreign currencies
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
MidCap Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments and Net Unrealized Appreciation
(Depreciation) on translation of assets and
liabilities denominated in foreign currencies
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Corporate Bond Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments and Net Unrealized Appreciation
(Depreciation) on translation of assets and
liabilities denominated in foreign currencies
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Small-Cap Aggressive Growth Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income (Loss)
Dividend Distribution - End of Year
Undistributed (Overdistributed) Net
Investment Income - End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Foreign Equity Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income (Loss)
Dividend Distribution - End of Year
Undistributed (Overdistributed) Net
Investment Income - End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments and Net Unrealized Appreciation
(Depreciation) on translation of assets and
liabilities denominated in foreign currencies
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Maxim T. Rowe Price Equity/Income Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Maxim INVESCO Small-Cap Growth Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Maxim INVESCO ADR Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding
<PAGE>
Price Make-up Sheet
Short-Term Maturity Bond Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding <PAGE>
Price
Make-up Sheet
Maxim INVESCO Balanced Portfolio
Year Ended 12/31/96 Per Share Amount
Undistributed Net Investment Income -
Beginning of Year $
Dividend Income
Ordinary Income
Operational Expenses
Net Investment Income
Dividend Distribution - End of Year
Undistributed Net Investment Income -
End of Year
Net Long-Term Realized Gain (Loss) on Investments
Beginning of Year
Net Long-Term Realized Gain (Loss) on Investments
End of Year
Distribution from Net Realized Gain
Accumulated Undistributed Net
Realized Gain (Loss) on Investments
Net Unrealized Appreciation (Depreciation)
on Investments
Capital Stock at Par
Additional Paid-in Capital
Net Assets
Shares Outstanding <PAGE>
FINANCIAL STATEMENTS
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
The financial statements are to be filed by
amendment.
(b) Exhibits.
Items (b)(1)-(4), (b)(6)-(7), (b)(12) and (b)(13)
are incorporated by reference to
Registrant's Pre-Effective Amendment No. 1 to its
Registration Statement dated March
10, 1982.
Item (b)(5) is attached hereto as Exhibit 5(b),
incorporated by reference to Registrant's
Post-Effective Amendments No. 28 and 29 dated
September 1, 1994 and additional
sub-advisory agreements relating to the Maxim T.
Rowe Price MidCap Growth and
Maxim Founders Blue Chip Portfolios to be filed by
amendment.
Item (b)(8) is incorporated by reference to
Registrant's Post-Effective Amendment No.
24 dated March 1, 1993.
Computation of Performance Quotations are set
forth in the Statement of Additional
Information.May 1, 1989.
Items (b)(9) and (b)(14)-(15) are not applicable.
(11) Written Consents
(a) Written consent of Jorden Burt Berenson
& Johnson, LLP.
(b) Written consent of Deloitte & Touche LLP,
Independent Auditors for
the Fund.
Item 25. Persons Controlled by or under Common Control with
Registrant.
The organizational chart showing persons controlled by or
under common control with
Registrant follows this page.
Item 26. Number of Holders of Securities:
(1) (2)
Number of Record Holders
Title of Class as of December 31, 1996
Common Stock ($.10 par value) 7
C-1
<PAGE>
ORGANIZATIONAL CHART
Power Corporation of Canada, a Canadian company
100% - 171263 Canada Inc., a Canadian company
68.8% - Power Financial Corporation, a Canadian company
86.4% - Great-West Lifeco Inc., a Canadian company
99.4% - The Great-West Life Assurance Company, a Canadian company
100% - Great-West Life & Annuity Insurance Company, a Colorado
company
100% - GW Capital Management, Inc., a Colorado company
100% - Financial Administrative Services Corporation, a
Colorado company
100% - One Corporation, a Colorado company
100% - One Health Plan of Illinois, Inc., an
Illinois company
100% - One Health Plan of Texas, Inc., a Texas
company
100% - One Health Plan of California, Inc., a
California company
100% - One Health Plan of Colorado, Inc., a
Colorado company
100% - One Health Plan of Georgia, Inc., a
Georgia company
100% - One Orchard Equities, Inc., a Colorado
company
100% - Great-West Benefit Services, Inc., a Delaware
company
13% - Private Healthcare Systems, Inc., a
Massachusetts company
100% - Benefits Communication Corporation, a Delaware
company
100% - BenefitsCorp Equities, Inc., a Delaware
company
94% - Maxim Series Fund, Inc., a Maryland company
100% - Greenwood Property, Inc., a Colorado company
100% - GWL Properties Inc., a Colorado company
100% - Great-West Realty Investments Inc., a
Delaware company
50% - Westkin Properties Ltd., a California
limited partnership
100% - Confed Admin Services, Inc., a Delaware company
100% - Orchard Series Fund, a Delaware business trust
C-1a
<PAGE>
Item 27. Indemnification.
Item 4, Part II, of Registrant's Pre-Effective Amendment
No. 1 to its Registration Statement is
herein incorporated by reference.
Item 28. Business and Other Connections of Investment Adviser.
Part A to Item 5, Part II to Registrant's Post-Effective
Amendment No. 7 to its Registration
Statement is herein incorporated by reference.
Item 29. Principal Underwriter.
Not applicable.
Item 30. Location of Accounts and Records.
Item 7, Part II, of Registrant's Pre-Effective Amendment
No. 1 to its Registration Statement is
herein incorporated by reference.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy
of the Registrant's latest annual report to shareholders
upon request and without charge.
C-2<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused Post-Effective
Amendment No. 49 to the Registration Statement to be signed on its
behalf, in the City of Englewood, State of Colorado on the 14th
day of February, 1997.
MAXIM SERIES FUND, INC.
(Registrant)
By:/s/ J.D. Motz
President (J.D. Motz)
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 46 to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated.
Signature and Title Date
/s/ J.D. Motz 2/14/96
President (J.D. Motz)
/s/ D.L. Wooden 2/14/96
Director (D.L. Wooden)
/s/ R. Jennings* 2/14/96
Director (R. Jennings)
/s/ R.P. Koeppe* 2/14/96
Director (R.P. Koeppe)
/s/ J.D. Motz 2/14/96
Director (J.D. Motz)
Signature and Title Date
/s/ S. Zisman* 2/14/96
Director (S. Zisman)
/s/ G.R. Derback 2/14/96
Treasurer (G.R. Derback)
/s/ G.R. Derback 2/14/96
Principal Financial Officer
(G.R. Derback)
/s/ G.R. Derback 2/14/96
Principal Accounting Officer
(G.R. Derback)
*By: /s/ R.B. Lurie
R.B. Lurie
Attorney-in-fact pursuant to Powers of Attorney filed under
Post-Effective Amendment No. 19 to this Registration
Statement.
EXHIBIT 5(b)
INVESTMENT ADVISORY
AGREEMENT
BETWEEN
MAXIM SERIES FUND, INC.
AND
G W CAPITAL MANAGEMENT,
INC.<PAGE>
INVESTMENT ADVISORY
AGREEMENT
INVESTMENT ADVISORY AGREEMENT made this 1st day of
November, 1996, by and between
Maxim Series Fund, Inc., a Maryland corporation ("the Fund"), and
GW Capital Management, Inc., a
Colorado corporation registered as an investment adviser under the
Investment Advisers Act of 1940 ("the
Adviser"), whereby the Adviser will act as investment adviser to
the Fund as follows:
ARTICLE I
Duties of the Adviser
The Fund hereby employs the Adviser to act as the
investment adviser to and manager of the
Fund, and, subject to the review of the Board of Directors of the
Fund ("the Board"), to manage the
investment and reinvestment of the assets of its existing portfolio
and of each portfolio it may create in
the future ("the Portfolios") and to administer its affairs, for
the period and on the terms and conditions set
forth in this Agreement. The Adviser hereby accepts such
employment and agrees during such period,
at its own expense, to render the services and to assume the
obligations herein set forth for the
compensation provided for herein. The Adviser shall for all
purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund.
A. Investment Advisory Services. In carrying out its
obligations to manage the investment and
reinvestment of the assets of the Fund, the Adviser shall, when
appropriate and consistent with the
limitations set forth in Section C hereof:
(a) perform research and obtain and evaluate
pertinent economic, statistical, and
financial data relevant to the investment policies of the
Fund;
(b) consult with the Board and furnish to the
Board recommendations with respect
to an overall investment plan for approval, modification,
or rejection by the Board;
(c) seek out, present, and recommend specific
investment opportunities, consistent
with any overall investment plan approved by the Board;
(d) take such steps as are necessary to
implement any overall investment plan
approved by the Board, including making and carrying out
decisions to acquire or dispose of
permissible investments, management of investments and any
other property of the Fund, and
providing or obtaining such services as may be necessary
in managing, acquiring or disposing
of investments;
(e) regularly report to the Board with respect
to the implementation of any approved
overall investment plan and any other activities in
connection with management of the assets of
the Account;
(f) maintain all required accounts, records,
memoranda, instructions or authorizations
relating to the acquisition or disposition of investments
for the Fund; and
(g) determine the net asset value of the Fund
as required by applicable law.
If, in the judgment of the Adviser, the Fund would be
benefitted by supplemental investment
research from other persons or entities, outside the context of a
specific brokerage transaction, the
Adviser is authorized to obtain and pay a reasonable flat fee for
such information. Supplemental
investment research shall be limited to statistical and other
factual information, advice regarding economic
factors and trends, and advice as to occasional transactions in
specific securities, and shall not involve
general advice or recommendations regarding the purchase or sale of
securities. The expense of the
Adviser may not be necessarily reduced as a result of the receipt
of such supplement information. The
advisor shall regularly report to the Board when it has secured or,
where time permits, intends to secure
said supplemental investment research. It is understood and agreed
that the Board retains the right to
limit the scope of or to disapprove of said research.
B. Administrative Services. In addition to the
performance of investment advisory services, the
Adviser shall perform, or supervise the performance of,
administrative services in connection with the
management of the Fund and the Portfolios, including all financial
reporting for the Fund. In this
connection, the Adviser agrees to (i) assist in supervising all
aspects of the Fund's operations, including
the co-ordination of all matters relating to the functions of the
custodian, transfer agent or other
shareholder service agents, if any, accountants, attorneys and
other parties performing services or
operational functions for the Fund, (ii) provide the Fund, at the
Adviser's expense, with services of
persons, who may be the Adviser's officers, competent to perform
such administrative and clerical
functions as are necessary in order to provide effective
administration of the Fund, including duties in
connection with certain reports and the maintenance of certain
books and records of the Fund, and (ii)
provide the Fund, at the Adviser's expense, with adequate office
space and related services necessary
for its operations as contemplated in this Agreement. Nothing
contained herein will be construed to
restrict the Fund's right to hire its own employees or to contract
for services to be performed by third
parties.
C. Limitations on Advisory Services. The Adviser shall
perform the services under this Agreement
subject to the review of the Board and in a manner consistent with
the investment objectives, policies, and
restrictions of the Fund as stated in its Registration Statement,
as amended from time to time, filed with
the Securities and Exchange Commission, its Articles of
Incorporation and Bylaws, as amended from time
to time and the provisions of the Investment Company Act of 1940,
as amended (the "Investment
Company Act").
The Fund has furnished or will furnish the Adviser with
copies of the Fund's Prospectus, Articles
of Incorporation, and Bylaws as currently in effect and agrees
during the continuance of this Agreement
to furnish the Adviser with copies of any amendments or supplements
thereto before or at the time the
amendments or supplements become effective. The Adviser will be
entitled to rely on all documents
furnished by the Fund.
ARTICLE II
Compensation of the
Adviser
A. Investment Advisory Fee. As compensation for its
services to the Fund, the Adviser receives
monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market
Portfolio; 0.50% of the average daily net assets of the Zero-Coupon
Treasury Portfolio; 0.53% of the
average daily net assets of the Maxim Vista Growth & Income
Portfolio; 0.60% of the average daily net
assets of each of the Bond Portfolio, the Investment Grade Bond
Portfolio, the U.S. Government Securities
Portfolio, the Total Return Portfolio, the Stock Index Portfolio,
the U.S. Governmental Mortgage Securities
Portfolio, the Small-Cap Index Portfolio, the Growth Index
Portfolio, the Value Index Portfolio and the Short-
Term Maturity Bond Portfolio; 0.80% of the average daily net assets
of the Maxim T. Rowe Price
Equity/Income Portfolio; 0.90% of the average daily net assets of
the Corporate Bond Portfolio; 0.95% of
the average daily net assets of each of the Mid-Cap Portfolio and
the Maxim INVESCO Small-Cap Growth
Portfolio; and 1.00% of the average daily net assets of each of the
Maxim INVESCO Balanced Portfolio,
Small-Cap Value Portfolio, the Maxim INVESCO ADR Portfolio, the
Foreign Equity Portfolio, the Small-Cap
Aggressive Growth Portfolio and the International Equity Portfolio.
B. Allocation of Expenses. Except with respect to the
Portfolios indicated below, the Adviser shall
be responsible for all expenses incurred in performing the services
set forth in this Agreement and all
other expenses, and the Fund shall pay only extraordinary expenses,
including the cost of litigation.
With respect to the Small-Cap Value, the Mid-Cap,
Small-Cap Aggressive Growth, Foreign Equity,
Maxim T. Rowe Price Equity/Income, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and the
International Equity Portfolios:
(a) The Adviser shall be responsible for all of its
expenses incurred in performing the services
set forth in Article I hereunder. Such expenses
include, but are not limited to, costs
incurred in providing investment advisory
services; compensating and furnishing office
space for officers and employees of the Adviser
connected with investment and economic
research, trading, and investment management of
the Fund; and paying all fees of all
directors of the Fund who are affiliated persons
of the Adviser or any of its subsidiaries.
(b) The Fund pays all other expenses incurred in its
operation and all of its general
administrative expenses, including, but not
limited to, redemption expenses, expenses of
portfolio transactions, shareholder servicing
costs, pricing costs (including the daily
calculation of net asset value), interest, charges
of the custodian and transfer agent, if
any, cost of auditing services, directors' fees,
legal expenses, state franchise and other
taxes, expenses of registering the shares under
Federal and state securities laws,
Securities and Exchange Commission fees, advisory
fees, insurance premiums, costs of
maintenance of corporate existence, investor
services (including allocable personnel and
telephone expenses), cost of printing proxies,
stock certificates, costs of corporate
meetings, and any extraordinary expenses,
including litigation costs. Accounting services
are provided for the Fund by the Adviser and the
Fund shall reimburse the Adviser for its
costs in connection therewith.
C. Notwithstanding the second paragraph of Section B,
above, with respect to the following
Portfolios of the Fund, the Adviser shall pay Expenses which exceed
an annual rate of: 1.35% of the
average daily net assets of the Small-Cap Value Portfolio; 1.10% of
the average daily net assets of the
Mid-Cap and Maxim INVESCO Small-Cap Growth Portfolios; 1.30% of the
average daily net assets of the
Small-Cap Aggressive Growth Portfolio; 0.95% of the Maxim T. Rowe
Price Equity/Income Portfolio; 1.50%
of the Maxim INVESCO ADR, Foreign Equity and International Equity
Portfolios. For purposes of this
Section C, "Expenses" with respect to a Portfolio shall mean the
sum of (a) the investment advisory fee
described in Section A, above, for such Portfolio, and (b) expenses
to be paid directly by the Fund, as
described in clause (b) of the second paragraph of Section B,
above, with respect to such Portfolio.
ARTICLE III
Portfolio Transactions and
Brokerage
The Adviser agrees to determine the securities to be
purchased or sold by the Portfolios, subject
to the provisions of Article I, and to place orders pursuant to its
determinations, either directly with the
issuer, with any broker-dealer or underwriter that specialized in
the securities for which the order is made,
or with any other broker or dealer selected by the Adviser, subject
to the following limitations.
The Adviser is authorized to select the brokers or dealers
that will execute the purchases and
sales of portfolio securities for the Fund and will use its best
efforts to obtain the most favorable net
results and execution of the Fund's orders, taking into account all
appropriate factors, including price,
dealer spread or commission, if any, size of the transaction, and
difficulty of the transaction. In evaluating
the net results of brokerage services offered by brokers or dealers
that also provide supplemental
investment research to the Adviser for a flat fee (see Article I)
the Adviser need not take such a flat fee
into consideration.
If, in the judgment of the Adviser, the Fund would be
benefitted by supplemental investment
research in addition to such research furnished for a flat fee, the
Adviser is authorized to pay spreads or
commissions to brokers or dealers furnishing such services in
excess of spreads or commissions which
another broker or dealer may charge for the same transaction. The
expenses of the Adviser may not
necessarily be reduced as a result of receipt of such supplemental
information.
Subject to the above requirements and the provisions of
the Investment Company Act of 1940,
the Securities Exchange Act of 1934, other applicable provisions of
law, and the terms of any exemption(s)
therefrom, nothing shall prohibit the Adviser from selecting
brokers or dealers with which it or the Fund
are affiliated.
ARTICLE IV
Activities of the Adviser
The services of the Adviser to the Fund under this
Investment Advisory Agreement are not to be
deemed exclusive and the Adviser will be free to render similar
services to others so long as its services
under this Investment Advisory Agreement are not impaired. It is
understood that directors, officers,
employees and shareholders of the Fund are or may become interested
in the Adviser, as directors,
officers, employees or shareholders or otherwise and that
directors, officers, employees or shareholders
of the Adviser are or may become similarly interested in the Fund,
and that the Adviser is or may become
interested in the Fund as shareholder or otherwise.
It is agreed that the Adviser may use any supplemental
investment research obtained for the
benefit of the Fund in providing investment advice to its other
investment advisory accounts. The Adviser
or its subsidiaries may use such information in managing their own
accounts. Conversely, such
supplemental information obtained by the placement of business for
the Adviser or other entities advised
by the Adviser will be considered by and may be useful to the
Adviser in carrying out its obligations to
the Fund.
Securities held by the Fund may also be held by separate
accounts or other mutual funds for
which the Adviser acts as an adviser or by the Adviser or its
subsidiaries. Because of different investment
objectives or other factors, a particular security may be bought by
the Adviser or its subsidiaries or 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 the Adviser or
its subsidiaries act as investment adviser
or for their advisory clients arise for consideration at or about
the same time, the Fund agrees that the
Adviser may make transactions in such securities, insofar as
feasible, 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 Adviser during the same period may increase the demand for
securities being purchased or the
supply of securities being sold, the Fund recognizes that there may
be an adverse effect on price.
It is agreed that, on occasions when the 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 other
accounts or companies in order to
obtain favorable execution and low 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 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. The Fund recognizes that in some
cases this procedure may
adversely affect the size of the position obtainable for a Fund
portfolio.
ARTICLE V
Effectiveness of the
Agreement
This Investment Advisory Agreement shall not become
effective (and the Adviser shall not serve
or act as investment adviser) unless and until it is approved by
the Board including a majority of directors
who are not parties to this Agreement or interested persons of any
such party to this Agreement, and by
the sole shareholder; and this Agreement shall come into full force
and effect on the date on which it is
so approved.
ARTICLE VI
Term of the Agreement
This Investment Advisory Agreement shall remain in effect
until the earlier of one year from its
effective date or the date of the first annual or special meeting
of shareholders of the Fund and shall
continue so long as such continuance is specifically approved by a
majority of the outstanding shares
of the Fund at that time and at least annually thereafter (a) by
the vote of the majority of the Board, or by
vote of a majority of the outstanding shares of the Fund, including
a majority of the outstanding shares
of each Portfolio, and (b) by the vote of a majority of the members
of the Board, who are not parties to
this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose
of voting on such approval. In connection with such approvals, the
Board shall request and evaluate, and
the Adviser shall furnish, such information as may be reasonably
necessary to evaluate the terms of this
Agreement. This Agreement:
(a) shall not be terminated by the Adviser without
sixty days' prior written notice and without
the prior approval of a new investment advisory
agreement by vote of a majority of the
outstanding shares of the Fund;
(b) shall be subject to termination, without the
payment of any penalty, by the Board or by
vote of a majority of the outstanding voting
securities of the Fund, on sixty days' written
notice to the Adviser;
(c) shall not be amended without specific approval of
such amendment by (i) the Board, or
by the vote of a majority of the outstanding
shares of the Fund, including a majority of the
outstanding shares of each Portfolio, and (ii) a
majority of those directors who are not
parties to this Agreement or interested persons of
such a party, cast in person at a
meeting called for the purpose of voting on such
approval; and
(d) shall automatically terminate upon assignment by
either party.
ARTICLE VII
Recordkeeping
The Adviser agrees that all accounts and records which it
maintains for the Fund shall be the
property of the Fund and that it will surrender promptly to the
designated officers of the Fund any or all
such accounts and records upon request. The Adviser further agrees
to preserve for the period
prescribed by the rules and regulations of the Securities and
Exchange Commission all such records as
are required to be maintained pursuant to said rules. The Adviser
also agrees that it will maintain all
records and accounts regarding the investment activities of the
Fund in a confidential manner. All such
accounts or records shall be made available, within five (5)
business days of the request, to the Fund's
accountants or auditors during regular business hours at the
Adviser's offices upon reasonable prior
written notice. In addition, the Adviser will provide any
materials, reasonably related to the investment
advisory services provided hereunder, as may be reasonably
requested in writing by the directors or
officers of the Fund or as may be required by any governmental
agency having jurisdiction.
ARTICLE VIII
Liability of the Adviser
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of
obligations or duties on the part of the Adviser (or its officers,
directors, agents, employees, controlling
persons, shareholders, and any other person or entity affiliated
with the Adviser or retained by it to
perform or assist in the performance of its obligations under this
Agreement), neither the Adviser nor any
of its officers, directors, employees or agents shall be subject to
liability to the Fund or to any shareholder
for any act or omission in the course of, or connected with,
rendering services hereunder, including
without limitation any error of judgment or mistake of law or for
any loss suffered by the Fund or any
shareholder in connection with the matters to which this Agreement
relates, except to the extent specified
in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services.
<PAGE>
ARTICLE IX
Governing Law
This Investment Advisory Agreement is subject to the
provisions of the Investment Company Act,
as amended, and the rules and regulations of the Securities and
Exchange Commission thereunder,
including such exemptions therefrom as the Securities and Exchange
Commission may grant. Words and
phrases used herein shall be interpreted in accordance with that
Act and those rules and regulations.
As used with respect to the Fund or any of its Portfolios, the term
"majority of the outstanding shares"
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.
IN WITNESS WHEREOF, the parties have caused this
Investment Advisory Agreement to be
signed by their respective officials duly authorized, as of the day
and year first above written.
MAXIM SERIES
FUND, INC.
Witness: /s/ J.D. Motz
President
/s/ R.B. Lurie
Secretary
GW CAPITAL
MANAGEMENT, INC.
Witness: /s/ M. Corbett
President
/s/ B.A. Byrne
Secretary
EXHIBIT 11 (a)
CONSENT OF JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
February 11, 1997
Maxim Series Fund, Inc.
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We consent to the use of our name under the caption "Legal
Counsel" in the Prospectus contained in Post-Effective Amendment
No. 49 to the Registration Statement on Form N-1A (File No. 2-
75503) filed by Maxim Series Fund, Inc. with the Securities and
Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
JORDEN BURT BERENSON & JOHNSON LLP
EXHIBIT 11(b)
CONSENT OF DELOITTE & TOUCHE LLP<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us under the caption "Independent
Auditors" appearing in the Prospectus which is included in Post-
Effective Amendment No. 49 to Registration Statement No. 2-75503.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 1997
