MAXIM SERIES FUND, INC.
8515 E. Orchard Road, Englewood, Colorado 80111
Phone No. (303) 689-3000
Maxim Series Fund, Inc. (the "Fund"), an open-end management investment
company, includes the following diversified investment portfolios: the Money
Market, Bond, Stock Index, U.S. Government Securities, Small-Cap Index,
International Equity, MidCap, Maxim T. Rowe Price Equity/Income, Maxim INVESCO
Small-Cap Growth, Maxim INVESCO ADR, Small-Cap Value, Maxim INVESCO Balanced,
Corporate Bond, Short-Term Maturity Bond, Value Index, Growth Index, Small-Cap
Aggressive Growth, Blue Chip, MidCap Growth, Aggressive Profile, Moderately
Aggressive Profile, Moderate Profile, Moderately Conservative Profile and the
Conservative Profile Portfolios.
The investment objective of the Money Market Portfolio is preservation
of capital, liquidity and the highest possible current income consistent with
the foregoing objectives, through investments in short-term money market
securities. Shares of the Money Market Portfolio are neither insured nor
guaranteed by the U.S. Government. Further, there is no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The investment objective of the Bond Portfolio is to seek to achieve
maximum total return, consistent with the preservation of capital, through
investment in an actively managed portfolio of debt securities.
The principal objective of the Stock Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the S&P
500 Index and the S&P MidCap Index, weighted according to their pro rata share
of the market.
The investment objective of the U.S. Government Securities Portfolio is
to seek the highest level of return consistent with preservation of capital and
substantial credit protection. The Portfolio seeks to achieve this objective by
investing primarily in mortgage-related securities issued or guaranteed by an
agency or instrumentality of the U.S. Government, other U.S. agency and
instrumentality obligations, and in U.S. Treasury obligations.
The objective of the Small-Cap Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Standard & Poor's Small-Cap 600 Stock Index.
The investment objective of the International Equity Portfolio is
long-term capital growth, which it seeks to achieve through a flexible policy of
investing in stocks and debt obligations of companies outside the United States.
The investment objective of the Maxim T. Rowe Price Equity/Income
Portfolio is to seek to provide substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established companies. In pursuing its objective, the Portfolio will emphasize
companies with favorable prospects for increasing dividend income and
secondarily, capital appreciation.
This Prospectus sets forth concisely the information about the Fund that
prospective investors ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission and is
available upon request, without charge by calling or writing the Fund. The
"Statement of Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
G W CAPITAL MANAGEMENT, LLC
Investment Adviser
The date of this Prospectus is May 1, 1998.
To learn more about this Fund and its investments, you may obtain the
Statement of Additional Information which has been filed with the
Securities and Exchange Commission (SEC) along with other related
materials on the SEC's Internet Web site (http://www.sec.gov).
<PAGE>
The investment objective of the MidCap Portfolio is long-term growth of
capital by normally investing at least 65% of its assets in securities issued by
medium-sized companies.
The investment objective of the Small-Cap Value Portfolio is to achieve
long-term capital appreciation by investing primarily in common stocks, although
the Portfolio also may invest in other securities, including restricted and
preferred stocks.
The investment objective of the Maxim INVESCO Small-Cap Growth Portfolio
is to seek long-term capital growth. The Portfolio seeks to achieve this
objective by investing its assets principally in a diversified group of equity
securities of emerging growth companies with market capitalizations of $1
billion or less at the time of initial purchase ("small-cap companies.")
The investment objective of the Maxim INVESCO ADR Portfolio is to seek
to achieve a high total return on investment through capital appreciation and
current income, while reducing risk through diversification. In pursuing this
objective, substantially all of the Portfolio's assets will be invested in
foreign securities that are issued in the form of American Depository Receipts
("ADRs") or foreign stocks that are registered with the Securities and Exchange
Commission ("SEC") and traded in the U.S.
The investment objective of the Maxim INVESCO Balanced Portfolio is to
seek to achieve a high total return on investment through capital appreciation
and current income. The Portfolio invests in a combination of common stocks
(normally 50% to 70% of total assets) and fixed-income securities (normally 25%
or more).
The investment objective of the Corporate Bond Portfolio is high total
investment return. The Corporate Bond Portfolio seeks to achieve its investment
objective by investing primarily in debt securities (including convertibles),
although up to 20% of its total assets (measured at the time of acquisition) may
be invested in preferred stocks.
The investment objective of the Value Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Russell 1000 Value Index.
The objective of the Growth Index Portfolio is to provide investment
results, before fees, that correspond to the total return of the Russell 1000
Growth Index.
The investment objective of the Small-Cap Aggressive Growth Portfolio is
long-term capital growth. The Small-Cap Aggressive Growth Portfolio seeks to
achieve its objective by investing in common stocks or their equivalent
emphasizing securities believed to be undervalued by the market.
The investment objective of the Short-Term Maturity Bond Portfolio is
preservation of capital, liquidity, and maximum total return through investment
in an actively managed portfolio of debt securities.
The investment objective of the Maxim Blue Chip Portfolio is long-term
growth of capital and income. To achieve its objective, the Portfolio normally
will invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
The investment objective of the Maxim MidCap Growth Portfolio is to
provide long-term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To achieve this objective, the
Portfolio will invest at least 65% of its assets in a diversified portfolio of
mid-cap companies whose earnings are expected to grow at a faster rate than the
average company.
The investment objective of the Aggressive Profile Portfolio is to seek
to achieve a high total return on investment through long-term capital
appreciation through investments in Underlying Portfolios with an emphaiss on
equity investments.. It is designed for an investor who is willing to take on a
greater degree of risk now for the chance of better returns later and places a
higher priority on investment growth than on safety. This investor typically is
comfortable riding out the ups and downs of the markets. This Portfolio would
not be appropriate for an investor with a short investment horizon.
The investment objective of the Moderately Aggressive Profile Portfolio
is to seek to achieve a high total return on investment through long-term
capital appreciation through investments in Underlying Portfolios with an
emphasis on equity investments, though income is a secondary consideration. This
Portfolio is designed for the investor who is willing to take on a slightly
greater degree of risk now for the chance of better returns later and places a
high priority on investment growth but also seeks some safety. This investor is
comfortable with riding the ups and downs of the market but is not comfortable
with the volatility that would be associated with the Aggressive Profile
Portfolio. This Portfolio would not be appropriate for an investor with a short
investment horizon.
The investment objective of the Moderate Profile Portfolio is to seek to
achieve a high total return on investment through long-term capital appreciation
through investments in Underlying Portfolios with a relatively equal emphasis on
equity and fixed income investments. This investor likes the potential for
higher returns but seeks more safety than an aggressive or moderately aggressive
investor.
The Moderately Conservative Profile Portfolio seeks to a achieve the
highest possible total return consistent with reasonable risk through a
combination of income and capital appreciation through investments in Underlying
Portfolios with a primary emphasis on fixed income investments, and, to a lesser
degree in Underlying Portfolios with an emphasis on equity investments.. This
Portfolio is designed for an investor who places a priority on investment safety
but is willing to take some risk for a potential higher return on investment.
This investor may be approaching retirement or simply prefers to take less risk
than other investors.
The investment objective of the Conservative Profile Portfolio is to
seek to achieve total return consistent with preservation of capital primarily
through fixed income investments through investments in Underlying Portfolios
with an emphasis on fixed income investments. This Portfolio is designed for
investors whose highest priority is safety for which the investor is willing to
accept a lower potential return on investments. This investor may be approaching
retirement or simply prefer to take less risk than other investors.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988
=====================================================================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Bond Portfolio
Years Ended December 31,
.........................................................................................................................
1997 1996 1995 1994 1993 1992
1991 1990 1989 1988
................................................................................................
..........
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value, $1.2059 $1.2301 $1.1352 $1.2274 $1.2259 $1.2929
$1.2312 $1.2297 $1.1725 $1.2002
Beginning of Period
Income from Investment 0.0767
Operations
Net investment income 0.0024 0.0745 0.0736 0.0634 0.0632 0.0831
0.0939 0.0946 0.0918 0.0916
Net Gains or Losses on 0.0036 (0.0242) (0.0949) (0.0922) 0.0326 (0.0053)
0.0798 0.0015 0.0572 (0.0275)
------- -------- -------- -------- ------ --------
- ------- ------- ------- --------
Securities (realized
and unrealized)
Total from Investment 0.0827 0.0503 0.1685 (0.0288) 0.0958 0.0778
0.1737 0.0961 0.1490 0.0641
Operations
Less Distributions
Dividends (from net (0.0767) (0.0745) (0.0736) (0.0634) (0.0632) (0.0760)
(0.0884) (0.0946) (0.0918) (0.0918)
investment income)
Distributions (from - - - (0.0311) (0.0311) (0.0688)
(0.0236) - - -
capital gains)
Initial Capitalization
- - - - - -
- - - - -
--------------------------------- -- -- --
- -- -- -- -
Returns of Capital (0.0767) (0.0745) (0.0736) (0.0634) (0.0943) (0.1448)
(0.1120) (0.0946) (0.0918) (0.0918)
Total Distributions
Net Asset Value End of $1.2119 $1.2059 $1.2301 $1.1352 $1.2274 $1.2259
$1.2929 $1.2312 $1.2297 $1.1725
------- ------- ------- ------- ------- -------
- ------- ------- ------- -------
Period
Total Return (1) 7.07% 4.26% 15.21% -2.36% 8.56% 6.24%
14.70% 8.21% 13.11% 5.40%
Net Assets, End of 70,283,703 78,093,109 80,025,099 68,965,299 84,696,187 69,974,848
88,545,656 62,311,336 47,442,300 35,806,047
Period
Ratio of Expenses to 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
0.60% 0.60% 0.60% 0.60%
Average Net Assets
Ratio of Net Income to 6.22% 6.10% 6.16% 5.33% 5.02% 5.93%
7.64% 8.41% 8.21% 8.27%
Average Net Assets
Portfolio Turnover Rate 90.81% 117.39% 191.58% 60.85% 164.32% 157.97%
168.18% 89.91% 79.68% 80.62%
.........................................................................................................................
(1) The performance shown does not reflect fees or expenses at the separate
account level.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994, 1993,
1992, 1991, 1990, 1989 and1988 <TABLE>
===============================================================================================================================
The following tables should be read in conjunction with
the financial statements and related notes included
in the Statement of Additional Information.
Stock Index Portfolio*
- -------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................................................
1997 1996 1995 1994 1993 1992
1991 1990 1989 1988
.................................................................................................
..........
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value, $2.3650 $1.9796 $1.4978 $1.5575 $1.4506 $1.5206
$1.3191 $1.3947 $1.2986 $1.1788
Beginning of Period
Income from Investment
Operations
Net investment income 0.0364 0.0336 0.0334 0.0350 0.0320 0.0383
0.0563 0.0682 0.0769 0.0605
Net Short-Term realized 0.0116 0.0009 0.0010
gain
Net Gains or Losses on 0.7080 0.3951 0.4953 (0.0335) 0.1097 0.0502
0.2492 (0.0756) 0.1213 0.1518
------- ------- ------- -------- ------- -------
- ------- -------- ------- ------
Securities (realized
and unrealized)
Total from Investment 0.7560 0.4296 0.5297 0.0015 0.1417 0.0885
0.3055 (0.0074) 0.1982 0.2123
Operations
Less Distributions
Dividends (from net (0.0437) (0.0345) (0.0344) (0.0350) (0.0320) (0.0382)
(0.0542) (0.0682) (0.0769) (0.0608)
investment income and
Net Short-Term realized
gains)
Distributions (from (0.1299) (0.0097) (0.0135) (0.0262) (0.0028) (0.1203)
(0.0498) - (0.0252) (0.0317)
capital gains)
Initial Capitalization
- - - - - -
- - - - -
--------------------------------- -- -- --
- -- -- -- -
Returns of Capital (0.1736) (0.0442) (0.0479) (0.0612) (0.0348) (0.1585)
(0.1040) (0.0682) (0.1021) (0.0925)
Total Distributions
Net Asset Value End of $2.9474 $2.3650 $1.9796 $1.4978 $1.5575 $1.4506
$1.5206 $1.3191 $1.3947 $1.2986
------- ------- ------- ------- ------- -------
- ------- ------- ------- -------
Period
Total Return (1) 32.20% 21.81% 35.60% 0.14% 9.84% 5.87%
23.33% -0.58% 15.21% 17.91%
Net Assets, End of 817,386,568 936,806,358 707,459,637 497,339,992 562,189,394 462,539,021
359,177,318 223,661,178 182,730,744
134,553,151
Period
Average Commission Rate $0.0343 $0.0389
Paid Per Share Bought
or Sold
Ratio of Expenses to 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
0.60% 0.60% 0.60% 0.60%
Average Net Assets
Ratio of Net Income to 1.15% 1.58% 1.91% 2.23% 2.14% 2.49%
4.33% 5.70% 6.15% 5.29%
Average Net Assets
Portfolio Turnover Rate 17.30% 3.31% 5.25% 11.98% 1.68% 118.83%
24.28% 26.41% 37.96% 44.65%
..........................................................................................................................
* From September 24, 1984 until December 1, 1992, the Portfolio's name was the
Growth Portfolio, and prior to September 24, 1984 the Portfolio's name was the
Income/Equity Portfolio. During these periods, the Portfolio's investment
policies differed from its current policies. (1) The performance shown does not
reflect fees or expenses deducted at the separate account level.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and 1988 <TABLE>
==================================================================================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
U.S. Government Securities Portfolio*
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
...........................................................................................................................
1997 1996 1995 1994 1993 1992
1991 1990 1989 1988
..................................................................................................
.........
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value, $1.0738 $1.1010 $1.0138 $1.1061 $1.1141 $1.1206
$1.0779 $1.0708 $1.0292 $1.0473
Beginning of Period
Income from Investment
Operations
Net investment income 0.0707 0.0675 0.0723 0.0572 0.0881 0.1037
0.0775 0.0901 0.0869 0.0867
Net Short-Term realized 0.0016
gain
Net Gains or Losses on 0.0164 (0.0263) 0.0863 (0.0924) (0.0006) (0.0069)
0.0709 0.0071 0.0416 (0.0179)
------- -------- ------- -------- -------- --------
- ------- ------- ------- --------
Securities (realized
and unrealized)
Total from Investment 0.0887 0.0412 0.1586 (0.0352) 0.0875 0.0968
0.1484 0.0972 0.1285 0.0688
Operations
Less Distributions
Dividends (from net (0.0707) (0.0675) (0.0723) (0.0571) (0.0887) (0.0581)
(0.0839) (0.0901) (0.0869) (0.0869)
investment income)
Distributions (from (0.0068) (0.0452)
(0.0218)
capital gains) - - -
- - - - -
Initial Capitalization
- - - - - -
- - - - -
---------------------------------- -- -- --
- -- -- -- -
Returns of Capital (0.0707) (0.0675) (0.0723) (0.0571) (0.0955) (0.1033)
(0.1057) (0.0901) (0.0869) (0.0869)
Total Distributions
Net Asset Value End of $1.0918 $1.0738 $1.1001 $1.0138 $1.1061 $1.1141
$1.1206 $1.0779 $1.0708 $1.0292
------- ------- ------- ------- ------- -------
- ------- ------- ------- -------
Period
Total Return (1) 8.51% 3.92% 16.09% -3.20% 9.35% 8.94%
14.34% 9.70% 13.10% 6.78%
Net Assets, End of 58,311,917 64,077,863 62,473,959 56,338,235 51,424,663 30,350,801
32,730,440 39,727,586 44,046,887 47,866,066
Period
Ratio of Expenses to 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
0.60% 0.60% 0.60% 0.60%
Average Net Assets
Ratio of Net Income to 6.32% 6.22% 6.76% 5.47% 8.49% 4.96%
8.09% 9.11% 8.88% 8.84%
Average Net Assets
Portfolio Turnover Rate 55.54% 145.02% 185.57% (2) 27.28% 42.15%
213.79% 138.07% 52.55% 36.83%
308.47%
...........................................................................................................................
*From July 29, 1987 until May 1, 1990 the Portfolio's name was the Government
and High Quality Securities Portfolio and from April 8, 1985 to July 29, 1987
the Portfolio's name was the
Government Guaranteed Portfolio.
During these periods, the Portfolio's investment policies differed from its
current policies. (1) The performance shown does not reflect fees or expenses
deducted at the separate account level. (2) In 1994, the Portfolio turnover rate
was higher than in past years due to the impact of rising interest rates with
respect to the reverse dollar repurchase ("dollar roll") strategy utilized for
this Portfolio. High Portfolio turnover rates may occur in the future if similar
economic conditions occur.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and
Capital Changes For the Years Ended
December 31, 1997, 1996, 1995, 1994, and
1993**
=============================================================================
<TABLE>
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
International Equity Portfolio
- ------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................
1997 1996 1995 1994 1993
............................................................
............
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.3229 $1.1395 $1.0673 $1.0110 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0205 0.0136 0.0190 0.0049 0.0009
Net Short-Term realized gain (0.0060) 0.0045 0.0034
Net Gains or Losses on 0.0113 0.2042 0.0722 0.0563 0.0110
------- ------- ------- ------- ------
Securities (realized and
unrealized)
Total from Investment 0.0258 0.2223 0.0946 0.0612 0.0119
Operations
Less Distributions
Dividends (from net (0.0270) (0.0181) (0.0224) (0.0049) (0.0009)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0431) (0.0208)
gains) - - -
Initial Capitalization
- - - - -
------------ ------------ ------------ -- -
Returns of Capital Total (0.0701) (0.0389) (0.0224) (0.0049) (0.0009)
Distributions
Net Asset Value End of Period $1.2786 $1.3229 $1.1395 $1.0673 $1.0110
------- ------- ------- ------- -------
Total Return (1) 1.99% 19.59% 8.93% 6.06% 1.19%
Net Assets, End of Period 132,774,511 96,172,049 55,017,668 32,180,949 3,126,038
Average Commission Rate Paid $0.0159 $0.0146
Per Share Bought or Sold
Ratio of Expenses to Average 1.20% 1.39% 1.50% 1.49% 1.48%*
Net Assets
Ratio of Net Income to 1.70% 1.24% 1.70% 1.25% 1.09%*
Average Net Assets
Portfolio Turnover Rate 34.30% 22.21% 20.28% 11.49% 0%
..........................................................................................
*Annualized
** The International Equity Portfolio was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and
Capital Changes For the Years Ended
December 31, 1997, 1996, 1995, 1994, and
1993**
==========================================================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
Small-Cap Value Portfolio
- ----------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................
1997 1996 1995 1994 1993
............................................................
...........
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.2480 $1.0669 $0.9974 $1.0330 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0067 0.0095 0.0286 0.0068 0.0012
Net Short-Term realized gain 0.0594 0.0350
Net Gains or Losses on 0.2629 0.1811 0.0884 (0.0356) 0.0330
------- ------- ------- -------- ------
Securities (realized and
unrealized)
Total from Investment 0.3290 0.1906 0.1520 (0.0288) 0.0342
Operations
Less Distributions
Dividends (from net (0.0771) (0.0095) (0.0636) (0.0068) (0.0012)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.5845) (0.0189)
gains) - -
Initial Capitalization
- - - - -
------------ ------------ ------------ -- -
Returns of Capital Total (0.6616) (0.0095) (0.0825) (0.0068) (0.0012)
Distributions
Net Asset Value End of Period $0.9154 $1.2480 $1.0669 $0.9974 $1.0330
------- ------- ------- ------- -------
Total Return (1) 27.86% 17.94% 15.51% -2.78% 3.42%
Net Assets, End of Period 22,526,242 36,599,651 20,769,579 9,721,848 3,007,882
Average Commission Rate Paid $0.0573 $0.0521
Per Share Bought or Sold
Ratio of Expenses to Average 1.28% 1.31% 1.35% 1.33% 1.33%*
Net Assets
Ratio of Net Income to 0.64% 0.90% 2.51% 0.80% 1.52%*
Average Net Assets
Portfolio Turnover Rate 82.83% 30.61% 17.78% 16.81% -
..........................................................................................
*Annualized
** The Small-Cap Value Portfolio was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and
Capital Changes For the Years Ended
December 31, 1997, 1996, 1995, 1994 and
1993**
===============================================================================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
Small-Cap Index Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................
1997 1996 1995 1994 1993
............................................................
...........
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.2370 $1.1680 $0.9540 $1.0112 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0081 0.0124 0.0102 0.0097 0.0009
Net Short-Term realized gain 0.0285 0.0374 0.0095
Net Gains or Losses on 0.2134 0.1285 0.2298 (0.0572) 0.0112
------- ------- ------- -------- ------
Securities (realized and
unrealized)
Total from Investment 0.2500 0.1783 0.2495 (0.0475) 0.0121
Operations
Less Distributions
Dividends (from net (0.0352) (0.0498) (0.0197) (0.0097) (0.0009)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.1930) (0.5950) (0.0158)
gains) - -
Initial Capitalization
- - - - -
------------ ------------ ------------ -- -
Returns of Capital Total (0.2282) (0.1093) (0.0355) (0.0097) (0.0009)
Distributions
Net Asset Value End of Period $1.2588 $1.2370 $1.1680 $0.9540 $1.0112
------- ------- ------- ------- -------
Total Return (1) 21.00% 15.30% 26.24% -4.69% 1.21%
Net Assets, End of Period 121,454,805 80,783,692 51,610,284 22,336,944 5,936,716
Average Commission Rate Paid $0.0350 $0.0453
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.60%*
Net Assets
Ratio of Net Income to 0.66% 1.04% 1.00% 1.20% 1.24%*
Average Net Assets
Portfolio Turnover Rate 102.45% 39.66% 30.17% 53.44% 0.72%
..........................................................................................
*Annualized
** The Small-Cap Index was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes For
the Years Ended December 31, 1997,1996, 1995, 1994 and
1993 **
======================================================================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Growth Index Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
.................................................................................
1997 1996 1995 1994 1993
...................................................
..........
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.4852 $1.3459 $1.0120 $1.0064 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0085 0.0114 0.0127 0.0133 0.0015
Net Short-Term realized gain 0.0044 0.0084 0.0038
Net Gains or Losses on 0.4197 0.2767 0.3394 0.0056 0.0064
------ ------ ------ ------ ------
Securities (realized and
unrealized)
Total from Investment 0.4326 0.2965 0.3359 0.0189 0.0079
Operations
Less Distributions
Dividends (from net (0.0137) (0.0198) (0.0165) (0.0133) (0.0015)
investment income and net
Short-Term realized gains)
Distributions (from capital (0.0534) (0.1374) (0.0055) - -
gains)
Initial Capitalization
- - - - -
-------- -------- -------- -- -
Returns of Capital Total (0.0671) (0.1572) (0.0220) (0.0133) (0.0015)
Distributions
Net Asset Value End of Period $1.8507 $1.4852 $1.3459 $1.0120 $1.0064
------- ------- ------- ------- -------
Total Return (1) 29.26% 22.10% 35.29% 1.93% 0.79%
Net Assets, End of Period 162,975,7683,743,21043,515,29914.171,307 3,099,916
Average Commission Rate Paid $0.0264 $0.0358
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.59% *
Net Assets
Ratio of Net Income to 0.54% 0.83% 1.15% 1.57% 1.98% *
Average Net Assets
Portfolio Turnover Rate 21.52% 41.55% 17.90% 18.50% 0.06%
.................................................................................
*Annualized
** The Growth Index Portfolio was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital
Changes For the Years Ended December 31, 1997,
1996, 1995, 1994 and 1993 **
================================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Value Index Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
................................................................................
1997 1996 1995 1994 1993
..................................................
..........
Net Asset Value, Beginning $1.4538 $1.2623 $0.9614 $1.0118 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0278 0.0298 0.0305 0.0253 0.0014
Net Short-Term realized gain 0.0111 0.0101 0.0054
Net Gains or Losses on 0.4520 0.2186 0.3144 (0.0504) 0.0119
------ ------ ------ -------- ------
Securities (realized and
unrealized)
Total from Investment 0.4909 0.2585 0.3503 (0.0251) 0.0133
Operations
Less Distributions
Dividends (from net (0.0389) (0.0399) (0.0359) (0.0253) (0.0014)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0922) (0.0271) (0.0135) - (0.0001)
gains)
Initial Capitalization
- - - - -
-------- -------- -------- -- -
Returns of Capital Total (0.1311) (0.0670) (0.0494) (0.0253) (0.0015)
Distributions
Net Asset Value End of Period $1.8136 $1.4538 $1.2623 $0.9614 $1.0118
------- ------- ------- ------- -------
Total Return (1) 34.08% 20.63% 36.80% -2.49% 1.32%
Net Assets, End of Period 237,421,804122,283,0265,183,89825,610,4744,337,142
Average Commission Rate Paid $0.0295 $0.0377
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.59% *
Net Assets
Ratio of Net Income to 1.83% 2.38% 2.87% 3.18% 2.11% *
Average Net Assets
Portfolio Turnover Rate 26.03% 16.31% 18.11% 16.88% 8.99%
................................................................................
*Annualized
** The Value Index Portfolio was established effective December 1, 1993. (1)
The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
================================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Mid-Cap Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
...............................................................................
1997 1996 1995 1994
.................................................
..........
Net Asset Value, Beginning $1.4327 $1.3538 $1.1003 $1.0000
of Period
Income from Investment
Operations
Net investment income (0.0083) 0.0018 0.0076
Net Short-Term realized gain (0.0437) 0.0299
Net Gains or Losses on 0.2257 0.0890 0.2594 0.1003
Securities (realized and
unrealized)
Total from Investment 0.1820 0.0807 0.2911 0.1079
Operations
Less Distributions
Dividends (from net (0.0317) (0.0076)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0615) (0.0018) (0.0059)
gains) -
Initial Capitalization
- - - -
-------- -------- -------- -
Returns of Capital Total (0.0615) (0.0018) (0.0376) (0.0076)
Distributions
Net Asset Value End of Period $1.5532 $1.4327 $1.3538 $1.1003
Total Return (1) 12.95% 5.96% 26.50% 10.86%
Net Assets, End of Period 233,939,911 214,710,803 148,264,194 81,088,654
Average Commission Rate Paid $0.0413 $0.0461
Per Share Bought or Sold
Ratio of Expenses to Average 1.06% 1.07% 1.10% 1.07%*
Net Assets
Ratio of Net Income to -0.51% -0.66% 0.13% 1.26%
Average Net Assets
Portfolio Turnover Rate 139.74% 80.31% 167.21% 166.12%
...............................................................................
*Annualized
** The Mid-Cap Portfolio was established effective January 3, 1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
===============================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the Statement
of Additional Information.
Maxim T. Rowe Price Equity/Income
- -------------------------------------------------------------------------------
Years Ended December 31,
...............................................................................
1997 1996 1995 1994
.................................................
..........
Net Asset Value, Beginning of Perio$1.4492 $1.2633 $0.9805 $1.0000
Income from Investment
Operations
Net investment income 0.0357 0.0299 0.0345 0.0061
Net Short-Term realized gain 0.0357 0.0121 0.0051
Net Gains or Losses on 0.3426 0.2009 0.2841 (0.0195)
------- ------- ------- --------
Securities (realized and
unrealized)
Total from Investment 0.4140 0.2429 0.3237 (0.0134)
Operations
Less Distributions
Dividends (from net (0.0713) (0.0420) (0.0396) (0.0061)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0317) (0.0150) (0.0013)
gains) -
Initial Capitalization
- - - -
------------ ------------ ------------ -
Returns of Capital Total (0.1030) (0.0570) (0.0409) (0.0061)
Distributions
Net Asset Value End of Period $1.7602 $1.4492 $1.2633 $0.9805
------- ------- ------- -------
Total Return (1) 28.82% 19.39% 33.42% -1.34%
Net Assets, End of Period 167,154,169 69,535,903 10,950,195 2,110,302
Average Commission Rate Paid $0.0380 $0.0368
Per Share Bought or Sold
Ratio of Expenses to 0.91% 0.95% 0.95% 0.95%*
Average Net Assets
Ratio of Net Income to 2.48% 2.85% 3.46% 3.90%*
Average Net Assets
Portfolio Turnover Rate 25.35% 26.15% 14.00% 2.74%
...............................................................................
*Annualized
** The Maxim T. Rowe Price Equity/Income fund was established effective
November 1, 1994. (1) The performance shown does not reflect fees or
expenses deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
===============================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Maxim INVESCO ADR
- --------------------------------------------------------------------------------
Years Ended December 31,
...............................................................................
1997 1996 1995 1994
.................................................
Net Asset Value, Beginning $1.3508 $1.1255 $0.9859 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0114 0.0112 0.0120 0.0026
Net Short-Term realized gain (0.0025)
Net Gains or Losses on 0.1537 0.2266 0.1396 (0.0141
------- ------- ------- -------
Securities (realized and
unrealized)
Total from Investment 0.1626 0.2378 0.1516 (0.0115)
Operations
Less Distributions
Dividends (from net (0.0140) (0.0112) (0.0120) (0.0026)
investment income)
Distributions (from capital (0.0190) (0.0013)
gains) - -
Initial Capitalization
- - - -
------------ ------------ ------------ -
Returns of Capital Total (0.0330) (0.0125) (0.0120) (0.0026)
Distributions
Net Asset Value End of Period $1.4804 $1.3508 $1.1255 $0.9859
------- ------- ------- -------
Total Return (1) 12.08% 21.17% 15.48% -1.16%
Net Assets, End of Period 16,581,357 7,694,858 2,681,969 1,976,834
Average Commission Rate Paid $0.0592 $0.0628
Per Share Bought or Sold
Ratio of Expenses to Average 1.30% 1.33% 1.50% 1.50%*
Net Assets
Ratio of Net Income to 1.02% 1.20% 1.17% 1.56%*
Average Net Assets
Portfolio Turnover Rate 19.56% 15.25% 5.88% 2.42%
...............................................................................
*Annualized
** The Maxim INVESCO ADR fund was established effective November 1, 1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
======================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Maxim INVESCO Small-Cap Growth
- --------------------------------------------------------------------------------
Years Ended December 31,
..............................................................................
1997 1996 1995 1994
................................................
..........
Net Asset Value, Beginning $1.4330 $1.2734 $1.0054 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0009 0.0024 0.0069 0.0030
Net Short-Term realized gain 0.1174 0.1530 0.0272
Net Gains or Losses on 0.1438 0.1850 0.2846 0.0054
------- ------- ------- ------
Securities (realized and
unrealized)
Total from Investment 0.2621 0.3404 0.3187 0.0084
Operations
Less Distributions
Dividends (from net (0.0996) (0.1554) (0.0341) (0.0030)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0254) (0.0166)
gains) -
Initial Capitalization
- - - -
------------ ------------ ------------ -
Returns of Capital Total (0.0996) (0.1808) (0.0507) (0.0030)
Distributions
Net Asset Value End of Period $1.5955 $1.4330 $1.2734 $1.0054
------- ------- ------- -------
Total Return (1) 18.70% 26.73% 31.79% 0.84%
Net Assets, End of Period 62,251,873 31,827,778 6,385,180 2,022,380
Average Commission Rate Paid $0.0580 $0.0410
Per Share Bought or Sold
Ratio of Expenses to Average 1.10% 1.10% 1.10% 1.08%*
Net Assets
Ratio of Net Income to 0.01% 0.25% 0.58% 1.86%*
Average Net Assets
Portfolio Turnover Rate 174.65% 265.05% 266.64% -
..............................................................................
*Annualized
** The Maxim INVESCO Small-Cap fund was established effective November 1, 1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
===============================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Corporate Bond Portfolio
- -------------------------------------------------------------------------------
Years Ended December 31,
..............................................................................
1997 1996 1995 1994
................................................
..........
Net Asset Value, Beginning $1.1618 $1.1521 $0.9716 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0764 0.0825 0.0842 0.0137
Net Short-Term realized gain 0.0081 0.0055 0.0159
Net Gains or Losses on 0.0608 0.0269 0.1835 (0.0284)
------- ------- ------- --------
Securities (realized and
unrealized)
Total from Investment 0.1453 0.1149 0.2836 (0.0147)
Operations
Less Distributions
Dividends (from net (0.0817) (0.0880) (0.1001) (0.0137)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0273) (0.0172) (0.0030)
gains) -
Initial Capitalization
- - - -
------------ ------------ ------------ -
Returns of Capital Total (0.1090) (0.1052) (0.1031) (0.0137)
Distributions
Net Asset Value End of Period $1.1981 $1.1618 $1.1521 $0.9716
------- ------- ------- -------
Total Return (1) 12.70% 10.35% 30.19% -1.47%
Net Assets, End of Period 158,884,389 83,645,029 45,530,190 13,713,195
Ratio of Expenses to Average 0.90% 0.90% 0.90% 1.08%*
Net Assets
Ratio of Net Income to 7.14% 7.68% 7.89% 8.64%*
Average Net Assets
Portfolio Turnover Rate 52.69% 40.02% 24.70% 9.45%
..............................................................................
*Annualized
** The Corporate Bond Portfolio was established effective November 1, 1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995 and 1994**
=========================================================================
The following tables should be read in conjunction with
the financial statements and related notes included in
the Statement of Additional Information.
- ------------------------------------------------------------------------------
Small-Cap Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
........................................................................
1997 1996 1995 1994
.........................................
...........
Net Asset Value, Beginning of $1.4028 $1.1605 $0.9755 $1.0000
Period
Income from Investment
Operations
Net investment income 0.0103 0.0091 0.0075 (0.0016)
Net Short-Term realized gain 0.1307 0.0597 0.0878
Net Gains or Losses on 0.1966 0.2779 0.1962 (0.0229)
------ ------ ------ --------
Securities (realized and
unrealized)
Total from Investment 0.3376 0.3467 0.2915 (0.0245)
Operations
Less Distributions
Dividends (from net (0.1524) (0.0688) (0.0945) -
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0564) (0.0356) (0.0120) -
gains)
Initial Capitalization
- - - -
-------------------------------
Returns of Capital Total (0.2088) (0.1044) (0.1065) -
Distributions
Net Asset Value End of Period $1.5316 $1.4028 $1.1605 $0.9755
------- ------- ------- -------
Total Return (1) 24.50% 30.09% 29.96% -2.46%
Net Assets, End of Period 183,322,637 9,944,926 28,594,611 12,963,409
Average Commission Rate Paid $0.0539 $0.0573
Per Share Bought or Sold
Ratio of Expenses to Average 1.11% 1.26% 1.30% 1.26% *
Net Assets
Ratio of Net Income to 0.89% 0.98% 0.65% -1.08%
Average Net Assets
Portfolio Turnover Rate 93.28% 62.63% 99.48% 8.84%
........................................................................
*Annualized
** The Small-Cap Aggressive Portfolio was established effective November 1,1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, and 1995**
===============================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Short-Term Maturity Bond Portfolio
- -------------------------------------------------------------------------
Years Ended December 31,
............................................................
1997 1996 1995
..............................
Net Asset Value, Beginning $1.0065 $1.0092 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0534 0.0489 0.0194
Net Short-Term realized gain 0.0009 0.0013
Net Gains or Losses on 0.0061 (0.0027) 0.0092
------ -------- ------
Securities (realized and
unrealized)
Total from Investment 0.0604 0.0462 0.0299
Operations
Less Distributions
Dividends (from net (0.0534) (0.0489) (0.0207)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0001) - -
gains)
Initial Capitalization
- - -
---------------------
Returns of Capital Total (0.0535) (0.0489) (0.0207)
Distributions
Net Asset Value End of Period $1.0134 $1.0065 $1.0092
------- ------- -------
Total Return (1) 6.14% 4.70% 3.02%
Net Assets, End of Period 78,367,545 39,503,114 15,618,670
Ratio of Expenses to Average 0.60% 0.60% 0.53% *
Net Assets
Ratio of Net Income to 5.47% 5.15% 4.61% *
Average Net Assets
Portfolio Turnover Rate 84.59% 51.71% 97.87%
............................................................
* Annualized
** The Short-Term Maturity Bond Portfolio was established effective August 1,
1995. (1) The performance shown does not reflect fees or expenses deducted at
the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997 and 1996 **
===============================================================================
The following tables should be read
in conjunction with the financial
statements and related notes
included in the Statement of
Additional Information.
Maxim INVESCO Balanced Portfolio
- -----------------------------------------------------------
Year Ended December 31,
..............................................................
1997 1996
.........................
Net Asset Value, Beginning of Period $1.0408 $1.0000
Income from Investment Operations
Net investment income 0.0187 0.0052
Net Short-Term realized gain 0.0232 0.0012
Net Gains or Losses on Securities 0.2286 0.0408
------- ------
(realized and unrealized)
Total from Investment Operations 0.2705 0.0472
Less Distributions
Dividends (from net investment (0.0525) (0.0064)
income and Short-Term realized
gains)
Distributions (from capital gains)
Initial Capitalization
- -
------------ -
Returns of Capital Total (0.0525) (0.0064)
Distributions
Net Asset Value End of Period $1.2588 $1.0408
------- -------
Total Return (1) 26.10% 4.60%
Net Assets, End of Period 127,072,586 15,987,166
Average Commission Rate Paid Per $0.0590 $0.0617
Share Bought or Sold
Ratio of Expenses to Average Net 1.00% 1.00%*
Assets
Ratio of Net Income to Average Net 2.77% 2.84%*
Assets
Portfolio Turnover Rate 150.57% 17.14%
..............................................................
* Annualized
** The Maxim INVESCO Balanced Portfolio was established effective October 1,
1996. (1) The performance shown does not reflect fees or expenses deducted at
the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
============================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Blue Chip Portfolio
- -----------------------------------------------------------------------------
Years Ended December 31,
........................................
1997
..........
Net Asset Value Beginning of $1.0000
Period
Income from Investment
Operations
Net investment income 0.0089
Net Short-Term realized gain (0.0051)
Net Gains or Losses on 0.0279
------
Securities (realized and
unrealized)
Total from Investment 0.0317
Operations
Less Distributions
Dividends (from net (0.0089)
investment income and net
Short-Term realized gain))
Distributions (from capital -
gains)
Initial Capitalization
Returns of Capital Total (0.0089)
Distributions
Net asset Value End of Period $1.0228
-------
Total Return(1) 3.17%
Net Assets, End of Period 94,206,892
Average Commission Rate Paid $0.0598
Per Share Bought or Sold
Ratio of Expenses to Average 1.14%*
Net Assets
Ratio of Net Income to 1.78%*
Average Net Assets
Portfolio Turnover Rate 111.45%
........................................
* Annualized
** The Blue Chip Portfolio was established effective July 1, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
MidCap Growth Portfolio
- ------------------------------------------------------------------------
Years Ended December 31,
........................................
1997
..........
Net Asset Value Beginning of $1.0000
Period
Income from Investment
Operations
Net investment income
Net Short-Term realized gain 0.0062
Net Gains or Losses on 0.1024
Securities (realized and
unrealized)
Total from Investment 0.1086
Operations
Less Distributions
Dividends from net (0.0017)
investment income and net
Short-Term realized gain)
Distributions (from capital -
gains)
Initial Capitalization
Returns of Capital Total (0.0017)
Distributions
Net asset Value End of Period $1.1069
-------
Total Return(1) 10.86%
Net Assets, End of Period 56,704,297
Average Commission Rate Paid $0.0517
Per Share Bought or Sold
Ratio of Expenses to Average 1.05%*
Net Assets
Ratio of Net Income to (0.16)%*
Average Net Assets
Portfolio Turnover Rate 24.28%
........................................
* Annualized
** The MidCap Growth Portfolio was established effective July 1, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
=============================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Aggressive Profile Portfolio
- -------------------------------------------------------------------------
Years Ended December 31,
........................................
1997
...........
Net Asset Value Beginning $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0047
Net Short-Term realized gain 0.0712
Net Gains or Losses on (0.0432)
--------
Securities (realized and
unrealized)
Total from Investment 0.0327
Operations
Less Distributions
Dividends from net (0.0127)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0695)
gains)
Initial Capitalization
Returns of Capital Total (0.0822)
Distributions
Net asset Value End of $0.9505
-------
Period
Total Return(1) 3.31%
Net Assets, End of Period 697,434
Ratio of Expenses to 0.25%*
Average Net Assets
Ratio of Net Income to 2.38%*
Average Net Assets
Portfolio Turnover Rate 59.90%
........................................
* Annualized
** The Aggressive Profile Portfolio was established effective September 9, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
================================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Moderately Aggressive Profile Portfolio
- --------------------------------------------------------------------
Years Ended December 31,
.......................................
1997
..........
Net Asset Value Beginning $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0075
Net Short-Term realized gain 0.0568
Net Gains or Losses on (0.0279)
--------
Securities (realized and
unrealized)
Total from Investment 0.0364
Operations
Less Distributions
Dividends from net (0.0141)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0547)
gains)
Initial Capitalization
Returns of Capital Total (0.0688)
Distributions
Net asset Value End of $0.9676
-------
Period
Total Return(1) 3.66%
Net Assets, End of Period 1,630,969
Ratio of Expenses to 0.25%*
Average Net Assets
Ratio of Net Income to 4.19%*
Average Net Assets
Portfolio Turnover Rate 41.30%
.......................................
* Annualized
** The Moderately Aggressive Profile Portfolio was established effective
September 9, 1997. (1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
============================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Moderate Profile Portfolio
- ------------------------------------------------------
Years Ended December 31,
.......................................
1997
..........
Net Asset Value Beginning $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0090
Net Short-Term realized gain 0.0477
Net Gains or Losses on (0.0308)
--------
Securities (realized and
unrealized)
Total from Investment 0.0259
Operations
Less Distributions
Dividends from net (0.0144)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0454)
gains)
Initial Capitalization
Returns of Capital Total (0.0598)
Distributions
Net asset Value End of $0.9661
-------
Period
Total Return(1) 2.60%
Net Assets, End of Period 1,044,081
Ratio of Expenses to 0.25%*
Average Net Assets
Ratio of Net Income to 5.51%*
Average Net Assets
Portfolio Turnover Rate 31.39%
.......................................
* Annualized
** The Moderate Profile Portfolio was established effective September 9, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
========================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Moderately Conservative Profile Portfolio
- -------------------------------------------------------------------------
Years Ended December 31,
........................................
1997
...........
Net Asset Value Beginning $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0132
Net Short-Term realized gain 0.0182
Net Gains or Losses on (0.0085)
--------
Securities (realized and
unrealized)
Total from Investment 0.0229
Operations
Less Distributions
Dividends from net (0.0151)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0169)
gains)
Initial Capitalization
Returns of Capital Total (0.0320)
Distributions
Net asset Value End of $0.9909
-------
Period
Total Return(1) 2.29%
Net Assets, End of Period 534,975
Ratio of Expenses to 0.25%*
Average Net Assets
Ratio of Net Income to 6.02%*
Average Net Assets
Portfolio Turnover Rate 32.97%
........................................
* Annualized
** The Moderately Conservative Profile Portfolio was established effective
September 9, 1997. (1) The performance shown does not reflect fees or expenses
deducted at the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
=================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Conservative Profile Portfolio
- ---------------------------------------------------------------------
Years Ended December 31,
........................................
1997
...........
Net Asset Value Beginning $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0145
Net Short-Term realized gain 0.0121
Net Gains or Losses on 0.0094
------
Securities (realized and
unrealized)
Total from Investment 0.0360
Operations
Less Distributions
Dividends from net (0.0159)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0113)
gains)
Initial Capitalization
Returns of Capital Total (0.0272)
Distributions
Net asset Value End of $1.0088
-------
Period
Total Return(1) 3.60%
Net Assets, End of Period 268,416
Ratio of Expenses to 0.25%*
Average Net Assets
Ratio of Net Income to 8.83%*
Average Net Assets
Portfolio Turnover Rate 25.56%
........................................
* Annualized
**The Conservative Profile Portfolio was established effective September 9,1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
INTRODUCTION
Maxim Series Fund, Inc. (the "Fund") is an open-end management
investment company (a mutual fund) that sells its shares to the Maxim Series
Account, FutureFunds Series Account, 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, the "Series Accounts") of Metropolitan
Life Insurance Company ("MetLife"). 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 MetLife. For information concerning your rights
under a variable contract, see the applicable Series Account prospectus provided
herewith and/or applicable disclosure documents. Shares of the Fund are, and may
in the future be, used to fund benefits under other contracts issued by GWL&A,
its affiliates, MetLife or other insurance companies. G W Capital Management,
Inc. ("GW Capital Management")is the Investment Adviser for the Fund. The
day-to-day management of certain Portfolios of the Fund is carried out by
sub-advisers which are not affiliated with GW Capital Management.
THE FUND PORTFOLIOS
Each portfolio has its own investment objective and investment strategy.
The investment objective of any portfolio may not be changed without a vote of a
majority of the shares of that portfolio. A more detailed description of the
Fund's investment policies and a glossary further describing certain investment
securities mentioned in the discussions that follow are contained in the
Statement of Additional Information.
Money Market Portfolio
The investment objectives of the Money Market Portfolio are to preserve
shareholder capital, to maintain liquidity and to achieve the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities.
The assets of the Money Market Portfolio are invested in money market
instruments with remaining maturities not exceeding 13 months. The Money Market
Portfolio also maintains a dollar-weighted average portfolio maturity of ninety
days or less. The money market instruments in which the Portfolio may invest
include the following:
1. U.S. government securities and government agency securities. U.S.
government securities consist of various types of marketable securities by the
United States Treasury, such as bills, notes and bonds. Such securities are
direct obligations of the United States Government. U.S. government agency
securities are debt securities issued by government-sponsored enterprises,
federal agencies and international institutions. Such securities are not direct
obligations of the U.S. Treasury but involve government sponsorship or
guarantees. Among the agencies whose debt securities may be purchased are: the
Government National Mortgage Association and Federal Housing Administration,
whose instruments are supported by the full faith and credit of the United
States; the Farm Credit Bank, whose instruments are not direct obligations of
the United States, although the Farm Credit Bank is supported by its ability to
borrow from the U.S. Treasury; and the Federal Land Bank, Federal Home Loan Bank
and Federal Home Loan Mortgage Corporation, whose instruments are not supported
by the U.S. Treasury, but only by the credit of the issuing agency;
2. Certificates of deposit, time deposits, swap deposits and bankers'
acceptances of (i) U.S. commercial banks or savings and loan associations having
total assets in excess of $1 billion, or (ii) other U.S. commercial banks or
savings and loan associations, foreign branches of U.S. banks, and U.S. branches
of foreign banks if such bank obligations are fully insured by the Federal
Deposit Insurance Corporation;
3. Commercial paper, including variable amount master demand notes;
4. Repurchase and reverse repurchase agreements. A repurchase agreement
is an instrument under which the purchaser (e.g., the Fund) acquires ownership
of the obligation (debt security) and the seller agrees at the time of the sale
to repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This results in a
fixed rate of return insulated from market fluctuations during such period.
Reverse repurchase agreements involve the sale of securities held by the
Portfolio, with an agreement to repurchase the securities at an agreed upon
price, date and interest payment. Repurchase agreements could involve certain
risks in the event of default or insolvency of the other party to the agreement,
including possible delays or restrictions upon the Portfolio's ability to
dispose of the underlying securities. The Investment Adviser, acting under the
supervision of the Board of Directors, reviews the credit worthiness of those
dealers with whom the Portfolio enters into repurchase agreements; and
5. Other money market instruments that the Portfolio may from
time-to-time invest in include floating rate notes and Eurodollar certificates
of deposit if denominated in U.S. currency.
The Money Market Portfolio generally invests in instruments (other than
U.S. government securities) that have received the highest rating by at least
one nationally recognized statistical rating organization ("NRSRO"), securities
whose issuer has received such ratings with respect to a class of short-term
debt obligations that is comparable in priority and security with the instrument
acquired, or securities which are determined or ratified by the Fund's Board of
Directors as being comparable to the foregoing securities. The Money Market
Portfolio only enters into repurchase agreements that are collateralized
entirely by U.S. government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest rating categories
by at least one NRSRO.
In addition to following the foregoing guidelines, the Money Market
Portfolio intends otherwise to comply with the requirements of Rule 2a-7 under
the Investment Company Act of 1940, as applicable to the Portfolio.
Bond Portfolio
The investment objective of the Bond Portfolio is to seek to achieve
maximum total return, consistent with the preservation of capital, through
investment in an actively managed portfolio of debt securities.
The Portfolio will normally consist of securities with various
maturities but the weighted average maturity will be 2 to 10 years.
Under normal circumstances, the Portfolio intends to invest at least 65%
of its net assets in debt securities of the U.S. Government and its agencies;
foreign governments, agencies and supra-national organizations; and, domestic or
foreign corporations. The Portfolio may also invest in mortgage related and
other asset-backed securities, domestic and foreign commercial banks and money
markets including commercial paper, bankers acceptances, certificates of
deposit, time deposit and repurchase agreements.
Foreign debt exposure will be limited to a maximum of 40% of total
assets (measured at the time of acquisition) in foreign debt, with a maximum of
20% of total assets (measured at the time of acquisition) in non-U.S. dollar
denominated foreign debt. No more than 25% of the total assets (measured at the
time of acquisition) may be invested in securities of issuers located in a
single country, other than the U.S. See "Foreign Investment Risks" in this
prospectus.
Foreign currency exchange transactions may be utilized in an attempt to
protect against uncertainty in the level of future exchange rates. See "Foreign
Currency Exchange Transactions" in this prospectus.
The Portfolio may invest in up to 10% of its total assets (measured at
the time of acquisition) in securities of below investment grade quality,
commonly referred to as "junk bonds." Lower rated fixed-income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed-income securities and are considered
predominately speculative with respect to the ability of the issuer to meet
principal and interest payments. In addition, the secondary market may be less
liquid for lower-rated fixed-income securities which may make the valuation and
sale of these securities more difficult. Securities in the lowest investment
grade category--BBB by Standard & Poor's Corporation ("S&P") or Baa by Moody's
Investor Service, Inc. ("Moody's)--have some speculative characteristics.
The Portfolio will also be able to invest in when-issued securities or
forward commitments, engage in securities lending, reverse repurchase agreements
and have the ability to borrow money for temporary administrative or emergency
purposes. Securities may be purchased on a when-issued basis and may be
purchased or sold on a forward commitment basis in order to hedge against
anticipated changes in interest rates and prices and/or secure a favorable rate
of return. The Statement of Additional Information contains more detailed
information about these investment practices.
In order to shorten/lengthen or hedge the duration of the Portfolio and
for the purpose of both hedging the foreign currency and interest-rate risks
associated with the Portfolio securities and increasing the total return of the
Portfolio, active interest rate management techniques through options, futures
contracts, options on certain futures contracts, interest rate swaps and
interest rate caps and floors may be utilized in the Portfolio. The Statement of
Additional Information contains more detailed information about these investment
practices.
U.S. Government Securities Portfolio
The investment objective of the U.S. Government Securities Portfolio is
to seek the highest level of return consistent with preservation of capital and
substantial credit protection. The Portfolio seeks to achieve this objective by
investing at least 65% of its total assets in securities issued or guaranteed by
the U.S. Government or one of its agencies or instrumentalities.
Investment by the U.S. Government Securities Portfolio in U.S.
government securities will include direct pass-through mortgage certificates
issued by those government agencies whose obligations are backed by the full
faith and credit of the United States Government, such as the Government
National Mortgage Association ("GNMA") or the Federal Housing Administration.
Such pass-through certificates represent individual interests in pools of
mortgages insured by the Veterans Administration, the Farmers' Home Association,
Federal Housing Administration or any other government agency. Owners of
pass-through certificates are entitled to receive a pro-rata share of the net
payments received on the underlying mortgages, hence such payments are "passed
through" to the owner. Accordingly, the amount and frequency of payments on such
pass-through certificates depends on the rate of prepayments on the underlying
mortgages, which may vary based upon a variety of economic factors.
The Portfolio may also invest in other U.S. government securities, such as
U.S. Treasury bills, notes and bonds, or in certificates representing individual
interests in pools of such U.S. Treasury securities. The payment of principal
and interest to the Portfolio on such certificates is fully backed by the U.S.
Government.
The Portfolio also may invest in securities issued by the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC").
FNMA and FHLMC both issue mortgage-backed securities that are similar to
GNMAs in that they represent interests in pools of mortgage loans. FNMA
guarantees timely payment of interest and principal on its certificates.
FHLMC guarantees timely payment of interest and ultimate payment of
principal. The FNMA and FHLMC guarantees are backed only by those agencies and
not by the full faith and credit of the United States.
The Portfolio also may invest in private mortgage pass-through
securities and collateralized mortgage obligations ("CMOs"). These CMOs may take
the form of those issued by private issuers and collateralized by securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
The Portfolio may also enter into reverse dollar repurchase agreements
("dollar rolls") of mortgage-backed securities in which the Portfolio sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Portfolio forgoes principal
and interest paid on the mortgage-backed securities. The Portfolio is
compensated by the difference between the current sales price and the lower
forward price for proceeds of the initial sale. Liquid assets equal to the value
of the outstanding repurchase commitments are segregated from general investible
funds and will be marked to market daily. The risk associated with dollar roll
transactions is that the securities may not be delivered and the Portfolio may
incur a loss or will have lost the opportunity to otherwise invest the amount
set aside for such transaction in the segregated asset account. As of December
31, 1997, 5.9% of the Portfolio was comprised of investments subject to dollar
roll transactions.
The Portfolio may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis in order to hedge
against anticipated changes in interest rates and prices and/or secure a
favorable rate of return. The Statement of Additional Information contains more
information about these investment practices.
The market value of securities held by the Portfolio can be expected to
decline when interest rates rise. Thus, the U.S. Government Securities Portfolio
will generally shorten the average maturity of the Portfolio when interest rates
are rising and lengthen the average maturity when interest rates are falling in
order to optimize the total return of the Portfolio.
The Portfolio also may hold money market instruments as it believes is
advisable to maintain liquidity or for temporary defensive purposes.
MidCap Portfolio
The Portfolio's investment objective is long-term growth of capital. The
Portfolio will normally invest at least 65% of its assets in securities issued
by medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P MidCap 400 Index
(the "S&P MidCap"). Companies whose capitalization falls outside this range
after the Portfolio's initial purchase continue to be considered medium-sized
companies for purposes of this policy. As of December 31, 1997, the S&P MidCap
included companies with capitalizations between approximately $213 million to
$13.7 billion. The range of the S&P MidCap is expected to change on a regular
basis. Janus Capital Corporation serves as sub-adviser to this Portfolio. As
such it is responsible for the day-to-day management of the Portfolio, subject
to the overall supervision of the Fund's Board of Directors and the Investment
Adviser.
Medium-sized companies may suffer more significant losses as well as
realize more substantial growth than larger capitalized, more established
issuers. Thus, investments in such companies tend to be more volatile and
somewhat speculative.
The Portfolio invests substantially all of its assets in common stock
when it is believed that the relevant market environment favors profitable
investing in those securities. Common stock investments are selected in
industries and companies that are believed to be experiencing favorable demand
for their products and services, and which operate in a favorable competitive
and regulatory climate. The process of analysis and selection focuses on
earnings growth potential. In particular, the Portfolio intends to buy stocks
with earnings growth potential that may not be recognized by the market.
Securities are selected solely for their capital growth potential; investment
income is not a consideration.
The Portfolio may also purchase securities of foreign issuers pursuant
to the same selection criteria applicable to domestic issuers. In addition,
factors such as expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and prospects for
relative economic growth amongst countries, regions or geographic areas may
warrant greater consideration in selecting foreign stocks. If appropriate, the
Portfolio may purchase foreign securities through dollar-denominated American
Depository Receipts, which do not involve the same direct currency and liquidity
risks as securities denominated in foreign currency and which are issued by
domestic banks and publicly traded in the United States. The Portfolio may
invest up to 25% of its total assets (measured at the time of acquisition) in
foreign securities denominated in foreign currency and not publicly traded in
the United States.
Investments in foreign securities involve risks that differ in some
respects from investment in securities of U.S. issuers. These risks include the
risk of fluctuations in the value of the currencies in which they are
denominated, the risk of adverse political and economic developments and, with
respect to certain countries, the possibility of expropriation, nationalization
or confiscatory taxation or limitations on the removal of funds or other assets
of the Portfolio. Securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. There also may be
less publicly available information about foreign issuers than domestic issuers,
and foreign issuers generally are not subject to the uniform accounting,
auditing and financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be encountered in settling securities
transactions in certain foreign markets and the Portfolio will incur costs in
converting foreign currencies to U.S. dollars. Custody charges are generally
higher for foreign securities.
The Portfolio may invest in "special situations" from time to time. A
special situation arises when it is believed that the securities of a particular
company will be recognized and appreciate in value due to a specific development
at that company. Developments creating a special situation might include a new
product or process, a management change or a technological breakthrough.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not result in the
anticipated economic impact on the value of a company's securities.
The Portfolio may also purchase and write options on securities
(including index options) and options on foreign currencies, and may invest in
futures contracts for the purchase or sale of instruments based on financial
indices, including interest rates or an index of U.S. Government or foreign
government securities or equity or fixed income securities futures contracts on
foreign currencies and fixed income securities ("futures contracts"), options on
futures contracts, forward contracts and swaps and swap-related products. These
instruments will be used primarily to hedge the Portfolio's positions, i.e., to
attempt to reduce the overall level of investment risk that normally would be
expected to be associated with the Portfolio's assets and to attempt to protect
the Portfolio against market movements that might adversely affect the value of
the Portfolio's securities or the price of securities that the Portfolio is
considering purchasing.
The use of futures, options, forward contracts and swaps exposes the
Portfolio to additional investment risks and transaction costs. If these
techniques are utilized to protect the Portfolio against potential adverse
movements in the securities, foreign currency or interest rate markets using
these instruments, and such markets do not move in a direction adverse to the
Portfolio, the Portfolio could be left in a less favorable position than if such
strategies had not been used. Risks inherent in the use of futures, options,
forward contracts and swaps include (1) the risk that interest rates, securities
prices and currency markets will not move in the directions anticipated; (2)
imperfect correlation between the price of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences.
The Portfolio may invest in securities that are considered illiquid
because of the absence of a readily available market or due to legal or
contractual restrictions. However, certain restricted securities that are not
registered for sale to the general public but that can be resold to
institutional investors may not be considered illiquid, provided that a dealer
or institutional trading market exists. See "Illiquid Securities" in this
prospectus.
Although the Portfolio may normally invest primarily in equity
securities, it may increase its cash position when investment opportunities with
desirable risk/reward characteristics cannot be located. The Portfolio may also
invest in preferred stocks, warrants, government securities, corporate bonds and
debentures, high-grade commercial paper, certificates of deposit or other debt
securities when it is believed there is an opportunity for capital growth for
such securities or so that the Portfolio may receive a return on idle cash. When
the Portfolio invests in such securities, investment income will increase and
may constitute a large portion of the return on the Portfolio. Consequently, the
Portfolio may not participate in market advances or declines to the extent that
it would if it remained fully invested in common stocks.
The Portfolio may also invest in money market securities for defensive
purposes or as a cash reserve or as a means of receiving a return on idle cash.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transactions
costs (which are borne directly by the Portfolio) and may result in greater tax
liability.
International Equity Portfolio
The Portfolio's investment objective is long-term capital growth, which
it seeks to achieve through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United States. Any income
realized will be incidental. Templeton Investment Counsel, Inc. serves as
sub-adviser to this Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio subject to the overall supervision of the Fund's
Board of Directors and the Investment Adviser.
Although the Portfolio will generally invest in common stock and certain
debt securities, rated or unrated, such as convertible bonds and bonds selling
at a discount, whenever, in the judgment of the sub-adviser, market or economic
conditions warrant, the Portfolio may, for temporary defensive purposes, invest
without limitation in U.S. government securities, money market instruments, bank
time deposits in the currency of any major nation and commercial paper.
The investments of the Portfolio in foreign issuers may involve special
risks in addition to those normally associated with investments in the
securities of U.S. issuers. For example, there may be less publicly available
information about foreign issuers than is available for U.S. issuers, and
foreign auditing, accounting, and financial reporting practices may differ from
U.S. practices. Also, foreign securities markets may be less active than U.S.
markets, trading may be thin and consequently securities prices may be more
volatile. Generally, all foreign investments are subject to risks of foreign
political and economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations, the
repatriation of foreign capital, and changes in foreign governmental attitudes
towards private investment, possibly leading to nationalization, increased
taxation, or confiscation of underlying fund assets. Also, there is the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.
The Portfolio is authorized to invest in medium quality or high risk,
lower quality debt securities that are rated between BBB and as low as CCC by
Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa by
Moody's Investors Service, Inc. ("Moody's"), commonly known as "high yield" (or
"junk") bonds, or, if unrated, are of an equivalent investment quality, as
determined by the sub-adviser. As an operating policy, which may be changed by
the Board of Directors without shareholder approval, the Portfolio will not
invest more than 10% of its total assets in debt securities rated BBB or lower
by S&P or Baa or lower by Moody's; however, this limitation is inapplicable to
unrated foreign convertible bonds which are convertible at any time into equity
securities suitable for investment by the Portfolio. The Board may consider a
change in this operating policy if, in its or the sub-adviser's judgment,
economic conditions change such that a higher level of investment in high risk,
lower quality debt securities would be consistent with the interest of the
Portfolio and its shareholders. The Portfolio usually effects currency exchange
transactions on a spot (i.e., cash) basis or on a forward commitment basis at
the spot rate prevailing in the foreign exchange market. However, some price
spread on currency exchange (to cover service charges) will be incurred when the
Portfolio converts assets from one currency to another.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Statement of
Additional Information contains more detail about these investment practices.
For temporary defensive purposes, the Portfolio may invest in cash, money market
instruments and may also purchase from banks or broker/dealers Canadian or U.S.
government securities with a simultaneous agreement by the seller to repurchase
them within more than seven days at the original purchase price, plus accrued
interest.
Stock Index Portfolio
The investment objective of the Stock Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the S&P
500 Index and the S&P MidCap Index, weighted according to their pro rata share
of the market. The Portfolio will pursue this objective by investing in common
stocks traded on the New York Stock Exchange and the American Stock Exchange
and, to a limited extent, in the over-the-counter markets.
Standard & Poor's Corporation ("S&P") chooses the 500 stocks comprising
the S&P 500 Index on the basis of market values and industry diversification.
Most of the stocks in the S&P 500 Index are issued by the 500 largest companies,
in terms of the aggregate market value of their outstanding stock, and such
companies are generally listed on the New York Stock Exchange. Additional stocks
that are not among the 500 largest market value stocks are included in the S&P
500 Index for diversification purposes.
The S&P MidCap Index is market-weighted and consists of 400 stocks of
domestic companies, having a median market capitalization of approximately $1.6
billion. The stocks included in the S&P 500 Index and the S&P MidCap Index do
not overlap.
Because smaller capitalized companies, regardless of their shares
outstanding, sometimes exhibit illiquidity in the market, minimum trading volume
constraints are placed on issues selected for the S&P MidCap Index. For this
reason, the S&P MidCap Index includes a small number of lesser known companies
in well known industries whose shares are more liquid.
S&P is not a sponsor of, or in any other way affiliated with, the
Portfolio or the Fund.
The Portfolio will attempt to duplicate the performance of the S&P 500
Index and the S&P MidCap Index while keeping transaction costs low and
minimizing Portfolio turnover. To achieve its investment objective, the
Portfolio will purchase equity securities that, in the Adviser's opinion, will
reflect, as a group, the composite price performance of the S&P 500 Index and
the S&P MidCap Index. Like these indices, the Portfolio will hold both
dividend-paying and non-dividend paying common stocks. Under normal
circumstances, at least 80% of the Portfolio's total assets will be invested in
securities included on the S&P 500 Index and the S&P MidCap Index.
A higher portfolio turnover rate may involve correspondingly greater
brokerage commissions and other expenses which might be borne by the Fund and,
thus, indirectly by its shareholders.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Small-Cap Index Portfolio
The investment objective of the Small-Cap Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Standard & Poor's Small-Cap 600 Stock Index ("S&P 600 Index"). The S&P 600 Index
is widely recognized and tracks an common stock of the small company sector of
the United States equities market. The S&P 600 Index is market-weighted, meaning
that each stock's influence on the index's performance is directly proportional
to that stock's "market value" (the stock price multiplied by the number of
outstanding shares). The securities that comprise the S&P 600 Index are traded
on the New York Stock Exchange, the American Stock Exchange and the NASDAQ Stock
Market.
Historically, small capitalization stocks, which constitute the
Portfolio's primary investments, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index. Among the reasons
for the greater price volatility of these small company stocks are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of small companies to
changing economic conditions. Besides exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger company
stocks. Small company stocks may decline in price as large company stocks rise,
or rise in price as large company stocks decline. Investors should therefore
expect that the Portfolio may be more volatile than, and may fluctuate
independently of, broad stock market indices such as the S&P 500 Index.
The Portfolio will attempt to duplicate the performance of the S&P 600
Index while keeping transaction costs low and minimizing portfolio turnover. To
achieve its investment objective, the Portfolio will purchase equity securities
that comprise the S&P 600 Index in proportion to their market-value weighting.
Like the index, the Portfolio will hold both dividend paying and non-dividend
paying common stocks.
From time to time, adjustments may be made in the Portfolio's holdings
due to a change in the composition of the S&P 600 Index. The Portfolio will
attempt to achieve a correlation between its performance and that of the S&P 600
Index of at least 0.95, without taking into account expenses. A correlation of
1.00 would indicate perfect correlation, which would be achieved when the
Portfolio's net asset value, including the value of its dividends and capital
gains distributions, increases or decreases in exact proportion to changes in
the S&P 600 Index. The Investment Adviser will attempt to minimize any "tracking
error" (the statistical measure of the difference between the investment results
of the Portfolio and that of the S&P 600 Index) in making investments for the
Portfolio. While the Small-Cap Index Portfolio tries to remain invested in the
S&P 600 Index securities as fully as possible, it must manage cash flows
resulting from the purchase and redemption of Portfolio shares. Therefore, the
Portfolio may also invest in U.S. dollar-denominated short-term bonds, and money
market instruments, including U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances and repurchase agreement for these
securities. Brokerage and other transaction costs, as well as investment
advisory fees for the Portfolio, in addition to potential tracking errors, will
tend to cause the Portfolio's return to be lower than the return of the S&P 600
Index. In addition, there can be no assurance as to how closely the Portfolio's
performance will correspond to the performance of the S&P 600 Index.
The Portfolio intends that, under normal circumstances, at least 80% of its
total assets will be invested in securities of the S&P 600 Index.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transactions
costs (which are borne directly by the Portfolio) and may result in greater tax
liability.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Standard & Poor's Small-Cap 600 Index and S&P 600 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Maxim Series Fund,
Inc. The Portfolio is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of using this index.
Maxim T. Rowe Price Equity/Income Portfolio
The investment objective of the Maxim T. Rowe Price Equity/Income
Portfolio is to seek to provide substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established companies. In pursuing its objective, the Portfolio will emphasize
companies with favorable prospects for increasing dividend income and
secondarily, capital appreciation. T. Rowe Price Associates, Inc. serves as
sub-adviser of this Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio subject to the overall supervision of the Fund's
Board of Directors and the Investment Adviser.
Over time, the income component (dividends and interest earned) of the
Portfolio's investments is expected to be a significant contributor to the
Portfolio's total return. Total return will consist primarily of dividend income
and secondarily of capital appreciation (or depreciation).
The investment program of the Portfolio is based on several premises.
First, it is believed that, over time, dividend income can account for a
significant component of the total return from equity investments. Second,
dividends are normally a more stable and predictable source of return than
capital appreciation. While the price of a company's stock generally increases
or decreases in response to short-term earnings and market fluctuations, its
dividends are generally less volatile. Finally, it is believed that stocks which
distribute a high level of current income tend to have less price volatility
than those which pay below-average dividends.
To achieve its objective, the Portfolio, under normal circumstances,
will invest at least 65% of its total assets in income-producing common stocks,
whose prospects for dividend growth and capital appreciation are considered
favorable. To enhance capital appreciation potential, the Portfolio will also
use a value-oriented approach, which means it will invest in stocks believed to
be currently undervalued in the marketplace. The Portfolio's investments will
generally be made in companies which share some of the following
characteristics: established operating histories; above-average current dividend
yields relative to the Standard & Poor's 500 Stock Index ("S&P 500"); low
price/earnings ratios relative to the S&P 500; sound balance sheets and other
financial characteristics; and, low stock price relative to a company's
underlying value as measured by assets, earnings, cash flow, or business
franchises.
The Portfolio may also invest its assets in fixed income securities
(corporate and government bonds of various maturities). The Portfolio may also
invest in municipal bonds when the expected total return from such bonds appears
to exceed the total returns obtainable from corporate or government bonds of
similar credit quality.
Debt securities in which the Portfolio may invest may include high
yield/high risk bonds, commonly referred to as "junk bonds." The total return
and yield of lower quality bonds can be expected to fluctuate more than the
total return and yield of higher quality, shorter-term bonds, but not as much as
common stocks. Junk bonds are regarded as predominantly speculative with respect
to the issuer's continuing ability to meet principal and interest payments. The
Portfolio will not purchase a non-investment grade debt security (or "junk
bond"), if immediately after such purchase the Portfolio would have more than
10% of its total assets (measured at the time of acquisition) invested in such
securities.
The Portfolio may invest up to 10% of its total assets (measured at the
time of acquisition) in hybrid instruments. These instruments combine the
characteristics of securities, futures and options. For example, the principal
amount, redemption or conversion terms of a security could be related to the
market price of some commodity, currency or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero. Hybrids can have volatile prices and limited liquidity and their
use by the Portfolio may not be successful.
Although the Portfolio will invest primarily in U.S. common stocks, it
may also purchase other types of securities. For example, the Portfolio may
invest up to 25% of its total assets (measured at the time of acquisition) in
securities issued by foreign issuers, including non-dollar denominated
securities traded outside the U.S. and dollar denominated securities traded in
the U.S. (such as ADRs).
See "Foreign Investment Risks" in this prospectus.
The Portfolio also may invest in convertible securities and warrants.
Convertible securities may include debt or preferred equity securities
convertible into or exchangeable for equity securities. Traditionally,
convertible securities have paid dividends or interest at rates higher than
common stocks but lower than non-convertible securities. They generally
participate in appreciation or depreciation of the underlying stock into which
they are convertible, but to a lesser degree. Warrants are options to buy a
stated number of shares of common stock at a specified price any time during the
life of the warrants (generally, two or more years).
The Portfolio may also engage in a variety of investment management
practices, such as buying and selling futures and options. The Statement of
Additional Information contains more detailed information about these practices.
Maxim INVESCO Small-Cap Growth Portfolio
The investment objective of the Maxim INVESCO Small-Cap Growth Portfolio
is to seek long-term capital growth. The Portfolio seeks to achieve this
objective by investing at least 65% of assets in a diversified group of equity
securities of emerging growth companies with market capitalizations of $1
billion or less at the time of initial purchase ("small-cap companies"). ITC
serves as sub-adviser to this Portfolio. As such, it is responsible for the
day-to-day management of the Portfolio, subject to the overall supervision of
the Fund's Board of Directors and the Investment Adviser.
In selecting investments, the Portfolio will seek to identify small-cap
companies that are undervalued in the marketplace and/or have earnings that may
be expected to grow faster than the U.S. economy in general. Under normal
circumstances, the Portfolio intends to invest at least 65% of its total assets
in equity securities of small-cap companies, consisting of common and preferred
stocks, convertible debt securities, and other securities having equity
features. The remainder of the Portfolio's assets may be invested in equity
securities of companies with market capitalizations in excess of $1 billion,
debt securities and short-term investments, as described below.
In selecting the small-cap companies in which the Portfolio will invest,
an attempt will be made to identify companies in any industry that are thought
to have the best opportunity for capital appreciation within their industry
grouping, subject to the additional requirement that the companies are
determined to be in the developing stages of their life cycle, and have
demonstrated, or are expected to achieve, long-term earnings growth. In
selecting investments in equity securities of companies with market
capitalizations in excess of $1 billion at the time of initial purchase, the
Portfolio will seek securities that are consistent with the objective of
long-term capital growth. Equity securities purchased for the Portfolio are
traded principally in the over-the-counter ("OTC") market, although securities
traded on national, regional or foreign stock exchanges may also be purchased.
The Portfolio may also invest in debt securities including U.S.
Government and corporate debt securities. Investment in U.S. government
securities may consist of securities issued or guaranteed by the U.S. Government
and any agency or instrumentality of the U.S. Government. The Portfolio may
invest in both investment grade and lower-rated corporate debt securities.
However, the Portfolio will not invest more than 5% of its total assets
(measured at the time of purchase) in corporate debt securities that are rated
below BBB by S&P or Baa by Moody's or, if unrated, are securities judged to be
equivalent in quality to debt securities having such ratings. In no event will
the Portfolio invest in a debt security rated below CCC by S&P or Caa by
Moody's.
The short-term investments of the Portfolio may consist of U.S.
government and agency securities, domestic bank certificates of deposit and
bankers' acceptances, and commercial paper rated A-1 by S&P or P-1 by Moody's,
as well as repurchase agreements with banks and registered broker-dealers and
registered government securities dealers with respect to the foregoing
securities. The Portfolio's assets invested in U.S. government securities and
short-term investments will be used to maintain liquidity. As well, when market
conditions are believed to warrant such action, the Portfolio may invest all or
a portion of its assets temporarily in high grade corporate bonds or notes, U.S.
government securities or equity securities of larger, more established
companies, or hold its assets in cash or cash equivalents, for defensive
purposes. While the Portfolio is in a temporary defensive position, the
opportunity to achieve capital growth will be limited, and, to the extent that
this assessment of market conditions is incorrect, the Portfolio will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments; however, the ability to maintain a
temporary defensive investment position provides the flexibility for the
Portfolio to seek to avoid capital loss during market down turns.
The Portfolio may invest in equity securities and corporate debt
obligations which may consist of securities issued by foreign issuers. Up to 25%
of the Portfolio's total assets, measured at the time of purchase, may be
invested directly in foreign securities. Securities of Canadian issuers and
securities purchased by means of American Depository Receipts ("ADRs") are not
subject to this 25% limitation. Foreign investments can involve risks, however,
that may not be present in domestic securities. See "Foreign Investment Risks"
in this prospectus.
The Portfolio may make commitments in an amount of up to 10% of the
value of its total assets at the time any commitment is made to purchase or sell
securities on a when-issued or delayed delivery basis (i.e., securities may be
purchased or sold by the Portfolio with settlement taking place in the future,
often a month or more later). The Statement of Additional Information contains
more detailed information about these investment practices.
The Portfolio also may invest in securities which are illiquid because
they are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, they are not
readily marketable. Investments in illiquid securities involve certain risks to
the extent that the Portfolio may be unable to dispose of such a security at the
time desired or at a reasonable price. In addition, in order to resell a
restricted security, the Portfolio might have to bear the expense and incur the
delays associated with effecting registration. See "Illiquid Securities" in the
prospectus.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in futures contracts. The Statement of Additional
Information contains more detail about these investment practices.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transactions
costs (which are borne directly by the Portfolio) and may result in greater tax
liability.
Maxim INVESCO ADR Portfolio
The investment objective of the Maxim INVESCO ADR Portfolio is to
achieve a high total return on investment through capital appreciation and
current income, while reducing risk through diversification. In pursuing this
objective, substantially all of the Portfolio's assets will be invested in
foreign securities that are issued in the form of American Depository Receipts
("ADRs") or foreign stocks that are registered with the Securities and Exchange
Commission ("SEC") and traded in the U.S. ITC serves as sub-adviser to this
Portfolio. As such, it is responsible for the day-to-day management of the
Portfolio, subject to the overall supervision of the Fund's Board of Directors
and the Investment Adviser.
ADRs are negotiable certificates, issued by a U.S. depository bank,
which represent an ownership interest in shares of non-U.S. companies that are
being held by a U.S. depository bank. Each ADR may represent one ordinary share
(or a fraction or multiple of an ordinary share) on deposit at the depository
bank. The foreign shares held by the depository bank are known as American
Depository Shares (ADSs). Although there is a technical distinction between ADRs
and ADSs, market participants often use the two terms interchangeably. ADRs are
traded freely on U.S. exchanges or in the U.S. over-the-counter market. ADRs can
be issued under different types of ADR programs, and, as a result, some ADRs may
not be registered with the SEC.
The stocks in the ADR Portfolio will be selected from a universe of
approximately 2,200 stocks of large and medium-sized capitalization, non-U.S.
companies for which a computer database of accounting data has been developed.
These stocks are subjected to a computer analysis that compares the current
stock price to measures such as book value, historical return on equity, the
company's ability to reinvest capital, dividends and dividend growth. This
analysis is based on a proprietary model developed by the sub-adviser which
ranks securities by relative value.
Once companies with a favorable relative valuation are identified, they
are subject to fundamental analysis by the sub-adviser to try to determine
whether the historical record that contributed to the favorable ranking can be
extended. Factors considered in this analysis include the company's business
strategy, competitive position and business environment. Based on this
fundamental analysis, the number of potential investment securities is reduced
to form a group of securities that the sub-adviser uses to build the Portfolio.
The country and industry weightings are a by-product of the stock selection
process.
ADRs are a convenient alternative to direct purchases of shares on
foreign stock exchanges. Although they offer investment characteristics that are
virtually identical to the underlying ordinary shares, they are often as easy to
trade as stocks of U.S. domiciled companies. A high level of geographic and
industry diversification can be achieved using ADRs, with all transactions and
dividends being in U.S. dollars and annual reports and shareholder literature
printed in English. On occasion, the sub-adviser may decide that it is
economical to have additional ADRs created or cause a bank to issue ADRs for
companies that have not previously had an ADR facility.
The ADR Portfolio's investment return and the value of the assets in the
Portfolio primarily will be dependent upon changes in the market value of its
equity investments, which will fluctuate based upon the growth and earnings of
the companies in which it invests, general conditions affecting the markets for
equity securities and exchange rate movements between the U.S. dollar and
overseas currencies. The Portfolio also may hold cash or cash equivalents to
maintain liquidity or for temporary defensive purposes.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in futures contracts. The Statement of Additional
Information contains more detail about these investment practices.
Foreign investments can involve risks, however, that may not be present
in domestic securities. See "Foreign Investment Risks" in this prospectus.
Although the Portfolio invests in U.S. dollar denominated shares of
foreign companies, the Portfolio's share value is affected by changes in
currency exchange rates. As one way of managing exchange rate risk, the
Portfolio may enter into forward foreign currency exchange contracts. See
"Foreign Currency Exchange Transactions" in this prospectus.
Small-Cap Value Portfolio
The investment objective of the Small-Cap Value Portfolio is to achieve
long-term capital appreciation by investing primarily in common stocks, although
the Portfolio may also invest in other securities, including restricted,
preferred stock or foreign securities. In seeking capital appreciation,
consideration will be given to undervalued small and medium sized companies in
industries that demonstrate a strong potential for growth, financially strong
companies with distinct market niches offering quality products or services,
outstanding management teams and a proven record of success. Ariel Capital
Management serves as sub-adviser to this Portfolio. As such, it is responsible
for the day-to-day management of the Portfolio, subject to the overall
supervision of the Fund's Board of Directors and the Investment Adviser.
As a means of controlling risk, industries that are believed to be
inherently unpredictable -- specifically, cyclical, commodity-based and start-up
industries -- will be avoided. The Portfolio will be constructed on a stock by
stock basis with little attention devoted to the macro-economic outlook of a
particular industry.
The Portfolio will adhere to a disciplined investment philosophy which
incorporates strict guidelines regarding individual securities. When initiating
a position, the Portfolio will focus on issuers generally ranging in market
capitalizations under $1.5 billion. Since these companies may be less widely
followed by market analysts, it is believed that they present a greater
opportunity for exceptional returns.
Additionally, in keeping with a value approach, the Portfolio will
generally invest in companies whose equities are trading at an expected
price/earnings ratio of 13x or less over the next 12 months' earnings estimate
and/or at a significant discount to its private market value. (Expected earnings
may represent normalized earnings or be adjusted for amortization of non-cash
charges. Private market value is an internally generated estimation by the
portfolio manager of the price an informed and rational buyer would pay in the
outright purchase of a public company if entire business were sold.) When
executing this philosophy, the portfolio manager will not trade or time the
market for quick gains. Rather, the manager will seek to maintain a fully
invested portfolio by following a conservative philosophy of investing for the
long-term. A security will be sold if it is believed to be fully valued or the
company is no longer perceived as having a strong potential for growth.
Specifically, from a valuation standpoint, a security is sold when a stock is
trading at a price/earnings multiple of 20x its forward 12 months' earnings
estimates and/or the company's shares no longer sell at a discount to its
private market value. In keeping with a long-term approach, a security will not
be sold because of a short-term earnings disappointment. However, a holding will
be sold if it is believed that the company's business has undergone fundamental
changes that will negatively affect its stock price or if there is a loss of
faith in a management's ability to execute the company's stated goals and
objectives.
The Portfolio may invest in foreign securities offering potential for
growth. Investments in foreign securities involve risks that differ in some
respects from investment in securities of U.S. issuers. These risks include the
risk of fluctuations in the value of the currencies in which they are
denominated, the risk of adverse political and economic developments and, with
respect to certain countries, the possibility of expropriation, nationalization
or confiscatory taxation or limitations on the removal of funds or other assets
of the Portfolio. Securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. There also may be
less publicly available information about foreign issuers than domestic issuers,
and foreign issuers generally are not subject to the uniform accounting,
auditing and financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be encountered in settling securities
transactions in certain foreign markets and the Portfolio will incur costs in
converting foreign currencies to U.S. dollars. Custody charges are generally
higher for foreign securities.
The Portfolio also may invest in money market securities for temporary
or emergency purposes or solely as a cash reserve. The Portfolio may purchase
and write options on securities and certain futures contracts and invest in
certain futures contracts. The Statement of Additional Information contains more
detail about these investment practices.
The Portfolio currently observes the following operating policies, which
may be changed without shareholder approval: (1) the Portfolio actively seeks to
invest in companies that achieve excellence in both financial return and
environmental soundness, selecting issuers that take positive steps toward
preserving our environment and avoiding companies with a poor environment; and
(2) the Portfolio will not invest in issuers primarily engaged in the
manufacture of weapons systems, the production of nuclear energy, or the
manufacture of equipment to produce nuclear energy.
It is believed that there are long-term benefits inherent in an
investment philosophy that demonstrate concern for the environment, human
rights, economic priorities and international relations.
The sub-adviser has engaged the services of Franklin Research and
Development Corporation of Boston to provide environmental screening for all
issuers selected for the Portfolio. Franklin provides information and opinions
on the companies' environmental histories. However, Franklin does not make
recommendations or provide investment advice concerning the purchase or sale of
securities for the Portfolio.
Corporate Bond Portfolio
The investment objective of the Corporate Bond Portfolio is high total
investment return through a combination of current income and capital
appreciation. The Corporate Bond Portfolio seeks to achieve its investment
objective by investing in debt securities (including convertibles), although up
to 20% of its total assets (measured at the time of acquisition) may be invested
in preferred stocks. In achieving high total investment returns through a
combination of current income and capital appreciation, the Portfolio will
normally invest at least 65% of its total assets in bonds. A limited portion of
its assets may also be invested in securities of foreign issuers and up to 35%
of its total assets (measured at the time of acquisition) in securities of below
investment grade quality. The Portfolio may also hold a portion of its assets in
cash or money market instruments. Loomis, Sayles & Company, L.P. serves as
sub-adviser to this Portfolio. As such, it is responsible for the day-to-day
management of the Portfolio, subject to the overall supervision of the Fund's
Board of Directors and the Investment Adviser.
The Portfolio may invest in fixed-income securities of any maturity.
Fixed-income securities pay a specified rate of interest or dividends, or a rate
that is adjusted periodically by reference to some specified index or market
rate. Fixed-income securities include securities issued by federal, state, local
and foreign governments and related agencies, and by a wide range of private
issuers. Because interest rates vary, it is impossible to predict the income in
fixed-income securities for any particular period. Therefore, the net asset
value of the Portfolio's shares will vary as a result of changes in the value of
the securities held. Fixed-income securities are subject to market and credit
risk. Market risk relates to changes in a security's value as a result of
changes in interest rates. In general, the values of fixed-income securities
increase when prevailing interest rates fall and decrease when interest rates
rise. Credit risk relates to the ability of the issuer to make payments of
principal and interest.
The Portfolio may invest a portion of its assets in securities rated
below investment grade (that is, below BBB by S&P or Baa by Moody's), including
securities in the lowest rating categories and comparable unrated securities.
The Portfolio may invest up to 35% of its total assets (measured at the time of
acquisition) in such securities. For purposes of this percentage, a security
will be treated as being of investment grade quality if at the time it is
acquired at least one major rating agency has rated the security in its top four
rating categories (even if another agency has issued a lower rating), or if the
security is unrated but it is otherwise determined to be of comparable quality.
Lower rated fixed-income securities generally provide higher yields, but are
subject to greater credit and market risk than higher quality fixed-income
securities. Lower rated fixed-income securities are considered predominately
speculative with respect to the ability of the issuer to meet principal and
interest payments. Achievement of the investment objective of the Portfolio
investing in lower rated fixed-income securities may be more dependent on credit
analysis than is the case with higher quality bonds. The market for lower rated
fixed-income securities may be more severely affected than some other financial
markets by economic recession or substantial interest rate increases, by
changing public perceptions of this market or by legislation that limits the
ability of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for lower rated
fixed-income securities. This lack of liquidity at certain times may affect the
values of these securities and may make the valuation and sale of these
securities more difficult. Securities of below investment grade quality are
commonly referred to as "junk bonds." Securities in the lowest rating categories
may be in poor standing or in default. Securities in the lowest investment grade
category (BBB by S&P or Baa by Moody's) have some speculative characteristics.
The Portfolio also may invest in "zero coupon" fixed-income securities.
These securities accrue interest at a specified rate, but do not pay interest in
cash on a current basis. If the Portfolio invests in zero coupon securities, it
is required to distribute the income on these securities as the income accrues,
even though the Portfolio is not receiving the income and cash on a current
basis. Thus, the Portfolio may have to sell other investments to obtain cash to
make income distributions. The market value of zero coupon securities is often
more volatile than that of non-zero coupon fixed-income securities of comparable
quality and maturity.
The Portfolio also may invest in securities of issuers organized or
headquartered outside of the United States. The Portfolio will not purchase a
foreign security if, as a result, its holdings of foreign securities would
exceed 20% of its total assets (measured at the time of acquisition); however,
the Portfolio may invest any portion of its assets in securities of Canadian
issuers. Foreign investments can involve risk that may not be present in
domestic securities. See "Foreign Investment Risks" in this prospectus.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. See "Foreign Currency Exchange Transactions" in this
prospectus.
The Portfolio may purchase Rule 144A securities. These are privately
offered securities that can be resold only to certain qualified institutional
buyers. Rule 144A securities are treated as illiquid, unless it has been
determined that the particular issue of Rule 144A securities is liquid. See
"Illiquid Securities" in this prospectus.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Portfolio may
also engage in the following investment practices each of which involves certain
special risks: collateralized mortgage obligations, when-issued securities and
repurchase agreements. The Statement of Additional Information contains more
detailed information about these practices.
Maxim INVESCO Balanced Portfolio
The Maxim INVESCO Balanced Portfolio (the "Portfolio") seeks to achieve
a high total return on investment through capital appreciation and current
income. The Portfolio pursues this objective by normally investing 50% to 70% of
its total assets in common stocks, and the remainder in fixed-income securities,
including money market instruments. At least 25% of the Portfolio's assets
normally will be invested in fixed income securities issued by the U.S.
Government, its agencies and instrumentalities, or in investment grade corporate
bonds. The capital appreciation component of total return includes both realized
and unrealized appreciation. There is no guarantee that the Portfolio will meet
its objective.
In selecting equity investments, the Portfolio will seek to identify
companies with better-than-average earnings growth potential are sought, as well
as companies within industries identified as well-positioned for the current and
expected economic climate. Because current income is a component of total
return, dividend payout records are also considered. Most of these holdings are
traded on national stock exchanges or in the over-the-counter markets; however,
securities traded on regional or foreign exchanges may also be included in the
Portfolio. In addition to common stocks, the Portfolio also may hold preferred
stocks and securities convertible into common stock.
For the fixed income portion of the Portfolio's holdings, obligations of
the U.S. Government, its agencies and instrumentalities, or investment grade
corporate bonds are selected. These securities tend to offer lower income than
bonds of lower quality. Obligations issued by U.S. Government agencies or
instrumentalities may include some supported only by the credit of the issuer
rather than backed by the full faith and credit of the U.S. Government. The
Portfolio may hold securities of any maturity (from less than one year up to 30
years), with the average maturity varying based upon economic and market
conditions. The Portfolio also may hold cash and cash equivalent securities as
cash reserves.
The amount invested in stocks, bonds and cash equivalent securities may
be varied from time to time depending upon the assessment of business, economic
and market conditions. When it is believed conditions are adverse, the Portfolio
may assume a defensive position by temporarily investing up to 100% of its
assets in U.S. Government and agency securities, investment grade corporate
bonds, or cash equivalent securities, such as domestic certificates of deposit
and bankers' acceptances, commercial paper and repurchase agreements, in an
attempt to protect principal value until conditions stabilize.
Up to 25% of the Portfolio's total assets, measured at the time of
purchase, may be invested directly in foreign equity or corporate debt
securities. Securities of Canadian issuers and American Depository Receipts
("ADRs") are not subject to this 25% limitation. ADRs are receipts representing
shares of a foreign corporation held by a U.S. bank that entitle the holder to
all dividends and capital gains. ADRs are denominated in U.S. dollars and trade
in the U.S. securities markets. Please see "Foreign Investment Risks" in this
prospectus for more information concerning these securities and their risks.
The Portfolio may purchase and write options on securities and may
invest in futures contracts for the purchase or sale of foreign currencies,
fixed income securities and instruments based on financial indices
(collectively, "futures contracts"), options on futures contracts and forward
contracts for hedging purposes only. These practices and their risks are
discussed in the Statement of Additional Information. Please also see "Foreign
Currency Exchange Transactions" in this prospectus.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transactions
costs (which are borne directly by the Portfolio) and may result in greater tax
liability.
Short-Term Maturity Bond Portfolio
The investment objective of the Short-Term Maturity Bond Portfolio is
preservation of capital, liquidity, and maximum total return through investment
in an actively managed portfolio of debt securities. It is classified as a
non-diversified portfolio.
The Portfolio will pursue its objectives primarily through investment in
a portfolio of investment grade bonds and other debt securities of similar
quality. The weighted average quality of the Portfolio will be A rated or
higher. The Portfolio will consist only of individual securities with maturities
of no longer than three years.
Other debt securities in which the Portfolio may invest include
securities of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities, corporate debt obligations, asset-backed securities
(including mortgage-related securities), commercial paper, certificates of
deposits, bankers' acceptances and other short-term instruments relating to such
securities. Securities may be issued by both domestic and foreign entities but
may be denominated in U.S. dollars only.
U.S. Government securities are issued or guaranteed by the U.S. Treasury or
by an agency or instrumentality of the U.S. Government. Not all U.S. Government
securities are backed by the full faith and credit of the United States. Some
are supported only by the credit of the agency that issued them.
The Portfolio may invest in repurchase agreements relating to the
securities in which it may invest. In a repurchase agreement, the Portfolio buys
a security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the party to the agreement defaults or
becomes bankrupt.
The Portfolio may purchase securities on a when-issued or forward
delivery basis. When-issued and forward delivery transactions are trading
practices wherein payment for and delivery of the securities take place at a
future date. The market value of a security could change during this period,
which could effect the market value of the Portfolio's assets. See the Statement
of Additional Information for further information about when-issued and forward
delivery securities.
In order to generate additional income, the Portfolio may lend up to
one-third of its portfolio securities to financial borrowers of securities. This
practice could cause the Portfolio to experience a loss or a delay in recovering
its securities. The Statement of Additional Information contains more
information regarding the lending of securities.
The Portfolio can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, commodity prices, or other
factors that effect securities values. These techniques include buying and
selling options and certain futures contracts, entering into swap agreements and
purchasing index securities. Further information regarding such techniques is
contained in the Statement of Additional Information. These techniques will be
used for hedging purposes only.
Generally, the Portfolio intends to invest in investment grade
securities. An investment grade security is one rated in one of the top four
categories by one or more nationally recognized security rating organizations or
which is deemed by the Investment Adviser to be of comparable creditworthiness.
However, if a security's rating were to drop below investment grade (commonly
referred to as "junk bonds"), the Portfolio may determine to retain the security
until such time as it is deemed appropriate to sell the security, which could
mean that the security may be held to maturity. Lower rated fixed-income
securities generally provide higher yields, but are subject to greater credit
and market risks than higher quality fixed-income securities and are considered
predominately speculative with respect to the ability of the issuer to meet
principal and interest payments. In addition, the secondary market may be less
liquid for lower-rated fixed-income securities which may make the valuation and
sale of the securities more difficult. The Statement of Additional Information
contains more information about securities ratings.
The Portfolio may invest in money market securities as part of the
ongoing investment strategy or as a cash reserve.
The Portfolio is classified as non-diversified. This means that the
proportion of the Portfolio's assets that may be invested in the securities of a
single issuer is not limited by the Investment Company Act of 1940. Because a
relatively high percentage of the Portfolio's assets may be invested in the
securities of a limited number of issuers, primarily within the same industry or
economic sector, the Portfolio's securities may be more susceptible to any
single economic, political or regulatory occurrence than that experience by a
diversified portfolio. Value Index Portfolio
The investment objective of the Maxim Russell 1000 Value Index Portfolio
is to provide investment results, before fees, that correspond to the total
return of the Russell 1000 Value Index. The Russell 1000 Value Index was
developed by the Frank Russell Company to track stock market performance of
stocks from the Russell 1000 Index exhibiting certain characteristics suggesting
value potential.
The Portfolio intends to pursue this objective by investing primarily in
common stocks with greater than average value orientation, as determined by the
formula set forth below, issued by corporations domiciled in the U.S. and its
territories traded on the various U.S. stock exchanges and, to a limited extent,
in the over-the-counter markets. The Portfolio may not hold all of the
securities in the Russell 1000 Value Index because of administrative costs
involved and the expenses associated with trading less active securities.
Instead, the Portfolio will hold a representative sample of securities included
in the Russell 1000 Value Index.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Portfolio or the Fund.
The Russell 1000 Value Index is a subset of the Russell 1000 Index which
in turn is a subset of the Russell 3000 Index. The Russell 3000 Index consists
of the largest 3000 publicly traded stocks of corporations domiciled in the U.S.
and its territories and includes large, medium and small capitalization stocks.
The Russell 3000 Index represents approximately 98% of the total market
capitalization of all U.S. stocks that trade on the New York and American Stock
Exchanges and in the NASDAQ (National Association of Securities Dealers
Automated Quotations) National Market System over-the-counter market. The
Russell 1000 consists of the 1000 largest stocks within the Russell 3000 Index,
representing approximately 94% of the Russell 3000 Index total market
capitalization.
The Russell 1000 Value Index is comprised of stocks from the Russell
1000 Index with greater-than-average value orientation. A stock is determined to
have greater-than-average value orientation if it falls in the bottom 50% of the
Russell 1000 Index based on cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell 1000 Value Index
typically have low price-to-book and price-earnings ratios, higher dividend
yields and lower forecasted growth rates than more growth- oriented securities.
The Russell 1000 Value Index is reconstituted annually to reflect
changes in the marketplace. At each reconstitution, the Russell 1000 Index
constituents are ranked by their price-to-book ratio. Once ranked by this ratio,
a breakpoint is determined by the median market capitalization of the Russell
1000 Index. As of May 31, 1997, the price-to-book breakpoint was 3.6.
The Portfolio will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May 31 total market
capitalizations, with the actual reconstitution effective June 30. As well,
securities that leave the Index for any reason between reconstitution dates will
not be replaced. As a result, the number of securities held in the Portfolio
over the year will fluctuate. As of May 31, 1997, the corporations included in
the Russell 1000 Value Index had an average market capitalization of $7.42
billion.
As discussed above, the Portfolio may not invest in all the stocks that
comprise the Russell 1000 Value Index. Thus, the Portfolio holdings may be
invested differently by industry segment or by weighting than the Russell 1000
Value Index. The Portfolio may compensate for the omission from its holdings
that are included in the Russell 1000 Value Index or for purchasing stocks in
proportions that differ from their weightings in that Index, by purchasing
stocks that may or may not be included in the Russell 1000 Value Index, but
which have characteristics similar to omitted stocks (such as stocks from the
same or similar industry group having similar market capitalizations and
investment characteristics). The Portfolio will not adopt a temporary or
defensive investment posture in times of generally declining market conditions.
Therefore, investors in the Portfolio will bear the risk of such market
conditions.
The Portfolio intends that, under normal circumstances, at least 80% of
the Portfolio's total assets will be invested in securities included in the
Russell 1000 Value Index.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Growth Index Portfolio
The investment objective of the Growth Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Russell 1000 Growth Index. The Russell 1000 Growth Index was developed by the
Frank Russell Company to track stock market performance of stocks from the
Russell 1000 Index exhibiting certain characteristics suggesting growth
potential.
The Portfolio intends to pursue this objective by investing primarily in
common stocks with greater than average growth orientation, as determined by the
formula set forth below, issued by corporations domiciled in the U.S. and its
territories traded on the various U.S. stock exchanges and, to a limited extent,
in the over-the-counter markets. The Portfolio may not hold all of the
securities in the Russell 1000 Growth Index because of administrative costs
involved and the expenses associated with trading less active securities.
Instead, the Portfolio will hold a representative sample of securities included
in the Russell 1000 Growth Index.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Portfolio or the Fund.
The Russell 1000 Growth Index is a subset of the Russell 1000 Index
which in turn is a subset of the Russell 3000 Index. The Russell 3000 Index
consists of the largest 3000 publicly traded stocks of corporations domiciled in
the U.S. and its territories and includes large, medium and small capitalization
stocks.
The Russell 1000 Growth Index is comprised of stocks from the Russell
1000 Index with greater-than-average growth orientation. A stock is determined
to have greater-than-average growth orientation if it falls in the top 50% of
the Russell 1000 Index based on cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell 1000 Growth
Index typically have high price-to-book and price-earnings ratios, lower
dividend yields and higher forecasted growth rates than more value-oriented
securities.
The Russell 1000 Growth Index is reconstituted annually to reflect
changes in the marketplace. At each reconstitution, the Russell 1000 Index
constituents are ranked by their price-to-book ratio. Once ranked by this ratio,
a breakpoint is determined by the median market capitalization of the Russell
1000 Index. As of May 31, 1997, the price-to-book breakpoint was 3.6.
The Portfolio will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May 31 total market
capitalizations, with the actual reconstitution effective June 30. As well,
securities that leave the Index for any reason between reconstitution dates will
not be replaced. As a result, the number of securities held in the Portfolio
over the year will fluctuate. As of May 31, 1997, the corporations included in
the Russell 1000 Growth Index had an average market capitalization of $7.98
billion.
As discussed above, the Portfolio may not invest in all the stocks that
comprise the Russell 1000 Growth Index. Thus, the Portfolio holdings may be
invested differently by industry segment or by weighting than the Russell 1000
Growth Index. The Portfolio may compensate for the omission from its holdings
that are included in the Russell 1000 Growth Index or for purchasing stocks in
proportions that differ from their weightings in that Index, by purchasing
stocks that may or may not be included in the Russell 1000 Growth Index, but
which have characteristics similar to omitted stocks (such as stocks from the
same or similar industry group having similar market capitalizations and
investment characteristics). The Portfolio will not adopt a temporary or
defensive investment posture in times of generally declining market conditions.
Therefore, investors in the Portfolio will bear the risk of such market
conditions.
The Portfolio intends that, under normal circumstances, at least 80% of
the Portfolio's total assets will be invested in securities included in the
Russell 1000 Growth Index.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Small-Cap Aggressive Growth Portfolio
The investment objective of the Small-Cap Aggressive Growth Portfolio is
long-term capital growth. The Small-Cap Aggressive Growth Portfolio seeks to
achieve its objective by investing in common stocks or their equivalent,
emphasizing securities believed to be undervalued by the market. The Portfolio
may also hold a portion of its assets in cash or money market instruments.
Loomis, Sayles & Company, L.P. serves as sub-adviser to this Portfolio. As such,
it is responsible for the day-to-day management of the Portfolio subject to the
overall supervision of the Fund's Board of Directors and the Investment Adviser.
Loomis Sayles seeks to build a core small-cap portfolio of solid growth
companies' stock with a smaller emphasis on special situations and turnarounds
(companies that have experienced significant business problems but which are
believed to have favorable prospects for recovery), as well as unrecognized
stocks.
In seeking long-term capital growth, the Portfolio will normally invest
at least 65% of its total assets in companies within the Russell 2000 Index
market capitalization range and may invest up to 35% of its total assets
(measured at the time of acquisition) in larger companies. Current income is not
a consideration in selecting investments for the Portfolio. Equity securities of
companies with relatively small market capitalization may be more volatile than
the securities of larger, more established companies and the broad equity market
indexes.
The Portfolio may invest a limited portion of its assets in securities
of issuers organized or headquartered outside the United States. However, such
investments cannot exceed 10% of the Portfolio's total assets (measured at the
time of acquisition). Foreign investments can involve risk, however, that may
not be present in domestic securities. Please see "Foreign Investment Risks" in
this prospectus and the Statement of Additional Information.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Portfolio may
also engage in the following investment practices each of which may involve
certain special risks: when-issued securities and repurchase agreements. The
Statement of Additional Information contains more detailed information about
these practices.
Maxim Blue Chip Portfolio
The investment objective of the Maxim Blue Chip Portfolio is long-term
growth of capital and income. To achieve its objective, the Portfolio normally
will invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
"Blue Chip" companies typically have long records of financial success
and dividend payments and a reputation for quality management, products and
services. The Portfolio normally invests at least 65% of its total assets
(measured at the time of investment) in "Blue Chip" stocks that (1) are included
in a widely recognized index of stock market performance such as the Dow Jones
Industrial Average, the Standard & Poor's 500 Index, or the New York Stock
Exchange Index; (2) generally pay regular dividends; and (3) have a market
capitalization of at least $1 billion. The Portfolio may also invest in
non-dividend paying companies if it is determined they offer favorable prospects
for capital appreciation. The Portfolio may also invest up to 30% of its total
assets (measured at the time of investment) in foreign securities and may
invest, without limitation, in ADRs. Such investments may enhance return, but
also involve some special risks. See "Foreign Investment Risks" in this
prospectus.
The Portfolio may purchase and write call and put options and enter into
certain futures contracts on securities, financial indices and foreign
currencies. Such transactions may be entered into for any number of reasons,
including: to manage its exposure to changes in securities prices and foreign
securities; as an efficient means of adjusting its overall exposure to certain
markets; in an effort to enhance income; and to protect the value of portfolio
securities. See the Statement of Additional Information for more detailed
information about these investment practices.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. See "Foreign Currency Exchange Transactions" in this
prospectus and the Statement of Additional Information for more detailed
information about these practices.
The Portfolio may purchase "illiquid securities," that is, securities
which are not readily marketable, which includes securities whose disposition is
restricted by federal securities laws. See "Illiquid Securities" in this
prospectus.
The Portfolio may also invest in convertible securities, preferred
stocks, bonds, debentures and other corporate obligations when it is determined
that these investments may offer opportunities for capital appreciation. The
Portfolio will invest in bonds, debentures, and corporate obligations only if
they are rated investment grade (BBB or higher) at the time of purchase. The
Portfolio may invest in convertible securities and preferred stocks which are
rated in medium and lower categories by Moody's or S&P (Ba or lower by Moody's
and BB or lower by S&P), but none may be rated lower than B. Securities rated B
generally are less desirable investments and are deemed speculative as far as
the issuer's capacity to pay interest and repay principal over a long period of
time. Traditionally, convertible securities have paid dividends or interest at
rates higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. The Portfolio may
also invest in unrated convertible securities and preferred stocks if they are
deemed to be equivalent in quality to the rated securities that the Portfolio
may buy. The Portfolio will not invest more than 5% of its total assets
(measured at the time of investment) in bonds, debentures, convertible
securities and corporate obligations rated below investment grade either at the
time of purchase or as a result of a rating reduction after purchase, or in
unrated securities that are believed to be equivalent in quality to securities
rated below investment grade. This 5% limitation does not apply to preferred
stocks.
All or part of the Portfolio's assets may be invested temporarily in
U.S. and foreign-dollar denominated money market securities, including
repurchase agreements, commercial paper, bank obligations, certificates of
deposit, bankers' acceptances, other cash equivalents and government securities
if it is determined to be appropriate for purposes of enhancing liquidity or
preserving capital in light of prevailing market or economic conditions. While
in such a defensive position, the opportunity to achieve capital growth will be
limited, and, to the extent that this assessment of market conditions is
incorrect, the Portfolio will be foregoing the opportunity to benefit from
capital growth resulting from increases in the value of equity investments.
Maxim MidCap Growth Portfolio
The investment objective of the Maxim MidCap Growth Portfolio is to
provide long-term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To achieve this objective, the
Portfolio will invest at least 65% of its assets (measured at the time of
investment) in a diversified portfolio of mid-cap companies whose earnings are
expected to grow at a faster rate than the average mid-cap company.
A mid-cap company is defined as one whose market capitalization (number
of shares outstanding multiplied by share price) falls within the capitalization
range of companies included in the Standard & Poor's 400 MidCap Index generally,
between $191 million and $6.5 billion. Mid-cap growth companies are often in the
early, more dynamic phase of their life cycles, but are no longer considered new
or emerging. Mid-cap companies tend to offer higher growth prospects than larger
companies. At the same time, mid-cap companies tend to have greater resources,
and therefore represent less risk, than smaller companies. In addition, mid-cap
companies generally have sufficient financial resources and access to capital to
finance their growth.
The Portfolio will attempt to invest primarily in companies that offer
proven products or services; have a historical record of above-average earnings
growth; demonstrate the potential to sustain earnings growth; operate in
industries experiencing increasing demands; or are believed to be undervalued in
the market place.
Mid-cap growth stocks entail greater risk and are usually more volatile
than the shares of larger, more established companies. Since mid-cap companies
usually reinvest a high portion of earnings in their own businesses, they tend
to pay a lesser dividend than larger companies. Also, since investors buy
mid-cap growth stocks because of their expected superior earnings growth,
earnings disappointments often result in sharp price declines.
The Portfolio may invest in preferred equity, warrants and debt
securities convertible into or exchangeable for equity securities.
Traditionally, convertible securities have paid dividends or interest at rates
higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. Warrants are
options to buy a stated number of shares of common stock at a specified price
anytime during the life of the warrants (generally, two or more years).
The Portfolio may invest up to 25% (measured at the time of investment)
in foreign securities. These include non-dollar denominated securities traded
outside of the U.S. and dollar denominated securities of foreign issuers traded
in the U.S. Such investments may enhance return, but also involve some special
risks. See "Foreign Investment Risks" in this prospectus.
The Portfolio may, for non-hedging purposes, invest 10% of its total
assets in hybrid instruments. These instruments (a type of potentially high-risk
derivative) can combine the characteristics of securities, futures and options.
For example, the principal amount, redemption or conversion terms of a security
could be related to the market price of a commodity, currency, or securities
index. Such securities may bear interest or pay dividends at low market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an investment could be zero. See also the Statement of Additional
Information for more information about these types of transactions.
The Portfolio may purchase "illiquid securities," that is, securities
which are not readily marketable, which includes securities whose disposition is
restricted by federal securities laws. See "Illiquid Securities" in this
prospectus.
The Portfolio may purchase and write call and put options and enter into
certain futures contracts on securities and financial indices. Such transactions
may be entered into for any number of reasons, including: to manage its exposure
to changes in securities prices and foreign securities; as an efficient means of
adjusting its overall exposure to certain markets; in an effort to enhance
income; and to protect the value of portfolio securities. See the Statement of
Additional Information for more detailed information about these investment
practices.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. See also "Foreign Currency Exchange Transactions" in this
prospectus.
The Portfolio may hold a certain portion of its assets in U.S. and
foreign-dollar denominated money market securities, including repurchase
agreements, high quality corporate bonds or notes and government securities.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transactions
costs (which are borne directly by the Portfolio) and may result in greater tax
liability.
THE PROFILE PORTFOLIOS
The objective of the Maxim Profile Portfolios is to maximize total
investment return subject to the investment restrictions and asset allocation
policies described in this prospectus. Specifically,
The investment objective of the Aggressive Profile Portfolio is to seek
to achieve a high total return on investment through long-term capital
appreciation primarily through investments in Underlying Portfolios with an
emphasis on equity investments.
The investment objective of the Moderately Aggressive Profile Portfolio
is to seek to achieve a high total return on investment through long-term
capital appreciation primarily through investments in Underlying Portfolios with
an emphasis on equity investments, though income is a secondary consideration.
The investment objective of the Moderate Profile Portfolio is to seek to
achieve a high total return on investment through long-term capital appreciation
primarily through investments in Underlying Portfolios with a relatively equal
emphasis on equity and fixed income investments.
The Moderately Conservative Profile Portfolio seeks to a achieve the
highest possible total return consistent with reasonable risk through a
combination of income and capital appreciation, through investments in
Underlying Portfolios with a primary emphasis on fixed income investments, and,
to a lesser degree in Portfolios with an emphasis on equity investments.
The investment objective of the Conservative Profile Portfolio is to
seek to achieve total return consistent with preservation of capital primarily
through investments in Underlying Portfolios with an emphasis on fixed income
investments.
The investment objectives are summarized below in a chart that
illustrates the degree to which each Profile Portfolio emphasizes income, growth
of capital and risk of principal: <TABLE>
<S> <C> <C> <C> <C> <C> <C>
Portfolio Income Growth of
Capital Risk of Principal
Aggressive Profile Low High High
Moderately Aggressive Profile Low High to Medium High
Moderate Profile Medium Medium to High Medium
Moderately Conservative Profile Medium to High Low to Medium Medium
Conservative Profile High Low Low
</TABLE>
There is no assurance that the Portfolios will achieve their stated
objectives.
Each Maxim Profile Portfolio invests in a select group of Underlying
Portfolios suited to the Maxim Profile Portfolio's particular investment
objective. The allocation of assets among the Underlying Portfolios is
determined by GW Capital Management. The Maxim Profile Portfolios are
automatically rebalanced once per quarter to maintain the appropriate asset
allocation as well as the appropriate selection of Underlying Portfolios. This
rebalancing takes place on the 20th day of February, May, August and November,
unless that day is not a business day in which case the Maxim Profile Portfolios
will be rebalanced on the next business day after the 20th. Rebalancing involves
selling shares of one Underlying Portfolio purchasing shares of another
Underlying Portfolio. GW Capital Management may from time to time adjust the
percentage of assets invested in any specific Underlying Portfolio. Such
adjustments may be made to increase or decrease the Maxim Profile Portfolio's
holdings of particular asset classes. The particular Underlying Portfolios in
which each Maxim Profile Portfolio may invest and the asset allocation ranges
may be changed from time to time by the Board of Directors without the approval
of the Maxim Profile Portfolios' shareholders.
Although the Maxim Profile Portfolios will generally be fully invested
in the Underlying Portfolios, each Profile Portfolio may invest up to 100% of
its assets in cash or in money market instruments for the purpose of meeting
redemption requests or making other anticipated cash payments or to protect the
Portfolio in the event it is believed market or economic conditions warrant a
defensive posture.
Investors in the Maxim Profile Portfolios, in addition to bearing their
proportionate share of the expenses of a Maxim Profile Portfolio (see
"Management of the Fund" in this prospectus), will indirectly bear expenses of
the Underlying Portfolios. Therefore, investors would realize lower aggregate
charges and expenses by investing directly in the Underlying Portfolios rather
than investing directly in the Maxim Profile Portfolios. An investor who chooses
to invest directly in the Underlying Portfolios rather than purchasing the Maxim
Profile Portfolios would, however, forego the asset allocation services provided
by GW Capital Management in its management of the Maxim Profile Portfolios.
Asset Allocation Design
Asset allocation is one of the most important investment decisions an
investor makes. Selecting the appropriate mix of asset classes should be based
on personal objectives, investment time horizons and risk tolerances. The Maxim
Profile Portfolios provide different types of investors with a way to meet
target asset allocations.
In order to achieve their investment objectives, the Maxim Profile
Portfolios maintain different allocations of equity and fixed income Underlying
Portfolios reflecting varying degrees of potential investment risk and reward.
These asset class allocations provide investors with five diversified, distinct
options that meet a wide array of investor needs. The chart below illustrates
the asset allocation ranges for each Maxim Profile Portfolio:
<TABLE>
- ------ -------------------- ------------- ------------- ---------- ------------- ============
Asset Class Conservative Moderately Moderate Moderately Aggressive
Conservative Aggressive
-------------------- ------------- ------------- ---------- ------------- ============
<S> <C> <C> <C> <C> <C>
E International 0-10% 5-25% 5-25% 10-30% 15-35%
Q
-------------------- ------------- ------------- ---------- ------------- ============
U Small-Cap 0-10% 0-10% 0-20% 0-20% 10-30%
I
-------------------- ------------- ------------- ---------- ------------- ============
T MidCap 0-10% 0-20% 5-25% 10-30% 20-40%
-------------------- ------------- ------------- ---------- ------------- ============
Y Large-Cap 15-35% 15-35% 20-40% 25-45% 15-35%
- ------
-------------------- ------------- ------------- ---------- ------------- ============
D Bond 30-50% 20-40% 5-25% 5-25% 0-10%
E
B Short-Term Bond 25-45% 10-30% 5-25% 0-10% 0-10%
T
====== ==================== ============= ============= ==========
</TABLE>
The asset allocations are determined and the Underlying Portfolios are
selected according to guidelines established by the Board of Directors according
to fundamental and quantitative analysis of the expected long term return and
risk characteristics for each Underlying Portfolio.
Risk Factors and Special Considerations of Profile Portfolios
Like any investment program, an investment in one or more of the Maxim
Profile Portfolios entails certain risks. The Portfolios are concentrated in the
various series of Maxim Series Fund, so investors should be aware that each
Profile Portfolio's performance is directly related to the investment
performance of the Underlying Portfolios in which the Profile Portfolios invest
and each Profile Portfolio's allocation among the Underlying Portfolios. First,
changes in the net asset values of the Underlying Portfolios affect each Profile
Portfolio's net asset value. Second, over the long-term, each Profile
Portfolio's ability to meet its investment objective depends on the Underlying
Portfolios meeting their investment objectives.
The Maxim Profile Portfolios are "non-diversified" for purposes of the
Investment Company Act of 1940 because they invest in securities of a limited
number of Underlying Portfolios. However, the Underlying Portfolios themselves
are diversified investment companies. The Maxim Profile Portfolios intend to
qualify as diversified investment companies for purposes of Subchapter M of the
Internal Revenue Code of 1986, as amended.
The different types of securities and investment techniques common to
one or more of the Underlying Portfolios all have attendant risks of varying
degrees. With respect to the Moderate Profile, Moderately Aggressive Profile and
Aggressive Profile Portfolios, the primary risk is the same as for those related
to equity securities, with a secondary risk being that associated with debt
securities. For the Conservative Profile and Moderately Conservative Profile,
the primary risk is the same as for those related to debt securities, with a
secondary risk being that associated with equity securities.
Investment Restrictions
In addition to the investment objectives of each Maxim Profile
Portfolio, the Portfolios are subject to investment restrictions that are
described under "Investment Limitations" in the SAI.
The Underlying Portfolios
Following is a list of eligible Underlying Portfolios in which the Maxim
Profile Portfolios may invest. A description of the investment objectives and
practices for each of these Underlying Portfolios is contained in this
Prospectus. There can be no assurance that the investment objectives of the
Underlying Portfolios will be met. Additional information regarding the
investment practices of the Underlying Portfolios may also be found in the SAI.
<PAGE>
<TABLE>
Eligible Underlying Portfolios by Asset Class
<S> <C> <C> <C> <C> <C> <C>
Short-Term Bond Bond MidCap
Equity
oShort-Term Maturity Bond Portfolio oBond Portfolio oMidCap
Portfolio
oCorporate Bond
Portfolio oMidCap Growth Portfolio
oU.S. Government Securities Portfolio
Large-Cap Equity Small-Cap Equity
International Equity
oMaxim T. Rowe Equity/Income Portfolio oMaxim INVESCO Small-Cap oMaxim
INVESCO
oStock Index Portfolio Growth Portfolio
ADR Portfolio
oValue Index Portfolio oSmall-Cap Index Portfolio
oInternational Equity
oGrowth Index Portfolio oSmall-Cap Value
Portfolio Portfolio
</TABLE>
Index Portfolio Management
All index styled portfolios may utilize futures as a substitute for a
comparable market position in the underlying securities, or for hedging
purposes. A stock index futures contract obligates the seller to deliver (and
the purchaser to take) an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. The intent
is to purchase and sell futures contracts so as to obtain the best price with
consideration also given to liquidity.
Stock index futures contracts may be purchased or sold to the extent
that such activities would be consistent with the requirements of Section 4.5 of
the regulations under the Commodity Exchange Act, under which the portfolios
would be excluded from the definition of a "commodity pool operator."
Accordingly, each portfolio may enter into futures positions in such futures
contracts to the extent that the aggregate initial margins and premiums required
to establish such positions do not exceed 5% of the liquidation value of the
respective portfolio.
Risks associated with the use of futures contracts are: (i) imperfect
correlation between the change in value of securities included on the index and
the prices of futures contracts; and (ii) possible lack of a liquid secondary
market for a futures position when desired. The risk that a portfolio will be
unable to close out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.
In addition, because of the low margin deposits normally required in futures
trading, a high degree of leverage is typical of a futures trading account. As a
result, a relatively small price movement in a futures contract may result in
substantial losses to the trader (i.e., the Portfolio).
Traditional methods of securities analysis are not used by the
Investment Adviser in making investment decisions for index styled portfolios.
Rather a statistical selection technique is utilized to determine which
securities it will purchase or sell in order to track the performance of the
relevant index(es) to the extent feasible. In addition, from time to time,
adjustments may be made in a portfolio's holdings due to change in the
composition of the relevant index(es). Each index styled portfolio will attempt
to achieve a correlation between its performance and that of the relevant
index(es) of at least 0.95, without taking into account expenses. A correlation
of 1.00 would indicate perfect correlation, which would be achieved when a
portfolio's net asset value, including the value of its dividends and capital
gains distributions, increases or decreases, is in exact proportion to change in
the relevant index(es). The Investment Adviser will attempt to minimize any
"tracing error" (that statistical measure of the difference between the
investment results of a portfolio and that of the relevant index(es)) in making
investments for a portfolio. However, brokerage and other transaction costs, as
well as potential tracking errors, will tend to cause a portfolio's return to be
lower than the return of the relevant index(es). There can be no assurance,
however, as to how closely a portfolio's performance will correspond to the
performance of the relevant index(es). Moreover, the index itself may not
perform favorably in which case a Portfolio's performance would similarly be
unfavorable.
Foreign Investment Risks
Investments in foreign securities present risks not typically associated
with investments in comparable securities of U.S. issuers. Since foreign
securities involve foreign currencies, the value of the assets of a Portfolio
and its net investment income available for distribution may be affected
favorably or unfavorably by changes in currency exchange rates and exchange
control regulations. Investment will not be made in securities denominated in a
foreign currency that is not fully exchangeable into U.S. dollars without legal
restriction at the time of investment.
There may be less information publicly available about a foreign
corporate or government issuer than about a U.S. issuer, and foreign corporate
issuers generally are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those in the United
States. The securities of some foreign issuers are less liquid and at times more
volatile than securities of comparable U.S. issuers. Foreign brokerage
commissions and securities custody costs are often higher than those in the
United States, and judgments against foreign entities may be more difficult to
obtain and enforce. With respect to certain foreign countries, there is a
possibility of governmental expropriation of assets, confiscatory taxation,
political or financial instability and diplomatic developments that could affect
the value of investments in those countries. The receipt of interest on foreign
government securities may depend on the availability of tax or other revenues to
satisfy the issuer's obligations.
A Portfolio's investments in foreign securities may include investments
in countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.
In determining whether to invest in securities of foreign issuers, the
likely impact of foreign taxes on the net yield available may be considered.
Income received from sources within foreign countries and the U.S. may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of assets to be invested in various
countries is not known, and tax laws and their interpretations may change from
time to time and may change without advance notice. While attempts will be made
to minimize such taxes by timing of transactions and other strategies, there is
no assurance that such efforts will be successful. Any such taxes paid will
reduce net income available for distribution.
Most foreign securities in a Portfolio (other than ADRs) will be
denominated in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Similarly, any income on such
securities is generally paid to a Portfolio in foreign currencies. With respect
to all Portfolios, the value of foreign currencies relative to the U.S. dollar
varies continually, causing changes in the dollar value of a Portfolio's
investments (even if the price of the investments is unchanged) and changes in
the dollar value of a Portfolio's income available for distribution to its
shareholders. The effect of changes in the dollar value of a foreign currency on
the dollar value of a Portfolio's assets and on the net investment income
available for distribution may be favorable or unfavorable.
For Portfolios other than the Maxim INVESCO ADR Portfolio, a Portfolio
may incur costs in connection with conversions between various currencies. In
addition, a Portfolio may be required to liquidate portfolio assets, or may
incur increased currency conversion costs, to compensate for a decline in the
dollar value of a foreign currency occurring between the time when a Portfolio
declares and pays a dividend, or between the time when a Portfolio accrues and
pays an operating expense in U.S. dollars.
The Maxim INVESCO ADR Portfolio may invest in ADRs. ADRs are receipts,
typically issued by a U.S. bank or trust company, evidencing ownership of the
underlying foreign securities. ADRs are denominated in U.S. dollars and trade in
the U.S. securities markets. ADRs may be issued in sponsored or unsponsored
programs. In sponsored programs, the issuer makes arrangements to have its
securities traded in the form of ADRs; in unsponsored programs, the issuer may
not be directly involved in the creation of the program. Although the regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, the issuers of unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, such information may not be
reflected in the market value of the ADRs. ADRs are subject to certain of the
same risks as direct investments in foreign securities, including the risk that
changes in the value of the currency in which the security underlying an ADR is
denominated relative to the U.S. dollar may adversely affect the value of the
ADR.
Foreign Currency Exchange Transactions
Portfolios which engage in foreign currency exchange transactions do so
in an attempt to protect against uncertainty in the level of future exchange
rates. Some Portfolios may engage in foreign currency exchange transactions in
connection with the purchase and sale of securities ("transaction hedging") and
to protect against changes in the value of specific positions ("position
hedging.")
A Portfolio may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on which the
Portfolio contracts to purchase or sell a security and the settlement date, or
to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. A Portfolio may purchase or sell a foreign currency on a spot
(or cash) basis at the prevailing spot rate in connection with the settlement of
transactions in securities denominated in that foreign currency.
If conditions warrant, a Portfolio may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts as a hedge against changes
in foreign currency exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a future time at a
rate or rates that may be higher or lower than the spot rate. Foreign currency
futures contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes a Portfolio may also purchase or sell
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
A Portfolio may engage in position hedging to protect against the
decline in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated, quoted or exposed (or an increase in the
value of the currency in which the securities the Portfolio intends to buy are
denominated, when the Portfolio holds cash or short-term investments). For
position hedging purposes, a Portfolio may purchase or sell foreign currency
futures contracts, foreign currency forward contracts and options on foreign
currency futures contracts and on foreign currencies on exchanges or
over-the-counter markets. In connection with position hedging, the Portfolio
also may purchase or sell foreign currency on a spot basis.
A Portfolio's currency hedging transactions may call for the delivery of
one foreign currency in exchange for another foreign currency and may at times
not involve currencies in which its portfolio securities are then denominated. A
Portfolio could hedge a foreign currency with forward contracts on another
("proxy") currency of which changes in value generally correlate with the
currency to be hedged. Such "cross hedging" activities may be engaged in when it
is believed that such transactions provide significant hedging opportunities.
Cross hedging transactions involve the risk of imperfect correlation between
changes in the values of the currencies to which such transactions relate and
changes in the value of the currency or other asset or liability which is the
subject of the hedge.
Hedging transactions involve costs and may result in losses. A Portfolio
will engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when it is believed the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. There is no assurance that
appropriate foreign currency exchange transactions will be available with
respect to all currencies in which investments may be denominated. Hedging
transactions also may be limited by tax considerations. Hedging transactions may
affect the character or amount of distributions.
Illiquid Securities
Each Portfolio, other than the Money Market Portfolio, may invest up to
15% of its total assets in "illiquid securities" (taken as of the time of
acquisition of an illiquid security). The Money Market Portfolio may invest up
to 10% of its total assets in illiquid securities. Illiquid securities are
securities that may not be sold in the ordinary course of business within seven
days at approximately the price used in determining the net asset value of the
Portfolio. This restriction applies to securities for which a ready market does
not exist, such as restricted securities, but does not necessarily encompass all
restricted securities. Institutional markets for restricted securities have
developed as a result of the promulgation of Rule 144A under the Securities Act
of 1933 which provides a "safe harbor" from 1933 Act registration requirements
for qualifying sales to institutional investors. When Rule 144A securities
present an attractive investment opportunity and otherwise meet selection
criteria, the Portfolios may make such investments. Whether or not such
securities are "illiquid" depends on the market that exists for the particular
security.
The staff of the Securities and Exchange Commission has taken the
position that the liquidity of Rule 144A securities is a question of fact for a
board of directors to determine, such determination is to be based on a
consideration of the readily available trading markets and the review of any
contractual restrictions. The staff also acknowledges that while the board
retains ultimate responsibility, it may delegate this function to an investment
adviser. The Board of Directors of the Fund has delegated this responsibility to
the Investment Adviser, and with respect to those Portfolios having a
sub-adviser, the sub-adviser is responsible for determining the liquidity of
Rule 144A securities.
It is not possible to predict with assurance exactly how the market for
Rule 144A securities or any other security will develop. A security which when
purchased enjoyed a fair degree of marketability may subsequently become
illiquid and, accordingly, a security which was deemed to be liquid at the time
of acquisition may subsequently become illiquid. In such event, appropriate
remedies will be considered to minimize the effect on a Portfolio's liquidity.
Equity Securities Risk
Investments in equity securities are subject to "stock market risk" the
possibility that stock prices in general will decline over short or extended
periods and that investors may suffer loss of principal. Stock markets tend to
be cyclical with periods when stock prices generally rise or fall. Since
economic growth has been punctuated by declines, share prices of even the
best-managed most profitable companies are subject to market risk. Swings in
investor psychology and significant trading by large institutions can result in
price declines. For this reason, equity investors should have a long-term
investment horizon and be willing to wait out their markets.
Debt Securities
Bonds and other debt instruments are used by issuers to borrow money
from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero-coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall, and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
This sensitivity to interest rates is also referred to as "market risk."
Debt obligations are rated based on their estimated credit risk by
independent services such as S&P and Moody's. "Credit risk" relates to the
issuer's ability to make payments of principal and interest when due.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. Investment grade securities are
those rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by Moody's or, if
unrated, are judged to be of comparable quality to securities so rated. Debt
securities rated BBB by S&P or Baa by Moody's and unrated securities of
comparable quality are viewed as having adequate capacity for payment of
principal and interest, but do involve a higher degree of risk than that
associated with investments in debt securities in the higher rating categories.
Securities rated below investment grade are commonly referred to as
"high yield-high risk securities" or "junk bonds". These securities are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the obligations. It is,
therefore, possible that these types of factors could in certain instances,
reduce the value of securities held with a commensurate effect on share value.
Debt securities include (1) securities issued or guaranteed as to
principal or interest by the U.S. Government, its agencies or instrumentalities;
(2) debt securities issued or guaranteed by U.S. corporations or other issuers
(including foreign governments or corporations); (3) asset-backed securities and
mortgage-related securities, including collateralized mortgage obligations
("CMOs"); and (4) securities issued or guaranteed as to principal or interest by
a sovereign government or one of its agencies or political subdivisions,
supranational entities such as development banks, non-U.S. corporations, banks
or bank holding companies, or other non-U.S. issuers.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests
with the Fund's directors. There currently are five directors, three of whom are
not "interested persons" of the Fund within the meaning of that term under the
Investment Company Act of 1940. The Board meets regularly four times each year
and at other times as necessary. By virtue of the functions performed by GW
Capital Management as Investment Adviser, the Fund requires no employees other
than its executive officers, none of whom devotes full time to the affairs of
the Fund. These officers are employees of GW Capital Management and receive
compensation from it. The Statement of Additional Information contains the names
of, and general background information regarding, each Director and executive
officer of the Fund.
Investment Adviser
GW Capital Management, located at 8515 E. Orchard Rd., Englewood,
Colorado 80111, serves as the Fund's "Investment Adviser." Through Power
Corporation of Canada, a holding and management company, the Investment Adviser
is controlled by a Canadian investor, Paul Desmarais, and his associates. The
Investment Adviser presently acts as the investment adviser for Great-West
Variable Annuity Account A, a separate account of GWL&A registered as a
management investment company, and certain non-registered, qualified corporate
pension plan separate accounts of GWL&A. GW Capital Management is a registered
investment adviser with the Securities and Exchange Commission.
Subject to the supervision and direction of the Fund's Board of
Directors, the Investment Adviser manages the Fund's portfolios in accordance
with each Portfolio's stated investment objectives and policies, makes
investment decisions for the Portfolios and places orders to buy and sell
securities on behalf of the Fund or delegates these functions to a sub-adviser,
as discussed below. The Investment Adviser provides investment advisory services
and pays all the expenses, except extraordinary expenses, incurred for providing
such services for the Portfolios described herein. As compensation for its
services to the Fund, the Investment Adviser receives monthly compensation at
the annual rate 0.25% of the average daily net assets of the Aggressive Profile,
Moderately Aggressive Profile, Moderate Profile, Moderately Conservative Profile
and Conservative Profile Portfolios; 0.46% of the average daily net assets of
the Money Market Portfolio; 0.60% of the average daily net assets of the Bond,
Stock Index, U.S. Government Securities, Small-Cap Index, Growth Index, Value
Index and Short-Term Maturity Bond Portfolios; 0.80% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio; 0.90% of the average
daily net assets of the Corporate Bond Portfolio; 0.95% of the average daily net
assets of the MidCap and Maxim INVESCO Small-Cap Growth Portfolios; and 1.00% of
the average daily net assets of the Small-Cap Value, International Equity, Maxim
INVESCO ADR, Maxim INVESCO Balanced, Small-Cap Aggressive Growth, Blue Chip and
MidCap Growth Portfolios.
With respect to the MidCap, International Equity, Small-Cap Value, Maxim
T. Rowe Price Equity/Income, Maxim INVESCO Small-Cap Growth, Maxim INVESCO ADR,
MidCap Growth, Blue Chip and Small-Cap Aggressive Growth Portfolios, the
Investment Adviser pays all compensation of, and furnishes office space for,
officers and employees of the Investment Adviser connected with investment
management of these Portfolios, as well as the fees of all directors of the Fund
who are affiliated persons of the Investment Adviser or any of its subsidiaries.
All other expenses incurred in the operation of these Portfolios, including
general administrative expenses, are borne by these Portfolios, respectively.
Accounting services are provided for these Portfolios by the Investment Adviser
and these Portfolios reimburse the Adviser for its costs in connection with such
services. However, the Adviser has agreed to pay any expenses of the Fund which
exceed an annual rate of 0.95% of the average daily net assets of the Maxim T.
Rowe Price Equity/Income Portfolio; 1.05% of the average daily net asset of the
MidCap Growth Portfolio; 1.10% of the average daily net assets of the MidCap and
Maxim INVESCO Small-Cap Growth Portfolios; 1.15% of the average daily net assets
of the Blue Chip Portfolio; 1.30% of the average daily net assets of the Maxim
INVESCO ADR and Small-Cap Aggressive Growth Portfolios; 1.35% of the average
daily net assets of the Small-Cap Value Portfolio; and, 1.50% of the average
daily net assets of the International Equity Portfolio.
The services provided to the Fund by the Investment Adviser depend on
the smooth functioning of its computer systems. Many computer software systems
in use today cannot distinguish the year 2000 from the year 1900 because of the
way dates are encoded and calculated. That failure could have a negative impact
on the handling of securities trades, pricing and account services. The
Investment Adviser has been actively working on necessary changes to its
computer systems to deal with the year 2000 and expects that its systems will be
adapted in time for that event.
The day-to-day lead portfolio manager for the Bond Portfolio is B.G.
Masters. Mr. Masters is Manager, Public Bond Investments, Great-West, 1993 to
Present; Manager, Bond, Investment Grade Corporate Bond and Short-Term Maturity
Bond Portfolios of Maxim Series Fund, June 1994 to Present. He was Assistant
Manager, Public Bond Investments, Great-West, 1987 to 1993.
The day-to-day lead portfolio manager for the U.S. Government Securities
Portfolio is C.S. Tocher. Ms. Tocher is Manager, Public Bond Investments,
Securities Great-West, 1993 to Present; Manager, U.S. Government Securities and
U.S. Government Mortgage Securities Portfolio of Maxim Series Fund; June 1994 to
Present. She was Associate Manager, Public Bond Investments, Great-West, 1990 to
1993; Manager, Bond, Investment Grade Corporate Bond and Zero Coupon Treasury
Portfolios of Maxim Series Fund, 1990 to June 1994.
Sub-Advisers
Janus Capital Corporation ("Janus") serves as the Sub-Adviser to the
MidCap Portfolio. As such, Janus is responsible for daily managing the
investment and reinvestment of assets of the MidCap Portfolio, subject generally
to review and supervision of the Investment Adviser and the Board of Directors.
Janus bears all expenses in connection with the performance of its services,
such as compensating and furnishing office space for its officers and employees
connected with investment and economic research, trading and investment
management of the MidCap Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address is
100 Fillmore Street, Denver, Colorado 80206.
The day-to-day manager of the MidCap Portfolio is James P. Goff, Portfolio
Manager for the Janus Enterprise Fund. Mr. Goff joined Janus in 1988 and has
managed the Janus Enterprise Fund since its inception in September 1992.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate of
.60% on the first $100 million; .55% on next $400 million; and .45% on all
assets over $500 million.
Templeton Investment Counsel, Inc. ("TICI") serves as the Sub-Adviser of
the International Equity Portfolio. As such, TICI is responsible for daily
managing the investment and reinvestment of assets of the International Equity
Portfolio, subject generally to review and supervision of the Investment Adviser
and the Board of Directors.
TICI bears all expenses in connection with the performance of its
services, such as compensating and furnishing office space for its officers and
employees connected with investment and economic research, trading and
investment management of the International Equity Portfolio.
The day-to-day manager of the International Equity Portfolio is Mark
Beveridge, Senior Vice President, TICI (since 1985).
TICI is an indirect subsidiary of Templeton Worldwide, Inc., which in
turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc. TICI is a
Florida corporation with its principal business address at Broward Financial
Centre, 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating TICI, which
receives monthly compensation from the Investment Adviser at the annual rate of
.70% on the first $25 million, .55% on the next $25 million, .50% on the next
$50 million, and .40% on all amounts over $100 million.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio and MidCap Growth
Portfolio. As such, T. Rowe Price is responsible for daily managing the
investment and reinvestment of assets of the Portfolio, subject generally to
review and supervision of the Investment Adviser and the Board of Directors. T.
Rowe Price bears all expenses in connection with the performance of its
services, such as compensating and furnishing office space for its officers and
employees connected with the investment and economic research, trading and
investment management of the Maxim T. Rowe Price Equity/Income Portfolio and
MidCap Growth Portfolio.
T. Rowe Price is a Maryland corporation, registered as an investment
adviser with the Securities and Exchange Commission. Its principal business
address is 100 East Pratt Street, Baltimore, Maryland 21202.
The Maxim T. Rowe Price Equity/Income Portfolio is managed by an Investment
Advisory Committee composed of the following members: Brian C. Rogers, Chairman,
Stephen W. Boesel, Thomas H. Broadus, Jr., Richard P. Howard and William J.
Stromberg. The committee chairman has day-to-day responsibility for managing the
Portfolio and works with the committee in developing and executing the
Portfolio's investment program. Mr. Rogers has been chairman of the committee
since 1993. He joined T. Rowe Price in 1982 and has been managing investments
since 1983.
The Maxim MidCap Growth Portfolio is managed by an investment advisory
committee comprised of the following members: Brian W. Berghuis, Chairman, Marc
L. Baylin, James A. Kennedy, and John F. Wakeman. The committee chairman has
day-to-day responsibility for managing the Portfolio and works with the
committee in developing and executing the Portfolio's investment program. This
investment committee also serves as the investment committee for the T. Rowe
Price Mid-Cap Growth Portfolio. Mr. Berghuis has been Chairman of the T. Rowe
Price Mid-Cap Growth Fund since 1992. He has been managing investments since
joining T. Rowe Price in 1985.
The Investment Adviser is responsible for compensating T. Rowe Price, which
receives monthly compensation from the Investment Adviser for the T. Rowe Price
Equity/Income Portfolio at the annual rate of .50% on the first $20 million,
.40% on the next $30 million and for the MidCap Growth Portfolio at the annual
rate of .50% on all assets of the Maxim MidCap Growth Portfolio.
Institutional Trust Company ("ITC") serves as the sub-adviser to the
Maxim INVESCO Small-Cap Growth Portfolio, Maxim INVESCO Balanced Portfolio and
Maxim INVESCO ADR Portfolio. As such, ITC is responsible for daily managing the
investment and reinvestment of assets of the Maxim INVESCO Small Cap Growth,
Maxim INVESCO Balanced and Maxim INVESCO ADR Portfolios, subject generally to
review and supervision of the Investment Adviser and the Board of Directors. ITC
bears all expenses in connection with the performance of its services, such as
compensating and furnishing office space for its officers and employees
connected with investment and economic research, trading and investment
management of the Portfolios.
ITC is a Colorado Trust Company and an indirect wholly-owned subsidiary
of AMVESCAP PLC. ITC is registered as an Investment Adviser with the Securities
and Exchange Commission. Its principal business address is 7800 E. Union Avenue,
Denver, Colorado, 80237.
The day-to-day management of the Maxim INVESCO Small-Cap Growth
Portfolio is provided by a team of individuals, led by Timothy J. Miller (since
1997). Mr. Miller also serves as the co-portfolio manager of the INVESCO Small
Company Growth Fund (since 1997); co-portfolio manager of the INVESCO Growth
Fund (since 1996); portfolio manager of the INVESCO Dynamics Fund (since 1993);
senior vice president (1995 to present), vice president (1993-1995) and
portfolio manager (1992 to present) of ITC. Formerly (1979 to 1992), Mr. Miller
was analyst and portfolio manager with Mississippi Valley Advisors. Trent E. May
is a co-portfolio manager of the Maxim INVESCO Small-Cap Growth Portfolio and
INVESCO Small Company Growth Fund (since 1997); co-portfolio manager of the
INVESCO Growth Fund (since 1996); portfolio manager (since 1996) of ITC.
Formerly, Mr. May was senior equity fund manager/equity analyst at Munder
Capital Management in Detroit. Stacie Cowell is a co-portfolio manager of the
Maxim INVESCO Small-Cap Growth Portfolio and INVESCO Small Company Growth Fund
(since 1997); portfolio manager (since 1996) of ITC. Formerly, Ms. Cowell was
senior equity analyst with Founders Asset Management; and was capital markets
and trading analyst with Chase Manhattan Bank in New York.
The Investment Adviser is responsible for compensating ITC, which
receives monthly compensation from the Investment Adviser at the annual rate of
.55% on the first $25 million, .50% on the next $50 million, .40% on the next
$25 million and .35% on assets over $100 million of the Maxim INVESCO Small-Cap
Growth Portfolio.
Donovan J. (Jerry) Paul, Charles P. Mayer and Albert M. Grossi are
co-portfolio managers for the Maxim INVESCO Balanced Portfolio. Mr. Mayer is
primarily responsible for the day-to-day management of the Portfolio's equity
holdings. He is also the co-portfolio manager for the INVESCO Balanced Fund,
since 1996. Mr. Mayer is also co-portfolio manager of the INVESCO Industrial
Income Fund, Inc. and INVESCO VIF-Industrial Income Fund. Mr. Mayer began his
investment career in 1969 and is now senior vice president and director of ITC
and a director of INVESCO Funds Group, Inc.; from 1993 to 1994, he was a vice
president of ITC. From 1984 to 1993, he was a portfolio manager with
Westinghouse Pension. Mr. Paul focuses on the fixed income investments for the
Portfolio. Since 1994, he has also served as co-portfolio manager for the
INVESCO Balanced Portfolio; portfolio manager of INVESCO Select Income Fund,
INVESCO High Yield Fund, and INVESCO VIF-High Yield Portfolio; co-portfolio
manager of INVESCO Industrial Income Fund and INVESCO VIF-Industrial Income
Fund; portfolio manager and senior vice president of ITC. Formerly, Mr. Paul was
Senior Vice President and Director of Fixed-Income Research (1989 to 1992) and
portfolio manager (1987 to 1992) with Stein, Roe and Farnham Inc., and President
(1993 to 1994) of Quixote Investment Management, Inc. Mr. Grossi has served as
co-portfolio manager of the INVESCO Balanced Fund since 1996. He is also the
portfolio manager of INVESCO Worldwide Capital Goods Fund. Mr. Grossi began his
investment career in 1944 and is now a vice president of ITC. Formerly, Mr.
Grossi was a portfolio manager for Westinghouse Pension Investments Corporation.
The Investment Adviser is responsible for compensating ITC, which
receives monthly compensation from the Investment Adviser at the annual rate of
.50% of the average daily net assets of the Portfolio up to $25 million, .45% on
the next $50 million, .40% on the next $25 million and .35% of such value in
excess of $100 million of the Maxim INVESCO Balanced Portfolio.
The day-to-day manager of the Maxim INVESCO ADR Portfolio is W. Lindsay
Davidson, who also serves as portfolio manager for the INVESCO ADR International
Equity Management Fund. Mr. Davidson has been with INVESCO PLC since 1984 and in
1989 he assumed responsibility for global and international portfolios. Mr.
Davidson began his investment career in 1974 and previously worked for both
insurance and reinsurance companies in England. He holds an M.A. (Honours)
degree in Economics from Edinburgh University.
The Investment Adviser is responsible for compensating ITC, which
receives monthly compensation from the Investment Adviser at the annual rate of
.55% on the first $50 million, .50% on the next $50 million, and .40% on assets
over $100 million of the Maxim INVESCO ADR Portfolio.
Ariel Capital Management, Inc. (Ariel) is a privately held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. It is an Illinois corporation with its
principal business address at 307 North Michigan Avenue, Chicago, Illinois
60601. Subject generally to review and supervision by the Investment Adviser and
the Board of Directors of the Fund, Ariel is responsible for the actual daily
management of the Small-Cap Value Portfolio and for making decisions to buy,
sell or hold any particular security.
Ariel bears all expenses in connection with the performance of its
services, such as compensating and furnishing office space for its officers and
employees connected with investment and economic research, trading and
investment management of the Small-Cap Value Portfolio.
The day-to-day manager for the Small-Cap Value Portfolio is John W. Rogers,
Jr. Mr. Rogers' business experience during the past five years is as Chief
Investment Officer, Ariel Capital Management and Portfolio Manager,
Calvert-Ariel Growth Fund.
The Investment Adviser is responsible for compensating Ariel, which
receives monthly compensation from the Investment Adviser at the annual rate of
.40% of the average daily net asset value of the Small-Cap Value Portfolio up to
$5 million, .35% on the next $10 million, .30% on the next $10 million, and .25%
of such value in excess of $25 million.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the sub-adviser of
the Corporate Bond Portfolio. As such, Loomis Sayles is responsible for daily
managing the investment and reinvestment of assets of the Portfolios, subject
generally to review and supervision of the Investment Adviser and the Board of
Directors. Loomis Sayles bears all expenses in connection with the performance
of its services, such as compensating and furnishing office space for its
officers and employees connected with the investment and economic research,
trading and investment management of the Portfolio.
Loomis Sayles is a Delaware limited partnership, registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111.
The day-to-day manager of the Corporate Bond Portfolio is Daniel J.
Fuss, Executive Vice President of Loomis Sayles who also serves as the fund
manager of the Loomis Sayles Bond Fund. Mr. Fuss has served as the portfolio
manager of the Loomis Sayles Bond Fund since its inception in 1991.
Jeffrey C. Petherick, Vice President of Loomis Sayles, and Mary Champagne,
Vice President of Loomis Sayles, have day-to-day management responsibility for
the Small-Cap Aggressive Growth Portfolio. Mr. Petherick has co-managed the
Portfolio since the Portfolio's inception. Mr. Petherick joined Loomis Sayles in
1990. Ms. Champagne has co-managed the Portfolio since July 1995. Prior to
joining Loomis Sayles in 1993, Ms. Champagne served as a portfolio manager at
NBD Bank for 10 years.
The Investment Adviser is responsible for compensating Loomis Sayles,
which receives monthly compensation from the Investment Adviser for the
Corporate Bond Portfolio at the annual rate of .30% on all assets of the
Corporate Bond Portfolio and for the Small-Cap Aggressive Growth Portfolio at
the annual rate of .50% on the first $10 million, .45% on the next $15 million,
.40% on the next $75 million and .30% on all amounts over $100 million of the
Small-Cap Aggressive Growth Portfolio.
The Board of Directors has authorized each sub-adviser to utilize
certain brokers affiliated with the sub-advisers, respectively, in connection
with the execution of transactions in the Portfolios for which the sub-adviser
provides sub-advisory services.
Founders Asset Management, LLC ("Founders") serves as the sub-adviser to
the Maxim Blue Chip Portfolio. As such, Founders is responsible for daily
management of the investment and reinvestment of assets of the Maxim Blue Chip
Portfolio, subject generally to review and supervision of the Investment Adviser
and the Board of Directors. Founders bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic research,
trading and investment management for the Maxim Blue Chip Portfolio.
Founders is a Delaware limited liability company, registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 2930 East Third Avenue, Denver, Colorado 80206.
The day-to-day manager of the Maxim Blue Chip Portfolio is Brian F. Kelly.
Mr. Kelly also serves as the lead portfolio manager for the Founders Blue Chip
and Balanced Funds. Mr. Kelly joined Founders in 1996. Prior to joining
Founders, Mr. Kelly served as a portfolio manager (1993 - 1996) for ITC, and as
a senior equity investment analyst for Sears Investment Management Company (1986
- - 1993).
The Investment Adviser is responsible for compensating Founders, which
receives monthly compensation from the Investment Adviser at the annual rate of
.425% on the first $250 million, .35% on the next $250 million, .325% on the
next $250 million and .30% on all amounts over $750 million.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from investment income of the Money Market Portfolio shall be
declared daily and reinvested monthly in additional shares of the Portfolio at
net asset value. Dividends from net investment income of the Bond, U.S.
Government Securities and Short-Term Maturity Bond Portfolios shall be declared
and reinvested quarterly. Dividends from investment income, if any, of the Stock
Index, Small-Cap Index, Small-Cap Value, MidCap, Maxim T. Rowe Price
Equity/Income, Maxim INVESCO Balanced, Maxim INVESCO Small-Cap Growth, Value
Index, Growth Index, MidCap Growth, Blue Chip, Aggressive Profile, Moderately
Aggressive Profile, Moderate Profile, Moderately Conservative Profile and
Conservative Profile Portfolios will be declared and reinvested semi-annually.
Dividends from net investment income of the International Equity, Maxim INVESCO
ADR and Small-Cap Aggressive Growth Portfolios shall be declared and reinvested
annually. Distributions of net realized capital gains, if any, are declared in
the fiscal year in which they have been earned and are reinvested in additional
shares of the Fund at net asset value.
The Fund has qualified, and intends to continue to qualify, as a
registered investment company under Subchapter M of the Internal Revenue Code
("Code"). Each Portfolio of the Fund will be treated as a separate corporation
for federal income tax purposes. The Fund intends to distribute all of its net
income so as to avoid any Fund-level tax. Therefore, dividends derived from
interest and distributions of any realized capital gains will be taxable, under
Subchapter M, to the Fund's shareholders, which in this case are the Series
Accounts of GWL&A and MetLife. 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/MetLife and the Series
Accounts, see "Federal Tax Considerations" included in the applicable Series
Account prospectus.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are sold and redeemed at their net asset value next
determined after initial receipt of a purchase order or notice of redemption
without the imposition of any sales commission or redemption charge. However,
certain deferred sales and other charges may apply to the variable contracts.
Such charges are described in the applicable Series Account prospectus.
VALUATION OF SHARES
A portfolio's net asset value per share is determined as of 4:00 p.m.,
EST/EDT once daily Monday through Friday, except on holidays on which the New
York Stock Exchange is closed.
Net asset value of a portfolio share is computed by dividing the value
of the net assets of the portfolio by the total number of portfolio shares
outstanding. Portfolio securities that are listed on an established securities
exchange or on the NASDAQ National Market System are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked price.
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices or yield equivalent as obtained from one or more
dealers that make markets in the securities. Portfolio securities that are
traded both in the over-the-counter market and on an exchange are valued
according to the broadest and most representative market. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of Directors,
including valuations furnished by a pricing service that may be retained by the
Fund.
Market quotations of foreign securities in foreign currency are
translated to U.S. dollars at the prevailing rate of exchange. Securities for
which market quotations are not readily available, and other assets, are valued
at fair value as determined in good faith by the Board of Directors. Such a
determination may take into account, for example, quotations by dealers or
issuers for securities of similar type, quality, and maturity, or valuations
furnished by a pricing service retained by the Fund.
Money market securities held by the Fund with 60 days or less remaining
to maturity are valued on an amortized cost basis, which involves valuing a
portfolio instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the security.
THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State of Maryland on
December 7, 1981 and is registered with the Securities and Exchange Commission
as an open-end, management investment company. The Fund commenced operations on
February 25, 1982.
The Fund offers a separate class of common stock for each portfolio. All
shares will have equal voting rights, except that only shares of a respective
portfolio will be entitled to vote on matters concerning only that portfolio.
Each issued and outstanding share of a portfolio is entitled to one vote and to
participate equally in dividends and distributions declared by that portfolio
and, upon liquidation or dissolution, to participate equally in the net assets
of such portfolio remaining after satisfaction of outstanding liabilities. The
shares of each portfolio, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, exchange or similar rights, and will
be freely transferable. Shares do not have cumulative voting rights and the
holders of more than 50% of the shares of the Fund voting for the election of
directors can elect all of the directors of the Fund if they choose to do so
and, in such event, holders of the remaining shares would not be able to elect
any directors.
The Series Accounts, as part of GWL&A or of MetLife, and The Great-West
Life Assurance Company, which provided the Fund's initial capitalization, will
be holders of the shares and be entitled to exercise the rights directly as
described in the applicable Series Account prospectus.
The Fund offers its shares to the Series Accounts. For various reasons,
it may become disadvantageous for one or more of the Series Accounts to continue
to invest in Fund shares. In such an event, one or more Series Accounts may
redeem its Fund shares. For further information, see the Statement of Additional
Information.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information.
Performance information about the Fund is based on the Fund's past performance
only and is no indication of future performance.
The Fund may include total return in advertisements or other sales
materials regarding the Portfolios. When the Fund advertises the total return of
one of these portfolios, it will usually be calculated for one year, five years,
and ten years or some other relevant period if the Fund has not been in
existence for at least ten years. Total return is measured by comparing the
value of an investment in the portfolio at the beginning of the relevant period
to the value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions).
Some of the Portfolios also may advertise their yield in addition to
total return. This yield will be computed by dividing the net investment income
per share earned during a recent one-month period by the net asset value of a
Fund share (reduced by any dividend expected to be paid shortly out of Fund
income) on the last day of the period.
The Money Market Portfolio may advertise its yield and effective yield.
The yield of the Money Market Portfolio is based upon the income earned by the
Portfolio over a seven-day period and then annualized, i.e., the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but, when annualized, the income earned by the investment is assumed
to be reinvested in portfolio shares and thus compounded in the course of a
52-week period.
YIELDS
Yield (and effective yield, in the case of the Money Market Portfolio) will
fluctuate, and publication of yield information may not provide a basis for
comparison with bank deposits, securities of other investment companies or other
investments which are insured and/or pay a fixed yield for a stated period of
time. In addition, the yield and effective yield information may be of limited
use for comparative purposes because it does not reflect charges imposed at the
Series Account level which, if included, would decrease the yield. Moreover, the
yields shown reflect past performance of the Portfolios only and, as such, are
not intended to indicate, predict or guarantee future performance. For
information on the method used to calculate the yields shown below, see the
Statement of Additional Information.
<TABLE>
Yield** Effective
Yield**
<S> <C> <C>
MONEY MARKET PORTFOLIO 5.27% 5.41%
Comparison Information (1)
BOND PORTFOLIO 7.16%
STOCK INDEX PORTFOLIO 1.15%
U.S. GOVERNMENT SECURITIES PORTFOLIO 8.32%
SMALL-CAP INDEX PORTFOLIO 0.48%
INTERNATIONAL EQUITY PORTFOLIO 0.74%
MIDCAP PORTFOLIO -0.60%
MAXIM T. ROWE PRICE
EQUITY/INCOME PORTFOLIO 2.50%
MAXIM INVESCO SMALL-CAP
0.24%TH PORTFOLIO
MAXIM INVESCO ADR PORTFOLIO 0.79%
SMALL-CAP VALUE PORTFOLIO 2.06%
CORPORATE BOND PORTFOLIO 6.51%
MAXIM INVESCO BALANCED PORTFOLIO 2.62%
SHORT-TERM MATURITY BOND PORTFOLIO 5.39%
VALUE INDEX 1.53%
GROWTH INDEX 1.01%
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO 1.67%
BLUE CHIP PORTFOLIO 1.70%
MIDCAP GROWTH PORTFOLIO -0.27%
</TABLE>
**Yield and effective yield for the Money Market Portfolio is for the 7-day
period ended December 31,1997. Yield for the other Portfolios is for the month
ended December 31,1997. All the yield and effective yield calculations above
take into account charges against the Portfolio. All yield and effective yield
information is annualized. (1) The Donoghue MONEY FUND AVERAGE lists 772 taxable
money funds that are available to individual investors.
TOTAL RETURNS
All total return calculations assume the full redemption of the
Portfolio at the end of the period for which the calculation was made. These
returns also reflect annual returns over the period indicated. For information
on the method used to calculate the returns show below, see the Statement of
Additional Information. The performance shown reflects only past performance of
the Portfolios and is not intended to be an indication, prediction or guarantee
of future performance. Total return information, however, may be of limited use
for comparative purposes because it does not reflect charges imposed at the
Series Account level which, if included, would decrease the total return.
<PAGE>
<TABLE>
One Five Ten Since
Year Year Year
Inception+++
<S> <C> <C>
BOND PORTFOLIO 7.07% 6.39% 7.92%
STOCK INDEX PORTFOLIO+ 32.20% 19.15% 15.53%
U.S. GOVERNMENT
SECURITIES PORTFOLIO++ 8.51% 6.74% 8.62%
SMALL-CAP INDEX PORTFOLIO 21.00% N/A N/A 13.86%
INTERNATIONAL EQUITY
PORTFOLIO 1.99% N/A N/A 9.07%
MIDCAP PORTFOLIO 12.95% N/A N/A 13.82%
MAXIM T. ROWE PRICE
EQUITY/INCOME PORTFOLIO 28.82% N/A N/A 24.95%
MAXIM INVESCO SMALL-
CAP GROWTH PORTFOLIO 18.70% N/A N/A 24.45%
MAXIM INVESCO
ADR PORTFOLIO 12.08% N/A N/A 14.85%
SMALL-CAP VALUE PORTFOLIO 27.86% N/A N/A 14.71%
CORPORATE BOND PORTFOLIO 12.70% N/A N/A 15.90%
MAXIM INVESCO
BALANCED PORTFOLIO 26.10% N/A N/A 24.79%
SHORT-TERM MATURITY
BOND PORTFOLIO 6.14% N/A N/A 5.76%
VALUE INDEX PORTFOLIO 34.08% N/A N/A 21.11%
GROWTH INDEX PORTFOLIO 29.26% N/A N/A 21.22%
SMALL-CAP AGGRESSIVE
GROWTH PORTFOLIO 24.50% N/A N/A 25.50%
BLUE CHIP PORTFOLIO N/A N/A N/A 6.43%
MIDCAP GROWTH PORTFOLIO N/A N/A N/A 22.90%
AGGRESSIVE PROFILE
PORTFOLIO N/A N/A N/A 10.25%
MODERATELY AGRESSIVE
PROFILE PORTFOLIO N/A N/A N/A 11.38%
MODERATE PROFILE
PORTFOLIO N/A N/A N/A 8.02%
MODERATELY CONSERVATIVE
PROFILE PORTFOLIO N/A N/A N/A 7.03%
CONSERVATIVE PROFILE
PORTFOLIO N/A N/A N/A 11.18%
</TABLE>
+From September 24, 1984, until December 1, 1992, the Stock Index Portfolio was
named the Growth Portfolio and prior to September 24, 1984, was named the
Income/Equity Portfolio. During these periods, the Portfolio's investment
policies differed from the Stock Index Portfolio's current policies. ++From July
29, 1987, until May 1, 1990, the U.S. Government Securities Portfolio's name was
the Government and High Quality Securities Portfolio and from April 8, 1985,
until July 29, 1987, the Portfolio's name was the Government Guaranteed
Portfolio. During these periods the Portfolio's investment policies differed
from the U.S. Government Securities Portfolio's current policies. +++ The
Small-Cap Index, Small-Cap Value, International Equity, Value Index and Growth
Index Portfolios were established effective December 1, 1993. The MidCap
Portfolio was established effective January 3, 1994. The Maxim INVESCO Small-Cap
Growth, Corporate Bond, Maxim INVESCO ADR, Maxim T. Rowe Price Equity/Income and
Small-Cap Aggressive Growth Portfolios were established November 1, 1994. The
Short-Term Maturity Bond Portfolio was established effective August 1, 1995. The
Maxim INVESCO Balanced Portfolio was established effective October 1, 1996. The
Blue Chip and MidCap Growth Portfolios were established effective July 1, 1997.
The Aggressive Profile, Moderately Aggressive Profile, Moderate Profile,
Moderately Conservative Profile and Conservative Profile Portfolios were
established effective September 9, 1997.
GENERAL INFORMATION
Reports to Shareholders
The fiscal year of the Fund ends on December 31 of each year. The Fund
will send to its shareholders, at least semiannually, reports showing
performance of the Fund's portfolios and other information. An annual report,
containing financial statements, audited by independent certified public
accountants, will be sent to shareholders each year.
Custodian
Bank of New York, New York City ("BONY"), acts as custodian of the
Fund's assets. BONY has custody of the Fund's assets held within and outside the
United States. BONY holds the Fund's assets in safekeeping and collects and
remits the income thereon subject to the instructions of the Fund.
Independent Auditors
Deloitte & Touche LLP, has been selected as the independent auditors of
the Fund. The selection of independent auditors is subject to annual
ratification by the Fund's shareholders.
Legal Counsel
Jorden Burt Boros Cicchetti Berenson & Johnson, LLP is counsel for the
Fund.
Additional Information
The telephone number or the address of the Fund appearing on the front
page of this prospectus should be used for requests for additional information.
<PAGE>
[Qualified Prospectus]
MAXIM SERIES FUND, INC.
8515 E. Orchard Rd., Englewood, Colorado 80111
Phone No. (303) 689-3000
Maxim Series Fund, Inc. (the Fund), an open-end management investment
company, includes the following investment portfolios: the Money Market
Portfolio, the Investment Grade Corporate Bond Portfolio, the Stock Index
Portfolio, the U.S. Government Mortgage Securities Portfolio, the Small-Cap
Index Portfolio, the Value Index Portfolio, the Growth Index Portfolio, the
Small-Cap Value Portfolio, the Small-Cap Aggressive Growth Portfolio, the
Corporate Bond Portfolio, the Foreign Equity Portfolio, the Short-Term Maturity
Bond Portfolio, the Maxim Blue Chip Portfolio and the Maxim MidCap Growth
Portfolio.
The investment objective of the Money Market Portfolio is preservation
of capital, liquidity and the highest possible current income consistent with
the foregoing objectives, through investments in short-term money market
securities. Shares of the Money Market Portfolio are neither insured nor
guaranteed by the U.S. Government. Further, there is no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
The Investment Grade Corporate Bond Portfolio seeks the highest possible
current income within the confines of the primary goal of insuring the
protection of capital by investing primarily in investment grade corporate debt
securities and in debt securities issued by the U.S. Government and its
agencies.
The principal objective of the Stock Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the S&P
500 Index and the S&P MidCap Index, weighted according to their pro rata share
of the market.
The investment objective of the U.S. Government Mortgage Securities
Portfolio is to seek the highest level of return consistent with preservation of
capital and substantial credit protection. The Portfolio seeks to achieve this
objective by investing primarily in mortgage related securities issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities.
The objective of the Small-Cap Index Portfolio is to provide investment
results, before fees, that correspond to the total return of the Standard &
Poor's Small-Cap 600 Stock Index.
The investment objective of the Value Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Russell 1000 Value Index.
The investment objective of the Growth Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Russell 1000 Growth Index.
This Prospectus sets forth concisely the information about the Fund that
prospective investors ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission and is
available upon request, without charge by calling or writing the Fund. The
"Statement of Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
G W CAPITAL MANAGEMENT, LLC
Investment Adviser
The date of this Prospectus is May 1, 1998.
To learn more about this Fund and its investments, you may
obtain the Statement of Additional Information which has
been filed with the Securities and Exchange Commission (SEC)
along with other related materials on the SEC's Internet Web site
(http://www.sec.gov).
<PAGE>
The objective of the Small-Cap Value Portfolio is to achieve long-term
capital appreciation by investing primarily in common stocks, although the
Portfolio may also invest in other securities, including restricted and
preferred stocks.
The investment objective of the Small-Cap Aggressive Growth Portfolio is
long-term capital growth. The Small-Cap Aggressive Growth Portfolio seeks to
achieve its objective by investing in common stocks or their equivalent
emphasizing securities believed to be undervalued by the market.
The investment objective of the Corporate Bond Portfolio is high total
investment return. The Corporate Bond Portfolio seeks to achieve its investment
objective by investing primarily in debt securities (including convertibles),
although up to 20% of its total assets (measured at the time of acquisition) may
be invested in preferred stocks.
The investment objective of the Foreign Equity Portfolio is total return
from long-term growth of capital and dividend income. The Foreign Equity
Portfolio seeks to achieve its objective by investing primarily in international
equity securities. Although the Portfolio seeks to invest primarily in common
stocks, it may also invest in any type of equity security.
The investment objective of the Short-Term Maturity Bond Portfolio is
preservation of capital, liquidity, and maximum total return through investment
in an actively managed portfolio of debt securities.
The investment objective of the Maxim Blue Chip Portfolio is long-term
growth of capital and income. To achieve its objective, the Portfolio normally
will invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
The investment objective of the Maxim MidCap Growth Portfolio is to
provide long-term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To achieve this objective, the
Portfolio will invest at least 65% of its assets in a diversified portfolio of
mid-cap companies whose earnings are expected to grow at a faster rate than the
average company.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and 1988
===============================================================================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Money Market Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
.........................................................................................................................
1997 1996 1995 1994 1993 1992
1991 1990 1989 1988
................................................................................................
..........
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value, $1.0007 $1.0007 $1.0007 $1.0007 $1.0007 $1.0006
$1.0005 $1.0027 $1.0014 $1.0002
Beginning of Period
Income from Investment
Operations
Net investment income 0.0512 0.0493 0.0555 0.0394 0.0278 0.0343
0.0565 0.0766 0.0870 0.0711
Net Gains or Losses on 0.0001
0.0001 (0.0022) 0.0013 0.0018
--------------------------------------------------------
- -- ------ -------- ------ ------
Securities (realized - - - - -
-- -- -- -- -
and unrealized)
Total from Investment 0.0512 0.0493 0.0555 0.0394 0.0278 0.0344
0.0566 0.0744 0.0883 0.0729
Operations
Less Distributions
Dividends (from net (0.0512) (0.0493) (0.0555) (0.0394) (0.0278) (0.0343)
(0.0565) (0.0766) (0.0870) (0.0711)
investment income)
Distributions (from - - - - - -
- - - - (0.0006)
capital gains)
Initial Capitalization
- - - - - -
- - - - -
--------------------------------- -- -- --
- -- -- -- -
Returns of Capital (0.0512) (0.0493) (0.0555) (0.0394) (0.0278) (0.0343)
(0.0565) (0.0766) (0.0870) (0.0717)
Total Distributions
Net Asset Value End of $1.0007 $1.0007 $1.0007 $1.0007 $1.0007 $1.0007
$1.0006 $1.0005 $1.0027 $1.0014
------- ------- ------- ------- ------- -------
- ------- ------- ------- -------
Period
Net Assets, End of
453,155,21396,453,188277,257,28186,587,2696,997,9764,220,56252,118,3736,738,6128,749,1224,590,994
Period
Ratio of Expenses to 0.46% 0.46% 0.46% 0.46% 0.46% 0.46%
0.48% 0.50% 0.50% 0.50%
Average Net Assets
Ratio of Net Income to 5.14% 4.99% 5.55% 3.96% 2.82% 3.43%
6.15% 8.14% 9.18% 7.61%
Average Net Assets
Portfolio Turnover Rate - - - - - -
- - - - -
.........................................................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994, 1993,
1992, 1991, 1990, 1989 and1988
===============================================================================================================================
The following tables should be read in conjunction with
the financial statements and related notes included
in the Statement of Additional Information.
Stock Index Portfolio*
- -------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................................................
1997 1996 1995 1994 1993 1992
1991 1990 1989 1988
.................................................................................................
..........
Net Asset Value, $2.3650 $1.9796 $1.4978 $1.5575 $1.4506 $1.5206
$1.3191 $1.3947 $1.2986 $1.1788
Beginning of Period
Income from Investment
Operations
Net investment income 0.0364 0.0336 0.0334 0.0350 0.0320 0.0383
0.0563 0.0682 0.0769 0.0605
Net Short-Term realized 0.0116 0.0009 0.0010
gain
Net Gains or Losses on 0.7080 0.3951 0.4953 (0.0335) 0.1097 0.0502
0.2492 (0.0756) 0.1213 0.1518
------- ------- ------- -------- ------- -------
- ------- -------- ------- ------
Securities (realized
and unrealized)
Total from Investment 0.7560 0.4296 0.5297 0.0015 0.1417 0.0885
0.3055 (0.0074) 0.1982 0.2123
Operations
Less Distributions
Dividends (from net (0.0437) (0.0345) (0.0344) (0.0350) (0.0320) (0.0382)
(0.0542) (0.0682) (0.0769) (0.0608)
investment income and
Net Short-Term realized
gains)
Distributions (from (0.1299) (0.0097) (0.0135) (0.0262) (0.0028) (0.1203)
(0.0498) - (0.0252) (0.0317)
capital gains)
Initial Capitalization
- - - - - -
- - - - -
--------------------------------- -- -- --
- -- -- -- -
Returns of Capital (0.1736) (0.0442) (0.0479) (0.0612) (0.0348) (0.1585)
(0.1040) (0.0682) (0.1021) (0.0925)
Total Distributions
Net Asset Value End of $2.9474 $2.3650 $1.9796 $1.4978 $1.5575 $1.4506
$1.5206 $1.3191 $1.3947 $1.2986
------- ------- ------- ------- ------- -------
- ------- ------- ------- -------
Period
Total Return (1) 32.20% 21.81% 35.60% 0.14% 9.84% 5.87%
23.33% -0.58% 15.21% 17.91%
Net Assets, End of
817,386,56936,806,358707,459,63497,339,99562,189,3462,539,02359,177,3223,661,17182,730,7134,553,151
Period
Average Commission Rate $0.0343 $0.0389
Paid Per Share Bought
or Sold
Ratio of Expenses to 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
0.60% 0.60% 0.60% 0.60%
Average Net Assets
Ratio of Net Income to 1.15% 1.58% 1.91% 2.23% 2.14% 2.49%
4.33% 5.70% 6.15% 5.29%
Average Net Assets
Portfolio Turnover Rate 17.30% 3.31% 5.25% 11.98% 1.68% 118.83%
24.28% 26.41% 37.96% 44.65%
..........................................................................................................................
* From September 24, 1984 until December 1, 1992, the Portfolio's name was the
Growth Portfolio, and prior to September 24, 1984 the Portfolio's name was the
Income/Equity Portfolio. During these periods, the Portfolio's investment
policies differed from its current policies. (1) The performance shown does not
reflect fees or expenses deducted at the separate account level. </TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, 1994,
1993 and 1992**
================================================================================================================
The following tables should be read in conjunction
with the financial statements and related
notes included in the Statement of Additional
Information.
Investment Grade Corporate Bond Portfolio
- ------------------------------------------------------------------------------------------
Years Ended December 31,
...................................................................................................
1997 1996 1995 1994 1993
1992
.....................................................................
..........
<S> <C> <C> <C> <C> <C>
<C>
Net Asset Value, Beginning $1.2774 $1.3161 $1.2019 $1.3090 $1.2957
$1.0000
of Period
Income from Investment
Operations
Net investment income 0.0769 0.0777 0.0794 0.0665 0.0691
0.0058
Net Short-Term realized gain (0.0071) 0.0022
Net Gains or Losses on 0.0152 (0.0387) 0.1142 (0.1071) 0.0452
0.2957
------ -------- ------ -------- ------
- ------
Securities (realized and
unrealized)
Total from Investment 0.0850 0.0390 0.1958 (0.0406) 0.1143
0.3015
Operations
Less Distributions
Dividends (from net (0.0768) (0.0777) (0.0816) (0.0665) (0.0686)
(0.0058)
investment income)
Distributions (from capital - - - - (0.0324) -
gains)
Initial Capitalization
- - - - - -
------------ ------------------------ -- -- -
Returns of Capital Total (0.0768) (0.0777) (0.0816) (0.0665) (0.1010)
(0.0058)
Distributions
Net Asset Value End of Period $1.2856 $1.2775 $1.3161 $1.2019 $1.3090
$1.2957
------- ------- ------- ------- -------
- -------
Total Return (1) 6.85% 3.14% 16.71% -3.15% 8.95%
29.57%
Net Assets, End of Period 114,875,960 100,722,152 95,210,404 71,276,294 63,585,296
49,607,522
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.60% *
0.59%*
Net Assets
Ratio of Net Income to 6.02% 6.08% 6.30% 5.37% 5.13% *
4.71%
Average Net Assets
Portfolio Turnover Rate 140.35% 118.50% 159.21% 51.66% 151.14%
23.91%
...................................................................................................
* Annualized
** The Investment Grade Corporate Bond Portfolio was established effective December 1, 1992.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital
Changes For the Years Ended December 31, 1997,
1996, 1995, 1994, 1993 and 1992**
==============================================================================================================================
The following tables should be read in conjunction
with the financial statements and related
notes included in the Statement of Additional
Information.
US Government Mortgage Securities Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..................................................................................................
1997 1996 1995 1994 1993
1992
....................................................................
..........
<S> <C> <C> <C> <C> <C>
<C>
Net Asset Value, Beginning $1.1519 $1.1786 $1.0917 $1.1813 $1.1503
$1.0000
of Period
Income from Investment
Operations
Net investment income 0.0745 0.0751 0.0781 0.0620 0.0788
0.0029
Net Short-Term realized gain 0.0036
Net Gains or Losses on (0.0188) (0.0267) 0.0869 (0.0869) 0.0315
0.1598
-------- -------- ------ -------- ------
- ------
Securities (realized and
unrealized)
Total from Investment 0.0969 0.0484 0.1650 (0.0276) 0.1103
0.1627
Operations
Less Distributions
Dividends (from net (0.0745) (0.0751) (0.0781) (0.0620) (0.0788)
(0.0029)
investment income)
Distributions (from capital - - - - (0.0005)
(0.0095)
gains)
Initial Capitalization
- - - - - -
------------ ------------ ------------ -- -- -
Returns of Capital Total (0.0745) (0.0751) (0.0781) (0.0620) (0.0793)
(0.0124)
Distributions
Net Asset Value End of Period $1.1743 $1.1519 $1.1786 $1.0917 $1.1813
$1.1503
------- ------- ------- ------- -------
- -------
Total Return (1) 8.64% 4.29% 15.55% -2.34% 9.65%
15.03%
Net Assets, End of Period 162,184,386 138,465,908 129,549,680 93,386,36 77,052,883
28,107,848
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.60%
0.59% *
Net Assets
Ratio of Net Income to 6.44% 6.51% 6.84% 5.67% 8.12%
3.16% *
Average Net Assets
Portfolio Turnover Rate 34.01% 94.63% 188.04% (2) 17.78%
33.52%
331.42%
..................................................................................................
* Annualized
** The U.S. Government Mortgage Securities Portfolio was established effective
December 1, 1992. (1) The performance shown does not reflect fees or expenses
deducted at the separate account level. (2) In 1994, the Portfolio turnover rate
was higher than in past years due to the impact of rising interest rates with
respect to the reverse dollar repurchase ("dollar roll") strategy utilized for
this Portfolio. High Portfolio turnover rates may occur in the future if the
similar economic conditions occur.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and
Capital Changes For the Years Ended
December 31, 1997, 1996, 1995, 1994, and
1993**
==================================================================================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
Small-Cap Value Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................
1997 1996 1995 1994 1993
............................................................
...........
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.2480 $1.0669 $0.9974 $1.0330 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0067 0.0095 0.0286 0.0068 0.0012
Net Short-Term realized gain 0.0594 0.0350
Net Gains or Losses on 0.2629 0.1811 0.0884 (0.0356) 0.0330
------- ------- ------- -------- ------
Securities (realized and
unrealized)
Total from Investment 0.3290 0.1906 0.1520 (0.0288) 0.0342
Operations
Less Distributions
Dividends (from net (0.0771) (0.0095) (0.0636) (0.0068) (0.0012)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.5845) (0.0189)
gains) - -
Initial Capitalization
- - - - -
------------ ------------ ------------ -- -
Returns of Capital Total (0.6616) (0.0095) (0.0825) (0.0068) (0.0012)
Distributions
Net Asset Value End of Period $0.9154 $1.2480 $1.0669 $0.9974 $1.0330
------- ------- ------- ------- -------
Total Return (1) 27.86% 17.94% 15.51% -2.78% 3.42%
Net Assets, End of Period 22,526,242 36,599,651 20,769,579 9,721,848 3,007,882
Average Commission Rate Paid $0.0573 $0.0521
Per Share Bought or Sold
Ratio of Expenses to Average 1.28%# 1.31%# 1.35%# 1.33%# 1.33%*#
Net Assets
Ratio of Net Income to 0.64% 0.90% 2.51% 0.80% 1.52%*
Average Net Assets
Portfolio Turnover Rate 82.83% 30.61% 17.78% 16.81% -
..........................................................................................
*Annualized
** The Small-Cap Value Portfolio was established effective December 1, 1993.
# Percentages are shown net of expenses reimbursed by G W Capital Management, LLC.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and
Capital Changes For the Years Ended
December 31, 1997, 1996, 1995, 1994 and
1993**
==================================================================================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
Small-Cap Index Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
..........................................................................................
1997 1996 1995 1994 1993
............................................................
...........
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning $1.2370 $1.1680 $0.9540 $1.0112 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0081 0.0124 0.0102 0.0097 0.0009
Net Short-Term realized gain 0.0285 0.0374 0.0095
Net Gains or Losses on 0.2134 0.1285 0.2298 (0.0572) 0.0112
------- ------- ------- -------- ------
Securities (realized and
unrealized)
Total from Investment 0.2500 0.1783 0.2495 (0.0475) 0.0121
Operations
Less Distributions
Dividends (from net (0.0352) (0.0498) (0.0197) (0.0097) (0.0009)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.1930) (0.5950) (0.0158)
gains) - -
Initial Capitalization
- - - - -
------------ ------------ ------------ -- -
Returns of Capital Total (0.2282) (0.1093) (0.0355) (0.0097) (0.0009)
Distributions
Net Asset Value End of Period $1.2588 $1.2370 $1.1680 $0.9540 $1.0112
------- ------- ------- ------- -------
Total Return (1) 21.00% 15.30% 26.24% -4.69% 1.21%
Net Assets, End of Period 121,454,805 80,783,692 51,610,284 22,336,944 5,936,716
Average Commission Rate Paid $0.0350 $0.0453
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.60%*
Net Assets
Ratio of Net Income to 0.66% 1.04% 1.00% 1.20% 1.24%*
Average Net Assets
Portfolio Turnover Rate 102.45% 39.66% 30.17% 53.44% 0.72%
..........................................................................................
*Annualized
** The Small-Cap Index was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the separate account
level.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes For
the Years Ended December 31, 1997,1996, 1995, 1994 and
1993 **
============================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Growth Index Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
................................................................................
1997 1996 1995 1994 1993
..................................................
..........
Net Asset Value, Beginning $1.4852 $1.3459 $1.0120 $1.0064 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0085 0.0114 0.0127 0.0133 0.0015
Net Short-Term realized gain 0.0044 0.0084 0.0038
Net Gains or Losses on 0.4197 0.2767 0.3394 0.0056 0.0064
------ ------ ------ ------ ------
Securities (realized and
unrealized)
Total from Investment 0.4326 0.2965 0.3359 0.0189 0.0079
Operations
Less Distributions
Dividends (from net (0.0137) (0.0198) (0.0165) (0.0133) (0.0015)
investment income and net
Short-Term realized gains)
Distributions (from capital (0.0534) (0.1374) (0.0055) - -
gains)
Initial Capitalization
- - - - -
-------- -------- -------- -- -
Returns of Capital Total (0.0671) (0.1572) (0.0220) (0.0133) (0.0015)
Distributions
Net Asset Value End of Period $1.8507 $1.4852 $1.3459 $1.0120 $1.0064
------- ------- ------- ------- -------
Total Return (1) 29.26% 22.10% 35.29% 1.93% 0.79%
Net Assets, End of Period 162,975,7683,743,21043,515,29914.171,307 3,099,916
Average Commission Rate Paid $0.0264 $0.0358
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.59% *
Net Assets
Ratio of Net Income to 0.54% 0.83% 1.15% 1.57% 1.98% *
Average Net Assets
Portfolio Turnover Rate 21.52% 41.55% 17.90% 18.50% 0.06%
................................................................................
*Annualized
** The Growth Index Portfolio was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital
Changes For the Years Ended December 31, 1997,
1996, 1995, 1994 and 1993 **
============================================================================
The following tables should be read in conjunction
with the financial statements and related notes
included in the Statement of Additional
Information.
Value Index Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
................................................................................
1997 1996 1995 1994 1993
..................................................
..........
Net Asset Value, Beginning $1.4538 $1.2623 $0.9614 $1.0118 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0278 0.0298 0.0305 0.0253 0.0014
Net Short-Term realized gain 0.0111 0.0101 0.0054
Net Gains or Losses on 0.4520 0.2186 0.3144 (0.0504) 0.0119
------ ------ ------ -------- ------
Securities (realized and
unrealized)
Total from Investment 0.4909 0.2585 0.3503 (0.0251) 0.0133
Operations
Less Distributions
Dividends (from net (0.0389) (0.0399) (0.0359) (0.0253) (0.0014)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0922) (0.0271) (0.0135) - (0.0001)
gains)
Initial Capitalization
- - - - -
-------- -------- -------- -- -
Returns of Capital Total (0.1311) (0.0670) (0.0494) (0.0253) (0.0015)
Distributions
Net Asset Value End of Period $1.8136 $1.4538 $1.2623 $0.9614 $1.0118
------- ------- ------- ------- -------
Total Return (1) 34.08% 20.63% 36.80% -2.49% 1.32%
Net Assets, End of Period 237,421,804122,283,0265,183,89825,610,4744,337,142
Average Commission Rate Paid $0.0295 $0.0377
Per Share Bought or Sold
Ratio of Expenses to Average 0.60% 0.60% 0.60% 0.60% 0.59% *
Net Assets
Ratio of Net Income to 1.83% 2.38% 2.87% 3.18% 2.11% *
Average Net Assets
Portfolio Turnover Rate 26.03% 16.31% 18.11% 16.88% 8.99%
................................................................................
*Annualized
** The Value Index Portfolio was established effective December 1, 1993.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995, and 1994**
============================================================================
The following tables should be read in conjunction with the financial
statements and related notes included in the Statement of
Additional Information.
Corporate Bond Portfolio
- --------------------------------------------------------------------------------
Years Ended December 31,
..............................................................................
1997 1996 1995 1994
................................................
..........
Net Asset Value, Beginning $1.1618 $1.1521 $0.9716 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0764 0.0825 0.0842 0.0137
Net Short-Term realized gain 0.0081 0.0055 0.0159
Net Gains or Losses on 0.0608 0.0269 0.1835 (0.0284)
------- ------- ------- --------
Securities (realized and
unrealized)
Total from Investment 0.1453 0.1149 0.2836 (0.0147)
Operations
Less Distributions
Dividends (from net (0.0817) (0.0880) (0.1001) (0.0137)
investment income and Net
Short-Term realized gains)
Distributions (from capital (0.0273) (0.0172) (0.0030)
gains) -
Initial Capitalization
- - - -
------------ ------------ ------------ -
Returns of Capital Total (0.1090) (0.1052) (0.1031) (0.0137)
Distributions
Net Asset Value End of Period $1.1981 $1.1618 $1.1521 $0.9716
------- ------- ------- -------
Total Return (1) 12.70% 10.35% 30.19% -1.47%
Net Assets, End of Period 158,884,389 83,645,029 45,530,190 13,713,195
Ratio of Expenses to Average 0.90% 0.90% 0.90% 1.08%*
Net Assets
Ratio of Net Income to 7.14% 7.68% 7.89% 8.64%*
Average Net Assets
Portfolio Turnover Rate 52.69% 40.02% 24.70% 9.45%
..............................................................................
*Annualized
** The Corporate Bond Portfolio was established effective November 1, 1994.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 996, 1995 and 1994**
============================================================================
The following tables should be read in
conjunction with the financial statements
and related notes included in the
Statement of Additional Information.
Foreign Equity Portfolio
- -------------------------------------------------------------------------------
Years Ended December 31,
..............................................................................
1997 1996 1995 1994
...............................................
..........
Net Asset Value, Beginning of Perio$1.0580 $0.9871 $0.9515 $1.0000
Income from Investment
Operations
Net investment income (0.0017) 0.0041 0.0073 -0.0019
Net Short-Term realized gain 0.0078
Net Gains or Losses on (0.0671) 0.0709 0.0398 -0.0466
-------- ------ ------ -------
Securities (realized and
unrealized)
Total from Investment (0.0610) 0.0750 0.0471 (0.0485)
Operations
Less Distributions
Dividends (from net (0.0208) (0.0041) (0.0115)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0485) -
gains)
Initial Capitalization
- - - -
------------ ------------------------ -
Returns of Capital Total (0.0693) (0.0041) (0.0115)
Distributions
Net Asset Value End of Period $0.9277 $1.0580 $0.9871 $0.9515
------- ------- ------- -------
Total Return (1) -5.69% 7.61% 5.02% -4.85%
Net Assets, End of Period 64,674,772 80,106,459 64,403,868 42,760,613
Average Commission Rate Paid $0.0026 $0.2520
Per Share Bought or Sold
Ratio of Expenses to Average 1.33%# 1.45%# 1.50% # 1.50% * #
Net Assets
Ratio of Net Income to -0.23% 0.41% 0.69% -1.26%
Average Net Assets
Portfolio Turnover Rate 200.82% 75.65% 119.98% 19.85%
..............................................................................
* Annualized
** The Foreign Equity Portfolio was established effective November 1, 1994.
#Percentage is shown net of expenses reimbursed byG W Capital Management, LLC.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, 1995 and 1994**
===============================================================================
The following tables should be read in conjunction with
the financial statements and related notes included in
the Statement of Additional Information.
- -------------------------------------------------------------------------------
Small-Cap Aggressive Growth Portfolio
- -------------------------------------------------------------------------
Years Ended December 31,
........................................................................
1997 1996 1995 1994
.........................................
...........
Net Asset Value, Beginning of $1.4028 $1.1605 $0.9755 $1.0000
Period
Income from Investment
Operations
Net investment income 0.0103 0.0091 0.0075 (0.0016)
Net Short-Term realized gain 0.1307 0.0597 0.0878
Net Gains or Losses on 0.1966 0.2779 0.1962 (0.0229)
------ ------ ------ --------
Securities (realized and
unrealized)
Total from Investment 0.3376 0.3467 0.2915 (0.0245)
Operations
Less Distributions
Dividends (from net (0.1524) (0.0688) (0.0945) -
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0564) (0.0356) (0.0120) -
gains)
Initial Capitalization
- - - -
-------------------------------
Returns of Capital Total (0.2088) (0.1044) (0.1065) -
Distributions
Net Asset Value End of Period $1.5316 $1.4028 $1.1605 $0.9755
------- ------- ------- -------
Total Return (1) 24.50% 30.09% 29.96% -2.46%
Net Assets, End of Period 183,322,637 9,944,926 28,594,611 12,963,409
Average Commission Rate Paid $0.0539 $0.0573
Per Share Bought or Sold
Ratio of Expenses to Average 1.11%# 1.26%# 1.30% # 1.26% * #
Net Assets
Ratio of Net Income to 0.89% 0.98% 0.65% -1.08%
Average Net Assets
Portfolio Turnover Rate 93.28% 62.63% 99.48% 8.84%
........................................................................
*Annualized
** The Small-Cap Aggressive Portfolio was established effective November 1,1994.
#Percentage is shown net of expenses reimbursed by G W Capital Management, LLC.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997, 1996, and 1995**
=====================================================================
The following tables should be read in conjunction with the financial
statements and related notes included in the Statement of
Additional Information.
Short-Term Maturity Bond Portfolio
- ------------------------------------------------------------------------
Years Ended December 31,
............................................................
1997 1996 1995
..............................
Net Asset Value, Beginning $1.0065 $1.0092 $1.0000
of Period
Income from Investment
Operations
Net investment income 0.0534 0.0489 0.0194
Net Short-Term realized gain 0.0009 0.0013
Net Gains or Losses on 0.0061 (0.0027) 0.0092
------ -------- ------
Securities (realized and
unrealized)
Total from Investment 0.0604 0.0462 0.0299
Operations
Less Distributions
Dividends (from net (0.0534) (0.0489) (0.0207)
investment income and net
Short-Term realized gain)
Distributions (from capital (0.0001) - -
gains)
Initial Capitalization
- - -
---------------------
Returns of Capital Total (0.0535) (0.0489) (0.0207)
Distributions
Net Asset Value End of Period $1.0134 $1.0065 $1.0092
------- ------- -------
Total Return (1) 6.14% 4.70% 3.02%
Net Assets, End of Period 78,367,54539,503,11415,618,670
Ratio of Expenses to Average 0.60% 0.60% 0.53% *
Net Assets
Ratio of Net Income to 5.47% 5.15% 4.61% *
Average Net Assets
Portfolio Turnover Rate 84.59% 51.71% 97.87%
............................................................
* Annualized
** The Short-Term Maturity Bond Portfolio was established effective August 1,
1995. (1) The performance shown does not reflect fees or expenses deducted at
the separate account level.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
============================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
Blue Chip Portfolio
- ----------------------------------------------------------
Years Ended December 31,
........................................
1997
..........
Net Asset Value Beginning of $1.0000
Period
Income from Investment
Operations
Net investment income 0.0089
Net Short-Term realized gain (0.0051)
Net Gains or Losses on 0.0279
------
Securities (realized and
unrealized)
Total from Investment 0.0317
Operations
Less Distributions
Dividends (from net (0.0089)
investment income and net
Short-Term realized gain))
Distributions (from capital -
gains)
Initial Capitalization
Returns of Capital Total (0.0089)
Distributions
Net asset Value End of Period $1.0228
-------
Total Return(1) 3.17%
Net Assets, End of Period 94,206,892
Average Commission Rate Paid $0.0598
Per Share Bought or Sold
Ratio of Expenses to Average 1.14%*#
Net Assets
Ratio of Net Income to 1.78%*
Average Net Assets
Portfolio Turnover Rate 111.45%
........................................
* Annualized
** The Blue Chip Portfolio was established effective July 1, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level. # Percentage is shown net of expenses reimbursed by GW
Capital Management, LLC.
<PAGE>
FINANCIAL HIGHLIGHTS (AUDITED)
Per Share Income and Capital Changes
For the Years Ended December 31, 1997**
============================================================================
The following tables should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information.
MidCap Growth Portfolio
- ---------------------------------------------------------------------------
Years Ended December 31,
........................................
1997
..........
Net Asset Value Beginning of $1.0000
Period
Income from Investment
Operations
Net investment income
Net Short-Term realized gain 0.0062
Net Gains or Losses on 0.1024
Securities (realized and
unrealized)
Total from Investment 0.1086
Operations
Less Distributions
Dividends from net (0.0017)
investment income and net
Short-Term realized gain)
Distributions (from capital -
gains)
Initial Capitalization
Returns of Capital Total (0.0017)
Distributions
Net asset Value End of Period $1.1069
-------
Total Return(1) 10.86%
Net Assets, End of Period 56,704,297
Average Commission Rate Paid $0.0517
Per Share Bought or Sold
Ratio of Expenses to Average 1.05%*#
Net Assets
Ratio of Net Income to (0.16)%*
Average Net Assets
Portfolio Turnover Rate 24.28%
........................................
* Annualized
** The MidCap Growth Portfolio was established effective July 1, 1997.
(1) The performance shown does not reflect fees or expenses deducted at the
separate account level. # Percentage is shown net of expenses reimbursed by GW
Capital Management, LLC.
<PAGE>
9494
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, Retirement Plan Series Account and Pinnacle
Series Account of Great-West Life & Annuity Insurance Company ("GWL&A") and TNE
Series(k) Account (collectively, the "Series Accounts") of Metropolitan Life
Insurance Company ("MetLife"). 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 MetLife. For information concerning your rights under a variable
contract, see the applicable Series Account prospectus and/or applicable
disclosure documents. Shares of the Fund are, and may in the future be, used to
fund benefits under other contracts issued by GWL&A, its affiliates, MetLife or
other insurance companies. G W Capital Management, Inc. ("GW Capital
Management") is the Investment Adviser for the Fund. The day-to-day management
of certain Portfolios of the Fund is carried out by sub-advisers which are not
affiliated with GW Capital Management.
THE FUND PORTFOLIOS
Each portfolio has its own investment objective and investment strategy.
The investment objective of any portfolio may not be changed without a vote of a
majority of the shares of that portfolio. A more detailed description of the
Fund's investment policies and a glossary further describing certain investment
securities mentioned in the discussions that follow are contained in the
Statement of Additional Information. Following is a description of each of the
Portfolios.
Money Market Portfolio
The investment objectives of the Money Market Portfolio are to preserve
shareholder capital, to maintain liquidity and to achieve the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities.
The assets of the Money Market Portfolio are invested in money market
instruments with remaining maturities not exceeding 13 months. The Money Market
Portfolio also maintains a dollar-weighted average portfolio maturity of ninety
days or less. The money market instruments in which the Portfolio may invest
include the following:
1. U.S. government securities and government agency securities. U.S.
government securities consist of various types of marketable securities by the
United States Treasury, such as bills, notes and bonds. Such securities are
direct obligations of the United States government. U.S. government agency
securities are debt securities issued by government-sponsored enterprises,
federal agencies and international institutions. Such securities are not direct
obligations of the U.S. Treasury but involve government sponsorship or
guarantees. Among the agencies whose debt securities may be purchased are: the
Government National Mortgage Association and Federal Housing Administration,
whose instruments are supported by the full faith and credit of the United
States; the Farm Credit Bank, whose instruments are not direct obligations of
the United States, although the Farm Credit Bank is supported by its ability to
borrow from the U.S. Treasury; and the Federal Land Bank, Federal Home Loan Bank
and Federal Home Loan Mortgage Corporation, whose instruments are not supported
by the U.S. Treasury, but only by the credit of the issuing agency;
2. Certificates of deposit, time deposits, swap deposits and bankers'
acceptances of (i) U.S. commercial banks or savings and loan associations having
total assets in excess of $1 billion, or (ii) other U.S. commercial banks or
savings and loan associations, foreign branches of U.S. banks, and U.S. branches
of foreign banks if such bank obligations are fully insured by the Federal
Deposit Insurance Corporation;
3. Commercial paper, including variable amount master demand notes;
4. Repurchase and reverse repurchase agreements. A repurchase agreement
is an instrument under which the purchaser (e.g., the Fund) acquires ownership
of the obligation (debt security) and the seller agrees at the time of the sale
to repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This results in a
fixed rate of return insulated from market fluctuations during such period.
Reverse repurchase agreements involve the sale of securities held by the
Portfolio, with an agreement to repurchase the securities at an agreed upon
price, date and interest payment. Repurchase agreements could involve certain
risks in the event of default or insolvency of the other party to the agreement,
including possible delays or restrictions upon the Portfolio's ability to
dispose of the underlying securities. The Investment Adviser, acting under the
supervision of the Board of Directors, reviews the credit worthiness of those
dealers with whom the Portfolio enters into repurchase agreements; and
5. Other money market instruments that the Portfolio may from
time-to-time invest in include floating rate notes and Eurodollar certificates
of deposit if denominated in U.S. currency.
The Money Market Portfolio generally invests in instruments (other than
U.S. government securities) that have received the highest rating by at least
one nationally recognized statistical rating organization ("NRSRO"), securities
whose issuer has received such ratings with respect to a class of short-term
debt obligations that is comparable in priority and security with the instrument
acquired, or securities which are determined or ratified by the Fund's Board of
Directors as being comparable to the foregoing securities. The Money Market
Portfolio only enters into repurchase agreements that are collateralized
entirely by U.S. government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest rating categories
by at least one NRSRO.
In addition to following the foregoing guidelines, the Money Market
Portfolio intends otherwise to comply with the requirements of Rule 2a-7 under
the Investment Company Act of 1940, as applicable to the Portfolio.
Investment Grade Corporate Bond Portfolio
The investment objective of the Investment Grade Corporate Bond
Portfolio is to seek the highest possible current income within the confines of
the primary goal of insuring the protection of capital by investing primarily in
investment grade corporate debt securities and in debt securities issued by the
U.S. government and its agencies. Generally, the Investment Grade Corporate Bond
Portfolio intends to invest in corporate debt securities having a rating within
the two highest grades as determined by Moody's Investors Service Inc. (Aaa or
Aa) or Standard & Poor's Corporation (AAA or AA). The Investment Grade Corporate
Bond Portfolio may, however, also invest in debt securities within the third or
fourth highest grades as determined by Moody's Investors Services Inc. (A or
Baa) or Standard & Poor's Corporation (A or BBB), if the Fund determines such
investment meets the standard of the Portfolio's investment objectives and the
debt securities ratings are supported by an internal credit review that the Fund
will conduct in each such instance. Bonds rated Baa by Moody's or BBB by
Standard & Poor's are considered medium grade obligations; i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security for such bonds appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics. Adverse changes in economic conditions
are more likely to lead to a weakened capacity to make principal and interest
payments under such bonds than in the case of higher grade bonds. The Portfolio
will not retain any bond of this type should its rating drop below a Baa rating
by Moody's or a BBB rating by Standard & Poor's.
The Investment Grade Corporate Bond Portfolio may invest in money market
securities solely for defensive purposes or as a cash reserve.
The Investment Grade Corporate Bond Portfolio is classified as
non-diversified. This means that the proportion of the Portfolio's assets that
may be invested in the securities of a single issuer is not limited by the
Investment Company Act of 1940. Because a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, primarily within the same industry or economic sector, the Portfolio's
securities may be more susceptible to any single economic, political or
regulatory occurrence than that experienced by a diversified portfolio.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transaction costs
(which are borne directly by the Portfolio) and may result in greater tax
liability.
U.S. Government Mortgage Securities Portfolio
The investment objective of the U.S. Government Mortgage Securities
Portfolio is to seek the highest level of return consistent with preservation of
capital and substantial credit protection. The Portfolio seeks to achieve this
objective by investing primarily (at least 65% of its total assets) in mortgage
related securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities.
Investment by the U.S. Government Mortgage Securities Portfolio in U. S.
government securities will include direct pass-through mortgage certificates
issued by those government agencies whose obligations are backed by the full
faith and credit of the United States government, such as the Government
National Mortgage Association ("GNMA") or Federal Housing Administration. Such
pass-through certificates represent individual interests in pools of mortgages
insured by the Veterans Administration, the Farmers' Home Association, Federal
Housing Administration or other government agencies. Owners of pass-through
certificates are entitled to receive a pro-rata share of the net payments
received on the underlying mortgages, hence such payments are passed through to
the owner. Accordingly, the amount and frequency of payments on such
pass-through certificates depends on the rate of prepayments on the underlying
mortgages, which may vary based upon a variety of economic factors.
The Portfolio may also invest in other U.S. government securities, such as
U.S. Treasury bills, notes and bonds, or in certificates representing individual
interests in pools of such U.S. Treasury securities. The payment of principal
and interest to the Portfolio on such certificates is fully backed by the U.S.
government.
The Portfolio may additionally invest in securities issued by the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC both issue mortgage-backed
securities that are similar to GNMAs in that they represent interests in pools
of mortgage loans. FNMA guarantees timely payment of interest and principal on
its certificates. FHLMC guarantees timely payment of interest and ultimate
payment of principal. The FNMA and FHLMC guarantees are backed only by those
agencies and not by the full faith and credit of the United States. The
Portfolio may also invest in private mortgage pass-through securities and
collateralized mortgage obligations ("CMOs"). These CMOs may take the form of
those issued by private issuers and collateralized by securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
The Portfolio may also enter into reverse dollar repurchase agreements
("dollar rolls") of mortgage-backed securities in which the Portfolio sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Portfolio forgoes principal
and interest paid on the mortgage-backed securities. The Portfolio is
compensated by the difference between the current sales price and the lower
forward price for the future purchase as well as the interest earned on the cash
proceeds of the initial sale. Liquid assets equal to the value of the
outstanding repurchase commitments are segregated from general investible funds
and will be marked to the market daily. The risk associated with dollar roll
transactions is that the securities may not be delivered and the Portfolio may
incur a loss or will have lost the opportunity to otherwise invest the amount
set aside for such transaction in the segregated asset account. As of December
31, 1997, 14.2% of the Portfolio was comprised of investments subject to dollar
roll transactions.
The Portfolio may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis in order to hedge
against anticipated changes in interest rates and prices and/or secure a
favorable rate of return. The Statement of Additional Information contains more
detailed information about these investment practices.
The market value of securities held by the Portfolio can be expected to
decline when interest rates rise. Thus, the U.S. Government Mortgage Securities
Portfolio will generally shorten the average maturity of the Portfolio when
interest rates are rising and lengthen the average maturity when interest rates
are falling in order to optimize the total return of the Portfolio.
The Portfolio may also hold money market instruments as it believes is
advisable to maintain liquidity or for temporary defensive purposes.
The U.S. Government Mortgage Securities Portfolio is classified as
non-diversified . This means that the proportion of the Portfolio's assets that
may be invested in the securities of a single issuer is not limited by the
Investment Company Act of 1940. Because a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, primarily within the same industry or economic sector, the Portfolio's
securities may be more susceptible to any single economic, political or
regulatory occurrence than that experienced by a diversified portfolio.
Short-Term Maturity Bond Portfolio
The investment objective of the Short-Term Maturity Bond Portfolio is
preservation of capital, liquidity, and maximum total return through investment
in an actively managed portfolio of debt securities. It is classified as a
non-diversified portfolio.
The Portfolio will pursue its objectives primarily through investment in
a portfolio of investment grade bonds and other debt securities of similar
quality. The weighted average quality of the Portfolio will be A rated or
higher. The Portfolio will consist only of individual securities with maturities
of no longer than three years.
Other debt securities in which the Portfolio may invest include
securities of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities, corporate debt obligations, asset-backed securities
(including mortgage-related securities), commercial paper, certificates of
deposits, bankers' acceptances and other short-term instruments relating to such
securities. Securities may be issued by both domestic and foreign entities but
may be denominated in U.S. dollars only.
U.S. Government securities are issued or guaranteed by the U.S. Treasury or
by an agency or instrumentality of the U.S. Government. Not all U.S. Government
securities are backed by the full faith and credit of the United States. Some
are supported only by the credit of the agency that issued them.
The Portfolio may invest in repurchase agreements relating to the
securities in which it may invest. In a repurchase agreement, the Portfolio buys
a security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the party to the agreement defaults or
becomes bankrupt.
The Portfolio may purchase securities on a when-issued or forward
delivery basis. When-issued and forward delivery transactions are trading
practices wherein payment for and delivery of the securities take place at a
future date. The market value of a security could change during this period,
which could effect the market value of the Portfolio's assets. See the Statement
of Additional Information for further information about when-issued and forward
delivery securities.
In order to generate additional income, the Portfolio may lend up to
one-third of its portfolio securities to financial borrowers of securities. This
practice could cause the Portfolio to experience a loss or a delay in recovering
its securities. The Statement of Additional Information contains more
information regarding the lending of securities.
The Portfolio can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, commodity prices, or other
factors that effect securities values. These techniques include buying and
selling options and certain futures contracts, entering into swap agreements and
purchasing index securities. Further information regarding such techniques is
contained in the Statement of Additional Information. These techniques will be
used for hedging purposes only.
Generally, the Portfolio intends to invest in investment grade
securities. An investment grade security is one rated in one of the top four
categories by one or more nationally recognized security rating organizations or
which is deemed by the Investment Adviser to be of comparable creditworthiness.
However, if a security's rating were to drop below investment grade (commonly
referred to as "junk bonds"), the Portfolio may determine to retain the security
until such time as it is deemed appropriate to sell the security, which could
mean that the security may be held to maturity. Lower rated fixed-income
securities generally provide higher yields, but are subject to greater credit
and market risks than higher quality fixed-income securities and are considered
predominately speculative with respect to the ability of the issuer to meet
principal and interest payments. In addition, the secondary market may be less
liquid for lower-rated fixed-income securities which may make the valuation and
sale of the securities more difficult. The Statement of Additional Information
contains more information about securities ratings.
The Portfolio may invest in money market securities as part of the
ongoing investment strategy or as a cash reserve.
The Portfolio is classified as non-diversified. This means that the
proportion of the Portfolio's assets that may be invested in the securities of a
single issuer is not limited by the Investment Company Act of 1940. Because a
relatively high percentage of the Portfolio's assets may be invested in the
securities of a limited number of issuers, primarily within the same industry or
economic sector, the Portfolio's securities may be more susceptible to any
single economic, political or regulatory occurrence than that experience by a
diversified portfolio.
Stock Index Portfolio
The investment objective of the Stock Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the S&P
500 Index and the S&P MidCap Index, weighted according to their pro rata share
of the market. The Portfolio will pursue this objective by investing in common
stocks traded on the New York Stock Exchange and the American Stock Exchange
and, to a limited extent, in the over-the-counter markets.
Standard & Poor's Corporation ("S&P") chooses the 500 stocks comprising
the S&P 500 Index on the basis of market values and industry diversification.
Most of the stocks in the S&P 500 Index are issued by the 500 largest companies,
in terms of the aggregate market value of their outstanding stock, and such
companies are generally listed on the New York Stock Exchange. Additional stocks
that are not among the 500 largest market value stocks are included in the S&P
500 Index for diversification purposes.
The S&P MidCap Index is market-weighted and consists of 400 stocks of
domestic companies, having a median market capitalization of approximately $1.6
billion. The stocks included in the S&P 500 Index and the S&P MidCap Index do
not overlap.
Because smaller capitalized companies, regardless of their shares
outstanding, sometimes exhibit illiquidity in the market, minimum trading volume
constraints are placed on issues selected for the S&P MidCap Index. For this
reason, the S&P MidCap Index includes a small number of lesser known companies
in well known industries whose shares are more liquid.
S&P is not a sponsor of, or in any other way affiliated with, the
Portfolio or the Fund.
The Portfolio will attempt to duplicate the performance of the S&P 500
Index and the S&P MidCap Index while keeping transaction costs low and
minimizing Portfolio turnover. To achieve its investment objective, the
Portfolio will purchase equity securities that, in the Adviser's opinion, will
reflect, as a group, the composite price performance of the S&P 500 Index and
the S&P MidCap Index. Like these indices, the Portfolio will hold both
dividend-paying and non-dividend paying common stocks. Under normal
circumstances, at least 80% of the Portfolio's total assets will be invested in
securities included on the S&P 500 Index and the S&P MidCap Index.
A higher portfolio turnover rate may involve correspondingly greater
brokerage commissions and other expenses which might be borne by the Fund and,
thus, indirectly by its shareholders.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
S&P does not endorse, sell, promote or sponsor the Portfolio or the
Fund, and is not in any other way affiliated with the Portfolio, the Fund or the
Investment Adviser.
Small-Cap Index Portfolio
The investment objective of the Small-Cap Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Standard & Poor's Small-Cap 600 Stock Index ("S&P 600 Index"). The S&P 600 Index
is widely recognized and tracks an index of 600 small company stock prices. The
S&P 600 Index is designed to monitor the performance of publicly traded common
stock of the small company sector of the United States equities market. The S&P
600 Index is market-weighted, meaning that each stock's influence on the index's
performance is directly proportional to that stock's "market value" (the stock
price multiplied by the number of outstanding shares). The securities that
comprise the S&P 600 Index are traded on the New York Stock Exchange, the
American Stock Exchange and the NASDAQ Stock Market.
Historically, small capitalization stocks, which constitute the
Portfolio's primary investments, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index. Among the reasons
for the greater price volatility of these small company stocks are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of small companies to
changing economic conditions. Besides exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger company
stocks. Small company stocks may decline in price as large company stocks rise,
or rise in price as large company stocks decline. Investors should therefore
expect that the Portfolio may be more volatile than, and may fluctuate
independently of, broad stock market indices such as the S&P 500 Index.
The Portfolio will attempt to duplicate the performance of the S&P 600
Index while keeping transaction costs low and minimizing portfolio turnover. To
achieve its investment objective, the Portfolio will purchase equity securities
that comprise the S&P 600 Index in proportion to their market-value weighting.
Like the index, the Portfolio will hold both dividend paying and non-dividend
paying common stocks.
From time to time, adjustments may be made in the Portfolio's holdings
due to a change in the composition of the S&P 600 Index. The Portfolio will
attempt to achieve a correlation between its performance and that of the S&P 600
Index of at least 0.95, without taking into account expenses. A correlation of
1.00 would indicate perfect correlation, which would be achieved when the
Portfolio's net asset value, including the value of its dividends and capital
gains distributions, increases or decreases in exact proportion to changes in
the S&P 600 Index. The Investment Adviser will attempt to minimize any "tracking
error" (the statistical measure of the difference between the investment results
of the Portfolio and that of the S&P 600 Index) in making investments for the
Portfolio. While the Small-Cap Index Portfolio tries to remain invested in the
S&P 600 Index securities as fully as possible, it must manage cash flows
resulting from the purchase and redemption of Portfolio shares. Therefore, the
Portfolio may also invest in U.S. dollar-denominated short-term bonds, and money
market instruments, including U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances and repurchase agreement for these
securities. Brokerage and other transaction costs, as well as investment
advisory fees for the Portfolio, in addition to potential tracking errors, will
tend to cause the Portfolio's return to be lower than the return of the S&P 600
Index. In addition, there can be no assurance as to how closely the Portfolio's
performance will correspond to the performance of the S&P 600 Index.
The Portfolio intends that, under normal circumstances, at least 80% of its
total assets will be invested I in securities of the S&P 600 Index.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transaction costs
(which are borne directly by the Portfolio) and may result in greater tax
liability.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Standard & Poor's Small-Cap 600 Index and S&P 600 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Maxim Series Fund,
Inc. The Portfolio is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of using this index.
Value Index Portfolio
The investment objective of the Maxim Russell 1000 Value Index Portfolio
is to provide investment results, before fees, that correspond to the total
return of the Russell 1000 Value Index. The Russell 1000 Value Index was
developed by the Frank Russell Company to track stock market performance of
stocks from the Russell 1000 Index exhibiting certain characteristics suggesting
value potential.
The Portfolio intends to pursue this objective by investing primarily in
common stocks with greater than average value orientation, as determined by the
formula set forth below, issued by corporations domiciled in the U.S. and its
territories traded on the various U.S. stock exchanges and, to a limited extent,
in the over-the-counter markets. The Portfolio may not hold all of the
securities in the Russell 1000 Value Index because of administrative costs
involved and the expenses associated with trading less active securities.
Instead, the Portfolio will hold a representative sample of securities included
in the Russell 1000 Value Index.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Portfolio or the Fund.
The Russell 1000 Value Index is a subset of the Russell 1000 Index which
in turn is a subset of the Russell 3000 Index. The Russell 3000 Index consists
of the largest 3000 publicly traded stocks of corporations domiciled in the U.S.
and its territories and includes large, medium and small capitalization stocks.
The Russell 3000 Index represents approximately 98% of the total market
capitalization of all U.S. stocks that trade on the New York and American Stock
Exchanges and in the NASDAQ (National Association of Securities Dealers
Automated Quotations) National Market System over-the-counter market. The
Russell 1000 consists of the 1000 largest stocks within the Russell 3000 Index,
representing approximately 94% of the Russell 3000 Index total market
capitalization.
The Russell 1000 Value Index is comprised of stocks from the Russell
1000 Index with greater-than-average value orientation. A stock is determined to
have greater-than-average value orientation if it falls in the bottom 50% of the
Russell 1000 Index based on cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell 1000 Value Index
typically have low price-to-book and price-earnings ratios, higher dividend
yields and lower forecasted growth rates than more growth- oriented securities.
The Russell 1000 Value Index is reconstituted annually to reflect
changes in the marketplace. At each reconstitution, the Russell 1000 Index
constituents are ranked by their price-to-book ratio. Once ranked by this ratio,
a breakpoint is determined by the median market capitalization of the Russell
1000 Index. As of May 31, 1997, the price-to-book breakpoint was 3.6.
The Portfolio will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May 31 total market
capitalizations, with the actual reconstitution effective June 30. As well,
securities that leave the Index for any reason between reconstitution dates will
not be replaced. As a result, the number of securities held in the Portfolio
over the year will fluctuate. As of May 31, 1997, the corporations included in
the Russell 1000 Value Index had an average market capitalization of $7.42
billion.
As discussed above, the Portfolio may not invest in all the stocks that
comprise the Russell 1000 Value Index. Thus, the Portfolio holdings may be
invested differently by industry segment or by weighting than the Russell 1000
Value Index. The Portfolio may compensate for the omission from its holdings
that are included in the Russell 1000 Value Index or for purchasing stocks in
proportions that differ from their weightings in that Index, by purchasing
stocks that may or may not be included in the Russell 1000 Value Index, but
which have characteristics similar to omitted stocks (such as stocks from the
same or similar industry group having similar market capitalizations and
investment characteristics). The Portfolio will not adopt a temporary or
defensive investment posture in times of generally declining market conditions.
Therefore, investors in the Portfolio will bear the risk of such market
conditions.
The Portfolio intends that, under normal circumstances, at least 80% of
the Portfolio's total assets will be invested in securities included in the
Russell 1000 Value Index.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Growth Index Portfolio
The investment objective of the Growth Index Portfolio is to provide
investment results, before fees, that correspond to the total return of the
Russell 1000 Growth Index. The Russell 1000 Growth Index was developed by the
Frank Russell Company to track stock market performance of stocks from the
Russell 1000 Index exhibiting certain characteristics suggesting growth
potential.
The Portfolio intends to pursue this objective by investing primarily in
common stocks with greater than average growth orientation, as determined by the
formula set forth below, issued by corporations domiciled in the U.S. and its
territories traded on the various U.S. stock exchanges and, to a limited extent,
in the over-the-counter markets. The Portfolio may not hold all of the
securities in the Russell 1000 Growth Index because of administrative costs
involved and the expenses associated with trading less active securities.
Instead, the Portfolio will hold a representative sample of securities included
in the Russell 1000 Growth Index.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Portfolio or the Fund.
The Russell 1000 Growth Index is a subset of the Russell 1000 Index
which in turn is a subset of the Russell 3000 Index. The Russell 3000 Index
consists of the largest 3000 publicly traded stocks of corporations domiciled in
the U.S. and its territories and includes large, medium and small capitalization
stocks.
The Russell 1000 Growth Index is comprised of stocks from the Russell
1000 Index with greater-than-average growth orientation. A stock is determined
to have greater-than-average growth orientation if it falls in the top 50% of
the Russell 1000 Index based on cumulative market capitalization, ranked by
descending price-to-book ratio. Thus, securities in the Russell 1000 Growth
Index typically have high price-to-book and price-earnings ratios, lower
dividend yields and higher forecasted growth rates than more value-oriented
securities.
The Russell 1000 Growth Index is reconstituted annually to reflect
changes in the marketplace. At each reconstitution, the Russell 1000 Index
constituents are ranked by their price-to-book ratio. Once ranked by this ratio,
a breakpoint is determined by the median market capitalization of the Russell
1000 Index. As of May 31, 1997, the price-to-book breakpoint was 3.6.
The Portfolio will similarly reconstitute itself on an annual basis. The
reconstituted list of securities are ranked based on May 31 total market
capitalizations, with the actual reconstitution effective June 30. As well,
securities that leave the Index for any reason between reconstitution dates will
not be replaced. As a result, the number of securities held in the Portfolio
over the year will fluctuate. As of May 31, 1997, the corporations included in
the Russell 1000 Growth Index had an average market capitalization of $7.98
billion.
As discussed above, the Portfolio may not invest in all the stocks that
comprise the Russell 1000 Growth Index. Thus, the Portfolio holdings may be
invested differently by industry segment or by weighting than the Russell 1000
Growth Index. The Portfolio may compensate for the omission from its holdings
that are included in the Russell 1000 Growth Index or for purchasing stocks in
proportions that differ from their weightings in that Index, by purchasing
stocks that may or may not be included in the Russell 1000 Growth Index, but
which have characteristics similar to omitted stocks (such as stocks from the
same or similar industry group having similar market capitalizations and
investment characteristics). The Portfolio will not adopt a temporary or
defensive investment posture in times of generally declining market conditions.
Therefore, investors in the Portfolio will bear the risk of such market
conditions.
The Portfolio intends that, under normal circumstances, at least 80% of
the Portfolio's total assets will be invested in securities included in the
Russell 1000 Growth Index.
See also "Index Portfolio Management" in this Prospectus for more
information on management practices and risks associated with index-type
portfolios.
Small-Cap Value Portfolio
The investment objective of the Small-Cap Value Portfolio is to achieve
long-term capital appreciation by investing primarily in common stocks, although
the Portfolio may also invest in other securities, including restricted,
preferred stock or foreign securities. In seeking capital appreciation,
consideration will be given to undervalued small and medium sized companies in
industries that demonstrate a strong potential for growth, financially strong
companies with distinct market niches offering quality products or services,
outstanding management teams and a proven record of success. Ariel Capital
Management serves as sub-adviser to this Portfolio. As such, it is responsible
for the day-to-day management of the Portfolio subject to the overall
supervision of the Fund's Board of Directors and the Investment Adviser.
As a means of controlling risk, industries that are believed to be
inherently unpredictable--specifically, cyclical, commodity-based and start-up
industries--will be avoided. The Portfolio will be constructed on a stock by
stock basis with little attention devoted to the macro-economic outlook of a
particular industry.
The Portfolio will adhere to a disciplined investment philosophy which
incorporates strict guidelines regarding individual securities. When initiating
a position, the Portfolio will focus on issuers generally ranging in market
capitalizations under $1.5 billion. Since these companies may be less widely
followed by market analysts, it is believed that they present greater
opportunity for exceptional returns.
Additionally, in keeping with a value approach, the Portfolio will
generally invest in companies whose equities are trading at an expected
price/earnings ratio of 13x or less over the next 12 month's earnings estimate
and/or at a significant discount to its private market value. (Expected earnings
may represent normalized earnings or be adjusted for amortization of non-cash
charges. Private market value is an internally generated estimation by the
portfolio manager of the price an informed and rational buyer would pay in the
outright purchase of a public company if entire business were to be sold.) When
executing this philosophy, the portfolio manager will not trade or time the
market for quick gains. Rather, the manager will seek to maintain a fully
invested portfolio by following a conservative philosophy of investing for the
long-term. A security will be sold if it is believed to be fully valued or the
company is no longer perceived as having a strong potential growth.
Specifically, from a valuation standpoint, a security is sold when a stock is
trading at a price/earnings multiple in excess of 20x its forward 12 months'
earnings estimates and/or the company's shares no longer sell at a discount to
its private market value. In keeping with a long-term approach, a security will
not be sold because of a short-term earnings disappointment. However, a holding
will be sold if it is believed that the company's business has undergone
fundamental changes that will negatively affect its stock price or if there is a
loss of faith in a management's ability to execute the company's stated goals
and objectives.
The Portfolio may invest in foreign securities offering potential for
growth. Investments in foreign securities involve risks that differ in some
respects from investment in securities of U.S. issuers. These risks include the
risk of fluctuations in the value of the currencies in which they are
denominated, the risk of adverse political and economic developments and, with
respect to certain countries, the possibility of expropriation, nationalization
or confiscatory taxation or limitations on the removal of funds or other assets
of the Portfolio. Securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. There also may be
less publicly available information about foreign issuers than domestic issuers,
and foreign issuers generally are not subject to the uniform accounting,
auditing and financial reporting standards, practices and requirements
applicable to domestic issuers. Delays may be encountered in settling securities
transactions in certain foreign markets and the Portfolio will incur costs in
converting foreign currencies to U.S. dollars. Custody charges are generally
higher for foreign securities.
The Portfolio may also invest in money market securities for temporary
or emergency purposes or solely as a cash reserve.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Statement of
Additional Information contains more detailed information about these investment
practices.
The Portfolio currently observes the following operating policies, which
may be changed without shareholder approval: (1) the Portfolio actively seeks to
invest in companies that achieve excellence in both financial return and
environmental soundness, selecting issuers that take positive steps toward
preserving our environment and avoiding companies with poor environmental
records; and (2) the Portfolio will not invest in issuers primarily engaged in
the manufacture of weapons systems, the production of nuclear energy, or the
manufacture of equipment to produce nuclear energy.
It is believed that there are long-term benefits inherent in an
investment philosophy that demonstrates concerns for the environment, human
rights, economic priorities and international relations.
The sub-adviser has engaged the services of Franklin Research and
Development Corporation of Boston to provide environmental screening for all
issuers selected for the Portfolio. Franklin provides information and opinions
on the companies' environmental histories. However, Franklin does not make
recommendations or provide investment advice concerning the purchase or sale of
securities for the Portfolio.
Small-Cap Aggressive Growth Portfolio
The investment objective of the Small-Cap Aggressive Growth Portfolio is
long-term capital growth. The Small-Cap Aggressive Growth Portfolio seeks to
achieve its objective by investing in common stocks or their equivalent,
emphasizing securities believed to be undervalued by the market. The Portfolio
may also hold a portion of its assets in cash or money market instruments.
Loomis, Sayles & Company, L.P. serves as sub-adviser to this Portfolio. As such,
it is responsible for the day-to-day management of the Portfolio subject to the
overall supervision of the Fund's Board of Directors and the Investment Adviser.
Loomis Sayles seeks to build a core small-cap portfolio of solid growth
companies' stock with a smaller emphasis on special situations and turnarounds
(companies that have experienced significant business problems but which are
believed to have favorable prospects for recovery), as well as unrecognized
stocks.
In seeking long-term capital growth, the Portfolio will normally invest
at least 65% of its total assets in companies within the Russell 2000 Index
market capitalization range and may invest up to 35% of its total assets
(measured at the time of acquisition) in larger companies. Current income is not
a consideration in selecting investments for the Portfolio. Equity securities of
companies with relatively small market capitalization may be more volatile than
the securities of larger, more established companies and the broad equity market
indexes.
The Portfolio may invest a limited portion of its assets in securities
of issuers organized or headquartered outside the United States. However, such
investments cannot exceed 10% of the Portfolio's total assets (measured at the
time of acquisition). Foreign investments can involve risk, however, that may
not be present in domestic securities. Please see "Foreign Investment Risks" in
this prospectus and the Statement of Additional Information.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Portfolio may
also engage in the following investment practices each of which may involve
certain special risks: when-issued securities and repurchase agreements. The
Statement of Additional Information contains more detailed information about
these practices.
Corporate Bond Portfolio
The investment objective of the Corporate Bond Portfolio is high total
investment return through a combination of current income and capital
appreciation. The Corporate Bond Portfolio seeks to achieve its investment
objective by investing in debt securities (including convertibles), although up
to 20% of its total assets (measured at the time of acquisition) may be invested
in preferred stocks. In achieving high total investment returns through a
combination of current income and capital appreciation, the Portfolio will
normally invest at least 65% of its total assets in bonds. A limited portion of
its total assets (measured at the time of acquisition) may also be invested in
securities of foreign issuers and up to 35% of its total assets (measured at the
time of acquisition) in securities of below investment grade quality. The
Portfolio may also hold a portion of its assets in cash or money market
instruments. Loomis, Sayles & Company, L.P. serves as sub-adviser to this
Portfolio. As such, it is responsible for the day-to-day management of the
Portfolio subject to the overall supervision of the Funds' Board of Directors
and the Investment Adviser.
The Portfolio may invest in fixed-income securities of any maturity.
Fixed-income securities pay a specified rate of interest or dividends, or a rate
that is adjusted periodically by reference to some specified index or market
rate. Fixed-income securities include securities issued by federal, state, local
and foreign governments and related agencies, and by a wide range of private
issuers. Because interest rates vary, it is impossible to predict the income in
fixed-income securities for any particular period. Therefore, the net asset
value of the Portfolio's shares will vary as a result of changes in the value of
the securities held. Fixed-income securities are subject to market and credit
risk. Market risk relates to changes in a security's value as a result of
changes in interest rates. In general, the values of fixed-income securities
increase when prevailing interest rates fall and decrease when interest rates
rise. Credit risk relates to the ability of the issuer to make payments of
principal and interest.
The Portfolio may invest a portion of its assets in securities rated
below investment grade (that is, below BBB by S&P or Baa by Moody's), including
securities in the lowest rating categories and comparable unrated securities.
The Portfolio may invest up to 35% of its total assets (measured at the time of
acquisition) in such securities. For purposes of this percentage, a security
will be treated as being of investment grade quality if at the time it is
acquired at least one major rating agency has rated the security in its top four
rating categories (even if another agency has issued a lower rating), or if the
security is unrated but it is otherwise determined to be of comparable quality.
Lower rated fixed-income securities generally provide higher yields, but are
subject to greater credit and market risk than higher quality fixed-income
securities. Lower rated fixed-income securities are considered predominately
speculative with respect to the ability of the issuer to meet principal and
interest payments. Achievement of the investment objective of the Portfolio
investing in lower rated fixed-income securities may be more dependent on credit
analysis than is the case with higher quality bonds. The market for lower rated
fixed-income securities may be more severely affected than some other financial
markets by economic recession or substantial interest rate increases, by
changing public perceptions of this market or by legislation that limits the
ability of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for lower rated
fixed-income securities. This lack of liquidity at certain times may affect the
values of these securities and may make the valuation and sale of these
securities more difficult. Securities of below investment grade quality are
commonly referred to as "junk bonds." Securities in the lowest rating categories
may be in poor standing or in default. Securities in the lowest investment grade
category (BBB by S&P or Baa by Moody's) have some speculative characteristics.
The Portfolio may also invest in "zero coupon" fixed-income securities.
These securities accrue interest at a specified rate, but do not pay interest in
cash on a current basis. If the Portfolio invests in zero coupon securities, it
is required to distribute the income on these securities as the income accrues,
even though the Portfolio is not receiving the income and cash on a current
basis. Thus, the Portfolio may have to sell other investments to obtain cash to
make income distributions. The market value of zero coupon securities is often
more volatile than that of non-zero coupon fixed-income securities of comparable
quality and maturity.
The Portfolio may also invest in securities of issuers organized or
headquartered outside of the United States. The Portfolio will not purchase a
foreign security if, as a result, its holdings of foreign securities would
exceed 20% of its total assets (measured at the time of acquisition); however,
the Portfolio may invest any portion of its assets in securities of Canadian
issuers. Foreign investments can involve risk that may not be present in
domestic securities. Please see "Foreign Investment Risks" in this prospectus.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. Please see "Foreign Currency Exchange Transactions" in
this prospectus.
The Portfolio may purchase Rule 144A securities. These are privately
offered securities that can be resold only to certain qualified institutional
buyers. Rule 144A securities are treated as illiquid, unless it has been
determined that the particular issue of Rule 144A securities is liquid. Please
see "Illiquid Securities" in this prospectus.
The Portfolio may purchase and write options on securities and certain
futures contracts and invest in certain futures contracts. The Portfolio may
also engage in the following investment practices each of which involves certain
special risks: collateralized mortgage obligations, when issued securities and
repurchase agreements. The Statement of Additional Information contains more
detailed information about these practices.
Foreign Equity Portfolio
The investment objective of the Foreign Equity Portfolio is total return
from long-term growth of capital and dividend income. The Foreign Equity
Portfolio seeks to achieve its objective by investing primarily in international
equity securities. Although the Portfolio seeks to invest primarily in common
stocks, it may also invest in any type of equity security. Loomis, Sayles &
Company, L.P. serves as sub-adviser to this Portfolio. As such, it is
responsible for the day-to-day management of the Portfolio subject to the
overall supervision of the Fund's Board of Directors and the Investment Adviser.
In seeking to achieve its investment objective, the Portfolio will
normally invest 65% of its total assets in equity securities of issuers
headquartered outside of the United States. Under normal conditions, the
Portfolio will contain equity securities of issuers from at least three
countries outside the United States. The Portfolio may also hold a portion of
its assets in cash or money market instruments.
The Portfolio will not limit its investments to any particular type of
company. First, a group of attractively valued countries will be selected.
Within the selected countries, securities will be selected that are expected to
offer the best value based on valuation and earnings growth expectations.
Foreign investments can involve risk, however, that may not be present
in domestic securities. Please see "Foreign Investment Risks" in this
prospectus.
The Portfolio may also, from time to time, invest up to 20% of its
assets in fixed-income securities issued or guaranteed by foreign governments
(including their political subdivisions, agencies and authorities, and/or
instrumentalities), issued by supranational agencies or issued by foreign
companies, including but not limited to convertible debt and less than
investment grade or non-rated debt. The net asset value of the Portfolio will
vary as a result of changes in the value of bonds and other fixed-income
securities held by the Portfolio. Fixed-income securities are subject to market
and credit risk. Market risk relates to changes in a security's value as a
result of changes in interest rates generally. Credit risk relates to the
ability of the issuer to make payments of principal and interest. Securities
with a rating which is less than investment grade are commonly referred to as
"junk bonds." Lower rated fixed-income securities generally provide higher
yields, but are subject to greater credit and market risks than higher quality
fixed-income securities and are considered predominately speculative with
respect to the ability of the issuer to meet principal and interest payments. In
addition, the secondary market may be less liquid for lower-rated fixed-income
securities which may make the valuation and sale of the securities more
difficult. The Statement of Additional Information contains more information
about securities ratings.
The Portfolio may invest in convertible securities, including corporate
bonds, notes or preferred stocks that can be converted into common stocks or
other equity securities. Convertible securities include other securities, such
as warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
The value of convertible securities that pay dividends or interest, like the
value of all fixed-income securities, generally fluctuates inversely with
changes in interest rates. Warrants have no voting rights, pay no dividends and
have no rights with respect to the assets of the corporation issuing them. They
do not represent ownership of the securities for which they are exercisable, but
only the right to buy such securities at a particular price. Convertible
securities purchased by the Portfolio may be rated below investment grade or may
be unrated.
The Portfolio may also engage in the following investment practices each
of which involves certain special risks: transactions in options and certain
futures contracts and repurchase agreements. The Statement of Additional
Information contains more detailed information about these practices.
The Portfolio may engage in foreign currency exchange transactions to
protect against uncertainty in the level of future exchange rates. Please see
"Foreign Currency Exchange Transactions" in this prospectus.
The Portfolio may invest up to 10% of its assets (measured at the time
of acquisition) in securities of investment companies which invest primarily in
securities issued by foreign companies. As such, the Portfolio may indirectly
bear investment management fees of such investment companies, which are in
addition to the management fees the Portfolio pays its adviser.
The Portfolio may purchase "illiquid securities," that is, securities
which are not readily marketable, which includes securities whose disposition is
restricted by federal securities laws. See "Illiquid Securities" in this
prospectus.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
200%. High portfolio turnover rates generally result in higher transaction costs
(which are borne directly by the Portfolio) and may result in greater tax
liability.
Maxim Blue Chip Portfolio
The investment objective of the Maxim Blue Chip Portfolio is long-term
growth of capital and income. To achieve its objective, the Portfolio normally
will invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
"Blue Chip" companies typically have long records of financial success
and dividend payments and a reputation for quality management, products and
services. The Portfolio normally invests at least 65% of its total assets
(measured at the time of investment) in "Blue Chip" stocks that (1) are included
in a widely recognized index of stock market performance such as the Dow Jones
Industrial Average, the Standard & Poor's 500 Index, or the New York Stock
Exchange Index; (2) generally pay regular dividends; and (3) have a market
capitalization of at least $1 billion. The Portfolio may also invest in
non-dividend paying companies if it is determined they offer favorable prospects
for capital appreciation. The Portfolio may also invest up to 30% of its total
assets (measured at the time of investment) in foreign securities and may
invest, without limitation, in ADRs. Such investments may enhance return, but
also involve some special risks. See "Foreign Investment Risks" in this
prospectus.
The Portfolio may purchase and write call and put options and enter into
certain futures contracts on securities, financial indices and foreign
currencies. Such transactions may be entered into for any number of reasons,
including: to manage its exposure to changes in securities prices and foreign
securities; as an efficient means of adjusting its overall exposure to certain
markets; in an effort to enhance income; and to protect the value of portfolio
securities. See the Statement of Additional Information for more detailed
information about these investment practices.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. See "Foreign Currency Exchange Transactions" in this
prospectus and the Statement of Additional Information for more detailed
information about these practices.
The Portfolio may purchase "illiquid securities," that is, securities
which are not readily marketable, which includes securities whose disposition is
restricted by federal securities laws. See "Illiquid Securities" in this
prospectus.
The Portfolio may also invest in convertible securities, preferred
stocks, bonds, debentures and other corporate obligations when it is determined
that these investments may offer opportunities for capital appreciation. The
Portfolio will invest in bonds, debentures, and corporate obligations only if
they are rated investment grade (BBB or higher) at the time of purchase. The
Portfolio may invest in convertible securities and preferred stocks which are
rated in medium and lower categories by Moody's or S&P (Ba or lower by Moody's
and BB or lower by S&P), but none may be rated lower than B. Securities rated B
generally are less desirable investments and are deemed speculative as far as
the issuer's capacity to pay interest and repay principal over a long period of
time. Traditionally, convertible securities have paid dividends or interest at
rates higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. The Portfolio may
also invest in unrated convertible securities and preferred stocks if they are
deemed to be equivalent in quality to the rated securities that the Portfolio
may buy. The Portfolio will not invest more than 5% of its total assets
(measured at the time of investment) in bonds, debentures, convertible
securities and corporate obligations rated below investment grade either at the
time of purchase or as a result of a rating reduction after purchase, or in
unrated securities that are believed to be equivalent in quality to securities
rated below investment grade. This 5% limitation does not apply to preferred
stocks.
All or part of the Portfolio's assets may be invested temporarily in
U.S. and foreign-dollar denominated money market securities, including
repurchase agreements, commercial paper, bank obligations, certificates of
deposit, banker's acceptances, other cash equivalents and government securities
if it is determined to be appropriate for purposes of enhancing liquidity or
preserving capital in light of prevailing market or economic conditions. While
in such a defensive position, the opportunity to achieve capital growth will be
limited, and, to the extent that this assessment of market conditions is
incorrect, the Portfolio will be foregoing the opportunity to benefit from
capital growth resulting from increases in the value of equity investments.
The portfolio turnover rate for the Portfolio in 1997 was in excess of
100%. High portfolio turnover rates generally result in higher transaction costs
(which are borne directly by the Portfolio) and may result in greater tax
liability.
Maxim MidCap Growth Portfolio
The investment objective of the Maxim MidCap Growth Portfolio is to
provide long-term appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies. To achieve this objective, the
Portfolio will invest at least 65% of its assets (measured at the time of
investment) in a diversified portfolio of mid-cap companies whose earnings are
expected to grow at a faster rate than the average mid-cap company.
A mid-cap company is defined as one whose market capitalization (number
of shares outstanding multiplied by share price) falls within the capitalization
range of companies included in the Standard & Poor's 400 MidCap Index generally,
between $191 million and $6.5 billion. Mid-cap growth companies are often in the
early, more dynamic phase of their life cycles, but are no longer considered new
or emerging. Mid-cap companies tend to offer higher growth prospects than larger
companies. At the same time, mid-cap companies tend to have greater resources,
and therefore represent less risk, than smaller companies. In addition, mid-cap
companies generally have sufficient financial resources and access to capital to
finance their growth.
The Portfolio will attempt to invest primarily in companies that offer
proven products or services; have a historical record of above-average earnings
growth; demonstrate the potential to sustain earnings growth; operate in
industries experiencing increasing demands; or are believed to be undervalued in
the market place.
Mid-cap growth stocks entail greater risk and are usually more volatile
than the shares of larger, more established companies. Since mid-cap companies
usually reinvest a high portion of earnings in their own businesses, they tend
to pay a lesser dividend than larger companies. Also, since investors buy
mid-cap growth stocks because of their expected superior earnings growth,
earnings disappointments often result in sharp price declines.
The Portfolio may invest in preferred equity, warrants and debt
securities convertible into or exchangeable for equity securities.
Traditionally, convertible securities have paid dividends or interest at rates
higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. Warrants are
options to buy a stated number of shares of common stock at a specified price
anytime during the life of the warrants (generally, two or more years).
The Portfolio may invest up to 25% (measured at the time of investment)
in foreign securities. These include non-dollar denominated securities traded
outside of the U.S. and dollar denominated securities of foreign issuers traded
in the U.S. Such investments may enhance return, but also involve some special
risks. See "Foreign Investment Risks" in this prospectus.
The Portfolio may, for non-hedging purposes, invest 10% of its total
assets in hybrid instruments. These instruments (a type of potentially high-risk
derivative) can combine the characteristics of securities, futures and options.
For example, the principal amount, redemption or conversion terms of a security
could be related to the market price of a commodity, currency, or securities
index. Such securities may bear interest or pay dividends at low market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an investment could be zero. See also the Statement of Additional
Information for more information about these types of transactions.
The Portfolio may purchase "illiquid securities," that is, securities
which are not readily marketable, which includes securities whose disposition is
restricted by federal securities laws. See "Illiquid Securities" in this
prospectus.
The Portfolio may purchase and write call and put options and enter into
certain futures contracts on securities and financial indices. Such transactions
may be entered into for any number of reasons, including: to manage its exposure
to changes in securities prices and foreign securities; as an efficient means of
adjusting its overall exposure to certain markets; in an effort to enhance
income; and to protect the value of portfolio securities. See the Statement of
Additional Information for more detailed information about these investment
practices.
The Portfolio may engage in foreign currency exchange transactions to
protect the value of specific positions or in anticipation of changes in
relative values of currencies in which current or future holdings are
denominated or quoted. See also "Foreign Currency Exchange Transactions" in this
prospectus.
The Portfolio may hold a certain portion of its assets in U.S. and
foreign-dollar denominated money market securities, including repurchase
agreements, high quality corporate bonds or notes and government securities.
Index Portfolio Management
All index styled portfolios may utilize futures as a substitute for a
comparable market position in the underlying securities, or for hedging
purposes. A stock index futures contract obligates the seller to deliver (and
the purchaser to take) an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. The intent
is to purchase and sell futures contracts so as to obtain the best price with
consideration also given to liquidity.
Stock index futures contracts may be purchased or sold to the extent
that such activities would be consistent with the requirements of Section 4.5 of
the regulations under the Commodity Exchange Act, under which the portfolios
would be excluded from the definition of a "commodity pool operator."
Accordingly, each portfolio may enter into futures positions in such futures
contracts to the extent that the aggregate initial margins and premiums required
to establish such positions do not exceed 5% of the liquidation value of the
respective portfolio.
Risks associated with the use of futures contracts are: (i) imperfect
correlation between the change in value of securities included on the index and
the prices of futures contracts; and (ii) possible lack of a liquid secondary
market for a futures position when desired. The risk that a portfolio will be
unable to close out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.
In addition, because of the low margin deposits normally required in futures
trading, a high degree of leverage is typical of a futures trading account.
As a result, a relatively small price movement in a futures contract may
result in substantial losses to the trader (i.e., the Portfolio). Traditional
methods of securities analysis are not used by the Investment Adviser in making
investment decisions for index styled portfolios. Rather a statistical selection
technique is utilized to determine which securities it will purchase or sell in
order to track the performance of the relevant index(es) to the extent feasible.
In addition, from time to time, adjustments may be made in a portfolio's
holdings due to change in the composition of the relevant index(es). Each index
styled portfolio will attempt to achieve a correlation between its performance
and that of the relevant index(es) of at least 0.95, without taking into account
expenses. A correlation of 1.00 would indicate perfect correlation, which would
be achieved when a portfolio's net asset value, including the value of its
dividends and capital gains distributions, increases or decreases, is in exact
proportion to change in the relevant index(es). The Investment Adviser will
attempt to minimize any tracing error (that statistical measure of the
difference between the investment results of a portfolio and that of the
relevant index(es)) in making investments for a portfolio. However, brokerage
and other transaction costs, as well as potential tracking errors, will tend to
cause a portfolio's return to be lower than the return of the relevant
index(es). There can be no assurance, however, as to how closely a portfolio's
performance will correspond to the performance of the relevant index(es).
Moreover, the index itself may not perform favorably in which case a Portfolio's
performance would similarly be unfavorable.
Foreign Investment Risks
Investments in foreign securities present risks not typically associated
with investments in comparable securities of U.S. issuers.
There may be less information publicly available about a foreign
corporate or government issuer than about a U.S. issuer, and foreign corporate
issuers are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
securities custody costs are often higher than those in the United States, and
judgments against foreign entities may be more difficult to obtain and enforce.
With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or
financial instability and diplomatic developments that could affect the value of
investments in those countries. The receipt of interest on foreign government
securities may depend on the availability of tax or other revenues to satisfy
the issuer's obligations.
A Portfolio's investments in foreign securities may include investments
in countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities, delays and disruptions in securities settlement procedures.
Most foreign securities in a Portfolio will be denominated in foreign
currencies or traded in securities markets in which settlements are made in
foreign currencies. Similarly, any income on such securities is generally paid
to a Portfolio in foreign currencies. The value of these foreign currencies
relative to the U.S. dollar varies continually, causing changes in the dollar
value of a Portfolio's investments (even if the price of the investments is
unchanged) and changes in the dollar value of a Portfolio's income available for
distribution to its shareholders. The effect of changes in the dollar value of a
foreign currency on the dollar value of a Portfolio's assets and on the net
investment income available for distribution may be favorable or unfavorable.
A Portfolio may incur costs in connection with conversions between
various currencies. In addition, a Portfolio may be required to liquidate
portfolio assets, or may incur increased currency conversion costs, to
compensate for a decline in the dollar value of a foreign currency occurring
between the time when a Portfolio declares and pays a dividend, or between the
time when a Portfolio accrues and pays an operating expense in U.S. dollars.
Foreign Currency Exchange Transactions
Portfolios which engage in foreign currency exchange transactions do so
in an attempt to protect against uncertainty in the level of future exchange
rates. Some Portfolios may engage in foreign currency exchange transactions in
connection with the purchase and sale of securities ("transaction hedging") and
to protect against changes in the value of specific positions ("position
hedging").
A Portfolio may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on which the
Portfolio contracts to purchase or sell a security and the settlement date, or
to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. A portfolio may purchase or sell a foreign currency on a spot
(or cash) basis at the prevailing spot rate in connection with the settlement of
transactions in securities denominated in that foreign currency.
If conditions warrant, a Portfolio may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts as a hedge against changes
in foreign currency exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a future time at a
rate or rates that may be higher or lower than the spot rate. Foreign currency
futures contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes a Portfolio may also purchase or sell
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
A Portfolio may engage in position hedging to protect against the
decline in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated, quoted or exposed (or an increase in the
value of the currency in which the securities the Portfolio intends to buy are
denominated, when the Portfolio holds cash or short-term investments). For
position hedging purposes, a Portfolio may purchase or sell foreign currency
futures contracts, foreign currency forward contracts and options on foreign
currency futures contracts and on foreign currencies on exchanges or
over-the-counter markets. In connection with position hedging, the Portfolio may
also purchase or sell foreign currency on a spot basis.
A Portfolio's currency hedging transactions may call for the delivery of
one foreign currency in exchange for another foreign currency and may at times
not involve currencies in which its portfolio securities are then denominated. A
Portfolio could hedge a foreign currency with forward contracts on another
("proxy") currency of which changes in value generally correlate with the
currency to be hedged. Such "cross hedging" activities may be engaged in when it
is believed that such transactions provide significant hedging opportunities.
Cross hedging transactions involve the risk of imperfect correlation between
changes in the values of the currencies to which such transactions relate and
changes in the value of the currency or other asset or liability which is the
subject of the hedge.
Hedging transactions involve costs and may result in losses. A Portfolio
will engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when it is believed the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. There is no assurance that
appropriate foreign currency exchange transactions will be available with
respect to all currencies in which investments may be denominated. Hedging
transactions may also be limited by tax considerations. Hedging transactions may
affect the character or amount of distributions.
Illiquid Securities
Each Portfolio, other than the Money Market Portfolio, may invest up to
15% of its total assets in "illiquid securities" (taken as of the time of
acquisition of an illiquid security). The Money Market Portfolio may invest up
to 10% of its total assets in illiquid securities. Illiquid securities are
securities that may not be sold in the ordinary course of business within seven
days at approximately the price used in determining the net asset value of the
Portfolio. This restriction applies to securities for which a ready market does
not exist, such as restricted securities, but does not necessarily encompass all
restricted securities. Institutional markets for restricted securities have
developed as a result of the promulgation of Rule 144A under the Securities Act
of 1933 which provides a "safe harbor" from 1933 Act registration requirements
for qualifying sales to institutional investors. When Rule 144A securities
present an attractive investment opportunity and otherwise meet selection
criteria, the Portfolios may make such investments. Whether or not such
securities are "illiquid" depends on the market that exists for the particular
security.
The staff of the Securities and Exchange Commission has taken the
position that the liquidity of Rule 144A securities is a question of fact for a
board of directors to determined, such determination to be based on a
consideration of the readily available trading markets and the review of any
contractual restrictions. The staff also acknowledges that while the board
retains ultimate responsibility, it may delegate this function to an investment
adviser. The Board of Directors of the Fund has delegated this responsibility to
the Investment Adviser, and with respect to those Portfolios having a
sub-adviser, the sub-adviser is responsible for determining the liquidity of
Rule 144A securities.
It is not possible to predict with assurance exactly how the market for
Rule 144A securities or any other security will develop. A security which when
purchased enjoyed a fair degree of marketability may subsequently become
illiquid and, accordingly, a security which was deemed to be liquid at the time
of acquisition may subsequently become illiquid. In such event, appropriate
remedies will be considered to minimize the effect on a Portfolio's liquidity.
Equity Securities Risk
Investments in equity securities are subject to "stock market risk" the
possibility that stock prices in general will decline over short or extended
periods and that investors may suffer loss of principal. Stock markets tend to
be cyclical with periods when stock prices generally rise or fall. Since
economic growth has been punctuated by declines, share prices of even the
best-managed most profitable companies are subject to market risk. Swings in
investor psychology and significant trading by large institutions can result in
price declines. For this reason, equity investors should have a long-term
investment horizon and be willing to wait out their markets.
Debt Securities
Bonds and other debt instruments are used by issuers to borrow money
from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero-coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall, and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
This sensitivity to interest rates is also referred to as "market risk."
Debt obligations are rated based on their estimated credit risk by
independent services such as S&P and Moody's. "Credit risk" relates to the
ability of the issuer's ability to make payments of principal and interest when
due.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated debt securities. Investment grade securities are those rated AAA, AA, A
or BBB by S&P or Aaa, Aa, A or Baa by Moody's or, if unrated, are judged to be
of comparable quality to securities so rated. Debt securities rated BBB by S&P
or Baa by Moody's and unrated securities of comparable quality are viewed as
having adequate capacity for payment of principal and interest, but do involve a
higher degree of risk than that associated with investments in debt securities
in the higher rating categories.
Securities rated below investment grade are commonly referred to as
"high yield-high risk securities" or "junk bonds". These securities are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the obligations. It is,
therefore, possible that these types of factors could in certain instances,
reduce the value of securities held with a commensurate effect on share value.
Debt securities include (1) securities issued or guaranteed as to
principal or interest by the U.S. Government, its agencies or instrumentalities;
(2) debt securities issued or guaranteed by U.S. corporations or other issuers
(including foreign governments or corporations); (3) asset-backed securities and
mortgage-related securities, including collateralized mortgage obligations
("CMOs"); and (4) securities issued or guaranteed as to principal or interest by
a sovereign government or one of its agencies or political subdivisions,
supranational entities such as development banks, non-U.S. corporations, banks
or bank holding companies, or other non-U.S. issuers.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests
with the Fund's directors. There are currently five directors, three of whom are
not "interested persons" of the Fund within the meaning of that term under the
Investment Company Act of 1940. The Board meets regularly four times each year
and at other times as necessary. By virtue of the functions performed by GW
Capital Management as Investment Adviser, the Fund requires no employees other
than its executive officers, none of whom devotes full time to the affairs of
the Fund. These officers are employees of GWL&A and receive compensation from
it. The Statement of Additional Information contains the names of, and general
background information regarding, each Director and executive officer of the
Fund.
Investment Adviser
GW Capital Management, located at 8515 E. Orchard Rd., Englewood,
Colorado 80111, serves as the Fund's "Investment Adviser." Through Power
Corporation of Canada, a holding and management company, the Investment Adviser
is controlled by a Canadian investor, Paul Desmarais, and his associates. The
Investment Adviser presently acts as the investment adviser for Great-West
Variable Annuity Account A, a separate account of GWL&A registered as a
management investment company, and certain non-registered, qualified corporate
pension plan separate accounts of GWL&A. GW Capital Management is a registered
investment adviser with the Securities and Exchange Commission.
Subject to the supervision and direction of the Fund's Board of
Directors, the Investment Adviser manages the Fund's portfolios in accordance
with each Portfolio's stated investment objectives and policies, makes
investment decisions for the Portfolios and places orders to buy and sell
securities on behalf of the Fund or delegates these functions to a sub-adviser,
as discussed below. The Investment Adviser provides investment advisory services
and pays all the expenses, except extraordinary expenses, of the Portfolios
described herein. As compensation for its services to the Fund, the Investment
Adviser receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily net
assets of the Investment Grade Corporate Bond, Stock Index, Small-Cap Index,
Value Index, Growth Index, U.S. Government Mortgage Securities, and Short-Term
Maturity Bond Portfolios; 0.90% of the average daily net assets of the Corporate
Bond Portfolio; and, 1.00% of the average daily net assets of the Small-Cap
Value, Small-Cap Aggressive Growth, Foreign Equity, Maxim Blue Chip and Maxim
MidCap Growth Portfolios.
With respect to the Small-Cap Value, Small-Cap Aggressive Growth,
Foreign Equity, Maxim MidCap Growth and Maxim Blue Chip Portfolios, the
Investment Adviser pays all compensation of, and furnishes office space for,
officers and employees of the Investment Adviser connected with investment
management of these Portfolios, as well as the fees of all directors of the Fund
who are affiliated persons of the Investment Adviser or any of its subsidiaries.
All other expenses incurred in the operation of these Portfolios, including
general administrative expenses are borne by these Portfolios, respectively.
Accounting services are provided for these Portfolios by the Investment Adviser
and these Portfolios reimburse the Adviser for its costs in connection with such
services. However, the Adviser shall pay any expenses of the Fund which exceed
an annual rate of 1.05% of the average daily net assets of the Maxim MidCap
Growth Portfolio; 1.15% of the average daily net assets of the Maxim Blue Chip
Portfolio; 1.30% of the average daily net assets of the Small-Cap Aggressive
Growth Portfolio; 1.35% of the average daily net assets of the Small-Cap Value
Portfolio; and 1.50% of the Foreign Equity Portfolio.
The services provided to the Fund by the Investment Adviser depend on
the smooth functioning of its computer systems. Many computer software systems
in use today cannot distinguish the year 2000 from the year 1900 because of the
way dates are encoded and calculated. That failure could have a negative impact
on the handling of securities trades, pricing and account services. The
Investment Adviser has been actively working on necessary changes to its
computer systems to deal with the year 2000 and expects that its systems will be
adapted in time for that event.
The day-to-day lead portfolio manager for the Investment Grade Corporate
Bond Portfolio and the Short-Term Maturity Bond Portfolio is B.G. Masters. Mr.
Masters is Manager, Public Bond Investments, GWL&A, 1993 to Present; Manager,
Bond, Investment Grade Corporate Bond and Short-Term Maturity Bond Portfolios of
Maxim Series Fund, June 1994 to Present. He was Assistant Manager, Public Bond
Investments, GWL&A, 1987 to 1993.
The day-to-day lead portfolio manager for the U.S. Government Mortgage
Securities Portfolio is C.S. Tocher. Ms. Tocher is Manager, Public Bond
Investments, GWL&A, 1993 to Present; Manager, U.S. Government Securities and
U.S. Government Mortgage Securities Portfolio of Maxim Series Fund; June 1994 to
Present. She was Associate Manager, Public Bond Investments, GWL&A, 1990 to
1993; Manager, Bond, Investment Grade Corporate Bond and Zero-Coupon Treasury
Portfolios of Maxim Series Fund, 1990 to June 1994.
Sub-Advisers
Ariel Capital Management, Inc. ( Ariel ) is a privately held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. It is an Illinois corporation with its
principal business address at 307 North Michigan Avenue, Chicago, Illinois
60601. Subject generally to review and supervision by the Investment Adviser and
the Board of Directors of the Fund, Ariel is responsible for the actual daily
management of the Small-Cap Value Portfolio and for making decisions to buy,
sell or hold any particular security.
Ariel bears all expenses in connection with the performance of its
services, such as compensating and furnishing office space for its officers and
employees connected with investment and economic research, trading and
investment management of the Small-Cap Value Portfolio.
The day-to-day manager for the Small-Cap Value Portfolio is John W. Rogers,
Jr. Mr. Rogers' business experience during the past five years is as Chief
Investment Officer, Ariel Capital Management and Portfolio Manager,
Calvert-Ariel Growth Fund.
The Investment Adviser is responsible for compensating Ariel, which
receives monthly compensation from the Investment Adviser at the annual rate of
.40% of the average daily net asset value of the Small-Cap Value Portfolio up to
$5 million, .35% on the next $10 million, .30% on the next $10 million, and .25%
of such value in excess of $25 million.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the sub-adviser of
the Small-Cap Aggressive Growth, Corporate Bond and Foreign Equity Portfolios.
As such, Loomis Sayles is responsible for daily managing the investment and
reinvestment of assets of the Portfolios, subject generally to review and
supervision of the Investment Adviser and the Board of Directors. Loomis Sayles
bears all expenses in connection with the performance of its services, such as
compensating and furnishing office space for its officers and employees
connected with the investment and economic research, trading and investment
management of the Portfolios
Loomis Sayles is a Delaware limited partnership, registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111.
Jeffrey C. Petherick, Vice President of Loomis Sayles, and Mary Champagne,
Vice President of Loomis Sayles, have day-to-day management responsibility for
the Small-Cap Aggressive Growth Portfolio. Mr. Petherick has co-managed the
Portfolio since the Portfolio's inception. Mr. Petherick joined Loomis Sayles in
1990. Ms. Champagne has co-managed the Portfolio since July 1995. Prior to
joining Loomis Sayles in 1993, Ms. Champagne served as a portfolio manager at
NBD Bank for 10 years.
The day-to-day manager of the Corporate Bond Portfolio is Daniel J.
Fuss, Executive Vice President of Loomis Sayles who also serves as the fund
manager of the Loomis Sayles Bond Fund. Mr. Fuss has served as the portfolio
manager of the Loomis Sayles Bond Fund since its inception in 1991.
The day-to-day manager of the Foreign Equity Portfolio is Paul Drexler,
Vice President of Loomis Sayles who also serves as the fund manager of the
Loomis Sayles International Equity Fund (since 1996) and the New England
International Equity Fund (since 1997).
The Investment Adviser is responsible for compensating Loomis Sayles,
which receives monthly compensation from the Investment Adviser at the annual
rate of .50% on the first $10 million, .45% on the next $15 million, .40% on the
next $75 million and .30% on all amounts over $100 million of the Small-Cap
Aggressive Growth Portfolio; .30% on all assets of the Corporate Bond Portfolio;
and, .60% on the first $10 million, .50% on the next $40 million, and .35% on
amounts over $50 million on the Foreign Equity Portfolio.
Founders Asset Management, LLC ("Founders") serves as the sub-adviser to
the Maxim Blue Chip Portfolio. As such, Founders is responsible for daily
management of the investment and reinvestment of assets of the Maxim Blue Chip
Portfolio, subject generally to review and supervision of the Investment Adviser
and the Board of Directors. Founders bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic research,
trading and investment management for the Maxim Blue Chip Portfolio.
Founders is a Delaware limited liability company, registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 2930 East Third Avenue, Denver, Colorado 80206.
The day-to-day manager of the Maxim Blue Chip Portfolio is Brian F. Kelly.
Mr. Kelly also serves as the lead portfolio manager for the Founders Blue Chip
and Balanced Funds. Mr. Kelly joined Founders in 1996. Prior to joining
Founders, Mr. Kelly served as a portfolio manager (1993 - 1996) for INVESCO
Trust Company, and as a senior equity investment analyst for Sears Investment
Management Company (1986 - 1993).
The Investment Adviser is responsible for compensating Founders, which
receives monthly compensation from the Investment Adviser at the annual rate of
.425% on the first $250 million, .35% on the next $250 million, .325% on the
next $250 million and .30% on all amounts over $750 million.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim MidCap Growth Portfolio. As such, T. Rowe Price is
responsible for daily management of the investment and reinvestment of assets of
the Portfolio, subject generally to review and supervision of the Investment
Adviser and the Board of Directors. T. Rowe Price bears all expenses in
connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with the
investment and economic research, trading and investment management of the Maxim
MidCap Growth Portfolio.
T. Rowe Price is a Maryland corporation, registered as an investment
adviser with the Securities and Exchange Commission. Its principal address is
100 East Pratt Street, Baltimore, Maryland 21202.
The Maxim MidCap Growth Portfolio is managed by an investment advisory
committee comprised of the following members: Brian W. Berghuis, Chairman, Marc
L. Baylin, James A. Kennedy and John F. Wakeman. The committee chairman has
day-to-day responsibility for managing the Portfolio and works with the
committee in developing and executing the Portfolio's investment program. This
investment committee also serves as the investment committee for the T. Rowe
Price Mid-Cap Growth Portfolio. Mr. Berghuis has been Chairman of the T. Rowe
Price Mid-Cap Growth Fund since 1992. He has been managing investments since
joining T. Rowe Price in 1985.
The Investment Adviser is responsible for compensating T. Rowe Price,
which receives monthly compensation from the Investment Adviser at the annual
rate of .50% on all assets of the Maxim MidCap Growth Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from investment income of the Money Market Portfolio shall be
declared daily and reinvested monthly in additional shares of the Portfolio at
net asset value. Dividends from investment income of the Investment Grade
Corporate Bond, U.S. Government Mortgage Securities and Short-Term Maturity Bond
Portfolios shall be declared and reinvested quarterly. Dividends from net
investment income of the Stock Index, Small-Cap Index, Growth Index, Value
Index, Small-Cap Value, Maxim Blue Chip, Maxim MidCap Growth and Corporate Bond
Portfolios shall be declared and reinvested semi-annually. Dividends from net
investment income of the Small-Cap Aggressive Growth and Foreign Equity
Portfolios shall be declared and reinvested annually. Distributions of net
realized capital gains, if any, are declared in the fiscal year in which they
have been earned and are reinvested in additional shares of the Fund at net
asset value.
The Fund has qualified, and intends to continue to qualify, as a
registered investment company under Subchapter M of the Internal Revenue Code
("Code"). Each Portfolio of the Fund will be treated as a separate corporation
for federal income tax purposes. The Fund intends to distribute all of its net
income so as to avoid any Fund-level tax. Therefore, dividends derived from
interest and distributions of any realized capital gains will be taxable, under
Subchapter M, to the Fund's shareholders, which in this case are the Series
Accounts of GWL&A and MetLife. 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/MetLife and the Series
Accounts, see "Federal Tax Considerations" included in the applicable Series
Account prospectus.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are sold and redeemed at their net asset value next
determined after initial receipt of a purchase order or notice of redemption
without the imposition of any sales commission or redemption charge. However,
certain deferred sales and other charges may apply to the variable contracts.
Such charges are described in the applicable Series Account prospectus.
VALUATION OF SHARES
A portfolio's net asset value per share is determined as of 4:00 p.m.,
EST/EDT once daily Monday through Friday, except on holidays on which the New
York Stock Exchange is closed.
Net asset value of a portfolio share is computed by dividing the value
of the net assets of the portfolio by the total number of portfolio shares
outstanding. Portfolio securities that are listed on an established securities
exchange or on the NASDAQ National Market System are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked price.
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices or yield equivalent as obtained from one or more
dealers that make markets in the securities. Portfolio securities that are
traded both in the over-the-counter market and on an exchange are valued
according to the broadest and most representative market. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of Directors,
including valuations furnished by a pricing service that may be retained by the
Fund.
Market quotations of foreign securities in foreign currency are
translated to U.S. dollars at the prevailing rate of exchange. Securities for
which market quotations are not readily available and other assets are valued at
fair value as determined in good faith by the Board of Directors. Such a
determination may take into account, for example, quotations by dealers or
issuers for securities of similar type, quality, and maturity, or valuations
furnished by a pricing service retained by the Fund.
Money market securities held by the Fund with 60 days or less remaining
to maturity are valued on an amortized cost basis, which involves valuing a
portfolio instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the security.
THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State of Maryland on
December 7, 1981 and is registered with the Securities and Exchange Commission
as an open-end, management investment company. The Fund commenced operations on
February 25, 1982.
The Fund offers a separate class of common stock for each portfolio. All
shares will have equal voting rights, except that only shares of a respective
portfolio will be entitled to vote on matters concerning only that portfolio.
Each issued and outstanding share of a portfolio is entitled to one vote and to
participate equally in dividends and distributions declared by that portfolio
and, upon liquidation or dissolution, to participate equally in the net assets
of such portfolio remaining after satisfaction of outstanding liabilities. The
shares of each portfolio, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, exchange or similar rights, and will
be freely transferable. Shares do not have cumulative voting rights and the
holders of more than 50% of the shares of the Fund voting for the election of
directors can elect all of the directors of the Fund if they choose to do so
and, in such event, holders of the remaining shares would not be able to elect
any directors.
The Series Accounts, as part of GWL&A or of MetLife, and The Great-West
Life Assurance Company, which provided the Fund's initial capitalization, will
be holders of the shares and be entitled to exercise the rights directly as
described in the applicable Series Account prospectus.
The Fund offers its shares to the Series Accounts. For various reasons,
it may become disadvantageous for one or more of the Series Accounts to continue
to invest in Fund shares. In such an event, one or more Series Accounts may
redeem its Fund shares. For further information, see the Statement of Additional
Information.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information.
Performance information about the Fund is based on the Fund's past performance
only and is no indication of future performance.
The Fund may include total return in advertisements or other sales
materials regarding the Portfolios. When the Fund advertises the total return of
one of these portfolios, it will usually be calculated for one year, five years,
and ten years or some other relevant period if the Fund has not been in
existence for at least ten years. Total return is measured by comparing the
value of an investment in the portfolio at the beginning of the relevant period
to the value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions).
Some of the Portfolios may also advertise their yield in addition to
total return. This yield will be computed by dividing the net investment income
per share earned during a recent one-month period by the net asset value of a
Fund share (reduced by any dividend expected to be paid shortly out of Fund
income) on the last day of the period.
The Money Market Portfolio may advertise its yield and effective yield.
The yield of the Money Market Portfolio is based upon the income earned by the
Portfolio over a seven-day period and then annualized, i.e., the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but, when annualized, the income earned by the investment is assumed
to be reinvested in portfolio shares and thus compounded in the course of a
52-week period.
YIELDS
Yield (and effective yield, in the case of the Money Market Portfolio)
will fluctuate, and publication of yield information may not provide a basis for
comparison with bank deposits, securities of other investment companies or other
investments which are insured and/or pay a fixed yield for a stated period of
time. In addition, the yield and effective yield information may be of limited
use for comparative purposes because it does not reflect charges imposed at the
Series Account level which, if included, would decrease the yield. Moreover, the
yields shown reflect past performance only and are not intended to indicate,
predict or guarantee future performance. For information on the method used to
calculate the yields shown below, see the Statement of Additional Information.
Yield** Effective
Yield**
MONEY MARKET PORTFOLIO
Comparison Information (1) 5.27% 5.41%
INVESTMENT GRADE CORPORATE
BOND PORTFOLIO 5.73%
U.S. GOVERNMENT MORTGAGE
SECURITIES PORTFOLIO 9.57%
STOCK INDEX PORTFOLIO 1.15%
SMALL-CAP INDEX PORTFOLIO 0.48%
GROWTH INDEX PORTFOLIO 1.01%
VALUE INDEX PORTFOLIO 1.53%
SMALL-CAP VALUE PORTFOLIO 2.06%
CORPORATE BOND PORTFOLIO 6.51%
SMALL-CAP AGGRESSIVE
GROWTH PORTFOLIO 1.67%
FOREIGN EQUITY PORTFOLIO -2.66%
SHORT-TERM MATURITY
BOND PORTFOLIO 5.39%
BLUE CHIP PORTFOLIO 1.70%
MIDCAP GROWTH PORTFOLIO -0.27%
**Yield and effective yield for the Money Market Portfolio is for the 7-day
period ended December 31, 1997. Yield for the other Portfolios is for the month
ended December 31, 1997. All the yield and effective yield calculations above
take into account charges against the Portfolio. All yield and effective yield
information is annualized. (1) The Donoghue MONEY FUND AVERAGE lists 772 taxable
money funds that are available to individual investors.
TOTAL RETURNS
All total return calculations assume the full redemption of the
Portfolio at the end of the period for which the calculation was made. These
returns also reflect annual returns over the period indicated. For information
on the method used to calculate the returns shown below, see the Statement of
Additional Information. The performance shown reflects past performance only and
is not intended to indicate, predict or guarantee future performance. Total
return information, however, may be of limited use for comparative purposes
because it does not reflect charges imposed at the Series Account level which,
if included, would decrease total return.
<TABLE>
One Five Ten
Since++
Year Year
Year Inception
<S> <C> <C> <C>
INVESTMENT GRADE CORPORATE
BOND PORTFOLIO 6.85% 6.30% N/A 6.46%
U.S. GOVERNMENT MORTGAGE
SECURITIES PORTFOLIO 8.51% 6.74% N/A 8.62%
STOCK INDEX PORTFOLIO+ 32.20% 19.15% 15.53%
SMALL-CAP INDEX PORTFOLIO 21.00% N/A N/A 13.86%
GROWTH INDEX PORTFOLIO 29.26% N/A N/A 21.22%
VALUE INDEX PORTFOLIO 34.08% N/A N/A 21.11%
SMALL-CAP VALUE PORTFOLIO 27.86% N/A N/A 14.71%
CORPORATE BOND PORTFOLIO 12.70% N/A N/A 15.90%
FOREIGN EQUITY PORTFOLIO -5.69% N/A N/A 0.44%
SMALL-CAP AGGRESSIVE
GROWTH PORTFOLIO 24.50% N/A N/A 25.50%
SHORT-TERM MATURITY
BOND PORTFOLIO 6.14% N/A N/A
5.76%
BLUE CHIP PORTFOLIO N/A N/A N/A 6.43%
Comparison Information (3)
MIDCAP GROWTH PORTFOLIO N/A N/A N/A 22.90%
Comparison Information (5)
</TABLE>
+From September 24, 1984 until December 1, 1992, the Stock Index
Portfolio was named the Growth Portfolio and prior to September 24, 1984, was
named the Income/Equity Portfolio. During these periods, the Portfolio's
investment policies differed from the Stock Index Portfolio's current policies.
++ The Investment Grade Corporate Bond, U.S. Government Mortgage
Securities were established effective December 1, 1992. The Small-Cap Index,
Growth Index and Value Index, and Small-Cap Value Portfolios were established
effective December 1, 1993. The Small-Cap Aggressive Growth, Corporate Bond and
Foreign Equity Portfolios were established effective November 1, 1994. The
Short-Term Maturity Bond Portfolio was established effective August 1, 1995. The
Blue Chip and MidCap Growth Portfolios were established effective July 1, 1997.
GENERAL INFORMATION
Reports to Shareholders
The fiscal year of the Fund ends on December 31 of each year. The Fund
will send to its shareholders, at least semiannually, reports showing
performance of the Fund's Portfolios and other information. An annual report,
containing financial statements, audited by independent certified public
accountants, will be sent to shareholders each year.
Custodian
Bank of New York ("BONY"), New York City, New York, acts as custodian of
the Fund's assets. BONY has custody of the Fund's assets held within and outside
the United States. BONY holds the Fund's assets in safekeeping and collects and
remits the income thereon subject to the instructions of the Fund.
Independent Auditors
Deloitte & Touche LLP has been selected as the independent auditors of
the Fund. The selection of independent auditors is subject to annual
ratification by the Fund's shareholders.
Legal Counsel
Jorden Burt Boros Cicchetti Berenson & Johnson, LLP is counsel for the
Fund.
Additional Information
The telephone number or the address of the Fund appearing on the front
page of this prospectus should be used for requests for additional information.
<PAGE>
-----------------------------------------------------------
MAXIM SERIES FUND, INC.
-----------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Prospectus
for the Fund. A copy of the Prospectus may be obtained from the
Fund by writing the Fund at 8515 E. Orchard Rd., Englewood,
Colorado 80111 or by calling the Fund at (303) 689-3000.
-----------------------------------------------------------
G W CAPITAL MANAGEMENT, LLC
Investment Adviser
-----------------------------------------------------------
The date of the Prospectus to which this Statement
of Additional Information relates and the date of
this Statement of Additional Information is
May 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
Cross-reference
to page(s) in
Page Prospectus
<S> <C> <C> <C> <C> <C> <C>
Sale of Shares.............................
The Fund Portfolios........................
Description of Investment Securities..
Information About Securities Ratings..
Investment Limitations................
Foreign Securities....................
Lending of Portfolio Securities.......
Management of the Fund.....................
Directors and Officers................
The Investment Adviser................
The Sub-Advisers......................
Portfolio Transactions and Brokerage.......
Portfolio Turnover....................
Placement of Portfolio Brokerage......
Purchase and Redemption of Shares..........
Calculation of Yield and Return............
Price Make-Up Sheets.......................
Financial Statements........................
</TABLE>
<PAGE>
SALE OF SHARES
Shares of the Fund are sold to the FutureFunds Series Account, Maxim Series
Account and Retirement Plan 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 Metropolitan Life Insurance Company ("MetLife") to fund benefits
under variable annuity contracts. Shares of the Fund are also sold to the
Pinnacle Series Account, a separate account established by GWL&A to fund
variable life insurance policies. Shares of the Fund are, and in the future may
be, sold to other separate accounts of GWL&A, its affiliates or other insurance
companies. It is conceivable that in the future it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate accounts
to invest in the Fund simultaneously. Although no such disadvantages are
currently foreseen either to variable life insurance policyowners or to variable
annuity contract owners, the Fund's Board of Directors intends to monitor events
in order to identify any material conflicts between such policyowners and
contract owners and to determine what action, if any, should be taken in
response thereto. Material conflicts could result from, for example, (1) changes
in state insurance laws, (2) changes in Federal income tax laws, (3) changes in
the investment management of any portfolio of the Fund, or (4) differences in
voting instructions between those given by policyowners and those given by
contract owners.
THE FUND PORTFOLIOS
The discussion that follows provides supplemental information to the discussion
captioned "The Fund Portfolios" in the Prospectus.
The Fund commenced operations as a management investment company in 1982 with
three portfolios, the Money Market, Bond and Income/Equity Portfolios. Pursuant
to shareholders' approval, the investment objectives of the Income/Equity
Portfolio were changed to that of a growth-type portfolio and it was renamed the
Growth Portfolio effective September 24, 1984. Subsequently, the investment
objectives of the Growth Portfolio were again changed to that of an index-type
portfolio and it was renamed the Stock Index Portfolio effective December 1,
1992. The Government Guaranteed Portfolio was added effective January 30, 1985.
Subsequently, pursuant to approval of the shareholders, the investment
objectives of the Government Guaranteed Portfolio were changed and it was
renamed the Government and High Quality Securities Portfolio effective July 29,
1987. Pursuant to approval of the shareholders, the investment objectives of the
Government and High Quality Securities Portfolio were changed and it was renamed
the U.S. Government Securities Portfolio effective May 1, 1990. The Investment
Grade Corporate Bond and the U.S. Government Mortgage Securities Portfolios were
added effective December 1, 1992. The Small-Cap Index, Value Index, Growth
Index, Small-Cap Value and International Equity Portfolios were added effective
December 1, 1993. The Mid-Cap Portfolio was added effective January 3, 1994. The
Corporate Bond, Small-Cap Aggressive Growth, Foreign Equity, Maxim T. Rowe Price
Equity/Income, Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios
were added effective November 1, 1994. The Short-Term Maturity Bond Portfolio
was added effective August 1, 1995. The Maxim INVESCO Balanced Portfolio was
added effective October 1, 1996. The Maxim MidCap Growth and Maxim Blue Chip
Portfolios were added effective July 1, 1997. The Maxim Aggressive Profile,
Moderately Aggressive Profile, Moderate Profile, Moderately Conservative Profile
and Conservative Profile Portfolios were added effective September 1, 1997.
Description of Investment Securities
1. Asset-Backed Securities. Asset-backed securities may be classified as
pass-through certificates of collateralized obligations. They depend
primarily on the credit quality of the assets underlying such securities,
how well the entity issuing the security is insulated from the credit risk
of the originator or any other affiliated entities and the amount and
quality of any credit support provided to the securities. The rate of
principal payment on asset-backed securities generally depends on the rate
of principal payments received on the underlying assets which in turn may
be affected by a variety of economic and other factors. As a result, the
yield on any asset-backed security is difficult to predict with precision
and actual yield to maturity may be more or less than the anticipated yield
to maturity.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in any underlying pool of assets.
Pass-through certificates usually provide for payments of principal and
interest received to be passed through to their holders, usually after
deduction for certain costs and expenses incurred in administering the
pool. Because pass-through certificates represent an ownership interest in
the underlying assets, the holders thereof bear directly the risk of any
defaults by the obligors on the underlying assets not covered by any credit
support.
Asset-backed securities issued in the form of debt instruments, also known
as collateralized obligations, are generally issued as the debt of a
special purpose entity organized solely for the purposes of owning such
assets and issuing such debt. Such assets are most often trade, credit card
or automobile receivables. The assets collateralizing the debt instrument
are pledged to a trustee or custodian for the benefit of the holders
thereof. Such issuers generally hold no assets other than those underlying
the security and any credit support provided. As a result, although
payments on such securities are obligations of the issuers, in the event of
a default on the underlying assets not covered by credit support, the
issuing entities are unlikely to have sufficient assets to satisfy their
obligations on the related asset-backed securities.
2. Bankers' Acceptance. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with international
commercial transactions (to finance the import, export, transfer or storage
of goods). The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and
are traded in secondary markets prior to maturity. The Fund generally will
not invest in acceptances with maturities exceeding 7 days where to do so
would tend to create liquidity problems.
3. Certificate of Deposit. A certificate of deposit generally is a short-term,
interest bearing negotiable certificate issued by a commercial bank or
savings and loan association against funds deposited in the issuing
institution.
4. Collateralized Mortgage Obligations. A Collateralized Mortgage Obligation
("CMO") is a bond which uses certificates issued by the Government National
Mortgage Association, or the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation as collateral in trust. The trust
then issues several bonds which will be paid using the cash flow from the
collateral. The trust can redirect cash flow temporarily, first paying one
bond before other bonds are paid. The trust can also redirect prepayments
from one bond to another bond, creating some stable bonds and some volatile
bonds. The proportion of principal cash flow and interest cash flow from
the collateral flowing to each bond can also be changed, creating bonds
with higher or lower coupons to the extreme of passing through the interest
only to one bond and principal only to another bond. Variable rate or
floating coupon bonds are also often created through the use of CMO's.
5. Commercial Paper. Commercial paper is a short-term promissory note issued
by a corporation primarily to finance short-term credit needs.
6. Covered Options. There are two types of covered options. A covered call
option gives the purchaser the right to buy the underlying securities from
the seller at a stated exercise price. In writing a covered call option,
the seller must own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of securities
exchanges). A covered put option gives the purchaser the right to sell the
underlying securities at a stated price. In the case of a covered put
option, the seller will hold cash and/or high-grade short-term debt
obligations or liquid equity securities equal to the price to be paid if
the option is exercised. The seller will be considered to have covered a
put or call option if and to the extent that it holds an option that
offsets some or all of the risk of the option it has written. Combinations
of covered puts and calls may be written on the same underlying security.
Put options may be purchased to protect its portfolio holdings in an
underlying security against a decline in market value. Such protection is
provided during the life of the put option because the holder of the option
is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In
order for a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this manner, the
seller will reduce any profit it might otherwise have realized from
appreciation of the underlying security by the premium paid for the put
option and by transaction costs.
Premiums are received from writing a put or call option, which increases
the return on the underlying security in the event the option expires
unexercised or is closed out at a profit. The amount of the premium
reflects, among other things, the relationship between the exercise price
and the current market value of the underlying security, the volatility of
the underlying security, the amount of time remaining until expiration,
current interest rates, and the effect of supply and demand in the options
market and in the market for the underlying security. By writing a call
option, the seller limits its opportunity to profit from any increase in
the market value of the underlying security above the exercise price of the
option but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the seller assumes the risk
that it may be required to purchase the underlying security for an
exercises price higher than its then-current market value, resulting in a
potential capital loss unless the security subsequently appreciates in
value.
Call options may be purchased to hedge against an increase in the price of
securities that the purchaser wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the holder
of the call option is able to buy the underlying security at the exercise
price regardless of any increase in the underlying security's market price.
In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to
cover the premium and transactions costs.
Special risks are presented by internationally-traded options. Because of
time differences, and because different holidays are observed in different
countries, foreign options markets may be open for trading during hours or
on days when U.S. markets are closed. As a result, option premiums may not
reflect the current prices of the underlying interest in the United States.
7. Dealer (Over-the-Counter) Options. A dealer option is an option which is
not traded on an exchange and may be exercised through the dealer from whom
it had purchased the option. If a Portfolio were to purchase a dealer
option, failure by the dealer to perform on the option would result in the
loss of the premium paid as well as loss of the expected benefit of the
transaction.
Dealer options do not have a continuous liquid market as do exchange-traded
options. Consequently, the value of a dealer option may be realized only be
exercising it or reselling it to the dealer who issued it. Dealer options
will only be entered into with dealers who will agree to and which are
expected to be capable of entering into closing transactions; however,
there can be no assurance the a dealer option may be liquidated at a
favorable price at any time prior to expiration. In the event of an
insolvency of the contra party, a dealer option may not be liquidated.
The staff of the SEC has taken the position that purchased dealer options
and the assets used to secure the written dealer options are illiquid
securities. The cover used for written over-the-counter options may be
treated as liquid if the dealer agrees that the over-the-counter option
which the dealer has written may be repurchased for a maximum price to be
calculated by a predetermined formula. In such cases, the over-the-counter
option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the
option. Accordingly, dealer options will be treated as subject to the
limitation on illiquid securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.
8. Eurodollar Certificate of Deposit. A Eurodollar certificate of deposit is a
short-term obligation of a foreign subsidiary of a U.S. bank payable in
U.S. dollars.
9. Floating Rate Note. A floating rate note is debt issued by a corporation or
commercial bank that is typically several years in term but has a resetting
of the interest rate on a one to six month rollover basis.
10. Forward Contracts. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated
asset at a specified time in the future and the other party is obligated to
pay a specified amount for the assets at the time of delivery. When used
with foreign currency exchange transactions, a forward contract involves an
obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts
may be bought or sold to protect the seller, to some degree, against a
possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar. Forward contracts can be used to
protect the value of a seller's investment securities by establishing a
rate of exchange that the seller can achieve at some future point in time;
they do not simulate fluctuations in the underlying prices of the
securities. Additionally, although forward contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the
same time, they tend to limit any potential gains that might result should
the value of such currency increase. Forward contracts generally are traded
in an interbank market conducted directly between traders (usually large
commercial banks) and their customers. Unlike futures contracts, which are
standardized contracts, forward contracts can be specifically drawn to meet
the need of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity,
or may hold the contract to maturity and complete the contemplated
exchange.
11. Hybrid Instruments. Hybrid instruments have recently been developed and
combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. Often these hybrid instruments
are indexed to the price of a commodity, particular currency, or a domestic
or foreign debt or equity securities index. Hybrid instruments may take a
variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference
to the value of a currency or commodity or securities index at a future
point in time, preferred stock with dividend rates determined by reference
to the value of a currency, or convertible securities with the conversion
terms related to a particular commodity. The risks associated with hybrid
instruments reflect a combination of the risks of investing in securities,
options, futures and currencies, including volatility and lack of
liquidity. Further, the prices of the hybrid instrument and the related
commodity or currency may not move in the same direction or at the same
time.
12. Index Futures Contracts. An index futures contract obligates the seller to
deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at
the close of the last trading day of the contract and the price at which
the agreement is made. No physical delivery of the underlying security in
the index is made. When purchasing an index futures contract or selling
index futures, (1) a segregated account consisting of cash, U.S. Government
securities, or other liquid high-grade debt securities or liquid equity
securities must be maintained with the custodian bank (and marked to market
daily) which, when added to any amounts deposited with a futures commission
merchant as margin, are equal to the market value of the futures contract;
or (2) the Fund must "cover" its position.
13. Interest Rate Transactions. Interest rate swaps and interest rate caps and
floors are types of hedging transactions which are utilized to attempt to
protect the Portfolio against and potentially benefit from fluctuations in
interest rates and to preserve a return or spread on a particular
investment or portion of the Portfolio's holdings. These transactions may
also be used to attempt to protect against possible declines in the market
value of the Portfolio's assets resulting from downward trends in the debt
securities markets (generally due to a rise in interest rates) or to
protect unrealized gains in the value of the Portfolio's holdings, or to
facilitate the sale of such securities.
Interest rate swaps involve the exchange with another party of commitments
to pay or receive interest; e.g., an exchange of fixed rate payments for
variable rate payments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest on a notional principal
amount from the party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate floor.
The successful utilization of interest rate transactions depends on the
Portfolio manager's ability to predict correctly the direction and degree
of movements in interest rates. If the Portfolio manager's judgment about
the direction or extent of movement in interest rates is incorrect, the
Portfolio's overall performance would be worse than if it had not entered
into such transactions. For example, if the Portfolio purchases an interest
rate swap or an interest rate floor to hedge against the expectation that
interest rates will decline but instead interest rates rise, the Portfolio
would lose part or all of the benefit of the increased payments it would
receive as a result of the rising interest rates because it would have to
pay amounts to its counterparts under the swap agreement or would have paid
the purchase price of the interest rate floor.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. Interest rate
swaps, caps and floors are considered by the Staff of the Securities and
Exchange Commission to be illiquid securities and, therefore, the Portfolio
may not invest more than 15% of its assets in such instruments. Finally,
there can be no assurance that the Portfolio will be able to enter into
interest rate swaps or to purchase interest rate caps or floors at prices
or on terms the Portfolio manager believes are advantageous to the
Portfolio. In addition, although the terms of interest rate swaps, caps and
floors may provide for termination, there can be no assurance that the
Portfolio will be able to terminate an interest rate swap or to sell or
offset interest rate caps or floors that it has purchased.
14. Repurchase Agreements. A repurchase agreement is an instrument under which
the purchaser acquires ownership of a debt security and the seller agrees
to repurchase the obligation at a mutually agreed upon time and price. The
total amount received on repurchase is calculated to exceed the price paid
by the purchaser, reflecting an agreed upon market rate of interest for the
period from the time of purchase of the security to the settlement date
(i.e., the time of repurchase), and would not necessarily relate to the
interest rate on the underlying securities. A purchaser will only enter
repurchase agreements with underlying securities consisting of U.S.
Government or government agency securities, certificates of deposit,
commercial paper or bankers' acceptances, and will be entered only with
primary dealers. While investment in repurchase agreements may be made for
periods up to 30 days, it is expected that typically such periods will be
for a week or less. The staff of the Securities and Exchange Commission has
taken the position that repurchase agreements of greater than 7 days should
be limited to an amount not in excess of 15% (together with other illiquid
investments) of a purchaser's total assets.
Although repurchase transactions usually do not impose market risks on the
purchaser, the purchaser would be subject to the risk of loss if the seller
fails to repurchase the securities for any reason and the value of the
securities is less than the agreed upon repurchase price. In addition, if
the seller defaults, the purchaser may incur disposition costs in
connection with liquidating the securities. Moreover, if the seller is
insolvent and bankruptcy proceedings are commenced, under current law, the
purchaser could be ordered by a court not to liquidate the securities for
an indeterminate period of time and the amount realized by the purchaser
upon liquidation of the securities may be limited.
15. Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by the seller, with an agreement to repurchase the
securities at an agreed upon price, date and interest payment. The seller
will use the proceeds of the reverse repurchase agreements to purchase
other money market securities either maturing, or under an agreement to
resell, at a date simultaneous with or prior to the expiration of the
reverse repurchase agreement. The seller will utilize reverse repurchase
agreements when the interest income to be earned from the investment of the
proceeds from the transaction is greater than the interest expense of the
reverse repurchase transaction.
16. Stripped Treasury Securities. Zero-Coupon Treasury Securities come in two
forms: U.S. Treasury bills issued directly by the U.S. Treasury and U.S.
Treasury bonds or notes and their unmatured interest coupons which have
been separated by their holder, typically a custodian bank or investment
brokerage firm. A number of securities firms and banks have stripped the
interest coupons from Treasury bonds and notes and resold them in custodial
receipt programs with a number of different names. The underlying Treasury
bonds and notes themselves are held in book-entry form at the Federal
Reserve Bank or, in the case of bearer securities, in trust on behalf of
the owners thereof.
Publicly filed documents state that counsel to the underwriters of these
certificates or other evidences of ownership of the U.S. Treasury
securities have stated that for Federal tax and securities purposes,
purchasers of such certificates most likely will be deemed the beneficial
holders of the underlying U.S. Government securities. In addition, such
documents state that the terms of custody for the custodial receipt
programs generally provide that the underlying debt obligations will be
held separate from the general assets of the custodian and will not be
subject to any right, charge, security interest, lien, or claim of any kind
in favor of the custodian or any person claiming through the custodian, and
the custodian will be responsible for applying all payments received on
these underlying debt obligations, if any, to the related receipts or
certificates without making any deductions other than applicable tax
withholding. The custodian is required to maintain insurance in customary
amounts to protect the holders of the receipts or certificates against
losses resulting from the custody arrangement. The holders of receipts or
certificates, as the real parties in interest, are entitled to the rights
and privileges of owners of the underlying debt obligations, including the
right, in the event of default, to proceed directly and individually
against the U.S. Government without acting in concert with other holders of
such receipts or the custodian.
When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the stripped coupons are sold off
separately. The principal or corpus is sold at a deep discount because the
buyer receives only the right to receive a future fixed payment on the
security and does not receive any rights to periodic interest payments.
Once stripped or separated, the corpus and coupons may be sold separately.
Typically, the coupons are sold separately or grouped with other coupons
with like maturity dates and sold in bundled form. Purchasers of Stripped
Treasury Securities acquire, in effect, discount obligations that are
economically identical to the "zero coupon bonds" that have been issued by
corporations.
The U.S. Treasury has facilitated transfers of ownership of Stripped
Treasury Securities by accounting separately for the beneficial ownership
of particular interest coupon and corpus payments on U.S. Treasury
securities through the Federal Reserve book-entry recordkeeping system. The
Federal Reserve program, as established by the U.S. Treasury Department, is
known as Separate Trading of Registered Interest and Principal of
Securities or "STRIPS". The plan eliminates the need for the trust or
custody arrangements.
17. Swap Deposit. Swap deposits are foreign currency short-term investments
consisting of a foreign exchange contract, a short-term note in foreign
currency and a foreign exchange forward contract that is totally hedged in
U.S. currency. This type of investment can produce competitive yield in
U.S. dollars without incurring risks of foreign exchange.
18. Time Deposit. A time deposit is a deposit in a commercial bank for a
specified period of time at a fixed interest rate for which a negotiable
certificate is not received.
19. Variable Amount Master Demand Note. A variable amount master demand note is
a note which fixes a minimum and maximum amount of credit and provides for
lending and repayment within those limits at the discretion of the lender.
Before investing in any variable amount master demand notes, the liquidity
of the issuer must be determined through periodic credit analysis based
upon publicly available information.
20. Warrants. Warrants are pure speculation in that they have no voting rights,
pay no dividends and have no rights with respect to the assets of the
corporation issuing them. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of time. They do
not represent ownership of the securities, but only the right to buy them.
Warrants differ from call options in that warrants are issued by the issuer
of the security which may be purchased on their exercise, whereas call
options may be written or issued by anyone. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.
21. When-issued Securities. When the purchase of securities on a "when-issued"
or on a "forward delivery" basis is permitted, it is expected that, under
normal circumstances, delivery of such securities will be taken. When a
commitment to purchase a security on a "when-issued" or on a "forward
delivery" basis is made, procedures are established for such purchase
consistent with the relevant policies of the Securities and Exchange
Commission. Since those policies currently recommend that assets equal to
the amount of the purchase be held aside or segregated to be used to pay
for the commitment, cash or other liquid assets sufficient to cover any
commitments or to limit any potential risk are expected to be held.
However, although it is not intended that such purchases would be made for
speculative purposes and adherence to the provisions of the Securities and
Exchange Commission policies is expected, purchase of securities on such
bases may involve more risk than other types of purchases. For example, the
sale of assets which have been set aside in order to meet redemptions may
be required. Also, if it is determined that it is advisable as a matter of
investment strategy to sell the "when-issued" or "forward delivery"
securities, the then available cash flow or the sale of securities would be
required to meet the resulting obligations, or, although it would not
normally be expected, from the sale of the "when-issued" or "forward
delivery" securities themselves (which may have a value greater or less
than the payment obligation).
Information about Securities Ratings
Corporate Bonds - Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Corporate Bonds - Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity for bonds rated BBB than for bonds in the A category.
BB, B, CCC, and CC - Standard & Poor's describes the BB, B, CCC and CC rated
issues together with issues rated CCC and CC. Debt in these categories is
regarded on balance as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Commercial Paper - Moody's Investors Service, Inc.
"Prime-1" - Commercial Paper issuers rated Prime-1 are judged to be of the best
quality. Their short-term debt obligations carry the smallest degree of
investment risk. Margins of support for current indebtedness are large or stable
with cash flow and asset protection well assured. Current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
"Prime-2" - Issuers in the Commercial Paper market rated Prime-2 are high
quality. Protection for short-term holders is assured with liquidity and value
of current assets as well as cash generation in sound relationship to current
indebtedness. They are rated lower than the best commercial paper issuers
because margins of protection may not be as large or because fluctuations of
protective elements over the near or immediate term may be of greater amplitude.
Temporary increases in relative short and overall debt load may occur.
Alternative means of financing remain assured.
"Prime-3" - Issuers in the Commercial Paper market rated Prime-3 have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earning and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
<PAGE>
Commercial Paper - Standard & Poor's Corporation
"A" - Issuers assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issuers in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.
"A-1" - This designation indicates that the degree of safety regarding timely
payment is very strong.
"A-2" - Capacity for timely payment for issuers with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
"A-3" - Issuers carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation.
Investment Limitations
The Fund has adopted limitations on the investment activity of its Portfolios
which are fundamental policies and may not be changed without the approval of
the holders of a majority of the outstanding voting shares of the Fund,
including a majority of the shares of each Portfolio affected by the change.
These limitations apply to all Portfolios except the Maxim T. Rowe Price
Equity/Income, Maxim MidCap Growth, Maxim INVESCO Balanced, Maxim Blue Chip,
Aggressive Profile, Moderately Aggressive Profile, Moderate Profile, Moderately
Conservative Profile and Conservative Profile Portfolios. Please see
descriptions starting on page 14 of the investment limitations applicable to
these Portfolios. If only one Portfolio is affected, only shares of that
Portfolio are entitled to vote. "Majority" for this purpose and under the
Investment Company Act of 1940 means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares. A complete
statement of all such limitations are set forth below.
The Fund (i.e., each Portfolio) will not:
1. (a) Invest more than 15% of its total assets (taken at market value at the
time of each investment) in obligations (excluding repurchase agreements)
of any one bank, or, with respect to 75% of its assets, invest more than 5%
of such assets in the securities (other than United States Government or
government agency securities) of any one issuer other than a bank (but
including repurchase agreements with any one bank); and (b) purchase more
than either (i) 10% in principal amount of the outstanding debt securities
of an issuer, or (ii) 10% of the outstanding voting securities of an
issuer, except that such restrictions shall not apply to securities issued
or guaranteed by the United States Government or its agencies, bank money
instruments or bank repurchase agreements. Under the diversification
requirements of the Investment Company Act of 1940 applicable to
diversified investment companies, such as the Fund, the Fund may not invest
more than 5% of the value of its total assets in the securities of any one
issuer (except that this statutory restriction does not apply with respect
to 25% of the value of an investment company's total assets). Under the
Fund's current interpretation of the statutory diversification tests, bank
obligations of the type in which the Fund invests are not subject to this
5% limitation and thus the Fund's only limitation in this regard is the 15%
limitation set forth above. The staff of the Securities and Exchange
Commission, however, has taken the position that certain bank obligations
are subject to the statutory 5% limitation, and further action by the
Commission may make it necessary that the Fund revise its investments in
bank obligations so as not to exceed the 5% limitation in order for the
Fund to maintain its status as a diversified company. This investment
restriction does not apply to the Investment Grade Corporate Bond, U.S.
Government Mortgage Securities or Short-Term Maturity Bond Portfolios.
2. Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers primarily engaged in the
same industry; utilities will be divided according to their services; for
example, gas, gas transmission, electric and telephone each will be
considered a separate industry for purposes of this restriction; provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, or its agencies or instrumentalities, or
of certificates of deposit and bankers' acceptances.
3. Alone or together with any other investor make investments for the purpose of
exercising control over, or management of any issuer.
4. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase
in the open market of securities of closed-end investment companies where
no underwriter or dealer's commission or profit, other than customary
broker's commission, is involved, and only if immediately thereafter not
more than 10% of such Fund's total assets, taken at market value, would be
invested in such securities; and except that the Foreign Equity Portfolio
may invest up to 10% of its total assets at the time of acquisition in
securities of any investments companies. This investment restriction does
not apply to the Short-Term Maturity Bond Portfolio.
5. Purchase or sell interests in commodities, commodities contracts, oil, gas
or other mineral exploration or development programs, or real estate,
except that the Fund may purchase securities of issuers which invest or
deal in any of the above; provided, however, that the Bond, Stock Index,
Small-Cap Index, Growth Index, Value Index, MidCap, International Equity,
Small-Cap Value, Corporate Bond, Foreign Equity, Small-Cap Aggressive
Growth, Maxim INVESCO Small-Cap Growth, Maxim INVESCO ADR and Short-Term
Maturity Bond Portfolios may invest in futures contracts based on financial
indices, foreign currency transactions and options on permissible futures
contracts.
6. Purchase securities for the Fund which cannot be sold without registration
or the filing of a notification under federal or state securities laws if,
as a result, such investments would exceed 10% of the value of such Fund's
net assets (15% for the Maxim INVESCO Small-Cap Growth and Maxim INVESCO
ADR Portfolios). This investment restriction does not apply to the
Short-Term Maturity Bond Portfolio.
7. Purchase any securities on margin (except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities, and the Bond, Stock Index, Small-Cap Index,
Value Index, Growth Index, International Equity, Small-Cap Value, MidCap,
Corporate Bond, Short-Term Maturity Bond, Small-Cap Aggressive Growth,
Foreign Equity, Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR
Portfolios may make margin payments in connection with transactions in
currency futures contracts) or make short sales of securities or maintain a
short position.
8. Make loans, except as provided in limitation (9) below and except through
the purchase of obligations in private placements (the purchase of
publicly-traded obligations are not being considered the making of a loan).
9. Lend its portfolio securities in excess of 20% of its total assets, taken
at market value at the time of the loan, and provided that such loan shall
be made in accordance with the guidelines set forth under "Lending of
Portfolio Securities", in this Statement of Additional Information (33 1/3%
for the Short-Term Maturity Bond Portfolio).
10. Borrow amounts in excess of 10% of its total assets, taken at market value
at the time of the borrowing, and then only from banks as a temporary
measure for extraordinary or emergency purposes. In the event the Fund
borrows in excess of 5% of its total assets, at the time of such borrowing
it will have an asset coverage of at least 300%. As a matter of policy, all
borrowings will be repaid before any investments are made.
11. Mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Fund except as may be
necessary in connection with borrowings mentioned in limitation (10) above,
and then such mortgaging, pledging or hypothecating may not exceed 10% of
the Fund's total assets, taken at market value at the time thereof. The
Fund will not, as a matter of operating policy, mortgage, pledge or
hypothecate its portfolio securities to the extent that at any time the
percentage of the value of pledged securities will exceed 10% of the value
of the Fund's shares. This restriction does not apply to segregated
accounts.
12. Underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in selling portfolio
securities.
13. Write, purchase or sell puts, calls or combinations thereof, except that
the Bond, Small-Cap Index, Value Index, Growth Index, MidCap, International
Equity, Small-Cap Value, Corporate Bond, Small-Cap Aggressive Growth,
Foreign Equity, Short-Term Maturity Bond, Maxim INVESCO Small-Cap Growth
and Maxim INVESCO ADR Portfolios may buy and sell put and call options (and
any combination thereof) on securities (including index options), on index
futures contracts, on securities indices, and on foreign currencies (to the
extent a Portfolio may invest in foreign currencies) and may buy and sell
put and call warrants, the values of which are based upon securities
indices. In addition, the Bond Portfolio may buy and sell put and call
options ( and any combination thereof) on permissible futures contracts.
14. Sell securities short or purchase securities on margin.
15. Invest in securities of foreign issuers if at the time of acquisition more
than 10% of its total assets, taken at market value at the time of
investment, would be invested in such securities. However, up to 25% of the
total assets of a Portfolio may be invested in securities (i) issued,
assumed or guaranteed by foreign governments, or political subdivisions or
instrumentalities thereof, (ii) assumed or guaranteed by domestic issuers,
including Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on the New
York Stock Exchange or on a major Canadian exchange. See "Foreign
Securities", below. This investment limitation will not apply to the
International Equity, MidCap, Bond, Small-Cap Value, Corporate Bond,
Short-Term Maturity Bond, Small-Cap Aggressive Growth, Foreign Equity,
Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios.
Following are investment limitations applicable to the Maxim T. Rowe Price
Equity/Income and Maxim MidCap Growth Portfolios. These are fundamental policies
and may not be changed without the approval of the holders of a majority of the
outstanding voting shares of the Portfolio. "Majority" for this purpose and
under the Investment Company Act of 1940 means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares.
The Portfolios will not:
1. (a) Invest more than 15% of its total assets (taken at market value at the
time of each investment) in obligations (excluding repurchase agreements)
of any one bank, or, with respect to 75% of its assets, invest more than 5%
of such assets in the securities (other than United States Government or
government agency securities) of any one issuer other than a bank (but
including repurchase agreements with any one bank); and (b) purchase more
than either (i) 10% in principal amount of the outstanding debt securities
of an issuer, or (ii) 10% of the outstanding voting securities of an
issuer, except that such restrictions shall not apply to securities issued
or guaranteed by the United States Government or its agencies, bank money
instruments or bank repurchase agreements. Under the diversification
requirements of the Investment Company Act of 1940 applicable to
diversified investment companies, such as the Fund, the Fund may not invest
more than 5% of the value of its total assets in the securities of any one
issuer (except that this statutory restriction does not apply with respect
to 25% of the value of an investment company's total assets). Under the
Fund's current interpretation of the statutory diversification tests, bank
obligations of the type in which the Fund invests are not subject to this
5% limitation and thus the Fund's only limitation in this regard is the 15%
limitation set forth above. The staff of the Securities and Exchange
Commission, however, has taken the position that certain bank obligations
are subject to the statutory 5% limitation, and further action by the
Commission may make it necessary that the Fund revise its investments in
bank obligations so as not to exceed the 5% limitation in order for the
Fund to maintain its status as a diversified company. This investment
restriction does not apply to the Investment Grade Corporate Bond, U.S.
Government Mortgage Securities or Short-Term Maturity Bond Portfolios.
2. Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers primarily engaged in the
same industry; utilities will be divided according to their services; for
example, gas, gas transmission, electric and telephone each will be
considered a separate industry for purposes of this restriction; provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, or its agencies or instrumentalities, or
of certificates of deposit and bankers' acceptances.
3. Purchase or sell interests in commodities, commodities contracts, oil, gas
or other mineral exploration or development programs, or real estate,
except that the Portfolio may purchase securities of issuers which invest
or deal in any of the above; provided, however, that the Portfolio may
invest in futures contracts, forward currency contracts, and options on
futures.
4. Make loans, except as provided in limitation (5) below and except through
the purchase of obligations in private placements (the purchase of
publicly-traded obligations are not being considered the making of a loan).
5. Lend its portfolio securities in excess of 33 1/3% of its total assets,
taken at market value at the time of the loan, and provided that such loan
shall be made in accordance with the guidelines set forth under "Lending of
Portfolio Securities" of this Statement of Additional Information.
6. Borrow, except that the Portfolios may (i) borrow for non-leveraging,
temporary or emergency purposes and (ii) engage in reverse repurchase
agreements and make other investments or engage in other transactions which
may involve a borrowing, in a manner consistent with the Portfolio's
investment objective and program, provided that the combination of (i) and
(ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets
(including the borrowed amount) less liabilities (other than borrowings) or
such other percentage permitted by law. Any borrowings which come to exceed
this amount will be reduced in accordance with applicable law. Reverse
repurchase agreements and other investments which are "covered" by a
segregated account or an offsetting position in accordance with applicable
SEC requirements do not constitute borrowings for purposes of any asset
coverage requirement.
7. Underwrite securities of other issuers except insofar as the Portfolio may
be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
8. Purchase or sell real estate including limited partnership interests
therein, unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Portfolio from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business).
9. Issue senior securities except in compliance with the Investment Company Act
of 1940.
Notes
The following notes should be read in connection with the above-described
investment limitations. The notes are not fundamental policies.
With respect to investment limitation (3), the Portfolios do not consider
currency contracts or hybrid investments to be commodities.
For purposes of investment limitation (2), U.S., state or local governments, or
related agencies or instrumentalities, are not considered an industry.
Industries are determined by reference to the classifications of industries set
forth in the Portfolio's semi-annual and annual reports.
For purposes of investment limitations (4) and (5), the Portfolios will consider
the acquisition of a debt security to include the execution of a note or other
evidence of an extension of credit with a term of more than nine months.
Operating Policies
As a matter of operating policy, the Portfolios may not:
Purchase additional securities when money borrowed exceeds 5% of its total
assets.
Invest in companies for the purpose of exercising management or control.
Purchase a futures contract or an option thereon if, with respect to positions
in futures or options on futures which do not represent bona fide hedging, the
aggregate initial margin and premiums on such options would exceed 5% of the
Portfolio's net asset value.
Purchase securities of open-end or closed-end investment companies except in
compliance with the Investment Company Act of 1940 and applicable state law.
Duplicate fees may result from such purchases.
Purchase securities on margin, except (i) to obtain short-term credit necessary
for clearance of purchases of portfolio securities and (ii) to make margin
deposits in connection with futures contracts or other permissible investments.
Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by
the Portfolios as security for indebtedness except as may be necessary in
connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets
at the time of borrowing or investment.
Purchase participation or other direct interests in or enter into leases with
respect to, oil, gas, or other mineral exploration or development programs if,
as a result thereof, more than 5% of the value of the total assets of the
Portfolio would be invested in such programs.
Effect short sales of securities, unless a Portfolio owns or has the right to
obtain securities equivalent in kind and amount to the securities sold short
without the payment of any additional consideration therefor, and provided that
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
Invest in warrants if, as a result thereof, more than 10% of the value of the
net assets of the Portfolio would be invested in warrants.
Following are investment limitations applicable to the Maxim Blue Chip
Portfolio. The policies designated as fundamental policies may not be changed
without the approval of the holders of a majority of the outstanding voting
shares of the Portfolio. "Majority" for this purpose and under the Investment
Company Act of 1940 means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares. The policies designated as
non-fundamental may be changed by the Fund's Board of Directors without
shareholder approval.
Fundamental Policies
The Portfolio will not:
1. Make loans to other persons; the purchase of a portion of an issue of
publicly or privately distributed bonds, debentures or other securities is
not considered the making of a loan by the Portfolio. The Portfolio may
also enter into repurchase agreements.
2. Underwrite the securities of other issuers except insofar as the Portfolio
may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
3. Invest directly in physical commodities (other than foreign currencies),
real estate or interests in real estate; provided that the Portfolio may
invest in securities of issuers that invest in physical commodities, real
estate or interests in real estate; and, provided further, that this shall
not prevent the Portfolio from purchasing or selling options, futures,
swaps and forward contracts or from investing in securities or other
instruments backed by physical commodities, real estate or interests in
real estate.
4. Make any investment if, as a result, 25% or more of the Portfolio's total
assets would be invested in securities of issuers having their principal
business activities in the same industry, provided that this limitation
does not apply to obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
5. Issue any senior securities except in compliance with the Investment Company
Act of 1940.
6. Borrow money, except for extraordinary or emergency purposes, and then only
from banks in amounts up to 33 1/3% of the Portfolio's total assets.
Non-Fundamental Policies
Purchase any securities on margin except to obtain such short-term credits as
may be necessary for the clearance of transactions.
Sell securities short, unless the Portfolio owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short without
the payment of any additional consideration therefor, and provided that
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
Purchase more than 10% of any class of securities of any single issuer or
purchase more than 10% of the voting securities of any single issuer.
Purchase securities of any issuer (other than obligations of, or guaranteed by,
the United States government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Portfolio's total assets would be
invested in securities of that issuer.
Invest more than 15% of the market value of its net assets in securities which
are not readily marketable, including repurchase agreements maturing in over
seven days.
Following are investment limitations applicable to the Maxim INVESCO Balanced
Portfolio. These are fundamental policies and may not be changed without the
approval of the holders of a majority of the outstanding voting shares of the
Portfolio. "Majority" for this purpose and under the Investment Company Act of
1940 means the lesser of (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (ii) more than 50% of
the outstanding shares.
The Portfolio will not:
1. Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers primarily engaged in the
same industry; utilities will be divided according to their services; for
example, gas, gas transmission, electric and telephone each will be
considered a separate industry for purposes of this restriction; provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, or its agencies or instrumentalities, or
of certificates of deposit and bankers' acceptances.
2. With respect to 75% of its total assets, purchase the securities of any one
issuer (except cash items and "Government securities" as defined under the
1940 Act), if the purchase would cause the Portfolio to have more than 5%
of the value of its total assets invested in the securities of such issuer
or to own more than 10% of the outstanding voting securities of such
issuer.
3. Purchase or sell physical commodities other than foreign currencies unless
acquired as a result of ownership of securities (but this shall not prevent
the Portfolio from purchasing or selling options, futures, swap and forward
contracts or from investing in securities or other instruments backed by
physical commodities).
4. Make loans, except as provided in limitation (5) below and except through
the purchase of obligations in private placements (the purchase of
publicly-traded obligations are not being considered the making of a loan).
5. Lend its portfolio securities in excess of 33 1/3% of the total assets of
the Portfolio (including the amount borrowed), taken at market value at the
time of the loan, and provided that such loan shall be made in accordance
with the guidelines set forth under "Lending of Portfolio Securities", in
this Statement of Additional Information.
6. Borrow money, except that the Portfolio may borrow money as a temporary
measure for extraordinary or emergency purposes (not for leveraging or
investment) and may enter into reverse repurchase agreements in an
aggregate amount not exceeding 33 1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings).
Any borrowing that comes to exceed 33 1/3% of the value of the Portfolio's
total assets due to a decline in net assets will be reduced within three
days to the extent necessary to comply with the 33 1/3% limitation. This
restriction shall not prohibit deposits of assets to margin or guarantee
positions in futures, options, swaps or forward contracts, or the
segregation of assets in connection with such contracts.
7. Underwrite securities of other issuers except insofar as the Portfolio may
be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
8. Invest directly in real estate or interest in real estate; however, the
Portfolio may own debt or equity securities issued by companies engaged in
those businesses.
9. Issue senior securities. For purposes of this restriction, the issuance of
shares of common stock in multiple classes or series, obtaining of
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities, short sales against the box, the purchase or
sale or permissible options and futures transactions (and the use of
initial and maintenance margin arrangements with respect to futures
contracts or related options transactions), the purchase or sale of
securities on a when issued or delayed delivery basis, permissible
borrowings entered into in accordance with the Portfolio's investment
policies, and reverse repurchase agreements are not deemed to be issuances
of senior securities.
As a fundamental policy in addition to the above, the Portfolio may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Portfolio.
Further, the following additional investment restrictions, which are
operating policies of the Portfolio are applicable. These policies may be
changed by the Board of Directors without shareholder approval.
(a) Investments in warrants, valued at the lower of cost or market, may not
exceed 5% of the value of the Portfolio's net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or American Stock
Exchanges. Warrants acquired by the Portfolio in units or attached to
securities shall be deemed to be without value.
(b) The Portfolio will not (i) enter into futures contracts or options on
futures contracts if immediately thereafter the aggregate margin deposits
on all outstanding futures contracts positions held by the Portfolio and
premiums paid on outstanding options on futures contracts, after taking
into consideration unrealized profits and losses, would exceed 5% of the
market value of the total assets of the Portfolio, or (ii) enter into any
futures contracts if the aggregate net amount of the Portfolio's
commitments under outstanding futures contracts positions of the Portfolio
would exceed the market value of the total assets of the Portfolio.
(c) The Portfolio does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short without the payment of any additional
consideration therefor, and provided that transactions in options, swaps
and forward futures contracts are not deemed to constitute selling
securities short.
(d) The Portfolio does not currently intend to purchase securities on margin,
except that the Portfolio may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments and other deposits in connection with transactions in options,
futures, swaps and forward contracts shall not be deemed to constitute
purchasing securities on margin.
(e) The Portfolio does not currently intend to (i) purchase securities of
closed end investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end management
investment companies. Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through offers of exchange,
or as a result of a reorganization, consolidation, or merger. If the
Portfolio invests in a money market fund, the investment advisory fee will
be waived on the assets of the Portfolio which are invested in the money
market fund during the time that those assets are so invested.
(f) The Portfolio may not mortgage or pledge any securities owned or held by
the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net asset value, provided that this limitation does not apply
to reverse repurchase agreements or in the case of assets deposited to
margin or guarantee positions in futures, options, swaps or forward
contracts or placed in a segregated account in connection with such
contracts.
(g) The Portfolio does not currently intend to purchase securities of any
issuer (other the U.S. Government agencies and instrumentalities or
instruments guaranteed by an entity with a record of more than three years'
continuous operation, including that of predecessors) with a record of less
than three years' continuous operation (including that of predecessors) if
such purchase would cause the Portfolio's investments in all such issuers
to exceed 5% of the Portfolio's total assets taken at market value at the
time of such purchase.
(h) The Portfolio does not currently intend to invest directly in oil, gas, or
other mineral development or exploration programs or leases; however, the
Portfolio may own debt or equity securities of companies engaged in those
businesses.
(i) The Portfolio may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the Portfolio
of its rights under agreements related to portfolio securities would be
deemed to constitute such control.
Following are the limitations on the investment activity of the Maxim Profile
Portfolios. These limitations are fundamental policies and may not be changed
without the approval of the holders of a majority of the outstanding voting
shares of the Portfolio. "Majority" for this purpose and under the Investment
Company Act of 1940 means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares. A complete statement of all such
limitations are set forth below.
Each Profile 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; provided that, the
Maxim Profile Portfolios may invest 100% of their assets in investment
companies which are advised by G W Capital or any affiliates thereof (or
other investment companies with the approval of the SEC).
2. With respect to 75% of its total assets, purchase the securities of any one
issuer (except cash items and "Government securities" as defined under the
1940 Act), if the purchase would cause the Portfolio to have more than 5%
of the value of its total assets invested in the securities of such issuer
or to own more than 10% of the outstanding voting securities of such
issuer, except that this shall not apply to the Profile Portfolios.
3. Purchase or sell physical commodities other than foreign currencies unless
acquired as a result of ownership of securities (but this shall not prevent
the Portfolio from purchasing or selling options, futures, swap and forward
contracts or from investing in securities or other instruments backed by
physical commodities).
4. Make loans, except as provided in limitation (5) below and except through
the purchase of obligations in private placements (the purchase of
publicly-traded obligations are not being considered the making of a loan).
5. Lend its portfolio securities in excess of 33 1/3% of the total assets of
the Portfolio (including the amount borrowed), taken at market value at the
time of the loan, and provided that such loan shall be made in accordance
with the guidelines set forth under "Lending of Portfolio Securities", in
this Statement of Additional Information.
6. Borrow money, except that the Portfolio may borrow money as a temporary
measure for extraordinary or emergency purposes (not for leveraging or
investment) and may enter into reverse repurchase agreements in an
aggregate amount not exceeding 33 1/3% of the value of its total assets
(including the amount borrowed). Any borrowing that comes to exceed 33 1/3%
of the value of the Portfolio's total assets due to a decline in net assets
will be reduced within three days to the extent necessary to comply with
the 33 1/3% limitation.
7. Underwrite securities of other issuers except insofar as the Portfolio may
be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
8. Invest directly in real estate or interest in real estate; however, the
Portfolio may own debt or equity securities issued by companies engaged in
those businesses.
9. Issue senior securities. For purposes of this restriction, the issuance of
shares of common stock in multiple classes or series, obtaining of
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities, short sales against the box, the purchase or
sale or permissible options and futures transactions (and the use of initial
and maintenance margin arrangements with respect to futures contracts or
related options transactions), the purchase or sale of securities on a when
issued or delayed delivery basis, permissible borrowings entered into in
accordance with the Portfolio's investment policies and reverse repurchase
agreements are not deemed to be issuances of senior securities.
10. Purchase any securities on margin except to obtain such short-term credits
as may be necessary for the clearance of transactions, and provided that
margin payments and other deposits in connection with transactions in
options, futures, swaps and forward contracts shall not be deemed to
constitute purchasing securities on margin.
11. Sell securities short, unless the Portfolio owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short
without the payment of any additional consideration therefor, and provided
that transactions in options, swaps and forward futures contracts are not
deemed to constitute selling securities short.
Foreign Securities
Any Portfolio of the Fund may purchase certain foreign securities. Investments
in foreign securities, particularly those of non-governmental issuers, involve
considerations which are not ordinarily associated with investing in domestic
issuers. The following describes certain of these considerations in addition to
those set forth in the Prospectus. Delays may be encountered in settling
securities transactions in certain foreign markets. Also, it is possible that
market quotations for foreign securities will not be readily available. In such
event, these securities shall be valued at fair value as determined in good
faith by the Board of Directors. If it should become necessary, the Fund could
encounter greater difficulties in invoking legal processes abroad than would be
the case in the United States. Transaction costs in foreign securities may be
higher. The Investment Adviser will consider these and other factors before
investing in foreign securities, and will not make such investments unless, in
its opinion, such investments will meet the standards and objectives of the
Fund. In particular, management anticipates that these considerations will be
inapplicable to a variety of Canadian investments. The Portfolios will not
concentrate its investments in any particular foreign country, and will purchase
only securities issued in dollar denominations. Notwithstanding the foregoing,
the following Portfolios may invest in non-dollar denominated foreign equity
securities: International Equity, Mid-Cap, Small-Cap Value, Bond, Corporate
Bond, Small-Cap Aggressive Growth, Foreign Equity, Maxim T. Rowe Price
Equity/Income, Maxim MidCap Growth, Maxim Blue Chip, Maxim INVESCO Balanced,
Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios.
Lending of Portfolio Securities
Subject to Investment Limitations described above for all Portfolios, each
Portfolio of the Fund from time-to-time may lend securities from its portfolio
to brokers, dealers and financial institutions and receive as collateral cash or
U.S. Treasury securities which, at all times while the loan is outstanding, will
be maintained in amounts equal to at least 100% of the current market value of
the loaned securities. Any cash collateral will be invested in short-term
securities, which will increase the current income of the Fund. Such loans,
which will not have terms longer than 30 days, will be terminable at any time.
The Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights and rights
to dividends, interest or other distributions. The Fund may pay reasonable fees
to persons unaffiliated with the Fund for services in arranging such loans.
<PAGE>
MANAGEMENT OF THE FUND
Directors and Officers
The directors and executive officers of the Fund and their principal occupations
for at least the last five years are set forth below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name, Relationship with Principal Occupation
the Fund, and Address Past Five Years
Rex Jennings President Emeritus, Denver Metro Chamber
Director2/ of Commerce (since 1987)
Richard P. Koeppe, Ph.D. Retired Superintendent, Denver Public
Director3/ Schools (1988-1990)
Douglas L. Wooden Great-West Life & Annuity Insurance Company,
Director1/ 5/ Executive Vice President, Financial Services,
(since 1998) Senior Vice
President, Financial Services (1996-1998); Senior Vice
President, Chief Financial Officer
(1991-1996)
James D. Motz Great-West Life & Annuity Insurance
Company,
Director1/ 5/ Executive Vice President, Employee
Benefits
(since 1997), Senior Vice President,
Employee
Benefits (1991-1997); Vice President,
Group
(1983-1990)
Sanford Zisman Attorney, Zisman & Ingraham, P.C.
Director4/
David G. McLeod Great-West Life & Annuity Insurance Company,
Treasurer, Principal Assistant Vice President, Investment
Financial and Accounting Administration (since 1994); Manager,
Securities
Officer1/ 5/ and Equities Administration
(1992-1994)
Beverly A. Byrne Great-West Life & Annuity Insurance Company,
Secretary1/ 5/ Assistant Vice President and Associate
Counsel
(since 1997); Assistant Counsel
(1993-1997);
Attorney (1988-1993)
</TABLE>
- ---------------------------------
1/ Interested person as defined in the Investment Company Act of 1940 and
affiliated person of Investment Adviser. -
2/ 6508 Hollytree Circle, Tyler, Texas 75703
3/ 8679 East Kenyon Avenue, Denver, Colorado 80237
4/ 3773 Cherry Creek North Drive, Suite 250, Denver, Colorado 80209.
5/ Great-West Life & Annuity Insurance Company, 8515 E. Orchard Road, Englewood,
Colorado 80111.
Compensation
The Fund pays no salaries or compensation to any of its officers or Directors
affiliated with the Investment Adviser or its affiliates. The chart below sets
for the annual fees paid to non-interested Directors in 1997.
R.P. Koeppe R. Jennings S. Zisman
Compensation received from the Fund
$9,000 $8,500 $9,000
Pension or retirement benefits
accrued as a Fund expense $0 $0 $0
Total compensation received from the
Fund and all affiliated funds** 0
$17,500 $17,000 $17,500
- ------------------------
** As of December 31, 1997, there were thirty-six funds for which the Directors
serve as Directors or Trustees of which twenty-nine are Portfolios of the Fund.
The total compensation paid is comprised of the amount paid during 1997 by the
Fund and all affiliated investment companies.
The Investment Adviser
The information that follows supplements the information provided about the
Investment Adviser under the caption "Management of the Fund - Investment
Adviser" in the Prospectus.
G W Capital Management, Inc. (the "Investment Adviser") serves as the investment
adviser to the Fund pursuant to an Investment Advisory Agreement with the Fund.
The Investment Adviser is a wholly owned subsidiary of Great-West Life & Annuity
Insurance Company ("GWL&A"). GWL&A is in turn a wholly owned subsidiary of The
Great-West Life Assurance Company ("Great-West") which is a 99.5% 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 Marquette Communications Corporation which in turn
is a wholly owned subsidiary of Power Corporation of Canada. Mr. Paul Desmarais,
through a group of private holding companies, which he controls, has voting
control of Power Corporation of Canada.
The Investment Advisory Agreement, as amended, was considered by the Fund's
Board of Directors, including a majority of the Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940), on
April 14, 1998. As approved, the Agreement will remain in effect until April 1,
1999 and will continue in effect from year to year if approved annually (a) by
the Board of Directors of the Fund or by a majority of the outstanding shares of
the Fund, including a majority of the outstanding shares of each portfolio, and
(b) by a majority of the Directors who are not parties to such contract or
"interested persons" of any such party. The agreement is not assignable and may
be terminated without penalty on 60 days' written notice at the option of either
party or by the vote of the shareholders of the Fund.
While the Investment Adviser is at all times subject to the direction of the
Board of Directors of the Fund, the Investment Advisory Agreement provides that
the Investment Adviser, subject to review by the Board of Directors, is
responsible for the actual management of the Fund and has responsibility for
making decisions to buy, sell or hold any particular security. The Investment
Adviser provides the portfolio managers for the Fund. Such managers consider
analysis from various sources, make the necessary investment decisions and
effect transactions accordingly. The Investment Adviser also is obligated to
perform certain administrative and management services for the Fund and is
obligated to provide all the office space, facilities, equipment and personnel
necessary to perform its duties under the Agreement.
Advisory Fee.
The method of computing the investment advisory fee is fully described in the
Prospectus.
The Sub-Advisers
Janus Capital Corporation
Janus Capital Corporation serves as the sub-adviser to the MidCap Portfolio
pursuant to a Sub-Advisory Agreement dated December 1, 1993. Janus Capital
Corporation has served as investment adviser to Janus Investment Fund since 1969
and also serves as adviser and sub-adviser to other mutual funds, and
individual, corporate, charitable and retirement accounts. Kansas City Southern
Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock
of Janus Capital. KCSI is a publicly traded holding company whose primary
subsidiaries are engaged in transportation, financial services and real estate.
Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI") serves as the sub-adviser to the
International Equity Portfolio pursuant to a Sub-Advisory Agreement dated
December 1, 1993. TICI is an indirect subsidiary of Templeton Worldwide, Inc.,
which in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Ariel Capital Management, Inc.
Ariel Capital Management, Inc. ("Ariel") serves as the sub-adviser to the
Small-Cap Value Portfolio pursuant to a Sub-Advisory Agreement dated December 1,
1993. Ariel is a privately held minority-owned money manager.
The Sub-Advisers provides investment advisory assistance and portfolio
management advice to the Investment Adviser for the respective Portfolios.
Subject to review and supervision by the Investment Adviser and the Board of
Directors of the Fund, the sub-advisers are responsible for the actual
management of the respective Portfolios and for making decisions to buy, sell or
hold any particular securities. The Sub-Advisers bear all expenses in connection
with the performance of their services, such as compensating and furnishing
office space for their officers and employees connected with investment and
economic research, trading and investment management for the Portfolios.
T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as the sub-adviser to
the Maxim T. Rowe Price Equity/Income and Maxim MidCap Growth Portfolios
pursuant to a Sub-Advisory Agreement dated November 1, 1994 as amended. T. Rowe
Price serves as investment manager to a variety of individual and institutional
investors, including limited and real estate partnerships and other mutual
funds.
Institutional Trust Company
Institutional Trust Company ("ITC") serves as the sub-adviser to the Maxim
INVESCO Small-Cap Growth, Maxim INVESCO ADR and Maxim INVESCO Balanced
Portfolios pursuant to Sub-Advisory Agreements dated November 1, 1994 and August
30, 1996. ITC is an indirect wholly-owned subsidiary of AMVESCAP PLC. AMVESCAP
PLC is a publicly-traded holding company that, through its subsidiaries, engages
in the business of investment management on an international basis. AMVESCAP PLC
has approximately $165 billion in assets under management.
Loomis, Sayles, & Company, L.P.
Loomis, Sayles & Company, L.P. serves as the sub-adviser to the Corporate Bond,
Small-Cap Aggressive Growth and Foreign Equity Portfolios pursuant to a
Sub-Advisory Agreement dated August 30, 1996, as amended. Loomis Sayles serves
as investment manager to a variety of individual investors, including other
mutual funds. Loomis Sayles is an indirect, majority-owned subsidiary of
Metropolitan Life Insurance Company.
Founders Asset Management, Inc.
Founders Asset Management, LLC ("Founders") serves as the sub-adviser to the
Maxim Blue Chip Portfolio pursuant to a Sub-Advisory Agreement dated April 1,
1998. Founders is a 90%-owned subsidiary of Mellon Bank, N.A., with the
remaining 10% held by certain Founders executives and portfolio managers. Mellon
Bank is a wholly-owned subsidiary of Mellon Bank Corporation, a publicly-owned
multibank holding company which provides a comprehensive range of financial
products and services in domestic and selected international markets. Founders
serves as investment manager to a variety of individual and institutional
investors, including other mutual funds.
Sub-Advisory Fees
The method of computing the sub-advisory fees are fully described in the
Prospectus.
For the past three fiscal years, the Investment Adviser was paid a fee for its
services to the Fund as follows:
Sub-Advisory Fees
The method of computing the sub-advisory fees are fully described in the
Prospectus.
For the past three fiscal years, the Investment Adviser was paid a fee for its
services to the Fund as follows:
<PAGE>
<TABLE>
-------------------------------------- ----------------- -----------------
- -----------------
<S> <C> <C> <C>
Portfolio 1997 1996 1995
-------------------------------------- ----------------- -----------------
- -----------------
Money Market $2,027,526 $1,566,842 $1,094,639
-------------------------------------- ----------------- -----------------
- -----------------
Bond $444,724 $ 470,658 $ 450,783
-------------------------------------- ----------------- -----------------
- -----------------
Stock Index1/ $6,451,773 $4,887,975 $3,630,287
- -------------------------------------- ----------------- -----------------
- -----------------
U.S. Government Securities2/ $357,014 $ 360,629 $ 377,523
-------------------------------------- ----------------- -----------------
- -----------------
Zero-Coupon Treasury3/ N/A N/A $ 4,195
-------------------------------------- ----------------- -----------------
- -----------------
Total Return4/ $241,372 $ 364,049 $ 293,890
-------------------------------------- ----------------- -----------------
- -----------------
Investment Grade Corporate Bond5/ $646,636 $ 575,853 $ 511,001
-------------------------------------- ----------------- -----------------
- -----------------
U.S. Government Mortgage Securities6/
$ 896,131 $ 791,813 $ 679,091
-------------------------------------- ----------------- -----------------
- -----------------
Small-Cap Index7/ $617,929 $ 404,890 $ 218,365
-------------------------------------- ----------------- -----------------
- -----------------
Growth Index7/ $767,173 $ 371,758 $ 172,719
-------------------------------------- ----------------- -----------------
- -----------------
Value Index7/ $1,083,359 $ 552,296 $ 264,392
-------------------------------------- ----------------- -----------------
- -----------------
-------------------------------------- ----------------- -----------------
- -----------------
Portfolio 1997 1996 1995
-------------------------------------- ----------------- -----------------
- -----------------
International Equity7/ $1,229,003 $ 756,318 $ 459,104
-------------------------------------- ----------------- -----------------
- -----------------
Small-Cap Value7/ $351,399 $ 274,316 $ 148,789
-------------------------------------- ----------------- -----------------
- -----------------
MidCap8/ $1,998,656 $1,794,155 $1,049,333
-------------------------------------- ----------------- -----------------
- -----------------
Corporate Bond9/ $1,113,908 $ 574,728 $ 250,744
-------------------------------------- ----------------- -----------------
- -----------------
Small-Cap Aggressive Growth9/ $1,365,904 $ 469,293 $ 202,999
-------------------------------------- ----------------- -----------------
- -----------------
Foreign Equity9/ $761,903 $ 711,998 $ 581,443
-------------------------------------- ----------------- -----------------
- -----------------
Maxim T. Rowe Price Equity/Income9/ $958,793 $ 257,708 $ 44,411
-------------------------------------- ----------------- -----------------
- -----------------
Maxim INVESCO Small-Cap Growth9/ $441,341 $ 178,001 $ 34,500
-------------------------------------- ----------------- -----------------
- -----------------
Maxim INVESCO ADR9/ $123,490 $ 45,589 $ 22,375
-------------------------------------- ----------------- -----------------
- -----------------
Short-Term Maturity Bond10/ $352,368 $ 179,920 $ 22,401
-------------------------------------- ----------------- -----------------
- -----------------
Maxim INVESCO Balanced11/ $530,851 $ 26,984 N/A
-------------------------------------- ----------------- -----------------
- -----------------
Blue Chip12/ $452,967 N/A N/A
-------------------------------------- ----------------- -----------------
- -----------------
MidCap Growth12/ $214,690 N/A N/A
- -------------------------------------- ----------------- -----------------
- -----------------
Aggressive Profile13/ $292 N/A N/A
- ------------------------------------- ----------------- -----------------
- -----------------
Moderately Aggressive Profile13/ $583 N/A N/A
- -------------------------------------- ----------------- -----------------
- -----------------
Moderate Profile13/ $325 N/A N/A
- -------------------------------------- ----------------- -----------------
- -----------------
Moderately Conservative Profile13/ $238 N/A N/A
- -------------------------------------- ----------------- -----------------
- -----------------
Conservative Profile Profile13/ $80 N/A N/A
-------------------------------------- ----------------- -----------------
- -----------------
</TABLE>
1/ For the period commencing September 24, 1984. The name and investment
objective of this portfolio was changed effective December 1, 1992.
2/ Formed April 6, 1985. The name and the investment objective of this
portfolio was changed effective July 29, 1987, and renamed and the
investment objective changed effective May 1, 1990.
3/ Formed October 1, 1985. 9/ Formed November 1,
1994. -
4/ Formed July 29, 1987. 10/ Formed August 1, 1995.
5/ Formed December 1, 1992. 11/ Formed October 1, 1996.
6/ Formed December 1, 1992. 12/ Formed July 1, 1997.
7/ Formed December 1, 1993. 13/ Formed September 1, 1997.
8/ Formed January 3, 1994.
Payment of Expenses.
Prior to May 1, 1992, the Investment Adviser provided investment advisory
services and paid all compensation of and furnished office space for officers
and employees of the Investment Adviser connected with investment and economic
research, trading and investment
of the Fund who are affiliated persons of GW Capital Management or any of its
affiliates. The Fund paid all other expenses incurred in its operation and all
of the Fund's general administrative expenses.
Expenses that were borne directly by the Fund included redemption expenses,
expenses of portfolio transactions, shareholder servicing costs, expenses of
registering the shares under federal and state securities laws, pricing costs
(including the daily calculation of net asset value), interest, certain taxes,
charges of the Custodian and Transfer Agent, directors' fees, legal expenses,
state franchise taxes, costs of auditing services, costs of printing proxies and
stock certificates, Securities and Exchange Commission fees, advisory fees,
certain insurance premiums, costs of corporate meetings, costs of maintenance of
corporate existence, investor services (including allocable telephone and
personnel expenses), extraordinary expenses, and other expenses properly payable
by the Fund. Accounting services were provided for the Fund by the Investment
Adviser and the Fund reimbursed the Investment Adviser for its costs in
connection with such services. The amounts of such expense reimbursements for
the Fund's fiscal years ended December 31, 1997 1996 and 1995 were $216,643,
$266,446 and $236,850 respectively. Depending upon the nature of the lawsuit,
litigation costs may be borne by the Fund.
The Investment Adviser has agreed that it will waive all or a part of its
management fee to the extent normal operating expenses (excluding interest,
taxes, brokerage fees, commissions and extraordinary charges) of the Portfolios
listed below. With respect to these Portfolios, the Fund shall pay all expenses
incurred with operations, including extraordinary expenses, however, the
Investment Adviser shall pay all expenses which exceed an annual rate of 0.95%
of the average daily net assets of the Maxim T. Rowe Price Equity/Income
Portfolio; 1.05% of the average daily net assets of the MidCap Growth Portfolio;
1.10% of the average daily net assets of the MidCap and Maxim INVESCO Small-Cap
Growth Portfolios; 1.15% of the average daily net assets of the Blue Chip
Portfolio; 1.30% of the average daily net assets of the Small-Cap Aggressive
Growth and Maxim INVESCO ADR Portfolios; 1.35% of the average daily net assets
of the Small-Cap Value Portfolio; and 1.50% of the average daily net assets of
the International Equity and Foreign Equity Portfolios.
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Portfolio Turnover
Brokerage costs to each Portfolio of the Fund are commensurate with the rate of
portfolio activity. In computing the portfolio turnover rate for each portfolio,
certain U.S. Government securities (long-term for periods before 1986 and
short-term for all periods) and all other securities, the maturities or
expiration dates of which at the time of acquisition are one year or less, are
excluded. Subject to this exclusion, the turnover rate for a portfolio is
calculated by dividing (a) the lesser of purchases or sales of portfolio
securities for the fiscal year by (b) the monthly average value of portfolio
securities owned by the portfolio during the fiscal year.
There will be no fixed limitations regarding the portfolio turnover of
Portfolios of the Fund. Portfolio turnover rates are expected to fluctuate under
constantly changing economic conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of each Portfolio may be
disposed of when they are no longer deemed suitable.
Based upon the formulation for calculating the portfolio turnover rate, as
stated above, for each Portfolio (other than the Money Market Portfolio) is as
follows: <TABLE>
1997 1996
Portfolio Turnover Rate Turnover Rate
<S> <C> <C>
Bond 90.81% 117.39%
Stock Index 17.30% 3.31%
U.S. Government Securities 55.54% 145.02%
Corporate Bond 52.69% 40.02%
Small-Cap Index 102.45% 39.66%
Small-Cap Value 82.83% 30.61%
International Equity 34.30% 22.21%
Maxim INVESCO ADR 19.56% 15.25%
Maxim INVESCO Balanced 150.57% 17.14%
Maxim INVESCO
Small-Cap Growth 174.65% 265.05%
MidCap 139.74% 80.31%
Maxim T. Rowe Price
Equity/Income 25.35% 26.15%
Foreign Equity 200.82% 75.65%
Growth Index 21.52% 41.55%
Investment Grade
Corporate Bond 140.35% 118.50%
Short-Term Maturity Bond 84.59% 51.71%
Small-Cap Aggressive Growth 93.28% 62.63%
U.S. Government
Mortgage Securities 34.01% 94.63%
Value Index 26.03% 16.31%
Blue Chip 111.45% N/A
MidCap Growth 24.28% N/A
Aggressive Profile 59.90% N/A
Moderately Aggressive Profile 41.30% N/A
Moderate Profile 31.39% N/A
Moderately Conservative Profile 32.97% N/A
Conservative Profile 25.56% N/A
</TABLE>
* Annualized
A higher portfolio turnover rate may involve correspondingly greater brokerage
commissions and other expenses which might be borne by the Fund and, thus,
indirectly by its shareholders.
Placement of Portfolio Brokerage
The Fund does not have any obligation to deal with any broker, dealer or group
of brokers or dealers in the execution of transactions in portfolio securities.
Subject to policy established by the Board of Directors, the Investment Adviser
is primarily responsible for placement of the Fund's portfolio transactions. In
placing orders, it is the policy of the Fund to obtain the most favorable net
results, taking into account various factors, including price, dealer spread or
commissions, if any, size of the transaction and difficulty of execution. While
the Investment Adviser generally will seek reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
In placing portfolio transactions, the Investment Adviser may give consideration
to brokers who provide supplemental investment research, in addition to such
research obtained for a flat fee, to the Investment Adviser, and pay commissions
to such brokers or dealers furnishing such services which are in excess of
commissions which another broker or dealer may charge for the same transaction.
Such supplemental research ordinarily consists of assessments and analyses of
the business or prospects of a company, industry, or economic sector.
Supplemental research obtained through brokers or dealers will be in addition to
and not in lieu of the services required to be performed by the Investment
Adviser. The expenses of the Investment Adviser will not necessarily be reduced
as a result of the receipt of such supplemental information. The Investment
Adviser may use any supplemental investment research obtained for the benefit of
the Fund in providing investment advice to its other investment advisory
accounts, and may use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of business
for the Investment Adviser will be considered by and may be useful to the
Investment Adviser in carrying out its obligations to the Fund. For the year
ended December 31, 1997 the Fund paid out $3,575,431 in commissions on
transactions that aggregated $2,132,489,486 to brokers who supplied such
supplemental research.
Purchases and sales of securities for the Money Market Portfolio usually are
principal transactions, and normally, for all portfolios, the Fund will deal
directly with the underwriters or dealers who make a market in the securities
involved unless better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On occasion, securities
may be purchased directly from the issuer. Bonds and money market securities are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of portfolio securities transactions of
the Fund that are not transactions with principals will consist primarily of
brokerage commissions or dealer or underwriter spreads between the bid and asked
price, although purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer.
Securities held by the Fund may also be held by other separate accounts or
mutual funds for which the Investment Adviser serves as an adviser, or held by
GWL&A, the Investment Adviser for one or more clients when one or more clients
are selling the same security. If purchases or sales of securities for the Fund
or other entities for which they act as investment adviser or for their advisory
clients arise for consideration at or about the same time, transactions in such
securities will be made for the respective entities and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of the Investment Adviser during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.
On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interests of the Fund as well as other accounts or
companies, it may to the extent permitted by applicable laws and regulations,
but will not be obligated to, aggregate the securities to be sold or purchased
for the Fund with those to be sold or purchased for such other accounts or
companies in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Adviser in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Fund and to such other accounts or companies. In
some cases this procedure may adversely affect the size of the position
obtainable for a Portfolio.
No brokerage commissions have been paid by the Money Market, Bond, Investment
Grade Corporate Bond, U.S. Government Securities, U.S. Government Mortgage
Securities, Short-Term Maturity Bond, Aggressive Profile, Moderately Aggressive
Profile, Moderate Profile, Moderately Conservative Profile and Conservative
Profile Portfolios for the years ended December 31, 1995 through December 31,
1997. The Stock Index Portfolio (prior to December 1, 1992, the Growth
Portfolio) paid commissions in the amount of $80,467, $89,897 and $130,615 for
the years ended December 31, 1995, 1996 and 1997. The Total Return Portfolio
paid commissions in the amount of $51,369, $61,228 and $80,101 for the years
ended December 31,1995, 1996 and 1997, respectively. The International Equity
portfolio paid commissions in the amount of $126,601, $190,398 and $290,435 in
1995, 1996 and 1997, respectively. The Small-Cap Index Portfolio paid
commissions in the amount of $63,611, $154,696 and $247,609 in 1995, 1996 and
1997, respectively. The Value Index Portfolio paid commissions in the amount of
$38,183, $53,019 and $79,357 in 1995, 1996 and 1997, respectively. The Growth
Index Portfolio paid commissions in the amount of $25,946, $48,480 and $46,825
in 1995, 1996 and 1997, respectively. The Small-Cap Value Portfolio paid
commissions in the amount of $29,175, $55,133 and $117,550 in 1995, 1996 and
1997, respectively. The MidCap Portfolio paid commissions in the amount of
$468,104, $471,788 and $548,942 in 1995, 1996 and 1997, respectively. The
Small-Cap Aggressive Growth Portfolio paid commissions in the amount of $60,792,
$131,463 and $377,783 in 1995, 1996 and 1997, respectively. The Foreign Equity
Portfolio paid commissions in the amount of $456,623, $322,774 and $912,227 in
1995, 1996 and 1997, respectively. The Maxim T. Rowe Price Equity/Income
Portfolio paid commissions in the amount of $7,074, $50,812 and $108.963 in
1995, 1996 and 1997, respectively. The Maxim INVESCO Small-Cap Growth Portfolio
paid commissions in the amount of $11,195, $40,317 and $95,102 in 1995, 1996 and
1997, respectively. The Maxim INVESCO ADR Portfolio paid commissions in the
amount of $932, $2,664 and $6,894 in 1995, 1996 and 1997, respectively. The
Corporate Bond Portfolio paid commissions in the amount of $1,064, $1,120 and
$270 in 1995, 1996 and 1997 respectively. The Maxim INVESCO Balanced Portfolio
paid commissions in the amount of $18,537 in 1996 and $188,000 in 1997. The Blue
Chip Portfolio paid commissions in the amount of $267,899 in 1997. The MidCap
Growth Portfolio paid commissions in the amount of $79,790 in 1997.
PURCHASE AND REDEMPTION OF SHARES
As of December 31, 1997, all of the outstanding shares of the Fund were
presently held of record by Maxim Series Account, Pinnacle Series Account,
Retirement Plan Series Account, FutureFunds Series Account, FutureFunds Series
Account II and Qualified Series Account of GWL&A, by TNE Series (k) Account of
MetLife, and by Great-West, which provided the initial capitalization for
certain Portfolios.
The following tables show the allocations of shares of the Fund among the Series
Accounts as of December 31, 1997.
Money Market Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 2,441,629 .54%
FutureFunds Series Account 65,754,369 14.52%
FutureFunds Series Account II 352,941,540 77.94%
Pinnacle Series Account 344,423 .07%
Qualified Series Account 530,494 .12%
TNE Series (k) Account 29,146,958 6.44%
Retirement Plan Series Account 1,689,350 .37%
TOTAL 452,848,763
Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 2,484,161 4.29%
FutureFunds Series Account 41,425,675 71.43%
FutureFunds Series Account II 13,475,067 23.24%
FutureFunds Profile Series 77,203 .13%
Pinnacle Series Account 442,411 .76%
Qualified Series Account 88,455 .15%
TOTAL 57,992,972
International Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account 34,628,638 33.35%
FutureFunds Series Account
FutureFunds II Series Account 68,831,947 66.28%
FutureFunds Profile Series 385,536 .37%
TOTAL 103,846,121
U.S. Government Securities Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 9,061,068 16.97%
Maxim Series Account
FutureFunds Series Account 39,043,122 73.10%
FutureFunds Series Account
FutureFunds Series Account II 3,815,718 7.14%
FutureFunds Profile Series 451,070 .84%
Pinnacle Series Account 1,039,557 1.95%
TOTAL 53,410,535
Stock Index Portfolio*
Series Account No. of Shares Percentage
Maxim Series Account 7,549,870 2.72%
FutureFunds Series Account 171,124,459 61.71%
FutureFunds Series Account II 93,191,997 33.60%
Pinnacle Series Account 650,229 .23%
Qualified Series Account 1,875,340 .68%
TNE Series (K) Account 0 0.00%
Retirement Plan Series Account 2,934,032 1.06%
TOTAL 277,325,927
* Prior to December 1, 1992, the Growth
Portfolio.
Total Return Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 3,685,542 93.22%
FutureFunds Series Account II 16,000 .40%
Pinnacle Series Account 251,718 6.37%
FutureFunds Series Account 308 .01%
TNE Series (K) Account 0 0.00%
Retirement Plan Series Account 0 0.00%
TOTAL 3,953,568
Investment Grade Corporate Bond Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II 80,600,664 90.20%
Qualified Series Account 186,851 .21%
TNE Series (K) Account 8,182,303 9.16%
Retirement Plan Series Account 384,430 .43%
TOTAL 89,354,248
U.S. Government Mortgage Securities Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II 126,798,716 91.80%
TNE Series (K) Account 10,507,964 7.61%
Retirement Plan Series Account 809,091 .59%
TOTAL 138,115,771
Growth Index Portfolio
Series Account No. of Shares Percentage
FutureFunds 74,418,297 84.51%
II Series Account
FutureFunds Series Account 230,257 .26%
FutureFunds Profile Series 223,612 .25%
TNE Series (K) Account 10,295,333 11.69%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 2,894,409 3.29%
TOTAL 88,061,908
<TABLE>
Maxim INVESCO Balanced Portfolio
Series Account No. of Shares Percentage
================================================== --------------------------
======================
<S> <C>
<C>
FutureFunds II Series Account 51,612,241
79.03%
================================================== --------------------------
======================
TNE Series (K) Account
5,616,063 8.60%
Maxim Series Account 329,826 .33%
FutureFunds Series Account 50,576,808 50.10%
FutureFunds Series Account II 50,041,284 49.57%
Great-West 0 0.00%
TOTAL 100,947,918
Small-Cap Index Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 196,606 .20%
FutureFunds Series Account 10,678,592 11.07%
FutureFunds Series Account II 73,969,319 76.66%
TNE Series (K) Account 10,006,476 10.37
================================================== --------------------------
======================
Retirement Plan Series Account 1,578,888 1.64%
FutureFunds Profile Series 54,904 .06%
TOTAL 96,484,785
Small-Cap Value Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 56,847 .23%
FutureFunds Series Account 2,238,433 9.10%
FutureFunds Series Account II 18,335,872 74.51%
TNE Series (K) Account 1,969,349 8.00%
Retirement Plan Series Account 1,630,916 6.63%
FutureFunds Profile Series 376,984 1.53%
TOTAL 24,608,401
Corporate Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 285,497 .22%
FutureFunds Series Account 11,860,160 8.94%
FutureFunds Series Account II 105,709,146 79.71%
TNE Series (K) Account 13,648,447 10.29%
Retirement Plan Series Account 1,043,774 .79%
FutureFunds Profile Series 66,443 .05%
TOTAL 132,613,467
Small-Cap Aggressive Growth Portfolio
Series Account No. of Shares Percentage
FutureFunds 103,832,567 86.75%
II Series AccountSeries Account II
FutureFunds Series Account 439,262 .37%
TNE Series (K) Account 12,490,318 10.43%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 2,933,801 2.45%
TOTAL 119,695,948
<PAGE>
Foreign Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds 59,681,818 85.61%
II Series AccountSeries Account II
TNE Series (K) Account 9,172,928 13.16%
Retirement Plan Series Account 859,807 1.23%
TOTAL 69,714,553
Maxim INVESCO Small-Cap Growth Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 535,120 1.37%
FutureFunds Series Account 19,261,317 49.37%
FutureFunds Series Account II 19,220,569 49.26%
Great-West 0 0.00%
TOTAL 39,017,006
Maxim T.Rowe Price Equity/Income Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 1,174,067 1.24%
FutureFunds Series Account 43,318,928 45.61%
FutureFunds Series Account II 50,471,659 53.15%
Great-West 0 0.00%
TOTAL 94,964,654
MidCap Portfolio
Series Account No. of Shares Percentage
FutureFunds 121,511,391 80.68%
II Series AccountSeries Account II
Maxim Series Account 503,122 .33%
FutureFunds Series Account 28,427,319 18.87%
FutureFunds Profile Series 174,044 .12%
TOTAL 150,615,876
Maxim INVESCO ADR Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 321,828 2.87%
FutureFunds Series Account 4,722,382 42.16%
FutureFunds Series Account II 3,904,813 34.86%
FutureFunds Profile Series 157,333 1.41%
Great-West 2,094,180 18.70%
TOTAL 11,200,536
Short-Term Maturity Bond Portfolio
Series Account No. of Shares Percentage
FutureFunds 65,420,946 84.60%
II Series AccountSeries Account II
FutureFunds Series Account 0 0.00%
FutureFunds Profile Series 351,568 .46%
TNE Series (K) Account 11,355,140 14.68%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 202,881 .26%
Great-West 0 0.00%
TOTAL 77,330,535
Value Index Portfolio
Series Account No. of Shares Percentage
FutureFunds 111,891,595 85.47%
II Series Account
FutureFunds Series Account 318,290 .24%
FutureFunds Profile Series 319,212 .25%
TNE Series (K) Account 15,607,841 11.92%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 2,774,338 2.12%
TOTAL 130,911,276
Blue Chip Portfolio
Series Account No. of Shares Percentage
FutureFunds 81,957,175 88.98%
II Series AccountSeries Account
II
FutureFunds Series Account 604,520 .66%
FutureFunds Profile Series 259,144 .28%
TNE Series (K) Account 7,399,091 8.03%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 1,889,907 2.05%
TOTAL 92,109,837
MidCap Growth Portfolio
Series Account No. of Shares Percentage
FutureFunds 43,256,426 84.44%
II Series AccountSeries Account
II
FutureFunds Series Account 1,072,600 2.09%
FutureFunds Profile Series 440,250 .86%
TNE Series (K) Account 6,446,061 12.58%
Maxim Series Account 0 0.00%
Retirement Plan Series Account 14,882 .03%
TOTAL 51,230,219
Aggressive Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 0 0.00%
FutureFunds Series Account 733,767 100.00%
TOTAL 733,767
Moderately Aggressive Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 0 0.00%
FutureFunds Series Account 1,685,584 100.00%
TOTAL 1,685,584
Moderate Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 0 0.00%
FutureFunds Series Account 1,080,669 100.00%
TOTAL 1,080,669
Moderately Conservative Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 0 0.00%
FutureFunds Series Account 539,907 100.00%
TOTAL 539,907
Conservative Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 0 0.00%
FutureFunds Series Account 266,080 100.00%
TOTAL 266,080
</TABLE>
<PAGE>
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Portfolio
As summarized in the Prospectus under the heading "Performance Related
Information," the yield of the Money Market Portfolio for a seven-day period
(the "base period") will be computed by determining the "net change in value"
(calculated as set forth below) of a hypothetical account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield") which assumes that net income is reinvested in Portfolio shares at the
same rate as net income is earned for the base period.
The Money Market Portfolio's yield and effective yield will vary in response to
fluctuations in interest rates and in the expenses of the Portfolio.
7.e following is an example of this yield calculation for the Money Market
Portfolio based on a seven-day period ending December 31, 199
Assumptions:
account with alue of a hypothetical pre-existing
exactly one share at the beginning of the period: $1.00067671
Value of the same account* (excluding capital
hanges) c
at the end of the seven-day period: $1.00168853
* This value would include the value of any additional shares
purchased with dividends from the original share, and all dividends
declared on both the original share and any such additional shares.
Calculation:
Ending account value $1.00168853
Less beginning account value $1.00067671
------------
Net change in account value
$0.00101182
Base period return:
$.0.000101182/$1.00067671 (adjusted
change/beginning account value) = $0.000101114
Current yield = Base period return
x (365/7) = 5.27%
Effective yield = (1 + Base period
return) to the power of 365/7 = 5.41%
-----
Yields of the Bond, Stock Index*, U.S. Government Securities, Investment Grade
Corporate Bond, U.S. Government Mortgage Securities, Small-Cap Index, Growth
Index, Value Index, Small-Cap Value, International Equity, Corporate Bond,
Small-Cap Aggressive Growth, Foreign Equity, Maxim T. Rowe Price Equity/Income,
Maxim INVESCO Small-Cap Growth, Maxim INVESCO ADR, Maxim INVESCO Balanced, Blue
Chip, MidCap Growth, Aggressive Profile, Moderately Aggressive Profile, Moderate
Profile, Moderately Conservative Profile and Conservative Profile Portfolios
As summarized in the Prospectus under the heading "Performance Related
Information," yields of these Portfolios will be computed by annualizing a
recent month's net investment income, divided by a Portfolio share's net asset
value on the last trading day of that month multiplied by the average number of
outstanding shares for the period. Net investment income will reflect
amortization of any market value premium or discount of fixed income securities
and may include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yields of the Portfolios will vary
from time to time depending upon market conditions and the composition of the
Portfolios. Yield should also be considered relative to changes in the value of
the shares of the Portfolios and to the relative risks associated with the
investment objectives and policies of the Portfolios.
* Prior to December 1, 1992, the Growth Portfolio.
The following is an example of this yield calculation based on a 30-day period
ending December 31.
Formula: YIELD = 2[ (a-b)+ 1)6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units
outstanding during the period.
d = the maximum offering price per accumulation unit on the
last day of the period.
<PAGE>
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 they
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period and deducting any applicable contingent
deferred sales charge; and (4) dividing this account value for the hypothetical
investor by the initial $1,000 investment. Total return will be calculated for
one year, five years and ten years or some other relevant periods if a Portfolio
has not been in existence for at least ten years.
<PAGE>
FORMULA: P(1+T) to the power of N = ERV
WHERE: T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being measured
ERV = Ending redeemable value of a hypothetical $1.00 payment made a the
inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment made at the
inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
Performance Comparisons
Each Portfolio may from time to time include its yield and/or total return in
advertisements or in information furnished to present or prospective
shareholders. Each Portfolio may include in such advertisements the ranking of
those performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, relevant indexes and Donoghue Money
Fund Report as having the same or similar investment objectives.
The manner in which total return and yield will be calculated for public use is
described above. The table in the Prospectus under the heading "Performance
Related Information", summarizes the calculation of total return and yield for
each Portfolio, where applicable,
<PAGE>
FINANCIAL STATEMENTS
The financial statements are incorporated by reference to Registrant's N-30D
filed via EDGAR on February 26, 1997.