As filed with the Securities and Exchange Commission on March 1, 1999
Registration No. 2-75503
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 59 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 59 (X)
MAXIM SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
8515 E. Orchard Road
Englewood, Colorado 80111
Registrant's Telephone Number, including Area Code: (303) 689-3000
W. T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copies of Communications to:
James F. Jorden, Esquire
Jorden Burt Berenson & Johnson, LLP
1025 Thomas Jefferson St. N. W.
Suite 400 East
Washington, D. C. 20007-0805
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
on pursuant to paragraph (b)(1)(v) of Rule 485
X 60 days after filing pursuant to paragraph (a)(1) of
Rule 485 on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of
Rule 485 on pursuant to paragraph (a)(2) of Rule
485.
If appropriate, check the following:
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24F-2 Notice for Registrant's fiscal year was filed February 26, 1997.
<PAGE>
MAXIM SERIES FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS-REFERENCE SHEET
PART A
<TABLE>
<S> <C>
Form N-1A Item Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Introduction; Fund
Portfolios; The Fund and
Its Shares
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Securities The Fund and Its Shares
7. Purchase of Securities Being Offered Introduction;
Purchase and Redemption of Shares;
Valuation of Shares
8. Redemption or Repurchase Purchase and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
PART B
Statement of Additional
Form N-1A Item Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies The Fund Portfolios
14. Management of the Registrant Management of the Fund
15. Control Persons and Principal Holders of Securities Purchase and Redemption of
Shares
16. Investment Advisory and Other Services Management of Fund
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemption and Price of Securities Being Offered Purchase and Redemption of
Shares
20. Tax Status Taxes
21. Underwriters Not Applicable
22. Calculation of Yield Quotations of Performance Data Calculation of Yields and
Total Return
23. Financial Statements Financial Statements
PART C
Form N-1A Item Part C Caption
24. Financial Statements and Exhibits Financial Statements and
Exhibits
25. Persons Controlled by or Under Common Control Persons Controlled by or Under
Common Control
26. Number of Holders of Securities Number of Holders of
Securities
27. Indemnification Indemnification
28. Business and Other Connections of Investment Adviser Business and Other Connections of
Investment Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and
Records
31. Management Services Management Services
32. Undertakings Undertakings
33. Signatures Signatures
MAXIM SERIES FUND, INC.
Money Market Portfolio International Equity Portfolio
Bond Portfolio Maxim INVESCO ADR Portfolio
U.S. Government Securities Portfolio Maxim Blue Chip Portfolio
Short-Term Maturity Bond Portfolio Maxim T. Rowe Price Equity/Income Portfolio
Corporate Bond Portfolio Maxim INVESCO Balanced Portfolio
MidCap Portfolio Small-Cap Value Portfolio
MidCap Growth Portfolio Maxim INVESCO Small-Cap Growth Portfolio
Small-Cap Aggressive Growth Portfolio
Aggressive Profile Portfolio Stock Index Portfolio
Moderately Aggressive Profile Portfolio Small-Cap Index Portfolio
Moderate Profile Portfolio Value Index Portfolio
Moderately Conservative Profile Portfolio Growth Index Portfolio
Conservative Profile Portfolio
</TABLE>
----------------
8515 East Orchard Road
Englewood, CO 80111
(800) 338 - 4015
This Prospectus describes twenty-four portfolios, sixteen of which are "Equity
Portfolios," seven of which are "Debt Portfolios" (including the Money Market
Portfolio) and one which is a "Balanced Portfolio." GW Capital Management, LLC
("GW Capital Management"), a wholly owned subsidiary of Great-West Life &
Annuity Insurance Company, serves as investment adviser to each of the
Portfolios. Several of the Portfolios are managed on a day-to-day basis by
"Sub-Advisers" hired by GW Capital Management.
Each Portfolio is a series of the Maxim Series Fund, Inc. (the "Fund"). Each
Portfolio operates as a separate mutual fund and has its own investment
objectives and strategies.
The Fund is available only as an investment option for certain variable annuity
contracts and variable life policies. Therefore you cannot purchase shares of
the Portfolios directly; rather you must own a variable insurance contract that
makes one or more of the Portfolios available for investment.
This Prospectus contains important information about each Portfolio that you
should consider before investing. Please read it carefully and save it for
future reference.
This Prospectus does not constitute an offer to sell securities in any state or
other jurisdiction to any person to whom it is unlawful to make such an offer in
such state or other jurisdiction.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is May 1, 1999.
<PAGE>
CONTENTS
The Portfolios at a Glance
Maxim Small-Cap Portfolios
Maxim MidCap Portfolios
Maxim Foreign Equity Portfolios
Maxim Domestic Equity Portfolios
Maxim Index Portfolios
Maxim Profile Portfolios
Maxim Bond Portfolios
Maxim Money Market Portfolio
More Information About the Portfolios
The Debt Portfolios
The Money Market Portfolio
The Balanced Portfolio
Other Investment Practices
Management of the Portfolios
Important Information About Your Investment
How the Fund Reports Performance
Financial Highlights
THE PORTFOLIOS AT A GLANCE
The following information about each Portfolio is only a summary of important
information you should know. More detailed information about the Portfolios'
investment strategies and risks is included elsewhere in this Prospectus. Please
read this prospectus carefully before investing in any of the Portfolios.
THE MAXIM MONEY MARKET PORTFOLIO
The investment objective for this Portfolio is to:
o Seek as high a level of current income as is consistent with the
preservation of capital and liquidity.
Principal investment strategies. This Portfolio will:
o Invest in high-quality, short-term debt securities. These securities will
have the highest rating for short-term debt by at least one nationally
recognized statistical rating organization such as Moody's Investor
Services, Inc. ("Moody's) or Standard & Poor's Corporation ("S&P") (or
unrated securities of comparable quality).
o Invest in securities which are only denominated in U.S. dollars.
The principal investment risks for this Portfolio include:
Possible loss of money
o You should know that an investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $1.00 per share, it is possible your shares could be
worth less than $1.00 per share when you sell them.
Interest rate risk
o The market value of a money market instrument is affected by changes in
interest rates. When interest rates rise, the market value of money market
instruments declines and when interest rates decline, market value rises.
When interest rates rise, money market instruments which can be purchased by
the Portfolio will have lower yields.
Portfolio Performance Data
Yield
Yield and effective yield will fluctuate and may not provide a basis for
comparison with bank deposits, other mutual funds or other investments which are
insured or pay a fixed yield for a stated period of time. Yields are based on
past results and are not an indication of future performance.
As of December 31, 1998, the Money Market Portfolio's 7-day yield was x.xx% and
its effective yield was x.xx%.
<PAGE>
MAXIM BOND PORTFOLIOS
Short-Term Maturity Bond Portfolio
The investment objective of this Portfolio is to:
o Seek maximum total return that is consistent with preservation of capital
and liquidity.
Principal investment strategies. This Portfolio will:
o Invest in short-term investment grade bonds.
o Select securities based on relative value, maturity, quality and sector.
o Maintain an actively managed portfolio of debt securities.
o Maintain a weighted average quality of A or higher.
o Invest in individual securities with maturities of no longer than three
years.
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Non-Diversification Risk
o The Portfolio is classified as non-diversified which means a relatively high
percentage of its assets may be invested in securities of a limited number
of issuers, including issuers primarily within the same industry or economic
sector. As a result, the Portfolio's performance may be adversely affected
by any single economic, political or regulatory event than that experienced
by a diversified portfolio.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1996 1997 1998
During the periods shown in the chart for the Short-Term Maturity Bond
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Short-Term Maturity
Bond Portfolio
Lehman 1-3 Year Government/
Corporate Bond Index
The inception date for the Short-Term Maturity Bond Portfolio was August 1,
1995.
U.S. Government Securities Portfolio
The investment objective of this Portfolio is to:
o Seek the highest level of return consistent with preservation of capital
and substantial credit protection
Principal investment strategies. This Portfolio will:
o Invest primarily in securities issued or guaranteed by the U.S. Government
or one of its agencies or instrumentalities.
o Focus on relative value of the security by analyzing the current and
expected level of interest rates, and current and historical asset yields
versus treasury yields.
o Invest in private mortgage pass-through securities and collateralized
mortgage obligations (CMOs). CMOs may by issued by private issuers and
collateralized by securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities.
o Invest in U.S. Treasury bills, notes or bonds or in certificates (which are
fully backed by the U.S. Government) representing individual interests in
pools of these types of U.S. Treasury securities.
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance for the last 10
calendar years since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year-by-Year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
During the periods shown in the chart for the U.S. Government Securities
Portfolio , the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
+ From July 29, 1987 to May 1, 1990, the U.S. Government Securities Portfolio's
name was the Government and High Quality Securities Portfolio. During this
period, the Portfolio's investment policies differed from the U.S. Government
Securities Portfolio's current policies.
The average annual return for one year, five years, and ten years for the period
ended December 31, 1998:
One Year Five Year Ten Year
U.S. Government Securities
Portfolio
Lehman Government/Mortgage Index
Lehman Mortgage Index
Merrill Lynch Mortgage Index
Bond Portfolio
The investment objective of this Portfolio is to:
o Seek maximum total return consistent with preservation of capital
Principal investment strategies. This Portfolio will:
o Invest primarily in bonds issued by the U.S. Government and its agencies and
by domestic or foreign corporations.
o Select securities based on relative value, maturity, quality and sector.
o Invest in securities with various maturities but maintaining a weighted
average maturity of 2 to 10 years.
o Invest up to 40% of its total assets in foreign securities,with no more than
20% in non-U.S. dollar denominated foreign debt. No more than 25% of total
assets may be invested in securities of issuers located in a single country,
(other than the U.S).
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Foreign Risk
o Foreign markets can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market, currency valuation
or economic developments and can perform differently than the U.S. market.
As a result, foreign securities subject the Portfolio to greater risk of
loss than U.S. securities.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance for the last 10
calendar years. The table shows how the Portfolio's average annual total return
for the one, five and ten year periods compared to a broad based stock market
index. The returns shown below are historical and are not an indication of
future performance.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year-by-Year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
During the periods shown in the chart for the Bond Portfolio, the highest return
for a quarter was % (quarter ending , 199 ) and the lowest return for a quarter
was % (quarter ending , 199 ).
The average annual return for one, five, and ten years for the period ended
December 31, 1998:
One Year Five Year Ten Year
Bond Portfolio
Lehman Intermediate
Government/Corporate Index
Lehman Intermediate Corporate
Index
Corporate Bond Portfolio (Sub-Adviser: Loomis, Sayles & Company, L.P.)
The investment objective of this Portfolio is to:
o Seek high total investment return through a combination of current income
and capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in corporate debt securities of any maturity.
o Focus on good relative value based on the credit outlook of the issuer, good
structural fit within the objectives and constraints of the Portfolio, and
maximum total return potential.
o Invest up to 20% of its total assets in preferred stock.
o Invest up to 20% in foreign securities.
o Invest up to 35% of its total assets in securities of below investment grade
quality ("high yield/high risk" or "junk" bonds).
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
o Junk bonds are regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. As a
result, the total return and yield of a junk bond can be expected to
fluctuate more than the total return and yield of high quality bonds and the
potential loss is significantly greater.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Preferred Stock Risk
o Preferred stocks are subject to interest rate risk and credit risk. The
value of these stocks will tend to fall in response to a general increase in
interest rates and rise in value in response to a general decline in
interest rates. In addition, the value of these stocks will vary in response
to changes in the credit rating of the issuing corporation.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them.
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Corporate Bond Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Corporate Bond Portfolio
Merrill Lynch Intermediate
Government/Corporate Index
The inception date for the Corporate Bond Portfolio was November 1, 1994.
<PAGE>
MAXIM SMALL-CAP PORTFOLIOS
Small-Cap Value Portfolio (Sub-Adviser: Ariel Capital Management, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in small-cap common stocks.
o Emphasize small companies that are believed to be undervalued.
o Seek medium-sized companies consistent with its investment philosophy.
The Portfolio also currently observes the following operating policies:
o Actively seeking investment 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 record.
o Not investing in issuers primarily engaged in the manufacture of tobacco,
weapons systems, the production of nuclear energy, or the manufacture of
equipment to produce nuclear energy.
The principal investment risks for this Portfolio include:
Small Company Risk
o The stocks of small companies often involve more risk and volatility than
those of larger companies. Because small companies are often dependent on a
small number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security can be more volatile than the market as
a whole and can perform differently than the value of the market as a whole.
This is particularly true of small companies.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1994 1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Value Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Small-Cap Value Portfolio
S&P 500 Index
The inception date for the Small-Cap Value Portfolio was December 1, 1993.
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO (Sub-Adviser: Loomis, Sayles & Company,
L.P.)
The investment objective of this Portfolio is to:
o Seek long-term capital growth.
Principal investment strategies. This Portfolio will:
o Invest primarily in small-cap companies within the Russell 2000 Index market
capitalization range ($ to $ as of May 30, 1998).
o Seek to build a core small-cap portfolio of common stocks of solid growth
companies.
o Seek companies that have experienced significant business problems but which
are believed to have favorable prospects for recovery
o Invest up to 35% of total assets in equity securities of companies with
market capitalizations in excess of the Russell 2000 Index market
capitalization range.
The principal investment risks for this Portfolio include:
Small Company Risk
o The stocks of small companies often involve more risk and volatility than
those of larger companies. Because small companies are often dependent on a
small number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision. These risks may be more acute for companies that have experienced
significant business problems.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security can be more volatile than the market as
a whole and can perform differently than the value of the market as a whole.
This is particularly true of small companies.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Aggressive Growth
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Small-Cap Aggressive
Growth Portfolio
Russell 2000 Index
The inception date for the Small-Cap Aggressive Growth Portfolio was November 1,
1994.
MAXIM INVESCO SMALL-CAP GROWTH PORTFOLIO (Sub-Adviser: Institutional Trust
Company)
The investment objective of this Portfolio is to:
o Seek long-term capital growth.
Principal investment strategies. This Portfolio will:
o Invest primarily in a diversified group of equity securities of emerging
growth companies with market capitalizations of $1 billion or less.
o Invest up to 35% of total assets in equity securities of companies with
market capitalizations in excess of $1 billion.
o Identify companies believed to have favorable opportunities for capital
appreciation within their industry grouping and invest in these companies
when they are:
o are determined to be in the developing stages of their life cycle, and o have
demonstrated, or are expected to achieve, long-term earnings growth.
o Invest up to 25% of its total assets in foreign securities; however,
securities of Canadian issuers and American Depository Receipts ("ADRs") are
not subject to this 25% limitation.
The principal investment risks for this Portfolio include:
Small Company Risk
o The stocks of small companies often involve more risk and volatility than
those of larger companies. Because small companies are often dependent on a
small number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security can be more volatile than the market as
a whole and can perform differently than the value of the market as a whole.
This is particularly true of small companies.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Maxim INVESCO Small-Cap Growth
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Maxim INVESCO Small-Cap
Growth Portfolio
Russell 2000 Index
The inception date for the Maxim INVESCO Small-Cap Growth Portfolio was November
1, 1994.
<PAGE>
MAXIM MIDCAP PORTFOLIOS
MidCap Growth Portfolio (Sub-Adviser: T. Rowe Price Associates, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term appreciation .
Principal investment strategies. This Portfolio will:
o Maintain a diversified portfolio of mid-cap companies
o Emphasize companies whose earnings are expected to grow at a faster rate
than the average mid-cap company. In this connection, the Portfolio will
focus on issuers whose market capitalization fall within the range of
companies included in the Standard & Poor's 400 MidCap Index - generally
between $201 million and $14.3 billion.
o Invest in companies that:
o offer proven products or services;
o have a historical record of above-average earnings growth;
o demonstrate potential for sustained earnings growth;
o operate in industries experiencing increasing demand; or
o are believed to be undervalued in the market place.
o Invest up to 25% in foreign securities.
The principal investment risks for this Portfolio include:
Mid-Cap Company Risk
o The stocks of medium sized companies often involve more risk and volatility
than those of larger companies.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each calendar
year since inception. The table shows how the Portfolio's average annual total
return for the one year and since inception periods compare to a broad based
stock market index. The returns shown below are historical and are not an
indication of future performance.
Year-by-Year
1998
During the periods shown in the chart for the MidCap Growth Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The inception date for the MidCap Growth Portfolio was July 1, 1997.
MidCap Portfolio (Sub-Adviser: Ariel Capital Management, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in equity securities of mid-cap companies.
o Emphasize issuers that are believed to be undervalued but demonstrate a
strong potential for growth. In this connection the Portfolio will focus on
issuers with market capitalization between approximately $200 million and $5
billion.
The Portfolio also currently observes the following operating policies:
o Actively seeking investment 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 record.
o Not investing in issuers primarily engaged in the manufacture of tobacco,
weapons systems, the production of nuclear energy, or the manufacture of
equipment to produce nuclear energy.
The principal investment risks for this Portfolio include:
Mid-Cap Company Risk
o The stocks of medium sized companies often involve more risk and volatility
than those of larger companies.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the MidCap Portfolio, the highest
return for a quarter was % (quarter ending , 199 ) and the lowest return for a
quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
MidCap Portfolio
S&P MidCap 400 Index
The inception date for the MidCap Portfolio was January 3, 1994.
<PAGE>
MAXIM FOREIGN EQUITY PORTFOLIOS
International Equity Portfolio (Sub-Adviser: Templeton Investment Counsel, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term capital growth.
Principal investment strategies. This Portfolio will:
o Invest primarily in common stocks of foreign companies.
o Focus on the market price of a company's securities relative to the
company's long-term earnings, asset value and cash flow potential. The
company's historical value measures including price/earnings ratio, profit
margins and liquidation value will also be considered.
o Invest in high risk/high yield ("junk bonds") debt securities or, if
unrated, of comparable investment quality.
The Portfolio also currently observes the following operating policies:
o Investment in high risk/high yield ("junk bonds") debt securities will be
limited to 10%; however, this limitation does not apply to unrated foreign
convertible bonds which are convertible at any time into equity securities
suitable for investment by the Portfolio.
The principal investment risks for this Portfolio include:
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
o Junk bonds are regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. As a
result, the total return and yield of a junk bond can be expected to
fluctuate more than the total return and yield of high quality bonds.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year, five year and since inception periods
compare to a broad based stock market index. The returns shown below are
historical and are not an indication of future performance.
Year-by-Year
1994 1995 1996 1997 1998
During the periods shown in the chart for the International Equity Portfolio,
the highest return for a quarter was % (quarter ending , 199 ) and the lowest
return for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
International Portfolio
MSCI EAFE Index
The inception date for the International Equity Portfolio was December 1, 1993.
Maxim INVESCO ADR Portfolio (Sub-Adviser: Institutional Trust Company)
The investment objective of this Portfolio is to:
o Seek high total return through capital appreciation and current income,
while reducing risk through diversification.
Principal investment strategies. This Portfolio will:
o Invest primarily 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.
o Select stocks in the Portfolio from approximately 2,200 large and
medium-sized capitalization foreign companies.
o Analyze potential investments through computer analysis which compares
current stock price to measures such as:
o book value,
o historical return on equity,
o company's ability to reinvest capital,
o dividends, and
o dividend growth.
The principal investment risks for this Portfolio include:
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Maxim INVESCO ADR Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio) for
the period ended December 31, 1998:
Since
One Year Inception
Maxim INVESCO ADR Portfolio
MSCI EAFE Index
The inception date for the Maxim INVESCO ADR Portfolio was November 1, 1994.
<PAGE>
MAXIM DOMESTIC EQUITY PORTFOLIOS
Maxim Blue Chip Portfolio (Sub-Adviser: Founders Asset Management, LLC)
The investment objective of this Portfolio is to:
o Seek long-term growth of capital and income.
Principal investment strategies. This Portfolio will:
o Invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
o Invest in "Blue Chip" stocks that:
o are included in a widely recognized index of stock market
performance, such as the Dow Jones Industrial Average or the Standard
& Poor's Index
o generally pay regular dividends
o have a market capitalization of at least $1 billion.
o Invest up to 30% in foreign securities; however, the Portfolio may invest
without limitation in American Depository Receipts ("ADRs").
The principal investment risks for this Portfolio include:
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market, currency valuation
or economic developments and can perform differently than the U.S. market.
As a result, foreign securities subject the Portfolio to greater risk of
potential loss than U.S. securities.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1998
During the periods shown in the chart for the Maxim Blue Chip Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The inception date for the Blue Chip Portfolio was July 1, 1997.
Maxim T. Rowe Price Equity/Income Portfolio (Sub-Adviser: T. Rowe Price
Associates, Inc.)
The investment objective of this Portfolio is to:
o Seek substantial dividend income and also capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in dividend-paying common stocks of established companies.
o Emphasize companies with favorable prospects for increasing dividend income
and, secondarily, capital appreciation.
o Invest in companies which have some of the following characteristics:
o established operating histories
o above-average current dividend yields relative to Standard & Poor's 500
Stock Index
o sound balance sheets and other financial characteristics
o low stock price relative to a company's underlying value as measured by
assets, earnings, cash flow or business franchises.
o Invest up to 25% in foreign securities.
The principal investment risks for this Portfolio include:
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Maxim T. Rowe Price Equity/Income
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Maxim T. Rowe Equity/Income
Portfolio
S&P 500 Index
The inception date for the Maxim T. Rowe Price Equity/Income Portfolio was
November 1, 1994.
Maxim INVESCO Balanced Portfolio (Sub-Adviser: Institutional Trust Company)
The investment objective of this Portfolio is to:
o Seek high total return through capital appreciation and current income.
Principal investment strategies. This Portfolio will:
o Invest 50% to 70% of its assets in common stocks.
o Invest at least 25% of its assets in debt securities issued by the U.S.
Government, its agencies and instrumentalities, or in investment grade
corporate bonds.
o In selecting equity securities, the Portfolio will:
o seek to identify companies with better-than-average earnings growth
potential
o seek to identify companies within industries identified as
well-positioned for the current and expected economic climate
o consider dividend payout records
o seek to identify companies traded on national stock exchanges or
in the over-the counter markets; however, securities traded on
regional or foreign exchanges may also be included.
o Invest up to 25% of total assets in foreign securities; however, securities of
Canadian issuers and American Depository Receipts ("ADRs") are not subject to
this 25% limitation.
The principal investment risks for this Portfolio include:
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield. Conversely,
the shorter a bond's maturity, the lower the risk and the lower its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1997 1998
During the periods shown in the chart for the Maxim INVESCO Balanced Portfolio,
the highest return for a quarter was % (quarter ending , 199 ) and the lowest
return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Maxim INVESCO Balanced Portfolio
Lipper Balanced Index
S&P 500 Index
Lehman Intermediate Government/
Corporate Index
The inception date for the Maxim INVESCO Balanced Portfolio was October 1, 1996.
<PAGE>
MAXIM INDEX PORTFOLIOS
The investment objective for each of the Index Portfolios is to:
o Each Index Portfolio seeks investment results that track the total return of
the common stocks that comprise its benchmark index.
Principal investment strategies. Each Index Fund will:
o Investing at least 80% in common stocks of the following applicable benchmark
indexes:
PORTFOLIO BENCHMARK INDEX
<TABLE>
<S> <C>
Stock Index Portfolio Standard & Poor's (S&P) 500 Composite Stock Price
Index and S&P MidCap Index, weighted according to their
pro rata share of the market*
Small-Cap Index Portfolio S&P SmallCap 600 Stock Index
Value Index Portfolio Russell 1000 Value Index
Growth Index Portfolio Russell 1000 Growth Index
</TABLE>
S&P is not a sponsor of, or in any other way affiliated with, the Stock Index
and Small-Cap Index Portfolios or the Fund.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Growth Index and Value Index Portfolios or the Fund.
o Attempt to reproduce the returns of the applicable Benchmark Index by owning
the securities contained in each index in as close as possible a proportion
of the portfolio as each stock's weight in the Benchmark Index. This may be
accomplished through ownership of all the stocks in the Benchmark Index
and/or through a combination of stock ownership and owning futures contracts
on the relevant index and options on futures contracts.
The principal investment risks for all of the Index Portfolios include:
Index Risk
o It is possible the benchmark index may perform unfavorably and/or
underperform the market as a whole. As a result, it is possible that an
Index Portfolio could have poor investment results even if it is tracking
the return of the Benchmark Index.
Tracking Error Risk
o Several factors will affect a Portfolio's ability to track precisely the
performance of its benchmark index. For example, unlike benchmark indexes,
which are merely unmanaged groups of securities, each Portfolio has
operating expenses and those expenses will reduce the Portfolio's total
return. In addition, a Portfolio may own less than all the securities of a
benchmark index, which also may cause a variance between the performance of
the Portfolio and its benchmark index.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Derivative Risk
o When using futures contracts on market indexes and options on the futures
contracts, there is a risk that the change in value of the securities
included on the index and the price of a futures contract will not match.
There is also a risk that the Fund could be unable to sell the futures
contract when it wishes to due to possible illiquidity of those instruments.
Also, there is the risk use of these types of derivative techniques could
cause the Fund to lose more money than if the Fund had actually purchased
the underlying securities. This is because derivatives magnify gains and
losses.
Possible Loss of Money
o When you sell your shares of any of the Index Portfolios, they could be
worth less than what you paid for them.
The Small-Cap Index Portfolio also has the following additional principal
investment risk:
Small-Company Risk
o The Small-Cap Index Portfolio invests in the stocks of small companies. The
stocks of small companies often involve more risk and volatility than those
of larger companies. Because small companies are often dependent on a small
number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision.
Portfolio Performance Data
The bar charts and tables below provide an indication of the risk of investment
in the Index Portfolios. The bar charts show each Index Portfolio's performance
in each full calendar year since its inception. The table shows how each Index
Portfolio's average annual total return for the one year and since inception
periods compare to a broad based stock market index. The returns shown below are
historical and are not an indication of future performance.
Year-to-Year
Stock Index Portfolio +
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
During the periods shown in the chart for the Stock Index Portfolio , the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
+ From September 24, 1984 to December 1, 1992, the Stock Index Portfolio's name
was the Growth Portfolio. During this period, the Portfolio's investment
policies differed from the Stock Index Portfolio's current policies.
The average annual return for one year, five year and ten years for the period
ended December 31, 1998:
One Year Five Year Ten Year
Stock Index Portfolio
S&P 500 Index
S&P 400 Index
Small-Cap Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Index Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year, and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Small-Cap Index Portfolio
S&P 600 Index
Russell 2000 Index
The inception date for the Small-Cap Index Portfolio was December 1, 1993.
Value Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Value Index Portfolio, the highest
return for a quarter was % (quarter ending , 199 ) and the lowest return for a
quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Value Index Portfolio
Russell 1000 Value Index
The inception date for the Value Index Portfolio was December 1, 1993.
Growth Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Growth Index Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Growth Index Portfolio
Russell 1000 Growth Index
The inception date for the Growth Index Portfolio was December 1, 1993.
<PAGE>
MAXIM PROFILE PORTFOLIOS
There are five separate Maxim Profile Portfolios. Each Profile Portfolio
provides an asset allocation program designed to meet certain investment goals
based on an investor's risk tolerance, investment horizon and personal
objectives. Each Profile Portfolio pursues its investment objective by investing
exclusively in other Portfolios of the Maxim Series Fund (the "Underlying
Portfolios").
The investment objective for each Profile Portfolio is to:
Aggressive Profile
o Seek long-term capital appreciation primarily through investments in
Underlying Portfolios that emphasize equity investments
o
Moderately Aggressive Profile
o Seek long-term capital appreciation primarily through investments in
Underlying Portfolios that emphasize equity investments, and to a lesser
degree, in Underlying Portfolios that emphasize fixed income investments.
Moderate Profile
o Seek long-term capital appreciation primarily through investments in
Underlying Portfolios with a relatively equal emphasis on equity and fixed
income investments
Moderately Conservative Profile
o Seek capital appreciation primarily through investments in Underlying
Portfolios that emphasize fixed income investments, and to a lesser degree,
in Underlying Portfolios that emphasize equity investments
Conservative Profile
o Seek capital preservation primarily through investments in Underlying
Portfolios that emphasize fixed income investments
The principal investment strategies for each Profile Portfolio are to:
o Invest in Underlying Portfolios according to an asset allocation program
designed to meet an investor's risk tolerance, investment time horizons and
personal objectives
Following is an illustration of each Profile Portfolio according to its emphasis
on 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>
o Maintain different allocations of equity and fixed income Underlying
Portfolios with varying degrees of potential investment risk and reward
o Select asset allocations and Underlying Portfolios to provide investors with
five diversified, distinct options that meet a wide array of investor needs
o Automatically rebalance each Profile Portfolio's holdings of Underlying
Portfolios quarterly to maintain the appropriate asset allocation as well as
the appropriate selection of Underlying Portfolios. Rebalancing occurs on
the 20th of February, May, August and November (unless that day is not a
business day in which case rebalancing will be effected on the next business
day after the 20th). Rebalancing involves selling shares of one Underlying
Portfolio and purchasing shares of another Underlying Portfolio.
The following chart describes the asset allocation ranges for each 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
====== ==================== ============= ============= ========== ============= ============
Following is a list of eligible Underlying Portfolios by asset class:
Eligible Underlying Portfolios by Asset Class
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
Portfolio
oValue Index Portfolio oSmall-Cap Index Portfolio
oInternational Equity
oGrowth Index Portfolio oSmall-Cap Value Portfolio Portfolio
</TABLE>
The principal investment risks for the Profile Portfolios include:
Risks Associated with Underlying Portfolios
o Since each Profile Portfolio invests directly in the Underlying Portfolios,
all risks associated with the eligible Underlying Portfolios apply to the
Profile Portfolios which invest in them.
o Changes in the net asset values of each Underlying Portfolio affect the net
asset values of the Profile Portfolios invested in them. As a result, over
the long-term the Profile Portfolios' ability to meet their investment
objective will be depend on the ability of the Underlying Portfolios to meet
their own investment objectives.
o For the Aggressive, Moderately Aggressive and Moderate Profile Portfolios,
the primary risks are the same as those associated with equity securities.
Secondary risks are the same as those associated with debt securities.
o For the Moderately Conservative and Conservative Profile Portfolios, the
primary risks are the same as those associated with debt securities and the
secondary risks are the same as those associated with equity securities.
Portfolio Performance Data
The bar charts and tables below provide an indication of the risk of investment
in the Profile Portfolios. The bar charts show the Profile Portfolios'
performance in each calendar year since inception. The table shows how the
Profile Portfolios' average annual total return for the one year and since
inception periods compare to a broad based stock market index. The returns shown
below are historical and are not an indication of future performance.
Year-to-Year
Aggressive Profile Portfolio
1998
During the periods shown in the chart for the Aggressive Profile Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
Moderately Aggressive Profile Portfolio
1998
During the periods shown in the chart for the Moderately Aggressive Profile
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
Moderate Profile Portfolio
1998
During the periods shown in the chart for the Moderate Profile Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
Moderately Conservative Profile Portfolio
1998
During the periods shown in the chart for the Moderately Conservative Profile
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
Conservative Profile Portfolio
1998
During the periods shown in the chart for the Conservative Profile Portfolio,
the highest return for a quarter was % (quarter ending , 199 ) and the lowest
return for a quarter was % (quarter ending , 199 ).
<PAGE>
MORE INFORMATION ABOUT THE PORTFOLIOS
--------------------------------------------------------------------
Some of the Portfolios are managed by sub-advisers which manage
other mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be
modeled after, other mutual funds, you should understand that the
Portfolios are not otherwise directly related to any other mutual
funds. Consequently, the investment performance of other mutual
funds and any similarly-named Portfolio may differ substantially.
--------------------------------------------------------------------
Each Portfolio follows a distinct set of investment strategies. Sixteen
Portfolios are considered to be "Equity Portfolios" because they invest
primarily in equity securities (mostly common stocks). Seven Portfolios
(including the Money Market Portfolio) are considered to be "Debt Portfolios"
because they invest primarily in debt securities (mostly bonds). One Portfolio
is considered to be a "Balanced Portfolio" because its principal investment
strategy is to invest in a mix of debt and equity securities. All percentage
limitations relating to the Portfolios' investment strategies are applied at the
time a Portfolio acquires a security.
Equity Portfolios
Each of the Equity Portfolios will normally invest at least 65% of its assets in
equity securities. Therefore, as an investor in an Equity Portfolio, the return
on your investment will be based primarily on the risks and rewards of equity
securities. The Equity Portfolios include:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
o Small-Cap Value Portfolio o Maxim INVESCO Small-Cap Value
Portfolio
o Small-Cap Aggressive Growth Portfolio o MidCap Portfolio
o MidCap Growth Portfolio o International Equity Portfolio
o Maxim INVESCO ADR Portfolio o Maxim Blue Chip Portfolio
o Maxim INVESCO Balanced Portfolio o Maxim T. Rowe Price
Equity/Income Portfolio
o Stock Index Portfolio o Small-Cap Index Portfolio
o Value Index Portfolio o Growth Index Portfolio
o Value Index Portfolio o Aggressive Profile Portfolio
o Moderately Aggressive Portfolio o Moderate Profile Portfolio
</TABLE>
Common stocks represent partial ownership in a company and entitle stockholders
to share in the company's profits (or losses). Common stocks also entitle the
holder to share in any of the company's dividends. The value of a company's
stock may fall as a result of factors which directly relate to that company,
such as lower demand for the company's products or services or poor management
decisions. A stock's value may also fall because of economic conditions which
affect many companies, such as increases in production costs. The value of a
company's stock may also be affected by changes in financial market conditions
that are not directly related to the company or its industry, such as changes in
interest rates or currency exchange rates. In addition, a company's stock
generally pays dividends only after the company makes required payments to
holders of its bonds and other debt. For this reason, the value of the stock
will usually react more strongly than bonds and other debt to actual or
perceived changes in company's financial condition or progress.
As a general matter, other types of equity securities are subject to many of the
same risks as common stocks.
The Equity Portfolios may invest in common stocks and other equity securities of
U.S. and foreign companies, though only the International Equity and Maxim
INVESCO ADR Portfolios will pursue investments in foreign securities as a
principal investment strategy.. Equity investments in foreign companies present
special risks and other considerations - these are discussed below under
"Foreign Securities" on page .
While the Equity Portfolios intend to principally invest in equity securities,
they may make other types of investments. For example, all Equity Portfolios may
invest in money market instruments and other types of debt securities, either as
a cash reserve or for other appropriate reasons. Money market investments are
discussed below under "Money Market Portfolio, Money Market Instruments and
Temporary Investment Strategies" on page and debt securities are discussed below
under "Debt Portfolios." Each Portfolio may invest in derivatives in order to
hedge against market risk or reduce interest rate or credit risk. Derivatives
are discussed below under "Derivatives" on page . Investments in instruments
which are not equity securities will generally not exceed 35% of an Equity
Portfolio's assets, except when a Portfolio adopts what is known as a temporary
defensive strategy.
Small and Medium Size Companies
Companies that are small or unseasoned (less then 3 years of operating history)
are more likely not to survive or accomplish their goals with the result that
the value of their stock could decline significantly. These companies are less
likely to survive since they are often dependent upon a small number of products
and may have limited financial resources.
Small or unseasoned companies often have a greater degree of change in earnings
and business prospects than larger companies resulting in more volatility in the
price of their securities. As well, the securities of small or unseasoned
companies may not have wide marketability. This fact could cause a Portfolio to
lose money if it needs to sell the securities when there are few interested
buyers. Small or unseasoned companies also normally have fewer outstanding
shares than larger companies. As a result, it may be more difficult to buy or
sell large amounts of these shares without unfavorably impacting the price of
the security. Finally, there may be less publicly information available about
small or unseasoned companies. As a result, a Sub-Adviser when making a decision
to purchase a security for a Portfolio may not be aware of some problems
associated with the company issuing the security.
Index Portfolios
Certain of the Equity Portfolios are Index Portfolios. This means they are not
actively managed, but are designed to track the performance of specified
benchmarks. The benchmark indexes are described below:
The S&P 500 Composite Stock Price Index (the "S&P 500") is a widely recognized,
unmanaged, market-value weighted index of 500 stock prices. The stocks which
make up the S&P 500 trade on the New York Stock Exchange, the American Stock
Exchange, or the NASDAQ National Market System. It is generally acknowledged
that the S&P 500 broadly represents the performance of publicly traded common
stocks in the United States.
The S&P Small Cap 600 Stock Index (the "S&P 600") is a widely recognized,
unmanaged index of 600 stock prices. The index is market-value weighted, meaning
that each stock's influence on the index's performance is directly proportional
to that stock's "market value" (stock price multiplied by the number of
outstanding shares). The stocks which make up the S&P 600 trade on the New York
Stock Exchange, American Stock Exchange, or NASDAQ quotation system. The S&P 600
is designed to monitor the performance of publicly traded common stocks of the
small company sector of the United States equities market.
Both the S&P 600 and the S&P 500 are sponsored by Standard & Poor's, which is
responsible for determining which stocks are represented on the indexes. Total
returns for the S&P 600 and the S&P 500 assume reinvestment of dividends, but do
not include the effect of taxes, brokerage commissions or other costs you would
pay if you actually invested in those stocks.
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 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 great-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, 1998,
the price-to-book breakpoint was 4.651.
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 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 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, 1998,
the price-to-book breakpoint was 4.651.
Debt Portfolios
Each of the Debt Portfolios will normally invest at least 65% of its assets in
debt securities. Therefore, as an investor in Debt Portfolios, the return on
your investment will be based primarily on the risks and rewards of debt
securities. Debt securities include money market instruments, bonds, securities
issued by the U.S. Government and its agencies, including mortgage pass-through
securities and collateralized mortgage obligations issued by both government
agency and private issuers. The Debt Portfolios include:
o Bond Portfolio o Corporate Bond Portfolio
o U.S. Government Securities Portfolio o Short-Term Maturity Bond
Portfolio
o Moderately Conservative Profile Portfolio o Conservative Portfolio
o Money Market Portfolio
Debt securities 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. 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 "interest rate risk."
Debt obligations are rated based on their estimated credit risks by independent
services such as S&P and Moody's. "Credit risk" elates 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 interest
rate risk and the more speculative it becomes.
Investment grade securities are those rated in one of the four highest rating
categories by S&P or Moody's or, if unrated, are judged to be of comparable
quality. Debt securities rated in the fourth highest rating categories by S&P or
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 the higher rating
categories. Money market instruments are short-term debt securities of the
highest investment grade quality. They are discussed separately below under
"Money Market Portfolio, Money Market Instruments and Temporary Investment
Strategies."
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. The
following Portfolios may invest in below investment grade debt securities: Bond,
Corporate Bond, Maxim INVESCO Small-Cap Growth, International Equity and Maxim
T. Rowe Price Equity/Income Portfolios.
The Debt Portfolios may invest in debt securities of U.S. and foreign issuers.
Investments in foreign securities present special risks and other considerations
- - these are discussed below under "Foreign Securities" on page .
While the Debt Portfolios intend to principally invest in debt securities, they
may make other types of investments. For example, some of the Debt Portfolios
may invest a portion of their assets in equity securities. Equity securities are
discussed above under "Equity Portfolios." Each of the Debt Portfolios may
invest in derivatives in order to hedge against market risk or reduce interest
rate or credit risk. Derivatives are discussed below under "Derivatives" on page
.
Money Market Portfolio, Money Market Instruments and Temporary Investment
Strategies
The Money Market Portfolio invests exclusively in money market instruments as
its investment strategy. Therefore, the value of your investment in the Money
Market Portfolio will be determined exclusively by the rewards and risks
relating to money market instruments.
Money market instruments include a variety of short-term debt securities,
usually with a maturity of less than 13 months. Some common types of money
market instruments include Treasury bills and notes, which are securities by the
U.S. Government, commercial paper, which is a promissory note issued by a
company of financial firm, bankers' acceptances, which are credit instruments
guaranteed by a bank, and negotiable certificates of deposit, which are issued
by banks in large denominations.
The manager of the Money Market Portfolio selects high-quality money market
instruments which means they are rated Prime-1 by Moody's Investors Services,
Inc. or A-1 by Standard & Poor's Corporation.
Temporary Investment Strategies
In addition to the Money Market Portfolio, the other Portfolios each may hold
cash or cash equivalents and may invest in money market instruments as deemed
appropriate by GW Capital Management or the Portfolio's sub-adviser. Each
non-Money Market Portfolio may invest up to 100% of its assets in money market
instruments as deemed necessary by GW Capital Management, or the Portfolio's
sub-adviser, for temporary defensive purposes to respond to adverse market,
economic or political conditions, or as a cash reserve. Should a Portfolio take
this action, it may not achieve its investment objective.
Balanced Portfolio
The Maxim INVESCO Balanced Portfolio's principal investment strategy is to
invest in both debt securities and equity securities. As such, the Portfolio
will be subject primarily to the risks discussed above under "Equity Securities"
and Debt Securities". The Maxim INVESCO Balanced Portfolio is required to invest
at least 50% of its assets in equity securities and at least 25% in debt
securities. However, the Portfolio's day-to-day investment allocation mix among
equity and debt securities will be determined by the Sub-Adviser based on the
Sub-Adviser's perception of prevailing market conditions and risks. By investing
in both debt and equity securities, it is anticipated that the Portfolio will
generally be less volatile than the overall market.
The Maxim INVESCO Balanced Portfolio has the flexibility to invest up to 25% of
its assets in foreign securities. Investments in foreign securities present
special risks and other considerations; these are discussed below under "Foreign
Securities" at page ______. Similar to the Equity Funds, this Portfolio may also
engage in various types of "derivative" transactions to protect the value of its
investments. Risks associated with derivative transactions are discussed in
"Derivatives" below at page ____.
OTHER INVESTMENT PRACTICES
Foreign Securities
The International Equity and Maxim INVESCO ADR Portfolios pursue investment in
foreign securities as its principal investment strategy. Therefore, as an
investor in these Portfolios, the return on your investment will be based
substantially on the rewards and risks relating to foreign investment. However,
many of the other Portfolios may, in a manner consistent with their respective
investment objective and policies, invest in foreign securities. Accordingly, as
an investor in these Portfolios, you also should be aware of the risks
associated with foreign securities investments.
Debt and equity securities of foreign companies and governments generally have
the same risk characteristics as those issued by the U.S. government and U.S.
companies. In addition, foreign investments present other risks and
considerations not presented by U.S. investments. Investments in foreign
securities may cause a Portfolio to lose money when converting investments from
foreign currencies into U.S. dollars due to unfavorable currency exchange rates.
Investments in foreign securities also subject a Portfolio to the adverse
political or economic conditions of the foreign country. These risks increase in
the case of "emerging market" countries which are more likely to be politically
and economically unstable. Foreign countries, especially emerging market
countries, may prevent or delay a Portfolio from selling its investments and
taking money out of the country. In addition, foreign securities may not be as
liquid as U.S. securities which could result in a Portfolio being unable to sell
its investments in a timely manner. Foreign countries, especially emerging
market countries, also have less stringent investor protection, disclosure and
accounting standards than the U.S. As a result, there is generally less publicly
available information about foreign companies than U.S. companies. Investments
in foreign securities may cause a Portfolio to lose money when converting
investments from foreign currency to U.S. dollars due to unfavorable currency
exchange rates.
As noted, the International Equity and Maxim INVESCO ADR Portfolios have
substantial exposure to foreign markets since these Portfolios invests primarily
in securities of foreign issuers. The other Portfolios which may invest in
foreign securities have some exposure to foreign markets. This exposure will be
minimized to the extent these Portfolios invest primarily in securities of U.S.
issuers.
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.
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.
Derivatives
Each Portfolio, other than the Money Market and Profile Portfolios, can use
various techniques to increase or decrease its exposure to changing security
prices, currency exchange rates, or other factors that affect security values.
These techniques are also referred to as "derivative" transactions.
Derivatives are financial instruments designed to achieve a certain economic
result when an underlying security, index, interest rate, commodity, or other
financial instrument moves in price. Derivatives may be used by the Portfolios
to hedge investments or manage interest or currency-sensitive assets. The Index
Portfolios may purchase and sell derivative instruments (futures contracts on
the Benchmark Index and options thereon) as part of their principal investment
strategy. The other non-Index Portfolios which may enter into derivative
transactions will do so only to protect the value of its investments and not for
speculative purposes. Derivatives can, however, subject a Portfolio to various
levels of risk. There are four basic derivative products: forward contracts,
futures contracts, options and swaps.
Forward contracts commit the parties to a transaction at a time in the future at
a price determined when the transaction is initiated. They are the predominant
means of hedging currency or commodity exposures. Futures contracts are similar
to forwards but differ in that (1) they are traded through regulated exchanges,
and (2) are "marked to market" daily.
Options differ from forwards and futures in that they buyer has no obligation to
perform under the contract. The buyer pays a fee, called a premium, to the
seller, who is called a writer. The writer gets to keep the premium in any event
but must deliver (in the context of the type of option) at the buyer's demand.
Caps and floors are specialized options which enable floating-rate borrowers and
lenders to reduce their exposure to interest rate swings for a fee.
A swap is an agreement between two parties to exchange certain financial
instruments or components of financial instruments. Parties may exchange streams
of interest rate payments, principal denominated in two different currencies, or
virtually any payment stream as defined by the parties.
Derivatives involve special risks. If GW Capital Management or a sub-adviser
judges market conditions incorrectly or employs a strategy that does not
correlate well with a Portfolio's investments, these techniques could result in
a loss. These techniques may increase the volatility of a Portfolio and may
involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.
Derivative transactions may not always be available and/or may be infeasible to
use due to the associated costs.
Other Risk Factors Associated with the Portfolios
As a mutual fund, each Portfolio is subject to market risk. The value of a
Portfolio's shares will fluctuate in response to changes in economic conditions,
interest rates, and the market's perception of the securities held by the
Portfolio.
No Portfolio should be considered to be a complete investment program by itself.
You should consider your own investment objectives and tolerance for risk, as
well as your other investments when deciding whether to purchase shares of any
Portfolio.
A complete listing of the Portfolios' investment limitations and more detailed
information about their investment practices are contained in the Statement of
Additional Information.
MANAGEMENT OF THE PORTFOLIOS
GW Capital Management provides investment advisory, accounting and
administrative services to the Fund. GW Capital Management's address is 8515
East Orchard Road, Englewood, Colorado 80111. GW Capital Management provides
investment management services for mutual funds and other investment portfolios
representing assets of over $5.7 billion. GW Capital Management and its
affiliates have been providing investment management services since 1969.
The management fee paid to GW Capital Management is as follows:
Portfolio Percentage of Average Net Assets
--------- --------------------------------
Money Market Portfolio 0.46%
Bond Portfolio 0.60%
U.S. Government Securities Portfolio 0.60%
Corporate Bond Portfolio 0.90%
Short-Term Maturity Bond Portfolio 0.60%
International Equity Portfolio 1.00%
Maxim INVESCO ADR Portfolio 1.00%
Maxim Blue Chip Portfolio 1.00%
Maxim T. Rowe Price Equity/Income Portfolio 0.80%
Maxim INVESCO Balanced Portfolio 1.00%
MidCap Portfolio 0.95%
MidCap Growth Portfolio 1.00%
Small-Cap Value Portfolio 1.00%
Small-Cap Aggressive Growth Portfolio 1.00%
Maxim INVESCO Small-Cap Growth Portfolio 0.95%
Stock Index Portfolio 0.60%
Small-Cap Index Portfolio 0.60%
Value Index Portfolio 0.60%
Growth Index Portfolio 0.60%
Aggressive Profile Portfolio 0.60%
Moderately Aggressive Profile Portfolio 0.25%
Moderate Profile Portfolio 0.25%
Moderately Conservative Portfolio 0.25%
Conservative Profile Portfolio 0.25%
GW Capital Management shall pay any expenses of the Fund which exceed an annual
rate (including the management fee) 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 day-to-day lead portfolio manager for the Bond and Short-Term Maturity Bond
Portfolios is B.G. Masters. Mr. Masters is Manager, Public Bond Investments,
Great-West Life & Annuity Insurance Company, 1993 to Present; Manager, Bond,
Investment Grade Corporate Bond Portfolio 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,
Great-West, 1993 to Present; Manager, 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
For some of the Portfolios, GW Capital Management has entered into an agreement
with a sub-adviser. This means that the sub-adviser is responsible for the daily
management of the Portfolio and for making decisions to buy, sell or hold any
particular security. Each sub-adviser's management activities are subject to
review and supervision by GW Capital Management and the Board of Directors of
the Fund. Each sub-adviser bears all expenses in connection with the performance
of its services, such as compensating and furnishing office space for its
officers and employees connected with investment and economic research, trading
and investment management of the Portfolio.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles & Company, L.P. Templeton Investment Counsel, Inc. Founders Asset
Management, LLC
Corporate Bond Portfolio International Equity Portfolio Maxim Blue
Chip Portfolio
Small-Cap Aggressive
Growth Portfolio
T. Rowe Price Associates, Inc. Ariel Capital Management, Inc. Institutional Trust
Company
MidCap Growth Portfolio MidCap Portfolio Maxim INVESCO ADR
Portfolio
Maxim T. Rowe Small-Cap Value Portfolio Maxim INVESCO Balanced Portfolio
Equity/Income Portfolio Maxim INVESCO Small-Cap
Growth Portfolio
</TABLE>
Following is additional information about each sub-adviser:
Templeton Investment Counsel, Inc. ("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 day-to-day manager of the International Equity Portfolio is Mark Beveridge,
Senior Vice President, TICI (since 1985).
T. Rowe Price Associates, Inc. ("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.
Institutional Trust Company ("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.
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 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.
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.
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.
Loomis, Sayles & Company, L.P. ("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.
Founders Asset Management, LLC ("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 Thomas M. Arrington,
Vice President of Investments, Founders Asset Management, LLC. Mr. Arrington is
a Chartered Financial Analyst who has been lead portfolio manager for Founders
Blue Chip Fund since February 1999. Mr. Arrington joined Founders in December
1998 as co-lead portfolio manager for Founders Growth Fund. Prior to joining
Founders, he was a vice president and director of income equity strategy
(1994-1998), a vice president and director of income and growth strategy
(1993-1994), a securities research analyst (1991-1994), and a business
administration manager (1990-1991) for HighMark Capital Management, Inc., a
subsidiary of Union BanCal Corporation. A graduate of the University of
California, Los Angeles, Mr. Arrington received an MBA from San Francisco State
University.
Year 2000 Issues
The services provided to the Fund by GW Capital Management 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 year 2000
problem could also have a negative impact on the companies in which the
Portfolios invest. Any of these factors could have an adverse effect on the
performance of the Portfolios. GW Capital Management has been actively working
on necessary changes to its computer systems to deal with the year 2000 and to
obtain assurances from our service providers that they are taking similar steps.
GW Capital Management is working to avoid problems associated with the Year 2000
computer-related problems, but cannot provide absolute assurance that this
problem will not have an adverse affect on the Fund.
Each sub-adviser has provided assurance to GW Capital Management that they have
been actively working on necessary changes to their computer systems to deal
with the year 2000 and to work with their service providers to assure that they
are taking similar steps.
<PAGE>
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
Investing in the Portfolios
Shares of the Portfolios are not for sale directly to the public. Currently, the
Portfolios' shares are sold only to separate accounts of Great-West Life &
Annuity Insurance Company and New England Life Insurance Company to fund
benefits under certain variable annuity contracts and variable life policies. In
the future, shares of the Portfolios may be used to fund other variable
contracts offered by Great-West, or its affiliates, or other unrelated insurance
companies. For information concerning your rights under a specific variable
contract, please refer to the applicable prospectus and/or disclosure documents
for that contract.
Share Price
The transaction price for buying, selling, or exchanging a Portfolio's shares is
the net asset value of that Portfolio. Each Portfolio's net asset value is
generally calculated as of the close of trading on the New York Stock Exchange
every day the NYSE is open (generally 4:00 p.m. Eastern Time). If the NYSE
closes at any other time, or if an emergency exists, the time at which the NAV
is calculated may differ. To the extent that a Portfolio's assets are traded in
other markets on days when the NYSE is closed, the value of the Portfolio's
assets may be affected on days when the Fund is not open for business. In
addition, trading in some of a Portfolio's assets may not occur on days when the
Fund is open for business. Your share price will be next net asset value
calculated after we receive your order in good form.
The net asset value of the Money Market Portfolio is determined by using the
amortized cost method of valuation. Net asset value is based on the market value
of the securities in the Portfolio. Short-term securities with a maturity of 60
days or less are valued on the basis of amortized cost. If market prices are not
available of if a security's value has been materially affected by events
occurring after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market) , that security
may be valued by another method that the Board of Directors of the Fund believes
accurately reflects fair value.
We determine net asset value by dividing net assets of the Portfolio (the value
of its investments, cash, and other assets minus its liabilities) by the number
of the Portfolio's outstanding shares.
Dividends and Capital Gains Distributions
Each Portfolio earns dividends, interest and other income from its investments,
and distributes this income (less expenses) to shareholders as dividends. Each
Portfolio also realizes capital gains from its investments, and distributes
these gains (less any losses) to shareholders as capital gains distributions.
o The Money Market Portfolio ordinarily declares dividends from net investment
income daily and distributes dividends monthly.
o The Bond, U.S. Government Securities and Short-Term Maturity Bond Portfolios
ordinarily distribute dividends from net investment income quarterly.
o The Blue Chip, Maxim T. Rowe Equity/Income, Maxim INVESCO Balanced, MidCap,
MidCap Growth, Small-Cap Value, Small-Cap Aggressive Growth, Maxim INVESCO
Small-Cap Growth, Stock Index, Small-Cap Index, Value Index, Growth Index,
Aggressive Profile, Moderately Aggressive Profile, Moderate Profile,
Moderately Conservative Profile and Conservative Profile Portfolios
ordinarily distribute dividends semi-annually.
o The International Equity and Maxim INVESCO ADR Portfolios ordinarily
distribute dividends annually.
o All of the Portfolios generally distribute capital gains, if any, in December.
Tax Consequences
The Portfolios are not currently separately taxable entities. It is possible a
Portfolio could lose this favorable tax treatment if it does not meet certain
requirements of the Internal Revenue Code of 1986. If it does not meet those tax
requirements and becomes a taxable entity, the Portfolio would be required to
pay taxes on income and capital gains. This would affect your investment because
your return would be reduced by the taxes paid by the Portfolio.
Tax consequences of your investment in any one of the Portfolios depend on the
provisions of the variable contract through which you invest in Fund. For more
information, please refer to the applicable prospectus and/or disclosure
documents for that contract.
Effect of Foreign Taxes. Dividends and interest received by the Portfolios on
foreign securities may be subject to withholding and other taxes imposed by
foreign governments. These taxes will generally reduce the amount of
distributions on foreign securities.
Annual and Semi-Annual Shareholder Reports
The fiscal year of the Fund ends on December 31 of each year. Twice a year
shareholders of each Fund will receive a report containing a summary of the
Fund's performance and other information.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Portfolio's financial history for the period of the Portfolios' operations.
Certain information reflects financial results for a single Portfolio share.
Total returns for each period include the reinvestment of all dividends and
distributions. The information has been audited by Deloitte & Touche LLP,
independent auditors, whose report, along with the Fund's financial statements,
are included in the Fund's Annual Report. A free copy of the Annual Report is
available upon request.
MAXIM SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.0007 $ 1.0007 1.0007 $ 1.0007 $ 1.0007
Income From Investment Operations
Net investment income 0.0505 0.0512 0.0493 0.0555 0.0394
Net realized and unrealized gain (0.0002)
(loss)
------------- ------------ ------------- ----------- -------------
Total Income From Investment 0.0503 0.0512 0.0493 0.0555 0.0394
Operations
------------- ------------ ------------- ----------- -------------
Less Distributions
From net investment income (0.0505) (0.0512) (0.0493) (0.0555) (0.0394)
------------- ------------ ------------- ----------- -------------
Total Distributions (0.0505) (0.0512) (0.0493) (0.0555) (0.0394)
------------- ------------ ------------- ----------- -------------
Net Asset Value, End of Period $ 1.0005 $ 1.0007 1.0007 $ 1.0007 $ 1.0007
=============
============ ============= =========== =============
Total Return/Yield 5.15% 5.24% 5.04% 5.62% 3.80%
Ratios/Supplemental Data
Net Assets, End of Period $ 619,416,664 $ 453,155,210 396,453,188 $ 277,257,289$ 186,587,262
Ratio of Expenses to Average Net 0.46% 0.46% 0.46% 0.46% 0.46%
Assets
Ratio of Net Investment Income to
Average Net Assets 5.05% 5.14% 4.99% 5.55% 3.96%
<PAGE>
MAXIM SERIES FUND, INC.
SHORT-TERM MATURITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998, 1997, 1996 and 1995 are as follows:
Year Ended December 31,
----------------------------------------------------------
1998 1997 1996 1995
-------------- ------------- ------------- -------------
(A)
Net Asset Value, Beginning of Year $ 1.0134 $ 1.0065 $ 1.0092 1.0000
Income From Investment Operations
Net investment income 0.0546 0.0534 0.0489 0.0194
Net realized and unrealized gain (loss) 0.0087 0.0070 (0.0027) 0.0105
-------------- ------------- ------------- -------------
Total Income From Investment Operations 0.0633 0.0604 0.0462 0.0299
Less Distributions
From net investment income (0.0543) (0.0534) (0.0489) (0.0207)
From net realized gains (0.0020) (0.0001)
-------------- ------------- ------------- -------------
Total Distributions (0.0563) (0.0535) (0.0489) (0.0207)
-------------- ------------- ------------- -------------
Net Asset Value, End of Year $ 1.0204 $ 1.0134 $ 1.0065 1.0092
============== ============= ============= =============
Total Return 6.36% 6.14% 4.70% 3.02%
Ratios/Supplemental Data
Net Assets, End of Year $ 110,917,091 $ 78,367,545 $ 39,503,114 15,618,670
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.53%*
Ratio of Net Investment Income to Average Net 5.45% 5.47% 5.15% 4.61%*
Assets
Portfolio Turnover Rate 37.33% 84.59% 51.71% 97.87%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $73,139,704 and $34,240,284, respectively.
(A) The portfolio commenced operations on August 1, 1995.
* Annualized
<PAGE>
MAXIM SERIES FUND, INC.
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 is as follows:
Year Ended December 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ---------- ---------
Net Asset Value, Beginning of Period $ 1.2119 $ 1.2059 $ 1.2301 $ 1.1352 $ 1.2274
Income From Investment Operations
Net investment income 0.0740 0.0767 0.0745 0.0736 0.0634
Net realized and unrealized gain (loss) 0.0050 0.0060 (0.0242) 0.0949 (0.0922)
------------ ----------- ----------- ---------- ---------
Total Income (Loss) From Investment 0.0790 0.0827 0.0503 0.1685 (0.0288)
Operations
Less Distributions
From net investment income (0.0740) (0.0767) (0.0745) (0.0736) (0.0634)
------------ ----------- ----------- ---------- ---------
Total Distributions (0.0740) (0.0767) (0.0745) (0.0736) (0.0634)
------------ ----------- ----------- ---------- ---------
Net Asset Value, End of Period $ 1.2169 $ 1.2119 $ 1.2059 $ 1.2301 $ 1.1352
============ =========== =========== ========== =========
Total Return 6.65% 7.07% 4.26% 15.21% (2.36)%
Ratios/Supplemental Data
Net Assets, End of Period $ 76,099,882 $ 70,283,703 $ 78,093,109 $ 80,025,099$ 68,965,299
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Investment Income to Average 6.00% 6.22% 6.10% 6.16% 5.33%
Net Assets
Portfolio Turnover Rate 42.50% 90.81% 117.39% 191.58% 60.85%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $32,742,558 and $29,886,069, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 is as follows:
Year Ended December 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ----------- ---------- ----------- ----------
Net Asset Value, Beginning of Period 1.0918 $ 1.0738 $ 1.1001 $ 1.0138 $ 1.1061
Income From Investment Operations
Net investment income 0.0646 0.0707 0.0675 0.0723 0.0572
Net realized and unrealized gain (loss) 0.0126 0.0180 (0.0263) 0.0863 (0.0924)
----------- ---------- ----------- ----------
----------
Total Income (Loss) from Investment 0.0772 0.0887 0.0412 0.1586 (0.0352)
Operations
---------- ----------- ---------- ----------- ----------
Less Distributions
From net investment income (0.0641) (0.0707) (0.0675) (0.0723) (0.0571)
---------- ----------- ---------- ----------- ----------
Total Distributions (0.0641) (0.0707) (0.0675) (0.0723) (0.0571)
---------- ----------- ---------- ----------- ----------
Net Asset Value, End of Period 1.1049 1.0918 $ 1.0738 $ 1.1001 $ 1.0138
========== =========== ========== =========== ==========
Total Return 7.24% 8.51% 3.92% 16.09% (3.20)%
Ratios/Supplemental Data
Net Assets, End of Period 78,875,126 $ 58,311,917 $ 64,077,863 $ 62,473,959 $ 56,338,235
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of Net Investment Income to Average 5.91% 6.32% 6.22% 6.76% 5.47%
Net Assets
Portfolio Turnover Rate 56.64% 55.54% 145.02% 185.57% 308.47%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $56,734,133 and $35,922,799, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
CORPORATE BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ------------ ----------- ------------
(A)
Net Asset Value, Beginning of Year 1.1981 $ 1.1618 $ 1.1521 $ 0.9716$ 1.0000
Income From Investment Operations
Net investment income 0.0838 0.0764 0.0825 0.0842 0.0137
Net realized and unrealized gain (loss) (0.0429) 0.0689 0.0324 0.1994 (0.0284)
-------------- ----------- ------------ ----------- ------------
Total Income (Loss) From Investment
Operations 0.0409 0.1453 0.1149 0.2836 (0.0147)
-------------- ----------- ------------ ----------- ------------
Less Distributions
From net investment income (0.0839) (0.0762) (0.0825) (0.1001) (0.0137)
From net realized gains (0.0433) (0.0328) (0.0227) (0.0030)
-------------- ----------- ------------ ----------- ------------
Total Distributions (0.1272) (0.1090) (0.1052) (0.1031) (0.0137)
-------------- ----------- ------------ ----------- ------------
Net Asset Value, End of Year 1.1118 $ 1.1981 $ 1.1618 $ 1.1521$ 0.9716
============== =========== ============ =========== ============
Total Return 3.43% 12.70% 10.35% 30.19% (1.47)%
Ratios/Supplemental Data
Net Assets, End of Year 199,386,033 $ 158,884,389$ 83,645,029 $ 45,530,190 $ 13,713,195
Ratio of Expenses to Average Net Assets 0.90% 0.90% 0.90% 0.90% 1.08% *
Ratio of Net Investment Income to
Average Net Assets 7.41% 7.14% 7.68% 7.89% 8.64% *
Portfolio Turnover Rate 55.47% 52.69% 40.02% 24.70% 9.45%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $151,069,300 and $101,598,707, respectively.
(A) The portfolio commenced operations on November 1, 1994.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ----------- ----------- -----------
Net Asset Value, Beginning of Period $ 0.9154 $ 1.2480 $ 1.0669 $ 0.9974 $ 1.0330
Income From Investment Operations
Net investment income 0.0022 0.0067 0.0095 0.0286 0.0068
Net realized and unrealized gain (loss) 0.0721 0.3223 0.1811 0.1234 (0.0356)
-------------- ----------- ----------- ----------- -----------
Total Income (Loss) From
Investment Operations 0.0743 0.3290 0.1906 0.1520 (0.0288)
-------------- ----------- ----------- ----------- -----------
Less Distributions
From net investment income (0.0022) (0.0067) (0.0095) (0.0636) (0.0068)
From net realized gains (0.0337) (0.6549) (0.0189)
-------------- ----------- ----------- ----------- -----------
Total Distributions (0.0359) (0.6616) (0.0095) (0.0825) (0.0068)
-------------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 0.9538 $ 0.9154 $ 1.2480 $ 1.0669 $ 0.9974
============== =========== =========== =========== ===========
Total Return 8.28% 27.86% 17.94% 15.51% (2.78)%
Ratios/Supplemental Data
Net Assets, End of Period $ 38,747,052 $ 22,526,242 $ 36,599,651 $ 20,769,579 $ 9,721,848
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.27% 1.33% 1.42% 1.52% 1.61%
After reimbursement # 1.26% 1.28% 1.31% 1.35% 1.33%
Ratio of Net Investment Income
to Average Net Assets 0.27% 0.64% 0.90% 2.51% 0.80%
Portfolio Turnover Rate 26.29% 82.83% 30.61% 17.78% 16.81%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $20,516,913 and $7,443,580, respectively.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------ ------------- ------------
(A)
Net Asset Value, Beginning of Period $ 1.5316 $ 1.4028 $ 1.1605 $ 0.9755 $ 1.0000
Income From Investment Operations
Net investment income 0.0139 0.0103 0.0091 0.0075 (0.0016)
Net realized and unrealized gain (0.0492) 0.3273 0.3376 0.2840 (0.0229)
(loss)
-------------- ------------ ------------ ------------- ------------
Total Income (Loss) From Investment
Operations (0.0353) 0.3376 0.3467 0.2915 (0.0245)
-------------- ------------ ------------ ------------- ------------
Less Distributions
From net investment income (0.0138) (0.0100) (0.0091) (0.0945)
From net realized gains (0.0343) (0.1988) (0.0953) (0.0120)
-------------- ------------ ------------ ------------- ------------
Total Distributions (0.0481) (0.2088) (0.1044) (0.1065)
-------------- ------------ ------------ ------------- ------------
Net Asset Value, End of Period $ 1.4482 $ 1.5316 $ 1.4028 $ 1.1605 $ 0.9755
============== ============ ============ ============= ============
Total Return (2.28)% 24.50% 30.09% 29.96% (2.46)%
Ratios/Supplemental Data
Net Assets, End of Period $ 127,807,361 $ 183,322,635 $ 79,944,926 $ 28,594,611 $ 12,963,409
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.11% 1.11% 1.27% 1.46% 1.61% *
After reimbursement # 1.11% 1.11% 1.26% 1.30% 1.26% *
Ratio of Net Investment Income
to Average Net Assets 0.81% 0.89% 0.98% 0.65% (1.08)% *
Portfolio Turnover Rate 149.12% 93.28% 62.63% 99.48% 8.84%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $428,455,623 and $200,770,368, respectively.
(A) The portfolio commenced operations on November 1, 1994.
* Annualized
# Percentage is shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
INVESCO SMALL-CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ----------- ------------ ----------
(A)
Net Asset Value, Beginning of Period $ 1.5955 $ 1.4330 $ 1.2734 $ 1.0054 $ 1.0000
Income From Investment Operations
Net investment income (loss) (0.0048) 0.0009 0.0024 0.0069 0.0030
Net realized and unrealized gain 0.2842 0.2612 0.3380 0.3118 0.0054
------------- ----------- ----------- ------------ ----------
Total Income From Investment Operations 0.2794 0.2621 0.3404 0.3187 0.0084
------------- ----------- ----------- ------------ ----------
Less Distributions
From net investment income (0.0009) (0.0024) (0.0341) (0.0030)
From net realized gains (0.0243) (0.0987) (0.1784) (0.0166)
------------- ----------- ----------- ------------ ----------
Total Distributions (0.0243) (0.0996) (0.1808) (0.0507) (0.0030)
------------- ----------- ----------- ------------ ----------
Net Asset Value, End of Period $ 1.8506 $ 1.5955 $ 1.4330 $ 1.2734 $ 1.0054
============= =========== =========== ==========
============
Total Return 17.62% 18.70% 26.73% 31.79% 0.84%
Ratios/Supplemental Data
Net Assets, End of Period $ 82,115,568 $ 62,251,873 $ 31,827,778 $ 6,385,180 $ 2,022,380
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.11% 1.19% 1.46% 2.30% 5.10% *
After reimbursement # 1.10% 1.10% 1.10% 1.10% 1.08% *
Ratio of Net Investment Income
to Average Net Assets (0.31)% 0.01% 25.00% 0.58% 1.86% *
Portfolio Turnover Rate 149.15% 174.65% 265.05% 266.64% 0.00%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $99,917,808 and $92,106,636, respectively.
* Annualized
(A) The portfolio commenced operations on November 1, 1994.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
MID-CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 are as follows:
Year Ended December 31,
----------------------------------------------------------------------
------------
1998 1997 1996 1995 1994
------------- ------------ ------------ ----------- ------------
(A)
Net Asset Value, Beginning of Period $ 1.5532 $ 1.4327 $ 1.3538 $ 1.1003 $ 1.0000
Income From Investment Operations
Net investment income (loss) (0.0092) (0.0437) (0.0083) 0.0018 0.0076
Net realized and unrealized gain 0.5058 0.2257 0.0890 0.2893 0.1003
------------- ------------ ------------ ----------- ------------
Total Income From Investment 0.4966 0.1820 0.0807 0.2911 0.1079
Operations
------------- ------------ ------------ ----------- ------------
Less Distributions
From net investment income (0.0317) (0.0076)
From net realized gains (0.2081) (0.0615) (0.0018) (0.0059)
------------- ------------ ------------ ----------- ------------
Total Distributions (0.2081) (0.0615) (0.0018) (0.0376) (0.0076)
------------- ------------ ------------ ----------- ------------
Net Asset Value, End of Period $ 1.8417 $ 1.5532 $ 1.4327 $ 1.3538 $ 1.1003
============= ============ ============ =========== ============
Total Return 33.77% 12.95% 5.96% 26.50% 10.86%
Ratios/Supplemental Data
Net Assets, End of Period $ 317,547,944 $ 233,939,911$ 214,710,803 $ 148,264,194 $ 81,088,654
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.02% 1.06% 1.08% 1.15% 1.13%
After reimbursement # 1.02% 1.06% 1.07% 1.10% 1.07%
Ratio of Net Investment Income
to Average Net Assets (0.64)% (0.51)% (0.66)% 0.13% 1.26%
Portfolio Turnover Rate 87.81% 139.74% 80.31% 167.21% 166.12%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $219,995,056 and $339,059,102, respectively.
(A) The portfolio commenced operations January 3, 1994.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
---------------------------------------
1998 1997
---------------- -----------------
(A)
Net Asset Value, Beginning of Year $ 1.1069 $ 1.0000
Income From Investment Operations
Net investment income (loss) (0.0016)
Net realized and unrealized gain 0.2471 0.1086
---------------- -----------------
Total Income From Investment Operations 0.2455 0.1086
---------------- -----------------
Less Distributions
From net realized gains (0.0052) (0.0017)
---------------- -----------------
Total Distributions (0.0052) (0.0017)
---------------- -----------------
Net Asset Value, End of Year $ 1.3472 $ 1.1069
================ =================
Total Return 22.23% 10.86%
Ratios/Supplemental Data
Net Assets, End of Year $ 139,762,438 $ 56,704,297
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.16% 1.30% *
After reimbursement # 1.05% 1.05% *
Ratio of Net Investment Income to Average Net Assets (0.21)% (0.16)% *
Portfolio Turnover Rate 52.50% 24.28%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $120,493,581 and $45,527,992, respectively.
(A) The portfolio commenced operations on July 1, 1997.
* Annualized
# Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ------------- ------------ -------------
Net Asset Value, Beginning of Period $ 1.2786 $ 1.3229$ 1.1395 $ 1.0673 $ 1.0110
Income From Investment Operations
Net investment income 0.0270 0.0205 0.0136 0.0190 0.0049
Net realized and unrealized gain (0.0911) 0.0053 0.2087 0.0756 0.0563
(loss)
------------- ----------- ------------- ------------ -------------
Total Income (Loss) From
Investment Operations (0.0641) 0.0258 0.2223 0.0946 0.0612
------------- ----------- ------------- ------------ -------------
Less Distributions
From net investment income (0.0271) (0.0204) (0.0136) (0.0224) (0.0049)
From net realized gains (0.0497) (0.0253)
------------- ----------- ------------- ------------ -------------
Total Distributions (0.0271) (0.0701) (0.0389) (0.0224) (0.0049)
------------- ----------- ------------- ------------ -------------
Net Asset Value, End of Period $ 1.1874 $ 1.2786$ 1.3229 $ 1.1395 $ 1.0673
============= ===========
============= ============ =============
Total Return (5.00)% 1.99% 19.59% 8.93% 6.06%
Ratios/Supplemental Data
Net Assets, End of Period $ 120,381,642 $ 132,774,511$ 96,172,049 $ 55,017,668 $ 32,180,949
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.21% 1.21% 1.42% 1.62%
After reimbursement # 1.20% 1.20% 1.39% 1.50% 1.49%
Ratio of Net Investment Income
to Average Net Assets 2.05% 1.70% 1.24% 1.70% 1.25%
Portfolio Turnover Rate 40.02% 34.30% 22.21% 20.28% 11.49%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $58,457,028 and $48,792,005, respectively.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
INVESCO ADR PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------
------------
1998 1997 1996 1995 1994
------------ ------------ ----------- ----------- -----------
(A)
Net Asset Value, Beginning of Period 1.4804 $ 1.3508 $ 1.1255 $ 0.9859 1.0000
Income From Investment Operations
Net investment income 0.0123 0.0114 0.0112 0.0120 0.0026
Net realized and unrealized gain (loss) 0.1453 0.1512 0.2266 0.1396 (0.0141)
------------ ------------ ----------- ----------- -----------
Total Income (Loss) From Investment 0.1576 0.1626 0.2378 0.1516 (0.0115)
Operations
------------ ------------ ----------- ----------- -----------
Less Distributions
From net investment income (0.0128) (0.0116) (0.0112) (0.0120) (0.0026)
From net realized gains (0.0214) (0.0013)
------------ ------------ ----------- ----------- -----------
Total Distributions (0.0128) (0.0330) (0.0125) (0.0120) (0.0026)
------------ ------------ ----------- ----------- -----------
Net Asset Value, End of Period 1.6252 $ 1.4804 $ 1.3508 $ 1.1255 0.9859
============ ============ =========== ===========
===========
Total Return 10.64% 12.08% 21.17% 15.48% (1.16)%
Ratios/Supplemental Data
Net Assets, End of Period 28,296,279 $ 16,581,357 $ 7,694,858 $ 2,681,969 1,976,834
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.32% 1.63% 2.29% 2.78% 5.33%*
After reimbursement # 1.30% 1.30% 1.33% 1.50% 1.50% *
Ratio of Net Investment Income to
Average Net Assets 0.86% 1.02% 1.20% 1.17% 1.56% *
Portfolio Turnover Rate 28.66% 19.56% 15.25% 5.88% 2.42%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $16,409,993 and $6,710,165, respectively.
* Annualized
(A) The portfolio commenced operations on November 1, 1994.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
T. ROWE PRICE EQUITY/INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------------
-------------
1998 1997 1996 1995 1994
-------------- ------------- ----------- ------------- ------------
(A)
Net Asset Value, Beginning of Period $ 1.7602 1.4492 $ 1.2633$ 0.9805 $ 1.0000
Income From Investment Operations
Net investment income 0.0370 0.0357 0.0299 0.0345 0.0061
Net realized and unrealized gain 0.1177 0.3783 0.2130 0.2892 (0.0195)
(loss)
-------------- ------------- ----------- ------------- ------------
Total Income (Loss) From
Investment Operations 0.1547 0.4140 0.2429 0.3237 (0.0134)
-------------- ------------- ----------- ------------- ------------
Less Distributions
From net investment income (0.0369) (0.0357) (0.0300) (0.0396) (0.0061)
From net realized gains (0.0976) (0.0673) (0.0270) (0.0013)
-------------- ------------- ----------- ------------- ------------
Total Distributions (0.1345) (0.1030) (0.0570) (0.0409) (0.0061)
-------------- ------------- ----------- ------------- ------------
Net Asset Value, End of Period $ 1.7804 1.7602 $ 1.4492$ 1.2633 $ 0.9805
============== ============= =========== ============
=============
Total Return 8.93% 28.82% 19.39% 33.42% (1.34)%
Ratios/Supplemental Data
Net Assets, End of Period $ 209,702,724 167,154,169 $ 69,535,903 $ 10,950,195 $ 2,110,302
Ratio of Expenses to Average Net
Assets:
Before reimbursement 0.88% 0.93% 1.20% 1.82% 5.89% *
After reimbursement # 0.88% 0.91% 0.95% 0.95% 0.95% *
Ratio of Net Investment Income to
Average Net Assets 2.14% 2.48% 2.85% 3.46% 3.90% *
Portfolio Turnover Rate 32.30% 25.35% 26.15% 14.00% 2.74%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $105,037,660 and $59,705,673, respectively.
(A) The portfolio commenced operations on November 1, 1994.
* Annualized
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
BLUE CHIP PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
------------------------------------------
1998 1997
------------------ -----------------
(A)
Net Asset Value, Beginning of Year $ 1.0228 $ 1.0000
Income From Investment Operations
Net investment income 0.0157 0.0089
Net realized and unrealized gain 0.1655 0.0228
------------------ -----------------
Total Income From Investment Operations 0.1812 0.0317
------------------ -----------------
Less Distributions
From net investment income (0.0157) (0.0089)
From net realized gains (0.0435)
------------------ -----------------
Total Distributions (0.0592) (0.0089)
------------------ -----------------
Net Asset Value, End of Year $ 1.1448 $ 1.0228
================== =================
Total Return 17.85% 3.17%
Ratios/Supplemental Data
Net Assets, End of Year $ 120,887,237 $ 94,206,892
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.15% 1.15% *
After reimbursement # 1.15% 1.14% *
Ratio of Net Investment Income to Average Net Assets 1.46% 1.78% *
Portfolio Turnover Rate 287.17% 111.45%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $301,523,208 and $281,082,327, respectively.
(A) The portfolio commenced operations on July 1, 1997.
* Annualized
# Percentage is shown net of expenses reimbursed by GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
INVESCO BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997 and 1996 are as follows:
Year Ended December 31,
---------------------------------------------------------
------------------
1998 1997 1996
----------------- ------------------ ----------------
(A)
Net Asset Value, Beginning of Period $ 1.2588 $ 1.0408 $ 1.0000
Income From Investment Operations
Net investment income 0.0289 0.0187 0.0052
Net realized and unrealized gain 0.2020 0.2518 0.0420
----------------- ------------------ ----------------
Total Income From Investment Operations 0.2309 0.2705 0.0472
----------------- ------------------ ----------------
Less Distributions
From net investment income (0.0289) (0.0187) (0.0052)
From net realized gains (0.0338) (0.0012)
----------------- ------------------ ----------------
Total Distributions (0.0289) (0.0525) (0.0064)
----------------- ------------------ ----------------
Net Asset Value, End of Period $ 1.4608 $ 1.2588 $ 1.0408
================= ================== ================
Total Return 18.42% 26.10% 4.60%
Ratios/Supplemental Data
Net Assets, End of Period $ 175,637,780 $ 127,072,586 $ 15,987,166
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% *
Ratio of Net Investment Income to
Average Net Assets 2.18% 2.77% 2.84% *
Portfolio Turnover Rate 119.95% 150.57% 17.14%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $202,494,145 and $175,643,036 respectively.
* Annualized
(A) The portfolio commenced operations on October 1, 1996.
<PAGE>
MAXIM SERIES FUND, INC.
STOCK INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ------------ ------------ ------------
Net Asset Value, Beginning of Period $ 2.9474 $ 2.3650 $ 1.9796 $ 1.4978 1.5575
Income From Investment Operations
Net investment income 0.0283 0.0364 0.0336 0.0334 0.0350
Net realized and unrealized gain 0.7538 0.7196 0.3960 0.4963 (0.0335)
(loss)
------------- ----------- ------------ ------------ ------------
Total Income (Loss) From
Investment Operations 0.7821 0.7560 0.4296 0.5297 0.0015
Less Distributions
From net investment income (0.0284) (0.0364) (0.0336) (0.0332) (0.0350)
From net realized gains (0.1190) (0.1372) (0.0106) (0.0147) (0.0262)
------------- ----------- ------------ ------------ ------------
Total Distributions (0.1474) (0.1736) (0.0442) (0.0479) (0.0612)
------------- ----------- ------------ ------------ ------------
Net Asset Value, End of Period $ 3.5821 $ 2.9474 $ 2.3650 $ 1.9796 1.4978
============= =========== ============ ============ ============
Total Return 26.79% 32.20% 21.81% 35.60% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period $ 1,029,722,471 $ 817,386,568 $ 936,806,358 $ 707,459,637 497,339,992
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets:
Ratio of Net Investment Income
to Average Net Assets 0.87% 1.15% 1.58% 1.91% 2.23%
Portfolio Turnover Rate 12.91% 17.30% 3.31% 5.25% 11.98%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $133,508,986 and $117,060,332, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ------------- ------------ ------------
Net Asset Value, Beginning of Period 1.2588 $ 1.2370$ 1.1680 $ 0.9540 $ 1.0112
Income From Investment Operations
Net investment income 0.0069 0.0081 0.0124 0.0102 0.0097
Net realized and unrealized gain (0.0532) 0.2419 0.1659 0.2393 (0.0572)
(loss)
-------------- ----------- ------------- ------------ ------------
Total Income (Loss)
from Investment Operations (0.0463) 0.2500 0.1783 0.2495 (0.0475)
-------------- ----------- ------------- ------------ ------------
Less Distributions
From net investment income (0.0069) (0.0081) (0.0124) (0.0197) (0.0097)
From net realized gains (0.4135) (0.2201) (0.0969) (0.0158)
-------------- ----------- ------------- ------------ ------------
Total Distributions (0.4204) (0.2282) (0.1093) (0.0355) (0.0097)
-------------- ----------- ------------- ------------ ------------
Net Asset Value, End of Period 0.7921 $ 1.2588$ 1.2370 $ 1.1680 $ 0.9540
============== =========== ============= ============ ============
Total Return (1.58)% 21.00% 15.30% 26.24% (4.69)%
Ratios/Supplemental Data
Net Assets, End of Period 23,618,628 $ 121,454,805$ 80,783,692 $ 51,610,284 $ 23,336,944
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 0.25% 0.66% 1.04% 1.00% 1.20%
Portfolio Turnover Rate 59.18% 102.45% 39.66% 30.17% 53.44%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $70,654,510 and $158,336,536, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
VALUE INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 is as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------- ----------- ------------
Net Asset Value, Beginning of Year $ 1.8136 1.4538 $ 1.2623 $ 0.9614 $ 1.0118
Income From Investment Operations
Net investment income 0.0279 0.0278 0.0298 0.0305 0.0253
Net realized and unrealized gain 0.2301 0.4631 0.2287 0.3198 (0.0504)
(loss)
-------------- ------------ ------------- ----------- ------------
Total Income (Loss) From Investment
Operations 0.2580 0.4909 0.2585 0.3503 (0.0251)
-------------- ------------ ------------- ----------- ------------
Less Distributions
From net investment income (0.0278) (0.0278) (0.0298) (0.0359) (0.0253)
From net realized gains (0.1485) (0.1033) (0.0372) (0.0135)
-------------- ------------ ------------- ----------- ------------
Total Distributions (0.1763) (0.1311) (0.0670) (0.0494) (0.0253)
-------------- ------------ ------------- ----------- ------------
Net Asset Value, End of Year $ 1.8953 $ 1.8136 $ 1.4538 $ 1.2623 $ 0.9614
============== ============ ============= =========== ============
Total Return 14.48% 34.08% 20.63% 36.80% (2.49)%
Ratios/Supplemental Data
Net Assets, End of Year $ 326,339,498 $ 237,421,804 $ 122,283,026 $ 65,183,898$ 25,610,474
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 1.54% 1.83% 2.38% 2.87% 3.18%
Portfolio Turnover Rate 39.67% 26.03% 16.31% 18.11% 16.88%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $177,712,342 and $111,264,436, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
GROWTH INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------ ------------- ------------
Net Asset Value, Beginning of Year $ 1.8507 $ 1.4852 $ 1.3459 $ 1.0120 $ 1.0064
Income From Investment Operations
Net investment income 0.0070 0.0085 0.0114 0.0127 0.0133
Net realized and unrealized gain 0.6769 0.4241 0.2851 0.3432 0.0056
-------------- ------------ ------------ ------------- ------------
Total Income From Investment 0.6839 0.4326 0.2965 0.3559 0.0189
Operations
Less Distributions
From net investment income (0.0070) (0.0085) (0.0114) (0.0165) (0.0133)
From net realized gains (0.1000) (0.0586) (0.1458) (0.0055)
-------------- ------------ ------------ ------------- ------------
Total Distributions (0.1070) (0.0671) (0.1572) (0.0220) (0.0133)
-------------- ------------ ------------ ------------- ------------
Net Asset Value, End of Year $ 2.4276 $ 1.8507 $ 1.4852 $ 1.3459 $ 1.0120
============== ============ ============ ============= ============
Total Return 37.28% 29.26% 22.10% 35.29% 1.93%
Ratios/Supplemental Data
Net Assets, End of Year $ 297,170,229 $ 162,975,760 $ 83,743,210 $ 43,515,299 $ 14,171,307
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 0.36% 0.54% 0.83% 1.15% 1.57%
Portfolio Turnover Rate 26.48% 21.52% 41.55% 17.90% 18.50%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $117,491,258 and $56,327,645, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
AGGRESSIVE PROFILE PORTFOLIO
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
--------------------------------------
1998 1997
----------------- -----------------
(A)
Net Asset Value, Beginning of Period $ 0.9505 $ 1.0000
Income From Investment Operations
Net investment income 0.0060 0.0047
Capital gain distributions received 0.0286 0.0712
----------------- -----------------
Total distributions received 0.0346 0.0759
Net realized and unrealized gain (loss) on 0.1061 (0.0432)
investments
----------------- -----------------
Total from Investment Operations 0.1407 0.0327
----------------- -----------------
Less Distributions
From net investment income (0.0111) (0.0127)
From net realized gains (0.0007) (0.0695)
----------------- -----------------
Total Distributions (0.0118) (0.0822)
----------------- -----------------
Net Asset Value, End of Period $ 1.0794 $ 0.9505
================= =================
Total Return 14.84% 3.31%
Ratios/Supplemental Data
Net Assets, End of Period $ 7,608,452 $ 697,434
Ratio of Expenses to Average Net Assets 0.25% 0.25%*
Ratio of Net Investment Income to Average Net Assets 0.97% 2.38%*
Portfolio Turnover Rate 94.75% 59.90%
Portfolio turnover is calculated using the lesser of long-term purchases and
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $10,247,272 and $3,629,093, respectively.
(A) The portfolio commenced operations on September 9, 1997. * Annualized
<PAGE>
MAXIM SERIES FUND, INC.
MODERATELY AGGRESSIVE PROFILE PORTFOLIO
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
---------------------------------------
1998 1997
-----------------
-----------------
(A)
Net Asset Value, Beginning of Period $ 0.9676 $ 1.0000
Income From Investment Operations
Net investment income 0.0136 0.0075
Capital gain distributions received 0.0284 0.0568
----------------- -----------------
Total distributions received 0.0420 0.0643
Net realized and unrealized gain (loss) on 0.0790 (0.0279)
investments
----------------- -----------------
Total from Investment Operations 0.1210 0.0364
----------------- -----------------
Less Distributions
From net investment income (0.0217) (0.0141)
From net realized gains (0.0001) (0.0547)
----------------- -----------------
Total Distributions (0.0218) (0.0688)
----------------- -----------------
Net Asset Value, End of Period $ 1.0668 $ 0.9676
================= =================
Total Return 12.54% 3.66%
Ratios/Supplemental Data
Net Assets, End of Period $ 15,066,086 $ 1,630,969
Ratio of Expenses to Average Net Assets 0.25% 0.25%*
Ratio of Net Investment Income to Average Net Assets 1.80% 4.19%*
Portfolio Turnover Rate 123.12% 41.30%
Portfolio turnover is calculated using the lesser of long-term purchases and
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $23,368,947 and $10,262,855, respectively.
(A) The portfolio commenced operations on September 9, 1997.
* Annualized
<PAGE>
MAXIM SERIES FUND, INC.
MODERATE PROFILE PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
1998 1997
(A)
Net Asset Value, Beginning of Period $ 0.9661 $ 1.0000
Income From Investment Operations
Net investment income 0.0171 0.0090
Capital gain distributions received 0.0159 0.0477
----------------- -----------------
Total distributions received 0.0330 0.0567
Net realized and unrealized gain (loss) on 0.0769 (0.0308)
investments
----------------- -----------------
Total from Investment Operations 0.1099 0.0259
----------------- -----------------
Less Distributions
From net investment income (0.0257) (0.0144)
From net realized gains (0.0454)
----------------- -----------------
Total Distributions (0.0257) (0.0598)
----------------- -----------------
Net Asset Value, End of Period $ 1.0503 $ 0.9661
================= =================
Total Return 11.41% 2.60%
Ratios/Supplemental Data
Net Assets, End of Period $ 12,600,896 $ 1,044,081
Ratio of Expenses to Average Net Assets 0.25% 0.25%*
Ratio of Net Investment Income to Average Net Assets 2.27% 5.51%*
Portfolio Turnover Rate 114.39% 31.39%
Portfolio turnover is calculated using the lesser of long-term purchases and
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $19,857,542 and $8,538,009, respectively.
(A) The portfolio commenced operations on September 9, 1997.
* Annualized
<PAGE>
MAXIM SERIES FUND, INC.
MODERATELY CONSERVATIVE PROFILE PORTFOLIO
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Period Ended December 31,
---------------------------------------
1998 1997
-----------------
-----------------
(A)
Net Asset Value, Beginning of Period $ 0.9909 $ 1.0000
Income from Investment Operations
Net investment income 0.0266 0.0132
Capital gain distributions received 0.0121 0.0182
----------------- -----------------
Total distributions received 0.0387 0.0314
Net realized and unrealized gain (loss) on 0.0576 (0.0085)
investments
----------------- -----------------
Total from Investment Operations 0.0963 0.0229
----------------- -----------------
Less Distributions
From net investment income (0.0398) (0.0151)
From net realized gains (0.0004) (0.0169)
----------------- -----------------
Total Distributions (0.0402) (0.0320)
----------------- -----------------
Net Asset Value, End of Period $ 1.0470 $ 0.9909
================= =================
Total Return 9.75% 2.29%
Ratios/Supplemental Data
Net Assets, End of Period $ 9,586,577 $ 534,975
Ratio of Expenses to Average Net Assets 0.25% 0.25%*
Ratio of Net Investment Income to Average Net Assets 3.41% 6.02%*
Portfolio Turnover Rate 112.09% 32.97%
Portfolio turnover is calculated using the lesser of long-term purchases and
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $16,571,603 and $7,535,333, respectively.
(A) The portfolio commenced operations on September 9, 1997. * Annualized
<PAGE>
MAXIM SERIES FUND, INC.
CONSERVATIVE PROFILE PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
1998 1997
(A)
Net Asset Value, Beginning of Period $ 1.0088 $ 1.0000
Income From Investment Operations
Net investment income 0.0412 0.0145
Capital gain distributions received 0.0149 0.0121
----------------- -----------------
Total distributions received 0.0561 0.0266
Net realized and unrealized gain on investments 0.0266 0.0094
----------------- -----------------
Total from Investment Operations 0.0827 0.0360
----------------- -----------------
Less Distributions
From net investment income (0.0613) (0.0159)
From net realized gains (0.0001) (0.0113)
----------------- -----------------
Total Distributions (0.0614) (0.0272)
----------------- -----------------
Net Asset Value, End of Period $ 1.0301 $ 1.0088
================= =================
Total Return 8.25% 3.60%
Ratios/Supplemental Data
Net Assets, End of Period $ 15,519,563 $ 268,416
Ratio of Expenses to Average Net Assets 0.25% 0.25%*
Ratio of Net Investment Income to Average Net Assets 4.81% 8.83%*
Portfolio Turnover Rate 99.16% 25.56%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases and
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $27,795,003 and $12,368,743, respectively.
(A) The portfolio commenced operations on September 9, 1997. * Annualized
<PAGE>
ADDITIONAL INFORMATION
The Statement of Additional Information ("SAI") contains more details about the
investment policies and techniques of the Portfolios. A current SAI is on file
with the SEC and is incorporated into this Prospectus by reference. This means
that the SAI is legally considered a part of this Prospectus even though it is
not physically contained within this Prospectus.
Additional information about the Portfolios' investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Portfolios' performance during its
last fiscal year.
For a free copy of the SAI or annual or semi-annual reports or to request other
information or ask questions about a Fund, call 1-800-338-4015.
The SAI and the annual and semi-annual reports are available on the SEC's
Internet Web site (http://www.sec.gov). You can also obtain copies of this
information, upon paying a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the Portfolios, including the SAI, at the SEC's Public
Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the
operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-7735.
This prospectus should be read
and retained for future reference.
<PAGE>
MAXIM SERIES FUND, INC.
Money Market Portfolio Stock Index Portfolio
Investment Grade Corporate Bond Portfolio Small-Cap Index Portfolio
U.S. Government Mortgage Securities Portfolio Value Index Portfolio
Short-Term Maturity Bond Portfolio Growth Index Portfolio
Corporate Bond Portfolio
Small-Cap Value Portfolio MidCap Growth Portfolio
Small-Cap Aggressive Growth Portfolio
Maxim Blue Chip Portfolio Foreign Equity Portfolio
----------------
8515 East Orchard Road
Englewood, CO 80111
(800) 338 - 4015
This Prospectus describes fourteen portfolios, nine of which are "Equity
Portfolios, four of which are "Debt Portfolios, and one Money Market Portfolio.
GW Capital Management, LLC ("GW Capital Management"), a wholly owned subsidiary
of Great-West Life & Annuity Insurance Company, serves as investment adviser to
each of the Portfolios. Several of the Portfolios are managed on a day-to-day
basis by "Sub-Advisers" hired by GW Capital Management.
Each Portfolio is a series of the Maxim Series Fund, Inc. (the "Fund"). Each
Portfolio operates as a separate mutual fund and has its own investment
objectives and strategies.
The Fund is available only as an investment option for certain variable annuity
contracts and variable life policies. Therefore you cannot purchase shares of
the Portfolios directly; rather you must own a variable insurance contract that
makes one or more of the Portfolios available for investment.
This Prospectus contains important information about each Portfolio that you
should consider before investing. Please read it carefully and save it for
future reference.
This Prospectus does not constitute an offer to sell securities in any state or
other jurisdiction to any person to whom it is unlawful to make such an offer in
such state or other jurisdiction.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is May 1, 1999.
<PAGE>
CONTENTS
The Portfolios at a Glance
..............................................................................
Maxim Small-Cap Portfolios
Maxim MidCap Portfolios
Maxim Foreign Equity Portfolios
Maxim Domestic Equity Portfolios
Maxim Index Portfolios
Maxim Bond Portfolios
Maxim Money Market Portfolio
Performance ...................................................................
More Information About the Portfolios
...............................................................................
The Equity Portfolios
The Debt Portfolios
The Money Market Portfolio
Other Investment Practices
...............................................................................
Management of the Portfolios....................................................
Important Information About Your Investment.....................................
How the Fund Reports Performance................................................
Financial Highlights.................................................
<PAGE>
THE PORTFOLIOS AT A GLANCE
The following information about each Portfolio is only a summary of important
information you should know. More detailed information about the Portfolios'
investment strategies and risks is included elsewhere in this Prospectus. Please
read this prospectus carefully before investing in any of the Portfolios.
THE MAXIM MONEY MARKET PORTFOLIO
The investment objective for this Portfolio is to:
o Seek as high a level of current income as is consistent with the
preservation of capital and liquidity.
Principal investment strategies. This Portfolio will:
o Invest in high-quality, short-term debt securities. These securities will
have the highest rating for short-term debt by at least one nationally
recognized statistical rating organization such as Moody's Investor
Services, Inc. ("Moody's) or Standard & Poor's Corporation ("S&P") (or
unrated securities of comparable quality).
o Invest in securities which are only denominated in U.S. dollars.
The principal investment risks for this Portfolio include:
Possible loss of money
o You should know that an investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $1.00 per share, it is possible your shares could be
worth less than $1.00 per share when you sell them.
Interest rate risk
o The market value of a money market instrument is affected by changes in
interest rates. When interest rates rise, the market value of money market
instruments declines and when interest rates decline, market value rises.
When interest rates rise, money market instruments which can be purchased by
the Portfolio will have lower yields.
Portfolio Performance Data
Yield
Yield and effective yield will fluctuate and may not provide a basis for
comparison with bank deposits, other mutual funds or other investments which are
insured or pay a fixed yield for a stated period of time. Yields are based on
past results and are not an indication of future performance.
As of December 31, 1998, the Money Market Portfolio's 7-day yield was x.xx% and
its effective yield was x.xx%.
<PAGE>
MAXIM BOND PORTFOLIOS
Short-Term Maturity Bond Portfolio
The investment objective of this Portfolio is to:
o Seek maximum total return that is consistent with preservation of capital
and liquidity.
Principal investment strategies. This Portfolio will:
o Invest in short-term investment grade bonds.
o Select securities based on relative value, maturity, quality and sector.
o Maintain an actively managed portfolio of debt securities.
o Maintain a weighted average quality of A or higher.
o Invest in individual securities with maturities of no longer than three years.
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Non-Diversification Risk
o The Portfolio is classified as non-diversified which means a relatively high
percentage of its assets may be invested in securities of a limited number
of issuers, including issuers primarily within the same industry or economic
sector. As a result, the Portfolio's performance may be adversely affected
by any single economic, political or regulatory event than that experienced
by a diversified portfolio.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1996 1997 1998
During the periods shown in the chart for the Short-Term Maturity Bond
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Short-Term Maturity
Bond Portfolio
Lehman 1-3 Year Government/
Corporate Bond Index
The inception date for the Short-Term Maturity Bond Portfolio was August 1,
1995.
U.S. Government Mortgage Securities Portfolio
The investment objective of this Portfolio is to:
o Seek the highest level of return consistent with preservation of capital and
substantial credit protection
Principal investment strategies. This Portfolio will:
o Invest primarily in mortgage related securities that have been issued or
guaranteed by the U.S. Government or one of its agencies or
instrumentalities.
o Focus on relative value of the security by analyzing the current and
expected level of interest rates, and current and historical asset yields
versus treasury yields.
o Invest in private mortgage pass-through securities and collateralized
mortgage obligations (CMOs). CMOs may be issued by private issuers and
collateralized by securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities.
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Non-Diversification Risk
o The Portfolio is classified as non-diversified which means a relatively high
percentage of its assets may be invested in securities of a limited number
of issuers, including issuers primarily within the same industry or economic
sector. As a result, the Portfolio's securities may be more susceptible to
any single economic, political ore regulatory event than that experienced by
a diversified portfolio.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1993 1994 1995 1996 1997 1998
During the periods shown in the chart for the U.S. Government Mortgage
Securities Portfolio , the highest return for a quarter was % (quarter ending ,
199 ) and the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio) for the period ended December 31, 1998:
Since
One Year Five Year Inception
U.S. Government Mortgage
Securities Portfolio
Lehman Mortgage-Backed
Securities Index
The inception date for the U.S. Government Mortgage Securities Portfolio was
December 1, 1992.
Investment Grade Corporate Bond Portfolio
The investment objective of this Portfolio is to:
o Seek the highest possible current income consistent with the primary goal of
insuring protection of capital
Principal investment strategies. This Portfolio will:
o Invest primarily in investment grade corporate debt securities.
o Select securities based on relative value, maturity, quality and sector.
o Invest in debt securities that have been issued or guaranteed by the U.S.
Government and its agencies.
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
Non-Diversification Risk
o The Portfolio is classified as non-diversified which means a relatively high
percentage of its assets may be invested in securities of a limited number
of issuers, including issuers primarily within the same industry or economic
sector. As a result, the Portfolio's securities may be more susceptible to
any single economic, political ore regulatory event than that experienced by
a diversified portfolio.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1993 1994 1995 1996 1997 1998
During the periods shown in the chart for the Investment Grade Corporate Bond
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Investment Grade Corporate
Bond Portfolio
Lehman Intermediate Government/
Corporate Index
Lehman Intermediate
Corporate Index
The inception date for the Investment Grade Corporate Bond Portfolio was
December 1, 1992.
Corporate Bond Portfolio (Sub-Adviser: Loomis, Sayles & Company, L.P.)
The investment objective of this Portfolio is to:
o Seek high total investment return through a combination of current income
and capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in corporate debt securities of any maturity.
o Focus on good relative value based on the credit outlook of the issuer, good
structural fit within the objectives and constraints of the Portfolio, and
maximum total return potential.
o Invest up to 20% of its total assets in preferred stock.
o Invest up to 20% in foreign securities.
o Invest up to 35% of its total assets in securities of below investment grade
quality ("high yield/high risk" or "junk" bonds).
The principal investment risks for this Portfolio include:
Interest Rate Risk
o The market value of a debt security is affected significantly by changes in
interest rates. When interest rates rise, the security's market value
declines and when interest rates decline, market value rises. The longer a
bond's maturity, the greater the risk and the higher its yield.
Credit Rate Risk
o A bond's value can also be affected by changes in its credit quality rating
or its issuer's financial conditions.
o An issuer may default on its obligation to pay principal and/or interest.
o Junk bonds are regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. As a
result, the total return and yield of a junk bond can be expected to
fluctuate more than the total return and yield of high quality bonds and the
potential loss is significantly greater.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of potential loss than U.S.
securities.
Preferred Stock Risk
o Preferred stocks are subject to interest rate risk and credit risk. The
value of these stocks will tend to fall in response to a general increase in
interest rates and rise in value in response to a general decline in
interest rates. In addition, the value of these stocks will vary in response
to changes in the credit rating of the issuing corporation.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Corporate Bond Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Corporate Bond Portfolio
Merrill Lynch Intermediate
Government/Corporate Index
The inception date for the Corporate Bond Portfolio was November 1, 1994.
<PAGE>
MAXIM SMALL-CAP PORTFOLIOS
Small-Cap Value Portfolio (Sub-Adviser: Ariel Capital Management, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term capital appreciation.
Principal investment strategies. This Portfolio will:
o Invest primarily in small-cap common stocks.
o Emphasize small companies that are believed to be undervalued.
o Seek medium-sized companies consistent with its investment philosophy.
The Portfolio also currently observes the following operating policies:
o Actively seeking investment 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 record.
o Not investing in issuers primarily engaged in the manufacture of tobacco,
weapons systems, the production of nuclear energy, or the manufacture of
equipment to produce nuclear energy.
The principal investment risks for this Portfolio include:
Small Company Risk
o The stocks of small companies often involve more risk and volatility than
those of larger companies. Because, small companies are often dependent on a
small number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security can be more volatile than the market as
a whole and can perform differently than the value of the market as a whole.
This is particularly true of small companies.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1994 1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Value Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Small-Cap Value Portfolio
S&P 500 Index
The inception date for the Small-Cap Value Portfolio was December 1, 1993.
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO (Sub-Adviser: Loomis, Sayles & Company,
L.P.)
The investment objective of this Portfolio is to:
o Seek long-term capital growth.
Principal investment strategies. This Portfolio will:
o Invest primarily in small-cap companies within the Russell 2000 Index market
capitalization range ($ to $ as of May 30, 1998).
o Seek to build a core small-cap portfolio of common stocks of solid growth
companies.
o Seek companies that have experienced significant business problems but which
are believed to have favorable prospects for recovery.
o Invest up to 35% of total assets in equity securities of companies with
market capitalizations in excess of the Russell 2000 Index market
capitalization range
The principal investment risks for this Portfolio include:
Small Company Risk
o The stocks of small companies often involve more risk and volatility than
those of larger companies. Because small companies are often dependent on a
small number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision. These risks may be more acute for companies that have experienced
significant business problems.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security can be more volatile than the market as
a whole and can perform differently than the value of the market as a whole.
This is particularly true of small companies.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Aggressive Growth
Portfolio, the highest return for a quarter was % (quarter ending , 199 ) and
the lowest return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Small-Cap Aggressive
Growth Portfolio
Russell 2000 Index
The inception date for the Small-Cap Aggressive Growth Portfolio was November 1,
1994.
<PAGE>
MAXIM MIDCAP PORTFOLIOS
MidCap Growth Portfolio (Sub-Adviser: T. Rowe Price Associates, Inc.)
The investment objective of this Portfolio is to:
o Seek long-term appreciation .
Principal investment strategies. This Portfolio will:
o Maintain a diversified portfolio consisting primarily of mid-cap companies
o Emphasize companies whose earnings are expected to grow at a faster rate
than the average mid-cap company. In this connection, the Portfolio will
focus on issuers whose market capitalization fall within the range of
companies included in the Standard & Poor's 400 MidCap Index - generally
between $201 million and $14.3 billion.
o Invest in companies that:
o offer proven products or services;
o have a historical record of above-average earnings growth; o demonstrate
potential for sustained earnings growth; o operate in industries experiencing
increasing demand; or o are believed to be undervalued in the market place.
o Invest up to 25% in foreign securities.
The principal investment risks for this Portfolio include:
Mid-Cap Company Risk
o The stocks of medium sized companies often involve more risk and volatility
than those of larger companies.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of loss than U.S.
securities.
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1998
During the periods shown in the chart for the MidCap Growth Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The inception date for the MidCap Growth Portfolio was July 1, 1997.
<PAGE>
MAXIM FOREIGN EQUITY PORTFOLIOS
Foreign Equity Portfolio (Sub-Adviser: Loomis, Sayles & Company, L.P.)
The investment objective of this Portfolio is to:
o Seek total return from long-term growth of capital and dividend income.
Principal investment strategies. This Portfolio will:
o Invest primarily in equity securities of issuers headquartered outside the
U.S.
o Focus on the best value opportunities within a given market.
o Invest in securities of issuers from at least 3 countries, one of which may
be the U.S.
o Invest up to 20% in fixed income securities issued or guaranteed by foreign
governments, suprantional agencies or by foreign companies, including
convertibles and less than investment grade (high-yield/high-risk or "junk"
bonds) or non-rated debt.
The principal investment risks for this Portfolio include:
Foreign Risk
o Foreign markets, particularly emerging markets, can be more volatile than
the U.S. market due to increased risks of adverse issuer, political,
regulatory, market, currency valuation or economic developments and can
perform differently than the U.S. market. As a result, foreign securities
subject the Portfolio to greater risk of loss than U.S.
securities.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1995 1996 1997 1998
During the periods shown in the chart for the International Equity Portfolio,
the highest return for a quarter was % (quarter ending , 199 ) and the lowest
return for a quarter was % (quarter ending , 199 ).
The average annual return for one year and since inception of the Portfolio for
the period ended December 31, 1998:
Since
One Year Inception
Foreign Equity Portfolio
MSCI EAFE Index
The inception date for the Foreign Equity Portfolio was November 1, 1994.
<PAGE>
MAXIM DOMESTIC EQUITY PORTFOLIOS
Maxim Blue Chip Portfolio (Sub-Adviser: Founders Asset Management, LLC)
The investment objective of this Portfolio is to:
o Seek long-term growth of capital and income.
Principal investment strategies. This Portfolio will:
o Invest primarily in common stocks of large, well-established, stable and
mature companies, commonly known as "Blue Chip" companies.
o Invest in "Blue Chip" stocks that:
o are included in a widely recognized index of stock market
performance, such as the Dow Jones Industrial Average or the Standard
& Poor's Index
o generally pay regular dividends
o have a market capitalization of at least $1 billion.
o Invest up to 30% in foreign securities; however, the Portfolio may invest
without limitation in American Depository Receipts ("ADRs").
The principal investment risks for this Portfolio include:
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Foreign Risk
o Foreign markets can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market, currency valuation
or economic developments and can perform differently than the U.S. market.
As a result, foreign securities subject the Portfolio to greater risk of
loss than U.S. securities.
Portfolio Turnover Risk
o The portfolio turnover rate for this Portfolio in 1998 was in excess of
100%. High portfolio turnover rates generally result in higher transaction
costs (which are borne directly by the Portfolio).
Possible Loss of Money
o When you sell your shares of the Portfolio, they could be worth less than
what you paid for them
Portfolio Performance Data
The bar chart and table below provide an indication of the risk of investment in
the Portfolio. The bar chart shows the Portfolio's performance in each full
calendar year since inception. The table shows how the Portfolio's average
annual total return for the one year and since inception periods compare to a
broad based stock market index. The returns shown below are historical and are
not an indication of future performance.
Year-by-Year
1998
During the periods shown in the chart for the Maxim Blue Chip Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The inception date for the Blue Chip Portfolio was July 1, 1997.
<PAGE>
MAXIM INDEX PORTFOLIOS
The investment objective for each of the Index Portfolios is to:
o Each Index Portfolio seeks investment results that track the total return of
the common stocks that comprise its benchmark index.
Principal investment strategies. Each Index Fund will:
o Investing at least 80% in common stocks of the following applicable benchmark
indexes:
PORTFOLIO BENCHMARK INDEX
<TABLE>
<S> <C>
Stock Index Portfolio Standard & Poor's (S&P) 500 Composite Stock Price
Index and S&P MidCap Index, weighted according to
their pro rata share of the market
Small-Cap Index Portfolio S&P SmallCap 600 Stock Index
Value Index Portfolio Russell 1000 Value Index
Growth Index Portfolio Russell 1000 Growth Index
</TABLE>
S&P is not a sponsor of, or in any other way affiliated with, the Stock Index
and Small-Cap Index Portfolios or the Fund.
The Frank Russell Company is not a sponsor of, or in any other way affiliated
with, the Growth Index and Value Index Portfolios or the Fund.
o Attempt to reproduce the returns of the applicable Benchmark Index by owning
the securities contained in each index in as close as possible a proportion
of the portfolio as each stock's weight in the Benchmark Index. This may be
accomplished through ownership of all the stocks in the Benchmark Index
and/or through a combination of stock ownership and owning futures contracts
on the relevant index and options on the futures contracts.
The principal investment risks for all of the Index Portfolios include:
Index Risk
o It is possible the benchmark index may perform unfavorably and/or
underperform the market as a whole. As a result, it is possible that an
Index Portfolio could have poor investment results even if it is tracking
the return of the Benchmark Index.
Tracking Error Risk
o Several factors will affect a Portfolio's ability to track precisely the
performance of its benchmark index. For example, unlike benchmark indexes,
which are merely unmanaged groups of securities, each Portfolio has
operating expenses and those expenses will reduce the Portfolio's total
return. In addition, a Portfolio may own less than all the securities of a
benchmark index, which also may cause a variance between the performance of
the Portfolio and its benchmark index.
Stock Market Risk
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
Issuer Risk
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Derivative Risk
o When using futures contracts on market indexes and options on the futures
contracts, there is a risk that the change in value of the securities
included on the index and the price of a futures contract will not match.
There is also a risk that the Fund could be unable to sell the futures
contract when it wishes to due to possible illiquidity of those instruments.
Also, there is the risk use of these types of derivative techniques could
cause the Fund to lose more money than if the Fund had actually purchased
the underlying securities. This is because derivatives magnify gains and
losses.
Possible Loss of Money
o When you sell your shares of any of the Index Portfolios, they could be
worth less than what you paid for them.
The Small-Cap Index Portfolio also has the following additional principal
investment risk:
Small-Company Risk
o The Small-Cap Index Portfolio invests in the stocks of small companies. The
stocks of small companies often involve more risk and volatility than those
of larger companies. Because small companies are often dependent on a small
number of products and have limited financial resources, they may be
severely affected by economic changes, business cycles and adverse market
conditions. In addition, there is generally less publicly available
information concerning small companies upon which to base an investment
decision.
Portfolio Performance Data
The bar charts and tables below provide an indication of the risk of investment
in the Index Portfolios. The bar charts show each Index Portfolio's performance
in each full calendar year since its inception. The table shows how each Index
Portfolio's average annual total return for the one year and since inception
periods compare to a broad based stock market index. The returns shown below are
historical and are not an indication of future performance.
Year-to-Year
Stock Index Portfolio +
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
During the periods shown in the chart for the Stock Index Portfolio , the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
+ From September 24, 1984 to December 1, 1992, the Stock Index Portfolio's name
was the Growth Portfolio. During this period, the Portfolio's investment
policies differed from the Stock Index Portfolio's current policies.
The average annual return for one year, five year and ten years for the period
ended December 31, 1998:
Since
One Year Five Year Ten Year Inception
Stock Index Portfolio
S&P 500 Index
S&P 400 Index
Small-Cap Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Small-Cap Index Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Small-Cap Index Portfolio
S&P 600 Index
Russell 2000 Index
The inception date for the Small-Cap Index Portfolio was December 1, 1993.
Value Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Value Index Portfolio, the highest
return for a quarter was % (quarter ending , 199 ) and the lowest return for a
quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Value Index Portfolio
Russell 1000 Value Index
The inception date for the Value Index Portfolio was December 1, 1993.
Growth Index Portfolio
1994 1995 1996 1997 1998
During the periods shown in the chart for the Growth Index Portfolio, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The average annual return for one year, five year and since inception of the
Portfolio for the period ended December 31, 1998:
Since
One Year Five Year Inception
Growth Index Portfolio
Russell 1000 Growth Index
The inception date for the Growth Index Portfolio was December 1, 1993.
<PAGE>
MORE INFORMATION ABOUT THE PORTFOLIOS
--------------------------------------------------------------------
Some of the Portfolios are managed by sub-advisers which manage
other mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be
modeled after, other mutual funds, you should understand that the
Portfolios are not otherwise directly related to any other mutual
funds. Consequently, the investment performance of other mutual
funds and any similarly-named Portfolio may differ substantially.
--------------------------------------------------------------------
Each Portfolio follows a distinct set of investment strategies. Nine Portfolios
are considered to be "Equity Portfolios" because they invest primarily in equity
securities (mostly common stocks). Five Portfolios (including the Money Market
Portfolio) are considered to be "Debt Portfolios" because they invest primarily
in debt securities (mostly bonds). All percentage limitations relating to the
Portfolios' investment strategies are applied at the time a Portfolio acquires a
security.
Equity Portfolios
Each of the Equity Portfolios will normally invest at least 65% of its assets in
equity securities. Therefore, as an investor in an Equity Portfolio, the return
on your investment will be based primarily on the risks and rewards of equity
securities. The Equity Portfolios include:
o Small-Cap Value Portfolio o Small-Cap Aggressive Growth
Portfolio
o MidCap Growth Portfolio o Foreign Equity Portfolio
o Maxim Blue Chip Portfolio o Stock Index Portfolio
o Small-Cap Index Portfolio o Value Index Portfolio
o Growth Index Portfolio
Common stocks represent partial ownership in a company and entitle stockholders
to share in the company's profits (or losses). Common stocks also entitle the
holder to share in any of the company's dividends. The value of a company's
stock may fall as a result of factors which directly relate to that company,
such as lower demand for the company's products or services or poor management
decisions. A stock's value may also fall because of economic conditions which
affect many companies, such as increases in production costs. The value of a
company's stock may also be affected by changes in financial market conditions
that are not directly related to the company or its industry, such as changes in
interest rates or currency exchange rates. In addition, a company's stock
generally pays dividends only after the company makes required payments to
holders of its bonds and other debt. For this reason, the value of the stock
will usually react more strongly than bonds and other debt to actual or
perceived changes in company's financial condition or progress.
As a general matter, other types of equity securities are subject to many of the
same risks as common stocks.
The Equity Portfolios may invest in common stocks and other equity securities of
U.S. and foreign companies, though only the Foreign Equity Portfolio will pursue
investments in foreign securities as a principal investment strategy. Equity
investments in foreign companies present special risks and other considerations
- - these are discussed below under "Foreign Securities" on page .
While the Equity Portfolios intend to principally invest in equity securities,
they may make other types of investments. For example, all Equity Portfolios may
invest in money market instruments and other types of debt securities, either as
a cash reserve or for other appropriate reasons. Money market investments are
discussed below under "Money Market Portfolio, Money Market Instruments and
Temporary Investment Strategies" on page and debt securities are discussed below
under "Debt Portfolios." Each Portfolio may invest in derivatives in order to
hedge against market risk or reduce interest rate or credit risk. Derivatives
are discussed below under "Derivatives" on page . Investments in instruments
which are not equity securities will generally not exceed 35% of an Equity
Portfolio's assets, except when a Portfolio adopts what is known as a temporary
defensive strategy.
Small and Medium Size Companies
Companies that are small or unseasoned (less then 3 years of operating history)
are more likely not to survive or accomplish their goals with the result that
the value of their stock could decline significantly. These companies are less
likely to survive since they are often dependent upon a small number of products
and may have limited financial resources.
Small or unseasoned companies often have a greater degree of change in earnings
and business prospects than larger companies resulting in more volatility in the
price of their securities. As well, the securities of small or unseasoned
companies may not have wide marketability. This fact could cause a Portfolio to
lose money if it needs to sell the securities when there are few interested
buyers. Small or unseasoned companies also normally have fewer outstanding
shares than larger companies. As a result, it may be more difficult to buy or
sell large amounts of these shares without unfavorably impacting the price of
the security. Finally, there may be less publicly information available about
small or unseasoned companies. As a result, a Sub-Adviser when making a decision
to purchase a security for a Portfolio may not be aware of some problems
associated with the company issuing the security.
Index Portfolios
Certain of the Equity Portfolios are Index Portfolios. This means they are not
actively managed, but are designed to track the performance of specified
benchmarks. The benchmark indexes are described below:
The S&P 500 Composite Stock Price Index (the "S&P 500") is a widely recognized,
unmanaged, market-value weighted index of 500 stock prices. The stocks which
make up the S&P 500 trade on the New York Stock Exchange, the American Stock
Exchange, or the NASDAQ National Market System. It is generally acknowledged
that the S&P 500 broadly represents the performance of publicly traded common
stocks in the United States.
The S&P Small Cap 600 Stock Index (the "S&P 600") is a widely recognized,
unmanaged index of 600 stock prices. The index is market-value weighted, meaning
that each stock's influence on the index's performance is directly proportional
to that stock's "market value" (stock price multiplied by the number of
outstanding shares). The stocks which make up the S&P 600 trade on the New York
Stock Exchange, American Stock Exchange, or NASDAQ quotation system. The S&P 600
is designed to monitor the performance of publicly traded common stocks of the
small company sector of the United States equities market.
Both the S&P 600 and the S&P 500 are sponsored by Standard & Poor's, which is
responsible for determining which stocks are represented on the indexes. Total
returns for the S&P 600 and the S&P 500 assume reinvestment of dividends, but do
not include the effect of taxes, brokerage commissions or other costs you would
pay if you actually invested in those stocks.
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 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 great-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, 1998,
the price-to-book breakpoint was 4.651.
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 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 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, 1998,
the price-to-book breakpoint was 4.651.
Debt Portfolios
Each of the Debt Portfolios will normally invest at least 65% of its assets in
debt securities. Therefore, as an investor in Debt Portfolios, the return on
your investment will be based primarily on the risks and rewards of debt
securities. Debt securities include money market instruments, bonds, securities
issued by the U.S. Government and its agencies, including mortgage pass-through
securities and collateralized mortgage obligations issued by both government
agency and private issuers. The Debt Portfolios include:
o Investment Grade Corporate Bond Portfolio o Corporate Bond Portfolio
o U.S. Government Mortgage Securities Portfolio o Short-Term Maturity Bond
Portfolio
o Money Market Portfolio
Debt securities 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. 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 "interest rate risk."
Debt obligations are rated based on their estimated credit risks by independent
services such as S&P and Moody's. "Credit risk" elates 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 interest
rate risk and the more speculative it becomes.
Investment grade securities are those rated in one of the four highest rating
categories by S&P or Moody's or, if unrated, are judged to be of comparable
quality. Debt securities rated in the fourth highest rating categories by S&P or
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 the higher rating
categories. Money market instruments are short-term debt securities of the
highest investment grade quality. They are discussed separately below under
"Money Market Portfolio, Money Market Instruments and Temporary Investment
Strategies."
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. The
following Portfolios may invest in below investment grade debt securities are:
Corporate Bond and Foreign Equity Portfolios.
The Debt Portfolios may invest in debt securities of U.S. and foreign issuers.
Investments in foreign securities present special risks and other considerations
- - these are discussed below under "Foreign Securities" on page .
While the Debt Portfolios intend to principally invest in debt securities, they
may make other types of investments. For example, some of the Debt Portfolios
may invest a portion of their assets in equity securities. Equity securities are
discussed above under "Equity Portfolios." Each of the Debt Portfolios may
invest in derivatives in order to hedge against market risk or reduce interest
rate or credit risk. Derivatives are discussed below under "Derivatives" on page
.
Money Market Portfolio, Money Market Instruments and Temporary Investment
Strategies
The Money Market Portfolio invests exclusively in money market instruments as
its investment strategy. Therefore, the value of your investment in the Money
Market Portfolio will be determined exclusively by the rewards and risks
relating to money market instruments.
Money market instruments include a variety of short-term debt securities,
usually with a maturity of less than 13 months. Some common types of money
market instruments include Treasury bills and notes, which are securities by the
U.S. Government, commercial paper, which is a promissory note issued by a
company of financial firm, bankers' acceptances, which are credit instruments
guaranteed by a bank, and negotiable certificates of deposit, which are issued
by banks in large denominations.
The manager of the Money Market Portfolio selects high-quality money market
instruments which means they are rated Prime-1 by Moody's Investors Services,
Inc. or A-1 by Standard & Poor's Corporation.
Temporary Investment Strategies
In addition to the Money Market Portfolio, the other Portfolios each may hold
cash or cash equivalents and may invest in money market instruments as deemed
appropriate by GW Capital Management or the Portfolio's sub-adviser. Each
non-Money Market Portfolio may invest up to 100% of its assets in money market
instruments as deemed necessary by GW Capital Management, or the Portfolio's
sub-adviser, for temporary defensive purposes to respond to adverse market,
economic or political conditions, or as a cash reserve. Should a Portfolio take
this action, it may not achieve its investment objective.
OTHER INVESTMENT PRACTICES
Foreign Securities
The Foreign Equity Portfolio does pursue investment in foreign securities as its
principal investment strategy. Therefore, as an investor in the Foreign Equity
Portfolio, the return on your investment will be based substantially on the
rewards and risks relating to foreign investment. However, many of the other
Portfolios may, in a manner consistent with their respective investment
objective and policies, invest in foreign securities. Accordingly, as an
investor in these Portfolios, you also should be aware of the risks associated
with foreign securities investments.
Debt and equity securities of foreign companies and governments generally have
the same risk characteristics as those issued by the U.S. government and U.S.
companies. In addition, foreign investments present other risks and
considerations not presented by U.S. investments. Investments in foreign
securities may cause a Portfolio to lose money when converting investments from
foreign currencies into U.S. dollars due to unfavorable currency exchange rates.
Investments in foreign securities also subject a Portfolio to the adverse
political or economic conditions of the foreign country. These risks increase in
the case of "emerging market" countries which are more likely to be politically
and economically unstable. Foreign countries, especially emerging market
countries, may prevent or delay a Portfolio from selling its investments and
taking money out of the country. In addition, foreign securities may not be as
liquid as U.S. securities which could result in a Portfolio being unable to sell
its investments in a timely manner. Foreign countries, especially emerging
market countries, also have less stringent investor protection, disclosure and
accounting standards than the U.S. As a result, there is generally less publicly
available information about foreign companies than U.S. companies. Investments
in foreign securities may cause a Portfolio to lose money when converting
investments from foreign currency to U.S. dollars due to unfavorable currency
exchange rates.
As noted, the Foreign Equity Portfolio has substantial exposure to foreign
markets since this Portfolio invests primarily in securities of foreign issuers.
The other Portfolios which may invest in foreign securities have some exposure
to foreign markets. This exposure will be minimized to the extent these
Portfolios invest primarily in securities of U.S.
issuers.
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.
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.
Derivatives
Each Portfolio, other than the Money Market Portfolio, can use various
techniques to increase or decrease its exposure to changing security prices,
currency exchange rates, or other factors that affect security values. These
techniques are also referred to as "derivative" transactions.
Derivatives are financial instruments designed to achieve a certain economic
result when an underlying security, index, interest rate, commodity, or other
financial instrument moves in price. Derivatives may be used by the Portfolios
to hedge investments or manage interest or currency-sensitive assets. . The
Index Portfolios may purchase and sell derivative instruments (futures contracts
on the Benchmark Index and options thereon) as part of their principal
investment strategy. The other non-Index Portfolios which may enter into
derivative transactions will do so only to protect the value of its investments
and not for speculative purposes. Derivatives can, however, subject a Portfolio
to various levels of risk. There are four basic derivative products: forward
contracts, futures contracts, options and swaps.
Forward contracts commit the parties to a transaction at a time in the future at
a price determined when the transaction is initiated. They are the predominant
means of hedging currency or commodity exposures. Futures contracts are similar
to forwards but differ in that (1) they are traded through regulated exchanges,
and (2) are "marked to market" daily.
Options differ from forwards and futures in that they buyer has no obligation to
perform under the contract. The buyer pays a fee, called a premium, to the
seller, who is called a writer. The writer gets to keep the premium in any event
but must deliver (in the context of the type of option) at the buyer's demand.
Caps and floors are specialized options which enable floating-rate borrowers and
lenders to reduce their exposure to interest rate swings for a fee.
A swap is an agreement between two parties to exchange certain financial
instruments or components of financial instruments. Parties may exchange streams
of interest rate payments, principal denominated in two different currencies, or
virtually any payment stream as defined by the parties.
Derivatives involve special risks. If GW Capital Management or a sub-adviser
judges market conditions incorrectly or employs a strategy that does not
correlate well with a Portfolio's investments, these techniques could result in
a loss. These techniques may increase the volatility of a Portfolio and may
involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.
Derivative transactions may not always be available and/or may be infeasible to
use due to the associated costs.
Other Risk Factors Associated with the Portfolios
As a mutual fund, each Portfolio is subject to market risk. The value of a
Portfolio's shares will fluctuate in response to changes in economic conditions,
interest rates, and the market's perception of the securities held by the
Portfolio.
No Portfolio should be considered to be a complete investment program by itself.
You should consider your own investment objectives and tolerance for risk, as
well as your other investments when deciding whether to purchase shares of any
Portfolio.
A complete listing of the Portfolios' investment limitations and more detailed
information about their investment practices are contained in the Statement of
Additional Information.
MANAGEMENT OF THE PORTFOLIOS
GW Capital Management provides investment advisory, accounting and
administrative services to the Fund. GW Capital Management's address is 8515
East Orchard Road, Englewood, Colorado 80111. GW Capital Management provides
investment management services for mutual funds and other investment portfolios
representing assets of over $5.7 billion. GW Capital Management and its
affiliates have been providing investment management services since 1969.
The management fee paid to GW Capital Management is as follows:
Portfolio Percentage of Average Net Assets
--------- --------------------------------
Money Market Portfolio 0.46%
Investment Grade Corporate Bond Portfolio 0.60%
U.S. Government Mortgage Securities Portfolio 0.60%
Corporate Bond Portfolio 0.90%
Short-Term Maturity Bond Portfolio 0.60%
Foreign Equity Portfolio 1.00%
Maxim Blue Chip Portfolio 1.00%
MidCap Growth Portfolio 1.00%
Small-Cap Value Portfolio 1.00%
Small-Cap Aggressive Growth Portfolio 1.00%
Stock Index Portfolio 0.60%
Small-Cap Index Portfolio 0.60%
Value Index Portfolio 0.60%
Growth Index Portfolio 0.60%
GW Capital Management shall pay any expenses of the Fund which exceed an annual
rate (including the management fee) 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 day-to-day lead portfolio manager for the Investment Grade Corporate Bond
and Short-Term Maturity Bond Portfolios is B.G. Masters. Mr. Masters is Manager,
Public Bond Investments, Great-West Life & Annuity Insurance Company, 1993 to
Present; Manager, Bond Portfolio 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 Mortgage
Securities Portfolio is C.S. Tocher. Ms. Tocher is Manager, Public Bond
Investments, Great-West, 1993 to Present; Manager, U.S. Government 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
For some of the Portfolios, GW Capital Management has entered into an agreement
with a sub-adviser. This means that the sub-adviser is responsible for the daily
management of the Portfolio and for making decisions to buy, sell or hold any
particular security. Each sub-adviser's management activities are subject to
review and supervision by GW Capital Management and the Board of Directors of
the Fund. Each sub-adviser bears all expenses in connection with the performance
of its services, such as compensating and furnishing office space for its
officers and employees connected with investment and economic research, trading
and investment management of the Portfolio.
T. Rowe Price Associates, Inc. Ariel Capital Management, Inc.
MidCap Growth Portfolio Small-Cap Value Portfolio
Loomis Sayles & Company, L.P. Founders Asset Management, LLC
Corporate Bond Portfolio Maxim Blue Chip Portfolio
Small-Cap Aggressive Growth Portfolio
Foreign Equity Portfolio
Following is additional information about each sub-adviser:
T. Rowe Price Associates, Inc. ("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 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.
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.
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.
Loomis, Sayles & Company, L.P. ("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 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).
Founders Asset Management, LLC ("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 Thomas M. Arrington,
Vice President of Investments, Founders Asset Management, LLC. Mr. Arrington is
a Chartered Financial Analyst who has been lead portfolio manager for Founders
Blue Chip Fund since February 1999. Mr. Arrington joined Founders in December
1998 as co-lead portfolio manager for Founders Growth Fund. Prior to joining
Founders, he was a vice president and director of income equity strategy
(1994-1998), a vice president and director of income and growth strategy
(1993-1994), a securities research analyst (1991-1994), and a business
administration manager (1990-1991) for HighMark Capital Management, Inc., a
subsidiary of Union BanCal Corporation. A graduate of the University of
California, Los Angeles, Mr. Arrington received an MBA from San Francisco State
University.
Year 2000 Issues
The services provided to the Fund by GW Capital Management 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 year 2000
problem could also have a negative impact on the companies in which the
Portfolios invest. Any of these factors could have an adverse effect on the
performance of the Portfolios. GW Capital Management has been actively working
on necessary changes to its computer systems to deal with the year 2000 and to
obtain assurances from our service providers that they are taking similar steps.
GW Capital Management is working to avoid problems associated with the Year 2000
computer-related problems, but cannot provide absolute assurance that this
problem will not have an adverse affect on the Fund.
Each sub-adviser has provided assurance to GW Capital Management that they have
been actively working on necessary changes to their computer systems to deal
with the year 2000 and to work with their service providers to assure that they
are taking similar steps.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
Investing in the Portfolios
Shares of the Portfolios are not for sale directly to the public. Currently, the
Portfolios' shares are sold only to separate accounts of Great-West Life &
Annuity Insurance Company and New England Life Insurance Company to fund
benefits under certain variable annuity contracts and variable life policies. In
the future, shares of the Portfolios may be used to fund other variable
contracts offered by Great-West, or its affiliates, or other unrelated insurance
companies. For information concerning your rights under a specific variable
contract, please refer to the applicable prospectus and/or disclosure documents
for that contract.
Share Price
The transaction price for buying, selling, or exchanging a Portfolio's shares is
the net asset value of that Portfolio. Each Portfolio's net asset value is
generally calculated as of the close of trading on the New York Stock Exchange
every day the NYSE is open (generally 4:00 p.m. Eastern Time). If the NYSE
closes at any other time, or if an emergency exists, the time at which the NAV
is calculated may differ. To the extent that a Portfolio's assets are traded in
other markets on days when the NYSE is closed, the value of the Portfolio's
assets may be affected on days when the Fund is not open for business. In
addition, trading in some of a Portfolio's assets may not occur on days when the
Fund is open for business. Your share price will be next net asset value
calculated after we receive your order in good form.
The net asset value of the Money Market Portfolio is determined by using the
amortized cost method of valuation. Net asset value is based on the market value
of the securities in the Portfolio. Short-term securities with a maturity of 60
days or less are valued on the basis of amortized cost. If market prices are not
available of if a security's value has been materially affected by events
occurring after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market) , that security
may be valued by another method that the Board of Directors of the Fund believes
accurately reflects fair value.
We determine net asset value by dividing net assets of the Portfolio (the value
of its investments, cash, and other assets minus its liabilities) by the number
of the Portfolio's outstanding shares.
Dividends and Capital Gains Distributions
Each Portfolio earns dividends, interest and other income from its investments,
and distributes this income (less expenses) to shareholders as dividends. Each
Portfolio also realizes capital gains from its investments, and distributes
these gains (less any losses) to shareholders as capital gains distributions.
o The Money Market Portfolio ordinarily declares dividends from net investment
income daily and distributes dividends monthly.
o The Investment Grade Corporate Bond, U.S. Government Mortgage Securities and
Short-Term Maturity Bond Portfolios ordinarily distribute dividends from net
investment income quarterly.
o The Blue Chip, MidCap Growth, Small-Cap Value, Stock Index, Small-Cap Index,
Value Index and Growth Index Portfolios ordinarily distribute dividends
semi-annually.
o The Small-Cap Aggressive Growth and Foreign Equity Portfolios ordinarily
distributedividends annually.
o All of the Portfolios generally distribute capital gains, if any, in December.
Tax Consequences
The Portfolios are not currently separately taxable entities. It is possible a
Portfolio could lose this favorable tax treatment if it does not meet certain
requirements of the Internal Revenue Code of 1986. If it does not meet those tax
requirements and becomes a taxable entity, the Portfolio would be required to
pay taxes on income and capital gains. This would affect your investment because
your return would be reduced by the taxes paid by the Portfolio.
Tax consequences of your investment in any one of the Portfolios depend on the
provisions of the variable contract through which you invest in Fund. For more
information, please refer to the applicable prospectus and/or disclosure
documents for that contract.
Effect of Foreign Taxes. Dividends and interest received by the Portfolios on
foreign securities may be subject to withholding and other taxes imposed by
foreign governments. These taxes will generally reduce the amount of
distributions on foreign securities.
Annual and Semi-Annual Shareholder Reports
The fiscal year of the Fund ends on December 31 of each year. Twice a year
shareholders of each Fund will receive a report containing a summary of the
Fund's performance and other information.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Portfolio's financial history for the period of the Portfolios' operations.
Certain information reflects financial results for a single Portfolio share.
Total returns for each period include the reinvestment of all dividends and
distributions. The information has been audited by Deloitte & Touche LLP,
independent auditors, whose report, along with the Fund's financial statements,
are included in the Fund's Annual Report. A free copy of the Annual Report is
available upon request.
<PAGE>
MAXIM SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.0007 $ 1.0007 1.0007 $ 1.0007 $ 1.0007
Income From Investment Operations
Net investment income 0.0505 0.0512 0.0493 0.0555 0.0394
Net realized and unrealized gain (0.0002)
(loss)
------------- ------------ ------------- ----------- -------------
Total Income From Investment 0.0503 0.0512 0.0493 0.0555 0.0394
Operations
------------- ------------ ------------- ----------- -------------
Less Distributions
From net investment income (0.0505) (0.0512) (0.0493) (0.0555) (0.0394)
------------- ------------ ------------- ----------- -------------
Total Distributions (0.0505) (0.0512) (0.0493) (0.0555) (0.0394)
------------- ------------ ------------- ----------- -------------
Net Asset Value, End of Period $ 1.0005 $ 1.0007 1.0007 $ 1.0007 $ 1.0007
=============
============ ============= =========== =============
Total Return/Yield 5.15% 5.24% 5.04% 5.62% 3.80%
Ratios/Supplemental Data
Net Assets, End of Period $ 619,416,664 $ 453,155,210 396,453,188 $ 277,257,289$ 186,587,262
Ratio of Expenses to Average Net 0.46% 0.46% 0.46% 0.46% 0.46%
Assets
Ratio of Net Investment Income to
Average Net Assets 5.05% 5.14% 4.99% 5.55% 3.96%
<PAGE>
MAXIM SERIES FUND, INC.
SHORT-TERM MATURITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998, 1997, 1996 and 1995 are as follows:
Year Ended December 31,
----------------------------------------------------------
1998 1997 1996 1995
-------------- ------------- ------------- -------------
(A)
Net Asset Value, Beginning of Year $ 1.0134 $ 1.0065 $ 1.0092 1.0000
Income From Investment Operations
Net investment income 0.0546 0.0534 0.0489 0.0194
Net realized and unrealized gain (loss) 0.0087 0.0070 (0.0027) 0.0105
-------------- ------------- ------------- -------------
Total Income From Investment Operations 0.0633 0.0604 0.0462 0.0299
Less Distributions
From net investment income (0.0543) (0.0534) (0.0489) (0.0207)
From net realized gains (0.0020) (0.0001)
-------------- ------------- ------------- -------------
Total Distributions (0.0563) (0.0535) (0.0489) (0.0207)
-------------- ------------- ------------- -------------
Net Asset Value, End of Year $ 1.0204 $ 1.0134 $ 1.0065 1.0092
============== ============= ============= =============
Total Return 6.36% 6.14% 4.70% 3.02%
Ratios/Supplemental Data
Net Assets, End of Year $ 110,917,091 $ 78,367,545 $ 39,503,114 15,618,670
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% 0.53%*
Ratio of Net Investment Income to Average Net 5.45% 5.47% 5.15% 4.61%*
Assets
Portfolio Turnover Rate 37.33% 84.59% 51.71% 97.87%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $73,139,704 and $34,240,284, respectively.
(A) The portfolio commenced operations on August 1, 1995.
* Annualized
<PAGE>
MAXIM SERIES FUND, INC.
INVESTMENT GRADE CORPORATE BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ------------ ----------- ------------
Net Asset Value, Beginning of Period $ 1.2856 $ 1.2774 $ 1.3161 $ 1.2019$ 1.3090
Income From Investment Operations
Net investment income 0.0737 0.0769 0.0777 0.0794 0.0665
Net realized and unrealized gain 0.0154 0.0081 (0.0387) 0.1164 (0.1071)
(loss)
------------- ----------- ----------- ------------
------------
Total Income (Loss) From Investment
Operations 0.0891 0.0850 0.0390 0.1958 (0.0406)
------------- ----------- ------------ ----------- ------------
Less Distributions
From net investment income (0.0737) (0.0768) (0.0777) (0.0816) (0.0665)
From net realized gains
------------- ----------- ------------ ----------- ------------
Total Distributions (0.0737) (0.0768) (0.0777) (0.0816) (0.0665)
------------- ----------- ------------ ----------- ------------
Net Asset Value, End of Period $ 1.3010 $ 1.2856 $ 1.2774 $ 1.3161$ 1.2019
============= =========== ============ =========== ============
Total Return 7.08% 6.85% 3.14% 16.71% (3.15)%
Ratios/Supplemental Data
Net Assets, End of Period $ 130,436,898 $ 114,875,960$ 100,722,152 $ 95,210,404 $ 71,276,294
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets:
Ratio of Net Investment Income to
Average Net Assets 5.69% 6.02% 6.08% 6.30% 5.37%
Portfolio Turnover Rate 59.84% 140.35% 118.50% 159.21% 51.66%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $83,493,849 and $69,181,240, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------ ------------ -------------
Net Asset Value, Beginning of Period $ 1.1743 1.1519 $ 1.1786 $ 1.0917 $ 1.1813
Income From Investment Operations
Net investment income 0.0700 0.0745 0.0751 0.0781 0.0620
Net realized and unrealized gain 0.0118 0.0224 (0.0267) 0.0869 (0.0896)
(loss)
------------- ------------- ------------ ------------ -------------
Total Income (Loss) From
Investment Operations 0.0818 0.0969 0.0484 0.1650 (0.0276)
------------- ------------- ------------ ------------ -------------
Less Distributions
From net investment income (0.0698) (0.0745) (0.0751) (0.0781) (0.0620)
------------- ------------- ------------ ------------ -------------
Total Distributions (0.0698) (0.0745) (0.0751) (0.0781) (0.0620)
------------- ------------- ------------ ------------ -------------
Net Asset Value, End of Period $ 1.1863 1.1743 $ 1.1519 $ 1.1786 $ 1.0917
============= ============= ============ ============ =============
Total Return 7.12% 8.64% 4.29% 15.55% (2.34)%
Ratios/Supplemental Data
Net Assets, End of Period $ 192,302,277 162,184,386 $ 138,465,908 $ 129,549,680 $ 93,386,366
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income to
Average Net Assets 5.98% 6.44% 6.51% 6.84% 5.67%
Portfolio Turnover Rate 108.19% 34.01% 94.63% 188.04% 331.42%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $204,211,217 and $178,065,483, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
CORPORATE BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ------------ ----------- ------------
(A)
Net Asset Value, Beginning of Year 1.1981 $ 1.1618 $ 1.1521 $ 0.9716$ 1.0000
Income From Investment Operations
Net investment income 0.0838 0.0764 0.0825 0.0842 0.0137
Net realized and unrealized gain (loss) (0.0429) 0.0689 0.0324 0.1994 (0.0284)
-------------- ----------- ------------ ----------- ------------
Total Income (Loss) From Investment
Operations 0.0409 0.1453 0.1149 0.2836 (0.0147)
-------------- ----------- ------------ ----------- ------------
Less Distributions
From net investment income (0.0839) (0.0762) (0.0825) (0.1001) (0.0137)
From net realized gains (0.0433) (0.0328) (0.0227) (0.0030)
-------------- ----------- ------------ ----------- ------------
Total Distributions (0.1272) (0.1090) (0.1052) (0.1031) (0.0137)
-------------- ----------- ------------ ----------- ------------
Net Asset Value, End of Year 1.1118 $ 1.1981 $ 1.1618 $ 1.1521$ 0.9716
============== =========== ============ =========== ============
Total Return 3.43% 12.70% 10.35% 30.19% (1.47)%
Ratios/Supplemental Data
Net Assets, End of Year 199,386,033 $ 158,884,389$ 83,645,029 $ 45,530,190 $ 13,713,195
Ratio of Expenses to Average Net Assets 0.90% 0.90% 0.90% 0.90% 1.08% *
Ratio of Net Investment Income to
Average Net Assets 7.41% 7.14% 7.68% 7.89% 8.64% *
Portfolio Turnover Rate 55.47% 52.69% 40.02% 24.70% 9.45%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $151,069,300 and $101,598,707, respectively.
(A) The portfolio commenced operations on November 1, 1994.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ----------- ----------- -----------
Net Asset Value, Beginning of Period $ 0.9154 $ 1.2480 $ 1.0669 $ 0.9974 $ 1.0330
Income From Investment Operations
Net investment income 0.0022 0.0067 0.0095 0.0286 0.0068
Net realized and unrealized gain (loss) 0.0721 0.3223 0.1811 0.1234 (0.0356)
-------------- ----------- ----------- ----------- -----------
Total Income (Loss) From
Investment Operations 0.0743 0.3290 0.1906 0.1520 (0.0288)
-------------- ----------- ----------- ----------- -----------
Less Distributions
From net investment income (0.0022) (0.0067) (0.0095) (0.0636) (0.0068)
From net realized gains (0.0337) (0.6549) (0.0189)
-------------- ----------- ----------- ----------- -----------
Total Distributions (0.0359) (0.6616) (0.0095) (0.0825) (0.0068)
-------------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 0.9538 $ 0.9154 $ 1.2480 $ 1.0669 $ 0.9974
============== =========== =========== =========== ===========
Total Return 8.28% 27.86% 17.94% 15.51% (2.78)%
Ratios/Supplemental Data
Net Assets, End of Period $ 38,747,052 $ 22,526,242 $ 36,599,651 $ 20,769,579 $ 9,721,848
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.27% 1.33% 1.42% 1.52% 1.61%
After reimbursement # 1.26% 1.28% 1.31% 1.35% 1.33%
Ratio of Net Investment Income
to Average Net Assets 0.27% 0.64% 0.90% 2.51% 0.80%
Portfolio Turnover Rate 26.29% 82.83% 30.61% 17.78% 16.81%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $20,516,913 and $7,443,580, respectively.
# Percentages are shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP AGGRESSIVE GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------ ------------- ------------
(A)
Net Asset Value, Beginning of Period $ 1.5316 $ 1.4028 $ 1.1605 $ 0.9755 $ 1.0000
Income From Investment Operations
Net investment income 0.0139 0.0103 0.0091 0.0075 (0.0016)
Net realized and unrealized gain (0.0492) 0.3273 0.3376 0.2840 (0.0229)
(loss)
-------------- ------------ ------------ ------------- ------------
Total Income (Loss) From Investment
Operations (0.0353) 0.3376 0.3467 0.2915 (0.0245)
-------------- ------------ ------------ ------------- ------------
Less Distributions
From net investment income (0.0138) (0.0100) (0.0091) (0.0945)
From net realized gains (0.0343) (0.1988) (0.0953) (0.0120)
-------------- ------------ ------------ ------------- ------------
Total Distributions (0.0481) (0.2088) (0.1044) (0.1065)
-------------- ------------ ------------ ------------- ------------
Net Asset Value, End of Period $ 1.4482 $ 1.5316 $ 1.4028 $ 1.1605 $ 0.9755
============== ============ ============ ============= ============
Total Return (2.28)% 24.50% 30.09% 29.96% (2.46)%
Ratios/Supplemental Data
Net Assets, End of Period $ 127,807,361 $ 183,322,635 $ 79,944,926 $ 28,594,611 $ 12,963,409
Ratio of Expenses to Average Net
Assets:
Before reimbursement 1.11% 1.11% 1.27% 1.46% 1.61% *
After reimbursement # 1.11% 1.11% 1.26% 1.30% 1.26% *
Ratio of Net Investment Income
to Average Net Assets 0.81% 0.89% 0.98% 0.65% (1.08)% *
Portfolio Turnover Rate 149.12% 93.28% 62.63% 99.48% 8.84%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $428,455,623 and $200,770,368, respectively.
(A) The portfolio commenced operations on November 1, 1994.
* Annualized
# Percentage is shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
---------------------------------------
1998 1997
---------------- -----------------
(A)
Net Asset Value, Beginning of Year $ 1.1069 $ 1.0000
Income From Investment Operations
Net investment income (loss) (0.0016)
Net realized and unrealized gain 0.2471 0.1086
---------------- -----------------
Total Income From Investment Operations 0.2455 0.1086
---------------- -----------------
Less Distributions
From net realized gains (0.0052) (0.0017)
---------------- -----------------
Total Distributions (0.0052) (0.0017)
---------------- -----------------
Net Asset Value, End of Year $ 1.3472 $ 1.1069
================ =================
Total Return 22.23% 10.86%
Ratios/Supplemental Data
Net Assets, End of Year $ 139,762,438 $ 56,704,297
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.16% 1.30% *
After reimbursement # 1.05% 1.05% *
Ratio of Net Investment Income to Average Net Assets (0.21)% (0.16)% *
Portfolio Turnover Rate 52.50% 24.28%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $120,493,581 and $45,527,992, respectively.
(A) The portfolio commenced operations on July 1, 1997.
* Annualized
# Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
FOREIGN EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ---------- ------------ ----------- ------------
(A)
Net Asset Value, Beginning of Period $ 0.9277 $ 1.0580$ 0.9871 $ 0.9515$ 1.0000
Income From Investment Operations
Net investment income (loss) 0.0057 (0.0017) 0.0041 0.0073 (0.0019)
Net realized and unrealized gain (loss) 0.0649 (0.0593) 0.0709 0.0398 (0.0466)
------------ ---------- ----------- ------------
------------
Total Income (Loss) From Investment
Operations 0.0706 (0.0610) 0.0750 0.0471 (0.0485)
------------ ---------- ------------ ----------- ------------
Less Distributions
From net investment income (0.0086)
From net realized gains (0.0149) (0.0693) (0.0041) (0.0115)
------------ ---------- ------------ ----------- ------------
Total Distributions (0.0235) (0.0693) (0.0041) (0.0115)
------------ ---------- ------------ ----------- ------------
Net Asset Value, End of Period $ 0.9748 $ 0.9277$ 1.0580 $ 0.9871$ 0.9515
============ ========== ============ =========== ============
Total Return 7.67% (5.69)% 7.61% 5.02% (4.85)%
Ratios/Supplemental Data
Net Assets, End of Period $ 78,509,092 $ 64,674,772$ 80,106,459 $ 64,403,868 $ 42,760,613
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.31% 1.35% 1.45% 1.51% 1.60% *
After reimbursement # 1.30% 1.33% 1.45% 1.50% 1.50% *
Ratio of Net Investment Income to
Average Net Assets 0.63% (0.23)% 0.41% 0.69% (1.26)%*
Portfolio Turnover Rate 129.82% 200.82% 75.65% 119.98% 19.85%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $100,394,647 and $86,319,556, respectively.
(A) The portfolio commenced operations on November 1, 1994.
* Annualized
# Percentage is shown net of expenses reimbursed by The Great-West Life
Assurance Company or GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
BLUE CHIP PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the periods
ended December 31, 1998 and 1997 are as follows:
Year Ended December 31,
------------------------------------------
1998 1997
------------------ -----------------
(A)
Net Asset Value, Beginning of Year $ 1.0228 $ 1.0000
Income From Investment Operations
Net investment income 0.0157 0.0089
Net realized and unrealized gain 0.1655 0.0228
------------------ -----------------
Total Income From Investment Operations 0.1812 0.0317
------------------ -----------------
Less Distributions
From net investment income (0.0157) (0.0089)
From net realized gains (0.0435)
------------------ -----------------
Total Distributions (0.0592) (0.0089)
------------------ -----------------
Net Asset Value, End of Year $ 1.1448 $ 1.0228
================== =================
Total Return 17.85% 3.17%
Ratios/Supplemental Data
Net Assets, End of Year $ 120,887,237 $ 94,206,892
Ratio of Expenses to Average Net Assets:
Before reimbursement 1.15% 1.15% *
After reimbursement # 1.15% 1.14% *
Ratio of Net Investment Income to Average Net Assets 1.46% 1.78% *
Portfolio Turnover Rate 287.17% 111.45%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $301,523,208 and $281,082,327, respectively.
(A) The portfolio commenced operations on July 1, 1997.
* Annualized
# Percentage is shown net of expenses reimbursed by GW Capital Management, LLC.
<PAGE>
MAXIM SERIES FUND, INC.
STOCK INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ------------ ------------ ------------
Net Asset Value, Beginning of Period $ 2.9474 $ 2.3650 $ 1.9796 $ 1.4978 1.5575
Income From Investment Operations
Net investment income 0.0283 0.0364 0.0336 0.0334 0.0350
Net realized and unrealized gain 0.7538 0.7196 0.3960 0.4963 (0.0335)
(loss)
------------- ----------- ------------ ------------ ------------
Total Income (Loss) From
Investment Operations 0.7821 0.7560 0.4296 0.5297 0.0015
Less Distributions
From net investment income (0.0284) (0.0364) (0.0336) (0.0332) (0.0350)
From net realized gains (0.1190) (0.1372) (0.0106) (0.0147) (0.0262)
------------- ----------- ------------ ------------ ------------
Total Distributions (0.1474) (0.1736) (0.0442) (0.0479) (0.0612)
------------- ----------- ------------ ------------ ------------
Net Asset Value, End of Period $ 3.5821 $ 2.9474 $ 2.3650 $ 1.9796 1.4978
============= =========== ============ ============ ============
Total Return 26.79% 32.20% 21.81% 35.60% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period $ 1,029,722,471 $ 817,386,568 $ 936,806,358 $ 707,459,637 497,339,992
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets:
Ratio of Net Investment Income
to Average Net Assets 0.87% 1.15% 1.58% 1.91% 2.23%
Portfolio Turnover Rate 12.91% 17.30% 3.31% 5.25% 11.98%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $133,508,986 and $117,060,332, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
SMALL-CAP INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ------------- ------------ ------------
Net Asset Value, Beginning of Period 1.2588 $ 1.2370$ 1.1680 $ 0.9540 $ 1.0112
Income From Investment Operations
Net investment income 0.0069 0.0081 0.0124 0.0102 0.0097
Net realized and unrealized gain (0.0532) 0.2419 0.1659 0.2393 (0.0572)
(loss)
-------------- ----------- ------------- ------------ ------------
Total Income (Loss)
from Investment Operations (0.0463) 0.2500 0.1783 0.2495 (0.0475)
-------------- ----------- ------------- ------------ ------------
Less Distributions
From net investment income (0.0069) (0.0081) (0.0124) (0.0197) (0.0097)
From net realized gains (0.4135) (0.2201) (0.0969) (0.0158)
-------------- ----------- ------------- ------------ ------------
Total Distributions (0.4204) (0.2282) (0.1093) (0.0355) (0.0097)
-------------- ----------- ------------- ------------ ------------
Net Asset Value, End of Period 0.7921 $ 1.2588$ 1.2370 $ 1.1680 $ 0.9540
============== =========== ============= ============ ============
Total Return (1.58)% 21.00% 15.30% 26.24% (4.69)%
Ratios/Supplemental Data
Net Assets, End of Period 23,618,628 $ 121,454,805$ 80,783,692 $ 51,610,284 $ 23,336,944
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 0.25% 0.66% 1.04% 1.00% 1.20%
Portfolio Turnover Rate 59.18% 102.45% 39.66% 30.17% 53.44%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $70,654,510 and $158,336,536, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
VALUE INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 is as follows:
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------- ----------- ------------
Net Asset Value, Beginning of Year $ 1.8136 1.4538 $ 1.2623 $ 0.9614 $ 1.0118
Income From Investment Operations
Net investment income 0.0279 0.0278 0.0298 0.0305 0.0253
Net realized and unrealized gain 0.2301 0.4631 0.2287 0.3198 (0.0504)
(loss)
-------------- ------------ ------------- ----------- ------------
Total Income (Loss) From Investment
Operations 0.2580 0.4909 0.2585 0.3503 (0.0251)
-------------- ------------ ------------- ----------- ------------
Less Distributions
From net investment income (0.0278) (0.0278) (0.0298) (0.0359) (0.0253)
From net realized gains (0.1485) (0.1033) (0.0372) (0.0135)
-------------- ------------ ------------- ----------- ------------
Total Distributions (0.1763) (0.1311) (0.0670) (0.0494) (0.0253)
-------------- ------------ ------------- ----------- ------------
Net Asset Value, End of Year $ 1.8953 $ 1.8136 $ 1.4538 $ 1.2623 $ 0.9614
============== ============ ============= =========== ============
Total Return 14.48% 34.08% 20.63% 36.80% (2.49)%
Ratios/Supplemental Data
Net Assets, End of Year $ 326,339,498 $ 237,421,804 $ 122,283,026 $ 65,183,898$ 25,610,474
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 1.54% 1.83% 2.38% 2.87% 3.18%
Portfolio Turnover Rate 39.67% 26.03% 16.31% 18.11% 16.88%
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $177,712,342 and $111,264,436, respectively.
<PAGE>
MAXIM SERIES FUND, INC.
GROWTH INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the portfolio for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994 are as follows:
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------ ------------ ------------- ------------
Net Asset Value, Beginning of Year $ 1.8507 $ 1.4852 $ 1.3459 $ 1.0120 $ 1.0064
Income From Investment Operations
Net investment income 0.0070 0.0085 0.0114 0.0127 0.0133
Net realized and unrealized gain 0.6769 0.4241 0.2851 0.3432 0.0056
-------------- ------------ ------------ ------------- ------------
Total Income From Investment 0.6839 0.4326 0.2965 0.3559 0.0189
Operations
Less Distributions
From net investment income (0.0070) (0.0085) (0.0114) (0.0165) (0.0133)
From net realized gains (0.1000) (0.0586) (0.1458) (0.0055)
-------------- ------------ ------------ ------------- ------------
Total Distributions (0.1070) (0.0671) (0.1572) (0.0220) (0.0133)
-------------- ------------ ------------ ------------- ------------
Net Asset Value, End of Year $ 2.4276 $ 1.8507 $ 1.4852 $ 1.3459 $ 1.0120
============== ============ ============ ============= ============
Total Return 37.28% 29.26% 22.10% 35.29% 1.93%
Ratios/Supplemental Data
Net Assets, End of Year $ 297,170,229 $ 162,975,760 $ 83,743,210 $ 43,515,299 $ 14,171,307
Ratio of Expenses to Average Net 0.60% 0.60% 0.60% 0.60% 0.60%
Assets
Ratio of Net Investment Income
to Average Net Assets 0.36% 0.54% 0.83% 1.15% 1.57%
Portfolio Turnover Rate 26.48% 21.52% 41.55% 17.90% 18.50%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended December 31, 1998 were $117,491,258 and $56,327,645, respectively.
<PAGE>
ADDITIONAL INFORMATION
The Statement of Additional Information ("SAI") contains more details about the
investment policies and techniques of the Portfolios. A current SAI is on file
with the SEC and is incorporated into this Prospectus by reference. This means
that the SAI is legally considered a part of this Prospectus even though it is
not physically contained within this Prospectus.
Additional information about the Portfolios' investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Portfolios' performance during its
last fiscal year.
For a free copy of the SAI or annual or semi-annual reports or to request other
information or ask questions about a Fund, call 1-800-338-4015.
The SAI and the annual and semi-annual reports are available on the SEC's
Internet Web site (http://www.sec.gov). You can also obtain copies of this
information, upon paying a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the Portfolios, including the SAI, at the SEC's Public
Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the
operation of the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-7735.
This prospectus should be read
and retained for future reference.
<PAGE>
-----------------------------------------------------------
MAXIM SERIES FUND, INC.
-----------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio International Equity Portfolio
Bond Portfolio Maxim INVESCO ADR Portfolio
Investment Grade Corporate Bond Portfolio Foreign Equity Portfolio
U.S. Government Securities Portfolio Maxim Blue Chip Portfolio
U.S. Government Mortgage Securities Portfolio Maxim T. Rowe Price
Equity/Income Portfolio
Short-Term Maturity Bond Portfolio Maxim INVESCO Balanced Portfolio
Corporate Bond Portfolio
MidCap Portfolio Small-Cap Value Portfolio
MidCap Growth Portfolio Maxim INVESCO Small-Cap Growth
Portfolio
Small-Cap Aggressive Growth Portfolio
Aggressive Profile Portfolio Stock Index Portfolio
Moderately Aggressive Profile Portfolio Small-Cap Index Portfolio
Moderate Profile Portfolio Value Index Portfolio
Moderately Conservative Profile Portfolio Growth Index Portfolio
Conservative Profile Portfolio
</TABLE>
(the "Portfolios")
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Throughout this SAI, "the Portfolio" is intended to refer to each
Portfolio listed above, unless otherwise indicated. This SAI is not a
Prospectus and should be read together with the Prospectus for the Fund
dated May 1, 1999. Requests for copies of the Prospectus should be made
by writing to: Secretary, Maxim Series Fund, Inc., at 8515 East Orchard
Road, Englewood, Colorado 80111, or by calling (303) 689-3000. The
financial statements appearing in the Annual Report, which accompanies
this SAI, are incorporated into this SAI by reference.
May 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
INFORMATION ABOUT THE FUNDS 1
INVESTMENT LIMITATIONS 1
INVESTMENT POLICIES AND PRACTICES 10
MANAGEMENT OF THE FUND 21
INVESTMENT ADVISORY SERVICES 22
PORTFOLIO TRANSACTIONS. 27
PURCHASE, REEMPTION AND PRICING OF SHARES 28
INVESTMENT PERFORMANCE 38
DIVIDENDS AND TAXES 40
OTHER INFORMATION 42
FINANCIAL STATEMENTS 42
APPENDIX 43
<PAGE>
INFORMATION ABOUT THE FUND AND PORTFOLIOS
Maxim Series Fund, Inc. is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company (the "Fund").
The Fund offers twenty-seven investment portfolios, nineteen of which are
diversified portfolios and eight of which are non-diversified portfolios. The
Fund is a Maryland corporation organized on December 7, 1981and commenced
business as an investment company in 1982. The Portfolios are "no-load," meaning
you pay no sales charges or distribution fees. The Portfolios are presently only
available in connection with variable annuity contracts and variable life
insurance policies issued by Great-West Life & Annuity Insurance Company and
certain other life insurance companies. GW Capital Management, LLC ("GW Capital
Management"), a wholly owned subsidiary of Great-West Life & Annuity Insurance
Company ("GWL&A"), serves as the Fund's investment adviser.
Diversified Portfolios
Each diversified Portfolio will operate as a diversified investment portfolio of
the Fund. This means that at least 75% of the value of its total assets will be
represented by cash and cash items (including receivables), U.S. government
securities, securities of other investment companies, and other securities, the
value of which with respect to any one issuer is neither more than 5% of the
Portfolio's total assets nor more than 10% of the outstanding voting securities
of such issuer.
Non-Diversified Portfolios
A non-diversified Portfolio is any Portfolio other than a diversified Portfolio.
The Short-Term Maturity Bond, Investment Grade Corporate Bond, U.S. Government
Mortgage Securities and the Maxim Profile Portfolios are considered
"non-diversified" because they may invest a greater percentage of its assets in
a particular issuer or group of issuers than a diversified fund would. Since a
relatively high percentage of a non-diversified Portfolio's assets may be
invested in the securities of a limited number of issuers, some of which may be
in the same industry, the Portfolio may be more sensitive to changes in the
market value of a single issuer or industry.
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 affected
Portfolio. 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.
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,
cash items, high quality debt securities 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. 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.
INVESTMENT POLICIES AND PRACTICES
Except as described below and except as otherwise specifically stated in the
Prospectus or this Statement of Additional Information, the Portfolios'
investment policies set forth in the Prospectus and in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
The following pages contain more detailed information about types of securities
in which the Portfolios may invest, investment practices and techniques that GW
Capital Management or any sub-adviser may employ in pursuit of the Portfolios'
investment objectives, and a discussion of related risks. GW Capital Management
and/or its sub-advisers may not buy all of these securities or use all of these
techniques to the full extent permitted unless it believes that they are
consistent with the Portfolios' investment objectives and policies and that
doing so will help the Portfolios achieve their objectives. Unless otherwise
indicated, each Portfolio may invest in all these securities or use all of these
techniques. However, the Portfolios may not invest in all of these securities or
utilize all such techniques. In addition, due to unavailability, economic
unfeasibility or other factors, a Portfolio may simply have no opportunity to
invest in a particular security or use a particular investment technique.
Asset-Backed Securities. Asset-backed securities represent interests in pools of
mortgages, loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by the
assets backing the securities and, in certain cases, supported by letters of
credit, surety bonds, or other credit enhancements. Asset-backed security values
may also be affected by other factors including changes in interest rates, the
availability of information concerning the pool and its structure, the
creditworthiness of the servicing agent for the pool, the originator of the
loans or receivables, or the entities providing the credit enhancement. In
addition, these securities may be subject to prepayment risk.
Bankers' Acceptances. 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 Portfolios generally will not invest in
acceptances with maturities exceeding 7 days where to do so would tend to create
liquidity problems.
Borrowing. The Portfolios may borrow from banks or through reverse repurchase
agreements. If the fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If the fund makes additional
investments while borrowings are outstanding, this may be considered a form of
leverage. In the event a Portfolio 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%.
Certificates 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.
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.
Commercial Paper. Commercial paper is a short-term promissory note issued by a
corporation primarily to finance short-term credit needs.
Common Stock. Common stock represents an equity or ownership interest in an
issuer. In the event an issuer is liquidated or declares bankruptcy, owners of
bonds and preferred stock take precedence over the claims of those who own
common stock.
Convertible Securities. Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted or exchanged (by the
holder or by the issuer) into shares of the underlying common stock (or cash or
securities of equivalent value) at a stated exchange ratio. A convertible
security may also be called for redemption or conversion by the issuer after a
particular date and under certain circumstances (including a specified price),
may be called for redemption or conversion on a date established upon issue. If
a convertible security held by a fund is called for redemption or conversion,
the fund could be required to tender it for redemption, convert it into the
underlying common stock, or sell it to a third party. Convertible securities
generally have less potential for gain or loss than common stocks. Convertible
securities generally provide yields higher than the underlying common stocks,
but generally lower than comparable non-convertible securities. Because of this
higher yield, convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to be
received upon conversion. The difference between this conversion value and the
price of convertible securities will vary over time depending on changes in the
value of the underlying common stocks and interest rates. When the underlying
common stocks decline in value, convertible securities will tend not to decline
to the same extent because of the interest or dividend payments and the
repayment of principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of the holder
generally do not limit the potential for loss to the same extent as securities
convertible at the option of the holder. When the underlying common stocks rise
in value, the value of convertible securities may also be expected to increase.
At the same time, however, the difference between the market value of
convertible securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the same
extent as the value of the underlying common stocks. Because convertible
securities may also be interest-rate sensitive, their value may increase as
interest rates fall and decrease as interest rates rise. Convertible securities
are also subject to credit risk, and are often lower-quality securities.
Debt Securities. Debt securities are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay interest but are sold at a deep discount from
their face values. Debt securities include corporate bonds, government
securities, and mortgage and other asset-backed securities.
Eurodollar Certificates of Deposit. A Eurodollar certificate of deposit is a
short-term obligation of a foreign subsidiary of a U.S. bank payable in U.S.
dollars.
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.
Foreign Currency Transactions. Any Portfolio which may invest in non-dollar
denominated foreign securities may conduct foreign currency transactions on a
spot (i.e., cash) basis or by entering into forward contracts to purchase or
sell foreign currencies at a future date and price. The Portfolios will convert
currency on a spot basis from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers generally do not
charge a fee for conversion, they do realize a profit based on the difference
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to a Portfolio at one rate,
while offering a lesser rate of exchange should the Portfolio desire to resell
that currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. 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 currency exchange.
A Portfolio may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be used by
a Portfolio. A Portfolio may also use options and futures contracts relating to
foreign currencies for the same purposes.
When a Portfolio agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price for the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars, of the amount of foreign currency involved in the underlying
security transaction, the Portfolio will be able to protect itself against an
adverse change in foreign currency values between the date the security is
purchased or sold and the date on which payment is made or received. This
technique is sometimes referred to as a "settlement hedge" or "transaction
hedge." The Portfolios may also enter into forward contracts to purchase or sell
a foreign currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not yet
been selected by GW Capital Management or one the sub-advisers.
The Portfolios may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example, if a
Portfolio owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge, sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. A Portfolio could also hedge the position by selling another
currency expected to perform similarly to the pound sterling, for example, by
entering into a forward contract to sell Deutsche marks or European Currency
Units in return for U.S. dollars. This type of hedge, sometimes referred to as a
"proxy hedge," could offer advantages in terms of cost, yield, or efficiency,
but generally would not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
Each Portfolio may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from U.S.
dollars into a foreign currency, or from one foreign currency into another
foreign currency. For example, if a Portfolio held investments denominated in
Deutschemarks, the Portfolio could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes known
as a "cross-hedge," will tend to reduce or eliminate exposure to the currency
that is sold, and increase exposure to the currency that is purchased, much as
if the Portfolio had sold a security denominated in one currency and purchased
an equivalent security denominated in another. Cross-hedges protect against
losses resulting from a decline in the hedged currency, but will cause the
Portfolio to assume the risk of fluctuations in the value of the currency it
purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover currency
forward contracts. The Portfolios will not segregate assets to cover forward
contracts entered into for hedging purposes, including settlement hedges,
position hedges, and proxy hedges.
Successful use of currency management strategies will depend on GW Capital
Management's or the applicable sub-adviser's skill in analyzing and predicting
currency values. Currency management strategies may substantially change a
Portfolio's investment exposure to changes in currency exchange rates, and could
result in losses to the Portfolio if currencies do not perform as GW Capital
Management or the sub-adviser anticipates. For example, if a currency's value
rose at a time when GW Capital Management or the sub-adviser had hedged a
Portfolio by selling that currency in exchange for dollars, the Portfolio would
be unable to participate in the currency's appreciation. If GW Capital
Management or a sub-adviser hedges currency exposure through proxy hedges, a
Portfolio could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if GW
Capital Management or a sub-adviser increases a Portfolio's exposure to a
foreign currency, and that currency's value declines, the Portfolio will realize
a loss. There is no assurance that GW Capital Management's or a sub-adviser's
use of currency management strategies will be advantageous to the Portfolios or
that it will hedge at an appropriate time.
Foreign Securities. Certain Portfolios may invest in foreign securities and
securities issued by U.S. entities with substantial foreign operations in a
manner consistent with its investment objective and policies. Such foreign
investments may involve significant risks in addition to those risks normally
associated with U.S. equity investments.
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 developmental assistance,
currency transfer restrictions, illiquid markets, 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.
American Depository Receipts ("ADRs"), as well as other "hybrid" forms of ADRs
including European depository Receipts and Global Depository Receipts, are
certificates evidencing ownership of shares of a foreign issuer. These
certificate are issued by depository banks and generally trade on an established
market in the United States or elsewhere. The underlying shares are held in
trust by a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the underlying
security at all times and may charge fees for various services, including
forwarding dividends and interest and corporate actions. ADRs are an alternative
to directly purchasing the underlying foreign securities in their national
markets and currencies. However, ADRs continue to be subject to the risks
associated with investing directly in foreign securities. These risks include
foreign exchange risks as well as the political and economic risks of the
underlying issuer's country.
Futures. See "Futures and Options" below.
High Yield-High Risk Debt Securities ("Junk Bonds"). Lower-quality debt
securities have poor protection with respect to the payment of interest and
repayment of principal, or may be in default. These securities are often
considered to be speculative and involve greater risk of loss or price changes
due to changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of higher-quality
debt securities and may decline significantly in periods of general economic
difficulty, which may follow periods of rising interest rates.
The market for lower-quality debt securities may be thinner and less active than
that for higher-quality debt securities, which can adversely affect the prices
at which the former are sold. Adverse publicity and changing investor
perceptions may affect the liquidity of lower-quality debt securities and the
ability of outside pricing services to value lower-quality debt securities.
Because the risk of default is higher for lower-quality debt securities,
research and credit analysis are an especially important part of managing
securities of this type. GW Capital Management and its sub-advisers will attempt
to identify those issuers of high-yielding securities whose financial condition
is adequate to meet future obligations, has improved, or is expected to improve
in the future. Analysis will focus on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.
A Portfolio may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise to exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the Portfolio's shareholders.
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.
Illiquid Securities. Each Portfolio may invest up to 15% of its net assets in
illiquid securities, except the Money Market Portfolio which may invest up to
10% of its net assets in illiquid securities. The term "illiquid securities"
means securities that cannot be sold in the ordinary course of business within
seven days at approximately the price used in determining a Portfolio's net
asset value. Under the supervision of the Board of Directors, GW Capital
Management determines the liquidity of portfolio securities and, through reports
from GW Capital Management, the Board of Directors monitors investments in
illiquid securities. Certain types of securities are considered generally to be
illiquid. Included among these are "restricted securities" which are securities
whose public resale is subject to legal restrictions. However, certain types of
restricted securities (commonly known as "Rule 144A securities") that can be
resold to qualified institutional investors may be treated as liquid if they are
determined to be readily marketable pursuant to policies and guidelines of the
Board of Directors.
A Portfolio may be unable to sell illiquid securities when desirable or may be
forced to sell them at a price that is lower than the price at which they are
valued or that could be obtained if the securities were more liquid. In
addition, sales of illiquid securities may require more time and may result in
higher dealer discounts and other selling expenses than do sales of securities
that are not illiquid. Illiquid securities may also be more difficult to value
due to the unavailability of reliable market quotations for such securities.
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.
Money Market Instruments and Temporary Investment Strategies. In addition to the
Money Market Portfolio, the other Portfolios each may hold cash or cash
equivalents and may invest in short-term, high-quality debt instruments (that is
in "money market instruments") as deemed appropriate by GW Capital Management or
the applicable sub-adviser, or may invest any or all of their assets in money
market instruments as deemed necessary by GW Capital Management or the
applicable sub-adviser for temporary defensive purposes.
The types of money market instruments in which the Portfolios may invest
include, but are not limited to: (1) bankers' acceptances; (2) obligations of
U.S. and non-U.S. governments and their agencies and instrumentalities; (3)
short-term corporate obligations, including commercial paper, notes, and bonds;
(4) obligations of U.S. banks, non-U.S. branches of such bank (Eurodollars),
U.S. branches and agencies of non-U.S. banks (Yankee dollars), and non-U.S.
branches of non-U.S. banks; (5) asset-backed securities; and (6) repurchase
agreements.
Mortgage-Backed Securities. Mortgage backed securities may be issued by
government and non-government entities such as banks, mortgage lenders, or other
financial institutions. A mortgage security is an obligation of the issuer
backed by a mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. Some mortgage-backed securities, such as collateralized
mortgage obligations or CMOs, make payments of both principal and interest at a
variety of intervals; others make semi-annual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages including
those on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
investment in such securities may be made if deemed consistent with investment
objectives and policies.
The value of mortgage-backed securities may change due to shifts in the market's
perception of issuers. In addition, regulatory or tax changes may adversely
affect the mortgage securities market as a whole. Non-government mortgage-backed
securities may offer higher yields than those issued by government entities, but
also may be subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
total returns.
Options. See "Futures and Options" below.
Preferred Stock. Preferred stock is a class of equity or ownership in an issuer
that pays dividends at a specified rate and that has precedence over common
stock in the payment of dividends. In the event an issuer is liquidated or
declares bankruptcy, owners of bonds take precedence over the claims of those
who own preferred and common stock.
Repurchase Agreements. Repurchase agreements involve an agreement to purchase a
security and to sell that security back to the original seller at an agreed-upon
price. The resale price reflects the purchase price plus an agreed-upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a separate account at a
bank, marked-to-market daily, and maintained at a value at least equal to the
sale price plus the accrued incremental amount. The value of the security
purchased may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could result if
the other party to the agreement defaults or becomes insolvent. A Portfolio will
engage in repurchase agreement transactions with parties whose creditworthiness
has been reviewed and found satisfactory by GW Capital Management.
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. A Portfolio will enter into reverse repurchase agreements with
parties whose creditworthiness has been reviewed and found satisfactory by GW
Capital Management. Such transactions may increase fluctuations in the market
value of fund assets and may be viewed as a form of leverage.
Stripped Treasury Securities. Certain Portfolios may invest in zero-coupon
bonds. These securities are U.S. Treasury bonds which have been stripped of
their unmatured interest coupons, the coupons themselves, and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Interest is not paid in cash during the term of these securities, but
is accrued and paid at maturity. Such obligations have greater price volatility
than coupon obligations and other normal interest-paying securities, and the
value of zero coupon securities reacts more quickly to changes in interest rates
than do coupon bonds. Since dividend income is accrued throughout the term of
the zero coupon obligation, but not actually received until maturity, a
Portfolio may have to sell other securities to pay said accrued dividends prior
to maturity of the zero coupon obligation. Zero coupon securities are purchased
at a discount from face value, the discount reflecting the current value of the
deferred interest. The discount is taxable even though there is no cash return
until maturity.
Short Sales "Against the Box." Short sales "against the box" are short sales of
securities that a Portfolio owns or has the right to obtain (equivalent in kind
or amount to the securities sold short). If a Portfolio enters into a short sale
against the box, it will be required to set aside securities equivalent in kind
and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such securities
while the short sale is outstanding. The Portfolio will incur transaction costs,
including interest expenses, in connection with opening, maintaining, and
closing short sales against the box.
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.
Time Deposits. 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.
U.S. Government Securities. These are securities issued or guaranteed as to
principal and interest by the U.S. government or its agencies or
instrumentalities. U.S. Treasury bills and notes and certain agency securities,
such as those issued by the Government National Mortgage Association, are backed
by the full faith and credit of the U.S. government. Securities of other
government agencies and instrumentalities are not backed by the full faith and
credit of U.S. government. These securities have different degrees of government
support and may involve the risk of non-payment of principal and interest. For
example, some are supported by the agency's right to borrow from the U.S.
Treasury under certain circumstances, such as those of the Federal Home Loan
Banks. Others are supported by the discretionary authority of the U.S.
government to purchase certain obligations of the agency or instrumentality,
such as those of the Federal National Mortgage Association. Still other are
supported only by the credit of the agency that issued them, such as those of
the Student Loan Marketing Association. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities, and
consequently, the value of such securities may fluctuate.
Variable Amount Master Demand Notes. 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.
Variable or Floating Rate Securities. These securities have interest rates that
are adjusted periodically, or which "float" continuously according to formulas
intended to stabilize their market values. Many of them also carry demand
features that permit the Portfolios to sell them on short notice at par value
plus accrued interest. When determining the maturity of a variable or floating
rate instrument, the Portfolio may look to the date the demand feature can be
exercised, or to the date the interest rate is readjusted, rather than to the
final maturity of the instrument.
Warrants. 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 are
speculative 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
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.
When-Issued and Delayed-Delivery Transactions. When-issued or delayed-delivery
transactions arise when securities are purchased or sold with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield at the time of entering into the transaction.
While the Portfolios generally purchase securities on a when-issued basis with
the intention of acquiring the securities, the Portfolios may sell the
securities before the settlement date if GW Capital Management or the applicable
sub-adviser deems it advisable. At the time a Portfolio makes the commitment to
purchase securities on a when-issued basis, the Portfolio will record the
transaction and thereafter reflect the value, each day, of such security in
determining the net asset value of the Portfolio. At the time of delivery of the
securities, the value may be more or less than the purchase price. A Portfolio
will maintain, in a segregated account, liquid assets having a value equal to or
greater than the Portfolio's purchase commitments; likewise a Portfolio will
segregate securities sold on a delayed-delivery basis.
Futures and Options
Futures Contracts. When a Portfolio purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When a
Portfolio sells a futures contract, it agrees to sell the underlying instrument
at a specified future date. The price at which the purchase and sale will take
place is fixed when the Portfolio enters into the contract. Futures can be held
until their delivery dates, or can be closed out before then if a liquid
secondary market is available.
The value of a futures contract tends to increase and decrease in tandem with
the value of its underlying instrument. Therefore, purchasing futures contracts
will tend to increase a Portfolio's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When a Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market.
Futures Margin Payments. The purchaser or seller of a futures contract is not
required to deliver or pay for the underlying instrument unless the contract is
held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant ("FCM"), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value. If the
value of either party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value on a daily
basis. The party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a Portfolio's investment limitations. In
the event of a bankruptcy of an FCM that holds margin on behalf of a Portfolio,
the Portfolio may be entitled to return of margin owed to it only in proportion
to the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.
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.
Purchasing Put and Call Options. By purchasing a put option, a Portfolio obtains
the right (but not the obligation) to sell the option's underlying instrument at
a fixed strike price. In return for this right, the Portfolio pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The Portfolio may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the Portfolio will
lose the entire premium it paid. If the Portfolio exercises the option, in
completes the sale of the underlying instrument at the strike price. A Portfolio
may also terminate a put option position by closing it out in the secondary
market (that is by selling it to another party) at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.
Writing Put and Call Options. When a Portfolio writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Portfolio assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the option
chooses to exercise it. When writing an option on a futures contract, the
Portfolio will be required to make margin payments to an FCM as described above
for futures contracts. A Portfolio may seek to terminate its position in a put
option it writes before exercise by closing out the option in the secondary
market at is current price. If the secondary market is not liquid for a put
option the Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit, although
its gain would be limited to the amount of the premium it received. If security
prices remain the same over time, it is likely that the writer will also profit,
because it should be able to close out the option at a lower price. If security
prices fall, the put writer would expect to suffer a loss from purchasing the
underlying instrument directly, which can exceed the amount of the premium
received.
Writing a call option obligates a Portfolio to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer can mitigate the effect of a price decline. At the same
time, because a call writer gives up some ability to participate in security
price increases.
OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter ("OTC") options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the Portfolios greater
flexibility to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organization of the exchanges where they are traded.
Options and Futures Relating to Foreign Currencies. Currency futures contracts
are similar to forward currency exchange contracts, except that they are traded
on exchanges (and have margin requirements) and are standardized as to contract
size and delivery date. Most currency futures contracts call for payment or
delivery in U.S. dollars. The underlying instrument of a currency option may be
a foreign currency, which generally is purchased or delivered in exchange for
U.S. dollars, or may be a futures contract. The purchaser of a currency call
option obtains the right to purchase the underlying currency, and the purchaser
of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options and
futures relating to securities or indices, as discussed above. Certain
Portfolios may purchase and sell currency futures and may purchase and write
currency options to increase or decrease their exposure to different foreign
currencies. A Portfolio may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with exchange
rates, but may not reflect other factors that affect the value of a Portfolio's
investments. A currency hedge, for example, should protect a Yen-denominated
security from a decline in the Yen, but will not protect a Portfolio against a
price decline resulting from deterioration in the issuer's creditworthiness.
Because the value of a Portfolio's foreign-denominated investments changes in
response to many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the Portfolio's
investments exactly over time.
Asset Coverage for Futures and Options Positions. The Portfolios will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and if
the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a result,
there is a possibility that segregation of a large percentage of a Portfolio's
assets could impede portfolio management or the Portfolio's ability to meet
redemption requests or other current obligations.
Combined Positions. A Portfolio may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, a
Portfolio may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
Correlation of Price Changes. Options and futures prices can also diverge from
the prices of their underlying instruments, even if the underlying instruments
match a Portfolio's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
Limitations on Futures and Options Transactions. The Fund has filed a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the Commodity Futures Trading Commission and the National Futures
Association, which regulate trading in the futures markets. The Portfolios
intend to comply with Rule 4.5 under the Commodity Exchange Act, which limits
the extent to which the Portfolios can commit assets to initial margin deposits
and option premiums. Accordingly, to the extent that a Portfolio may invest in
futures contracts and options, a Portfolio may only enter into futures contract
and option positions for other than bona fide hedging purposes to the extent
that the aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the liquidation value of the Portfolio. This
limitation on a Portfolio's permissible investments in futures contracts and
options is not a fundamental investment limitation and may be changed as
regulatory agencies permit.
Liquidity of Options and Futures Contracts. There is no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument's current price.
In addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves upward
or downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a Portfolio to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a Portfolio to continue to
hold a position until delivery or expiration regardless of changes in its value.
As a result, a Portfolio's access to assets held to cover its options or futures
positions could also be impaired.
MANAGEMENT OF THE FUND
The Fund is governed by the Board of Directors. The Board is responsible for
overall management of the Funds' business affairs. The Directors meet at least 4
times during the year to, among other things, oversee the Funds' activities,
review contractual arrangements with companies that provide services to the
Funds, and review performance.
Directors and Officers
The directors and executive officers of the Fund, their ages, position(s) with
the Fund, and principal occupations during the past 5 years (or as otherwise
indicated) are set forth below. The business address of each director and
officer is 8515 East Orchard Road, Englewood, Colorado 80111 (unless otherwise
indicated). Those directors and officers who are "interested persons" (as
defined in the Investment Company Act of 1940, as amended) by virtue of their
affiliation with either the Fund or GW Capital Management are indicated by an
asterisk (*).
Rex Jennings (74), Director; President Emeritus, Denver Metro Chamber of
Commerce.
Richard P. Koeppe (67), Director; Retired Superintendent, Denver Public Schools.
*Douglas L. Wooden (42), Director and President; Executive Vice President,
Financial Services (1998 to Present); Senior Vice President, Financial
Services of GWL&A (1996-1998);Senior Vice President, Chief Financial
Officer of GWL&A (1991-1996)
*James D. Motz (49), Director; Executive Vice President, Employee Benefits of
GWL&A (1997 to present) Senior Vice President, Employee Benefits of
GWL&A (1991-1997).
Sanford Zisman (59), Director; Attorney, Zisman & Ingraham, P.C.
*David G. McLeod (36), Treasurer; Vice President, Investment Operations, (1998
to Present) Assistant Vice President, Investment Administration of GWL&A
(1994 to 1998); Manager, Securities and Equities Administration of GWL&A
(1992-1994).
*Bruce Hatcher (35), Assistant Treasurer, Manager, Investment Company
Administration (1998 - present); Associate Manager, Separate Account
Administration (1993-1998)
*Beverly A. Byrne (43), Secretary, Assistant Vice President, Associate Counsel
and Assistant Secretary of GWL&A (1997 - present); Assistant Counsel and
Assistant Secretary of GWL&A (1993-1997).
Compensation
The Fund pays no salaries or compensation to any of its officers or Directors
affiliated with GW Capital Management or its affiliates. The chart below sets
forth the annual fees paid or expected to be paid to the non-interested
Directors and certain other information.
<TABLE>
R.P. Koeppe R. Jennings S. Zisman
<S> <C> <C> <C>
Compensation Received from the Fund $10,000 $10,000 $10,000
Pension or Retirement
Benefits Accrued as
Fund Expense* $0 $0 $0
Estimated Annual Benefits
Upon Retirement $0 $0 $0
Total Compensation
Received from the Fund
and All Affiliated Funds* $19,000 $21,000 $21,000
</TABLE>
* As of December 31, 1998 there were thirty-six funds for which the
Directors serve as Directors or Trustees of which twenty-eight are
Portfolios of the Fund.
As of March 31, 1999, no person owns of record or beneficially 5% or more of the
shares outstanding of the Fund or any Portfolio separate accounts of GWL&A as
described in "Purchase and Redemption of Shares." Therefore, GWL&A could be
deemed to control each Fund as the term "control" is defined in the Investment
Company Act of 1940. As of the date of this Statement of Additional Information,
the directors and officers of the Fund, as a group, owned of record or
beneficially less than 1% of the outstanding share of each Fund.
INVESTMENT ADVISORY SERVICES
Investment Adviser
GW Capital Management, LLC is a Colorado limited liability company, located at
8515 East Orchard Road, Englewood, Colorado 80111, and serves as investment
adviser to the Fund pursuant to an Investment Advisory Agreement dated December
5, 1997. GW Capital Management is a wholly-owned subsidiary of GWL&A, which is a
wholly-owned subsidiary of The Great-West Life Assurance Company ("Great-West"),
a Canadian stock life insurance company. Great-West is a 99.6% owned subsidiary
of Great-West Lifeco Inc., which in turn is an 81.2% owned subsidiary of Power
Financial Corporation, Montreal, Quebec. Power Corporation of Canada, a holding
and management company, has voting control of Power Financial Corporation of
Canada. Mr. Paul Desmarais, and his associates, a group of private holding
companies, have voting control of Power Corporation of Canada.
Investment Advisory Agreement
The Investment Advisory Agreement became effective on December 5, 1997 and as
amended effective March 1, 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 by the Board of Directors including the vote of a majority of
the Directors who are not parties to the Agreement or interested persons of any
such party, or by vote of a majority of the outstanding shares of the affected
Portfolio. Any material amendment to the Agreement becomes effective with
respect to the affected Portfolio upon approval by vote of a majority of the
voting securities of that Portfolio. The agreement is not assignable and may be
terminated without penalty with respect to any Portfolio either by the Board of
Directors or by vote of a majority of the outstanding voting securities of such
Portfolio or by GW Capital Management, each on 60 days notice to the other
party.
Under the terms of investment advisory agreement with the Fund, GW Capital
Management acts as investment adviser and, subject to the supervision of the
Board of Directors, directs the investments of the Portfolios in accordance with
its investment objective, policies and limitations. GW Capital Management also
provides the Fund with all necessary office facilities and personnel for
servicing the Portfolios' investments, compensates all officers of the Fund and
all Directors who are "interested persons" of the Fund or of GW Capital
Management, and all personnel of the Fund or GW Capital Management performing
services relating to research, statistical and investment activities.
In addition, GW Capital Management, subject to the supervision of the Board of
Directors, provides the management and administrative services necessary for the
operation of the Fund. These services include providing facilities for
maintaining the Fund's organization; supervising relations with custodians,
transfer and pricing agents, accountants, underwriters and other persons dealing
with the Fund; preparing all general shareholder communications and conducting
shareholder relations; maintaining the Portfolios' records and the registration
of the Portfolios' shares under federal securities laws and making necessary
filings under state securities laws; developing management and shareholder
services for the Fund; and furnishing reports, evaluations and analyses on a
variety of subjects to the Directors.
Management Fees
Each Portfolio pays a management fee to GW Capital Management for managing its
investments and business affairs. GW Capital Management is paid monthly at an
annual rate of a Portfolio's average net assets as described in the Prospectus.
The Sub-Advisers
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.
GW Capital Management is responsible for compensating TICI, which receives
monthly compensation 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.
Ariel Capital Management, Inc.
Ariel Capital Management, Inc. ("Ariel") serves as the sub-adviser to the
Small-Cap Value Portfolio and the MidCap Portfolio pursuant to Sub-Advisory
Agreements dated December 1, 1993 and February 5, 1999. Ariel is a privately
held minority-owned money manager.
GW Capital Management is responsible for compensating Ariel, which receives
monthly compensation 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 and 0.50% on the first $25 million of assets, 0.40% on the next $75
million of assets and 0.30% on all amounts over $100 million of the MidCap
Portfolio.
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.
GW Capital Management is responsible for compensating T. Rowe Price, which
receives monthly compensation 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 .40% on all assets once total assets exceed $50 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
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.
GW Capital Management is responsible for compensating ITC, which receives
monthly compensation 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; .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; and .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.
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.
The Investment Adviser is responsible for compensating Loomis Sayles, which
receives monthly compensation from the Investment Adviser at the annual rate of
.50% on the first $10 million, .45% on the next $15 million, .40% on the next
$75 million and .30% on all amounts over $100 million of the Small-Cap
Aggressive Growth Portfolio; .30% on all assets of the Corporate Bond Portfolio;
and, .60% on the first $10 million, .50% on the next $40 million, and .35% on
amounts over $50 million on the Foreign Equity Portfolio.
Founders Asset Management, Inc.
Founders 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.
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.
The Sub-Advisers provide 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.
Advisory Fees
For the past three fiscal years, the Investment Adviser was paid a fee for its
services to the Fund as follows:
Portfolio 1998 1997 1996
Money Market $2,027,526 $1,566,842
Bond $444,724 $ 470,658
Stock Index1/ $6,451,773 $4,887,975
-
U.S. Government Securities2/ $357,014 $ 360,629
-
Zero-Coupon Treasury3/ N/A N/A
Total Return4/ $241,372 $ 364,049
-
Investment Grade Corporate Bond5/ $646,636 $ 575,853
-
$ 896,131 $ 791,813
U.S. Government Mortgage Securities6/
Small-Cap Index7/ $617,929 $ 404,890
-
Growth Index7/ $767,173 $ 371,758
-
Value Index7/ $1,083,359 $ 552,296
-
International Equity7/ $1,229,003 $ 756,318
-
Small-Cap Value7/ $351,399 $ 274,316
-
MidCap8/ $1,998,656 $1,794,155
-
Corporate Bond9/ $1,113,908 $ 574,728
-
Small-Cap Aggressive Growth9/ $1,365,904 $ 469,293
-
Foreign Equity9/ $761,903 $ 711,998
-
Maxim T. Rowe Price Equity/Income9/ $958,793 $ 257,708
-
Maxim INVESCO Small-Cap Growth9/ $441,341 $ 178,001
-
Maxim INVESCO ADR9/ $123,490 $ 45,589
-
Short-Term Maturity Bond10/ $352,368 $ 179,920
--
Maxim INVESCO Balanced11/ $530,851 $ 26,984
--
Maxim Blue Chip12/ $452,967 N/A
MidCap Growth12/ $214,690 N/A
Aggressive Profile13/ $292 N/A
Moderately Aggressive Profile13/ $583 N/A
Moderate Profile13/ $325 N/A
Moderately Conservative Profile13/ $238 N/A
Conservative Profile Profile13/ $80 N/A
1/ For the period commencing September 24, 1984. The name and investment
objective of this portfolio was changed effective December 1, 1992.
2/ Formed April 6, 1985. The name and the investment objective of this
portfolio was changed effective July 29, 1987, and renamed and the
investment objective changed effective May 1, 1990.
3/ Formed October 1, 1985. 9/ Formed November 1, 1994.
- - -
4/ Formed July 29, 1987.10/ 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.
GW Capital Management provides investment advisory services and pays all
compensation of and furnishes office space for officers and employees of the
Investment Adviser connected with investment and economic research, trading and
investment management of the Fund, as well as the fees of all directors of the
Fund who are affiliated persons of GW Capital Management or any of its
affiliates.
Expenses that are borne directly by the Fund include 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, independent 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 are provided for the Fund by GW Capital
Management and the Fund reimburses GW Capital Management for its costs in
connection with such services. The amounts of such expense reimbursements for
the Fund's fiscal years ended December 31, 1998, 1997 and 1996 were $ $216,643
and $266,446 respectively. Depending upon the nature of the lawsuit, litigation
costs may be borne by the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the direction of the Board of Directors, GW Capital Management is
primarily responsible for placement of Fund's portfolio transactions. GW Capital
Management has no obligation to deal with any broker, dealer or group of brokers
or dealers in the execution of transactions in portfolio securities. 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
GW Capital Management generally will seek reasonably competitive spreads or
commissions, the Portfolios will not necessarily pay the lowest spread or
commission available.
Transactions on U.S. futures and stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Commissions vary among
different brokers and dealers, which may charge different commissions according
to such factors as the difficulty and size of the transaction. Transactions in
foreign securities often involve the payment of fixed brokerage commissions,
which may be higher than those for negotiated transactions in the United States.
Prices for over-the-counter transactions usually include an undisclosed
commission or "mark-up" that is retained by the broker or dealer effecting the
trade. The cost of securities purchased from an underwriter or from a dealer in
connection with an underwritten offering usually includes a fixed commission
which is paid by the issuer to the underwriter or dealer. Transactions in U.S.
government securities occur usually through issuers and underwriters of and
major dealers in such securities, acting as principals. These transactions are
normally made on a net basis and do not involve payment of brokerage
commissions.
In placing portfolio transactions, GW Capital Management may give consideration
to brokers or dealers which provide supplemental investment research, in
addition to such research obtained for a flat fee, 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 GW Capital Management. The
expenses of GW Capital Management will not necessarily be reduced as a result of
the receipt of such supplemental information. GW Capital Management may use any
supplemental investment research obtained for the benefit of the Funds in
providing investment advice to its other investment advisory accounts, and may
use such information in managing its own accounts. Conversely, such supplemental
information obtained by the placement of business for GW Capital Management will
be considered by and may be useful to GW Capital Management in carrying out its
obligations to the Trust.
If in the best interests of both one or more Portfolios and other client
accounts of GW Capital Management, GW Capital Management may, to the extent
permitted by applicable law, but need not, aggregate the purchases or sales of
securities for these accounts to obtain favorable overall execution. When this
occurs, GW Capital Management will allocate the securities purchased and sold
and the expenses incurred in a manner that it deems equitable to all accounts.
In making this determination, GW Capital Management may consider, among other
things, the investment objectives of the respective client accounts, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally, and the opinions of persons responsible for managing the Portfolios
and other client accounts. The use of aggregated transactions may adversely
affect the size of the position obtainable for the Portfolios, and may itself
adversely affect transaction prices to the extent that it increases the demand
for the securities being purchased or the supply of the securities being sold.
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, 1996 through December 31,
1998. The For the years 1996, 1997 and 1998, respectively the Portfolios paid
commissions as follows: Stock Index Portfolio - $89,897, $130,615 and $ ;
International Equity Portfolio - $190,398, $290,435 and $ ; Small-Cap Index
Portfolio - $154,696, $247,609 and $ ; Value Index Portfolio - $53,019, $79,357
and $ ; Growth Index Portfolio - $48,480, $46,825 and $ ; Small-Cap Value
Portfolio - $55,133, $117,550 and $ ; MidCap Portfolio - $471,788, $548,942 and
$ ; Small-Cap Aggressive Growth Portfolio -$131,463, $377,783 and $ ; Foreign
Equity Portfolio - $322,774, $912,227 and $ ; Maxim T. Rowe Price Equity/Income
Portfolio - $50,812 and $108,963 and $ ; Maxim INVESCO Small-Cap Growth
Portfolio - $40,317, $95,102 and $ ; Maxim INVESCO ADR Portfolio - $2,664,
$6,894 and $ ; Corporate Bond Portfolio - $1,120, $270 and $ ; Maxim INVESCO
Balanced Portfolio - $18,537, $188,000 and $ . The Blue Chip Portfolio paid
commissions in the amount of $267,899 in 1997 and $ in 1998. The MidCap Growth
Portfolio paid commissions in the amount of $79,790 in 1997 and $
in 1998.
Portfolio Turnover
The turnover rate for each 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. In computing the portfolio turnover rate, 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.
There are no fixed limitations regarding the portfolio turnover of the
Portfolios. 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 appropriate in GW Capital Management's judgment.
With respect to any Portfolio, a higher portfolio turnover rate may involve
correspondingly greater brokerage commissions and other expenses which might be
borne by the Portfolio and, thus, indirectly by its shareholders. Higher
portfolio turnover may also increase a shareholder's current tax liability for
capital gains by increasing the level of capital gains realized by a Portfolio.
Based upon the formula for calculating the portfolio turnover rate, as stated
above, the portfolio turnover rate for each Portfolio (other than the Money
Market Portfolio) for 1997 and 1998 is as follows:
1997 1998
Portfolio Turnover Rate Turnover Rate
Bond 90.81%
Stock Index 17.30%
U.S. Government Securities 55.54%
Corporate Bond 52.69%
Small-Cap Index 102.45%
Small-Cap Value 82.83%
International Equity 34.30%
Maxim INVESCO ADR 19.56%
Maxim INVESCO Balanced 150.57%
Maxim INVESCO Small-Cap Growth 174.65%
MidCap 139.74%
Maxim T. Rowe Price Equity/Income 25.35%
Foreign Equity 200.82%
Growth Index 21.52%
Investment Grade Corporate Bond 140.35%
Short-Term Maturity Bond 84.59%
Small-Cap Aggressive Growth 93.28%
U.S. Government Mortgage Securities 34.01%
Value Index 26.03%
Blue Chip 111.45%
MidCap Growth 24.28%
Aggressive Profile 59.90%
Moderately Aggressive Profile 41.30%
Moderate Profile 31.39%
Moderately Conservative Profile 32.97%
Conservative Profile 25.56%
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.
PURCHASE AND REDEMPTION OF SHARES
As of December 31, 1998, 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
New England Life Insurance Company, 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, 1998.
Money Market Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
Pinnacle Series Account
Qualified Series Account
TNE Series (k) Account
Retirement Plan Series Account
TOTAL
Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
FutureFunds Profile Series
Pinnacle Series Account
Qualified Series Account
TOTAL
International Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account
FutureFunds Series Account
FutureFunds Series Account II
FutureFunds Profile Series
TOTAL
U.S. Government Securities Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account
FutureFunds Series Account II
FutureFunds Profile Series
Pinnacle Series Account
TOTAL
Stock Index Portfolio*
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
Pinnacle Series Account
Qualified Series Account
TNE Series (K) Account
Retirement Plan Series Account
TOTAL
Investment Grade Corporate Bond Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II
Qualified Series Account
TNE Series (K) Account
Retirement Plan Series Account
TOTAL
U.S. Government Mortgage Securities Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II
TNE Series (K) Account
Retirement Plan Series Account
TOTAL
Growth Index Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
FutureFunds Profile Series
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
TOTAL
Maxim INVESCO Balanced Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
Great-West
TOTAL
Small-Cap Index Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
TNE Series (K) Account
Retirement Plan Series Account
FutureFunds Profile Series
TOTAL
Small-Cap Value Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
TNE Series (K) Account
Retirement Plan Series Account
FutureFunds Profile Series
TOTAL
Corporate Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
TNE Series (K) Account
Retirement Plan Series Account
FutureFunds Profile Series
TOTAL
Foreign Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II
TNE Series (K) Account
Retirement Plan Series Account
TOTAL
Small-Cap Aggressive Growth Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
TOTAL
Maxim INVESCO Small-Cap Growth Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
Great-West
TOTAL
Maxim T. Rowe Price Equity/Income Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
Great-West
TOTAL
MidCap Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II
Maxim Series Account
FutureFunds Series Account
FutureFunds Profile Series
TOTAL
Maxim INVESCO ADR Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
FutureFunds Series Account II
FutureFunds Profile Series
Great-West
TOTAL
Short-Term Maturity Bond Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
FutureFunds Profile Series
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
Great-West
TOTAL
Value Index Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
FutureFunds Profile Series
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
TOTAL
Blue Chip Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
FutureFunds Profile Series
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
TOTAL
MidCap Growth Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II
FutureFunds Series Account
FutureFunds Profile Series
TNE Series (K) Account
Maxim Series Account
Retirement Plan Series Account
TOTAL
Aggressive Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
TOTAL
Moderately Aggressive Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
TOTAL
Moderate Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
TOTAL
Moderately Conservative Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
TOTAL
Conservative Profile Portfolio
Series Account No. of Shares Percentage
Maxim Series Account
FutureFunds Series Account
TOTAL
INVESTMENT PERFORMANCE
The Portfolios may quote measure of investment performance in various ways. All
performance information supplied by the Fund in advertising is historical and is
not intended to indicated future returns.
Money Market Portfolio
In accordance with regulations prescribed by the SEC, the Fund is required to
compute the Money Market Portfolio's current annualized yield for a seven-day
period in a manner which does not take into consideration any realized or
unrealized gains or losses on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains and
losses on the sale of securities and unrealized appreciation and depreciation)
in the value of a hypothetical account having a balance of one share of the
Money Market Portfolio at the beginning of such seven-day period, dividing such
net change in account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this quotient on a
365-day basis.
The SEC also permits the Fund to disclose the effective yield of the Money
Market Portfolio for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the annualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result. . The
yield on amounts held in the Money Market Portfolio normally will fluctuate on a
daily basis. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The
Portfolio's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Portfolio, the types and
quality of portfolio securities held by the Portfolio, and its operating
expenses.
Other Portfolios
Standardized Average Annual Total Return Quotations. Average annual total return
quotations for shares of a Portfolio are computed by finding the average annual
compounded rates of return that would cause a hypothetical investment made on
the first day of a designated period to equal the ending redeemable value of
such hypothetical investment on the last day of the designated period in
accordance with the following formula:
P(I+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1,000 initial payment made at the beginning of
the designated period (or fractional portion thereof)
The computation above assumes that all dividends and distributions made by a
Portfolio are reinvested at net asset value during the designated period. The
average annual total return quotation is determined to the nearest 1/100 of 1%.
One of the primary methods used to measure performance is "total return." Total
return will normally represent the percentage change in value of a Portfolio, or
of a hypothetical investment in a Portfolio, over any period up to the lifetime
of the Portfolio. Unless otherwise indicated, total return calculations will
usually assume the reinvestment of all dividends and capital gains distributions
and will be expressed as a percentage increase or decrease from an initial
value, for the entire period or for one or more specified periods within the
entire period.
Total return percentages for periods longer than one year will usually be
accompanied by total return percentages for each year within the period and/or
by the average annual compounded total return for the period. The income and
capital components of a given return may be separated and portrayed in a variety
of ways in order to illustrate their relative significance. Performance may also
be portrayed in terms of cash or investment values, without percentages. Past
performance cannot guarantee any particular result. In determining the average
annual total return (calculated as provided above), recurring fees, if any, that
are charged to all shareholder accounts are taken into consideration.
Each Portfolio's average annual total return quotations and yield quotations as
they may appear in the Prospectus, this Statement of Additional Information or
in advertising are calculated by standard methods prescribed by the SEC.
Each Portfolio may also publish its distribution rate and/or its effective
distribution rate. A Portfolio's distribution rate is computed by dividing the
most recent monthly distribution per share annualized, by the current net asset
value per share. A Portfolio's effective distribution rate is computed by
dividing the distribution rate by the ratio used to annualize the most recent
monthly distribution and reinvesting the resulting amount for a full year on the
basis of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
A Portfolio's yield is calculated using a standardized formula, the income
component of which is computed from the yields to maturity of all debt
obligations held by the Portfolio based on prescribed methods (with all
purchases and sales of securities during such period included in the income
calculation on a settlement date basis), whereas the distribution rate is based
on a Portfolio's last monthly distribution. A Portfolio's monthly distribution
tends to be relatively stable and may be more or less than the amount of net
investment income and short- term capital gain actually earned by the Portfolio
during the month.
Other data that may be advertised or published about each Portfolio include the
average portfolio quality, the average portfolio maturity and the average
portfolio duration.
Standardized Yield Quotations. The yield of a Portfolio is computed by dividing
the Portfolio's net investment income per share during a base period of 30 days,
or one month, by the maximum offering price per share on the last day of such
base period in accordance with the following formula:
2[( a - b + 1 )6 - 1 ]
(cd)
Where: a = net investment income earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share
Net investment income will be determined in accordance with rules established by
the SEC.
Calculation of Total Return. Total return is a measure of the change in value of
an investment in a Portfolio over the time period covered . In calculating total
return, any dividends or capital gains distributions are assumed to have been
reinvested in the Portfolio immediately rather than paid to the investor in
cash. The formula for total return 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.
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
Performance Comparisons
Each Portfolio may from time to time include its yield and/or total return in
advertisements or in information furnished to present or prospective
shareholders. Each Portfolio may include in such advertisements the ranking of
those performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, relevant indexes and Donoghue Money
Fund Report as having the same or similar investment objectives.
The manner in which total return and yield will be calculated for public use is
described above. The table in the Prospectus under the heading "Performance
Related Information", summarizes the calculation of total return and yield for
each Portfolio, where applicable, through December 31, 1998.
DIVIDENDS AND TAXES
The following is only a summary of certain tax considerations generally
affecting a Portfolio and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning.
Qualification as a Regulated Investment Company
The Internal Revenue Code of 1986, as amended (the "Code"), provides that each
investment portfolio of a series investment company is to be treated as a
separate corporation. Accordingly, a Portfolio will seek to be taxed as a
regulated investment company under Subchapter M of the Code. As a regulated
investment company, a Portfolio will not be subject federal income tax on the
portion of its net investment income (i.e., its taxable interest, dividends and
other taxable ordinary income, net of expenses) and net realized capital gain
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. A Portfolio will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within one month after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a Portfolio must derive
at least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies (to the extent such currency gains are
ancillary to a Portfolio's principal business of investing in stock and
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities, currencies (the "Income Requirement").
Certain debt securities purchased by a Portfolio (such as zero-coupon bonds) may
be treated for federal income tax purposes as having original issue discount.
Original issue discount, generally defined as the excess of the stated
redemption price at maturity over the issue price, is treated as interest for
Federal income tax purposes. Whether or not a Portfolio actually receives cash,
it is deemed to have earned original issue discount income that is subject to
the distribution requirements of the Code. Generally, the amount of original
issue discount included in the income of a Portfolio each year is determined on
the basis of a constant yield to maturity that takes into account the
compounding of accrued interest.
In addition, a Portfolio may purchase debt securities at a discount that exceeds
any original issue discount that remained on the securities at the time a
Portfolio purchased the securities. This additional discount represents market
discount for income tax purposes. Treatment of market discount varies depending
upon the maturity of the debt security and the date on which it was issued. For
a debt security issued after July 18, 1984 having a fixed maturity date or more
than six months from the date of issue and having market discount, the gain
realized on disposition will be treated as interest to the extent it does not
exceed the accrued market discount on the security (unless a Portfolio elects
for all its debt securities having a fixed maturity date or more than one year
from the date of issue to include market discount in income in taxable years to
which it is attributable). Generally, market discount accrues on a daily basis.
For any debt security issued on or before July 18, 1984 (unless a Portfolio
makes the election to include market discount in income currently), or any debt
security having a fixed maturity date of not more than six months from the date
of issue, the gain realized on disposition will be characterized as long-term or
short-term capital gain depending on the period a Portfolio held the security. A
Portfolio may be required to capitalize, rather than deduct currently, part of
all of any net direct interest expense on indebtedness incurred or continued to
purchase or carry any debt security having market discount (unless a Portfolio
makes the election to include market discount in income currently).
If for any taxable year a Portfolio does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the current and accumulated earnings and
profits of a Portfolio. In such event, such distributions generally will be
eligible for the dividends-received deductions in the case of corporate
shareholders.
If a Portfolio were to fail to qualify as a RIC for one or more taxable years,
the Portfolio could then qualify (or requalify) as a RIC for subsequent taxable
year only if the Portfolio had distributed to the Portfolio's shareholders a
taxable dividend equal to the full amount of any earnings or profits (less the
interest charge mentioned below, if applicable) attributable to such period. A
Portfolio might also be required to pay to the U.S. Internal Revenue Service
interest on 50% of such accumulated earnings and profits. In addition, pursuant
to the Code and an interpretative notice issued by the IRS, if the Portfolio
should fail to qualify as a RIC and should thereafter seek to requalify as a
RIC, the Portfolio may be subject to tax on the excess (if any) of the fair
market of the Portfolio's assets over the Portfolio's basis in such assets, as
of the day immediately before the first taxable year for which the Portfolio
seeks to requalify as a RIC.
If a Portfolio determines that it will not qualify as a RIC under Subchapter M
of the Code, the Portfolio will establish procedures to reflect the anticipated
tax liability in the Portfolio's net asset value.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to distribute in each calendar year an amount equal to 98% of ordinary
taxable income for the calendar year and 98% of capital gain net income for the
one-year period ended on December 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
U.S. Treasury regulations may permit a regulated investment company, in
determining its investment company taxable income and undistributed net capital
for any taxable year, to treat any capital loss incurred after December 31 as if
it had been incurred in the succeeding year. For purposes of the excise tax, a
regulated investment company may: (I) reduce its capital gain net income by the
amount of any net ordinary loss for any calendar year; and (ii) exclude foreign
currency gains and losses incurred after December 31 of any year in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
The Portfolios intend to make sufficient distributions or deemed distributions
of their ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Portfolios may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
OTHER INFORMATION
Voting Rights
The shares of the Portfolios have no preemptive or conversion rights. Voting and
dividends rights, the right or redemption, and exchange privileges are described
in the Prospectus. Shares are fully paid and nonassessable. The Fund or any
Portfolio may be terminated upon the sale of its assets to another investment
company (as defined in the Investment Company Act of 1940, as amended), or upon
liquidation and distribution of its assets, if approved by vote of the holders
of a majority of the outstanding shares of the Fund or the Portfolios. If not so
terminated, the Fund or the Portfolios will continue indefinitely.
Custodian
The Bank of New York, One Wall Street, New York, New York 10286, is custodian of
the Fund's assets. The custodian is responsible for the safekeeping of a
Portfolio's assets and the appointment of the subcustodian banks and clearing
agencies. The custodian takes no part in determining the investment policies of
a portfolio or in deciding which securities are purchased or sold by a
Portfolio. However, a Portfolio may invest in obligations of the custodian and
may purchase securities from or sell securities to the custodian.
Independent Auditors
Deloitte & Touche LLP, 555 17th Street, Suite 3600, Denver, Colorado 80202,
serves as the Fund's independent auditor. Deloitte & Touche LLP examines
financial statements for the Fund and provides other audit, tax, and related
services.
FINANCIAL STATEMENTS
The Fund's audited financial statements as of December 31, 1998, together with
the notes thereto and the report of Deloitte & Touche LLP are incorporated by
reference to Registrant's N-30D filed via EDGAR on February 26, 1999.
<PAGE>
APPENDIX
Corporate Bond Ratings by Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds where are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Corporate Bonds Ratings by Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in a small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity for bonds rated BBB than for bonds in the A category.
BB & B - Standard & Poor's describes the BB and B rated issues together
with issues rated CCC and CC. Debt in these categories is regarded on balance as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Commercial Paper Ratings by Moody's Investors Service, Inc.
Prime-1 - Commercial Paper issuers rated Prime-1 are judged to be of the
best quality. Their short-term debt obligations carry the smallest degree of
investment risk. Margins of support for current indebtedness are large or stable
with cash flow and asset protection well assured. Current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Prime-2 - Issuers in the Commercial Paper market rated Prime-2 are high
quality. Protection for short-term holders is assured with liquidity and value
of current assets as well as cash generation in sound relationship to current
indebtedness. They are rated lower than the best commercial paper issuers
because margins of protection may not be as large or because fluctuations of
protective elements over the near or immediate term may be of greater amplitude.
Temporary increases in relative short and overall debt load may occur.
Alternative means of financing remain assured.
Prime-3 - Issuers in the Commercial Paper market rated Prime-3 have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earning and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Commercial Paper Ratings by Standard & Poor's Corporation
A - Issuers assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issuers in this category are further
refined with the designation 1, 2 and 3 to indicate the relative degree of
safety.
A-1 - This designation indicates that the degree of safety regarding
timely payment is very strong.
A-2 - Capacity for timely payment for issuers with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 - Issuers carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designation.
<PAGE>
PART C
OTHER INFORMATION
Item 22. Financial Statements
The financial statements are incorporated by referenced to
Registrant's N-30D filed via EDGAR on February 26, 1999.
Item 23. Exhibits
Items (a)-(c) are incorporated by reference to Registrant's
Pre-Effective Amendment No. 1 to its Registration Statement dated
March 10, 1982.
Item (d) relating to the sub-advisory agreement for the MidCap
Portfolio is incorporated by reference to Registrant's
Post-Effective Amendment No. 56 to its Registration Statement
dated November 24, 1998, and as to the investment advisory
agreement and all other sub-advisory agreements is incorporated
by reference to Registrant's Post-Effective Amendments No 28, 29
and 55 to its Registration Statement dated September 1, 1994 and
May 1, 1998.
Items (e) and (f) are not applicable.
Item (g) is incorporated by reference to Registrant's
Post-Effective Amendment No. 24 dated March 1, 1993.
Item (h) is not applicable.
Item (i) is incorporated by reference to Registrant's
Pre-Effective Amendment No. 1 to its Registration Statement dated
March 10, 1982.
Item (j), written consent of Deloitte & Touche LLP, Independent
Auditors for the Fund to be filed by amendment.
Items (k) - (m) are not applicable.
Item (n) is incorporated by reference to Registrant's N-30D filed
via EDGAR on February 26, 1999.
Item (o) is not applicable.
Item 24. Persons Controlled by or under Common Control with Registrant.
The organizational chart showing persons controlled by or under
common control with Registrant is disclosed on page C-2
Item 25. Indemnification.
Item 4, Part II, of Registrant's Pre-Effective Amendment No. 1 to
its Registration Statement is herein incorporated by reference.
<PAGE>
<TABLE>
ORGANIZATIONAL CHART
<S> <C> <C> <C> <C> <C> <C>
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.7% - Power Financial Corporation
81.2% - Great-West Lifeco Inc.
99.6% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - Anthem Health & Life Insurance Company
100% - First Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Orchard Capital Management, LLC
100% - Greenwood Investments, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts, Inc.
100% - One Health Plan of Michigan, Inc.
100% - One Health Plan of Minnesota, Inc.
100% - One Health Plan of New York, Inc.
100% - One Health Plan, Inc.
100% - One Health Plan of Alaska, Inc.
100% - One Health Plan of Arizona, Inc.
100% - One of Arizona, Inc.
100% - One Health Plan of Maine, Inc.
100% - One Health Plan of Nevada, Inc.
100% - One Health Plan of New Hampshire, Inc.
100% - One Health Plan of New Jersey, Inc.
100% - One Health Plan of South Carolina, Inc.
100% - One Health Plan of Wisconsin, Inc.
100% - One Health Plan of Wyoming, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
100% - Greenwood Property Corporation
95% - Maxim Series
Fund, Inc.* 100% - GWL
Properties Inc.
100% - Great-West Realty Investments, Inc.
50% - Westkin Properties Ltd.
92%**- Orchard Series Fund
100% - Orchard Trust Company
</TABLE>
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
Registrant's investment adviser, GW Capital Management, LLC ("GW
Capital Management"), is a wholly-owned subsidiary of Great-West
Life & Annuity Insurance Company ("GWL&A"), which is a
wholly-owned subsidiary of The Great-West Life Assurance Company.
GW Capital Management provides investment advisory services to
various unregistered separate accounts of GWL&A and to Great-West
Variable Annuity Account A and Orchard Series Fund, which are
registered investment companies. The directors and officers of GW
Capital Management have held, during the past two fiscal years,
the following positions of a substantial nature.
<TABLE>
Name Position(s)
- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
John T. Hughes Director, Chairman of the Board and
President, GW Capital Management; Senior Vice
President and Chief Investment Officer (U.S.
Operations), Great-West; Senior Vice President,
Chief Investment Officer, GWL&A; Chairman of the
Board, GWL Properties Inc.
Wayne Hoffmann Director, GW Capital Management; Vice President,
Investments, Great-West and GWL&A.
Mark S. Hollen Director, GW Capital Management; Vice
President, Financial Services, Great-West and
GWL&A; Chief Operating Officer, Financial
Administrative Services Corporation.
James M. Desmond Vice President, GW Capital Management; Assistant Vice
President, Investments, Great-West and GWL&A.
David G. McLeod Treasurer, GW Capital Management; Vice President,
Investment Administration, Great-West, GWL&A and Financial
Administrative Services Corporation.
Beverly A. Byrne Secretary, GW Capital Management; Assistant Counsel,
Great-West; Assistant Counsel and Assistant Secretary, GWL&A;
Assistant Counsel and Secretary, Financial Administrative
Services Corporation; Secretary, One Orchard Equities, Inc.,
Confed Admin Services, Inc., BenefitsCorp Equities, Inc.,
Great-West Variable Annuity Account A, and Maxim Series Fund,
Inc.; Assistant Secretary, Benefits Communication Corporation,
One Corporation and Great-West Benefit Services, Inc.
</TABLE>
Item 27. Principal Underwriter
Not applicable.
Item 28. Location of Accounts and Records
All accounts, books, and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the rules promulgated thereunder are maintained in the
physical possession of: Maxim Series Fund, Inc., 8515 East
Orchard Road, Englewood, Colorado 80111; or GW Capital
Management, LLC, 8515 East Orchard Road, Englewood, Colorado
80111.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
(d) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940 as it relates to the assistance to be rendered to
shareholders with respect to the calling of a meeting to replace a trustee.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 59 to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized in the City of Englewood
in the State of Colorado on the 26th day of February, 1999.
MAXIM SERIES FUND, INC.
(Registrant)
By: /s/ D.L. Wooden
President (D.L. Wooden)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 59 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ D.L. Wooden President 2/26/99
D.L. Wooden and Trustee
/s/ D.G. McLeod Treasurer 2/26/99
D.G. McLeod
/s/ R.P. Koeppe* Trustee 2/26/99
R.P. Koeppe
/s/ R. Jennings* Trustee 2/26/99
R. Jennings
Signature Title Date
/s/ J.D. Motz Trustee 2/26/99
J.D. Motz
/s/ S. Zisman* Trustee 2/26/99
S. Zisman
*By: /s/ Beverly A. Byrne B.A. Byrne Attorney-in-fact pursuant to
Powers of Attorney filed under Post-Effective Amendment No. 52 to
this Registration Statement.
