SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional
Materials [ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss.
240.14a-12
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Maxim Series Fund, Inc.
(Name of Registrant as Specified in its Charter)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maxim Series Fund, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of Each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MAXIM SERIES FUND, INC.
Executive Offices: 8515 East Orchard Road
Englewood, Colorado 80111
Mailing address: P.O. Box 1700
Denver, Colorado 80201
May 28, 1999
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On June 25, 1999
Notice is hereby given that a special meeting (the "Meeting") of
shareholders of the Maxim Series Fund, Inc. (the "Fund"): Investment Grade
Corporate Bond, Value Index, and Growth Index Portfolios (collectively the
"Portfolios") will be held at 8515 East Orchard Road, Englewood, Colorado on
Friday June 25, 1999 at 10:00 a.m. Mountain Time. The purpose of the Meeting is
to consider and act upon the following proposals, and to transact such other
business as may properly come before the Meeting or any adjournments thereof.
1. To consider and act upon a proposal to change the investment
objective of the Investment Grade Corporate Bond Portfolio;
2. To consider and act upon a proposal to change certain
fundamental investment restrictions of the Investment Grade
Corporate Bond Portfolio;
3. To consider and act upon a proposal to change the investment
objective of the Value Index Portfolio;
4. To consider and act upon a proposal to change the investment
objective of the Growth Index Portfolio.
The Board of Directors has fixed the close of business on April 30, 1999
as the record date for the determination of shareholders of each of the
Portfolios entitled to notice of and to vote at the Meeting or any adjournment
thereof. Owners of certain variable annuity contracts issued by Great-West Life
& Annuity Insurance Company ("GWL&A") are entitled to provide voting
instructions with respect to their proportionate interest in the Portfolios.
You are invited and encouraged to attend the Meeting. Shareholders who
do not expect to attend the Meeting in person are requested to complete, date
and sign the enclosed form of Proxy and return it promptly in the envelope
provided for that purpose. The enclosed Proxy is being solicited by the Board of
Directors of the Fund.
By Order of the Board of Directors
/s/ Beverly A. Byrne
Beverly A. Byrne
Secretary
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWNED ON THE
RECORD DATE. PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED
PROXY CARD. DATE, SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS
ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. WE ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD
PROMPTLY.
<PAGE>
13
PROXY STATEMENT
MAXIM SERIES FUND, INC.
Executive Offices: 8515 East Orchard Road
Englewood, Colorado 80111
Mailing Address: P.O. Box 1700
Denver, Colorado 80201
May 28, 1999
SPECIAL MEETING OF SHAREHOLDERS
To Be Held On June 25, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by, and on behalf of, the Board of Directors (the "Board") of Maxim
Series Fund, Inc. (the "Fund") to be used at the Special Meeting (the
"Meeting")of Shareholders of the Investment Grade Corporate Bond, Value Index,
and Growth Index Portfolios (collectively the "Portfolios") and at any
adjournments thereof, to be held on Friday June 25, 1999 at 10:00 a.m. Mountain
Time at 8515 East Orchard Road, Englewood, Colorado. It is anticipated that the
approximate mailing date of this Proxy Statement will be May 28, 1999.
The Board of Directors has fixed the close of business on April 30, 1999
as the record date for the determination of shareholders of each Portfolio
entitled to notice of and to vote at the Meeting and at any adjournment thereof
(the "Record Date"). Owners of contracts ("Contractowners") issued through the
Series Accounts (as that term is defined below) by Great-West Life & Annuity
Insurance Company ("GWL&A") who have allocated contract value to one or more of
the Portfolios as of the Record Date will be entitled to provide voting
instructions with respect to their proportionate interest (including fractional
interests) in each Portfolio.
Shares of the Portfolios are sold to Maxim Series Account, FutureFunds
Series Account, and Retirement Plan Series Account of GWL&A to fund the benefits
under variable annuity contracts (the "Contracts") issued by GWL&A. The three
series accounts are hereinafter referred to as "the Series Accounts". Each
Series Account is a separate account of GWL&A and is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The shares of the Portfolios are also sold to
the Qualified Series Account and FutureFunds Series Account II of GWL&A and the
TNE Series (k) Account of New England Life Insurance Company ("NELICO") to fund
certain variable annuity contracts. Qualified Series Account, FutureFunds Series
Account II and TNE Series (k) Account are not registered with the Securities and
Exchange Commission and the voting instructions of Contractowners in Qualified
Series Account, FutureFunds Series Account II and TNE Series (k) Account are not
being solicited.
The Investment Adviser to the Fund is GW Capital Management, LLC.
("GWCM" or the "Adviser") 8515 East Orchard Road, Englewood, Colorado 80111, a
wholly owned subsidiary of GWL&A. GWCM also serves as the administrator for the
Fund.
Shares of the Portfolios are owned by the Series Accounts, on behalf of
Contractowners. In accordance with its view of present applicable law, shares of
the Portfolios held in the Series Accounts will be voted based on instructions
received from Contractowners who have allocated contract value to one or more of
the Portfolios as of the Record Date. The number of votes which a Contractowner
has the right to cast will be determined by applying his/her percentage interest
in a Portfolio (held through a Series Account) to the total number of votes
attributable to such Portfolio. In determining the number of votes, fractional
shares will be recognized. Shares of a Portfolio as to which no timely voting
instructions are received and shares owned by Qualified Series Account,
FutureFunds Series Account II and TNE Series (k) Account will be voted by GWL&A
in proportion to the voting instructions which are received from Contractowners.
Voting instructions to abstain on any item will be applied on a pro rata basis
to reduce the votes eligible to be cast. A proxy may be revoked at any time
before it is voted by the furnishing of a written revocation, properly executed,
to the Fund's Secretary before the Meeting or by attending the Meeting. In
addition to the solicitation of proxies by mail, proxies may be solicited by
officers and employees of the Fund or GWL&A or its agents or affiliates
personally or by telephone.
The following table indicates the Portfolios being solicited with
respect to the Proposals being presented at the meeting:
<TABLE>
------------------------------ ---------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Proposal Summary Eligible Voters
------------------------------ ---------------------------- ----------------------
------------------------------ ---------------------------- ----------------------
1. Approval of changes A proposal to change the Only Contractowners
relating to the Investment investment objective of having an interest
Grade Corporate Bond the Investment Grade in an investment
Portfolio. Corporate Bond Portfolio. option corresponding
to the Investment
Grade Corporate Bond
Portfolio.
------------------------------ ---------------------------- ----------------------
------------------------------ ---------------------------- ----------------------
2. Approval of amendments A proposal to change the Only Contractowners
to the fundamental fundamental investment having an interest investment
restrictions of restrictions of the in an investment the Investment
Grade Investment Grade Corporate option corresponding Corporate Bond
Portfolio. Bond Portfolio to to the Investment
correspond with the Grade Corporate Bond
investment objective Portfolio.
change in proposal 1.
------------------------------ ---------------------------- ----------------------
------------------------------ ---------------------------- ----------------------
3. Approval of changes A proposal to change the Only Contractowners
relating to the Value Index investment objective of having an interest
Portfolio. the Value Index Portfolio. in an investment
option corresponding
to the Value Index
Portfolio.
------------------------------ ---------------------------- ----------------------
------------------------------ ---------------------------- ----------------------
4. Approval of changes A proposal to change the Only Contractowners
relating to the Growth Index investment objective of having an interest
Portfolio. the Growth Index Portfolio. in an investment
option corresponding
to the Growth Index
Portfolio.
------------------------------ ---------------------------- ----------------------
</TABLE>
If you execute and return the enclosed proxy in time to be voted at the
Meeting, and do not subsequently revoke your proxy, then all shares represented
by the proxy will be voted in accordance with your instructions. Approval of
each Proposal requires the vote of a "majority of the outstanding voting
securities," of the affected Portfolio, within the meaning of the Investment
Company Act of 1940 (the "1940 Act"). The term "majority of outstanding voting
securities" is defined under the 1940 Act to mean: (a) 67% or more of the
outstanding shares present at a meeting of shareholders, if the holders of more
than 50% of the outstanding shares are present or represented by proxy, or (b)
more than 50% of the outstanding shares, whichever is less.
The Board may seek one or more adjournments of the Meeting to solicit
additional shareholders, if necessary, to obtain a quorum for the Meeting, or to
obtain the required shareholder vote to approve each Proposal . An adjournment
would require the affirmative vote of the holders of a majority of the shares
present at the Meeting (or an adjournment thereof) in person or by proxy and
entitled to vote. If adjournment is proposed in order to obtain the required
shareholder vote on a particular proposal, the persons named as proxies will
vote in favor of adjournment those shares which they are entitled to vote in
favor of such proposal and will vote against adjournment those shares which they
are required to vote against such proposal.
The Fund and the Portfolios will pay no expenses associated with this
proxy solicitation. Any expenses will be paid by GWCM. Management of the Fund
knows of no other business, other than that set forth in Proposals 1 through 4
which will be presented for consideration at the Meeting. If any other matter is
properly presented, it is the intention of the persons named in the enclosed
Proxy to vote in accordance with their best judgment.
Beneficial Ownership
The Portfolios each issue a separate class of common stock, par value
$.10 per share. Holders of common stock of each Portfolio on the Record Date
will be entitled to one vote for each share held of a particular Portfolio (and
fractional votes corresponding to any fractional shares), with no shares having
cumulative voting rights.
As of the Record Date, the number of shares outstanding for each
Portfolio was: 100,753,393 for the Investment Grade Corporate Bond Portfolio;
169,163,746 for the Value Index Portfolio and 148,560,337 for the Growth Index
Portfolio. As of the Record Date the following persons owned more than 5% of a
Portfolio's outstanding shares: Investment Grade Corporate Bond Portfolio:
FutureFunds II Series Account 88,493,124.19 shares 87.8%; and TNE Series (k)
Account 11,228,707.85 shares 11.1%; Value Index Portfolio: FutureFunds II Series
Account 140,442,110.91 shares 83%; and TNE Series (k) Account 20,132,065.25
shares 11.9%; and the Growth Index Portfolio: FutureFunds II Series Account
116,056,429.72 shares 78.1%; and the TNE Series (k) Account 15,544,848.33 shares
10.4%; and the Directors and executive officers of the Fund did not own any
Portfolio shares.
PROPOSAL 1: CHANGE OF INVESTMENT OBJECTIVE OF THE INVESTMENT GRADE CORPORATE
BOND PORTFOLIO
The current investment objective of the Investment Grade Corporate Bond
Portfolio (the " Bond Portfolio") is to seek the highest possible current income
consistent with the primary goal of insuring the protection of capital by
investing primarily in investment grade corporate debt securities and in debt
securities issued by the U.S. Government and its agencies. To date, the Bond
Portfolio's investment results have not compared favorably with most funds in
its asset category.
It is therefore proposed that the investment objective of the Bond
Portfolio be changed. Under the proposal, the new investment objective is to
seek investment results that track the total return of the Lehman Brothers
Aggregate Bond Index (the "Lehman Aggregate"). This means that the Portfolio
will invest in the securities contained in the Lehman Aggregate so as to match,
as nearly as possible, the performance of that index. In pursuing this strategy,
the Portfolio may also enter into futures contracts on financial indices as well
as options on such futures contracts. If the proposal is passed, the name of the
Bond Portfolio would change to the Bond Index Portfolio. The Bond Index
Portfolio would meet the needs of an investor who wishes to participate in the
overall performance of the investment grade debt sector without incurring the
investment selection risk of an actively managed portfolio investment strategy.
As an indexed portfolio, the Bond Index Portfolio may have lower turnover rates
than an actively managed portfolio.
The Lehman Aggregate is designed to replicate the investment performance
of the U.S. investment grade fixed rate bond market, including government and
corporate securities, agency mortgage pass-through securities, and asset-backed
securities. The Lehman Aggregate had a total market value of approximately $5.5
trillion and contained 7,422 securities as of March, 1999. To qualify for
inclusion in the Lehman Aggregate, a bond or other debt security must meet the
following criteria: (1) it must have a maturity of at least one year without a
limit on final maturity; (2) it must have at least $100 million par amount
outstanding; (3) it must be investment grade; (4) it must carry a fixed interest
rate; and (5) it must be publicly issued in U.S. dollars.
The Bond Index Portfolio will be invested to match, as closely as
possible, the relevant attributes of the Lehman Aggregate; these include
investment type, duration, and quality. From time to time, the composition of
the Bond Index Portfolio will be adjusted as a result of a change in the
composition of the Lehman Aggregate. Due to the size of the Lehman Aggregate and
in order to reduce expenses, sampling techniques will be used. A primary goal of
the sampling strategy is to minimize "tracking error", which is the statistical
measure of the difference between the investment results of the Bond Index
Portfolio and the Lehman Aggregate. The Bond Index Portfolio may also invest in
index futures contracts or options on such futures contracts as a means of
replicating the characteristics of the index. The Bond Index Portfolio will
attempt to achieve a correlation of at least 0.95 between its return performance
and that of the Lehman Aggregate, before expenses. In attempting to achieve this
correlation, it may be necessary for the Bond Index Portfolio to engage in
certain derivative transactions. In Proposal 2, below, we are asking
shareholders to approve certain changes in the Portfolio's fundamental
investment restrictions to allow it to engage in such derivative transactions.
While the Fund will implement the change of investment objective if Proposal 1
is approved regardless of whether Proposal 2 is approved, you should know that
without the ability to engage in derivative transactions the correlation between
the Bond Index Portfolio's performance, before expenses, and that of the Lehman
Aggregate may be lower. A correlation of 1.00 indicates a perfect correlation.
Investment advisory fees and other expenses will tend to cause the Bond Index
Portfolio's return to be lower than the return of the Lehman Aggregate.
In order to manage cash flow resulting from the Bond Index Portfolio's
purchase and redemption of its own shares, the Bond Index Portfolio may hold
cash, cash equivalents, or money market instruments as deemed appropriate by
GWCM. The Bond Index Portfolio may invest up to 100% of its assets in money
market instruments as deemed necessary by GWCM, for temporary defensive purposes
in response to adverse market, economic or political conditions, or as a cash
reserve. Due to "tracking error, expenses and cash flow management, there can be
no assurance that the Bond Index will meet its investment objective. In
addition, even if the Portfolio is successful in tracking the performance of the
index, the index may perform poorly in which case the Portfolio would have poor
investment results.
If the proposal is approved, the change in the Bond Index Portfolio's
investment objective would become effective immediately, though it may take a
few months to transition its holdings in accordance with the new investment
objective. During this transition period, it is less likely the Portfolio will
achieve its investment objective since it will not be fully invested in the
Lehman Aggregate. At the time the new investment objective would become
effective, GWCM will determine, based on market conditions and the new
investment objective, the extent to which securities held by the Bond Index
Portfolio will be sold and new securities purchased. While it is anticipated the
Adviser will have to make significant changes in the current holdings of the
Bond Index Portfolio as a result of the new investment objective, the Fund
cannot predict the precise impact the proposed changes would have on the Bond
Index Portfolio's turnover rate. However, the Fund estimates that approval of
this proposal would cause the turnover rate for 1999 to be at least 100% due to
the transition and for subsequent years, approximately 40%, though there can be
no assurance that these estimates will be accurate. For comparison purposes, the
turnover rate during 1998 was 59.8% and 1997 was140.4%. The Bond Index Portfolio
may also incur additional expenses as a result of the conversion. The
anticipated cost of these expenses is approximately $75,000.
Vote Required
In order to approve this Proposal, the affirmative vote of the holders
of a majority of the outstanding shares of the Bond Portfolio is required.
"Majority" for this purpose means: (a) 67% or more of the outstanding shares
present at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares, whichever is less.
If this proposal is approved at the Meeting, value held under a Contract
will remain in the Investment Division that invests in what was the Investment
Grade Corporate Bond Portfolio, unless separate instructions are received from
the Contractowner to move the Contract value into another available Investment
Division.
The Bond Index Portfolio is not sponsored, endorsed, sold or promoted by Lehman
Brothers and Lehman Brothers makes no representation regarding the advisability
of using this index.
PROPOSAL 2: AMENDMENTS TO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE
INVESTMENT GRADE CORPORATE BOND PORTFOLIO
As required by the 1940 Act, the Fund has adopted certain fundamental
investment restrictions ("fundamental restrictions"), with respect to its
Portfolios, which are set forth in its Statement of Additional Information.
These fundamental restrictions may be changed only with shareholder approval.
Restrictions and policies that have not been specifically designated as
fundamental are considered to be "non-fundamental" and may be changed by the
Board without shareholder approval.
Based on the proposed change of investment objective of the Bond
Portfolio discussed in Proposal 1 above, the Board has determined that three of
the current fundamental restrictions should be modified to allow the Bond Index
Portfolio additional investment flexibility consistent with its investment
objective and consistent with the investment flexibility provided to the other
Maxim index portfolios.
Specifically, as noted under Proposal No. 1, in order to replicate as
nearly as possible the performance of the Lehman Aggregate, the Bond Index
Portfolio may enter into futures contracts on financial indices and options on
such futures contracts. The ability to use these types of "derivative"
transactions will, among other things, compensate for the Portfolio's inability
to invest in all securities contained in that index. Presently, the fundamental
investment restrictions of this Portfolio do not explicitly permit the Portfolio
to engage in these types of transactions. The fundamental investment
restrictions of all other Maxim Index Portfolios do provide this investment
flexibility and GWCM believes these types of transactions are an important
component of the investment strategy of an index fund. Accordingly, the proposal
is intended to enable the Bond Index Portfolio to engage in the same types of
derivative transactions as the other Maxim Index Portfolios and thereby enhance
its ability to track the performance of the Lehman Aggregate. You should
understand, if Proposal 1 is not approved, this Proposal may still be approved
to allow the Portfolio the flexibility to invest in certain derivative
transactions as described below.
All three of the fundamental investment restrictions to be voted on
relate to financial futures contracts and related options transactions. It is
necessary for all three of these fundamental restrictions to be changed in order
to afford the Bond Index Portfolio the necessary investment flexibility to
engage in these transactions and to bring its policies in line with the other
Maxim Index Portfolios. In light of this, you are being asked to provide voting
instructions to approve or disapprove of all three proposed changes as part of a
single proposal.
The text of each fundamental restriction as currently in effect is set
forth below as well as the text of each such restriction as it would read if the
proposal is approved.
a. The Fund's current fundamental restriction relating to the purchase
of futures contracts and options on such contracts is as follows:
The Fund (i.e., each Portfolio) will not 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 Maxim Bond, Maxim Stock Index,
Maxim Small-Cap Index, Maxim Growth Index, Maxim Value Index, Maxim
Ariel MidCap Value, Maxim Templeton International Equity, Maxim Ariel
Small-Cap Value, Maxim Loomis Sayles Corporate Bond, Maxim Foreign
Equity, Maxim Loomis Sayles Small-Cap Value, Maxim INVESCO Small-Cap
Growth, Maxim INVESCO ADR and Maxim Short-Term Maturity Bond Portfolios
may invest in futures contracts based on financial indices, foreign
currency transactions and options on permissible futures contracts.
The Board recommends that this restriction be replaced with the following
fundamental restriction (changes underscored):
The Fund (i.e., each Portfolio) will not 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 Maxim Bond, Maxim Bond Index,
Maxim Stock Index, Maxim Small-Cap Index, Maxim Growth Index, Maxim
Value Index, Maxim Ariel MidCap Value, Maxim Templeton International
Equity, Maxim Ariel Small-Cap Value, Maxim Loomis Sayles Corporate Bond,
Maxim Foreign Equity, Maxim Loomis Sayles Small-Cap Value, Maxim INVESCO
Small-Cap Growth, Maxim INVESCO ADR and Maxim Short-Term Maturity Bond
Portfolios may invest in futures contracts based on financial indices,
foreign currency transactions and options on permissible futures
contracts.
The present fundamental restriction could be read to preclude the Bond Index
Portfolio from investing in futures contracts based on financial indices and
options on such futures contracts. The primary purpose of the modification is to
allow the Bond Index Portfolio to invest in these instruments in furtherance of
its investment objective.
Futures contracts based on financial indices provide for profits and
losses resulting from changes in the market value of the contract, which profits
and losses are credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date a final cash settlement occurs and the futures positions are simply closed
out. Changes in the market value of a particular index futures contract reflect
changes in the specified index of securities on which the futures contract is
based. At the time the Portfolio enters into a futures contract, an amount of
liquid assets less initial and variation margin on the futures contract will be
deposited in a segregated account with the Fund's custodian to collateralize the
position and ensure that the futures contract is "covered." The Portfolio would
be required to deposit additional liquid assets in order to continue covering
the contract as market conditions change.
Put and call options on financial futures contracts are traded on
exchanges that are licensed and regulated by the Commodity Futures Trading
Commission for the purpose of options trading. A call option on a futures
contract gives the purchaser the right, in return for the premium paid, to
purchase a futures contract (that is, assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(that is, assume a "short" position), for a specified exercise price, at any
time before the option expires. Upon the exercise of a call, the writer of the
option is obligated to sell the futures contract (to deliver a "long" position
to the option holder) at the option exercise price, which will presumably be
lower than the current market price of the contract in the futures market. Upon
exercise of a put, the writer of the option is obligated to purchase the futures
contract (deliver a "short" position to the option holder) at the option
exercise price which will presumably be higher than the current market price of
the contract in the futures market. When the holder of an option exercises it
and assumes a long futures position, in the case of a call, or a short futures
position, in the case of a put, its gain will be credited to its futures margin
account. However, as with the trading of futures, most participants in the
options markets do not seek to realize their gains or losses by exercise of
their option rights. Instead, the holder of an option will usually realize a
gain or loss by buying or selling an offsetting option at a market price that
will reflect an increase or a decrease from the premium originally paid.
Positions in futures contracts and options thereon can be closed out
only on an exchange that provides a market for those instruments. There can be
no assurance that such a market will exist for a particular futures contract or
option. If the Portfolio cannot close out an exchange traded futures contract or
option which it holds, it would have to perform its contract obligation or
exercise its option to realize any profit and would incur transaction costs on
the sale of the underlying assets. Another risk applicable to both futures
contracts and related options is that changes in the value of the contracts or
options may not correlate with changes in the underlying financial index. This
failure may be partly due to temporary activity of speculators in the futures
markets. To the extent there is not a perfect correlation, the Portfolio's
ability to achieve its investment objective may be impeded.
When the Portfolio buys an option on a futures contract or an option on
a financial index, its risk of loss is limited to the amount of the premium
paid. There is no such limit when the Portfolio enters into a futures contract.
Because of the low margin deposits required, futures trading involves a high
degree of leverage. As a result, a relatively small price change in a futures
contract may result in an immediate, substantial gain or loss. This is because
the use of leverage has the effect of magnifying gains and losses in the
underlying instrument.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price. Once the daily limit has been reached
in a particular type of contract, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day. It does not limit potential losses because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices
sometimes move to the daily limit for several consecutive trading days with
little or no trading. When this happens, futures cannot be liquidated promptly
and some futures traders suffer large losses.
b. Modification of fundamental restriction on the purchase of any
securities on margin.
The Fund's current fundamental restriction on this matter is as follows:
The Fund (i.e., each Portfolio) will not 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 Maxim Bond, Maxim Stock Index, Maxim Small-Cap
Index, Maxim Value Index, Maxim Growth Index, Maxim Templeton
International Equity, Maxim Ariel Small-Cap Value, Maxim Ariel MidCap
Value, Maxim Loomis Sayles Corporate Bond, Maxim Short-Term Maturity
Bond, Maxim Loomis Sayles Small-Cap Value, Maxim Foreign Equity, Maxim
INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios may make
margin payments in connection with transactions in futures contracts) or
make short sales of securities or maintain a short position.
The Board recommends that this restriction be replaced with the following
fundamental restriction (changes underscored):
The Fund (i.e., each Portfolio) will not 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 Maxim Bond, Maxim Bond Index, Maxim Stock Index,
Maxim Small-Cap Index, Maxim Value Index, Maxim Growth Index, Maxim
Templeton International Equity, Maxim Ariel Small-Cap Value, Maxim Ariel
MidCap Value, Maxim Loomis Sayles Corporate Bond, Maxim Short-Term
Maturity Bond, Maxim Loomis Sayles Small-Cap Value, Maxim Foreign
Equity, Maxim INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios
may make margin payments in connection with transactions in futures
contracts) or make short sales of securities or maintain a short
position.
The present fundamental restriction could be read to preclude the Bond Index
Portfolio from making margin payments in connection with transactions in futures
contracts. Because virtually all futures contracts require margin payments, the
proposed change is necessary to enable the Portfolio to enter into futures
contracts.
Because the Portfolio intends to engage in transactions in financial
futures contracts, it may be required to deposit initial or maintenance margin
in connection with those transactions. No consideration is paid or received at
the time the Portfolio enters into a financial futures contract. Instead, the
Portfolio must make an initial deposit, known as "initial margin," as a partial
guarantee of its performance under the contract (generally 1% to 10% of the
contract amount). As the value of the underlying financial index (or other
instrument) fluctuates, either party to the contract may be required to make
additional margin payments, known as "maintenance margin," or "variation margin"
to cover any additional obligation it may have under the contract. Such deposits
are not believed to constitute the purchase of securities on margin.
Nevertheless, to avoid any uncertainty, the Board of Directors propose to add
this exception to the general prohibition against purchasing securities on
margin to ensure that the Portfolio may make such initial and maintenance margin
deposits without violating its investment restrictions.
c. Modification of fundamental restriction on the writing, purchasing or
selling of put options, call options or combinations thereof.
The Fund's current fundamental restriction on this matter is as follows:
The Fund (i.e., each Portfolio) will not write, purchase or sell puts,
calls or combinations thereof, except that the Maxim Bond, Maxim
Small-Cap Index, Maxim Value Index, Maxim Growth Index, Maxim Ariel
MidCap Value, Maxim Templeton International Equity, Maxim Ariel
Small-Cap Value, Maxim Loomis Sayles Corporate Bond, Maxim Loomis Sayles
Small-Cap Value, Maxim Foreign Equity, Maxim 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 Maxim Bond Portfolio may buy and sell put and call options
( and any combination thereof) on permissible futures contracts.
The Board recommends that this restriction be replaced with the following
fundamental restriction (changes underscored):
The Fund (i.e., each Portfolio) will not write, purchase or sell puts,
calls or combinations thereof, except that the Maxim Bond, Maxim Bond
Index, Maxim Small-Cap Index, Maxim Value Index, Maxim Growth Index,
Maxim Ariel MidCap Value, Maxim Templeton International Equity, Maxim
Ariel Small-Cap Value, Maxim Loomis Sayles Corporate Bond, Maxim Loomis
Sayles Small-Cap Value, Maxim Foreign Equity, Maxim 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 Maxim Bond Portfolio may buy and sell put and call options
( and any combination thereof) on permissible futures contracts.
The proposed change would give the Bond Index Portfolio the same investment
flexibility as the other Maxim Index Portfolios. However, like the other Maxim
Index Portfolios, in actuality the Bond Index Portfolio presently intends to
limit its options related activities to the purchase of options of financial
futures contracts, as discussed above
Vote Required
In order to approve this Proposal, the affirmative vote of the holders
of a majority of the outstanding shares of the Bond Portfolio is required.
"Majority" for this purpose means: (a) 67% or more of the outstanding shares
present at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares, whichever is less.
If this proposal is approved at the Meeting, the proposed changes to
these three fundamental restrictions will be adopted and the Fund's Statement of
Additional Information will be revised to reflect those changes as soon as
practicable.
PROPOSAL 3: CHANGE OF INVESTMENT OBJECTIVE OF THE VALUE INDEX PORTFOLIO
The current investment objective of the Value Index Portfolio ("Value
Portfolio") is to seek investment results that track the total return of the
common stocks that comprise the Russell 1000 Value Index. During the last couple
of years there has been an increasing overlap in the securities comprising the
Russell 1000 Value Index and the Russell 1000 Growth Index. Out of the 1,000
stocks that comprise the Russell 1000 Index, the Russell 1000 Value Index holds
stocks of 707 of the listed companies while the Russell 1000 Growth Index holds
stocks of 569 of the listed companies. Such overlap of growth and value
companies comprising the Russell 1000 Value Index and the Russell 1000 Growth
Index has detracted from the Portfolio's orientation to invest in "value"
oriented securities.
As a result of the increase in overlap between the Russell Indexes, it
is proposed the investment objective of the Value Portfolio be changed to track
an index which invests exclusively in value oriented companies. Under the
proposal, the Value Portfolio's investment objective would be to seek investment
results that track the total return of the common stocks that comprise the
S&P/BARRA Value Index.
The S&P/BARRA Growth and S&P/BARRA Value indices were introduced in May
1992. The indices are used to split the S&P 500 Index into two separate and
mutually exclusive investment styles. This split gives the S&P/BARRA indices a
pure division between value and growth. The price-to-book ratio is used to
distinguish between value and growth. The Value Index contains the companies
with lower price-to-book ratios compared to the Growth Index, which consists of
higher price-to book ratios.
The Value Portfolio will attempt to reproduce the returns of the
S&P/BARRA Value Index by owning the securities contained in the index in as
close as possible a proportion of the Value Portfolio as each stock's weight in
the S&P/BARRA Value Index. This may be accomplished through ownership of all the
stocks in the S&P/BARRA Value Index and/or through a combination of stock
ownership and owning futures contracts on the index and options on futures
contracts.
Twice a year, on January 1 and July 1, adjustments may be made in the
Value Portfolio's holdings due to a change in the composition of the S&P/BARRA
Value Index. The Value Portfolio will attempt to achieve a correlation between
its performance and that of the S&P/BARRA Value Index of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Value Portfolio's net asset value,
including the value of its dividends and capital gains distributions, increases
or decreases in exact proportion to changes in the S&P/BARRA Value Index. The
Adviser will attempt to minimize any "tracking error" (the statistical measure
of the difference between the investment results of the Value Portfolio and that
of the S&P/BARRA Value Index) in making investments for the Value Portfolio.
While the Value Portfolio will remain invested in S&P/BARRA Value Index
securities as fully as possible, it must manage cash flows resulting from the
Value Portfolio's purchase and redemption of Value Portfolio shares. Therefore,
the Value Portfolio may invest in money market instruments and other types of
debt securities, either as a cash reserve or for other appropriate reasons.
Brokerage and other transaction costs, as well as investment advisory fees for
the Value Portfolio, in addition to potential tracking errors, will tend to
cause the Value Portfolio's return to be lower than the return of the S&P/BARRA
Value Index. In addition, there can be no assurance the Value Portfolio will
meet its objective. Furthermore, even if the Portfolio is successful in tracking
the performance of the index, the index may perform poorly in which case the
Portfolio would have poor investment results.
If the proposal is approved, the change in the Value Portfolio's
investment objective would become effective after the Shareholder vote, and
would be completely phased in by July 26, 1999 to allow the Value Portfolio a
period to transition its holdings. At the time the new investment objective
would become effective, the Adviser will determine, based on market conditions
and the new investment objective, the extent to which securities held by the
Value Portfolio will be sold and new securities purchased. It is, however,
important to understand the S&P/BARRA Value Index contains many of the same
securities as are contained in the Russell 1,000 Value Index; therefore, certain
securities will be retained. While it is anticipated the Adviser will have to
make significant changes in the current holdings of the Value Portfolio as a
result of the new investment objective, the Fund cannot predict the precise
impact the proposed changes would have on the Value Portfolio's turnover rate.
However, the Fund estimates that approval of this proposal would cause the
turnover rate for 1999 to be approximately 25% due to the transition and for
subsequent years, approximately 20%, due to changes in the S&P 500 as well as
movement between the two sub-indices during the bi-annual reconstitution, though
there can be no assurance that these estimates will be accurate. For comparison
purposes, the turnover rate during 1998 was 39% and 1997 was 26%. The Value
Portfolio may also incur additional brokerage expenses as a result of the
conversion. The anticipated cost of these brokerage expenses will be negligible
since the transition in investment objective will occur during the time of the
typical reconstitution of the Russell 1000 Value Index.
Vote Required
In order to approve this Proposal, the affirmative vote of the holders
of a majority of the outstanding shares of the Value Portfolio is required.
"Majority" for this purpose means: (a) 67% or more of the outstanding shares
present at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares, whichever is less.
If this proposal is approved at the Meeting, value held under a Contract
will remain in the Investment Division that invests in the Value Index Portfolio
unless separate instructions are received from the Contractowner to move the
Contract value into another available Investment Division.
Standard & Poor's S&P/BARRA Value Index is a trademark of The McGraw-Hill
Companies, Inc. and has been licensed for use by Maxim Series Fund, Inc. The
Value Portfolio is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of using this index.
PROPOSAL 4: CHANGE OF INVESTMENT OBJECTIVE OF THE GROWTH INDEX PORTFOLIO
The current investment objective of the Growth Index Portfolio ("Growth
Portfolio") is to seek investment results that track the total return of the
common stocks that comprise the Russell 1000 Growth Index. During the last
couple of years there has been an increasing overlap in the securities
comprising the Russell 1000 Value Index and the Russell 1000 Growth Index. Out
of the 1,000 stocks that comprise the Russell 1000 Index, the Russell 1000 Value
Index holds stocks of 707 of the listed companies while the Russell 1000 Growth
Index holds stocks of 569 of the listed companies. Such overlap of growth and
value companies comprising the Russell 1000 Value Index and the Russell 1000
Growth Index has detracted from the Portfolio's orientation to invest in
"growth" oriented securities.
As a result of the increased overlap between the Russell indexes, it is
proposed the investment objective of the Growth Portfolio be changed to track an
index which invests exclusively in growth oriented companies. Under the
proposal, the Growth Portfolio's investment objective would be to seek
investment results that track the total return of the common stocks that
comprise the S&P/BARRA Growth Index.
The S&P/BARRA Growth and S&P/BARRA Value indices were introduced in May
1992. The indices are used to split the S&P 500 Index into two separate and
mutually exclusive investment styles. This split gives the S&P/BARRA indices a
pure division between value and growth. The Price-to-book ratio is used to
distinguish between value and growth. The Value Index contains the companies
with lower price-to-book ratios compared to the Growth Index, which consists of
higher price-to book ratios.
The Growth Portfolio will attempt to reproduce the returns of the
S&P/BARRA Growth Index by owning the securities contained in the index in as
close as possible a proportion of the Growth Portfolio as each stock's weight in
the S&P/BARRA Growth Index. This may be accomplished through ownership of all
the stocks in the S&P/BARRA Growth Index and/or through a combination of stock
ownership and owning futures contracts on the index and options on futures
contracts.
Twice a year, on January 1 and July 1, adjustments may be made in the
Growth Portfolio's holdings due to a change in the composition of the S&P/BARRA
Growth Index. The Growth Portfolio will attempt to achieve a correlation between
its performance and that of the S&P/BARRA Growth Index of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Growth Portfolio's net asset
value, including the value of its dividends and capital gains distributions,
increases or decreases in exact proportion to changes in the S&P/BARRA Growth
Index. The Adviser will attempt to minimize any "tracking error" (the
statistical measure of the difference between the investment results of the
Growth Portfolio and that of the S&P/BARRA Growth Index) in making investments
for the Growth Portfolio. While the Growth Portfolio will remain invested in
S&P/BARRA Growth Index securities as fully as possible, it must manage cash
flows resulting from the Growth Portfolio's purchase and redemption of Growth
Portfolio shares. Therefore, the Growth Portfolio may invest in money market
instruments and other types of debt securities, either as a cash reserve or for
other appropriate reasons. Brokerage and other transaction costs, as well as
investment advisory fees for the Growth Portfolio, in addition to potential
tracking errors, will tend to cause the Growth Portfolio's return to be lower
than the return of the S&P/BARRA Growth Index. In addition, there can be no
assurance, that the Growth Portfolio will meet its objective. Furthermore, even
if the Portfolio is successful in tracking the performance of the index, the
index may perform poorly in which case the Portfolio would have poor investment
results.
If the proposal is approved, the change in the Growth Portfolio's
investment objective would become effective after the Shareholder vote, and
would be completely phased in by July 26, 1999 to allow the Growth Portfolio a
period to transition its holdings. At the time the new investment objective
would become effective, the Adviser will determine, based on market conditions
and the new investment objective, the extent to which securities held by the
Growth Portfolio will be sold and new securities purchased. It is, however,
important to understand the S&P/BARRA Growth Index contains many of the same
securities as are contained in the Russell 1,000 Growth Index; therefore,
certain securities will be retained. While it is anticipated the Adviser will
have to make significant changes in the current holdings of the Growth Portfolio
as a result of the new investment objective, the Fund cannot predict the precise
impact the proposed changes would have on the Growth Portfolio's turnover rate.
However, the Fund estimates that approval of this proposal would cause the
turnover rate for 1999 to be approximately 25% due to the transition and for
subsequent years, approximately 20%, though there can be no assurance that these
estimates will be accurate. For comparison purposes, the turnover rate during
1998 was 26% and 1997 was 21%. The anticipated cost of these brokerage expenses
will be negligible since the transition in investment objective will occur
during the time of the typical reconstitution of the Russell 1000 Growth Index.
Vote Required
In order to approve this Proposal, the affirmative vote of the holders
of a majority of the outstanding shares of the Growth Portfolio is required.
"Majority" for this purpose means: (a) 67% or more of the outstanding shares
present at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares, whichever is less.
If this proposal is approved at the Meeting, value held under a Contract
will remain in the Investment Division that invests in the Growth Index
Portfolio unless separate instructions are received from the Contractowner to
move the Contract value into another available Investment Division.
Standard & Poor's S&P/BARRA Growth Index is a trademark of The McGraw-Hill
Companies, Inc. and has been licensed for use by Maxim Series Fund, Inc. The
Growth Portfolio is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of using this index.
Evaluation of the Board of Directors
At a meeting of the Board held on April 7, 1999, at which a majority of
the Independent Directors were in attendance, the Board evaluated these
Proposals. Prior to and during the meeting the Board requested information they
deemed necessary to enable them to determine whether the Proposals are in the
best interest of the Fund, each affected Portfolio and its respective
shareholders.
Based upon the Board's review and the evaluation of the materials they
received, and in consideration of all factors deemed relevant, the Board
determined these Proposals are reasonable and in the best interest of the Fund,
each affected Portfolio and its respective shareholders. Accordingly, the Board,
including all of the Independent Directors, unanimously approved these Proposals
and voted to recommend that the shareholders of each affected Portfolio vote to
approve the proposed changes.
THE DIRECTORS, INCLUDING A MAJORITY OF THE INDEPENDENT DIRECTORS, RECOMMEND THAT
EACH OF THE AFFECTED PORTFOLIO'S RESPECTIVE SHAREHOLDERS VOTE TO APPROVE THE
PROPOSED CHANGES AS SET FORTH IN PROPOSALS 1 THROUGH 4.
Shareholder Proposals
It is anticipated that, following the Meeting, the Fund will not hold
any meetings of shareholders except as required by federal or Maryland law.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a subsequent shareholder meeting should send proposals to the offices of the
Fund. The expense of preparing, printing, and mailing this proxy statement and
the accompanying form of proxy and notice of shareholder meeting will be borne
by GWCM.
The Fund will furnish, without charge, a copy of the 1998 Annual Report
upon request of a Contractowner who has allocated contract value to the affected
Portfolios of the Fund. Such requests should be forwarded to Yvonne Brady, 8515
East Orchard Road, Englewood, Colorado 80111; (800) 537-2033 ext. 4932.
By Order of the Board of Directors
/s/ Beverly A. Byrne
Beverly A. Byrne
Secretary
May 28, 1999
<PAGE>
PROXY
MAXIM SERIES FUND, INC.
PROXY for SPECIAL MEETING OF SHAREHOLDERS JUNE 25, 1999
The undersigned hereby appoints Beverly A. Byrne and Glen R. Derback, or any of
them, to be the attorneys and proxies of the undersigned at the Special Meeting
of Shareholders of Maxim Series Fund, Inc. to be held at 8515 E. Orchard Rd.,
Englewood, Colorado, at 10:00 a.m. on June 25, 1999 and at any adjournment
thereof, and to represent and cast the votes held on record by the undersigned
on April 30, 1999, upon the proposal below and as set forth in the Notice of
Special Meeting and Proxy Statement for such Meeting.
<TABLE>
<S> <C>
1) PROPOSAL TO APPROVE OR DISAPPROVE THE PROPOSED CHANGE TO THE INVESTMENT
OBJECTIVE OF THE INVESTMENT GRADE CORPORATE BOND PORTFOLIO;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(The Board of Directors recommend a vote FOR)
2) PROPOSAL TO APPROVE OR DISAPPROVE THE PROPOSED CHANGE TO THE FUNDAMENTAL
INVESTMENT RESTRICTIONS OF THE INVESTMENT GRADE CORPORATE BOND PORTFOLIO;
a) THE CHANGE TO THE PORTFOLIO'S CURRENT RESTRICTION RELATING TO THE
PURCHASE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS;
b) THE CHANGE TO THE PORTFOLIO'S CURRENT RESTRICTION RELATING TO THE
PURCHASE OF ANY SECURITIES ON MARGIN;
c) THE CHANGE TO THE PORTFOLIO'S CURRENT RESTRICTION RELATING TO WRITING,
PURCHASING OR SELLING OF PUT OPTIONS, CALL OPTIONS OR A COMBINATION
THEREOF;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(The Board of Directors recommend a vote FOR)
3) PROPOSAL TO APPROVE OR DISAPPROVE THE PROPOSED CHANGE TO THE INVESTMENT
OBJECTIVE OF THE VALUE INDEX PORTFOLIO;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(The Board of Directors recommend a vote FOR)
4) PROPOSAL TO APPROVE OR DISAPPROVE THE PROPOSED CHANGE TO THE INVESTMENT
OBJECTIVE OF THE GROWTH INDEX PORTFOLIO;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(The Board of Directors recommend a vote FOR)
5) In the Board of Directors discretion, on such other business
which may properly come before the meeting or any adjournment
thereof.
</TABLE>
This Proxy will be voted as specified. IF NO SPECIFICATIONS ARE MADE, THIS PROXY
WILL BE VOTED AS STATED IN THE PROXY STATEMENT. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS.
Dated: , 1999
(Signature of Shareholder)
This Proxy may be revoked by the Shareholder (Contractowner) at any time prior
to the Special Meeting.
Please sign and date your Proxy and return promptly in the accompanying
envelope.
