As filed with the Securities and Exchange Commission on July 21, 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. 64 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 64 (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 Boros Cicchetti 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 X on July 26, 1999pursuant to
paragraph (b)(1)(v) of Rule 485
60 days after filing pursuant to paragraph
(a)(1) of Rule 485 on pursuant to paragraph
(a)(1) of Rule 485 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
<PAGE>
30
EXPLANATORY NOTE
This Post-Effective Amendment relates only to the Maxim Bond Index, Maxim Global
Bond, Maxim Index 400, Maxim Growth Index, Maxim Value Index, Maxim Index
European, Maxim Index Pacific, Maxim Aggressive Profile II, Maxim Moderately
Aggressive Profile II, Maxim Moderate Profile II, Maxim Moderately Conservative
Profile II and Maxim Conservative Profile II Portfolios. It shall not supersede
or affect this Registration Statement as it applies to the Prospectuses or
Statements of Additional Information for any other Portfolios of the Registrant.
<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 Cover Page; The Portfolios at a Glance
5. Management of the Fund Management of the Portfolios
6. Capital Stock and Other Securities Not Applicable
7. Purchase of Securities Being Offered Important Information About Your
Investment - Investing in the Portfolios
8. Redemption or Repurchase Not Applicable
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 Purchase and Redemption of Shares
Being Offered
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
<PAGE>
MAXIM SERIES FUND, INC.
Maxim Bond Index Portfolio Portfolio (formerly Maxim Aggressive Profile II Portfolio
Maxim Investment Grade Corporate Bond) Maxim Moderately Aggressive Profile II Portfolio
Maxim Moderate Profile II Portfolio
Maxim Global Bond Portfolio Maxim Moderately Conservative Profile II Portfolio
Maxim Conservative Profile II Portfolio
Maxim Growth Index Portfolio
Maxim Value Index Portfolio
Maxim Index European Portfolio
Maxim Index Pacific Portfolio
Maxim Index 400 Portfolio
</TABLE>
----------------
8515 East Orchard Road
Englewood, CO 80111
(800) 338 - 4015
This Prospectus describes twelve portfolios, eight of which are "Equity
Portfolios" and four of which are "Debt Portfolios." Five of the Portfolios are
"Profile Portfolios" which invest exclusively in other Portfolios of the Maxim
Series Fund, Inc. (the "Fund"). 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. One of the
Portfolios is managed on a day-to-day basis by a "Sub-Adviser" hired by GW
Capital Management.
Each Portfolio is a series of 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, variable life policies and certain qualified retirement plans.
Therefore you cannot purchase shares of the Portfolios directly; rather you must
own a variable insurance contract or participate in a retirement plan 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 July 26, 1999.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Fees and Expenses .........................................................................................
Examples..................................................................................
The Portfolios at a Glance ..............................................................................
Maxim Debt Index Portfolio
Maxim Foreign Debt Portfolio
Maxim Equity Portfolios
Maxim Profile II Portfolios
More Information About the Portfolios
.................................................................................
The Equity Portfolios
The Debt Portfolios
The Profile II Portfolios
Other Investment Practices .................................................................................
Management of the Portfolios.....................................................................
Important Information About Your Investment........................................
How the Fund Reports Performance.........................................................
Financial Highlights.................................................
Additional Information..................................................................
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Load Imposed on Purchases......................................................................NONE
Sales Load Imposed on Reinvested Dividends...................................................NONE
Deferred Sales Load............................................................................................NONE
Redemption Fees.................................................................................................NONE
Exchange
Fees.....................................................................................................NONE
ANNUAL PORTFOLIO OPERATING EXPENSES (expenses that are deducted from Portfolio assets)
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
Maxim Bond Index Maxim Maxim Index Maxim Growth Maxim Value Maxim Index
Global Bond 400 Index Index European+
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
Management Fees 0.50% 1.30% 0.60% 0.60% 0.60% 1.00%
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
Distribution (12b-1) Fees NONE NONE NONE NONE NONE NONE
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
Other Expenses+ 0.00% 0.00% 0.00% 0.00% 0.00% 0.20%*
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
Total Annual Portfolio
Operating Expenses 0.50% 1.30% 0.60% 0.60% 0.60% 1.20%
- ------------------------------ ----------------- -------------- --------------- -------------- -------------- ---------------
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
Maxim Index Maxim Maxim Maxim Maxim Maxim
Pacific+ Aggressive Moderately Moderate Moderately Conservative
Profile II Aggressive Profile II Conservative Profile II
Profile II Profile II
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
Management Fees 1.00% 0.10% 0.10% 0.10% 0.10% 0.10%
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
Distribution (12b-1) Fees NONE NONE NONE NONE NONE NONE
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
Other Expenses+ 0.20%* 0.00% 0.00% 0.00% 0.00% 0.00%
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
Total Annual Portfolio
Operating Expenses 1.20% 0.10% 0.10% 0.10% 0.10% 0.10%
- ------------------------------ ----------------- --------------- ----------------- --------------- -------------- ---------------
</TABLE>
Each Profile Portfolio will invest in shares of Underlying Portfolios.
Therefore, each Profile Portfolio will, in addition to its own expenses such as
management fees, bear its pro rata share of the fees and expenses incurred by
the Underlying Portfolios and the investment return of each Profile Portfolio
will be net of the Underlying Portfolio's expenses. Please see the prospectuses
for the Underlying Portfolios regarding their fees and expenses.
+ "Other Expenses" for the Maxim Index European and Maxim Index Pacific
Portfolios are based on estimated amounts expected to beincurred. While the fees
shown represent estimated expenses, GW Capital Management has contractually
agreed in the investment advisory agreement with the Fund to reimburse "Other
Expenses" of these Portfolios to the extent that such other expenses exceed
0.20%. Thus, these Portfolios will only pay a maximum of 0.20% of "Other
Expenses" and only a maximum of 1.20% of Total Annual Portfolio Operating
Expenses.
<PAGE>
Examples
These examples are intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Examples also assume that your investment has a 5% return each year
and that the Portfolio's operating expenses are the amount show in the fee table
and remain the same for the years show.
Portfolio 1 Year 3 Years
Maxim Global Bond $130 $425
Maxim Index 400 $60 $197
Maxim Index European $120 $392
Maxim Index Pacific $120 $392
Maxim Aggressive Profile II $10 $33
Maxim Moderately Aggressive Profile II $10 $33
Maxim Moderate Profile II $10 $33
Maxim Moderately Conservative Profile II $10 $33
Maxim Conservative Profile II $10 $33
Portfolio 1 Year 3 Years 5 Years 10 Years
Maxim Bond Index $50 $165 $301 $759
Maxim Growth Index $60 $197 $361 $907
Maxim Value Index $60 $197 $361 $907
<PAGE>
THE PORTFOLIOS AT A GLANCE
The following information about each Portfolio is only a summary of important
information you should know before investing. 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.
DEBT INDEX PORTFOLIO
Maxim Bond Index Portfolio (formerly, the Maxim Investment Grade Corporate Bond
Portfolio)
The investment objective for this Portfolio is to:
o Seek investment results that track the total return of the debt securities
that comprise the Lehman Aggregate Bond Index ("Lehman Index").
Principal Investment Strategies. The Portfolio will:
o Invest primarily in debt securities of the Lehman Index.
o Invest in a portfolio of securities using sampling techniques designed to
give the Portfolio the relevant comparable attributes of the Lehman Index.
The principal investment risks for the Portfolio include:
Index Risk
o It is possible the Lehman Index may perform unfavorably and/or underperform
the market as a whole. As a result, the Portfolio would have poor
investment results if it is tracking the return of the Lehman Index.
Tracking Error Risk
o Several factors will affect the Portfolio's ability to precisely track the
performance of the Lehman Index. For example, the Portfolio has operating
expenses and those expenses will reduce the Portfolio's total return. In
addition, the Portfolio will own less than all the securities of the Lehman
Index, which also may cause a variance between the performance of the
Portfolio and the Lehman Index.
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 values 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 obligations to pay principal and/or interest.
Derivative Risk
o The Portfolio may invest some assets in derivative securities, such as
options and futures. This practice is used primarily to hedge the Portfolio
but may be used to increase returns; however, such practices sometimes may
reduce returns or increase volatility.
o In addition, derivatives can be illiquid and highly sensitive to changes in
their underlying security, interest rate or index, and as a result can be
highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
Possible Loss of Money
When you sell your shares of the Portfolio, they could be worth less than the
amount 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, five year and since inception periods compared to a
broad-based bond market index. The returns shown below are historical and are
not an indication of future performance.+ With regard to variable insurance
contracts, performance returns do not reflect charges associated with the
contract.
Year-by-Year
[OBJECT OMITTED]
During the periods shown in the chart of the Bond Index Portfolio, the highest
return for a quarter was 6.31% (quarter ending June, 1995) and the lowest return
for a quarter was -2.54% (quarter ending March, 1994).
The average annual return for one year, five years and since inception of the
Portfolio for the period ended December 31, 1998:
<TABLE>
One Year Five Year Since Inception
<S> <C> <C> <C>
Bond Index Portfolio 7.08% 5.93% 6.56%
Lehman Aggregate Bond Index 8.69% 7.50% 7.85%
</TABLE>
+ The inception date for the Portfolio was December 1, 1992. On July 26, 1999,
pursuant to a vote of the majority of shareholders, the Portfolio changed its
name and investment objective so that it now seeks investment results that track
the total return of the debt securities that comprise the Lehman Aggregate Bond
Index. Prior to the changes, the Portfolio's name was the Maxim Investment Grade
Corporate Bond Portfolio and it compared its performance to that of the Lehman
Intermediate Government/Corporate Index and Lehman Intermediate Corporate Index.
Consistent with its change in investment objective, the Portfolio now compares
its performance to that of the Lehman Aggregate Bond Index, the Portfolio's new
benchmark index
FOREIGN DEBT PORTFOLIO
Maxim Global Bond Portfolio (Sub-Adviser: Pareto Partners)
The investment objective of this Portfolio is to:
o Seek highest total return consistent with a reasonable degree of risk.
Principal investment strategies. This Portfolio will:
o Invest primarily in debt obligations of issuers located throughout the world.
o Ordinarily invest in at least three countries.
o Hold foreign currencies and attempt to profit from fluctuations in currency
exchange rates.
o Typically invest in developed countries, but may invest up to 35% of total
assets in emerging markets.
o Invest primarily in debt securities rated investment grade or the unrated
equivalent as determined by Pareto .
o Invest up to 35% of its assets in below investment grade debt 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 values 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 obligations to pay principal and/or interest
o Junk bonds (debt securities rated below investment grade) are regarded as
predominantly 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.
Derivative Risk
o The Portfolio may invest some assets in derivative securities, such as
options and futures. This practice is used primarily to hedge the Portfolio
but may be used to increase returns; however, such practices sometimes may
reduce returns or increase volatility.
o In addition, derivatives can be illiquid and highly sensitive to changes in
their underlying security, interest rate or index, and as a result can be
highly volatile. A small investment in certain derivatives could have a
potentially large impact on the Portfolio's performance.
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 economic, political or regulatory event than a
diversified portfolio.
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.
o In addition, emerging market countries generally have economic structures
that are less diverse and mature, and political systems that are less
stable, than those of developed countries.
o Emerging markets may be more volatile and less liquid than the markets of
more mature economies, and the securities of emerging markets issuers often
are subject to rapid and large changes in price; however, these markets may
provide higher rates of return to investors.
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
No performance history is available as the Portfolio has less than one year of
performance data.
<PAGE>
EQUITY INDEX PORTFOLIOS
Maxim Index 400, Maxim Growth Index, Maxim Value Index, Maxim Index Pacific and
Maxim Index European Portfolios
The investment objective for each Equity Index Portfolio is to:
o Seek investment results that track the total return of the common stocks
that comprise the appropriate Benchmark Index.
Principal investment strategies. Each Equity Index Portfolio will:
o Invest primarily in common stocks comprising the following Benchmark Indices:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO BENCHMARK INDEX
Maxim Index 400 Portfolio Standard & Poor's (S&P) 400 MidCap Index
Maxim Growth Index Portfolio S&P/Barra Growth Index
Maxim Value Index Portfolio S&P/Barra Value Index
Maxim Index Pacific Portfolio Financial Times (FT)/S&P Actuaries Large-Cap
Pacific Index
Maxim Index European Portfolio FT/S&P Actuaries Large-Cap European Index
</TABLE>
o Each Index Portfolio may use futures contracts on market indices and
options on the futures contracts as a means of tracking the benchmark
index.
S&P, FT and Barra are not sponsors of, or in any other way affiliated with, the
Equity Index Portfolios or Maxim Series Fund.
o Attempt to reproduce the returns of the 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 the Equity 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
Equity 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 indices,
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.
<PAGE>
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 indices 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 Portfolio 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 Portfolio to lose more money than if the
Portfolio 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 Equity Index Portfolios, they could
be worth less than the amount paid for them.
The Maxim Index European and Maxim Index Pacific Portfolios have the following
additional risks:
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 Portfolios to greater risk of potential loss than U.S.
securities.
Portfolio Performance Data
The bar charts and tables below provide an indication of the risk of investment
in certain Equity Index Portfolios. The bar chart shows each Portfolio's
performance in each full calendar year since inception. The table shows how the
Portfolios' average annual total return for the one year, five years, ten years
and since inception periods compared to a broad based market index. The returns
shown below are historical and are not an indication of future performance. With
regard to variable insurance contracts, performance returns do not reflect
charges associated with the contract. No performance history is available for
the Index 400, Index European and Index Pacific Portfolios as these Portfolios
have less than one year of performance data.
Growth Index Portfolio+
Year-by-Year
[OBJECT OMITTED]
During the periods shown in the chart of the Growth Index Portfolio, the highest
return for a quarter was 26.28% (quarter ending December, 1998) and the lowest
return for a quarter was -9.21% (quarter ending September, 1998).
The average annual return for one year, five years and since inception of the
Portfolio for the period ended December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Since Inception
Growth Index Portfolio 37.28% 24.47% 24.22%
S&P/Barra Growth Index 42.09% 27.75% 27.22%
</TABLE>
+ The inception date for the Portfolio was December 1, 1993. On July 26, 1999,
pursuant to a vote of the majority of shareholders, the Portfolio changed
investment objective so that it now seeks investment results that track the
total return of the common stocks that comprsie the S&P/Barra Growth Index.
Prior to the change in objective, the Portfolio compared its performance to that
of the Russell 1000 Growth Index. Consistent with its change in investment
objective, the Portfolio now compares its performance to that of the S&P/Barra
Growth Index, the Portfolio's new benchmark index.
Value Index Portfolio+
Year-by-Year
[OBJECT OMITTED]
During the periods shown in the chart of the Value Index Portfolio, the highest
return for a quarter was 16.39% (quarter ending December, 1998) and the lowest
return for a quarter was -11.89% (quarter ending September, 1998).
The average annual return for one year, five years and since inception of the
Portfolio for the period ended December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Since Inception
Value Index Portfolio 14.48% 19.82% 19.78%
S&P/Barra Value Index 14.67% 19.66% 19.44%
</TABLE>
+ The inception date for the Portfolio was December 1, 1993. On July 26, 1999,
pursuant to a vote of the majority of shareholders, the Portfolio changed
investment objective so that it now seeks investment results that track the
total return of the common stocks that comprsie the S&P/Barra Value Index. Prior
to the change in objective, the Portfolio compared its performance to that of
the Russell 1000 Value Index. Consistent with its change in investment
objective, the Portfolio now compares its performance to that of the S&P/Barra
Value Index, the Portfolio's new benchmark index.
PROFILE PORTFOLIOS
Maxim Profile II Portfolios
There are five separate Maxim Profile II Portfolios ("Profile II 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 II 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.
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 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>
<S> <C> <C> <C> <C> <C> <C>
======= ======================== ================================================================================
Profile II Portfolios
================================================================================
Asset Class Conservative Moderately Moderate Moderately Aggressive
Conservative Aggressive
- ------- ------------------------
----------------- ---------------- ------------- --------------- ===============
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
oMaxim Short-Term Maturity Bond Portfolio oMaxim Bond Index Portfolio
oMaxim Loomis Sayles Corporate Bond Portfolio
oMaxim U.S. Government Mortgage Securities Portfolio
oMaxim Global Bond Portfolio
International Equity Mid-Cap Equity
oMaxim Templeton International Equity Portfolio oMaxim Ariel MidCap Value Portfolio
oMaxim INVESCO ADR Portfolio oMaxim Index 400 Portfolio
oMaxim Index European Portfolio oMaxim T. Rowe Price MidCap Growth Portfolio
oMaxim Index Pacific Portfolio
Large-Cap Equity Small-Cap Equity
oMaxim Founders Growth & Income Portfolio oMaxim Ariel Small Cap Value Portfolio
(formerly the Maxim Founders Blue Chip Portfolio)
oMaxim Value Index Portfolio oMaxim Index 600 Portfolio
oMaxim Growth Index Portfolio oMaxim Loomis Sayles Small-Cap Value Portfolio
oMaxim Stock Index Portfolio oMaxim INVESCO Small-Cap Growth Portfolio
oMaxim T. Rowe Price Equity/Income Portfolio
</TABLE>
The principal investment risks for the Profile II Portfolios include:
o Since each Profile II Portfolio invests directly in the Underlying
Portfolios, all risks associated with the eligible Underlying Portfolios
apply to the Profile II Portfolios which invest in them.
o Changes in the net asset values of each Underlying Portfolio affect the net
asset values of the Profile II Portfolios invested in them. As a result,
over the long-term the Profile II 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 II
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 II 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.
Possible Loss of Money
When you sell your shares of any of the Profile II Portfolios, they could be
worth less than what you paid for them.
Information on Underlying Portfolios
You can obtain prospectuses for the Underlying Portfolios by writing to
Great-West Life & Annuity Insurance Company, 8515 East Orchard Road, Englewood,
Colorado 80111 or by calling (800) 338-4015. Before investing, you should read
these prospectuses to get an understanding of the nature of the Underlying
Portfolios in which the Profile II Portfolios invest.
Portfolio Performance Data
No performance data is available for the Profile II Portfolios as these
Portfolios have less than one year of performance data.
MORE INFORMATION ABOUT THE PORTFOLIOS
Each Portfolio follows a distinct set of investment strategies. Eight Portfolios
are considered to be "Equity Portfolios" because they invest primarily in equity
securities (mostly common stocks). Four Portfolios are considered to be "Debt
Portfolios" because they invest primarily in debt securities (mostly bonds).
Five of the Portfolios are "Profile Portfolios" which invest exclusively in
other Portfolios of the Fund. 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 primarily 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>
o Maxim Index 400 Portfolio o Maxim Aggressive Profile II Portfolio
o Maxim Growth Index Portfolio o Maxim Moderately Aggressive Profile II
Portfolio
o Maxim Value Index Portfolio o Maxim Moderate Profile II Portfolio
o Maxim Index European Portfolio
o Maxim Index Pacific Portfolio
</TABLE>
Common stocks represent a proportionate share of 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 the company's common stock 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 Index European and Index Pacific
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 .
The Equity Portfolios may invest in money market instruments and other types of
debt securities, either as a cash reserve or for other appropriate reasons. 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
.
The Aggressive Profile II, Moderately Aggressive Profile II and Moderate Profile
II Portfolios are considered "Equity Portfolios" because they invest primarily
in underlying funds that emphasize equity investments. However, the Profile
Portfolios invest in Underlying Portfolios that invest in debt securities and,
therefore, to that extent are subject to the risks and rewards associated with
debt securities. As well, to the extent an Underlying Portfolio invests in
derivatives, a Profile Portfolio investing in that portfolio would also be
exposed to the risks and rewards associated with derivative transactions.
Small and Medium Size Companies
The Index 400 invests primarily in medium-sized companies, therefore,
prospective investors in these funds should be aware of the risks associated
with these investments. Additionally, various Profile II Portfolios are to
varying degrees also exposed to the risks associated with investing in small and
medium-sized 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 available information
available about small or unseasoned companies. As a result, when making a
decision to purchase a security issued by a small to medium-sized company, an
investment manager may not be aware of some problems associated with the company
issuing the security.
Equity Index Funds
As the Index 400, Growth Index, Value Index, Index European and Index Pacific
Portfolios are index portfolios, they are not actively managed, but are designed
to track the performance of specified benchmarks. The benchmark indices are
described below:
The S&P 400 MidCap Index (the "S&P 400") is a widely recognized, unmanaged
market capitalization weighted index of 400 stocks representing the mid-range in
terms of tradable market value of the U.S. equity market.
The S&P/Barra Growth Index (the "Growth Index") is a widely recognized,
unmanaged index that contains half of the market value of the S&P 500 stock
index. The Growth Index is comprised of the stocks representing half of the
total market value of the S&P 500 stock index with the highest price-to-book
value ratios.
The S&P/Barra Value Index (the "Value Index") is a widely recognized, unmanaged
index that contains the other half of the market value of the S&P 500 stock
index. The Value Index is comprised of the stocks representing half of the total
market value of the S&P 500 stock index with the lowest price-to-book value
ratios.
The FT/S&P Actuaries Large-Cap Pacific Index (the "FT/S&P Pacific Index") and
the FT/S&P Actuaries Large-Cap European Index (the "FT/S&P European Index") are
unmanaged, market-value weighted indices of equity securities traded on the
stock exchanges of the countries represented in the respective indices. They are
designed to represent the performance of stocks in the large-cap sector of the
markets from the countries included in the European and Pacific Rim regions of
the world.
The S&P 400, Growth Index and Value Index are sponsored by Standard & Poor's,
which is responsible for determining which stocks are represented on the
indices.
The FT/S&P Pacific Index and the FT/S&P European Index are sponsored by the
Financial Times-Stock Exchange International; Standard & Poor's; Goldman, Sachs
and Company; Nat West Securities, Ltd. Each of these entities has voting rights
on a committee that is responsible for determining the composition of the stocks
comprising the indices.
None of the portfolios is endorsed, sold or promoted by any of the sponsors of
the Benchmark Indices (the "Sponsors"), and no Sponsor is an affiliate or a
sponsor of the Fund, the Portfolios or GW Capital Management. The Sponsors are
not responsible for and do not participate in the operation or management of any
Portfolio, nor do they guarantee the accuracy or completeness of their
respective Benchmark Indices or the data therein. Inclusion of a stock in a
Benchmark Index does not imply that it is a good investment.
Total returns for the S&P 400, Growth Index, Value Index, FT/S&P Pacific and
FT/S&P European Indices 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.
Debt Portfolios
The Bond Index, Global Bond, Moderately Conservative Profile II and Conservative
Profile II Portfolios will primarily invest in debt securities. Therefore, as an
investor in the Bond Index, Global Bond, Moderately Conservative Profile II and
Conservative Profile II 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.
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.
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 Global
Bond, Moderately Conservative Profile II and Conservative Profile II Portfolios
may invest in below investment grade debt securities.
The Global Bond, Moderately Conservative Profile II and Conservative Profile II
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 Bond Index, Global Bond, Moderately Conservative Profile II and
Conservative Profile II Portfolios intend to principally invest in debt
securities, they may make other types of investments. For example, the Bond
Index and Global Bond Portfolios may invest in derivatives primarily to hedge
against market risk or reduce interest rate or credit risk. As well, to the
extent an Underlying Portfolio invests in derivatives, a Profile Portfolio
investing in that portfolio would also be exposed to the risks and rewards
associated with derivative transactions. Derivatives are discussed below under
"Derivatives" on page .
Debt Index Fund
The Bond Index Portfolio is not actively managed, but is designed to track the
performance of a specified benchmark. The benchmark index is described below:
Lehman Aggregate Bond Index
The Lehman Aggregate Bond Index covers the U.S. investment grade fixed rate bond
market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities having a final maturity of
greater than one year that are traded on U.S. financial markets.
Temporary Investment Strategies
The Portfolios each may hold cash or cash equivalents and may invest in money
market instruments as deemed appropriate by GW Capital Management (or by Pareto
in the case of the Global Bond Portfolio). Each Portfolio may invest up to 100%
of its assets in money market instruments as deemed necessary by GW Capital
Management (or by Pareto in the case of the Global Bond Portfolio), 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 Global Bond, Index European and Index Pacific Portfolios pursue investment
in foreign securities as their principal investment strategy. Therefore, as an
investor in one of 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. The Profile II Portfolios
effectively invest in foreign securities to the extent they invest in Underlying
Portfolios that do so.
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 Global Bond, Index European and Index Pacific Portfolios have
substantial exposure to foreign markets since these Portfolios invest 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 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 Equity
Portfolios may purchase and sell derivative instruments (futures contracts on
the Benchmark Index and options thereon) as part of their principal investment
strategy. The Bond Index and Global Bond Portfolios may enter into derivative
transactions primarily to protect the value of their investments. 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 the 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
Bond Index Portfolio* 0.50%
Global Bond Portfolio 1.30%
Index 400 Portfolio 0.60%
Growth Index Portfolio 0.60%
Value Index Portfolio 0.60%
Index European Portfolio 1.00%
Index Pacific Portfolio 1.00%
Aggressive Profile II Portfolio 0.10%
Moderately Aggressive Profile II Portfolio 0.10%
Moderate Profile II Portfolio 0.10%
Moderately Conservative Profile II Portfolio 0.10%
Conservative Profile II Portfolio 0.10%
* Formerly, the Maxim Investment Grade Corporate Bond Portfolio
Sub-Adviser
Pareto Partners ("Pareto") serves as the sub-adviser to the Maxim Global Bond
Portfolio pursuant to a Sub-Advisory Agreement dated July 26, 1999. Mellon Bank,
N.A. owns 30% of Pareto, XL Capital Ltd. owns 30% of Pareto and the employees of
Pareto own the remaining 40% of Pareto. Mellon Bank, N.A. 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.
The Portfolio, which is patterned after the Dreyfus Global Bond Fund managed by
Christine V. Downton, is also managed by Ms. Downton. She is a partner and the
Chief Investment Officer of Pareto and has been employed by Pareto since April
1991. Mellon Bank, N.A. wons 100% of The Dreyfus Corporation and, thus, Pareto
is affiliated with Dreyfus through Mellon Bank. 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.
The sub-adviser to the Global Bond Portfolio has provided assurance to GW
Capital Management that it has been actively working on necessary changes to its
computer systems to deal with the year 2000 and to work with its 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, variable life policies and to
participants in connection with qualified retirement plans. 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.
Purchasing and Redeeming Shares
Variable contract owners or Qualified Plan participants will not deal directly
with the Fund regarding the purchase or redemption of a Portfolio's shares.
Insurance company separate accounts place orders to purchase and redeem shares
of each Portfolio based on allocation instructions received from variable
contract owners. Similarly, Qualified Plan sponsors and administrators purchase
redeem Portfolio shares based on orders received from participants. Qualified
Plan participants cannot contact the Fund directly to purchase shares of the
Portfolios but may invest in shares of the Portfolios only through their
Qualified Plan. Participants should contact their Qualified Plan sponsor or
administrator for information concerning the appropriate procedure for investing
in the Fund.
Due to differences in tax treatment or other considerations, material
irreconcilable conflicts may arise between the interests of variable annuity
contract owners, variable life insurance policy owners and Qualified Plans that
invest in the Fund. The Board of Directors will monitor each Portfolio for any
material conflicts that may arise and will determine what action should be
taken.
How to Exchange Shares
This section is only applicable to participants in Qualified Plans that purchase
shares of the Fund outside a variable annuity contract.
An exchange involves selling all or a portion of the shares of one Portfolio and
purchasing shares of another Portfolio. There are no sales charges or
distribution fees for an exchange. The exchange will occur at the next net asset
value calculated for the two Portfolios after the exchange request is received
in proper form. Before exchanging into a Portfolio, read its prospectus.
Please note the following policies governing exchanges:
o You can request an exchange in writing or by telephone.
o Written requests should be submitted to:
8505 East Orchard Road, 401(k) Operations Department
Englewood, CO 80111.
o The form should be signed by the account owner(s) and include the following
information:
(1) the name of the account
(2) the account number
(3) the name of the Portfolio from which the shares of which are to be sold
(4) the dollar amount or number of shares to be exchanged
(5) the name of the Portfolio(s) in which new shares will be purchased; and
(6) the signature(s) of the person(s) authorized to effect exchanges in the
account.
o You can request an exchange by telephoning 1-800-338-4015.
o A Portfolio may refuse exchange purchases by any person or group if, in GW
Capital Management's judgment, the Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Other Information
o The policies and procedures to request an exchange of shares of the
Portfolios by telephone may be modified, suspended, or terminated by the
Fund at any time.
o If an account has more than one owner of record, we may rely on the
instructions of any one owner.
o Each account owner has telephone transaction privileges unless we receive
cancellation instructions from an account owner.
o We will not be responsible for losses or expenses arising from unauthorized
telephone transactions, as long as we use reasonable procedures to verify
the identity of the investor, such as requesting personal identification
numbers (PINs) and other information.
o All telephone calls will be recorded and we have adopted other procedures
to confirm that telephone instructions are genuine.
During periods of unusual market activity, severe weather, or other unusual,
extreme, or emergency conditions, you may not be able to complete a
telephone transaction and should consider placing your order by mail.
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.
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 Bond Index and Global Bond Portfolios ordinarily distribute dividends
from net investment income quarterly.
o The Index 400, Growth Index and Value Index Portfolios ordinarily distribute
dividends semi-annually. o The Index European and Index Pacific Portfolios
ordinarily distribute dividends annually. o The Profile II Portfolios ordinarily
distribute dividends semi-annually. o All of the Portfolios generally distribute
capital gains, if any, in December.
Tax Consequences
The Portfolios are not generally subject to federal income taxes. 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, as amended. If it does not
meet those tax requirements and becomes subject to federal income taxes, 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 or qualified plan through which you invest
in Fund. For more information, please refer to the applicable prospectus and/or
disclosure or plan documents for that contract or qualified plan.
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.
MAXIM BOND INDEX PORTFOLIO
(formerly, the Maxim 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:
<TABLE>
Year Ended December 31,
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 (loss) 0.0154 0.0081 (0.0387) 0.1164 (0.1071)
--------------- -------------- -------------- --------------
---------------
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 Assets: 0.60% 0.60% 0.60% 0.60% 0.60%
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%
</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 $83,493,849 and $69,181,240, respectively.
Prior to July 26, 1999, the Portfolio was named the Maxim Investment Grade
Corporate Bond Portfolio and its investment objective was to seek the highest
level of income consistent with the primary goal of ensuring the protection of
capital by investing primarily investment grade corporate debt securities and in
debt securities issued by the U.S. government and its agencies.
<PAGE>
MAXIM SERIES FUND, INC.
MAXIM VALUE INDEX 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 is as follows:
Year Ended December 31,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------------- --------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
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 (loss) 0.2301 0.4631 0.2287 0.3198 (0.0504)
----------------- --------------- ---------------- -------------- --------------
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 Assets 0.60% 0.60% 0.60% 0.60% 0.60%
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.
Prior to July 26, 1999, the Portfolio's investment objective was to seek
investment results that tracked the total return of the common stocks that
comprised the Russell 1000 Value Index.
<PAGE>
MAXIM SERIES FUND, INC.
MAXIM 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 Operations 0.6839 0.4326 0.2965 0.3559 0.0189
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 Assets 0.60% 0.60% 0.60% 0.60% 0.60%
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.
Prior to July 26, 1999, the Portfolio's investment objective was to seek
investment results that tracked the total return of the common stocks that
comprised the Russell 1000 Growth Index.
<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>
<TABLE>
-----------------------------------------------------------
MAXIM SERIES FUND, INC.
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maxim Money Market Portfolio Maxim Templeton International Equity Portfolio
Maxim Bond Portfolio Maxim INVESCO ADR Portfolio
Maxim Loomis Sayles Corporate Bond Portfolio Maxim Foreign Equity Portfolio
Maxim U.S. Government Securities Portfolio Maxim Founders Growth & Income Portfolio (formerly
Maxim Founders Blue Chip Portfolio
Maxim U.S. Government Mortgage Securities Maxim T. Rowe Price Equity/Income Portfolio
Maxim Short-Term Maturity Bond Portfolio Maxim INVESCO Balanced Portfolio
Maxim Global Bond Portfolio
Maxim Ariel MidCap Value Portfolio Maxim Ariel Small-Cap Value Portfolio
Maxim T. Rowe Price MidCap Growth Portfolio Maxim INVESCO Small-Cap Growth Portfolio
Maxim Loomis Sayles Small-Cap Value Portfolio
Aggressive Profile Portfolio Maxim Stock Index Portfolio
Moderately Aggressive Profile Portfolio Maxim Index 600 Portfolio
Moderate Profile Portfolio Maxim Value Index Portfolio
Moderately Conservative Profile Portfolio Maxim Growth Index Portfolio
Conservative Profile Portfolio Maxim Index 400 Portfolio
Maxim Bond Index Portfolio (formerly, Maxim
Investment Grade Corporate Bond Portfolio
Aggressive Profile II Portfolio Maxim Index Pacific Portfolio
Moderately Aggressive Profile II Portfolio Maxim Index European Portfolio
Moderate Profile II Portfolio
Moderately Conservative Profile II Portfolio
Conservative Profile II 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 July 26, 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.
July 26, 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 thirty-six investment portfolios, thirty-three of which are
diversified portfolios and three 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 and certain qualified retirement and
pension plans. 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 Maxim Short-Term Maturity Bond, Maxim Global Bond and Maxim U.S. Government
Mortgage Securities 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 T. Rowe Price MidCap Growth, Maxim INVESCO Balanced,
Maxim Founders Growth & Income, Aggressive Profile, Moderately Aggressive
Profile, Moderate Profile, Moderately Conservative Profile, Conservative
Profile, Maxim Global Bond, Aggressive Profile II, Moderately Aggressive Profile
II, Moderate Profile II, Moderately Conservative Profile II and Conservative
Profile II 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 Bond Index, Maxim U.S. Government
Mortgage Securities or Maxim 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 Maxim 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, Maxim Stock
Index, Maxim Index 600, Maxim Growth Index, Maxim Value Index, Maxim Ariel
MidCap Value, Maxim Templeton International Equity, Maxim Ariel Small-Cap
Value, Maxim Loomis Sayles Corporate Bond, Foreign Equity, Maxim Loomis
Sayles Small-Cap Value, Maxim INVESCO Small-Cap Growth, Maxim INVESCO ADR,
Maxim Short-Term Maturity Bond, Maxim Index 400, Maxim Index Pacific, Maxim
Index European and Maxim Bond Index 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 Maxim
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, Maxim Stock Index, Maxim Index
600, 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, Foreign Equity, Maxim INVESCO Small-Cap Growth, Maxim
INVESCO ADR, Maxim Index 400, Maxim Bond Index, Maxim Index Pacific and
Maxim Index European Portfolios may make margin payments in connection with
transactions in 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 Maxim Short-Term Maturity Bond, Maxim Index 400, Maxim Index
European and Maxim Index Pacific Portfolios).
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, Maxim Index 600, 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, Foreign Equity, Maxim Short-Term Maturity Bond, Maxim
INVESCO Small-Cap Growth, Maxim Index 400, Maxim Bond Index, Maxim Index
European, Maxim Index Pacific 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 Maxim
Templeton International Equity, Maxim Ariel MidCap Value, Bond, Maxim Ariel
Small-Cap Value, Maxim Loomis Sayles Corporate Bond, Maxim Short-Term
Maturity Bond, Maxim Loomis Sayles Small-Cap Value, Foreign Equity, Maxim
INVESCO Small-Cap Growth and Maxim INVESCO ADR Portfolios.
Following are investment limitations applicable to the Maxim T. Rowe Price
Equity/Income and Maxim T. Rowe Price MidCap Growth Portfolios. These are
fundamental policies and may not be changed without the approval of the holders
of a majority of the outstanding voting shares of the Portfolio. "Majority" for
this purpose and under the Investment Company Act of 1940 means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
<PAGE>
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.
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 Founders Growth &
Income 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 I
and Maxim Profile IIPortfolios. 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.
Following are investment limitations applicable to the Maxim Global Bond
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.
2. ......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 on financial indices, foreign currency
transactions and options on permissible futures contracts.
3. ......(a) Purchase any securities on margin, (b) make short sales of
securities, or (c) maintain a short position, except that the Portfolio may
(i) obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, (ii) make margin payments in
connection with transactions in futures contracts and currency futures
contracts and enter into permissible options transactions, and (iii) make
short sales against the box.
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)
and through repurchase agreements.
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, 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, except that the Portfolio may borrow for temporary or
emergency purposes. The Portfolio will not borrow unless immediately after
any such borrowing there is an asset coverage of at least 300 percent for
all borrowings of the Portfolio. If such asset coverage falls below 300
percent, the Portfolio will within three days thereafter reduce the amount
of its borrowings to an extent that the asset coverage of such borrowings
will be at least 300 percent. Reverse repurchase agreements and other
investments which are "covered" by a segregated account or an offsetting
position in accordance with applicable SEC requirements ("covered
investments") do not constitute borrowings for purposes of the 300% asset
coverage requirement. The Portfolio will repay all borrowings in excess of
5% of its total assets before any additional investments are made. Covered
investments will not be considered borrowings for purposes of applying the
limitation on making additional investments when borrowings exceed 5% of
total assets.
7. ......Mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by the Portfolio except as
may be necessary in connection with borrowings mentioned in limitation (6)
above, and then such mortgaging, pledging or hypothecating may not exceed
10% of the Portfolio's total assets, taken at market value at the time
thereof. The Portfolio 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 Portfolio's shares.
This limitation shall not apply to segregated accounts.
8. ......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.
9. ......Issue senior securities. The issuance of more than one series or
classes of shares of beneficial interest, 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 of
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 objectives and policies, and
reverse repurchase agreements are not deemed to be issuances of senior
securities.
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%.
Brady Bonds. Brady bonds are debt obligations created through the exchange of
existing commercial bank loans to foreign entities for new obligations in
connection with debt restructurings under a plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady.
Brady bonds have been issued only relatively recently, and, accordingly, do not
have a long payment history. They may be collateralized or uncollateralized and
issued in various currencies (although most are U.S. dollar-denominated). They
are actively traded in the over-the-counter secondary market.
Collateralized Brady bonds may be fixed rate par bonds or floating rate discount
bonds, which are generally collateralized in full as to principal due at
maturity by U.S. Treasury zero coupon obligations which have the same maturity
as the Brady bonds. Interest payments on these Brady bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time and
is adjusted at regular intervals thereafter. Certain Brady bonds are entitled to
"value recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized. Brady bonds
are often viewed as having three or four valuation components: (i) the
collateralized repayment of principal at final maturity; (ii) the collateralized
interest payments; (iii) the uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to Collateralized Brady bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments which would have then
been due on the Brady bonds in the normal course. In addition, in light of the
residual risk of Brady bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady bonds, investments in Brady bonds are to be viewed as
speculative.
Debt restructurings have been implemented under the Brady Plan in Argentina,
Brazil, Bolivia, Costa Rica, Mexico, Nigeria, the Philippines, Uruguay and
Venezuela, with the largest proportion of Brady bonds having been issued to date
by Argentina, Mexico and Venezuela. Most Argentine and Mexican Brady bonds and a
significant portion of the Venezuelan Brady bonds issued to date are
Collateralized Brady bonds with interest coupon payments collateralized on a
rolling-forward basis by funds or securities held in escrow by an agent for the
bondholders.
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.
Discount Obligations. Investment in discount obligations (including most Brady
bonds) may be in securities (i) which were initially issued at a discount from
their face value, and (ii) purchased by a Portfolio at a price less than their
stated face amount or t a price less than their issue price plus the portion of
"original issue discount" previously accrued thereon, i.e., purchased at a
"market discount." The amount of original issue discount and/or market discount
on obligations purchased by a Portfolio may be significant, and accretion of
market discount together with original issue discount, will cause the Portfolio
to realize income prior to the receipt of cash payments with respect to these
securities.
Emerging Markets Issuers. Emerging markets include any countries (i) having an
"emerging stock market" as defined by the International Finance Corporation;
(ii) with low- to middle-income economies according to the World Bank; or (iii)
listed in World Bank publications as developing. Currently, the countries not
included in these categories are Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United
States. Issuers whose principal activities are in countries with emerging
markets include issuers: (1) organized under the laws of, (2) whose securities
have their primary trading market in, (3) deriving at least 50% of their
revenues or profits from goods sold, investments made, or services performed in,
or (4) having at least 50% of their assets located in a country with, an
emerging market.
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.
Lending of Portfolio Securities. Subject to Investment Limitations described
above for all Portfolios, each Portfolio of the Fund from time-to-time may lend
its portfolio securities to brokers, dealers and financial institutions.
Securities lending allows a fund to retain ownership of the securities loaned
and, at the same time, to earn additional income.
Because there may be delays in the recovery of loaned securities, or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to parties deemed by GW Capital Management to be of good
standing. Furthermore, they will only be made if, in GW Capital Management's
judgment, the consideration to be earned from such loans would justify the risk.
GW Capital Management understands that it is the current view of the SEC Staff
that a Fund may engage in loan transactions only under the following conditions:
(1) the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the fund must be able to terminate the loan
at any time; (4) the fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and to any increase in market
value; (5) the fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Directors must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other eligible
securities. Investing this cash subjects that investment, as well as the
security loaned, to market forces (i.e., capital appreciation or depreciation).
Lower Quality Debt Securities. 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 Fund 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 Fund's shareholders.
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.
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.
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.
Structured Securities. Structured securities are interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or Brady bonds)
and the issuance by that entity of one or more classes of securities backed by,
or representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly-issued structured
securities to create securities with different investment characteristics such
as varying maturities, payment priorities and interest rate provisions, and the
extent of the payments made with respect to structured securities is dependent
on the extent of the cash flow on the underlying instruments. The credit risk
generally will be equivalent to that of the underlying instruments.
Structured securities may be either subordinated or unsubordinated to the right
of payment of another class. Subordinated structured securities typically have
higher yields and present greater risks than unsubordinated structured
securities.
Certain issuers of structured securities may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). As a result, any investment in these structured securities may be
limited by the restrictions contained in the 1940 Act.
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.
<PAGE>
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>
<S> <C> <C> <C> <C> <C> <C>
R.P. Koeppe R. Jennings S. Zisman
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*
$5,000 $17,000 $17,000
</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 ofJune 30, 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 July 26, 1999. As approved, the Agreement will remain in
effect until April 1, 2000, 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
Maxim Templeton 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 Maxim
Ariel Small-Cap Value Portfolio and the Maxim Ariel MidCap Value 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 Maxim Ariel 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 Maxim
Ariel MidCap Value 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 T. Rowe Price MidCap Growth
Portfolios pursuant to a Sub-Advisory Agreement dated November 1, 1994 as
amended. T. Rowe Price serves as investment manager to a variety of individual
and institutional investors, including limited and real estate partnerships and
other mutual funds.
GW Capital Management is responsible for compensating T. Rowe Price, which
receives monthly compensation for the Maxim 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 Maxim T. Rowe Price MidCap Growth Portfolio at the annual rate of .50% on
all assets of the Portfolio.
INVESCO Funds Group, Inc.
INVESCO Funds Group, Inc. ("INVESCO") serves as the sub-adviser to the Maxim
INVESCO Small-Cap Growth, and Maxim INVESCO Balanced Portfolios pursuant to
Sub-Advisory Agreements dated November 1, 1994 and August 30, 1996. INVESCO 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.
INVESCO Capital Management, Inc. ("ICM"), a subsidiary of INVESCO, serves as the
sub-adviser to the Maxim INVESCO ADR Portfolio pursuant to a Sub-Advisory
Agreement dated March 3, 1997.
GW Capital Management is responsible for compensating INVESCO, 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 GW Capital Management
is responsible for compensating ICM, which receives monthly compensation at the
annual rate of .55% on the first $50 million, .50% on the next $50 million, and
.40% on assets over $100 million of the Maxim INVESCO ADR Portfolio.
Loomis, Sayles, & Company, L.P.
Loomis, Sayles & Company, L.P. serves as the sub-adviser to the Maxim Loomis
Sayles Corporate Bond, Maxim Loomis Sayles Small-Cap Value and Maxim 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.
GW Capital Management 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 Maxim Loomis Sayles
Small-Cap Value; .30% on all assets of the Maxim Loomis Sayles 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 Maxim Foreign Equity Portfolio.
Founders Asset Management, Inc.
Founders Asset Management, LLC ("Founders") serves as the sub-adviser to the
Maxim Founders Growth & Income 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.
GW Capital Management 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.
Pareto Partners
Pareto Partners ("Pareto") serves as the sub-adviser to the Maxim Global Bond
Portfolio pursuant to a Sub-Advisory Agreement dated effective July 26, 1999.
Mellon Bank, N.A. owns 30% of Pareto, XL Capital Ltd. owns 30% of Pareto and the
employees of Pareto own the remaining 40% of Pareto. Mellon Bank, N.A. 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. GW Capital Management
is responsible for compensating Pareto, which receives monthly compensation at
the annual rate of .55% on the first $25 million, .45% on the next $50 million,
.35% on the next $175 million and .25% on all amounts over $250 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.
Principal Underwriter
The Fund has entered into a principal underwriting agreement with One Orchard
Equities, Inc. ("OOE"), 8515 East Orchard Road, Englewood, Colorado 80111, an
affiliate of the Fund. OOE is a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. ("NASD"). The principal underwriting agreement calls for OOE to
use all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the Funds, which are continuously offered at net asset
value.
Advisory Fees
For the past three fiscal years, the Investment Adviser was paid a fee for its
services to the Fund as follows:
<PAGE>
<TABLE>
<S> <C> <C> <C>
Portfolio 1998 1997 1996
Maxim Money Market $2,435,592 $2,027,526 $1,566,842
Maxim Bond $437, 276 $444,724 $ 470,658
Maxim Stock Index1/ $5,499,511 $6,451,773 $4,887,975
-
Maxim U.S. Government Securities2/ $402,762 $357,014 $ 360,629
-
Maxim Bond Index5/ $714,083 $646,636 $ 575,853
-
Maxim U.S. Government Mortgage Securities6/ $1,021,297 $ 896,131 $ 791,813
-
Maxim Index 6007/ $720,754 $617,929 $ 404,890
-
Maxim Growth Index7/ $1,297,577 $767,173 $ 371,758
-
Maxim Value Index7/ $1,711,895 $1,083,359 $ 552,296
-
Maxim Templeton International Equity7/ $1,307,392 $1,229,003 $ 756,318
-
Maxim Ariel Small-Cap Value7/ $301,499 $351,399 $ 274,316
-
Maxim Ariel MidCap Value8/ $2,409,975 $1,998,656 $1,794,155
-
Maxim Loomis Sayles Corporate Bond9/ $1,708,143 $1,113,908 $ 574,728
-
Maxim Loomis Sayles Small-Cap Value9/ $1,521,934 $1,365,904 $ 469,293
-
Maxim Foreign Equity9/ $703,112 $761,903 $ 711,998
-
Maxim T. Rowe Price Equity/Income9/ $1,588,063 $958,793 $ 257,708
-
Maxim INVESCO Small-Cap Growth9/ $661,772 $441,341 $ 178,001
-
Maxim INVESCO ADR9/ $245,921 $123,490 $ 45,589
-
Maxim Short-Term Maturity Bond10/ $571,390 $352,368 $ 179,920
--
Maxim INVESCO Balanced11/ $1,551,666 $530,851 $ 26,984
--
Maxim Founders Growth & Income 12/ $1,061,076 $452,967 N/A
--
Maxim T. Rowe Price MidCap Growth12/ $961,912 $214,690 N/A
--
Aggressive Profile13/ $9,631 $292 N/A
--
Moderately Aggressive Profile13/ $21,186 $583 N/A
--
Moderate Profile13/ $19,268 $325 N/A
--
Moderately Conservative Profile13/ $16,225 $238 N/A
--
Conservative Profile Profile13/ $30,453 $80 N/A
--
Maxim Global Bond14/ _ _ _
--
Maxim Index 40014/ _ _ _
--
Maxim Aggressive Profile14/ _ _ _
--
Maxim 401k Moderately Aggressive Profile II14/ _ _ _
--
Maxim Moderate Profile II14/ _ _ _
--
Maxim Moderately Conservative Profile II14 _ _ _
--
Maxim Conservative Profile II14 _ _ _
--
</TABLE>
1/ For the period commencing September 24, 1984. The name and investment
objective of this portfolio was changed effective December 1, 1992.
2/ Formed April 6, 1985. The name and the investment objective of this
portfolio was changed effective July 29, 1987, and renamed and the
investment objective changed effective May 1, 1990.
3/ Formed October 1, 1985. 4/ Formed July 29, 1987.10/
5/ Formed December 1, 1992. The name and investment objective of this
portfolio was changed effective July 26, 1999.
6/ Formed December 1, 1992.
7/ Formed December 1, 1993. The investment objective of the Maxim Value Index
and Maxim Growth Index Portfolios was changed effective July 26, 1999.
8/ Formed January 3, 1994. 9/ Formed November 1, 1994. 10/ Formed August 1,
1995. 11/ Formed October 1, 1996. 12/ Formed July 1, 1997. 13/ Formed September
1, 1997. 14 Formed July 26, 1999.
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 $143,649,
$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 Maxim Money Market, Bond, Maxim
Bond Index, U.S. Government Securities, Maxim U.S. Government Mortgage
Securities, Maxim 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. For the years 1996, 1997 and 1998, respectively the
Portfolios paid commissions as follows: Maxim Stock Index Portfolio - $89,897,
$130,615 and $36,833; Maxim Templeton International Equity Portfolio - $190,398,
$290,435 and $233,873; Maxim Index 600 Portfolio - $154,696, $247,609 and
$30,229; Maxim Value Index Portfolio - $53,019, $79,357 and $12,590; Maxim
Growth Index Portfolio - $48,480, $46,825 and $14,990; Maxim Ariel Small-Cap
Value Portfolio - $55,133, $117,550 and $42,644; Maxim Ariel MidCap Value
Portfolio - $471,788, $548,942 and $521,232; Maxim Loomis Sayles Small-Cap Value
Portfolio -$131,463, $377,783 and $517,306; Foreign Equity Portfolio - $322,774,
$912,227 and $583,617; Maxim T. Rowe Price Equity/Income Portfolio - $50,812 and
$108,963 and $107,927; Maxim INVESCO Small-Cap Growth Portfolio - $40,317,
$95,102 and $104,969; Maxim INVESCO ADR Portfolio - $2,664, $6,894 and $ 10,943;
Maxim Loomis Sayles Corporate Bond Portfolio - $1,120, $270 and $469; Maxim
INVESCO Balanced Portfolio - $18,537, $188,000 and $325,526 . The Maxim Founders
Growth & Income Portfolio paid commissions in the amount of $267,899 in 1997 and
$589,764 in 1998. The Maxim T. Rowe Price MidCap Growth Portfolio paid
commissions in the amount of $79,790 in 1997 and $149,774 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 Maxim
Money Market Portfolio) for 1997 and 1998 is as follows:
<PAGE>
1997 1998
Portfolio Turnover Rate Turnover Rate
Maxim Bond 90.81% 42.50%
Maxim Global Bond - -
Maxim Stock Index 17.30% 12.91%
Maxim U.S. Government Securities 55.54% 56.64%
Maxim Loomis Sayles Corporate Bond 52.69% 55.47%
Maxim Index 600 102.45% 59.18%
Maxim Index 400 - -
Maxim Ariel Small-Cap Value 82.83% 26.29%
Maxim Templeton International Equity 34.30% 40.02%
Maxim INVESCO ADR 19.56% 28.66%
Maxim INVESCO Balanced 150.57% 19.95%
Maxim INVESCO Small-Cap Growth 174.65% 149.15%
Maxim Ariel MidCap Value 139.74% 87.81%
Maxim T. Rowe Price Equity/Income 25.35% 32.30%
Maxim Foreign Equity 200.82% 129.82%
Maxim Growth Index 21.52% 26.48%
Maxim Bond
Index 140.35% 59.84%
Maxim Short-Term Maturity Bond 84.59% 37.33%
Maxim Loomis Sayles Small-Cap
Value 93.28% 149.12%
Maxim U.S. Government Mortgage Securities 34.01% 108.19%
Maxim Value Index 26.03% 39.67%
Maxim Founders
Growth & Income 111.45% 287.17%
Maxim T. Rowe Price MidCap Growth 24.28% 52.50%
Aggressive
Profile I 59.90% 94.75%
Moderately Aggressive
Profile I 41.30% 123.12%
Moderate
Profile I 31.39% 114.39%
Moderately Conservative
Profile I 32.97% 112.09%
Conservative
Profile I 25.56% 99.16%
Aggressive Profile II - -
Moderately Aggressive Profile II - -
Moderate Profile II - -
Moderately Conservative Profile II - -
Conservative Profile II - -
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.
<TABLE>
Maxim Money Market Portfolio
<S> <C> <C> <C> <C> <C> <C>
Series Account No. of Shares Percentage
Maxim Series Account 2,784,600 0.44%
Maxim Series Account
FutureFunds Series Account 97,174,519 15.70%
FutureFunds Series Account II 469,446,033 75.83%
Pinnacle Series Account 350,005 0.06%
Qualified Series Account 182,671 0.03%
TNE Series (k) Account 44,895,200 7.25%
Retirement Plan Series Account 4,269,190 0.69%
TOTAL 619,102,218 100.00%
Maxim Bond Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 2,920,904
4.67%
FutureFunds Series Account 44,758,047 71.57%
FutureFunds Series Account II 14,420,087 23.06%
Pinnacle Series Account 327,451 0.52%
Qualified Series Account 110,972 0.18%
TOTAL 62,537,461 100.00%
Maxim Templeton International Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account 32,554,511 32.11%
FutureFunds Series Account II 68,808,526 67.87%
Maxim Series Account 18,430 .02%
TOTAL 101,381,467 100.00%
Maxim U.S. Government Securities Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 8,021,389 11.24%
Maxim Series Account
FutureFunds Series Account 55,777,297 78.13%
FutureFunds Series Account II 6,666,505 9.34%
Pinnacle Series Account 921,783 1.29%
TOTAL 71,386,974 100.00%
Maxim Stock Index Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 2.99%
8,607,188
FutureFunds Series Account 175,085,107 60.91%
FutureFunds Series Account II 97,304,818 33.85%
Pinnacle Series Account 787,944 0.27%
Qualified Series Account 1,236,696 0.43%
Retirement Plan Series Account 4,441,666 1.55%
TOTAL 287,463,419 100.00%
Maxim Bond Index Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II 88,447,857 88.22%
Qualified Series Account 47,408 0.05%
TNE Series (K) Account 10,775,367 10.75%
Retirement Plan Series Account 991,791 0.98%
TOTAL 100,262,423 100.00%
Maxim U.S. Government Mortgage Securities Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II 144,926,657 89.40%
TNE Series (K) Account 15,207,829 9.38%
Retirement Plan Series Account 1,974,354 1.22%
TOTAL 162,108,840 100.00%
Maxim Growth Index Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account 5,505,553 4.50%
FutureFunds Series Account II 97,416,949 79.58%
TNE Series (K) Account 13,715,537 11.20%
Maxim Series Account 277,912 0.23%
Retirement Plan Series Account 5,499,405 4.49%
TOTAL 122,415,356 100.00%
Maxim INVESCO Balanced Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 1,484,994 1.24%
Maxim Series Account
FutureFunds Series Account 59,720,898 49.67%
FutureFunds Series Account II 59,029,165 49.09%
TOTAL 120,235,057 100.00%
Maxim Index 600 Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 387,174 1.30%
Maxim Series Account
FutureFunds Series Account 16,603,750 55.68%
FutureFunds Series Account II 9,927,636 33.29%
Retirement Plan Series Account 2,899,751 9.73%
TOTAL 29,818,311 100.00%
Maxim Ariel Small-Cap Value Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 163,841 0.40%
FutureFunds Series Account 10,723,065 26.40%
FutureFunds Series Account II 24,078,022 59.27%
TNE Series (K) Account 3,145,192 7.74%
Retirement Plan Series Account 2,513,878 6.19%
TOTAL 40,623,998 100.00%
Maxim Loomis Sayles Corporate Bond Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 1,072,798 0.60%
Maxim Series Account
FutureFunds Series Account 20,572,384 11.47%
FutureFunds Series Account II 137,890,884 76.89%
TNE Series (K) Account 17,966,203 10.02%
Retirement Plan Series Account 1,828,901 1.02%
TOTAL 179,331,170 100.00%
Maxim Foreign Equity Portfolio
Series Account No. of Shares Percentage
FutureFunds Series Account II 68,005,671 84.44%
TNE Series (K) Account 11,572,636 14.37%
Retirement Plan Series Account 962,104 1.19%
TOTAL 80,540,411 100.00%
Maxim Loomis Sayles Small-Cap Value Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account 1,586,012 1.80%
FutureFunds Series Account II 73,896,222 83.73%
TNE Series (K) Account 8,749,088 9.91%
Retirement Plan Series Account 4,022,775 4.56%
TOTAL 88,254,097 100.00%
Maxim INVESCO Small-Cap Growth Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 547,112 1.23%
FutureFunds Series Account 21,694,956 48.89%
FutureFunds Series Account II 22,129,487 49.88%
TOTAL 44,371,555 100.00%
Maxim T. Rowe Price Equity/Income Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 1,103,030 0.94%
FutureFunds Series Account 58,743,251 49.87%
FutureFunds Series Account II 57,940,204 49.19%
TOTAL 117,786,485 100.00%
Maxim Ariel MidCap Value Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 609,893 0.35%
FutureFunds Series Account 34,484,137 20.00%
FutureFunds Series Account II 137,323,193 79.65%
TOTAL 172,417,223 100.00%
Maxim INVESCO ADR Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
Maxim Series Account 409,998 2.35%
FutureFunds Series Account 11,672,152 67.04%
FutureFunds Series Account II 3,217,888 18.48%
Great-West 2,110,584 12.13%
TOTAL 17,410,622 100.00%
Maxim Short-Term Maturity Bond Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II 81,496,684 74.97%
FutureFunds Series Account 11,899,708 10.95%
Maxim Series Account III 120,199 0.11%
TNE Series (K) Account 15,009,128 13.81%
Retirement Plan Series Account 177,556 0.16%
TOTAL 108,703,275 100.00%
Maxim Value Index Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account 2,709,831 1.58%
FutureFunds Series Account II 144,791,238 84.09%
TNE Series (K) Account 20,167,714 11.72%
Maxim Series Account 10,349 0.00%
Retirement Plan Series Account 4,500,019 2.61%
TOTAL 172,179,151 100.00%
Maxim Founders Growth & Income Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II 89,672,742 84.93%
FutureFunds Series Account 2,664,814 2.52%
TNE Series (K) Account 9,720,449 9.21%
Maxim Series Account 0.00%
10,521
Retirement Plan Series Account 3,524,209 3.34%
TOTAL 105,592,735 100.00%
Maxim T. Rowe Price MidCap Growth Portfolio
Series Account No. of Shares Percentage
-------------- ------------- ----------
FutureFunds Series Account II 80,229,180 77.33%
FutureFunds Series Account 11,171,627 10.77%
TNE Series (K) Account 10,730,661 10.34%
Maxim Series Account 147,085 0.14%
Retirement Plan Series Account 1,467,595 1.42%
TOTAL 103,746,148 100.00%
Aggressive Profile I Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 23,515 0.33%
FutureFunds Series Account 7,025,022 99.67%
TOTAL 7,048,537 100.00%
Moderately Aggressive Profile I Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 138,929 0.98%
FutureFunds Series Account 13,983,412 99.02%
TOTAL 14,122,341 100.00%
Moderate Profile I Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 223,699 1.86%
FutureFunds Series Account 11,773,958 98.14%
TOTAL 11,997,657 100.00%
Moderately Conservative Profile I Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 71,163 0.78%
FutureFunds Series Account 9,085,316 99.22%
TOTAL 9,156,479 100.00%
Conservative Profile I Portfolio
Series Account No. of Shares Percentage
Maxim Series Account 159,816 1.06%
FutureFunds Series Account 14,906,768 98.94%
TOTAL 15,066,584 100.00%
</TABLE>
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 indices 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 or legal advice from a qualified tax
advisor.
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 ("RIC") under Subchapter M of the Code. As an RIC,
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 during 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 or currencies (the "Income Requirement"). A Portfolio
is also subject to certain investment diversification requirements.
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 or
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 a 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 and
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 our understanding of 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 discussion 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 audits 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. These
financial statements do not relate to the nine new Portfolios created effective
July 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>
C-31
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 Maxim
Ariel MidCap Value Portfolio is incorporated by reference to
Registrant's Post-Effective Amendment No. 56 to its
Registration Statement dated November 24, 1998, 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. The investment advisory agreement for the Fund,
including all amendments thereto and the sub-advisory
agreement for the Maxim Global Bond Portfolio are attached
hereto as Exhibit 23(d).
Item (e), Principal Underwriting Agreement, is attached hereto
as Exhibit 23(e).
Item (f) is 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 is attached hereto as
Exhibit 23(j). t.
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
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ORGANIZATIONAL CHART
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% -
GWL&A Financial
(Nova Scotia) Co.
100% GWL&A Financial, Inc.
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
100% - National Plan Coordinators of Delaware, Inc.
100% - NPC Securities, Inc.
100% - NPC Administrative Services Corporation
100% - Deferred Comp of Michigan, Inc.
100% - National Plan Coordinators of Washington, Inc.
100% - National Plan Coordinators of Ohio, Inc.
100% - Renco, Inc.
100% - NPC Advisers, Inc.
100% - P.C.Enrollment Services & Insurance Brokerage,Inc.
</TABLE>
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
<PAGE>
Item 25. Indemnification.
Item 4, Part II, of Registrant's Pre-Effective Amendment No. 1 to its
Registration Statement is herein incorporated by reference.
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>
<S> <C> <C> <C> <C> <C> <C>
Name Position(s)
- ---- -----------
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 Vice President and Associate
Counsel, Great-West; Assistant Vice President, Associate Counsel and Assistant
Secretary, GWL&A; Assistant Counsel and Secretary, Financial Administrative
Services Corporation; Secretary, One Orchard Equities, Inc., Greenwood
Investments, Inc., BenefitsCorp Equities, Inc., Great-West Variable Annuity
Account A, Maxim Series Fund, Inc., Benefits Communication Corporation and
Great-West Benefit Services, Inc.
Item 27. Principal Underwriter
(a) Orchard Series Fund
(b) The principal business address of the directors and
officers of One Orchard Equities, Inc. named below is
8515 East Orchard Road, Englewood, Colorado 80111.
Positions and Offices Positions and Officers
Name with Underwriter with Registrant
------ --------------------- --------------------
Steve Miller Director and President None
Stan Kenyon Director None
Steve Quenville Director None
Glen R. Derback Treasurer Treasurer
Beverly A. Byrne Secretary Secretary
</TABLE>
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
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it meets
the requirements for effectiveness under Rule 485(b) and has duly caused this
Post-Effective Amendment No. 64 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 19th day of July , 1999.
MAXIM SERIES FUND, INC.
(Registrant)
By: /s/ J.D.Motz
President (J.D. Motz)
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 64 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<S> <C> <C> <C> <C> <C> <C>
Signature Title Date
/s/ J.D. Motz President 7/19/99
J.D. Motz and Director
/s/ D.G. McLeod Treasurer 7/19/99
D.G. McLeod
/s/ R.P. Koeppe* Director 7/19/99
R.P. Koeppe
/s/ R. Jennings* Director 7/19/99
R. Jennings
/s/ D.L. Wooden Director 7/19/99
D.L. Wooden
/s/ S. Zisman* Director 7/19/99
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.
</TABLE>
Exhibit 23(d)
Investment Advisory Agreement
and
Sub-Advisory Agreement among
Maxim Series Fund, Inc.,
GW Capital Management, LLC and Pareto Partners
<PAGE>
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT made this 5th day of December, 1997, by
and between Maxim Series Fund, Inc., a Maryland corporation ("the Fund"), and GW
Capital Management, LLC, a Colorado Limited Liability Company registered as an
investment adviser under the Investment Advisers Act of 1940 ("the Adviser"),
whereby the Adviser will act as investment adviser to the Fund as follows:
ARTICLE I
Duties of the Adviser
The Fund hereby employs the Adviser to act as the investment adviser to
and manager of the Fund, and, subject to the review of the Board of Directors of
the Fund ("the Board"), to manage the investment and reinvestment of the assets
of its existing portfolio and of each portfolio it may create in the future
("the Portfolios") and to administer its affairs, for the period and on the
terms and conditions set forth in this Agreement. The Adviser hereby accepts
such employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth for the compensation
provided for herein. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
A. Investment Advisory Services. In carrying out its obligations to
manage the investment and reinvestment of the assets of the Fund, the Adviser
shall, when appropriate and consistent with the limitations set forth in Section
C hereof:
(a) perform research and obtain and evaluate pertinent
economic, statistical, and financial data relevant to the investment
policies of the Fund;
(b) consult with the Board and furnish to the Board
recommendations with respect to an overall investment plan for
approval, modification, or rejection by the Board;
(c) seek out, present, and recommend specific investment
opportunities, consistent with any overall investment plan approved by
the Board;
(d) take such steps as are necessary to implement any overall
investment plan approved by the Board, including making and carrying
out decisions to acquire or dispose of permissible investments,
management of investments and any other property of the Fund, and
providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments;
(e) regularly report to the Board with respect to the
implementation of any approved overall investment plan and any other
activities in connection with management of the assets of the Account;
(f) maintain all required accounts, records, memoranda,
instructions or authorizations relating to the acquisition or
disposition of investments for the Fund; and
(g) determine the net asset value of the Fund as required by
applicable law. If, in the judgment of the Adviser, the Fund would be
benefited by supplemental investment research from other persons or
entities, outside the context of a specific brokerage transaction, the
Adviser is authorized to obtain and pay a reasonable flat fee for such
information. Supplemental investment research shall be limited to
statistical and other factual information, advice regarding economic
factors and trends, and advice as to occasional transactions in
specific securities, and shall not involve general advice or
recommendations regarding the purchase or sale of securities. The
expense of the Adviser may not be necessarily reduced as a result of
the receipt of such supplement information. The Adviser shall
regularly report to the Board when it has secured or, where time
permits, intends to secure said supplemental investment research. It
is understood and agreed that the Board retains the right to limit the
scope of or to disapprove of said research.
B. Administrative Services. In addition to the performance of
investment advisory services, the Adviser shall perform, or supervise the
performance of, administrative services in connection with the management of the
Fund and the Portfolios, including all financial reporting for the Fund. In this
connection, the Adviser agrees to (i) assist in supervising all aspects of the
Fund's operations, including the coordination of all matters relating to the
functions of the custodian, transfer agent or other shareholder service agents,
if any, accountants, attorneys and other parties performing services or
operational functions for the Fund, (ii) provide the Fund, at the Adviser's
expense, with services of persons, who may be the Adviser's managers, competent
to perform such administrative and clerical functions as are necessary in order
to provide effective administration of the Fund, including duties in connection
with certain reports and the maintenance of certain books and records of the
Fund, and (ii) provide the Fund, at the Adviser's expense, with adequate office
space and related services necessary for its operations as contemplated in this
Agreement. Nothing contained herein will be construed to restrict the Fund's
right to hire its own employees or to contract for services to be performed by
third parties.
C. Limitations on Advisory Services. The Adviser shall perform the
services under this Agreement subject to the review of the Board and in a manner
consistent with the investment objectives, policies, and restrictions of the
Fund as stated in its Registration Statement, as amended from time to time,
filed with the Securities and Exchange Commission, its Articles of Incorporation
and Bylaws, as amended from time to time and the provisions of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
The Fund has furnished or will furnish the Adviser with copies of the
Fund's Prospectus, Articles of Incorporation, and Bylaws as currently in effect
and agrees during the continuance of this Agreement to furnish the Adviser with
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Adviser will be entitled to rely
on all documents furnished by the Fund.
ARTICLE II
Compensation of the Adviser
A. Investment Advisory Fee. As compensation for its services to the
Fund, the Adviser receives monthly compensation at the annual rate of 0.46% of
the average daily net assets of the Money Market Portfolio; 0.50% of the average
daily net assets of the Zero-Coupon Treasury Portfolio; 0.53% of the average
daily net assets of the Maxim Vista Growth & Income Portfolio; 0.60% of the
average daily net assets of each of the Bond Portfolio, the Investment Grade
Bond Portfolio, the U.S. Government Securities Portfolio, the Total Return
Portfolio, the Stock Index Portfolio, the U.S. Government Mortgage Securities
Portfolio, the Small-Cap Index Portfolio, the Growth Index Portfolio, the Value
Index Portfolio and the Short-Term Maturity Bond Portfolio; 0.80% of the average
daily net assets of the Maxim T. Rowe Price Equity/Income Portfolio; 0.90% of
the average daily net assets of the Corporate Bond Portfolio; 0.95% of the
average daily net assets of each of the Mid-Cap Portfolio and the Maxim INVESCO
Small-Cap Growth Portfolio; and 1.00% of the average daily net assets of each of
the Maxim INVESCO Balanced Portfolio, Small-Cap Value Portfolio, the Maxim
INVESCO ADR Portfolio, the Foreign Equity Portfolio, the Small-Cap Aggressive
Growth Portfolio and the International Equity Portfolio. As compensation for its
services with respect to the Fund, the Adviser receives monthly compensation at
the annual rate of 1.00% of the average daily net assets of each of the Maxim
Blue Chip and Maxim MidCap Growth Portfolios. As compensation for its services
with respect to the Fund, the Adviser receives monthly compensation at the
annual rate of 0.25% of the average daily net assets of each of the Maxim
Aggressive Profile, Maxim Moderately Aggressive Profile, Maxim Moderate Profile,
Maxim Moderately Conservative Profile and Maxim Conservative Profile Portfolios.
B. Allocation of Expenses. Except with respect to the Portfolios
indicated below, the Adviser shall be responsible for all expenses incurred in
performing the services set forth in this Agreement and all other expenses, and
the Fund shall pay only extraordinary expenses, including the cost of
litigation.
With respect to the Small-Cap Value, MidCap, Small-Cap Aggressive
Growth, Foreign Equity, Maxim T. Rowe Price Equity/Income, Maxim INVESCO
Small-Cap Growth, Maxim INVESCO ADR, International Equity, Maxim MidCap Growth
and Maxim Blue Chip Portfolios:
(a) The Adviser shall be responsible for all of its expenses
incurred in performing the services set forth in Article I
hereunder. Such expenses include, but are not limited to,
costs incurred in providing investment advisory services;
compensating and furnishing office space for managers and
employees of the Adviser connected with investment and
economic research, trading, and investment management of the
Fund; and paying all fees of all directors of the Fund who are
affiliated persons of the Adviser or any of its subsidiaries.
(b) The Fund pays all other expenses incurred in its operation
and all of its general administrative expenses, including, but
not limited to, redemption expenses, expenses of portfolio
transactions, shareholder servicing costs, pricing costs
(including the daily calculation of net asset value),
interest, charges of the custodian and transfer agent, if any,
cost of auditing services, directors' fees, legal expenses,
state franchise and other taxes, expenses of registering the
shares under Federal and state securities laws, Securities and
Exchange Commission fees, advisory fees, insurance premiums,
costs of maintenance of corporate existence, investor services
(including allocable personnel and telephone expenses), costs
of printing proxies, stock certificates, costs of corporate
meetings, and any extraordinary expenses, including litigation
costs. Accounting services are provided for the Fund by the
Adviser and the Fund shall reimburse the Adviser for its costs
in connection therewith.
C. Notwithstanding the second paragraph of Section B, above, with
respect to the following Portfolios of the Fund, the Adviser shall pay Expenses
which exceed an annual rate of: 1.35% of the average daily net assets of the
Small-Cap Value Portfolio; 1.10% of the average daily net assets of the Mid-Cap
and Maxim INVESCO Small-Cap Growth Portfolios; 1.30% of the average daily net
assets of the Small-Cap Aggressive Growth Portfolio; 0.95% of the Maxim T. Rowe
Price Equity/Income Portfolio; 1.50% of the Maxim INVESCO ADR, Foreign Equity
and International Equity Portfolios. For purposes of this Section C, "Expenses"
with respect to a Portfolio shall mean the sum of (a) the investment advisory
fee described in Section A, above, for such Portfolio, and (b) expenses to be
paid directly by the Fund, as described in clause (b) of the second paragraph of
Section B, above, with respect to such Portfolio. Notwithstanding the second
paragraph of Section B, above, with respect to the following Portfolios of the
Fund the Adviser shall pay Expenses which exceed an annual rate of: 1.05% of the
average daily net assets of the Maxim MidCap Growth Portfolio and 1.15% of the
average daily net assets of the Maxim Blue Chip Portfolio.
ARTICLE III
Portfolio Transactions and Brokerage
The Adviser agrees to determine the securities to be purchased or sold
by the Portfolios, subject to the provisions of Article I, and to place orders
pursuant to its determinations, either directly with the issuer, with any
broker-dealer or underwriter that specializes in the securities for which the
order is made, or with any other broker or dealer selected by the Adviser,
subject to the following limitations.
The Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund and will
use its best efforts to obtain the most favorable net results and execution of
the Fund's orders, taking into account all appropriate factors, including price,
dealer spread or commission, if any, size of the transaction, and difficulty of
the transaction. In evaluating the net results of brokerage services offered by
brokers or dealers that also provide supplemental investment research to the
Adviser for a flat fee (see Article I) the Adviser need not take such a flat fee
into consideration.
If, in the judgment of the Adviser, the Fund would be benefited by
supplemental investment research in addition to such research furnished for a
flat fee, the Adviser is authorized to pay spreads or commissions to brokers or
dealers furnishing such services in excess of spreads or commissions which
another broker or dealer may charge for the same transaction. The expenses of
the Adviser may not necessarily be reduced as a result of receipt of such
supplemental information.
Subject to the above requirements and the provisions of the Investment
Company Act of 1940, the Securities Exchange Act of 1934, other applicable
provisions of law, and the terms of any exemption(s) therefrom, nothing shall
prohibit the Adviser from selecting brokers or dealers with which it or the Fund
are affiliated.
ARTICLE IV
Activities of the Adviser
The services of the Adviser to the Fund under this Investment Advisory
Agreement are not to be deemed exclusive and the Adviser will be free to render
similar services to others so long as its services under this Investment
Advisory Agreement are not impaired. It is understood that directors, officers,
employees and shareholders of the Fund are or may become interested in the
Adviser, as managers, employees or members or otherwise and that managers,
employees or members of the Adviser are or may become similarly interested in
the Fund, and that the Adviser is or may become interested in the Fund as
shareholder or otherwise.
It is agreed that the Adviser may use any supplemental investment
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts. The Adviser or its subsidiaries may use
such information in managing their own accounts. Conversely, such supplemental
information obtained by the placement of business for the Adviser or other
entities advised by the Adviser will be considered by and may be useful to the
Adviser in carrying out its obligations to the Fund.
Securities held by the Fund may also be held by separate accounts or
other mutual funds for which the Adviser acts as an adviser or by the Adviser or
its subsidiaries. Because of different investment objectives or other factors, a
particular security may be bought by the Adviser or its subsidiaries or for one
or more clients when one or more clients are selling the same security. If
purchases or sales of securities for the Fund or other entities for which the
Adviser or its subsidiaries act as investment adviser or for their advisory
clients arise for consideration at or about the same time, the Fund agrees that
the Adviser may make transactions in such securities, insofar as feasible, for
the respective entities and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of the Adviser during
the same period may increase the demand for securities being purchased or the
supply of securities being sold, the Fund recognizes that there may be an
adverse effect on price.
It is agreed that, on occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of the Fund as well as other
accounts or companies, it may, to the extent permitted by applicable laws and
regulations, but will not be obligated to, aggregate the securities to be sold
or purchased for the Fund with those to be sold or purchased for other accounts
or companies in order to obtain favorable execution and low brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser in
the manner it considers to be most equitable and consistent with its fiduciary
obligations to the Fund and to such other accounts or companies. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for a Fund portfolio.
ARTICLE V
Effectiveness of the Agreement
This Investment Advisory Agreement shall not become effective (and the
Adviser shall not serve or act as investment adviser) unless and until it is
approved by the Board including a majority of directors who are not parties to
this Agreement or interested persons of any such party to this Agreement, and by
the sole shareholder; and this Agreement shall come into full force and effect
on the date on which it is so approved.
ARTICLE VI
Term of the Agreement
This Investment Advisory Agreement shall remain in effect until the
earlier of one year from its effective date or the date of the first annual or
special meeting of shareholders of the Fund and shall continue so long as such
continuance is specifically approved by a majority of the outstanding shares of
the Fund at that time and at least annually thereafter (a) by the vote of the
majority of the Board, or by vote of a majority of the outstanding shares of the
Fund, including a majority of the outstanding shares of each Portfolio, and (b)
by the vote of a majority of the members of the Board, who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. In connection with
such approvals, the Board shall request and evaluate, and the Adviser shall
furnish, such information as may be reasonably necessary to evaluate the terms
of this Agreement. This Agreement:
(a) shall not be terminated by the Adviser without sixty days'
prior written notice and without the prior approval of a new
investment advisory agreement by vote of a majority of the
outstanding shares of the Fund;
(b) shall be subject to termination, without the payment of any
penalty, by the Board or by vote of a majority of the
outstanding voting securities of the Fund, on sixty days'
written notice to the Adviser;
(c) shall not be amended without specific approval of such
amendment by (i) the Board, or by the vote of a majority of
the outstanding shares of the Fund, including a majority of
the outstanding shares of each Portfolio, and (ii) a majority
of those directors who are not parties to this Agreement or
interested persons of such a party, cast in person at a
meeting called for the purpose of voting on such approval; and
(d) shall automatically terminate upon assignment by either party.
ARTICLE VII
Recordkeeping
The Adviser agrees that all accounts and records which it maintains for
the Fund shall be the property of the Fund and that it will surrender promptly
to the designated officers of the Fund any or all such accounts and records upon
request. The Adviser further agrees to preserve for the period prescribed by the
rules and regulations of the Securities and Exchange Commission all such records
as are required to be maintained pursuant to said rules. The Adviser also agrees
that it will maintain all records and accounts regarding the investment
activities of the Fund in a confidential manner. All such accounts or records
shall be made available, within five (5) business days of the request, to the
Fund's accountants or auditors during regular business hours at the Adviser's
offices upon reasonable prior written notice. In addition, the Adviser will
provide any materials, reasonably related to the investment advisory services
provided hereunder, as may be reasonably requested in writing by the directors
or officers of the Fund or as may be required by any governmental agency having
jurisdiction.
ARTICLE VIII
Liability of the Adviser
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Adviser (or its
managers, agents, employees, members, and any other person or entity affiliated
with the Adviser or retained by it to perform or assist in the performance of
its obligations under this Agreement), neither the Adviser nor any of its
managers, employees or agents shall be subject to liability to the Fund or to
any shareholder for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation any error of judgment
or mistake of law or for any loss suffered by the Fund or any shareholder in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services.
ARTICLE IX
Governing Law
This Investment Advisory Agreement is subject to the provisions of the
Investment Company Act, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder, including such exemptions
therefrom as the Securities and Exchange Commission may grant. Words and phrases
used herein shall be interpreted in accordance with that Act and those rules and
regulations. As used with respect to the Fund or any of its Portfolios, the term
"majority of the outstanding shares" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Investment Advisory
Agreement to be signed by their respective officials duly authorized, as of the
day and year first above written.
MAXIM SERIES FUND, INC.
By: /s/ J.D. Motz
President
Witness:
/s/ B.A. Byrne
Secretary
GW CAPITAL MANGEMENT, LLC
By: /s/ J.T. Hughes
Title: President
Witness:
/s/ D.G. McLeod
Treasurer
<PAGE>
Amendment to
Investment Advisory Agreement
between Maxim Series Fund, Inc.
and G W Capital Management, LLC
The following amendment is made to the Investment Advisory Agreement
between Maxim Series Fund, Inc. and G W Capital Management, Inc. dated December
5, 1997, (the Agreement"), and is hereby incorporated into and made a part of
the Agreement:
1. The names of the Portfolios, wherever such references shall appear in the
Agreement or the amendments thereto, shall be re-designated as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Prior Designation New Designation
----------------- ---------------
Money Market Portfolio Maxim Money Market Portfolio
Bond Portfolio Maxim Bond Portfolio
Investment Grade Corporate Bond Portfolio Maxim Bond Index Portfolio
U.S. Government Securities Portfolio Maxim U.S. Government Securities Portfolio
U.S. Government Mortgage Securities Portfolio Maxim U.S. Government Mortgage Securities Portfolio
Short-Term Maturity Bond Portfolio Maxim Short-Term Maturity Bond Portfolio
Corporate Bond Portfolio Maxim Loomis Sayles Corporate Bond Portfolio
Small-Cap Value Portfolio Maxim Ariel Small-Cap Value Portfolio
Small-Cap Aggressive Growth Portfolio Maxim Loomis Sayles Small-Cap Value Portfolio
Small-Cap Index Portfolio Maxim Index 600 Portfolio
MidCap Portfolio Maxim Ariel MidCap Value Portfolio
MidCap Growth Portfolio Maxim T. Rowe Price MidCap Growth Portfolio
Blue Chip Portfolio Maxim Founders Growth & Income Portfolio
Stock Index Portfolio Maxim Stock Index Portfolio
Value Index Portfolio Maxim Value Index Portfolio
Growth Index Portfolio Maxim Growth Index Portfolio
International Equity Portfolio Maxim Templeton International Equity Portfolio
Foreign Equity Portfolio Maxim Foreign Equity Portfolio
</TABLE>
2. Article II, Section A is amended by adding the following:
As compensation for its services with respect to the Fund, the Adviser
receives monthly compensation at the annual rate of 1.30% of the average
daily net assets of the Maxim Dreyfus Global Bond Portfolio; 1.00% of the
average daily net assets of each of the Maxim Index European and Maxim Index
Pacific Portfolios; 0.50% of the Maxim Bond Index Portfolio; 0.60% of the
Maxim Index 400 Portfolio; and 0.10% of the average daily net assets of each
of the Maxim 401(k) Aggressive Profile, Maxim 401(k) Moderately Aggressive
Profile, Maxim 401(k) Moderate Profile, Maxim 401(k) Moderately Conservative
Profile and Maxim 401(k) Conservative Profile Portfolios.
3. Article II Section B is amended by deleting the first clause of the
second paragraph thereof and substituting the following:
With respect to the Maxim Ariel Small-Cap Value, Maxim Ariel MidCap Value,
Maxim Loomis Sayles Small-Cap Value, Foreign Equity, Maxim T. Row Price
Equity/Income, Maxim INVESCO Small-Cap Growth, Maxim INVESCO ADR, Maxim
Templeton International Equity, Maxim T. Rowe Price MidCap Growth, Maxim
Founders Blue Chip, Maxim Index European and Maxim Index Pacific
Portfolios:
4. Article II, Section C is amended by adding the following:
Notwithstanding the second paragraph of Section B, above, with respect to
the following Portfolios of the Fund the Adviser shall pay Expenses which
exceed an annual rate of: 1.20% of the average daily net assets of the Maxim
Index European and Maxim Index Pacific Portfolios.
IN WITNESS WHEREOF, the parties hereto have caused this amending
agreement to be executed in duplicate, in their names and on their behalf by and
through their duly authorized officers as of the 26th day of July, 1999.
MAXIM SERIES FUND, INC.
Attest: /s/ Beverly A. Byrne By: /s/ J.D. Motz
Name: Beverly A. Byrne Name: J.D. Motz
Title: President
G W CAPITAL MANAGEMENT, INC.
Attest: /s/ D.G. McLeod By: /s/ J.T. Hughes
Name: D.G. McLeod Name: J.T. Hughes
Title: President
<PAGE>
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (herein "the Agreement" or "this Agreement")
made this _________ day of _______________, 1999 by and between GW Capital
Management, LLC, a Colorado limited liability company registered as an
investment adviser under the Investment Advisers Act of 1940 ("the Adviser"),
Pareto Partners, an English Partnership registered as an investment adviser
under the Investment Advisers Act of 1940 ("the Sub-adviser"), and Maxim Series
Fund, Inc., a Maryland corporation and an open-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended ("Maxim" and the "1940 Act"), this Agreement embodying the arrangement
whereby the Sub-adviser will act as an investment adviser to the Maxim Global
Bond Portfolio (the "Portfolio"), in conjunction with the Adviser, as follows:
ARTICLE I
Preamble
Maxim entered into an Investment Advisory Agreement with the Adviser, a
copy of which is attached hereto as Appendix A. This advisory agreement and all
amendments thereto are hereinafter referred to as "the GW Agreement." In the GW
Agreement, the Adviser agreed to act as adviser to and manager of Maxim. In that
capacity it agreed to manage the investment and reinvestment of the assets of
any Portfolio of Maxim in existence or created in the future and to administer
Maxim's affairs. The Adviser wishes to obtain assistance with respect to its
aforesaid advisory and management role with respect to the Portfolio only to the
extent described herein, and Maxim by this Agreement agrees to such arrangement.
The Sub-adviser is regulated by the Investment Management Regulatory
Organization Limited ("IMRO") (and the expression IMRO shall include its
successor for the time being responsible for the regulation of the Sub-adviser)
and subject to the rules of IMRO ("the IMRO Rules") in the conduct of its
investment business. The Sub-adviser is authorized under the Financial Services
Act 1986 and permitted by IMRO to provide discretionary management and
investment advisory services.
The services provided by the Sub-adviser under this agreement will be
covered by the provisions of the Investment Advisers Act of 1940.
ARTICLE II
Duties of the Sub-adviser
The Adviser hereby employs the Sub-adviser to act with the Adviser as
investment advisers to and managers of the Portfolio, and, subject to the review
of the Board of Directors of Maxim ("the Board"), to manage the investment and
reinvestment of the assets of the Portfolio and to administer its affairs, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-adviser hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation provided for herein. The Sub-adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized by this Agreement or otherwise, have no authority to act
for or represent Maxim in any way or otherwise be deemed an agent of Maxim.
A. Investment Sub-Advisory Services.
In carrying out its obligations to assist in managing the investment
and reinvestment of the assets of the Portfolio, the Sub-adviser shall, when
appropriate and consistent with the limitations set forth in Section B hereof:
(a) perform research and obtain and evaluate pertinent
economic, statistical, and financial data relevant to the investment policies of
the Portfolio;
(b) consult with the Adviser and with the Board and furnish to
the Adviser and the Board recommendations with respect to an overall investment
plan for the Portfolio for approval, modification, or rejection by the Board;
(c) seek out specific investment opportunities for the
Portfolio, consistent with an overall investment plan approved by the Adviser
and the Board;
(d) take such steps as are necessary to implement any overall
investment plan approved by the Board for the Portfolio, including making and
carrying out decisions to acquire or dispose of permissible investments as set
forth in Maxim's Registration Statement, management of investments and any other
property of the Portfolio, and providing or obtaining such services as may be
necessary in managing, acquiring or disposing of investments, consulting as
appropriate with the Adviser;
(e) regularly report to the Adviser and the Board with respect
to the implementation of any approved overall investment plan and any other
activities in connection with management of the assets of the Portfolio;
(f) communicate as appropriate to the Adviser the purchases and sales
within the Portfolio;
(g) arrange with the applicable broker or dealer at the time of the
purchase or sale of investments or other assets of the Portfolio for the
appropriate delivery of the investment or other asset; (h) report monthly
in writing to the Adviser and report at least annually in person to the
Board with respect to the implementation of the approved investment plan
and any other activities in connection with management of the assets of the
Portfolio;
(i) maintain all records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments or
other assets of the Portfolio required to be maintained by Sub-adviser;
(j) arrange with the Investment Operations Department of the
Adviser an administrative process which permits the Adviser to appropriately
reflect in its daily determination of unit values, the expenses that will be
borne directly by the Portfolio and which are incurred as a result of providing
investment management services to the Portfolio.
In connection with the rendering of the services required to be
provided by the Sub-adviser under this Agreement, the Sub-adviser may, to the
extent it deems appropriate and subject to compliance with the requirements of
applicable laws and regulations, and upon receipt of written approval of Maxim,
make use of its affiliated companies, if any, and their employees; provided that
the Sub-adviser shall supervise and remain fully responsible for all such
services in accordance with and to the extent provided by this Agreement.
It is understood that any information or recommendation supplied by the
Sub-adviser in connection with the performance of its obligations hereunder is
to be regarded as confidential and for use only by the Adviser in connection
with the Portfolio.
The Adviser will continue to provide all of the services described in
the GW Agreement other than the services described above which have been
delegated to the Sub-adviser in this Agreement.
If, in the judgment of the Sub-adviser, the Portfolio would be
benefited by supplemental investment research from other persons or entities,
outside the context of brokerage transactions referred to in Article IV hereof,
the Sub-adviser is authorized to obtain, and pay at its own expense, for such
information.
All assets of the Portfolio will be held by the Custodian. The
Sub-adviser will not hold or take responsibility for any money or assets
belonging to the Adviser or to Maxim or to the Portfolio.
B. Limitations on Advisory Services.
The Sub-adviser shall perform the services under this Agreement subject
to the review of the Adviser and the Board and in a manner consistent with the
investment objectives, policies, and restrictions of Maxim as stated in its
Registration Statement, as amended from time to time, filed with the Securities
and Exchange Commission, its Articles of Incorporation and Bylaws, as amended
from time to time, and the provisions of the 1940 Act.
Maxim has furnished or will furnish the Sub-adviser with copies of
Maxim's Registration Statement, Prospectus, Articles of Incorporation, and
Bylaws as currently in effect and agrees during the continuance of this
Agreement to furnish the Sub-adviser with copies of any amendments or
supplements thereto before or at the time the amendments or supplements become
effective. The Sub-adviser will be entitled to rely on all documents furnished
by Maxim.
ARTICLE III
Compensation of the Sub-adviser
A. Investment Advisory Fee.
The Adviser, and not Maxim, will pay the "NAV Fee", set forth in Schedule A, on
the last day of each month as monthly compensation to the Sub-adviser for the
services rendered by the Sub-adviser with respect to the Portfolio. These fees
are based on an annual percentage of the total of assets of the Portfolio.
B. Allocation of Expenses.
The Sub-adviser shall be responsible for all expenses incurred in
performing the services set forth in Article II hereof. These expenses include
only the costs incurred in providing sub-advisory services pursuant to this
Agreement (such as compensating and furnishing office space for officers and
employees of the Sub-adviser connected with investment and economic research,
trading (excluding brokerage commissions, dealer spreads and exchange and other
transaction-based fees), and investment management of the Portfolio).
As described in the GW Agreement, Maxim and/or the Adviser pays all
other expenses incurred in the operation of the Portfolio and all of its general
administrative expenses.
ARTICLE IV
Portfolio Transactions and Brokerage
The Sub-adviser agrees to determine the securities to be purchased or
sold by the Portfolio, subject to the provisions of Article II regarding
coordination with and supervision by the Adviser and Maxim's Board of Directors,
and to place orders pursuant to its determinations, either directly with the
issuer, with any broker dealer or underwriter that specializes in the securities
for which the order is made, or with any other broker or dealer selected by the
Sub-adviser, subject to the following limitations.
The Sub-adviser is authorized to select the brokers or dealers that
will execute the purchases and sales of Portfolio securities for the Portfolio
and will use its best efforts to obtain the most favorable net results and
execution of the Portfolio's orders, taking into account all appropriate
factors, including price, dealer spread or commission, if any, size of the
transaction, difficulty of the transaction, and potentiality of market movement.
The Sub-adviser is specifically authorized to allocate brokerage and
principal business to firms that provide such services or facilities and to
cause Maxim to pay a member of a securities exchange or any other securities
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, if the Sub-adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services (as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided by
such member, broker or dealer, viewed in terms of either that particular
transaction or the Sub-adviser's over-all responsibilities with respect to the
accounts as to which it exercises investment discretion (as that term is defined
in Section 3(a)(35) of the Securities Exchange Act of 1934). The Sub-adviser
shall regularly report to the Adviser and the Board with respect to the
brokerage commissions incurred by the Portfolio for the purchases and sales of
its Portfolio securities. The Adviser and the Board will review the amount of
such brokerage commissions and consult with the Sub-adviser in that regard.
ARTICLE V
Activities of the Sub-adviser
The services of the Sub-adviser to the Adviser and Maxim under this
Agreement are not to be deemed exclusive and the Sub-adviser will be free to
render similar services to others so long as the Sub-adviser fulfills its rights
and obligations under this Agreement. It is understood that Directors, officers,
employees and shareholders of Maxim are or may become interested in the
Sub-adviser, as Directors, officers, employees or shareholders or otherwise, and
that Directors, officers, employees or shareholders of the Sub-adviser are or
may become similarly interested in Maxim, and that the Sub-adviser is or may
become interested in Maxim as shareholder or otherwise.
It is agreed that the Sub-adviser may use any supplemental investment
research obtained for the benefit of the Portfolio in providing investment
advice to its other investment advisory accounts. The Sub-adviser or its
affiliates may use such information in managing their own accounts. Conversely,
such supplemental information obtained by the Sub-adviser for the benefit of the
Sub-adviser or other entities advised by the Sub-adviser may be considered by
and may be useful to the Sub-adviser in carrying out its obligations to the
Adviser and Maxim.
Securities held by the Portfolio may also be held by separate accounts
or other mutual funds for which the Sub-adviser or its affiliates act as an
adviser or Sub-adviser, or by the Sub-adviser or its affiliates. Because of
different investment objectives or other factors, a particular security may be
bought by the Sub-adviser or its affiliates or for one or more clients when one
or more clients are selling the same security. If purchases or sales of
securities for the Portfolio or other entities for which the Sub-adviser or its
affiliates act as investment adviser or Sub-adviser or for their advisory
clients arise for consideration at or about the same time, the Adviser and Maxim
agree that the Sub-adviser may make transactions in such securities, insofar as
feasible, for the respective entities and clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more than one client of the
Sub-adviser during the same period may increase the demand for securities being
purchased or the supply of securities being sold, the Adviser and Maxim
recognize that there may be an adverse effect on price.
It is agreed that, on occasions when the Sub-adviser deems the purchase
or sale of a security to be in the best interests of the Portfolio as well as
other accounts or companies, it may, to the extent permitted by applicable laws
and regulations, but will not be obligated to, aggregate the securities to be so
sold or purchased for other accounts or companies in order to obtain favorable
execution and low brokerage commissions. In that event, allocation of the
securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Portfolio
and to such other accounts or companies.
ARTICLE VI
Effectiveness of the Agreement
The Agreement shall not become effective (and the Sub-adviser shall not
serve or act as investment adviser) unless and until it is approved by the Board
of Directors of Maxim including a majority of Directors who are not parties to
this Agreement or interested persons of any such party to this Agreement; and
this Agreement shall come into full force and effect on the date on which all of
these conditions are met.
ARTICLE VII
Term of the Agreement; Amendment
The Agreement shall remain in effect until two years from the date
first above-written and shall continue so long as such continuance is annually
approved thereafter (a) by the vote of a majority of the Board of Directors of
Maxim, or by vote of a majority of the outstanding shares of the Portfolio, and
(b) by the vote of a majority of the members of the Board, who are not parties
to this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. In connection with
such approvals, the Board shall request and evaluate, and the Sub-adviser shall
furnish, such information as may be reasonably necessary to evaluate the terms
of this Agreement. This Agreement:
(a) shall not be terminated by the Sub-adviser without sixty days prior
written notice; (b) shall be subject to termination, without the
payment of any penalty, by the Board or by vote of
a majority of the outstanding voting securities of the Portfolio, on
sixty days written notice to the Sub-adviser; (c) may be amended only
by a written instrument signed by Maxim, the Adviser and the
Sub-adviser;
provided that no material amendment of this Agreement shall be effective without
specific approval of such amendment by (i) the Board, including a majority of
those Directors who are not parties to this Agreement or interested persons of
such a party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) a majority of the outstanding shares of the Portfolio;
and
(d) shall automatically terminate upon assignment of this Agreement by
either party (as the term "termination" is defined in Section 2(a)(4) of the
1940 Act).
In addition,
(e) the Sub-adviser shall upon termination be entitled to receive fees
up to the effective date of termination and shall prepare and submit an invoice
calculated on a pro rata basis.
(f) termination shall be without prejudice to the accrued rights of the
parties and to the completion of transactions in the Portfolio already initiated
at the effective time of the termination and the Sub-adviser may charge and the
Adviser shall pay any additional expenses necessarily incurred in terminating
this Agreement and any losses necessarily realized in settling or concluding
outstanding obligations.
(g) upon written instruction from the Adviser upon termination, the
Sub-adviser may enter into binding transactions on behalf of Maxim to eliminate
open forward foreign exchange transactions, such transactions having value dates
beyond the effective date of termination.
The Sub-advisor is organized as a partnership. The Sub-adviser will
notify the Adviser and Maxim of any change in its membership not constituting an
assignment of this Agreement within a reasonable time after such change.
ARTICLE VIII
Recordkeeping
The Sub-adviser agrees that all accounts and records which it maintains
for the Portfolio shall be the property of Maxim and that it will surrender
promptly to the designated officers of Maxim any or all such accounts and
records upon request. The Sub-adviser further agrees to preserve for the period
prescribed by the rules and regulations of the Securities and Exchange
Commission all such records as are required to be maintained pursuant to said
rules. The Sub-adviser also agrees that it will maintain all records and
accounts regarding the investment activities of Maxim in a confidential manner.
All such accounts or records shall be made available, within five (5) business
days of the request, to Maxim's accountants or auditors during regular business
hours at the Sub-adviser's offices upon reasonable prior written notice;
provided, however, that the Sub-adviser shall be permitted to keep such records
or copies thereof for such periods of time as are necessary to comply with the
rules and regulations of the Securities and Exchange Commission or other
applicable provisions of state or federal law as well as the laws and
regulations stipulated by the relevant authorities of England. In addition, the
Sub-adviser will provide any materials, reasonably related to the investment
sub-advisory services provided hereunder, as may be reasonably requested in
writing by the Directors or officers of Maxim or as may be required by any
governmental agency or self-regulatory organization having jurisdiction.
ARTICLE IX
Liability of the Sub-adviser
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Sub-adviser or
its officers, Directors, employees, controlling persons, shareholders, and any
other person or entity affiliated with the Sub-adviser, neither the Sub-adviser
nor any of its officers, Directors, employees, controlling persons, shareholders
or any other person or entity affiliated with the Sub-adviser shall be subject
to liability to Maxim or to any shareholder or the Adviser for any act or
omission in the course of, or connected with, rendering services pursuant to
this Agreement, including without limitation any error of judgment or mistake of
law or for any loss suffered by Maxim or any shareholder in connection with the
matters to which this Agreement relates. The federal securities laws impose
liabilities under certain circumstances on persons who act in good faith and,
therefore, nothing herein shall in any way constitute a waiver or limitation of
any rights which Maxim or any shareholder of Maxim may have under any federal
securities laws. The Sub-adviser shall not be liable for the acts and omissions
of any independent contractor used by it nor for those of any bank, trust
company, broker or other person with whom or into whose hands any monies, shares
of Maxim, or securities and investments may be deposited or come, pursuant to
the provisions of this Agreement.
ARTICLE X
Indemnification
Subject to Article IX, the Sub-adviser agrees and undertakes to hold
the Adviser harmless and to indemnify and protect the Adviser from and against
any and all lawsuits or other claims brought against the Adviser as a result of
the activities of the Sub-adviser under this Agreement, including the activities
of the Sub-adviser's officers and Directors, agents, employees, controlling
persons, shareholders, and any other person or entity affiliated with the
Sub-adviser or retained by it to perform or assist in the performance of its
obligations under this Agreement; provided, however, that in no event is
Sub-adviser's indemnity in favor of Adviser deemed to protect Adviser against
any liability to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations or duties under
this Agreement or the GW Agreement.
The Adviser agrees and undertakes to hold the Sub-adviser harmless and
to indemnify and protect the Sub-adviser from and against any and all lawsuits
or other claims brought against the Sub-adviser as a result of the activities of
the Adviser under this Agreement and the GW Agreement, including the activities
of the Adviser's officers, Directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations under
this Agreement or the GW Agreement; provided, however, that in no event is
Adviser's indemnity in favor of Sub-adviser deemed to protect Sub-adviser
against any liability to which the Sub-adviser would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations or
duties under this Agreement.
ARTICLE XI
Agreements, Representations and Indemnification
Related to Disclosure Documents
A. The Sub-adviser will cooperate with Maxim and the Adviser in
connection with the registration or qualification of units of the Portfolio for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
Maxim may request and will cooperate with the preparation of the Disclosure
Documents (as defined in Article XI.C. below). Maxim and the Adviser will
provide the Sub-adviser with copies of all Disclosure Documents prior to
distribution to investors or submission to governmental bodies or
self-regulatory organizations and will incorporate its reasonable comments
relating to the description of, or services to be provided by, the Sub-adviser
or its affiliates, or relating to the description of the investment objectives
and policies of the Portfolio.
B. Maxim and the Adviser, jointly and severally, represent and warrant
to the Sub-adviser that the Disclosure Documents will fully comply with the
provisions of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the 1940 Act, and other applicable laws, and the
Disclosure Documents at all such times will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements or omissions in the
Disclosure Documents made in reliance upon information furnished to Maxim or the
Adviser in writing by the Sub-adviser which Maxim or the Adviser had informed
the Sub-adviser was to be used, or which the Sub-adviser had acknowledged was to
be used, in the particular Disclosure Document. Maxim and the Adviser will
notify the Sub-adviser promptly of the happening of any event which in the
judgment of Maxim or the Adviser makes any statement made in the Disclosure
Documents untrue in any material respect or requires the making of any changes
in the Disclosure Documents in order to make the statements therein, in the
light of circumstances under which they were made, not misleading in any
material respect.
The Sub-adviser represents and warrants to Maxim and the Adviser that
the information furnished in writing by it which Maxim has informed it is to be
used, or which the Sub-adviser has acknowledged is to be used, in a particular
Disclosure Document, will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading as required by the provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the 1940 Act and other applicable laws. The Sub-adviser will notify
Maxim and the Adviser promptly of the happening of any event which in the
judgment of the Sub-adviser makes any statement made in the Disclosure Documents
untrue in any material respect or requires the making of any changes in the
Disclosure Documents in order to make the statements therein, in the light of
circumstances under which they were made, not misleading in any material
respect, except that the Sub-adviser need only make such notification with
respect to information in the Disclosure Documents based upon information
furnished in writing to Maxim or the Adviser by the Sub-adviser which Maxim had
informed the Sub-adviser was to be used, or which the Sub-adviser had
acknowledged was to be used, in the particular Disclosure Statement.
C. Notwithstanding Article X to the contrary, Maxim and the Adviser,
jointly and severally, agree to hold harmless the Sub-adviser, its directors,
managers and officers (each such person a "Sub-adviser Indemnified Party"), and
each person, if any, who controls the Sub-adviser within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in Maxim's Registration Statement
or Prospectus, or any amendment or supplement thereto, or in any preliminary
prospectus, any other communication with investors or any other submissions to
governmental bodies or self-regulatory agencies filed or distributed on or
subsequent to the date first above-written (such documents being herein referred
to as "Disclosure Documents") or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any such untrue statement or omission or allegation thereof based upon
information furnished in writing to Maxim or the Adviser by the Sub-adviser
which Maxim had informed the Sub-adviser was to be used, or which the
Sub-adviser had acknowledged was to be used, in the particular Disclosure
Document.
If any action or proceeding (including any governmental investigation)
shall be brought or asserted against the Sub-adviser Indemnified Party in
respect of which indemnity may be sought from Maxim and the Adviser, the
Sub-adviser Indemnified Party shall promptly notify Maxim and the Adviser in
writing, and Maxim and the Adviser shall assume the defense thereof, including
the employment of counsel satisfactory to the Sub-adviser and the payment of all
expenses. The Sub-adviser Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expense of the
Sub-adviser Indemnified Party unless (a) Maxim or the Adviser has agreed to pay
such fees and expenses or (b) Maxim or the Adviser shall have failed to assume
the defense of such action or proceeding and to employ counsel satisfactory to
the Sub-adviser in any such action or proceeding or (c) the named parties to any
such action or proceeding (including any impleaded parties) include both the
Sub-adviser Indemnified Party and Maxim or the Sub-adviser Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to any of them which are different from or additional to those
available to Maxim or the Adviser (in which case, if the Sub-adviser Indemnified
Party notifies Maxim and the Adviser in writing that it elects to employ
separate counsel at the expense of Maxim and the Adviser, Maxim and the Adviser
shall not have the right to assume the defense of such action or proceeding on
behalf of the Sub-adviser Indemnified Party), it being understood, however, that
Maxim and the Adviser shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Sub-adviser Indemnified
Party, which firm shall be designated in writing by the Sub-adviser. Neither
Maxim nor the Adviser shall be liable for any settlement of any such action or
proceeding effected without their written consent, but if settled with their
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, Maxim and the Adviser agree to indemnify and hold harmless
the Sub-adviser Indemnified Party from and against any loss or liability by
reason of such settlement or judgment. It is understood that neither Maxim nor
the Adviser may settle on behalf of the Sub-adviser without the consent of the
Sub-adviser.
Notwithstanding Article X to the contrary, the Sub-adviser agrees to
indemnify and hold harmless Maxim and the Adviser, their directors, managers and
officers, and each person, if any, who controls Maxim or the Adviser within the
meaning of either Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended, to the same
extent as the foregoing indemnity from Maxim and the Adviser to the Sub-adviser,
but only with respect to information furnished in writing by it which Maxim or
the Adviser had informed the Sub-adviser was to be used, or which the
Sub-adviser had acknowledged was to be used, in the particular Disclosure
Document unless: (1) such information subsequently ceased to be true and
accurate; (2) Maxim and/or the Adviser had actual knowledge that the information
ceased to be true and accurate; and (3) neither Maxim nor the Adviser informed
the Sub-adviser of the change. In case any action or proceeding shall be brought
against Maxim or the Adviser, their directors, managers or officers, or any such
controlling persons, in respect of which indemnity may be sought against the
Sub-adviser, the Sub-adviser shall have the rights and duties given to Maxim and
the Adviser, and Maxim or the Adviser, their Directors, directors or officers,
or such controlling persons shall have the rights and duties given to the
Sub-adviser, by the preceding paragraph.
D. The agreements, representations and indemnification contained in
this Article XI shall remain operative and in full force and effect regardless
of (a) any investigation made by or on behalf of the Sub-adviser Indemnified
Party or by or on behalf of Maxim or the Adviser, its directors, managers and
officers, or any person controlling Maxim or the Adviser or (b) any termination
of this Agreement.
ARTICLE XII
Non-Compete
The Adviser and Sub-adviser acknowledge that, in the course of
providing services under this Agreement, Sub-adviser may obtain information
about current or prospective customers (hereinafter a "Customer") of Maxim or
any affiliate of the Adviser. In the event said Customer ultimately utilizes
Maxim or any affiliate of the Adviser as an investment product provider for any
defined contribution plan offered by Customer, Sub-adviser agrees:
(a) not to utilize any confidential information regarding the Customer
and/or its employees' participation in such defined contribution plan(s) which
Sub-adviser receives as result of providing services under this Agreement in
non-Maxim business of Sub-adviser or any of its affiliates;
(b) not to attempt to contact the Customer without prior notification
to the Adviser; and (c) not to attempt to sell any mutual funds
affiliated with the Sub-adviser directly to Customer on
a stand-alone basis while Maxim Portfolios are included either directly or
indirectly in the Customer's defined contribution plan(s).
For purposes of this Section, defined contribution plan shall mean
401(k), 457 and 403(b) plans. The following situations are not subject to the
provisions of this Section:
(a) Customer has a pre-existing relationship with the Sub-adviser; or
(b) The Sub-adviser or any of its affiliates makes its funds available to
another defined contribution plan product provider and that product provider
bids on the Customer's case using publicly available information.
Article XIII
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the 1940 Act and the rules
and regulations of the Securities and Exchange Commission thereunder, including
such exemptions therefrom as the Securities and Exchange Commission may grant.
Words and phrases used herein shall be interpreted in accordance with that Act
and those rules and regulations. As used with respect to the Portfolio, the term
"majority of the outstanding shares" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares. To the extent that
the applicable laws of the State of Colorado conflict with applicable provisions
of the 1940 Act as amended, or the rules and regulations thereunder, such Act,
rules and regulations shall control.
ARTICLE XIV
Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
ARTICLE XV
Counterparts
This Agreement may be executed in any number of counterparts, and by
separate parties hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument.
ARTICLE XVI
Sales Literature
The Adviser will not use the Sub-adviser's name in Portfolio sales
literature without prior review and approval by the Sub-adviser, which will not
be unreasonably withheld or delayed.
ARTICLE XVII
Confidentiality and Data Protection
(a) Each party will, during and after termination of this Agreement,
keep confidential all information acquired in consequence of this Agreement
relating to the business of the other parties except in relation to any such
information which they may be obliged or required to disclose by compulsion or
law or as required by any regulatory authority. For the avoidance of doubt, the
Sub-adviser may, however, disclose that the Adviser is a client of the
Sub-adviser. The Sub-adviser may state in its marketing materials that Maxim is
one of its investment management clients and may state the benchmark against
which the Portfolio's performance is measured. The Sub-adviser may also include
the Portfolio's investment performance in its performance composites for
purposes of calculating and marketing its investment performance.
(b) The Sub-adviser may use personnel-related information concerning
officers and employees of the Adviser and of Maxim (each "an Individual")
acquired in consequence of this Agreement for internal business and client
servicing purposes. The Sub-adviser may share this information with other group
companies and its agents insofar as this is reasonably required in order to
provide the services covered by this Agreement. An Individual has the right to
request a copy of the information held by the Sub-adviser in its records in
return for payment of a fee. An Individual also has the right to require the
Sub-adviser to correct any inaccuracies in the information.
(c) The Sub-adviser shall not be required to disclose or use for the
benefit of the Adviser any confidential information relating to or acquired
while providing discretionary management, advisory or other services to another
client or to disclose or use any other information not known to the manager of
the Portfolio even though it is known to an employee, director or agent of the
Sub-adviser who does not provide services in relation to the Portfolio.
(d) The Adviser and Maxim acknowledge that the Sub-adviser's investment
strategies and techniques are confidential and proprietary and that neither of
them will obtain any rights to the strategies and techniques by way of their
relationship with the Sub-adviser.
ARTICLE XVIII
Complaints
(a) The Adviser shall in the first instance refer any complaint to the
Sub-adviser for the attention of its Compliance Officer.
(b) The Adviser also has the right of complaint directly to the
Investment Ombudsman as appointed by IMRO.
(c) A statement is available on request of rights of compensation in
the event that the Sub-adviser is unable to meet any liabilities to the Adviser.
Such rights are only available to Private Customers.
ARTICLE XIX
Notices
Any notice under this Agreement shall be in writing and shall be deemed
given (a) upon person delivery, (b) on the relevant earliest business day after
receipted delivery to a courier service that guarantees a minimum delivery
period, under circumstances in which such guarantee is applicable or (c) on the
earlier of delivery or three business days after mailing by United States
certified mail if available, postage and fees prepaid, to the appropriate party
at the address set forth below, or to such other address as the party so
notifies the others in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officials duly authorized, as of the day and year first
above written.
GW CAPITAL MANAGEMENT, LLC
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Witness ________________________ By:
- ------------------------------
Name: _________________________ Name: ____________________________
Title: _____________________________
Address: 8515 East Orchard Road
Englewood, CO 80111
Attn: Secretary
PARETO PARTNERS
Witness: ________________________ By:
- -----------------------------
Name: __________________________ Name: ___________________________
Title: ____________________________
Address: 271 Regent Street
London W1R 8PP
UK
Attn:
MAXIM SERIES FUND, INC.
Witness: ________________________ By:
- ------------------------------
Name: __________________________ Name: ____________________________
Title: _____________________________
Address: 8515 East Orchard Road
Englewood, CO 80111
Attn: Secretary
</TABLE>
<PAGE>
SCHEDULE A
Fee Scale for Maxim Global Bond Portfolio
Annual Fee Assets
.55% First $25 million
.45% Next $50 million
.35% Next $175 million
.25% Assets over $250 million
Payment to the Sub-adviser will be made monthly by the Adviser based on the
average daily net assets of the Portfolio during each month, calculated as set
forth in the then current Registration Statement of Maxim. If this Agreement is
terminated, the payment shall be prorated to the effective date of termination.
<PAGE>
Exhibit 23(e)
Principal Underwriting Agreement
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
This PRINCIPAL UNDERWRITING AGREEMENT (the "Agreement") is made this
26th day of July , 1999, by and between Maxim Series Fund, Inc. a Maryland
corporation (the "Fund") and One Orchard Equities, Inc., a Colorado corporation
(the "Distributor").
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940 (the "1940 Act") and has shares of separate
investment portfolios of the Fund (each a Portfolio, and collectively, the
"Portfolios") named in Schedule A to this Agreement and which are or will be
registered under the Securities Act of 1933 (the "1933 Act") and the securities
acts of various states and jurisdictions, as required; and
WHEREAS, the Distributor is or will be prior to acting as Distributor
of the Portfolios, registered as a broker/dealer under the provisions of the
Securities Exchange Act of 1934 and is a member in good standing of the National
Association of Securities Dealers, Inc.; and
WHEREAS, the Distributor desires to act as the principal underwriter of the
Fund;
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein provided, the Fund and Distributor hereby agree as follows:
Appointment of Underwriter. The Fund appoints the Distributor as the sales agent
for distribution of the Portfolios (other than sales made directly by the Fund)
and agrees that it will deliver to the Distributor such shares of the Portfolios
as the Distributor may sell. The Distributor agrees to use its best efforts to
promote the sale of the Portfolios, but is not obligated to sell any specific
number of shares.
<PAGE>
Independent Contractor. The Distributor will undertake and discharge its
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind the Fund by its actions, conduct or contracts,
except that the Distributor is authorized to accept orders for the purchase or
repurchase of shares of the Portfolios as agent of the Fund. The Distributor may
appoint sub-agents or distribute the Portfolios through dealers (or otherwise)
as it may determine necessary or desirable from time to time. This Agreement
shall not, however, be construed as authorizing any dealer or other person to
accept orders for sale or repurchase on behalf of the Fund or any Fund or
otherwise to act as agent of the Fund or any Portfolio for any purpose.
Offering Price. Shares of the Portfolios shall be offered for sale at a price
equivalent to their net asset value determined in the manner set forth in the
then current prospectus and statements of additional information of the Fund
relating to the Portfolios. All orders shall be subject to acceptance by the
Fund, and the Fund reserves the right, in its sole discretion, to reject any
order received. Neither the Fund nor any Portfolio shall be liable to anyone for
failure to accept any order.
Payment for Shares. At or prior to the time of delivery of any shares, the
Distributor will pay or cause to be paid to the Fund for the account of the
applicable Portfolio, an amount in cash equal to the net asset value of such
shares. In the event that the Distributor pays for shares sold by it prior to
its receipt of payment from purchasers, the Distributor is authorized to
reimburse itself for the net asset value of such shares from the offering price
of such shares when received by the Distributor.
Purchases for Your Own Account. The Distributor shall not purchase shares of any
Portfolio for its own account for purposes of resale to the public, but it may
purchase shares for its own investment account upon its written assurance to the
Fund that the purchase is for investment purposes only and that the shares will
not be resold except through redemption by the Fund.
Allocation of Expenses. The Distributor shall bear the expense of preparing,
printing and distributing advertising, sales literature, prospectuses and
statements of additional information. The Fund shall bear the expense of
registering shares of the Portfolios under the 1933 Act and the Fund under the
1940 Act, qualifying shares for sale under the blue sky laws of any state, the
preparation and printing of prospectuses, statements of additional information
and reports required to be filed with the Securities and Exchange Commission and
other authorities, the preparation, printing and mailing of prospectuses and
statements of additional information to shareholders of the Portfolios and the
direct expenses of the issuance of shares.
Furnishing of Information. The Fund will furnish to the Distributor such
information with respect to the Fund and the Portfolios in such form and signed
by such officers of the Fund as the Distributor may reasonably request, and the
Fund warrants that the statements therein contained when so signed will be true
and correct. The Fund will also furnish to the Distributor such information and
will take such action as the Distributor may reasonably request in order to
qualify the shares for sale to the public under the blue sky laws or in
jurisdictions in which the Distributor may wish to offer them. If requested by
the Distributor, the Fund will furnish to the Distributor at least annually
audited financial statements of its books and accounts certified by independent
public accountants, and such additional information regarding its financial
condition, as the Distributor may reasonably request from time to time.
Conduct of Business. Other than currently effective prospectuses and statements
of additional information, the Distributor will not issue any sales material or
statements except literature or advertising which conforms to the requirements
of federal and state securities laws and rules and regulations thereunder and
which have been filed, where necessary, with the appropriate regulatory
authorities. The Distributor will furnish to the Fund copies of all such
material prior to its use and no such material shall be published if the Fund
shall reasonably and promptly object.
The Distributor shall comply with the applicable federal and state laws and
regulations where shares of the Portfolios are offered for sale and conduct its
affairs with the Fund and with dealers, brokers or investors in accordance with
the Conduct Rules of the NASD.
Other Activities. Services provided by the Distributor pursuant to this
Agreement shall not be deemed to be exclusive, and the Distributor may render
similar services and act as an underwriter, distributor or dealer for other
investment companies.
Term of Agreement. This Agreement shall become effective on the date indicated
and shall remain in effect for a period of two (2) years from the date of this
Agreement. This Agreement shall continue annually thereafter for successive one
(1) year periods if approved at least annually (i) by a vote of a majority of
the outstanding voting securities of the Fund or by a vote of the Directors of
the Fund (the "Directors"), and (ii) by a vote of a majority of the Directors
who are parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on this Agreement.
Termination. This Agreement: (i) may be terminated at any time without the
payment of any penalty, either by vote of the Directors or by a vote of a
majority of the outstanding voting securities of the Fund, on sixty (60) days'
written notice to the Distributor; (ii) shall terminate immediately in the event
of its assignment ; and (iii) may be terminated by the Distributor on sixty (60)
days' written notice to the Fund.
Suspension of Sales. The Fund reserves the right at all times to suspend or
limit the public offering of shares upon written notice to the Distributor.
Miscellaneous. This Agreement shall be subject to the laws of the State of
Colorado and shall be interpreted and construed to further and promote the
operation of the Fund as an open-end investment company. As used herein, the
terms "net asset value," "offering price," "investment company," "open-end
investment company," "assignment," "principal underwriter," "interested person,"
and "majority of the outstanding voting securities," shall have the meanings set
forth in the 1933 Act and the 1940 Act, as applicable, and the rules and
regulations thereunder.
Liability. Nothing contained herein shall be deemed to protect the Distributor
against any liability to the Fund or to its shareholders to which the
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties hereunder, or by
reason of reckless disregard of its obligations and duties hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Englewood,
Colorado, on the day and year first written above.
MAXIM SERIES FUND, Inc.
By: /s/ J.D. Motz
Name: J.D. Motz
Title: President
ONE ORCHARD EQUITIES, INC.
By: /s/ S.H. Miller
Name: S.H. Miller
Title: President
<PAGE>
Schedule A
Maxim Money Market Portfolio
Maxim Bond Portfolio
Maxim Bond Index Portfolio
Maxim U.S. Government Securities Portfolio Maxim U.S. Government Mortgage
Securities Portfolio Maxim Short-Term Maturity Bond Portfolio Maxim Loomis
Sayles Corporate Bond Portfolio Maxim Global Bond Portfolio Maxim Ariel
Small-Cap Value Portfolio Maxim Loomis Sayles Small-Cap Value Portfolio Maxim
INVESCO Small-Cap Growth Portfolio Maxim Index 600 Portfolio Maxim Ariel MidCap
Value Portfolio Maxim T. Rowe Price MidCap Growth Portfolio Maxim Index 400
Portfolio Maxim T. Rowe Price Equity/Income Portfolio Maxim Vista Growth &
Income Portfolio Maxim Founders Growth & Income Portfolio Maxim INVESCO Balanced
Portfolio Maxim Stock Index Portfolio Maxim Value Index Portfolio Maxim Growth
Index Portfolio Maxim Templeton International Equity Portfolio Maxim INVESCO ADR
Portfolio Maxim Index European Portfolio Maxim Index Pacific Portfolio Maxim
Foreign Equity Portfolio Aggressive Profile I Portfolio Moderately Aggressive
Profile I Portfolio Moderate Profile I Portfolio Moderately Conservative Profile
I Portfolio Conservative Profile I Portfolio 401(k) Aggressive Profile II
Portfolio 401(k) Moderately Aggressive Profile II Portfolio 401(k) Moderate
Profile II Portfolio 401(k) Moderately Conservative Profile II Portfolio 401(k)
Conservative Profile II Portfolio
Exhibit 23(j)
Written Consent of Deloitte & Touche LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 64 to Registration Statement No. 2-75503 on Form N-1A of Maxim Series Fund,
Inc. of our report dated February 5, 1999 appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the references to us under the headings "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement and "Independent
Auditors" appearing in the Statement of Additional Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
July 19, 1999
