As filed with the Securities and Exchange Commission on February
28, 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.
50 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 50 (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)
X immediately upon filing pursuant to paragraph (b) of Rule
485
on pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule
485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule
485
on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following:
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
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 December 30, 1996.
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 The Fund and 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
Redemption of Shares
Holders of Securities
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 Purchase and
Redemption of Shares
Securities Being Offered
20. Tax Status Taxes
21. Underwriters Not Applicable
22. Calculation of Yield Quotations Calculation of
Yields and Total Return
of Performance Data
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 Persons
Controlled by or Under
Common Control Common Control
26. Number of Holders of Securities Number of Holders
of Securities
27. Indemnification Indemnification
28. Business and Other Connections Business and
Other Connections of
of Investment Adviser 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
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 non-diversified
investment portfolio: the Maxim Vista Growth & Income Portfolio
(the "Vista Portfolio").
The investment objective of the Vista Portfolio is to
provide
its shareholders with long-term capital appreciation and to provide
dividend income. The Vista Portfolio seeks to achieve its
objective by investing all of its investible assets in the Growth
& Income Portfolio ("Growth & Income"), a non-diversified open-end
management investment company. Growth & Income seeks to achieve
its investment objective, which is identical to the investment
objective of the Vista Portfolio, by investing in common stock of
issuers with a broad range of market capitalizations.
This Prospectus sets forth concisely the information about the
Vista Portfolio that prospective investors ought to know before
investing.
Additional information about the Fund has been filed with the
Securities and Exchange Commission and is available upon request,
without charge by calling or writing the Fund. The "Statement of
Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.
Mutual fund shares are not deposits, obligations of, or
guaranteed by, any Depositary institution. Shares are not insured
by the FDIC, the Federal Reserve Board, or any other agency, and
are subject to investment risk, including the possible loss of
principal.
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.
GW CAPITAL MANAGEMENT, INC.
Investment Adviser
The date of this Prospectus is March 1, 1997.
FINANCIAL HIGHLIGHTS
Selected Data for a Share of Capital Stock
For the Year Ended October 31,
MAXIM VISTA GROWTH & INCOME PORTFOLIO
Period Ended October 31,
1996
1995 1
Net Asset Value, Beginning of Period
$ 1.2133
$ 1.0000
Income from Investment Operations
Net Investment Income
0.0219
0.0174
Net Realized and Unrealized Gain
0.2147
0.2133
Total Income From Investment Operations
0.2366
0.2307
Less Distributions
From Net Investment Income
(0.0215)
(0.0174)
From Net Realized Gain
(0.0327)
Total Distributions
(0.0542)
(0.0174)
Net Asset Value, End of Period
$ 1.3957
$ 1.2133
Total Return
20.01%
27.30%
Net Assets, End of Period
$ 86,430,279
$ 49,403,163
Ratio of Expenses to Average Net Assets
1.00%
1.01%
Ratio of Net Investment Income to Average Net Assets
1.75%
2.21%
____________
1 For 1995 the period is from December 21, 1994[inception] to
October 31, 1995.
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, FutureFunds II
Series Account, Retirement Plan Series Account and Pinnacle Series
Account of Great-West Life & Annuity Insurance Company ("GWL&A")
and to the TNE Series (k) Account (collectively "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 or its affiliates,
TNE or its affiliates, and other insurance companies. GW Capital
Management, Inc. ("GW Capital") is the Investment Adviser for the
Fund and the Vista Portfolio. The investment adviser of Growth &
Income is The Chase Manhattan Bank ("Chase"), 270 Park Avenue, New
York, New York 10017. Chase Asset Management, Inc. ("CAM") is the
sub-adviser to Growth & Income. CAM's address is 1211 Avenue of
the Americas, New York, New York 10036.
THE FUND PORTFOLIO
The Vista Portfolio has its own investment objective and
investment strategy. The investment objective may not be changed
without the affirmative vote of at least a majority of the
outstanding shares of the Vista Portfolio. A more detailed
description of the Vista Portfolio's investment policies and a
glossary further describing certain investment securities mentioned
in the discussion that follows are contained in the Statement of
Additional Information. Unlike other portfolios of the Fund which
directly acquire and manage their own portfolio of securities, the
Vista Portfolio will seek to achieve its objectives by investing
all of its investible assets in Growth & Income. The Vista
Portfolio has an investment objective that is identical to the
investment objective of Growth & Income. The various investments
of and techniques employed by Growth & Income are discussed under
"Maxim Vista Growth & Income Portfolio", below.
Smaller funds investing in Growth & Income may be
materially
affected by the actions of larger funds invested in Growth &
Income. For example, if a large fund withdraws from Growth &
Income, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns, or Growth &
Income may become less diverse, resulting in increased portfolio
risk. (However, this possibility also exists for traditionally
structured funds which have large and/or institutional investors.)
Also, funds with a greater pro rata ownership in Growth & Income
could have effective voting control of the operations of Growth &
Income. Whenever the Fund is requested to vote on matters
pertaining to Growth & Income, the Fund will cast all of its votes
in the same proportion as do the Vista Portfolio's shareholders.
See "The Fund And Its Shares" in this prospectus for additional
information regarding shareholders of the Fund.
The Vista Portfolio may withdraw its investment in Growth &
Income at any time without shareholder approval if the Board of
Directors of the Fund decides it is in the best interest of the
Vista Portfolio to do so. Upon any such withdrawal, the Board will
consider what action may be taken, including the investment of
assets of the Vista Portfolio in another underlying mutual fund
having the same investment objective as the Vista Portfolio or the
retention of an investment adviser to manage the Vista Portfolio's
assets in accordance with the investment objective. The investment
objective of the Vista Portfolio, however, and the investment
objective of Growth & Income, can only be changed with shareholder
approval. There is no assurance that the Vista Portfolio's
investment objective will be achieved nor is there any assurance
that Growth & Income's investment objective will be achieved.
Certain changes in Growth & Income's fundamental objectives,
policies and restrictions could require the Vista Portfolio to
redeem its interest. Any such redemption could result in a
distribution in kind of securities (as opposed to cash
distribution) by the underlying mutual fund. Should such a
distribution occur, the Vista Portfolio could incur brokerage fees
or other transaction costs in converting such securities to cash.
In addition, a distribution in kind could result in a less
diversified portfolio of investments for the Vista Portfolio and
could affect adversely the liquidity of the Vista Portfolio.
Following is a description of the Vista Portfolio that will be
managed on the basis described above.
Maxim Vista Growth & Income Portfolio
The investment objective of the Vista Portfolio is to
provide
its shareholders with long-term capital appreciation and to provide
dividend income. The Vista Portfolio seeks to achieve its
objective by investing all of its investible assets in the Growth
& Income, a non-diversified open-end management investment company
managed by Chase. Growth & Income seeks to achieve its investment
objective, which is identical to the investment objective of the
Vista Portfolio, by investing in common stocks of issuers with a
broad range of market capitalizations. Under normal market
conditions, Growth & Income will invest at least 80% of its total
assets in common stocks. In addition, Growth & Income may invest
up to 20% of its total assets in convertible securities. To the
extent the assets of Growth & Income are not invested in common
stocks or convertible securities, they will consist of or be
invested in cash, cash equivalents and short-term debt securities,
such as U.S. Government securities, bank obligations, commercial
paper and repurchase agreements. However, Growth & Income reserves
the right to invest up to 100% of its assets in such instruments as
well as investment grade debt securities for temporary defensive
purposes during periods that it is considered to be particularly
risky for investment in common stocks. At times when its advisers
deem it advisable to limit exposure to the equity market, Growth &
Income may invest up to 20% of its total assets in U.S. Government
obligations (exclusive of any investment in money market
instruments). To the extent that Growth & Income departs from its
investment policies during temporary defensive periods, its
investment objective may not be achieved.
Growth & Income intends to utilize both quantitative and
fundamental research to identify undervalued stocks with a catalyst
for positive change. It is believed that the market risk involved
in seeking capital appreciation will be moderated to an extent by
the anticipated dividend returns on the stocks in which Growth &
Income invests.
Other Investment Practices
Growth & Income may also engage in the following investment
practices, when consistent with its overall objective and policies.
Please see the Statement of Additional Information for a complete
discussion of these investment practices and the risks associated
therewith.
Investments in foreign securities present risks not
typically
associated with investments in comparable securities of U.S.
issuers. Growth & Income may invest up to 20% of its total assets
in foreign securities including Depositary receipts as described
below. Since foreign securities are normally denominated and
traded in foreign currencies, the values of Growth & Income's
foreign investments may be influenced by currency exchange rates
and exchange control regulations.
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 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.
Growth & Income's investments in foreign securities may
include investments in emerging markets; that is 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.
Most foreign securities held by Growth & Income 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 Growth & Income
in foreign currencies. The value of these foreign currencies
relative to the U.S. dollar varies continually, causing changes in
the dollar value of Growth & Income's investments (even if the
price of the investments is unchanged) and changes in the dollar
value of Growth & Income'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 Growth & Income's assets
and on the net investment income available for distribution may be
favorable or unfavorable.
Growth & Income may incur costs in connection with conversions
between various currencies. In addition, Growth & Income 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
Growth & Income declares and pays a dividend, or between the time
when Growth & Income accrues and pays an operating expense in U.S.
dollars.
Growth & income may invest its assets in securities of foreign
issuers in the form of: American Depositary Receipts, European
Depositary Receipts, Global Depositary Receipts or other similar
securities representing securities of a foreign issuer
(collectively, Depositary Receipts"). Growth & Income treats
Depositary Receipts as interests in the underlying securities for
purposes of its investment policies. Growth & Income will limit
its investment in Depositary Receipts, not sponsored by the issuer
of the underlying security, to no more than 5% of the value of its
net assets, at the time of investment.
Growth & Income may invest up to 20% of its net assets in
convertible securities, which are securities generally offering
fixed interest or dividend yields which may be converted either at
a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed income securities,
generally, the market value of convertible securities tends to
decline as interest rates increase and increase as interest rates
decline. Because of the conversion feature, the market value of a
convertible security tends to vary with fluctuations in the market
value of the underlying common or preferred stock.
Growth & Income may enter into repurchase agreements. A
repurchase agreement is an agreement whereby the seller of a
security agrees to repurchase the security sold at a mutually
agreed upon price and time. The resale price would be in excess of
the purchase price, reflecting an agreed upon market interest rate.
Delays or losses could result if the other party to the agreement
defaults or becomes insolvent. Moreover, it may lend portfolio
securities in an amount not exceeding 30% of its total assets in
order to generate additional income. These transactions, however,
must be fully collateralized at all times. Growth & Income may
enter into forward commitments, whereby Growth & Income may
purchase securities for delivery at a future date. A forward
commitment may increase Growth & Income's overall investment
exposure and involves a risk of loss if the value of the securities
declines prior to the settlement date. These transactions involve
some risk to Growth & Income if the other party should default on
its obligation and Growth & Income is delayed or prevented from
recovering the collateral or completing the transaction
Growth & Income may enter into put transactions, including those
sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, Growth &
Income would acquire the right to sell a security at an agreed-upon
price within a specified period prior to its maturity date. These
transactions involve some risk to Growth & Income if the other
party should default on its obligation and Growth & Income is
delayed or prevented from recovering the collateral or completing
the transaction. A put transaction will increase the cost of the
underlying security and consequently reduce the available
yield.
Growth & Income may invest up to 10% of its total assets
may
be invested in shares of other investment companies, when
consistent with its investment objectives and policies, subject to
applicable regulatory requirements. Additional fees will be
charged by other investment companies, which are in addition to
fees charged by Vista Portfolio.
Growth & Income may invest up to 20% of its total assets in
stripped obligations (i.e.: separately traded principal and
interest components of securities) where the underlying obligations
are backed by the full faith and credit of the U.S. Government,
commonly known as "STRIPS". Changes in interest rates tend to make
the value of these instruments fluctuate more than the value of
ordinary interest-paying debt securities with similar maturities.
The risk is greater when the period to maturity is longer.
Growth & Income may invest in debt securities issued by
supranational organizations, which include organizations such as
The World Bank, the European Community, the European Coal and Steel
Community and the Asian Development Bank. It may also invest in
securities denominated in the ECU, which is a "basket" consisting
of specified amounts of the currencies of certain member states of
the European Community. These securities are typically issued by
European governments and supranational organizations.
Growth & Income may invest in investment grade debt securities
which are securities rated in the category BBB or higher by
Standard & Poor's Corporation ("S&P"), or Baa or higher by Moody's
Investors Services, Inc. ("Moody's") or the equivalent by another
national rating organization, or, if unrated, determined by Growth
& Income to be of comparable quality.
Growth & Income may invest its assets in derivative and related
instruments to hedge various market risks or to increase its income
or gain. Some of these instruments will be subject to asset
segregation requirements to cover Growth & Income's obligations.
Growth & Income may (i) purchase, write and exercise call and put
options on securities and securities indexes (including using
options in combination with securities, other options or derivative
instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency contracts; and
(iv) purchase and sell structured products, which are instruments
designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of
derivatives
and related instruments and no assurance can be given that any
strategy will succeed. The value of certain derivatives or related
instruments in which Growth & Income invests may be particularly
sensitive to changes in prevailing economic conditions and market
value. The ability of Growth & Income to successfully utilize
these instruments may depend in part upon the ability of Growth &
Income's adviser to forecast these factors correctly. Inaccurate
forecasts could expose Growth & Income to a risk of loss. There
can be no guarantee that there will be a correlation between price
movements in a hedging instrument and in the portfolio assets being
hedged. Growth & Income is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can
also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve
leverage and result in losses that may exceed the original
investment of Growth & Income. There can be no assurance that a
liquid market will exist at a time when Growth & Income seeks to
close out a derivatives position. Activities of large traders in
the futures and securities markets involving arbitrage, "program
trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances,
particularly those involving over the counter transactions or
forward contracts, there is a greater potential that a counterparty
or broker may default. In the event of a default, Growth & Income
may experience a loss. For additional information concerning
derivatives, related instruments and the associated risks, see the
Statement of Additional Information.
Growth & Income may borrow money from banks for temporary or
short-term purposes, but will not borrow for leveraging purposes.
It may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to
meet redemptions. This practice is commonly known as a reverse
repurchase agreement. Whenever Growth & Income enters into a
reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued
interest). Growth & Income would be required to pay interest on
amounts obtained through reverse repurchase agreements. Reverse
repurchase agreements carry the risk that the market value of the
securities which Growth & Income is obligated to repurchase may
decline below the purchase price.
MANAGEMENT OF THE FUND AND GROWTH & INCOME
Overall responsibility for management and supervision of
the
Fund rests with the Fund's Directors and overall responsibility for
management and supervision of Growth & Income rests with Trustees
of Growth & Income. The Fund currently has 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
of Directors of the Fund meets regularly four times each year and
at other times as necessary. By virtue of the functions performed
by GW Capital as Investment Adviser to the Fund, 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 and each Trustee and executive officer of
Growth & Income.
Investment Adviser of the Fund
GW Capital, located at 8515 E. Orchard Rd., Englewood,
Colorado 80111, serves as the Fund's investment adviser. GW
Capital is a wholly owned subsidiary of Great-West Life & Annuity
Insurance Company which in turn is a wholly owned subsidiary of The
Great-West Life Assurance Company. The Great-West Life Assurance
Company is a subsidiary of Great-West Lifeco Inc., a holding
company. Great-West Lifeco Inc. is in turn a subsidiary of Power
Financial Corporation, a financial services company. Power
Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais,
through a group of private holding companies, which he controls,
has voting control of Power Corporation of Canada. GW Capital
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, Orchard Series Fund, a
publicly-available registered mutual fund, and certain
non-registered, qualified corporate pension plan separate accounts
of GWL&A. GW Capital is a registered investment adviser with the
Securities and Exchange Commission.
Subject to the supervision and direction of the Fund's
Board
of Directors, GW Capital generally manages the Fund's portfolios in
accordance with the Fund's stated investment objectives and
policies, makes investment decisions for the Fund and places orders
to buy and sell securities on behalf of the Fund. The investment
adviser and sub-adviser to Growth & Income, in which the Vista
Portfolio invests all its assets, manage Growth & Income in
accordance with Growth & Income's stated investment objectives and
policies, making investment decisions for Growth & Income and
placing orders to buy and sell securities on behalf of Growth &
Income.
With respect to the Vista Portfolio, GW Capital shall be
responsible for all expenses, except extraordinary expenses. In
addition to its investment advisory services, GW Capital is
responsible for providing accounting and administrative services
for the Vista Portfolio. GW Capital receives monthly compensation
at the annual rate of 0.53% for the services it provides with
respect to the Vista Portfolio.
Investment Adviser of Growth & Income
Chase is responsible for managing the assets of Growth &
Income pursuant to an investment advisory agreement dated May 6,
1996, and has overall responsibility for Growth & Income's
investment decisions, subject to the oversight of the Board of
Trustees. Chase is a wholly owned subsidiary of the Chase
Manhattan Corporation, a bank holding company. Chase and its
predecessors have over 100 years of money management experience.
For its investment advisory services, Chase is entitled to receive
an annual fee computed daily and paid monthly based on an annual
rate equal to .40% of Growth & Income's daily net assets. Chase
may, from time to time, voluntarily waive all or a portion of its
fees payable under its advisory agreement with Growth & Income.
Chase's address is 270 Park Avenue, New York, New York 10017.
CAM, a registered investment adviser serves as the
sub-adviser
to Growth & Income pursuant to a sub-advisory agreement between CAM
and Chase. CAM is a wholly owned subsidiary of Chase. CAM makes
the day-to-day investment decisions for Growth & Income and is
entitled to receive a fee, payable by Chase from its advisory fee,
at an annual rate equal to 0.20% of Growth & Income's average daily
net assets. CAM was formed to provide discretionary investment
advisory services to institutional clients and to consolidate
Chase's investment management functions. David Klassen, Director,
U.S. Funds Management and Equity Research of Domestic Equity
Management at Chase, is responsible for asset allocation and
investment strategy for Chase's domestic equity
portfolios. Mr. Klassen joined Chase in March of 1992. Prior to
joining Chase, Mr. Klassen was vice president and portfolio manager
at Dean Witter Reynolds, responsible for managing several mutual
funds and other accounts.
Mr. Klassen and Greg Adams, a Senior Portfolio Manager at Chase,
have been responsible for the day-to day management of Growth &
Income since March 1995. In addition to managing Growth & Income,
Mr. Klassen is a manager of Vista Small Cap Equity Fund and Vista
Capital Growth Portfolio. Mr. Adams joined Chase in 1987 and is
also a manager of Vista Balanced Fund and Vista Large Cap Equity
Fund. In addition, Mr. Adams has been responsible for overseeing
the proprietary computer model program used in the U.S. equity
selection process. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM
is located at 1211 Avenue of the Americas, New York, New York
10036.
Chase also serves as administrator to Growth & Income and is
entitled to a fee computed daily and paid monthly at an annual rate
equal to 0.05% of Growth & Income's average daily net assets.
Chase may, from time to time, voluntarily waive all or a portion of
its administrative fees.
Additionally, expenses attributable to and payable by the
Growth & Income Portfolio, currently at the annual rate of 0.02% of
Growth & Income's average daily net assets, are paid monthly.
Expenses include, but are not limited to, expenses connected with
the execution, recording and settlement of security transactions;
fees and expenses of Growth & Income's custodian for all services
to Growth & Income, including safekeeping of funds and securities
and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government officers and
commissions; and expenses of meetings of investors.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from the investment income of the Vista Portfolio
shall be declared and reinvested quarterly in additional shares of
Growth & Income at net asset value. Distributions of net realized
capital gains, if any, are declared in the fiscal year in which
they have been realized and are reinvested in additional shares of
Growth & Income 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 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 or 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 (i.e., its Portfolios) are sold and
redeemed at their net asset value next determined after initial
receipt of 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
The Vista Portfolio's net asset value per share is
determined
as of 4:00 p.m., EST/EDT time once, daily, Monday through Friday,
except on: (i) holidays on which the New York Stock Exchange is
closed, or (ii) days on which Growth & Income is not valued.
Since the Vista Portfolio will invest all its investible
assets in Growth & Income, the value of the Vista Portfolio's
shares will be equal to the value of its beneficial interests in
Growth & Income. If the securities owned by Growth & Income
increase in value, the value of the Vista Portfolio's shares will
increase. If the securities owned by Growth & Income decrease in
value, the value of the Vista Portfolio's shares will also decline.
In this way, investors participate in any change in the value of
the securities owned by Growth & Income.
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 TNE, and The
Great-West Life Assurance Company ("Great-West"), 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. Whenever the Fund is
requested to vote on matters pertaining to Growth & Income, the
Fund will cast all of its votes in the same proportion as do the
Vista Portfolio's shareholders.
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 Vista Portfolio's and/or Growth & Income'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 Vista Portfolio. When the Fund
advertises the total return of the Vista Portfolio, it will usually
be calculated for one year, five years, and ten years or some other
relevant period if the Vista Portfolio and Growth & Income have
been in existence for less than ten years. Total return is
measured by comparing the value of an investment in the portfolio
at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions). The
performance of the Vista Portfolio will be affected by charges and
fees at the separate account level.
The Vista Portfolio may also advertise its yield in addition
to total return. This yield will be computed by dividing the net
investment income per share earned during a recent one-month period
by the net asset value of a Vista Portfolio share (reduced by any
dividend expected to be paid shortly out of Vista Portfolio income)
on the last day of the period.
GENERAL INFORMATION
Reports to Shareholders
The fiscal year of the Vista Portfolio and Growth & Income
ends on October 31 of each year. The Fund will send to its
shareholders, at least semi-annually, reports of the Vista
Portfolio and other information. An annual report, containing
financial statements, audited by independent certified public
accountants, will be sent to shareholders each year.
Custodian for the Fund and Growth & Income
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.
The custodian of Growth & Income's assets is Chase, whose
duties include safeguarding and controlling Growth & Income's cash
and securities and other related functions.
Independent Auditors for the Fund and Growth & Income
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.
Price Waterhouse LLP has been selected as the independent
auditors of Growth & Income.
Legal Counsel for the Fund
Jorden Burt Berenson & Johnson, LLP is counsel for the Fund.
Additional Information
The telephone number or the address of the Fund appearing
on the front page of this prospectus should be used for requests
for additional information.
MAXIM SERIES FUND, INC.
Vista Portfolio
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Prospectus
for the Fund. A copy of the Prospectus may be obtained from the
Fund by writing the Fund at 8515 E. Orchard Rd., Englewood,
Colorado 80111 or by calling the Fund at (303) 689-3000.
GW 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
March 1, 1997.
TABLE OF CONTENTS
Page
Sale of Shares 3
The Fund Portfolios 3
Description of Investment Securities 3
Information About Securities Ratings 21
Investment Limitations 23
Lending of Portfolio Securities 26
Management 27
The Fund 27
Directors and Officers 27
The Investment Adviser 28
Advisory Fee 29
The Growth & Income Portfolio 29
Trustees and Officers 29
The Investment Adviser of Growth & Income 31
The Growth & Income Administrator 33
Purchase and Redemption of Shares 34
Calculation of Yields 35
Calculation of Total Return 36
Price Make-Up Sheet 37
Financial Statements 38
SALE OF SHARES
Shares of the Fund are sold to the FutureFunds Series Account,
FutureFunds II Series Account, Qualified Series Account and 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 New England Mutual Life Insurance Company ("TNE") to
fund benefits under variable annuity contracts. Shares of the Fund
are also sold to the Pinnacle Series Account, a separate account
established by GWL&A to fund variable life insurance policies.
Shares of the Fund are, and in the future may be, sold to other
separate accounts of GWL&A, its affiliates or other insurance
companies. It is conceivable that in the future it may be
disadvantageous for variable life insurance separate accounts and
variable annuity separate accounts to invest in the Fund
simultaneously. Although no such disadvantages are currently
foreseen either to variable life insurance policyowners or to
variable annuity contract owners, the Fund's Board of Directors
intends to monitor events in order to identify any material
conflicts between such policyowners and contract owners and to
determine what action, if any, should be taken in response thereto.
Material conflicts could result from, for example, (1) changes in
state insurance laws, (2) changes in Federal income tax laws, (3)
changes in the investment management of any portfolio of the Fund,
or (4) differences in voting instructions between those given by
policyowners and those given by contract owners.
THE FUND PORTFOLIOS
The discussion that follows provides supplemental information
to the discussion captioned "The Fund Portfolios" in the
Prospectus.
The Fund commenced operations as a management investment
company in 1982. The Maxim Vista Growth and Income Portfolio (the
"Vista Portfolio") was added effective December 21, 1994. The
Vista Portfolio invests all of its investible assets in the Growth
& Income Portfolio ("Growth & Income"), a non, diversified open-end
management investment company.
Description of Investment Securities
The following is a description of certain securities in
which
Growth & Income may invest. Since Vista Portfolio invests all of
its investible assets in Growth & Income, Vista Portfolio will
indirectly bear the investment risks associated with these
investments.
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. Bank Obligations. Bank Obligations include negotiable
certificates of deposit, bankers' acceptances, fixed time deposits
and deposit notes. A certificate of deposit is a short-term
negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased
on a discount basis. A bankers' acceptance is a short-term draft
drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is
liable for payment as is the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date. Fixed
time deposits are obligations of branches of United States banks or
foreign banks which are payable at a stated maturity date and bear
a fixed rate of interest. Although fixed time deposits do not have
a market, there are no contractual restrictions on the right to
transfer a beneficial interest in the deposit to a third party.
Fixed time deposits subject to withdrawal penalties and with
respect to which Growth & Income cannot realize the proceeds
thereon within seven days are deemed "illiquid" for the purposes of
its restriction on investments in illiquid securities. Deposit
notes are notes issued by commercial banks which generally bear
fixed rates of interest and typically have original maturities
ranging from eighteen months to five years.
Banks are subject to extensive governmental regulations that
may limit both the amounts and types of loans and other financial
commitments that may be made and the interest rates and fees that
may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the
purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to
credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations.
Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific
obligations or by government regulation. Investors should also be
aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in
addition to those relating to domestic bank obligations.
3. Commercial Paper. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A
variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying
amounts.
4. Corporate Reorganizations. In general, securities that are
the subject of a tender or exchange offer or proposal sell at a
premium to their historic market price immediately prior to the
announcement of the offer or proposal. The increased market price
of these securities may also discount what the stated or appraised
value of the security would be if the contemplated action were
approved or consummated. These investments may be advantageous
when the discount significantly overstates the risk of the
contingencies involved; significantly undervalues the securities,
assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or
proposal may be replaced or superseded by an offer or proposal of
greater value.
The evaluation of these contingencies requires unusually broad
knowledge and experience on the part of the advisers that must
appraise not only the value of the issuer and its component
businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial
resources and business motivation of the offeror as well as the
dynamics of the business climate when the offer or proposal is in
progress. Investments in reorganization securities may tend to
increase the turnover ration of Growth & Income and increase its
brokerage and other transaction expenses.
5. Foreign Currency Exchange Transactions. Growth & Income
may
engage in foreign currency exchange transactions to protect against
uncertainty in the level of future exchange rates. For example,
Growth & Income 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").
Growth & Income may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
date on which Growth & Income 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, Growth & Income 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 Growth & Income may also
purchase or sell exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies.
Growth & Income may engage in position hedging to protect
against a 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 Growth & Income intends to buy are denominated, when
Growth & Income holds cash or short-term investments). For
position hedging purposes, Growth & Income 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, Growth & Income may also purchase
or sell foreign currency on a spot basis.
Growth & Income'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. "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.
Growth & Income 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 dominated.
Hedging transactions may also be limited by tax
considerations. Hedging transactions may affect the character or
amount of distributions.
Growth & Income may invest in other types of certain futures
contracts and options which entail certain risks. Please see the
Statement of Additional Information for a complete discussion of
these investment techniques and risks associated therewith.
6. Foreign Securities, Eurodollar Certificates of Deposit, ECU
Obligations and Supranational Organizations. Growth & Income may
invest up to 20% of its total assets in foreign securities.
Investing in securities issued by non-U.S. companies involves
considerations and potential risks not typically associated with
investing in obligations issued by U.S. companies. Less
information may be available about non-U.S. companies and these
companies generally are not subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to U.S. companies.
The values of non-U.S. securities are affected by changes in
currency rates or exchange control regulations. Restrictions or
prohibitions on the repatriation of non-U.S. currencies,
application of non-U.S. tax laws, including withholding taxes,
changes in governmental administration or economic or monetary
policy (in the U.S. or outside the U.S.) or changed circumstances
in dealing between nations. Costs are also incurred in connection
with conversions between various currencies. Investing in non-U.S.
sovereign debt involves exposure to the direct or indirect
consequences or political, social or economic changes in developing
and emerging countries that issue the securities. The ability and
willingness of sovereign obligors in developing and emerging
countries or the governmental authorities that control repayment of
their external debt to pay principal and interest on such debt when
due may depend on general economic and political conditions within
the relevant country. Additional factors which may influence the
ability or willingness to service debt include, but are not limited
to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of
its debt service burden to the economy as a whole, and its
government's policy towards the International Monetary Fund, the
World Bank and other international agencies.
Growth & Income may also invest in securities of foreign
issuers in the form of American Depositary Receipts, Global
Depositary Receipts, European Depositary Receipts or other similar
securities representing securities of foreign issuers. Growth &
income treats Depositary receipts as interests in the underlying
securities for purposes of its investment policies. Growth &
Income will limit its investment in Depositary receipts not
sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
A purchaser of an unsponsored Depositary Receipt may not have
unlimited voting rights and may not receive as much information
about the issuer of the underlying securities as with a sponsored
Depositary Receipt.
Growth & Income may also invest in Eurodollar certificates 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. It may also invest in securities denominated in the ECU,
which is a "basket" consisting of specified amounts of currencies
of certain member states of the European Community. The specific
amounts of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community to reflect changes
in relative values of the underlying currencies. The Trustees of
Growth & Income do not believe that such adjustments will adversely
affect holders of ECU-denominated securities or the marketability
of such securities. Growth & Income also may invest in securities
issued by supranational organizations such as The World Bank, which
was charted to finance development projects in developing member
countries, the European Community, which is a twelve nation
organization engaged in cooperative economic activities, the
European Coal and Steel Community, which is an economic union of
various European nations' steel and coal industries, and the Asian
Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical
assistance to member nations of the Asian and Pacific regions. The
specific amounts of currencies comprising the ECU may be adjusted
by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The
Trustees do not believe that such adjustments will adversely affect
holders of ECU-denominated securities or the marketability of such
securities.
7. Forward Commitments. In order to invest Growth & Income's
assets immediately, while awaiting delivery of securities purchased
on a forward commitment basis, short-term obligations that offer
same day settlement and earnings will normally be purchased. When
a commitment to purchase a security on a forward commitment basis
is made, procedures are established consistent with the General
Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends
that an amount of Growth & Income's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of Growth & Income consisting of
liquid securities equal to the amount of Growth & Income's
commitments securities will be established at Growth & Income's
custodian bank. For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued
at market value. If the market value of such securities declines,
additional cash, cash equivalents or highly liquid securities will
be placed in the account daily so that the value of the account
will equal the amount of such commitments by Growth & Income.
Although it is not intended that such purchases would be made
for speculative purposes, purchases of securities on a forward
commitment basis may involve more risk than other types of
purchases. Securities purchased on a forward commitment basis and
the securities held in Growth & Income's portfolio are subject to
changes in value based upon the public's perception of the issuer
and changes, real or anticipated, in the level of interest rates.
Purchasing securities on a forward commitment basis can involve the
risk that the yields available in the market when the delivery
takes place may actually be higher or lower than those obtained in
the transaction itself. On the settlement date of the forward
commitment transaction, Growth & Income will meet its obligations
from then available cash flow, sale of securities held in the
separate account, sale of other securities or, although it would
not normally expect to do so, from the sale of the forward
commitment securities themselves (which may have a value greater or
lesser than Growth & Income's payment obligations). The sale of
securities to meet such obligations may result in the realization
of a capital gains or losses.
To the extent Growth & Income engages in forward commitment
transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for
the purpose of investment leverage, and settlement of such
transactions will be within 90 days from the trade date.
8. Forward Contracts. 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.
9. Illiquid Securities. Illiquid securities are securities
that
may not be sold or disposed of in the ordinary course of business
within seven days at approximately the price used to determine a
funds net asset value. Under current SEC interpretations, the
following types of securities will be considered illiquid: (1)
repurchase agreements maturing in more than seven days; (2) certain
restricted securities (securities whose public resale is subject to
legal or contractual restrictions; (3) options, with respect to
specific securities not traded on a national securities exchange
that are not readily marketable; and (4) any other securities that
are not readily marketable. For purposes of limitations on
investments in illiquid securities, certain investments might be
treated as liquid; such as investments in restricted securities for
which there may be a secondary market of qualified institutional
buyers as contemplated by Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial obligations
issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act
("Section 4(2) paper"). Rule 144A provides an exemption from the
registration requirements of the Securities Act for the resale of
certain restricted securities to qualified institutional buyers.
Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional
investors such as Growth & Income who agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale of Section 4(2) paper by the purchaser
must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a
liquid market for Rule 144A securities or Section 4(2) paper will
develop or be maintained. In determining whether a particular
instrument is liquid or illiquid, consideration is given to, among
other things, the frequency of trades and quotes for the security,
the number of dealers willing to sell the security and the number
of potential purchasers, dealer undertakings to make a market in
the security, the nature of the security and the time needed to
dispose of the security.
10. Interest Rate and Currency Transactions. Growth & Income
may
employ currency and interest rate management techniques including
transactions in options (including yield curve options), futures,
options on futures, forward foreign currency exchange contracts,
currency options and futures and currency and interest rate swaps.
The aggregate amount of Growth & Income's net currency exposure
will not exceed the total net asset value of its portfolio.
However, to the extent that Growth & Income is fully invested while
also maintaining currency positions, it may be exposed to greater
combined risk.
Growth & Income will enter into interest rate and currency swaps on
a net basis, i.e., the two payment streams are netted out, with
only the net amount of the two payments being received or paid, as
the case may be. Interest rate and currency swaps do not involve
the delivery of securities, the underlying currency, other
underlying assets or principal. Accordingly, the risk of loss with
respect to interest rate and currency swaps is limited to the net
amount of interest or currency payments that the party is
contractually obligated to make. If a party to an interest rate or
currency swap defaults, the risk of loss consists of the net amount
of interest or currency payments that the other party is
contractually entitled to receive. Since interest rate and
currency swaps are individually negotiated, an acceptable degree of
correlation between the portfolio investments and the interest rate
or currency swap positions is expected to be achieved.
Foreign currency received may be held in connection with
investments in foreign securities when it would be beneficial to
convert such currency into U.S. dollars at a later date, based on
anticipated changes in the relevant exchange rate.
Growth & Income may purchase or sell without limitation as to a
percentage of its assets when it is anticipated that the foreign
currency will appreciate or depreciate in value, but securities
denominated in that currency do not present attractive investment
opportunities and are not currently held by Growth & Income. In
addition, forward foreign currency exchange contracts may be
entered in order to protect against adverse changes in future
foreign currency exchange rates. Cross-hedging may also be engaged
in by using forward contracts in one currency to hedge against
fluctuations in the value of securities denominated in a different
currency if it is believed that there is a pattern of correlation
between the two currencies. Forward contracts may reduce the
potential gain from a positive change in the relationship between
the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance than if
such contracts had not been entered. The use of foreign currency
forward contracts will not eliminate fluctuations in the underlying
U.S. dollar equivalent value of the prices of or rates of return on
foreign currency denominated portfolio securities and the use of
such techniques will subject Growth & Income to certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will
not be precise. In addition, foreign currency forward contracts
may not always be available at attractive prices, and this will
limit the use of such contracts to hedge or cross-hedge assets.
Also, with regard to the use of cross-hedges, there can be no
assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies
underlying the cross-hedges and the movements in the exchange rates
of the foreign currencies in which the assets that are the subject
of such cross-hedges are denominated.
Interest rate and currency swaps may be entered to the maximum
allowed limits under applicable law. Typically, interest rate
swaps will be used to shorten the effective duration of the
portfolio. Interest rate swaps involve the exchange by one party
with another party of their respective commitments to pay or
receive interest, such as an exchange of fixed rate payments for
floating rate payments. Currency swaps involve the exchange of
their respective rights to make or receive payments in specified
currencies.
11. Mortgage Related Securities. Growth and Income may purchase
mortgage-backed securities-(i.e., securities representing an
ownership interest in a pool of mortgage loans) issued by lenders
such as mortgage bankers, commercial banks and savings and loan
associations. Mortgage loans included in the pool, but not the
security itself, may be insured by the Government National Mortgage
Association or the Federal Housing Administration or guaranteed by
the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation or the Veterans Administration.
Mortgage-backed securities provide investors with payments
consisting of both interest and principal as the mortgages in the
underlying mortgage pools are paid off. Although providing the
potential for enhanced returns, mortgage-backed securities can also
be volatile and result in unanticipated losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
greater part of the principal invested far in advance of the
maturity of the mortgages in the pool. The actual rate of return
of a mortgage-backed security may be adversely affected by the
prepayment of mortgages included in the mortgage pool underlying
the security.
Growth and Income may also invest in securities representing
interests in collateralized mortgage obligations ("CMO"), real
estate mortgage investment conduits ("REMICs") and in pools of
certain other asset backed bonds and mortgage pass-through
securities. Like a bond, interest and prepaid principal are paid,
in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios
of mortgage pass-through securities guaranteed by the U.S.
Government, or U.S. Government-related entities, and their income
streams.
CMOs are structured into multiple classes, each bearing a
different stated maturity. Actual maturity and average life will
depend upon the prepayment experience of the collateral. Monthly
payment of principal received from the pool of underlying
mortgages, including prepayments, are allocated to different
classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect
the expected average life and value of a particular class.
REMICs include governmental and/or private entities that issue
a fixed pool of mortgages secured by an interest in real property.
REMICs are similar to CMOs in that they issue multiple classes of
securities. REMICs issued by private entities are not U.S.
Government securities and are not directly guaranteed by any
government agency. They are secured by the underlying collateral of
the private issuer.
Growth & Income's advisers expect that governmental,
government-related or private entities may create mortgage loan
pools and other mortgage-related securities offering mortgage
pass-through and mortgage collateralized investments in addition to
those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose
terms to maturity may differ from customary long-term fixed-rate
mortgages. Growth and Income may also invest in debentures and
other securities of real estate investment trusts. As new types of
mortgage-related securities are developed and offered to investors,
Growth and Income may consider making investments in such new types
of mortgage-related securities.
12. 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.
Repurchase agreements maturing in more than 7 days are deemed to be
illiquid and are subject to Growth & Income's investment policy
regarding illiquid securities.
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.
13. 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. The
repurchase price is generally equal to the original sales price
plus interest. Reverse repurchase agreements are usually for seven
days or less and cannot be repaid prior to their expiration dates.
Reverse repurchase agreements involve the risk that the market
value of the portfolio securities transferred may decline below the
price at which the seller is obliged to purchase the
securities.
14. Securities Loans. As discussed in the prospectus, Growth
&
Income is permitted to lend its securities to broker/dealers and
other institutional investors in order to generate additional
income. In connection with such loans, Growth & Income will receive
collateral consisting of cash, cash equivalents, U.S. Government
securities or irrevocable letters of credit issued by financial
institutions. Such loans of portfolio securities may not exceed
30% of the value of Growth and Income's total assets. Such
collateral will be maintained at all times in an amount equal to at
least 102% of the current market value plus accrued interest of the
securities loaned. Growth & Income can increase its income through
the investment of such collateral. Such loans will be terminable
at any time upon specified notice. Growth & Income might experience
risk of loss if the institutions with which it has engaged in
portfolio loan transactions breach their agreements. The risks in
lending securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in
the recovery of the securities or possible loss of rights in the
collateral should the borrower experience financial difficulty.
15. Stand-By Commitments. Stand-By Commitments are put
transactions in which the purchaser is entitled to same-day
settlement and the right to receive an exercise price equal to the
amortized cost of the underlying security plus accrued interest, if
any, at the time of exercise. Stand-by commitments are subject to
certain risks, which include the inability of the issuer of the
commitment to pay for the securities at the time the commitment is
exercised, the fact that the commitment is not marketable by Growth
& Income, and that the maturity of the underlying security will
generally be different from that of the commitment.
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 record-keeping 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. Structured Products. Structured Products are interests in
entities organized and operated solely for the purpose of
restructuring the investment characteristics of certain other
investments. This type of restructuring involves the deposit with
or purchase by an entity, such as a corporation or trust, of
specified instruments (such as commercial bank loans) and the
issuance by that entity of one or more classes of securities
("structured products") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured
products to create securities with different investment
characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with
respect to structured products is dependent on the extent of the
cash flow on the underlying instruments. Investment may be made in
products which will represent derived investment positions based on
relationships among different markets or asset classes.
Investments may be made in other types of structured products
including, among others, inverse floaters, spread trades and notes
linked by a formula to the price of an underlying instrument.
Inverse floaters have coupon rates that vary inversely at a
multiple of a designated floating rate (which typically is
determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by
reference to another security) (the "reference rate"). As an
example, inverse floaters may constitute a class of CMO's with a
coupon rate that moves inversely to a designated index, such as
LIBOR (London Interbank Offered Rate) or the Cost of Funds Index.
Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the
coupon rate while any drop in the reference rate of an inverse
floater causes an increase in the coupon rate. A spread trade is
an investment position relating to a difference in the prices or
interest rates of two securities where the value of the investment
position is determined by movements in the difference between the
prices or interest rates, as the case may be, of the respective
securities. When investments are made in notes linked to the price
of an underlying instrument, the price of the underlying security
is determined by a multiple (based on a formula) of the price of
such underlying security. A structured product may be considered
to be leveraged to the extent its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index
rate of interest. Because they are linked to their underlying
markets or securities, investments in structured products generally
are subject to greater volatility than an investment directly in
the underlying market or security. Total return on the structured
product is derived by linking return to one or more characteristics
of the underlying instrument. Because certain structured may
involve no credit enhancement, the credit risk of those structured
products generally would be equivalent to that of the underlying
instruments. Investment may be made in a class of structured
products that is either subordinated or unsubordinated to the right
of payment of another class. Subordinated structured products
typically have higher yields and present greater risks than
unsubordinated structured products. Although the purchase of
subordinated structured products would have similar economic effect
to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of Growth
& Income's fundamental investment limitation related to borrowing
and leverage.
Certain issuers of structured products may be deemed to be,
"investment companies" as defined in the 1940 Act. As a result,
investments in these structured products may be limited by the
restrictions contained in the 1940 Act. Structured products are
typically sold in private placement transactions and there
currently is no active trading market for structured products. As
a result, certain structured products may be deemed illiquid and
subject to its limitation on illiquid investments. Investments in
structured products generally are subject to greater volatility
than an investment directly in the underlying market or
security.
18. U.S. Government Securities. U.S. Government Securities
include (1) U.S. Treasury obligations, which generally differ only
in their interest rates, maturities and times of issuance,
including: U.S. Treasury bills, U.S. Treasury notes, and U.S.
Treasury bonds ; and (2) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities which are supported by
any of the following: (a) the full faith and credit of the U.S.
Treasury, (b) the right of the issuer to borrow any amount listed
to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d)
the credit of the agency or instrumentality.
19. Warrants and Rights. Warrants are options to purchase
equity
securities at a specified price for a specific period of time.
Their prices do not necessarily move parallel to the prices of the
underlying securities. Rights are similar to warrants but normally
have a shorter duration and are distributed directly by the issuer
to shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the assets
of the issuer.
20. 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, liquid 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).
Derivatives and Related Instruments
Options on Securities, Securities Indexes, and Debt Instruments.
Growth & Income may purchase, sell, or exercise call and put
options on (i) securities, (ii) securities indexes, and (iii) debt
instruments. A call option gives the purchaser the right to buy
the underlying securities from the seller at a stated exercise
price. A put option gives the purchaser the right to sell the
underlying securities to the seller of the put option at a stated
exercise price. Call options may be purchased to hedge against an
increase in the price of securities the purchaser ultimately wants
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. Put options may be purchased
to hedge 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.
Growth & Income will only write "covered" options. When writing a
covered call option, a fund must own the underlying securities
subject to the option (or comparable securities satisfying the
cover requirements of securities exchanges). When writing a
covered put option, a fund will maintain a segregated account
consisting of liquid assets equal in value to the value of the
fund's obligation under the covered put option.
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 exercise price higher than
its then-current market value, resulting in a potential capital
loss unless the security subsequently appreciates in value.
In most cases, Growth & Income will purchase and sell
exchange-traded options. Growth & Income, however, may also
purchase, sell or exercise dealer options (also known as
"over-the-counter options"). There may not be a continuous liquid
market for dealer options as there is for 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 counterparty, 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 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.
Futures Contracts and Options on Futures Contracts
Growth & Income may purchase or sell (i) interest rate
futures
contracts, (ii) futures contracts on specified instruments or
indexes, and (iii) options on these future contracts.
Futures Contracts. A futures contract is a bilateral
agreement providing for the purchase and sale of a specified type
and amount of a financial instrument, or, in the case of futures
contracts on indexes of securities, for the making and acceptance
of a cash settlement, at a stated time in the future for a fixed
price. By its terms, a futures contract provides for a specified
settlement date on which, in the case of the majority of interest
rate futures contracts, the fixed income securities underlying a
contract are delivered by the seller and paid for by the purchaser,
or on which, in the case of a stock index futures contract, an
amount equal to a dollar amount multiplied by the difference
between the value of a stock index at the close of the last trading
day of the contract and the value of such index at the time the
futures contract was originally entered into is settled between the
purchaser and seller in cash. The purchase or sale of a futures
contract differs from the purchase or sale of a security in that no
purchase price is paid or received at the time the contract is
entered into. Instead, an amount of cash or cash equivalents, the
value of which may vary but is generally equal to 2% or less of the
value of the contract, must be deposited with the broker as initial
deposit or "margin". Subsequent payments to and from the broker,
referred to as "variation margin", are made on a daily basis as the
value of the index underlying the futures contract fluctuates,
making positions in the futures contract more or less valuable, a
process known as "marking to the market".
At any time prior to the expiration of a futures contract, a
trader may elect to close out its position by taking an opposite
position, subject to the availability of a secondary market, which
will operate to terminate the initial position. At that time, a
final determination of variation margin is made and any loss
experienced by a party is required to be paid to the exchange
clearing corporation, while any profit due to a party must be
delivered to it.
Futures contracts differ from options in that they are
bilateral agreements, with both the purchaser and the seller
equally obligated to complete the transaction. Futures contracts
call for settlement only on the expiration date, and cannot be
"exercised" at any other time during their term.
As indicated above, 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 or selling an index futures contract, a fund must
(1) maintain a segregated account consisting of liquid assets (and
marked to market daily) which, when added to any amounts deposited
with a futures commission merchant as margin, is equal to the
market value of the futures contract; or (2) "cover" its
position.
Options on Futures Contracts. An option on a futures contract
gives the purchaser (the "holder") the right, but not the
obligation, to enter into a "long" position in the underlying
futures contract (i.e., a purchase of such futures contract) in the
case of an option to purchase (a "call" option), or a "short"
position in the underlying futures contract (i.e., a sale of such
futures contract) in the case of an option to sell (a "put"
option), at a fixed priced (the "strike price") up to a stated
expiration date. The holder pays a nonrefundable purchase price
for the option, known as the "premium". The maximum amount of risk
the purchaser of the option assumes is equal to the premium plus
related transaction costs, although this entire amount may be
lost. Upon exercise of the option by the holder, the exchange
clearing corporation establishes a corresponding short position for
the seller (the "writer") of the option in the case of a call
option, or a corresponding long position in the case of a put
option. In the event that an option is exercised, the parties will
be subject to all the risks associated with the trading of futures
contracts, such as payment of variation margin deposits. In
addition, the writer of an option on a futures contract, unlike the
holder, is subject to initial and variation margin requirements on
the option position.
Regulations of the CFTC require Growth & Income to enter
into
transactions in futures contracts and options thereon for hedging
purposes only, in order to assure that it is not deemed to be a
"commodity pool" under such regulations. In particular, CFTC
regulations require that all short futures positions be entered
into for the purpose of hedging the value of securities held in
Growth & Income's portfolio, and that all long futures positions
either constitute bona fide hedging transactions, as defined in
such regulations, or have a total value not in excess of an amount
determined by reference to certain cash and securities positions
maintained for Growth & Income, and accrued profits on such
positions. In addition, Growth & Income may not purchase or sell
such instruments if, immediately thereafter, the sum of the amount
of initial margin deposits on its existing futures positions and
premiums paid for options on futures contracts would exceed 5% of
the market value of Growth & Income's total assets.
As indicated previously, when Growth & Income purchases a
futures contract, an amount of cash or cash equivalents or high
quality debt securities will be deposited in a segregated account
with Growth & Income's custodian so that the amount so segregated,
plus the initial deposit and variation margin held in the account
if its broker, will at all times equal the value of the futures
contract, thereby insuring that the use of such futures is
unleveraged.
Growth & Income's ability to engage in the hedging
transaction
described herein may be limited by the current federal income tax
requirement that Growth & Income derive less than 30% of its gross
income from the sale or other disposition of stock or securities
held for less than three months.
In addition to the foregoing requirements, the Board of
Trustees has adopted an additional restriction on the use of
futures contracts and options thereon, requiring that the aggregate
market value of the futures contracts held by Growth & Income not
exceed 50% of the market value of its total assets. Neither this
restriction nor any policy with respect to the above-referenced
restrictions, would be changed by the Board of Trustees without
considering the policies and concerns of the various federal and
state regulatory agencies.
In addition to any risk factors which may be described above,
the following sets forth certain information regarding the
potential risks associated with Growth & Income's futures and
options transactions.
Risk of Imperfect Correlation. Growth & Income's ability
effectively to hedge all or a portion of its portfolio through
transactions in futures, options on futures or options on stock
indexes depends on the degree to which movements in the value of
the securities or index underlying such hedging instrument
correlate with movements in the value of the relevant portion of
Growth & Income's portfolio. If the values of the portfolio
securities being hedged do not move in the same amount or direction
as the underlying security or index, the hedging strategy for
Growth & Income might not be successful and Growth & Income could
sustain losses on its hedging transaction which would not be offset
by gains on its portfolio. It is also possible that there may be
a negative correlation between the security or index underlying a
futures or option contract and the portfolio securities being
hedged, which could result in losses both on the hedging
transaction and the portfolio securities. In such instances,
Growth & Income's overall return could be less than if the hedging
transaction had not been undertaken. Stock index futures or
options based on a narrower index of securities may present greater
risk than options or futures based on a broad market index, as a
narrower index is more susceptible to rapid an extreme fluctuations
resulting from changes in the value of a small number of
securities. Growth & Income would, however, effect transactions in
such futures or options only for hedging purposes.
The trading of futures and options on indexes involves the
additional risk of imperfect correlation between movements in the
futures or option price and the value of the underlying index. The
anticipated spread between the prices may be distorted due to
differences in the nature of the markets, such as differences in
margin requirements, the liquidity of such markets and the
participation of speculators in the futures and options market.
The purchase of an option on a futures contract also involves the
risk that changes in the value of underlying futures contract will
not be fully reflected in the value of the option purchased. The
risk of imperfect correlation, however, generally tends to diminish
as the maturity date of the futures contract or termination date of
the option approaches. The risk incurred in purchasing an option
on a futures contract is limited to the amount of the premium plus
related transaction costs, although it may be necessary under
certain circumstances to exercise the option and enter into the
underlying futures contract in order to realize a profit. Under
certain extreme market conditions, it is possible that Growth &
Income will not be able to establish hedging positions, or that any
hedging strategy adopted will be insufficient to completely protect
Growth & Income.
Growth & Income will purchase or sell futures contracts or
options only if, in Chase's judgment, there is expected to be a
sufficient degree of correlation between movements in the value of
such instruments and changes in the value of the relevant portion
of Growth & Income's portfolio for the hedge to be effective.
There can be no assurance that Chase's judgment will be accurate.
Potential Lack of a Liquid Secondary Market. The ordinary
spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to
distortions. First, all participants in the futures market are
subject to initial deposit and variation margin requirements. This
could required Growth & Income to post additional cash or cash
equivalents as the value of the position fluctuates. Further,
rather than meeting additional variation margin requirements,
investors may close futures contracts through offsetting
transactions which could distort the normal relationship between
the cash and futures markets. Second, the liquidity of the futures
or options market may be lacking. Prior to exercise or expiration,
a futures or option position may be terminated only by entering
into a closing purchase or sale transaction, which requires a
secondary market on the exchange on which the position was
originally established. While Growth & Income will establish a
futures or option position only if there appears to be a liquid
secondary market therefor, there can be no assurance that such a
market will exist for any particular futures or option contract at
any specific time. In such event, it may not be possible to close
out a position held by Growth & Income, which could require Growth
& Income to purchase or sell the instrument underlying the
position, make or receive a cash settlement, or meet ongoing
variation margin requirements. The inability to close out futures
or option positions also could have an adverse impact on Growth &
Income's ability effectively to hedge its portfolio, or the
relevant portion thereof.
The liquidity of a secondary market in a futures contract or
an option on a futures contract may be adversely affected by "daily
price fluctuation limits" established by the exchanges, which limit
the amount of fluctuation in the price of a contract during a
single trading day and prohibit trading beyond such limits once
they have been reached. The trading of futures and options
contracts also is subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of the brokerage firm or
clearing house or other disruptions of normal trading activity,
which could at times make it difficult or impossible to liquidate
existing positions or to recover excess variation margin payments.
Risk of Predicting Interest Rate Movements. Investments in
futures contracts on fixed income securities and related indexes
involve the risk that if Chase's investment judgment concerning the
general direction of interest rates is incorrect, Growth & Income's
overall performance may be poorer than if it had not entered into
any such contract. For example, if Growth & Income has been hedged
against the possibility of an increase in interest rates which
would adversely affect the price of bonds held in its portfolio and
interest rates decrease instead, Growth & Income will lose part or
all of the benefit of the increased value of its bonds which have
been hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if Growth & Income has
insufficient cash, it may have to sell bonds from its portfolio to
meet daily variation margin requirements, possibly at a time when
it may be disadvantageous to do so. Such sale of bonds may be, but
will not necessarily be, at increased prices which reflect the
rising market.
Trading and Position Limits. Each contract market on which
futures and option contracts are traded has established a number of
limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others.
Chase does not believe that these trading and position limits will
have an adverse impact on the hedging strategies regarding Growth
& Income's portfolio.
Information about Securities Ratings
Corporate Bonds - Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B - Bonds where are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
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 - Standard & Poor's describes the BB and B 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.
Commercial Paper - Moody's Investors Service, Inc.
"Prime-1" - Commercial Paper issuers rated Prime-1 are judged
to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk. Margins of support for
current indebtedness are large or stable with cash flow and asset
protection well assured. Current liquidity provides ample coverage
of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements
may change over the intermediate or longer term, such changes are
most unlikely to impair the fundamentally strong position of
short-term obligations.
"Prime-2" - Issuers in the Commercial Paper market rated
Prime-2 are high quality. Protection for short-term holders is
assured with liquidity and value of current assets as well as cash
generation in sound relationship to current indebtedness. They are
rated lower than the best commercial paper issuers because margins
of protection may not be as large or because fluctuations of
protective elements over the near or immediate term may be of
greater amplitude. Temporary increases in relative short and
overall debt load may occur. Alternative means of financing remain
assured.
"Prime-3" - Issuers in the Commercial Paper market rated
Prime-3 have an acceptable capacity for repayment of short-term
promissory obligations. The effect of industry characteristics and
market composition may be more pronounced. Variability in earning
and profitability may result in changes in the level of debt
protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Commercial Paper - Standard & Poor's Corporation
"A" - Issuers assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issuers in this
category are further refined with the designation 1, 2 and 3 to
indicate the relative degree of safety.
"A-1" - This designation indicates that the degree of safety
regarding timely payment is very strong.
"A-2" - Capacity for timely payment for issuers with this
designation is strong. However, the relative degree of safety is
not as overwhelming as for issues designated "A-1".
"A-3" - Issuers carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designation.
Investment Limitations
The Fund has adopted limitations regarding the investment
activity of the Vista Portfolio which are fundamental policies and
may not be changed without the approval of the holders of a
majority of the outstanding voting shares of the Vista Portfolio.
"Majority" for this purpose and under the Investment Company Act of
1940 means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares. A
complete statement of all such limitations are set forth below.
The Vista 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, and positions in
permissible options and futures will not be subject to this
restriction.
2. Alone or together with any other investor make investments for
the purpose of exercising control over, or management of any
issuer.
3. Purchase or sell interests in commodities, commodities
contracts, or real estate, (including limited partnership interests
but excluding securities secured by real estate or interests
therein), except that the Vista Portfolio may purchase securities
of issuers which invest or deal in any of the above and may engage
in permissible futures and options transactions, permissible
forward purchases or sales of foreign currencies or securities, and
the purchase and sale of mortgage-backed securities.
4. Make loans, except as provided in limitation (5) below and
except through the purchase of debt instruments (including, without
limitation, bonds, notes, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time
deposits) in private placements (the purchase of publicly-traded
obligations are not being considered the making of a loan) and
further, through the use of repurchase agreements or the purchase
of short-term obligations.
5. Lend its portfolio securities in excess of one-third 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 amounts in excess of 33 1/3% of its total assets
(including the amount borrowed), taken at market value at the time
of the borrowing, and then only from banks as a temporary measure
for extraordinary or emergency purposes or by engaging in reverse
repurchase transactions; nor may the Vista Portfolio pledge,
mortgage, or hypothecate more than 1/3 of its net assets to secure
such borrowings. In the event the Vista Portfolio borrows in
excess of 5% of its total assets, the Vista Portfolio will not
purchase additional investment securities until any borrowings that
exceed 5% of the Vista Portfolio's total assets are repaid.
7. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Portfolio except as may be necessary in connection with borrowings
mentioned in limitation (6) above, and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Vista
Portfolio's total assets, taken at market value at the time
thereof; provided that collateral arrangements with respect to
permissible futures and options transactions, including initial and
variation margin payments, are not considered to be the pledge of
assets for purposes of this restriction.
8. Underwrite securities of other issuers except insofar as the
Vista Portfolio may be deemed an underwriter under the Securities
Act of 1933 in selling portfolio securities.
9. Issue any senior security (as defined in the 1940 Act), except
that (a) the Vista Portfolio may engage in transactions that may
result in the issuance of senior securities to the extent permitted
under the Portfolio's investment policies and applicable
regulations and interpretations of the 1940 Act or an exemptive
order; (b) the Vista Portfolio may acquire other securities, the
acquisition of which may result in the issuance of a senior
security, to the extent permitted under the Portfolio's investment
policies and applicable regulations or interpretations of the 1940
Act; and (c) subject to the restrictions set forth above, the Vista
Portfolio may borrow money as authorized by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect
to the Vista Portfolio's permissible options and futures
transactions, including deposits of initial and variation margin,
are not considered to be the issuance of a senior security.
The Vista Portfolio is subject to the following
non-fundamental investment limitations:
1. The Vista Portfolio may not invest more than 15% of its net
assets in illiquid securities.
2. The Vista Portfolio may not, with respect to 50% of its
assets, hold more than 10% of the outstanding voting securities of
an issuer.
3. The Vista Portfolio may not purchase or sell interests in oil,
gas, or mineral leases.
4. Write, purchase or sell puts, calls or combinations thereof,
except that the Vista Portfolio may buy and sell permissible
options and futures, and may hold and sell warrants where the
grantor of the warrants is the issuer of the underlying securities.
5. Purchase any securities on margin (except that the Vista
Portfolio may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of portfolio securities, and
the Vista Portfolio may make margin payments in connection with
permissible transactions in futures contracts and options) or make
short sales of securities or maintain a short position, except that
the Vista Portfolio may sell short against the box.
6. The Vista Portfolio will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying security to
no more than 5% of the value of its net assets (at the time of
investment).
7. Investments in bank obligations are limited to those of
U.S.
banks (including their foreign branches) which have total assets at
the time of purchase in excess of $1 billion and the deposits of
which are insured by either the Bank Insurance Fund or the Savings
Association Insurance Fund of the Federal Deposit Insurance
Corporation, and foreign banks (including their U.S. branches)
having total assets in excess of $10 billion (or the equivalent in
other currencies), and such other U.S. and foreign commercial banks
which are judged by the advisers to meet comparable credit standing
criteria.
In addition, Growth & Income is subject to additional
fundamental and nonfundamental investment limitations which are set
forth in its prospectus and statement of additional information.
Please see Growth & Income's Statement of Additional Information
regarding these operating policies.
Lending of Portfolio Securities
The Vista Portfolio is not permitted to make loans to other
persons, except (i) through the lending of its portfolio securities
and provided that any such loans do not exceed 33 1/3% of the Vista
Portfolio's total assets (taken at market value), (ii) through the
use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of the Vista
Portfolio's total assets will be invested in repurchase agreements
maturing in more than seven days, or (iii) by purchasing, subject
to the limitation in paragraph 6 above, a portion of an issue of
debt securities of types commonly distributed privately to
financial institutions; for purposes of this limitation the
purchase of short-term commercial paper and other debt securities
which are part of an issue offered to the public shall not be
considered the making of a loan.
For purposes of the investment restrictions described above,
the issuer of a tax-exempt security is deemed to be the entity
(public or private) ultimately responsible for the payment of the
principal of and interest on the security. For purposes of
Investment Restriction No. 7 industrial developments bonds, where
the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped
together as an "industry".
In the event the Vista Portfolio were ever to redeem its
investment in Growth & Income and the Investment Adviser were to
manage the Vista Portfolio's assets directly (or delegate such
management to a sub-adviser), the Vista Portfolio would be subject
to the above-described fundamental investment policies. If the
Vista Portfolio were to redeem its investment in Growth & Income
and invest in another investment company, the shareholders of the
Vista Portfolio would be asked to approve the adoption of the
investment policies of such investment company to the extent
necessary or appropriate to allow the Vista Portfolio to make such
investment.
MANAGEMENT OF THE FUND
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,
Director3 Denver Public Schools (1988
-1990)
Douglas L. Wooden Great-West Life & Annuity
Insurance
Director1 5 Company: Senior
Vice-President, Financial
Services
(since 1996); Senior
Vice-President, Chief
Financial Officer
(1991-1996)
James D. Motz Great-West Life & Annuity
Insurance
Director1 5 Company: Senior
Vice-President, Employee
Benefits
Operations (since 1991);
Vice-President, Group
(1983-1990)
Sanford Zisman Attorney, Zisman &
Ingraham,
P.C.
Director4
Glen R. Derback Great-West Life & Annuity
Insurance
Treasurer, Principal
Company: Vice-President, Financial
Financial and Accounting Officer1 5 Control (since
1984);
Ruth B. Lurie Great-West Life & Annuity
Insurance
Secretary1 5 Company: 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 GW Capital or its affiliates.
The chart below sets forth the annual fees paid or expected to be
paid to the non-interested directors and certain other information.
R.P. Koeppe
R. Jennings
S. Zisman
Compensation Received from the Fund*
$ 8,000
$ 8,000
$ 8,000
Pension or Retirement Benefits Accrued as Fund Expense*
$ 0
$ 0
$ 0
Total Compensation Received from the Fund and All Affiliated
Funds**
$ 16,000
$ 16,000
$ 16,000
* Estimated for current Fiscal Year
** As of January 31, 1997 there were twenty-nine funds for which
the directors serve as directors or Trustees, of which twenty-two
are Portfolios of the Fund. The total compensation paid is
comprised of the amount estimated to be paid during the Fund's
current fiscal year by the Fund and its affiliated investment
companies.
All of the shares of the Portfolio are owned by FutureFunds II
a separate account of Great-West Life & Annuity Insurance
Company.
The Investment Adviser of the Fund
The information that follows supplements the information
provided about the Investment Adviser under the caption "Management
of the Fund - Investment Adviser of the Fund" in the Prospectus.
GW Capital Management, Inc. (the "Investment Adviser")
serves
as the investment adviser to the Fund pursuant to an Investment
Advisory Agreement dated April 1, 1982 with the Fund. The
Investment Adviser is a wholly owned subsidiary of GWL&A which in
turn is a wholly owned subsidiary of Great-West. Great-West is a
99.4% owned subsidiary of Great-West Lifeco Inc., which in turn is
an 86.4% subsidiary of Power Financial Corporation, Montreal,
Quebec. A majority of the common stock of Power Financial
Corporation is owned by 171263 Canada Inc. 171263 Canada Inc. is
a wholly owned subsidiary of Power Corporation of Canada, which, in
turn, is controlled by a Canadian investor, Paul Desmarais, and his
associates.
The Investment Advisory Agreement, as amended, was considered
by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined in the
Investment Company Act of 1940), on November 1, 1996. The
Agreement will remain in effect until November 1, 1997 and will
continue in effect from year to year if approved annually (a) by
the Board of Directors of the Fund or by a majority of the
outstanding shares of the Fund, including a majority of the
outstanding shares of each portfolio, and (b) by a majority of the
Directors who are not parties to such contract or "interested
persons" of any such party. The agreement is not assignable and
may be terminated without penalty on 60 days' written notice at the
option of either party or by the vote of the shareholders of the
Fund.
While the Investment Adviser is at all times subject to the
direction of the Board of Directors of the Fund, the Investment
Advisory Agreement provides that the Investment Adviser, subject to
review by the Board of Directors, is responsible for the actual
management of the Fund and has responsibility for making decisions
to buy, sell or hold any particular security. The Investment
Adviser provides the portfolio managers for the Fund. Such
managers consider analysis from various sources, make the necessary
investment decisions and effect transactions accordingly. The
Investment Adviser also is obligated to perform certain
administrative and management services for the Fund and is
obligated to provide all the office space, facilities, equipment
and personnel necessary to perform its duties under the Agreement.
With respect to the Vista Portfolio, because all the Vista
Portfolio's investible assets will be invested in Growth & Income,
the investment adviser to Growth & Income will "in effect" manage
the Vista Portfolio in accordance with Growth & Income's stated
investment objectives and policies, making investment decisions for
Growth & income and placing orders to buy and sell securities on
behalf of Growth & Income. GW Capital will be responsible for
accounting and administration of the Vista Portfolio only.
Fees
For the year ended October 31, 1996, the Investment Adviser
has been paid $ 360,710 for the services it provides to the Vista
Portfolio.
The Growth and Income Portfolio ("Growth & Income")
Trustees and Officers
The Trustees and officers and their principal occupations for
at least the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate those Trustees
and officers that are "interested persons" (as defined in the 1940
Act). Unless otherwise indicated below, the address of each
officer other than the Chairman is 6 St. James Avenue, Suite 900,
Boston, Massachusetts.
FERGUS REID, III - Chairman and Trustee. Chairman of the Board of
Trustees of Mutual Fund Group and Mutual Fund Trust. Chairman and
Chief Executive Officer, Lumelite Corporation, since September
1985; Trustee, Morgan Stanley Funds. Address: 202 June Road,
Stamford, Connecticut 06903. Age: 64
DR. RICHARD E. TEN HAKEN - Trustee. Former District Superintendent
of Schools, Monroe No.2 and Orleans Counties, New York; Chairman of
the Board and President, New York State Teachers' Retirement
System. Address: 4 Barnfield Road, Pittsfield, New York 14534.
Age: 62
H. RICHARD VARTABEDIAN* - Trustee and President. Consultant,
Republic Bank of New York; formerly, Senior Investment Officer,
Division Executive of the Investment Management Division of The
Chase Manhattan Bank, N.A., 1980 through 1991. Address: P.O. Box
296, Beach Road, Hendrick's Head, Southport, Maine 04576. Age: 60
STUART W. CRAGIN, JR. - Trustee. Retired; formerly, President,
Fairfield Testing Laboratory, Inc. He has previously served in a
variety of marketing, manufacturing and general management
positions with Union Camp Corp., Trinity Paper & Plastics Corp.,
and Conover Industries. Address: 108 Valley Road, Cos Cob,
Connecticut 06807. Age: 63
IRVING L. THODE - Trustee. Retired; formerly Vice President of
Quotron Systems. He has previously served in a number of executive
positions with Control Data Corp., including President of its Latin
American Operations, and General Manager of its Data Services
business. Address: 80 Perkins Road, Greenwich, Connecticut 06830.
Age: 65
JOSEPH J. HARKINS* - Trustee. Retired; Commercial Sector Executive
and Executive Vice President of The Chase Manhattan Bank, N.A. from
1985 through 1989. He was employed by Chase in numerous capacities
as an officer from 1954 through 1989. Director of Blessings
Corporation, Jefferson Insurance Company of New York, Monticello
Insurance Company and National. Address: 257 Plantation Circle
South, Ponte Verde Beach, Florida 32082; Age: 65.
WILLIAM J. ARMSTRONG - Trustee. Vice President and Treasurer
Ingersoll-Rand Company. Address: 49 Aspen Way, Upper Saddle River,
New Jersey 07458; Age: 54.
JOHN R.H. BLUM - Trustee. Attorney in private practice; formerly
partner in the law firm of Richards, O'Neil & Allegaert;
Commissioner of Agriculture, State of Connecticut 1992-1995.
Address: 332 Main Street, Lakeville, Connecticut 06039; Age: 67
W. PERRY NEFF* - Trustee. Independent Financial Consultant;
Director of North America Life Assurance Co., Petroleum & Resources
Corp. and The Adams Express Co.; formerly Director and Chairman of
The Hanover Funds Inc.; formerly Director, Chairman and President
of The Hanover Investments Funds Inc. Address: RR 1 Box 102,
Weston, Vermont 05181; Age: 69
ROLAND R. EPPLEY, JR. - Trustee. Retired; formerly President and
Chief Executive Officer, Eastern States Bankcard Association Inc.
(1971-1988); Director, Janel Hydraulics, Inc.; formerly Director of
The Hanover Funds, Inc. Address: 105 Coventry Place, Palm Beach
Gardens, Florida 33418; Age: 64.
W.D. MACCALLAN - Trustee. Director of The Adams Express Co. and
Petroleum & Resources Corp.; formerly Chairman of the Board and
Chief Executive Officer of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Director of The Hanover Funds, Inc. and
The Hanover Investment Funds, Inc. Address: 624 East 45th Street
Savannah, Georgia 31405; Age: 69.
* Interested person as defined under the 1940 Act. Mr. Reid is not
an interested person of Growth & Income's investment advisor or
principal underwriter, but may be deemed an interested person of
Growth & Income solely by reason of being an officer of Growth &
Income.
The Board of Trustees of the Trust presently has an Audit
Committee. The members of the Audit Committee are Messrs. Ten
Haken (Chairman), Vartabedian Cragin, Thode and Reid. The function
of the Audit Committee is to recommend independent auditors and
monitor accounting and financial matters. The Audit Committee met
two times during the fiscal year ended October 31, 1996.
The board of Trustees has established an Investment Committee.
The members of the Investment Committee are Messrs. Vartabedian
(President) and Reid, as well as Leonard M. Spalding, President of
Vista Capital Management. The function of the Investment Committee
is to review the investment management process of Growth & Income.
The Trustees and officers of Growth & Income appearing above
also serve in the same capacities with respect to Mutual Fund
Group, Mutual Fund Trust, Mutual Fund Variable Annuity Trust,
Mutual Fund Select Group, Mutual Fund Select Trust, Capital Growth
Portfolio, International Equity Portfolio and New Growth
Opportunities Portfolio.
The Investment Adviser of Growth & Income
The Chase Manhattan Bank, N.A. ("Chase") manages the assets of
Growth & Income pursuant to an investment advisory agreement, dated
May 6, 1996 (the "Advisory Agreement"). Subject to such policies
as the Board of Trustees may determine, Chase makes investment
decisions for Growth & Income. Pursuant to the terms of the
Advisory Agreement, Chase provides Growth & Income with such
investment advice and supervision as it deems necessary for the
proper supervision of Growth & Income's investments. Chase
continuously provides investment programs and determines from time
to time what securities shall be purchased, sold or exchanged and
what portion of Growth & Income's assets shall be held uninvested.
Chase furnishes, at its own expense, all services, facilities and
personnel necessary in connection with managing the investments and
effecting portfolio transactions for Growth & Income. The other
expenses attributable to, and payable by Growth & Income, are
described under "Investment Adviser of Growth & Income Portfolio"
in the Prospectus. The Advisory Agreement for Growth & Income will
continue in effect from year to year only if such continuance is
specifically approved at least annually by the Board of Trustees or
by vote of a majority of Growth & Income's outstanding voting
securities and, in either case, by a majority of the Trustees who
are not parties to the Advisory Agreement or interested persons of
any such party, at a meeting called for the purpose of voting on
such Advisory Agreement.
Under the Advisory Agreement, Chase may delegate a portion of
its responsibilities to a sub-adviser. In addition, the Advisory
Agreement provides that Chase may render services through its own
employees or the employees of one or more affiliated companies that
are qualified to act as an investment adviser of Growth & Income
and are under the common control of Chase as long as all such
persons are functioning as part of an organized group of persons,
managed by authorized officers of Chase.
Chase has entered into an investment sub-advisory agreement
dated as of May 6, 1996 with Chase Asset Management, Inc. ("CAM").
With respect to the day-to-day management of Growth & Income, under
the sub-advisory agreement, CAM makes decisions concerning, and
places all orders for, purchases and sales of securities and helps
maintain the records relating to such purchases and sales. CAM
may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that
are qualified to act as an investment adviser to Growth & Income
under applicable laws and are under the common control of Chase;
provided that (i) all persons, when providing services under the
sub-advisory agreement, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of CAM. This
arrangement will not result in the payment of additional fees by
Growth & Income.
Pursuant to the terms of the Advisory Agreement and CAM's
agreement with Chase, Chase and CAM are permitted to render
services to others. Each advisory agreement is terminable without
penalty by Growth & Income on not more than 60 days', nor less than
30 days', written notice when authorized either by a majority vote
of Growth & Income's investors or by a vote of a majority of the
Board of Trustees of Growth & Income, or by Chase or CAM on not
more than 60 days', nor less than 30 days', written notice, and
will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The advisory agreements provide that
Chase or CAM under such agreement shall not be liable for any error
of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of portfolio
transactions for Growth & Income, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties
thereunder.
Under the Advisory Agreement, Chase may utilize the
specialized portfolio skills of all its various affiliates, thereby
providing Growth & Income with greater opportunities and
flexibility in accessing investment expertise. With respect to
Growth & Income, the equity research team of Chase looks for two
key variables when analyzing stocks for potential investment by
equity portfolios: value and momentum. To uncover these
qualities, the team uses a combination of quantitative analysis,
fundamental research and computer technology to help identify
undervalued stocks.
Chase, a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, is a commercial
bank offering a wide range of banking and investment services to
customers throughout the United States and around the world. The
Chase Manhattan Corporation is the entity resulting from the merger
of The Chase Manhattan Corporation into Chemical Banking
Corporation on March 31, 1996. Chemical Banking Corporation was
thereupon renamed The Chase Manhattan Corporation. Also included
among Chase's accounts are commingled trust funds and a broad
spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
CAM is a wholly-owned operating subsidiary of Chase. CAM is
registered with the Securities and Exchange Commission as an
investment adviser and was formed for the purpose of providing
discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function, and the
same individuals who serve as portfolio managers for CAM also serve
as portfolio managers for Chase.
In consideration of the services provided by Chase pursuant to
the Advisory Agreement, Growth & Income pays an investment advisory
fee computed and paid monthly based on a rate equal to .40%. of
Growth & Income's average daily net assets, on an annualized basis
for Growth & Income's then-current fiscal year. However, Chase may
voluntarily agree to waive a portion of the fees payable to it on
a month-to-month basis. For its services under its sub-advisory
agreement, CAM will be entitled to receive such compensation,
payable by Chase out of its advisory fee, as is described in the
prospectus.
The Growth & Income Administrator
Pursuant to an Administration Agreement, dated November 15,
1993 (the "Administration Agreement"), Chase serves as
administrator of Growth & Income. Chase provides certain
administrative services to Growth & Income, including among other
responsibilities, coordinating the negotiation of contracts and
fees with, and the monitoring of performance and billing of, Growth
& Income's independent contractors and agents; preparation for
signature by an officer of Growth & Income of all documents
required to be filed for compliance by Growth & Income with
applicable laws and regulations excluding those of the securities
laws of various states; arranging for the computation of
performance data, including net asset value and yield; responding
to shareholder inquiries; and arranging for the maintenance of
books and records of Growth & Income and providing, at its own
expense, office facilities, equipment and personnel necessary to
carry out its duties. The administrator does not have any
responsibility or authority for the management of Growth & Income,
the determination of investment policy, or for any matter
pertaining to the distribution of shares of Growth & Income or the
Vista Portfolio.
Under the Administration Agreement, Chase renders
administrative services to others. The administration agreement
will continue in effect from year to year with respect to Growth &
Income only if such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of
Growth & Income's outstanding voting securities and, in either
case, by a majority of the Trustees who are not parties to the
administration agreement of "interested person" (as defined in the
1940 Act) or any such party. The administration agreement is
terminable without penalty by the Trust on behalf of Growth &
Income on 60 days' written notice when authorized either by a
majority vote of Growth & Income's shareholders or by a vote of a
majority of the Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940
Act) Growth & Income, or by the Administrator on 60 days' written
notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The administration
agreement also provides that neither Chase nor its personnel shall
be liable for any error of judgment or mistake of law or for any
act or omission in the administration or management of Growth &
Income, except for willful misfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under
the administration agreements.
In addition, the administration agreement provides that, in
the event the operating expenses of Growth & Income, including all
investment advisory, administration and sub-administration fees,
but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, for any fiscal year
exceed the most restrictive expense limitation applicable to Growth
& Income imposed by the securities laws or regulations thereunder
of any state in which the shares of Growth & Income or Vista
Portfolio are qualified for sale, as such limitations may be raised
or lowered from time to time, Chase shall reduce its administration
fee (which fee is described below) to the extent of its share of
such excess expenses. The amount of such reduction to be borne by
Chase shall be deducted from the monthly administration fee
otherwise payable to Chase during such fiscal year; and if such
amounts should exceed the monthly fee, Chase shall pay to Growth &
Income its share of such excess expenses no later than the last day
of the first month of the next succeeding fiscal year.
In consideration of the services provided Chase pursuant to
the administration agreement, Chase receives from Growth & Income
a fee computed and paid monthly at an annual rate equal to 0.05% of
Growth & Income's average daily net assets, on an annualized basis
for Growth & Income's then-current fiscal year. Chase may
voluntarily waive a portion of the fees payable to it with respect
to Growth & Income on a month-to-month basis.
For the fiscal years ended October 31, 1993, 1994, 1995 and
1996, Chase, was paid or accrued the following administration fees
and voluntarily waived the amounts in parentheses following such
fees: $469,585; $600,633; $851,900 and $971,251.
PURCHASE AND REDEMPTION OF SHARES
As of October 31, 1996, 100% of the 61,926,690 outstanding
shares of the Vista Portfolio were held of record by FutureFunds II
Series Account.
CALCULATION OF YIELD
As summarized in the Prospectus under the heading "Performance
Related Information", yields of this Portfolio 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
Portfolio will vary from time to time depending upon market
conditions and the composition of the Portfolio. Yield should also
be considered relative to changes in the value of the shares of the
Portfolio and to the relative risks associated with the investment
objectives and policies of the Portfolio. Below is an example of
the yield calculation for the Portfolio.
Maxim Vista Growth & Income Portfolio
The following is an example of the yield calculation for the
Portfolio based on a 30-day period ending October 31, 1996.
Formula: YIELD = 2[(a+b)/cd + 1)6-1]
Where: a = net investment income earned during the period
by the portfolio company attributable to shares owned by the
sub-account.
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 October 31, 1996:
a = 132,012.97
b = 37,179.18
c = 61,051,630.80
d = 1.39570000
Therefore, 1 month yield as of October 31, 1996 is 1.34%.
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.
Below is an example of the total return calculation for the
Portfolio.
MAXIM VISTA GROWTH & INCOME PORTFOLIO
TOTAL RETURN PERFORMANCE
FORMULA: P(1=T)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 at 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)1/N] -1
One year total return as of October 31, 1996:
ERV = 1.47799
N = 1.00
P = 1.23152
Therefore, total return as of October 31, 1995 is 20.01%
compounded annually.
Price Make-up Sheet
Maxim Vista Growth & Income Portfolio
Period Ended 10/31/96 Per Share
Amount
Undistributed Net Income -
Beginning of Year $ 343
Dividend Income 1,552,411
Interest Income 0
Operational Expenses 360,710
Net Investment Income 1,191,701
Dividend Distribution -
End of Year 1,169,079
Undistributed Net Investment
Income -End of Year 22,966
.0004
Net Realized Gain(Loss) on
Investments - Beginning of Year 1,414,461
Net Realized Gain(Loss) on
Investments End of Year 6,631,434
Distribution from Net
Realized Gain 1,414,461
Accumulated Undistributed Net
Realized Gain(Loss)
on Investments 6,631,434 .1071
Net Unrealized Appreciation
(Depreciation) on Investments 8,343,941
.1347
Capital Stock at Par 6,192,669
.1000
Additional Paid-In Capital 65,239,269
1.0535
Net Assets 86,430,279
1.3957
Shares Outstanding 61,926,690
PART B
FINANCIAL STATEMENTS
MAXIM SERIES FUND, INC.
MAXIM VISTA GROWTH & INCOME PORTFOLIO
Financial Statements and Financial Highlights
for the Year Ended October 31, 1996 and
Period from December 21, 1994 (Inception)
to October 31, 1995 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Maxim Series Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of Maxim Vista Growth & Income Portfolio of Maxim
Series Fund, Inc. as of October 31, 1996, and the related statement
of operations, statement of changes in net assets and the financial
highlights for the period from December 21, 1994 (inception) to
October 31, 1995 and year ended October 31, 1996. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of October 31, 1996 and 1995, by correspondence with the
custodian and brokers, and the application of alternative auditing
procedures when confirmations were not received. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Maxim Vista Growth & Income Portfolio of Maxim Series Fund, Inc. at
October 31, 1996 and 1995 and the results of its operations, the
changes in net assets and the financial highlights for the year
ended October 31, 1996 and the period from December 21, 1994
(inception) to October 31, 1995, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
December 10, 1996
MAXIM SERIES FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
MAXIM VISTA
GROWTH
& INCOME
PORTFOLIO
ASSETS:
Investments in Hub - Growth and Income Portfolio, at value
$86,559,492
Receivable for investments sold
41,561
Total assets
86,601,053
LIABILITIES:
Payable for redemptions
30,500
Other liabilities
140,274
Total liabilities
170,774
NET ASSETS
$86,430,279
NET ASSETS REPRESENTED BY:
Capital stock, $.10 par value
$6,192,669
Additional paid-in capital
65,239,269
Net unrealized appreciation on investments
8,343,941
Undistributed net investment income
22,966
Accumulated undistributed net realized gain on investments
6,631,434
NET ASSETS
$86,430,279
NET ASSET VALUE PER OUTSTANDING SHARE
$1.39569
SHARES OF CAPITAL STOCK:
Authorized
100,000,000
Outstanding
61,926,690
See notes to financial statements.
MAXIM SERIES FUND INC.
STATEMENT OF OPERATIONS
OCTOBER 31, 1996
MAXIM VISTA
GROWTH
& INCOME
PORTFOLIO
INVESTMENT INCOME:
Investment income from portfolio
$1,873,199
Expenses from Hub portfolio
(320,788)
Total investment income
1,552,411
EXPENSES:
Advisory fees
360,710
Total expenses
360,710
NET INVESTMENT INCOME
1,191,701
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments
6,631,434
Change in net unrealized appreciation on investments
3,954,475
Net change in realized and unrealized appreciation on
investments
10,585,909
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS
$11,777,610
See notes to financial statements.
MAXIM SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1996 AND
THE PERIOD DECEMBER 21, 1994 (INCEPTION) TO OCTOBER 31, 1995
Maxim Vista Growth & Income
1996
1995
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income
$1,191,701
$638,920
Net realized gain
6,631,434
1,414,461
Change in net unrealized appreciation
3,954,475
4,389,466
Net increase in net assets resulting from operations
11,777,610
6,442,847
DISTRIBUTION TO SHAREHOLDERS:
From net investment income
(1,169,079)
(638,577)
From long-term capital gain
(1,414,461)
Total distribution
(2,583,540)
(638,577)
SHARE TRANSACTIONS:
Net proceeds from sale of shares
48,967,765
54,737,972
Reinvestment of distribution
2,583,393
638,577
Cost of shares redeemed
(23,718,112)
(11,777,656)
Net increase in net assets resulting from share transactions
27,833,046
43,598,893
Total increase in net assets
37,027,116
49,403,163
NET ASSETS:
Beginning of period
49,403,163
0
End of period
$86,430,279
$49,403,163
See notes to financial statements.
MAXIM SERIES FUND, INC.
MAXIM VISTA GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock of the portfolio for the
year ended October 31, 1996 and the period
December 21, 1994 [inception] to October 31, 1995 were as follows:
Period Ended October 31,
1996
1995
Net Asset Value, Beginning of Period
$1.2133
$1.0000
Income From Investment Operations
Net Investment Income
0.0219
0.0174
Net Realized and Unrealized Gain
0.2147
0.2133
Total Income From Investment Operations
0.2366
0.2307
Less Distributions
From Net Investment Income
(0.0215)
(0.0174)
From Net Realized Gain
(0.0327)
Total Distributions
(0.0542)
(0.0174)
Net Asset Value, End of Period
$1.3957
$1.2133
Total Return
20.01%
27.30% *
Net Assets, End of Period
$86,430,279
$49,403,163
Ratio of Expenses to Average Net Assets
1.00%
1.01% *
Ratio of Net Investment Income to Average Net Assets
1.75%
2.21% *
* Annualized
MAXIM SERIES FUND, INC.
MAXIM VISTA GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1996 AND
THE PERIOD DECEMBER 21, 1994 (INCEPTION) TO OCTOBER 31, 1995
1. HISTORY OF THE FUND
Maxim Series Fund, Inc. (the Fund) is a Maryland corporation
organized on December 7, 1981 as an open-end management investment
company. The Maxim Vista Growth & Income Portfolio (the
Portfolio) is non-diversified. The Portfolio commenced operations
on December 21, 1994. Interests in the Portfolio are represented
by separate classes of beneficial interest of the Fund. Shares of
the Fund are sold only to FutureFunds Series Account II of
Great-West Life & Annuity Insurance Company (the Company), to fund
benefits under variable annuity contracts and variable life
insurance policies issued by the Company. The shares are sold at
a price equal to the respective net asset value per share of each
class of shares.
The Fund seeks to achieve the investment objective of the
Portfolio through the adoption of a Hub and Spoke structure.
Contribution of Portfolio (i.e., the Spoke) investible funds to the
Hub portfolio are made in exchange for beneficial interests in the
Hub portfolio of equal value. The Hub portfolio is the Growth and
Income Portfolio; a non-diversified open-end management investment
company organized as a trust under the laws of the State of New
York and registered under the Investment Company Act of 1940, as
amended. Financial statements of the Hub portfolio are presented
following the Portfolio's financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies of the Fund, which are in accordance with the accounting
principles generally accepted in the investment company industry:
Dividends
Dividends from investment income of the Portfolio are declared
and reinvested quarterly and dividends from capital gains are
declared and reinvested annually.
Security Valuation
The Portfolio's investment in the Hub portfolio is valued at
the last reported net asset value of the Hub portfolio. The
portfolio receives an allocation of investment income and Hub
expenses as well as realized and unrealized gains and losses on a
daily basis from the Hub.
Federal Income Taxes
For federal income tax purposes, the Portfolio qualifies as a
regulated investment company under the provisions of the Internal
Revenue Code by distributing substantially all of its taxable net
income (both ordinary and capital gain) to its shareholders and
complying with other requirements for regulated investment
companies. Accordingly, no provision for federal income taxes has
been made.
3. INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory agreement
with The Great-West Life Assurance Company (parent of the Company).
As compensation for its services to the Fund with respect to the
Maxim Vista Growth & Income Portfolio, the investment advisor
receives monthly compensation at the annual rate of .53% of the
average daily net assets of the Maxim Vista Growth & Income
Portfolio.
4. Investment Transactions - Increases and decreases in the
Portfolio during the year ended October 31, 1996 were as follows:
Increases in Portfolio Investment
Decreases in Portfolio Investment
Maxim Vista Growth & Income Portfolio
$48,967,765
$23,718,112
The Portfolio's percentage interest in the Hub portfolio is
4.14% as at October 31, 1996.
5. Transactions in Shares of Beneficial Interest during the year
ended October 31, 1996 were as follows:
Shares sold
37,282,804
Shares issued in reinvestment of distributions
2,029,197
Shares redeemed
(18,102,506)
Net increase in shares of beneficial interest outstanding
21,209,495
Outstanding shares at:
40,717,195
Beginning of period
End of Period
61,926,690
Growth and Income Portfolio
Portfolio of Investments October 31, 1996
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- 94.0%
- -----------------------------------------------------------------
Common Stock -- 86.0%
- -------------------------------------------------------
Aerospace -- 1.9%
300,000 Allied-Signal, Inc.
$ 19,650,000
115,600 General Motors, Class H
6,170,150
110,000 United Technologies, Corp.
14,162,500
--------------
39,982,650
--------------
Agricultural Production/Services -- 2.0%
350,000 AGCO Corp.
8,881,250
355,000 Case Corp.
16,507,500
400,000 Deere & Co.
16,700,000
--------------
42,088,750
--------------
Airlines -- 0.5%
126,590 AMR Corp. *
10,633,560
--------------
Automotive -- 1.4%
300,000 Chrysler Corp.
10,087,500
200,000 General Motors
10,775,000
250,000 Lear Corp. *
9,250,000
--------------
30,112,500
--------------
Banking -- 5.8%
400,000 Bank of Boston Corp.
25,600,000
145,000 BankAmerica Corp.
13,267,500
175,000 Citicorp
17,325,000
204,333 Commonwealth Bank of Australia, ADR (Australia)
# 3,677,994
(Preference Stock)
220,000 First Union Corp.
16,005,000
425,000 National City Corp.
18,434,375
135,000 NationsBank Corp.
12,723,750
350,000 Norwest Corp.
15,356,250
--------------
122,389,869
--------------
Biotechnology -- 0.5%
160,000 Amgen, Inc.
9,810,000
--------------
Chemicals -- 3.0%
110,000 Dow Chemical Co.
8,552,500
245,000 duPont (EI) deNemours & Co.
22,723,750
340,000 IMC Global, Inc.
12,750,000
225,000 Praxair, Inc.
9,956,250
200,000 Union Carbide Corp.
8,525,000
--------------
62,507,500
--------------
See notes to financial statements.
68
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Computer Software -- 3.0%
350,000 Cisco Systems, Inc. *
$ 21,656,250
300,000 Computer Associates International
17,737,500
90,000 Microsoft Corp. *
12,352,500
446,000 Reynolds & Reynolds, Inc., Class A
11,763,250
--------------
63,509,500
--------------
Computers/Computer Hardware -- 6.4%
300,000 Analog Devices, Inc. *
7,800,000
350,000 Compaq Computer Corp. *
24,368,750
400,000 EMC Corp. *
10,500,000
230,000 Intel Corp.
25,271,250
145,000 International Business Machines Corp.
18,705,000
100,000 SCI Systems, Inc. *
4,975,000
100,000 Seagate Technology, Inc. *
6,675,000
250,000 Storage Technology Corp. *
10,656,250
220,000 Sun Microsystems, Inc. *
13,420,000
275,000 Texas Instruments
13,234,375
--------------
135,605,625
--------------
Construction Machinery -- 0.5%
160,000 Caterpillar Inc.
10,980,000
--------------
Consumer Products -- 6.4%
450,000 Avon Products, Inc.
24,412,500
375,000 Black & Decker Corp.
14,015,625
185,000 Colgate-Palmolive Co.
17,020,000
350,000 Fruit of the Loom, Inc., Class A *
12,731,250
200,000 Liz Claiborne, Inc.
8,450,000
270,000 Nike, Inc., Class B
15,896,250
185,000 Philip Morris Companies, Inc.
17,135,625
250,000 Procter & Gamble Co.
24,750,000
--------------
134,411,250
--------------
Diversified -- 0.5%
115,000 Textron, Inc.
10,206,250
--------------
Electronics/Electrical Equipment -- 0.5%
115,000 General Electric Co.
11,126,250
--------------
Entertainment/Leisure -- 1.8%
700,000 Carnival Corp., Class A
21,087,500
330,000 Circus Circus Enterprises Inc. *
11,385,000
325,000 Trump Hotels & Casino Resorts, Inc. *
5,159,375
--------------
37,631,875
--------------
See notes to financial statements.
69
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Financial Services -- 3.3%
574,500 Countrywide Credit Industries, Inc.
$ 16,373,250
175,000 Federal Home Loan Mortgage Corp.
17,675,000
360,000 Federal National Mortgage Assoc.
14,085,000
505,000 Green Tree Financial Corp.
20,010,625
--------------
68,143,875
--------------
Food/Beverage Products -- 4.4%
540,000 Coca-Cola Enterprises, Inc.
23,017,500
460,000 ConAgra, Inc.
22,942,500
535,000 PepsiCo., Inc.
15,849,375
430,000 Sara Lee Corp.
15,265,000
100,000 Unilever NV, ADR (Netherlands)
15,287,500
--------------
92,361,875
--------------
Health Care -- 2.9%
571,000 Columbia/HCA Healthcare Corp.
20,413,250
495,000 HEALTHSOUTH Corp. *
18,562,500
180,000 Medtronic, Inc.
11,587,500
500,000 Tenet Healthcare Corp. *
10,437,500
--------------
61,000,750
--------------
Insurance -- 4.3%
150,000 Aetna Inc.
10,031,250
335,000 AFLAC, Inc.
13,441,875
455,110 Allstate Corp.
25,543,049
110,500 American International Group
12,003,063
125,000 Loews Corp.
10,328,125
220,000 Mid Ocean, Ltd. (Bermuda)
10,340,000
140,000 Reliastar Financial Corp.
7,420,000
750 Transport Holdings, Inc., Class A *
57,000
--------------
89,164,362
--------------
Manufacturing -- 3.4%
350,000 Ingersoll-Rand Co.
14,568,750
225,000 Johnson Controls
16,425,000
175,000 Kennametal Inc.
5,950,000
370,000 Parker Hannifin Corp.
14,013,750
400,000 Tyco International Ltd.
19,850,000
--------------
70,807,500
--------------
Metals/Mining -- 1.4%
310,000 Aluminum Co. of America (ALCOA)
18,173,750
335,000 Inco, Ltd.
10,636,250
--------------
28,810,000
--------------
See notes to financial statements.
70
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Office/Business Equipment -- 0.7%
310,000 Xerox Corp.
$ 14,376,250
--------------
Oil & Gas -- 8.2%
150,000 Amoco Corp.
11,362,500
125,000 British Petroleum PLC, ADR (United Kingdom)
16,078,125
300,000 Halliburton Company
16,987,500
195,000 Mobil Corp.
22,766,250
601,500 PanEnergy Corp.
23,157,750
355,000 Phillips Petroleum Co.
14,555,000
224,200 Smith International *
8,519,600
190,000 Texaco, Inc.
19,308,750
140,000 Tidewater, Inc.
6,125,000
250,000 Unocal Corp.
9,156,250
445,000 Williams Companies, Inc.
23,251,250
--------------
171,267,975
--------------
Paper/Forest Products -- 1.1%
325,000 Fort Howard Corp. *
8,328,125
220,000 Willamette Industries
14,850,000
--------------
23,178,125
--------------
Pharmaceuticals -- 4.2%
420,000 American Home Products Corp.
25,725,000
90,000 Bristol-Myers Squibb Co.
9,517,500
340,000 Johnson & Johnson
16,745,000
200,000 Schering-Plough Corp.
12,800,000
361,300 SmithKline Beecham PLC, ADR (United Kingdom)
22,626,413
--------------
87,413,913
--------------
Photographic Equipment -- 0.5%
135,000 Eastman Kodak Co.
10,766,250
--------------
Printing & Publishing -- 1.5%
100,000 Harcourt General, Inc.
4,975,000
370,000 New York Times Company, Class A
13,366,250
150,000 Tribune Co.
12,262,500
--------------
30,603,750
--------------
Real Estate Investment Trust -- 1.3%
283,500 Beacon Properties Corp.
8,327,813
170,000 Equity Residential Properties Trust
6,247,500
280,000 Hospitality Properties Trust
7,280,000
210,000 Security Capital Industrial Trust
3,806,250
--------------
25,661,563
--------------
See notes to financial statements.
71
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Restaurants/Food Service -- 0.4%
400,000 Wendy's International, Inc.
$ 8,250,000
--------------
Retailing -- 4.2%
320,000 American Stores Co.
13,240,000
420,000 Dayton-Hudson Corp.
14,542,500
350,000 Federated Department Stores *
11,550,000
470,000 Gap, Inc.
13,630,000
542,500 Kroger Co. *
24,209,063
225,000 Sears Roebuck & Co.
10,884,375
--------------
88,055,938
--------------
Shipping/Transportation -- 1.3%
150,000 Burlington Northern, Inc.
12,356,250
130,000 Federal Express Corp. *
10,465,000
130,000 Ryder System
3,867,500
--------------
26,688,750
--------------
Telecommunications -- 5.4%
500,000 BellSouth Corp.
20,375,000
183,000 CPT Telefonica del Peru S.A., ADR (Peru)
3,774,375
300,000 Frontier Corp.
8,700,000
300,000 GTE Corp.
12,637,500
72,918 Lucent Technologies, Inc.
3,427,146
400,000 Sprint Corp.
15,700,000
800,000 Telefonaktiebolaget LM Ericsson, Sp, ADR
(Sweden) 22,100,000
150,000 Telefonica de Espana, ADR (Spain)
9,037,500
270,000 U S West, Inc.
8,201,250
350,000 WorldCom, Inc.
8,531,250
--------------
112,484,021
--------------
Utilities -- 3.3%
200,000 CINergy Corp.
6,625,000
370,000 FPL Group Inc.
17,020,000
350,000 GPU, Inc.
11,506,250
120,000 Northern States Power Co.
5,640,000
500,000 Pinnacle West Capital Corp.
15,437,500
280,000 Texas Utilities Co.
11,340,000
--------------
67,568,750
--------------
Total Common Stock (Cost $1,437,565,995)
1,797,599,226
--------------
Convertible Preferred Stock -- 4.6%
- -------------------------------------------------------
Airlines -- 0.3%
90,000 Continental Air Finance Trust, 8.50%, 12/01/20
# 5,535,000
--------------
See notes to financial statements.
72
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Shares Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Automotive -- 0.2%
45,000 Ford Motor Co., Ser. A, 8.4%
$ 4,601,250
--------------
Broadcasting -- 0.2%
100,000 American Radio Systems, 7.00%, #
4,900,000
--------------
Computers/Computer Hardware -- 0.3%
50,000 Ceridian Corp., 5.5%
5,450,000
--------------
Consumer Products -- 0.9%
700,000 RJR Nabisco Holdings Corp., 9.25%, Ser. C
3,937,500
960,000 Westinghouse Electric, $1.30, Ser. C #
15,255,360
--------------
19,192,860
--------------
Entertainment/Leisure -- 0.4%
200,000 Time Warner Financing Trust, $1.24
7,750,000
--------------
Financial Services -- 0.6%
100,000 American General Delaware, $3.00, Ser. A
5,225,000
91,000 SunAmerica Inc., $3.188, 10/31/99 Ser.
3,412,500
148,000 The Money Store, $1.720, 12/01/99 Ser.
3,848,000
--------------
12,485,500
--------------
Health Care -- 0.3%
225,000 FHP International Corp., Ser. A, 5.0%
6,468,750
--------------
Insurance -- 0.2%
67,000 American Bankers Insurance Group, 6.25%, Ser.
B 3,844,125
--------------
Oil & Gas -- 0.7%
90,000 Diamond Shamrock, 5% #
5,190,120
140,000 Occidental Petroleum, $3.00
8,995,000
--------------
14,185,120
--------------
Paper/Forest Products -- 0.4%
175,000 International Paper Capital Corp., 5.25% #
8,461,075
--------------
Telecommunications -- 0.1%
40,000 Viacom International, 5.0%, 7/31/06 Ser.
3,320,000
--------------
Total Convertible Preferred Stock (Cost
$88,416,322) 96,193,680
--------------
See notes to financial statements.
73
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Principal
Amount Issuer
Value
- -----------------------------------------------------------------
Long-Term Investments -- (continued)
- -----------------------------------------------------------------
Corporate Bonds & Notes -- 1.4%
- -------------------------------------------------------
Automotive -- 0.2%
$ 4,500,000 Magna International Inc., 5.00%, 10/15/02
$ 4,910,355
--------------
Computer Hardware -- 0.2%
4,000,000 Quantum Corp., 5.00%, 03/01/03 #
4,360,000
--------------
Electronics/Electrical Equipment -- 0.3%
7,000,000 Xilinx Inc., 5.25%, 11/01/02 #
6,600,300
--------------
Financial Services -- 0.5%
1,500,000 Aames Financial Corp., 5.50%, 03/15/06 #
2,444,985
6,600,000 South African Pulp & Paper Industries, BVI
Finance 6,121,500
Ltd., 7.50%, 06/30/06
2,000,000 UBS Finance of Delaware, 2.00%, 12/15/00
1,870,000
--------------
10,436,485
--------------
Health Care -- 0.2%
4,000,000 Tenet Healthcare Corp., 6.00%, 12/01/05
4,095,000
--------------
Total Corporate Bonds & Notes (Cost $29,600,000)
30,402,140
--------------
Convertible Corporate Bonds & Notes -- 2.0%
- -------------------------------------------------------
Computers/Computer Hardware -- 0.2%
4,000,000 Applied Magnetics Corp., 7.00%, 3/15/06 #
5,166,000
--------------
Electronics/Electrical Equipment -- 0.2%
3,850,000 SCI Systems Inc., 5.00%, 05/01/06 #
4,706,625
--------------
Financial Services -- 0.2%
2,300,000 First Financial Management, 5.00%, 12/15/99
4,315,306
--------------
Health Care -- 0.1%
1,200,000 Sterling House, 6.75%, 06/30/06 #
984,000
--------------
Hotels/Other Lodging -- 0.4%
6,885,000 Hilton Hotels Corp., 5.00%, 05/15/06
7,625,138
--------------
See notes to financial statements.
74
<PAGE>
Growth and Income Portfolio
Portfolio of Investments October 31, 1996 (continued)
Principal
Amount Issuer
Value
- -----------------------------------------------------------------
Manufacturing -- 0.4%
$ 4,000,000 3 Com Corp., 10.25%, 11/01/01 #
$ 8,265,640
1,000,000 Waban Inc., 6.50%, 07/01/02
1,093,750
--------------
9,359,390
--------------
Pharmaceuticals -- 0.3%
5,000,000 ICN Pharmaceuticals, 8.50%, 11/15/99
5,385,950
--------------
Retailing -- 0.2%
4,000,000 Federated Department Stores *, 5.00%, 10/01/03
4,612,520
--------------
Total Convertible Corporate Bonds & Notes
42,154,929
(Cost $32,207,500)
- -----------------------------------------------------------------
Total Long-Term Investments
1,966,349,975
(Cost $1,587,789,817)
- -----------------------------------------------------------------
Short-Term Investments -- 6.4%
- -----------------------------------------------------------------
U.S. Government Agency Obligations -- 1.0%
- -------------------------------------------------------
20,000,000 Federal Home Loan Mortgage Corp., Discount Notes,
19,965,867
5.12%, 11/13/96
--------------
Commercial Paper -- 5.4%
- -------------------------------------------------------
20,000,000 Cargill Inc., 5.27%, 11/22/96
19,938,517
20,000,000 Commerzbank US Finance Inc., 5.24%, 11/20/96
19,944,689
33,716,000 Household Finance Corp., 5.40%, 11/01/96
33,716,000
20,000,000 Lucent Technologies, Inc., 5.21%, 11/22/96
19,939,217
20,000,000 Merrill Lynch & Co., Inc., 5.25%, 11/13/96
19,965,000
--------------
113,503,423
- -----------------------------------------------------------------
Total Short-Term Investments
133,469,290
(Cost $133,469,290)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Total Investments -- 100.4%
$2,099,819,265
(Cost $1,721,259,107)
- -----------------------------------------------------------------
See notes to financial statements.
75
Statement of Assets and Liabilities October 31, 1996
- -----------------------------------------------------------------
Growth & Capital
Income Growth
Portfolio Portfolio
- -------------- --------------
ASSETS:
Investment securities, at value (Note 1)........................
$2,099,819,265 $1,103,102,580
Cash............................................................
956 941
Receivables:
Investment securities sold....................................
20,216,167 8,824,987
Interest and dividends........................................
4,587,325 750,403
Other assets....................................................
94,485 78,120
- -------------- --------------
Total Assets..............................................
2,124,718,198 1,112,757,031
- -------------- --------------
LIABILITIES:
Payable for investment securities purchased.....................
31,402,747 22,079,842
Accrued liabilities: (Note 2)
Administration fees...........................................
88,975 47,321
Investment advisory fees......................................
710,802 378,562
Custodian.....................................................
35,044 6,110
Other.........................................................
132,689 112,863
- -------------- --------------
Total Liabilities.........................................
32,370,257 22,624,698
- -------------- --------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.........
$2,092,347,941 $1,090,132,333
Cost of Investments..............................................
$1,721,063,078 $ 925,693,831
============== ==============
See notes to financial statements.
83
Statement of Operations For the year ended October 31, 1996
- -----------------------------------------------------------------
Growth & Capital
Income Growth
Portfolio Portfolio
------------- -------------
INVESTMENT INCOME:
Dividend.........................................................
... $ 40,163,037 $ 11,147,019
Interest.........................................................
... 15,979,731 6,376,287
------------ ------------
Total investment
income....................................... 56,142,768
17,523,306
------------ ------------
EXPENSES: (Note 2)
Investment Advisory
fees............................................ 8,101,188
4,226,466
Administration
fees................................................. 1,012,648
528,308
Custodian
fees......................................................
141,771 81,603
Amortization of organization costs (Note
1)......................... 8,012 8,012
Professional
fees...................................................
62,232 66,809
Trustees fees and
expenses.......................................... 88,590
51,050
Other............................................................
... 104,455 109,511
------------ ------------
Total
expenses................................................
9,518,896 5,071,759
------------ ------------
Net investment
income............................................. 46,623,872
12,451,547
------------ ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments.......................................................
155,750,263 132,963,967
Futures and written option
transactions........................... 7,927,539
- --
Change in net unrealized appreciation/depreciation on:
Investments.......................................................
164,599,862 71,608,504
Futures and written option
transactions........................... (1,362,579)
- --
------------ ------------
Net realized and unrealized gain on
investments..................... 326,915,085 204,572,471
------------ ------------
Net increase in net assets from
operations.......................... $ 373,538,957 $ 217,024,018
============ ============
See notes to financial statements.
84
Statement of Changes in Net Assets
- -----------------------------------------------------------------
Growth & Capital
Income Growth
Portfolio Portfolio
- ----------------------------------
- ------------------------------------
Year
Year Year Year
Ended
Ended Ended Ended
10/31/96
10/31/95 10/31/96 10/31/95
- --------------- --------------- ----------------
- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income.............................. $
46,623,872 $ 49,161,074 $ 12,451,547 $
14,034,371
Net realized gain on investments and futures
transactions.....................................
163,677,802 95,276,889 132,963,967
38,313,408
Change in net unrealized appreciation on
investments and futures..........................
163,237,283 154,841,478 71,608,504
83,513,979
- -------------- -------------- ---------------
- ---------------
Increase in net assets from operations.............
373,538,957 299,279,441 217,024,018
135,861,758
- -------------- -------------- ---------------
- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions......................................
470,616,913 511,820,403 1,114,082,444
1,403,653,138
Withdrawals........................................
(605,973,572) (542,453,501) (1,260,399,848)
(1,217,251,104)
- -------------- -------------- ---------------
- ---------------
Net increase (decrease) from transactions in
investors' beneficial interests..................
(135,356,659) (30,633,098) (146,317,404)
186,402,034
- -------------- -------------- ---------------
- ---------------
Net increase in net assets...................
238,182,298 268,646,343 70,706,614
322,263,792
NET ASSETS:
Beginning of period................................
1,854,165,643 1,585,519,300 1,019,425,719
697,161,927
- -------------- -------------- ---------------
- ---------------
End of period...................................... $
2,092,347,941 $ 1,854,165,643 $ 1,090,132,333 $
1,019,425,719
============== ============== ===============
===============
See notes to financial statements.
85
Vista Mutual Funds
Notes to Financial Statements October 31, 1996
- -----------------------------------------------------------------
1. Organization and Significant Accounting Policies -- Growth and
Income
Portfolio ("GIP") and Capital Growth Portfolio ("CGP"), (the
"Portfolios") are
separately registered under the Investment Company Act of 1940, as
amended, as
non-diversified, open end management investment companies organized
as trusts
under the laws of the State of New York. Each declaration of trust
permits the
Trustees to issue beneficial interests in the respective
Portfolios. The GIP
and the CGP commenced operations on November 29, 1993.
The preparation of financial statements in accordance with
generally accepted
accounting principles requires management to make estimates and
assumptions
that affect the reported amounts and disclosures in the financial
statements.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies
followed by
the Portfolios:
A. Valuation of investments -- Equity securities, purchased
options and
futures are valued at the last sale price on the exchange on
which they
are primarily traded, including the NASDAQ National Market.
Securities for
which sale prices are not available and other over-the-counter
securities
are valued at the last quoted bid price. Bonds and other fixed
income
securities (other than short-term obligations), including
listed issues,
are valued on the basis of valuations supplied by pricing
services or by
matrix pricing systems of a major dealer in bonds. Short-term
debt
securities with 61 days or more to maturity at time of purchase
are
valued, through the 61st day prior to maturity, at market value
based on
quotations obtained from market makers or other appropriate
sources;
thereafter, the value on the 61st day is amortized on a
straight-line
basis over the remaining number of days to maturity. Short-term
investments with 60 days or less to maturity at time of
purchase are
valued at amortized cost, which approximates market. Portfolio
securities
for which there are no such quotations or valuations are valued
at fair
value as determined in good faith by or at the direction of the
Trustees.
B. Repurchase agreements -- It is the Trusts' policy that
repurchase
agreements are fully collateralized by U.S. Treasury and
Government Agency
securities. All collateral is held by the Trusts' custodian
bank,
subcustodian, or a bank with which the custodian bank has
entered into a
subcustodian agreement, or is segregated in the Federal Reserve
Book Entry
System. In connection with transactions in repurchase
agreements, if the
seller defaults and the value of the collateral declines, or if
the seller
enters an insolvency proceeding, realization of the collateral
by the
Trusts may be delayed or limited.
C. Futures contracts -- When a portfolio enters into a
futures contract,
it makes an initial margin deposit in a segregated account,
either in cash
or liquid securities. Thereafter, the futures contract is
marked to market
and the portfolio makes (or receives) additional cash payments
daily to
the broker. Changes in the value of the contract are recorded
as
unrealized appreciation/depreciation until the contract is
closed or
settled.
The GIP invested a portion of its liquid assets in long stock
index
futures contracts to more fully participate in the market. Use
of futures
contracts subject the Portfolio to risk of loss up to the
amount of the
value of the contract.
The Portfolio may enter into futures contracts only on
exchanges or boards
of trade. The exchange or board of trade acts as the
counterparty to each
futures transaction, therefore, the Portfolio's credit risk is
limited to
failure of the exchange or board of trade.
As of October 31, 1996, the Portfolios had no outstanding
futures
contracts.
D. Written options -- When a portfolio writes an option on a
futures
contract, an amount equal to the premium received by the
portfolio is
included in the portfolio's Statement of Assets and Liabilities
as an
asset and corresponding liability. The amount of the liability
is adjusted
daily to reflect the current market value of the written
options and the
change is recorded in a corresponding unrealized gain or loss
account.
When a written option expires on its stipulated expiration
date, or when a
closing transaction is entered into, the related liability is
extinguished
and the portfolio realizes a gain (or loss if the cost of the
closing
transaction exceeds the premium received when the option was
written).
86
Vista Mutual Funds
Notes to Financial Statements October 31, 1996 (continued)
- -----------------------------------------------------------------
The GIP writes options on stock index securities futures. These
options
are settled for cash and subject the Portfolio to market risk
in excess of
the amounts that are reflected in the Statement of Assets and
Liabilities.
The Portfolio, however, is not subject to credit risk on
written options
as the counterparty has already performed its obligation by
paying a
premium at the inception of the contract.
As of October 31, 1996 the Portfolios had no outstanding
written options.
E. Security transactions and investment income -- Investment
transactions are accounted for on the trade date (the date the
order to
buy or sell is executed). Securities gains and losses are
calculated on
the identified cost basis. Interest income is accrued as
earned. Dividend
income is recorded on the ex-dividend date.
F. Organization costs -- Organization and initial
registration costs
incurred in connection with establishing the Portfolios have
been deferred
and are being amortized on a straight-line basis over a sixty
month period
beginning at the commencement of operations of each Portfolio.
G. Federal income taxes -- The Portfolios intend to continue
to qualify
as partnerships and therefore net income and net realized gains
are taxed
to the partners. Accordingly, no tax provisions are recorded by
the
Portfolios. The investors in the Portfolios must take into
account their
proportionate share of the Portfolios' income, gains, losses,
deductions,
credits and tax preference items in computing their federal
income tax
liability, without regard to whether they have received any
cash
distributions from the Portfolio. The Portfolios do not intend
to
distribute to investors their net investment income or their
net realized
gains, if any. It is intended that the Portfolios will be
managed in such
a way that investors in the portfolio will be able to satisfy
the
requirements of subchapter M of the Internal Revenue Code to be
taxed as
regulated investment companies.
2. Fees and Other Transactions with Affiliates
A. Investment advisory fee -- Pursuant to separate Investment
Advisory
Agreements, The Chase Manhattan Bank ("Chase" or the "Adviser")
acts as
the Investment Adviser to the Portfolios. Chase is a direct
wholly-owned
subsidiary of The Chase Manhattan Corporation. As Investment
Adviser,
Chase supervises the investments of the Portfolios and for such
services
is paid a fee.
The fee is computed daily and paid monthly at an annual rate
equal to
0.40% of the Portfolios' average daily net assets.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is
the sub-investment adviser to each of the Portfolios pursuant
to a
Sub-Investment Advisory Agreement between CAM and Chase. CAM is
a wholly
owned subsidiary of Chase and is entitled to receive a fee,
payable by
Chase from its advisory fee, at an annual rate equal to 0.20%
of each
Portfolio's average daily net assets.
B. Custodial fees -- Chase, as Custodian provides safekeeping
services
for the Portfolios' securities. Compensation for such services
are
presented in the Statement of Operations as custodian fees.
C. Administration fee -- Pursuant to an Administration
Agreement, Chase
(the "Administrator") provides certain administration services
to the
Trusts. For these services and facilities, the Administrator
receives from
each Portfolio a fee computed at the annual rate equal to 0.05%
of the
respective Portfolio's average daily net assets.
87
Vista Mutual Funds
Notes to Financial Statements October 31, 1996 (continued)
- -----------------------------------------------------------------
3. Investment Transactions -- For the year ended October 31,
1996, purchases
and sales of investments (excluding short-term investments) were as
follows:
GIP
CGP
- -------------- -------------
Purchases (excluding U.S. Government)...............
$1,187,045,632 $ 865,730,088
Sales (excluding U.S. Government)...................
1,135,951,143 953,423,528
Purchases of U.S. Government........................
20,197,299 570,385
Sales of U.S. Government............................
25,429,221 --
The portfolio turnover rates of GIP and CGP for the year end ended
were 62%
and 90%, respectively. The average commission rates paid per share
were
$0.05949 and $0.05843 for GIP and CGP, respectively.
4. Retirement Plan -- The Portfolios have adopted an unfunded
noncontributory defined benefit pension plan covering all
independent trustees
of the Portfolios who will have served as an independent trustee
for at least
five years at the time of retirement. Benefits under this plan are
based on
compensation and years of service. Pension expenses for the year
ended October
31, 1996, included in Trustees Fees and Expenses in the Statement
of
Operations, prepaid pension costs and accrued pension liability
included in
other assets, and other accrued liabilities, respectively, in the
Statement of
Assets and Liabilities were as follows:
Prepaid Accrued
Pension
Pension Pension
Expenses
Assets Liability
--------
------- -------
GIP.................................................. $19,631
$60,845 $80,476
CGP.................................................. 9,910
30,717 40,627
88
Report of Independent Accountants
- -----------------------------------------------------------------
- -------------
To the Trustees and Beneficial
Interest Holders of Growth and Income
Portfolio and Capital Growth Portfolio
In our opinion, the accompanying statements of assets and
liabilities,
including the portfolios of investments, and the related statements
of
operations and of changes in net assets present fairly, in all
material
respects, the financial position of Vista Growth and Income
Portfolio and
Vista Capital Growth Portfolio (the "Portfolios") at October 31,
1996, the
results of each of their operations for the year then ended, and
the changes
in their net assets for each of the two years in the period then
ended in
conformity with generally accepted accounting principles. These
financial
statements are the responsibility of the Portfolios' management;
our
responsibility is to express an opinion on these financial
statements based on
our audits. We conducted our audits of these financial statements
in
accordance with generally accepted auditing standards which require
that we
plan and perform the audit to obtain reasonable assurance about
whether the
financial statements are free of material misstatement. An audit
includes
examining, on a test basis, evidence supporting the amounts and
disclosures in
the financial statements, assessing the accounting principles used
and
significant estimates made by management, and evaluating the
overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence
with the
custodian and brokers and the application of alternative auditing
procedures
where confirmations from brokers were not received, provide a
reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 10, 1996
89
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
The Financial Statements for the Maxim Vista Growth &
Income
Portfolio and for Growth & Income Portfolio are included in Part
B.
(b) Exhibits.
Items (b)(1)-(10), 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 incorporated by reference to Registrant's
Post
Effective Amendment No. 49 dated February 14, 1997 and item (b)(8)
is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 dated March 1, 1993. Computation of Performance
Quotations is included in Part B.
(11) Written Consents
(a) Written consent of Jorden Burt Berenson &
Johnson, LLP.
(b) Written consent of Deloitte & Touche, LLP.
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 October 31, 1995
Common Stock ($.10 par value) - 1 -
Item 27. Indemnification.
Item 4, Part II, of Registrant's Pre-Effective Amendment No.
1 to its Registration Statement is herein incorporated by
reference.
ORGANIZATIONAL CHART
Power Corporation of Canada
100% - 171263 Canada Inc.
68.8% - Power Financial Corporation
86.4% - Great-West Lifeco Inc.
99.4% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
94% - Maxim Series Fund, Inc.
100% - Greenwood Property, Inc.
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
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.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual
report to shareholders upon request and without charge.
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the
requirements of this Registration Statement pursuant to Rule 485(b)
and has duly caused Post-Effective Amendment No. 45 to the
Registration Statement to be signed on its behalf, in the City of
Englewood, State of Colorado, on the 26th 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. 45 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 February 26, 1997
President (J.D. Motz)
/s/ R. Jennings* February 26, 1997
Director (R. Jennings)
R.P. Koeppe* February 26, 1997
Director (R.P. Koeppe)
D.L. Wooden February 26, 1997
Director (D. L. Wooden)
Signature and Title Date
/s/ S. Zisman* February 26, 1997
Director (S. Zisman)
/s/ G.R. Derback February 26, 1997
Treasurer (G.R. Derback)
/s/ G.R. Derback February 26, 1997
Principal Financial Officer
(G.R. Derback)
/s/G.R. Derback February 26, 1997
Principal Accounting Officer
(G.R. Derback)
*By: /s/ R.B. Lurie February 26, 1997
R.B. Lurie
Attorney-in-fact pursuant to Powers of Attorney filed under
Post-Effective Amendment No. 19 to this Registration Statement.
SIGNATURES
Growth and Income Portfolio has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A of Maxim
Series Fund, Inc., to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and the State of
New York, on the 25th day of February, 1997.
GROWTH AND INCOME PORTFOLIO
By: /s/ H.Richard Vartabedian
H. Richard Vartabedian
Chairman and President
This Registration Statement on Form N-1A of Maxim Series Fund, Inc.
has been signed below by the following persons in the capacities
and on the dates indicated.
/s/ H.Richard Vartabedian President and
February 25, 1997
H. Richard Vartabedian Trustee
Trustee
William J. Armstrong
Trustee
John R.H. Blum
Trustee
Joseph J. Harkins
Trustee
Richard E. Ten Haken
Trustee
Stuart W. Cragin, Jr.
Trustee
Irving Thode
Trustee
Fergus Reid, III
Trustee
W. Perry Neff
Trustee
Roland R. Eppley, Jr.
Trustee
W.D. MacCallan
/s/ H.Richard Vartabedian Attorney in Fact
February 25, 1997
H. Richard Vartabedian
/s/ Martin Dean Treasurer and
February 25, 1997
Martin Dean Principal Accounting Officer
(11)(a)
CONSENT OF JORDEN BURT BERENSON AND JOHNSON
February 25, 1997
Maxim Series Fund
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We hereby consent to the use of our name under the caption
"Legal Counsel for the Fund" in the Prospectus contained in
Post-Effective Amendment No. 50 to the Registration Statement on
Form N-1A (File No. 2-75503) filed by Maxim Series Fund, Inc. with
the Securities 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
(11)(b)
CONSENT OF DELOITTE & TOUCHE, LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 50 to Registration Statement No. 2-75503 of Maxim
Series Fund, Inc. of our report dated December 10, 1996 appearing
in Part B of the Statement of Additional Information, which is a
part of such Registration Statement, and to the reference to us
under the heading "Independent Auditors for the Fund and Growth &
Income" appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
February 23, 1997
