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Share Name | Share Symbol | Market | Type |
---|---|---|---|
China Energy Recovery Inc (CE) | USOTC:CGYV | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0002 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03364
GREAT-WEST FUNDS, INC.
(Exact name of registrant as specified in charter)
8515 E. Orchard Road, Greenwood Village, Colorado 80111
(Address of principal executive offices)
M.T.G. Graye
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Greenwood Village, Colorado 80111
(Name and address of agent for service)
Registrants telephone number, including area code: (866) 831-7129
Date of fiscal year end: December 31
Date of reporting period: December 31, 2012
ITEM 1. | REPORTS TO STOCKHOLDERS |
GREAT-WEST FUNDS, INC.
Great-West Ariel Small Cap Value Fund (Initial Class and Class L)
Annual Report
December 31, 2012
This report and the financial statements attached are submitted for general information and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein is to be considered an offer of the sale of shares of the Fund. Such offering is made only by the prospectus of the Fund, which includes details as to offering price and other information.
Management Discussion
For the three months ending December 31, 2012, the companies comprising the Great-West Ariel Small Cap Value Fund (Initial Class shares) gained 4.86%, which surpassed the Russell 2000 ® Indexs 1.85% rise as well as the Russell 2000 ® Value Indexs gain of 3.22%. Meanwhile, the larger-cap stocks tracked by the S&P 500 ® Index lost 0.38%. For the year, fundamental strength eventually overcame the mid-year worries related to global macroeconomics. In 2012, the Great-West Ariel Small Cap Value Fund (Initial Class shares) surged 20.19% versus the Russell 2000 ® Indexs 16.35% return and the Russell 2000 Value Indexs 18.05% gain. The S&P 500 ® Index gained 16.00%. Since the first quarter of 2009, our portfolio has looked forward while the market has largely looked backward. That is, we have positioned the portfolio opportunistically to take advantage of the economic recovery. In 2011 this stance admittedly held the Fund back as worries trumped fundamentals, but in 2012 our positioning paid off. Specifically, both sector allocation and stock selection boosted returns past the indices. Our stock-picking in the financial services and producer durables sectors were the key highlights. For the third year in a row, the market is climbing a wall of worry. Included under that heading comes the European debt crisis, the so-called New Normal, unemployment, the sequester and debt ceiling, and so on. We take a completely different view, largely because we have a very different process. Although we certainly read as many periodicals as any investment organizationand likely many morewe do not use them to craft a portfolio from the top-down. Rather, we examine the business results of our stocks and potential holdings, discuss in detail what our management teams are seeing, and draw a very general picture from there. What we see and hear are businesses chugging along, a lot of thoughtful capital allocation strategies (strengthening balance sheets, returning cash to shareowners) and reasonable demand from end customers. Broadly speaking valuations are cheaper than usual, and the market has enough inefficiencies here and there to construct quite attractive portfolios.
The views and opinions in this report were current as of December 31, 2012 and are subject to change at any time. They are not guarantees of performance or investment results and should not be taken as investment advice. Fund holdings are subject to change at any time. Fund returns are net of fees unless otherwise noted.
Growth of $10,000
This graph compares the value of a hypothetical $10,000 investment in the Fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records) with the performance of the Funds benchmark index. Results include the reinvestment of all dividends and capital gains distributions. Past performance is no guarantee of future results. The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance does not include any fees or expenses of variable insurance contracts, individual retirement accounts (IRA(s)), qualified retirement plans or college savings programs. If such fees and expenses were included, returns would be lower.
Year |
Fund | Russell 2000 Index | ||
10,000.00 | 10,000.00 | |||
2003 |
12,924.00 | 14,725.00 | ||
2004 |
15,789.25 | 17,424.09 | ||
2005 |
15,711.88 | 18,216.89 | ||
2006 |
17,685.30 | 21,563.33 | ||
2007 |
17,244.93 | 21,224.79 |
2008 |
9,324.33 | 14,052.93 | ||
2009 |
15,496.11 | 17,871.11 | ||
2010 |
20,037.71 | 22,669.51 | ||
2011 |
17,767.44 | 21,721.92 | ||
2012 |
21,354.69 | 25,273.46 |
Note: Performance for the Class L shares may vary due to their differing fee structure. See returns table below.
Average Annual Total Returns for the Periods Ended December 31, 2012
One Year | Five Years |
Ten Years/Since Inception |
||||
Initial Class |
20.19% | 4.37% | 7.88% | |||
Class L |
20.02% | | 6.75%* |
* Since inception on July 29, 2011.
Results include the reinvestment of all dividends and capital gains distributions. Past performance is no guarantee of future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance does not include any fees or expenses of variable insurance contracts, IRAs, qualified retirement plans or college savings programs. If such fees and expenses were included, returns would be lower.
Summary of Investments by Sector as of December 31, 2012
Sector |
% of Fund Investments |
|
Communications |
13.13% | |
Consumer, Cyclical |
12.59% | |
Consumer, Non-cyclical |
19.71% | |
Energy |
4.60% | |
Financial |
22.74% | |
Industrial |
16.18% | |
Repurchase Agreements |
7.40% | |
Technology |
3.65% | |
Total |
100.00% |
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (June 30, 2012 to December 31, 2012).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning
Account Value |
Ending
Account Value |
Expenses Paid
During Period |
||||
(06/30/12) | (12/31/12) | (06/30/12 12/31/12) | ||||
Initial Class |
||||||
Actual |
$1,000.00 | $1,104.70 | $7.16* | |||
Hypothetical (5% return before expenses) |
$1,000.00 | $1,018.47 | $6.86* | |||
Class L |
||||||
Actual |
$1,000.00 | $1,103.60 | $8.52** | |||
Hypothetical (5% return before expenses) |
$1,000.00 | $1,017.17 | $8.17** |
* |
Expenses are equal to the Funds annualized expense ratio of 1.35% for the Initial Class shares, multiplied by the average account value over the period, multiplied by 185/366 days to reflect the one-half year period. |
** |
Expenses are equal to the Funds annualized expense ratio of 1.60% for the Class L shares, multiplied by the average account value over the period, multiplied by 185/366 days to reflect the investment period. |
Performance does not include any fees or expenses of variable insurance contracts, IRAs, qualified retirement plans or college savings programs, if applicable. If such fees or expenses were included, returns would be lower.
GREAT-WEST FUNDS, INC.
GREAT-WEST ARIEL SMALL CAP VALUE FUND
Schedule of Investments
As of December 31, 2012
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
GREAT-WEST ARIEL SMALL CAP VALUE FUND
Schedule of Investments
As of December 31, 2012
Principal Amount | Value | |||||||||||
Securities Lending Collateral (continued) |
||||||||||||
$ |
5,272 |
Undivided interest of 0.26% in a repurchase agreement (principal amount/value $2,001,943 with a maturity value of $2,001,961) with HSBC Securities (USA) Inc, 0.16%, dated 12/31/12, to be repurchased at $5,272 on 1/2/13, collateralized by various U.S. Government Agency Securities, 0.00% - 9.38%, 1/15/13 - 3/17/31, with a value of $2,041,993. |
$ | 5,272 | ||||||||
902 |
Undivided interest of 0.26% in a repurchase agreement (principal amount/value $345,797 with a maturity value of $345,800) with Merrill Lynch, Pierce, Fenner & Smith, 0.15%, dated 12/31/12, to be repurchased at $902 on 1/2/13, collateralized by Federal National Mortgage Association, 0.50% - 6.00%, 8/9/13 - 4/18/36, with a value of $352,713. |
902 |
(a) |
A portion or all of the security is on loan at December 31, 2012. |
(b) |
Non-income producing security. |
Security classes presented herein are not necessarily the same as those used for determining the Funds compliance with its investment objectives and restrictions, as the Fund uses additional sub-classifications, which management defines by referring to one or more widely recognized market indexes or ratings group indexes (unaudited).
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
Statement of Assets and Liabilities
As of December 31, 2012
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
Statement of Operations
For the fiscal year ended December 31, 2012
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
Statement of Changes in Net Assets
For the fiscal years ended December 31, 2012 and 2011
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
Financial Highlights
Selected data for a share of capital stock of the Fund throughout the periods indicated.
(a) |
Per share amounts are based upon average shares outstanding. |
(b) |
Performance does not include any fees or expenses of variable insurance contracts, if applicable. If such fees or expenses were included, returns would be lower. |
(c) |
Portfolio turnover is calculated at the Fund level. |
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
Financial Highlights
Selected data for a share of capital stock of the Fund throughout the periods indicated.
(a) |
Class L inception date was July 29, 2011. |
(b) |
Per share amounts are based upon average shares outstanding. |
(c) |
Performance does not include any fees or expenses of variable insurance contracts, if applicable. If such fees or expenses were included, returns would be lower. |
(d) |
Not annualized for periods less than one full year. |
(e) |
Performance shown net of distribution fees waived. Without the waiver, the return shown would have been lower. |
(f) |
Annualized. |
(g) |
Portfolio turnover is calculated at the Fund level. |
See Notes to Financial Statements.
Annual Report - December 31, 2012
GREAT-WEST FUNDS, INC.
GREAT-WEST ARIEL SMALL CAP VALUE FUND
Notes to Financial Statements
1. | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES |
Great-West Funds, Inc. (the Great-West Funds) is a Maryland corporation organized on December 7, 1981 and is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Great-West Funds changed its name from Maxim Series Fund, Inc. on September 24, 2012 and presently consists of sixty-four funds. Interests in the Great-West Ariel Small Cap Value Fund (the Fund) are included herein and are represented by a separate class of beneficial interest of the Great-West Funds. Effective September 24, 2012, Maxim Ariel Small-Cap Value Portfolios name changed to Great-West Ariel Small Cap Value Fund. The investment objective of the Fund is to seek long-term capital appreciation. The Fund is diversified as defined in the 1940 Act. The Fund is available as an investment option for insurance company separate accounts for certain variable annuity contracts and variable life insurance policies, to individual retirement account custodians or trustees, to plan sponsors of qualified retirement plans, to college savings programs, and to asset allocation funds that are a series of the Great-West Funds.
The Fund offers two share classes, referred to as Initial Class and Class L shares. All shares of the Fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, expenses (other than those attributable to a specific class) and realized and unrealized gains and losses are allocated daily to each class of shares based on the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against operations of that class.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies of the Fund.
Net Asset Value
The net asset value of each class of the Funds shares is determined by dividing the net assets attributable to each class of the Fund by the number of issued and outstanding shares of each class of the Fund on each business day.
Security Valuation
The value of assets in the Fund is determined as of the close of trading on each valuation date.
For securities that are traded on an exchange, the last sale price as of the close of business of the principal exchange will be used. If the closing price is not available, the current bid will be used. For securities that principally trade on the NASDAQ National Market System, the NASDAQ official closing price will be used.
Foreign exchange rates are determined by utilizing the New York closing rates.
Foreign securities are generally valued using an adjusted systematic fair value price from an independent pricing service.
Independent pricing services are approved by the Board of Directors and are utilized for all investment types when available. In some instances valuations from independent pricing services are not available or do not reflect events in the market between the time the market closed and the valuation time and therefore fair valuation procedures are implemented. Developments that might trigger fair value pricing could be natural disasters, government actions or fluctuations in domestic and foreign markets.
Annual Report - December 31, 2012
The following table provides examples of the inputs that are commonly used for valuing particular classes of securities. These classifications are not exclusive, and any inputs may be used to value any other security class.
Class |
Inputs |
|||
Equity Investments: |
||||
Common Stock (Domestic and Foreign) |
Exchange traded close price, bids, evaluated bids, open and close price of local exchange, exchange rates, fair values based on significant market movement and various index data. |
|||
Securities Lending Collateral (Repurchase Agreements) |
Maturity date and credit quality. |
The Fund classifies its valuations into three levels based upon the transparency of inputs to the valuation of the Funds investments. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. The three levels are defined as follows:
Level 1 Unadjusted quoted prices for identical securities in active markets.
Level 2 Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly. These may include quoted prices for similar assets in active markets. The fair value for some Level 2 securities may be obtained from pricing services or other pricing sources. The inputs used by the pricing services are reviewed quarterly or when the pricing vendor issues updates to its pricing methodologies.
Level 3 Unobservable inputs to the extent observable inputs are not available and may include prices obtained from single broker quotes. Unobservable inputs reflect the reporting entitys own assumptions and would be based on the best information available under the circumstances. Broker quotes are analyzed through an internal review process, which includes a review of known market conditions and other relevant data.
As of December 31, 2012, the inputs used to value the Funds investments are detailed in the following table. The Fund recognizes transfers between levels as of the beginning of the reporting period. There were no transfers between Levels 1, 2 and 3 during the year.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Equity Investments: |
||||||||||||||||||||||||||||||||
Domestic Common Stock |
$ | 36,969,493 | $ | | $ | | $ | 36,969,493 | ||||||||||||||||||||||||
Foreign Common Stock |
1,682,976 | | | 1,682,976 | ||||||||||||||||||||||||||||
Securities Lending Collateral |
| 3,088,943 | | 3,088,943 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total Investments (a) |
$ | 38,652,469 | $ | 3,088,943 | $ | 0 | $ | 41,741,412 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(a) | Further breakdown of the Funds sector and industry classifications is included in the Schedule of Investments. |
Risk Factors
Investing in the Fund may involve certain risks including, but not limited to, the following.
Unforeseen developments in market conditions may result in the decline of prices of, and the income generated by, the securities held by the Fund. These events may have adverse effects on the Fund such as a decline in the value and liquidity of many securities held by the Fund, and a decrease in net asset value. Such unforeseen developments may limit or preclude the Funds ability to achieve its investment objective.
Investing in stocks may involve larger price fluctuation and greater potential for loss than other types of investments. This may cause the securities held by the Fund to be subject to larger short-term declines in value.
The Fund may have elements of risk due to concentrated investments in foreign issuers located in a specific country. Such concentrations may subject the Fund to additional risks resulting from future political or economic conditions and/or possible impositions of adverse foreign governmental laws or currency exchange restrictions. Investments in securities of
Annual Report - December 31, 2012
non-U.S. issuers have unique risks not present in securities of U.S. issuers, such as greater price volatility and less liquidity.
Repurchase Agreements
The Fund may engage in repurchase agreement transactions with institutions that the Funds investment adviser has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon a Funds ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights.
The Fund, along with certain other funds of the Great-West Funds, may hold repurchase agreement positions as a form of security lending collateral, that are jointly collateralized by various U.S. Government or U.S. Government Agency securities.
Dividends
Dividends from net investment income of the Fund, if any, are declared and paid semi-annually. Income dividends are reinvested in additional shares at net asset value. Dividends from capital gains of the Fund, if any, are declared and reinvested at least annually in additional shares at net asset value.
Security Transactions
Security transactions are accounted for on the date the security is purchased or sold (trade date). Realized gains and losses from investments sold are determined on the basis of the first-in, first-out method (FIFO).
Dividend income for the Fund is accrued as of the ex-dividend date and interest income, including amortization of discounts and premiums, is recorded daily.
Federal Income Taxes
The Funds policy complies with the requirements under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and the Fund intends to distribute substantially all of its net taxable income and net capital gains, if any, each year. The Fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income taxes or excise tax provision is required.
As of and during the year ended December 31, 2012, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Fund did not incur any interest or penalties.
The Fund files U.S. Federal and Colorado tax returns. The statute of limitations on the Funds U.S. Federal tax returns remain open for the fiscal years ended 2009 through 2012. The statute of limitations on the Funds Colorado tax returns remain open for an additional year.
Application of Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board issued ASU No. 2011-03 Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (ASU No. 2011-03). ASU No. 2011-03 removes from the assessment of effective control the criterion requiring a transferor to have the ability to repurchase or redeem the financial assets transferred in a repurchase arrangement. This requirement was one of the criterions under ASU topic 860 that entities used to determine whether a transferor maintained effective control. Entities are still required to consider all the effective control criterion under ASU topic 860; however, the elimination of this requirement may lead to more conclusions that a repurchase agreement should be accounted for as a secured borrowing rather than a sale. ASU No. 2011-03 is effective for the interim or annual periods beginning on or after December 15, 2011. The Fund adopted ASU No. 2011-03 for its fiscal year beginning January 1, 2012. The adoption of ASU No. 2011-03 did not have an impact on the Funds financial position or the results of its operations.
Annual Report - December 31, 2012
In May 2011, the Financial Accounting Standards Board issued ASU No. 2011-04 Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs (ASU No. 2011-04). ASU No. 2011-04 does not extend the use of the existing concept or guidance regarding fair value. It results in common fair value measurements and disclosures between accounting principles generally accepted in the United States and those of International Financial Reporting Standards. ASU No. 2011-04 expands disclosure requirements for Level 3 inputs to include a quantitative description of the unobservable inputs used, a description of the valuation process used and a qualitative description about the sensitivity of the fair value measurements. ASU No. 2011-04 is effective for interim or annual periods beginning on or after December 15, 2011. The Fund adopted ASU No. 2011-04 for its fiscal year beginning January 1, 2012. The adoption of ASU No. 2011-04 did not have an impact on the Funds financial position or the results of its operations.
In December 2011, the Financial Accounting Standards Board issued ASU No. 2011-11 Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU No. 2011-11). ASU No. 2011-11 requires an entity to enhance disclosures about financial and derivative instrument offsetting arrangements or similar arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11 is effective for interim or annual periods beginning on or after January 1, 2013. The Fund will adopt ASU No. 2011-11 for its fiscal year beginning January 1, 2013. At this time, the Fund is evaluating the impact, if any, of ASU No. 2011-11 on the financial statements and related disclosures.
2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Great-West Funds has entered into an investment advisory agreement with Great-West Capital Management, LLC (the Adviser), formerly known as GW Capital Management, LLC, a wholly-owned subsidiary of GWL&A. As compensation for its services to Great-West Funds, the Adviser receives monthly compensation at the annual rate of 1.00% of the average daily net assets of the Fund. However, the Adviser is required by contract to reimburse the Fund for any expenses which exceed an annual rate, including management fees, of 1.35% of the average daily net assets of the Fund. Expenses incurred by Great-West Funds, which are not Fund specific, are allocated based on relative net assets or other appropriate allocation methods. The Adviser and Great-West Funds have entered into a sub-advisory agreement with Ariel Investments, LLC. The Fund is not responsible for payment of the sub-advisory fees.
GWFS Equities, Inc. (the Distributor), is a wholly-owned subsidiary of GWL&A and the principal underwriter to distribute and market the Fund. The Fund has entered into a plan of distribution which provides for compensation for distribution of Class L shares and for providing or arranging for the provision of services to Class L shareholders. The distribution plan provides for a maximum fee equal to an annual rate of 0.25% of the average daily net assets of the Class L shares. The Distributor has agreed to voluntarily waive all 12b-1 fees attributable to Class L shares purchased by the Adviser in consideration for the Adviser providing initial capital to the Fund. The amount waived, if any, is reflected in the Statement of Operations.
The total compensation paid to the independent directors with respect to all sixty-four funds for which they serve as Directors was $238,800 for the year ended December 31, 2012. Certain officers of Great-West Funds are also directors and/or officers of GWL&A or its subsidiaries. No officer or interested director of Great-West Funds receives any compensation directly from Great-West Funds.
3. | PURCHASES AND SALES OF INVESTMENT SECURITIES |
For the year ended December 31, 2012, the aggregate cost of purchases and proceeds from sales of investment securities (excluding all U.S. Government securities and short-term securities) were $7,761,251 and $14,070,041, respectively. For the same period, there were no purchases or sales of long-term U.S. Government securities.
4. | UNREALIZED APPRECIATION (DEPRECIATION) |
At December 31, 2012, the U.S. Federal income tax cost basis was $35,041,488. The Fund had gross appreciation of securities in which there was an excess of value over tax cost of $9,816,069 and gross depreciation of securities in which there was an excess of tax cost over value of $3,116,145 resulting in net appreciation of $6,699,924.
Annual Report - December 31, 2012
5. | SECURITIES LOANED |
The Fund has entered into a securities lending agreement with its custodian. Under the terms of the agreement the Fund receives income, recorded monthly, after deductions of other amounts payable to the custodian or to the borrower from lending transactions. In exchange for such fees, the custodian is authorized to loan securities on behalf of the Fund against receipt of cash collateral at least equal in value at all times to the value of the securities loaned plus accrued interest. The Fund also continues to receive interest or dividends on the securities loaned. Cash collateral is invested in securities approved by the Board of Directors. The Fund bears the risk of any deficiency in the amount of collateral available for return to a borrower due to a loss in an approved investment. As of December 31, 2012 the Fund had securities on loan valued at $2,993,012 and received collateral of $3,088,943 for such loan which was invested in repurchase agreements collateralized by U.S. Government or U.S. Government Agency securities. The repurchase agreements can be jointly purchased with other lending agent clients and in the event of a default by the counterparty, all lending agent clients would share ratably in the collateral. Additional information regarding the Funds securities on loan is included in the Schedule of Investments.
6. | DISTRIBUTIONS TO SHAREHOLDERS |
Net investment income (loss) and net realized gain (loss) for federal income tax purposes may differ from those reported on the financial statements because of temporary and permanent book and tax basis differences. The differences may include but are not limited to the following: wash sales, distribution adjustments, adjustments to the accounting treatment of partnerships, adjustments for Passive Foreign Investment Corporation securities and adjustments for Real Estate Investment Trust securities. The differences have no impact on net assets or the results of operations. The character of dividends and distributions made during the fiscal year from net investment income and/or realized gains may differ from their ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.
The tax character of distributions paid during the years ended December 31, 2012 and 2011 were as follows:
2012 | 2011 | |||||||||||||
Distributions paid from: |
||||||||||||||
Ordinary Income |
$ | 209,586 | $ | | ||||||||||
|
|
|
|
|||||||||||
$ | 209,586 | $ | 0 | |||||||||||
|
|
|
|
As of December 31, 2012, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income |
$ | 2,237 | ||||||
Undistributed capital gains |
| |||||||
|
|
|||||||
Net accumulated earnings |
2,237 | |||||||
|
|
|||||||
Net unrealized appreciation on investments |
6,699,924 | |||||||
Capital loss carryforward |
(48,933,511) | |||||||
Post-October losses |
| |||||||
|
|
|||||||
Tax composition of capital |
$ | (42,231,350) | ||||||
|
|
Under the Regulated Investment Company Modernization Act of 2010, net capital losses realized in taxable years beginning after December 22, 2010 may be carried forward indefinitely, and the character of the losses is retained as short-term and/or long-term. For the year ended December 31, 2012, the Fund utilized $3,362,662 and had the following capital loss carryforwards available for federal income tax purposes:
Pre-Enactment |
Post-Enactment Unused |
|||||||||||||||||
Unused | Expiraton Date | Short-Term | Long-Term | |||||||||||||||
$ | (40,386,960) | 2017 | $ | | $ | | ||||||||||||
$ | (8,546,551) | 2018 | $ | | $ | |
Annual Report - December 31, 2012
7. | TAX INFORMATION (unaudited) |
Dividends paid by the Fund from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Of the ordinary income distributions declared for the year ended December 31, 2012, 100% qualifies for the dividend received deduction available to the Funds corporate shareholders.
Annual Report - December 31, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Great-West Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Great-West Ariel Small Cap Value Fund (formerly, Maxim Ariel Small-Cap Value Portfolio), one of the funds of Great-West Funds, Inc. (formerly, Maxim Series Fund, Inc.) (the Great-West Funds) as of December 31, 2012, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of Great-West Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. Great-West Funds is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Great-West Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Great-West Ariel Small Cap Value Fund of Great-West Funds, Inc. as of December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
February 22, 2013
Fund Directors and Officers
Great-West Funds, Inc. (Great-West Funds) is organized under Maryland law, and is governed by the Board of Directors (the Board). The Board is responsible for overall management of Great-West Funds business affairs. The Board meets at least four times during the year to, among other things, review a wide variety of matters affecting Great-West Funds, including performance, compliance matters, advisory fees and expenses, service providers, and other business affairs. Each Director oversees 64 funds, each of which is a series of Great-West Funds. The business address of each Director and officer is 8515 East Orchard Road, Greenwood Village, Colorado 80111. The following table provides information about each of the Directors and executive officers of Great-West Funds.
Village, CO 80111
1961 |
LLC, EMJAY Corporation, and FASCore, LLC; Chairman, President and Chief Executive Officer, GWFS Equities, Inc.; Manager, Great-West Capital Management, LLC
|
|||||||||
Officers
|
||||||||||
Name, Address, and Age |
Position(s) Held with Great-West Funds |
Term of
Office and Length of Time Served |
Principal Occupation(s)
During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Director |
Other
Directorships Held by Director |
|||||
Beverly A. Byrne
8515 East Orchard Road, Greenwood Village, CO 80111
1955 |
Chief Legal Counsel & Chief Compliance Officer |
Since 2004
(as Chief Compliance Officer)
Since 2011 (as Chief Legal Counsel) |
Chief Compliance Officer, Chief Legal Counsel, Financial Services, Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York; Chief Compliance Officer, U.S. Operations, The Great-West Life Assurance Company, The Canada Life Assurance Company, Crown Life Insurance Company, and London Life Insurance Company; Secretary and Chief Compliance Officer, GWFS Equities, Inc.; Chief Compliance Officer, Advised Assets Group, LLC; Chief Legal Officer and Secretary, FASCore, LLC; Chief Legal Counsel & Chief Compliance Officer, Great-West Capital Management, LLC; formerly, Secretary, Great-West Capital Management, LLC and Great-West Funds
|
N/A | N/A |
John A. Clouthier
8515 East Orchard Road, Greenwood Village, CO 80111
1967
|
Assistant Treasurer |
Since 2007 | Director, Fund Administration, Great-West Life & Annuity Insurance Company; Assistant Treasurer, Great-West Capital Management, LLC | N/A | N/A | |||||
Jill A. Kerschen
8515 East Orchard Road, Greenwood Village, CO 80111
1975
|
Assistant Treasurer |
Since 2008 | Senior Manager, Fund Financial & Tax Reporting, Great-West Life & Annuity Insurance Company; Assistant Treasurer, Great-West Capital Management, LLC | N/A | N/A | |||||
Ryan L. Logsdon 8515 East Orchard Road, Greenwood Village, CO 80111
1974 |
Assistant Vice President, Counsel & Secretary |
Since 2010 |
Assistant Vice President & Counsel, Great-West Life & Annuity Insurance Company; Assistant Vice President, Counsel & Secretary, Great-West Capital Management, LLC; formerly, Assistant Secretary, Great-West Capital Management, LLC and Great-West Funds
|
N/A | N/A | |||||
Mary C. Maiers
8515 East Orchard Road, Greenwood Village, CO 80111 |
Chief Financial Officer & Treasurer |
Since 2008
(as Treasurer)
Since 2011
|
Vice President, Investment Operations, Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York; Vice President and Treasurer, GWFS Equities, Inc. and Great-West Trust Company, LLC; Chief Financial | N/A | N/A |
1967 |
Officer & Treasurer, Great-West Capital Management, LLC; formerly Investment Operations Compliance Officer, Great-West Capital Management, LLC and Great-West Funds
|
|||||||||
David G. McLeod
8515 East Orchard Road, Greenwood Village, CO 80111
1962
|
Managing Director |
Since 2012 | Senior Vice President, Product Management, Great-West Life & Annuity Insurance Company; Manager, Vice President and Managing Director, Advised Assets Group, LLC; Managing Director, Great-West Capital Management, LLC | N/A | N/A | |||||
Joel L. Terwilliger
8515 East Orchard Road, Greenwood Village, CO 80111
1968
|
Assistant Chief Compliance Officer |
Since 2011 | Managing Counsel, Great-West Life & Annuity Insurance Company; Secretary, Advised Assets Group, LLC; Assistant Chief Compliance Officer, Great-West Capital Management, LLC | N/A | N/A |
* A Director who is not an interested person of Great-West Funds (as defined in the Investment Company Act of 1940, as amended) is referred to as an Independent Director.
** An Interested Director refers to a Director who is an interested person of Great-West Funds (as defined in the Investment Company Act of 1940, as amended) by virtue of their affiliation with either Great-West Funds or Great-West Capital Management, LLC.
Additional information about Great-West Funds and its Directors is available in the Great-West Funds Statement of Additional Information (SAI), which can be obtained free of charge upon request to: Secretary, Great-West Funds, Inc., 8525 East Orchard Road, Greenwood Village, Colorado 80111; (866) 831-7129. The SAI is also available on the Funds web site at http://www.greatwestfunds.com .
Availability of Quarterly Fund Schedule
Great-West Funds files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Great-West Funds Forms N-Q are available on the Commissions website at http://www.sec.gov , and may be reviewed and copied at the Commissions Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that Great-West Funds uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-866-831-7129, and on the Securities and Exchange Commissions website at http://www.sec.gov .
Availability of Proxy Voting Record
Information regarding how Great-West Fundsvoted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-866-831-7129, and on the Securities and Exchange Commissions website at http://www.sec.gov .
ITEM 2. | CODE OF ETHICS. |
(a) |
As of the end of the period covered by this report, the registrant has adopted a Code of Ethics (the Code of Ethics) that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(b) |
For purposes of this Item, code of ethics means written standards that are reasonably designed to deter wrongdoing and to promote: |
(1) |
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
(2) |
Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant; |
(3) |
Compliance with applicable governmental laws, rules, and regulations; |
(4) |
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and |
(5) |
Accountability for adherence to the code. |
(c) |
During the period covered by this report, there have been no substantive amendments made to the registrants Code of Ethics. |
(d) |
During the period covered by this report, the registrant has not granted any express or implicit waivers from the provisions of the Code of Ethics. |
(f) |
A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR. |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Mr. Sanford Zisman is the audit committee financial expert and is independent, pursuant to general instructions on Form N-CSR, Item 3.
An audit committee financial expert is not an expert for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an audit committee financial expert. Further, the designation of a person as an audit committee financial expert does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the audit committee financial expert designation. Similarly, the designation of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the Audit Committee or Board of Directors.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a) |
Audit Fees . The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrants annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were: $610,000 for fiscal year 2011 and $638,600 for fiscal year 2012. |
(b) |
Audit-Related Fees . The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrants financial statements and are not reported under paragraph (a) of this Item were: $79,500 for fiscal year 2011 and $79,500 for fiscal year 2012. The nature of the services comprising the fees disclosed under this category involved performance of 17f-2 (self-custody) audits and administrative services related to the audit. |
(c) |
Tax Fees . The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were: $263,400 for fiscal year 2011 and $0 for fiscal year 2012. The nature of the services comprising the fees disclosed under this category involved tax return preparation, spillover dividend assistance, reconciliation of book capital accounts, and dividend assistance. |
(d) |
All Other Fees . There were no fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. |
(e) (1) |
Audit Committees Pre-Approval Policies and Procedures . |
Pre-Approval of Audit Services. The Audit Committee must approve prior to retention all audit, review or attest engagements required under the securities laws that are provided
to Great-West Funds by its independent auditors. The Audit Committee will not grant such approval to any auditors that are proposed to perform an audit for Great-West Funds if a chief executive officer, controller, chief financial officer, chief accounting officer or any person serving in an equivalent position for Great-West Funds that is responsible for the financial reporting or operations of Great-West Funds was employed by those auditors and participated in any capacity in an audit of Great-West Funds during the year period (or such other period proscribed under SEC rules) preceding the date of initiation of such audit.
Pre-Approval of Non-Audit Services. The Audit Committee must pre-approve any non-audit services, including tax services, to be provided to the Fund by its independent auditors (except those within applicable de minimis statutory or regulatory exceptions) 1 provided that Great-West Funds auditors will not provide the following non-audit services to Great-West Funds: (a) bookkeeping or other services related to the accounting records or financial statements of Great-West Funds; (b) financial information systems design and implementation; (c) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (d) actuarial services; (e) internal audit outsourcing services; (f) management functions or human resources; (g) broker-dealer, investment adviser, or investment banking services; (h) legal services; (i) expert services unrelated to the audit; and (j) any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. 2
Pre-approval with respect to Non-Fund Entities. The Audit Committee must pre-approve any non-audit services that relate directly to the operations and financial reporting of Great-West Funds (except those within applicable de minimis statutory or regulatory exceptions) 3 to be provided by Great-West Funds auditors to (a) Great-West Funds investment adviser; and (b) any entity controlling, controlled by, or under common control with the investment adviser if that entity provides ongoing services to Great-West
1 No pre-approval is required as to non-audit services provided to Great-West Funds if: (a) the aggregate amount of all non-audit services provided to Great-West Funds constitute not more than 5% of the total amount of revenues paid by Great-West Funds to the independent auditors during the fiscal year in which the services are provided; (b) these services were not recognized by Great-West Funds at the time of the engagement to be non-audit services; and (c) the services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.
2 With respect to the prohibitions on (a) bookkeeping; (b) financial information systems design and implementation; (c) appraisal, valuation, fairness opinions, or contribution-in-kind reports; (d) actuarial; and (e) internal audit outsourcing, such services are permitted to be provided if it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit clients financial statements.
3 For non-audit services provided to the adviser and entities in a control relationship with the adviser, no pre-approval is required if: (a) the aggregate amount of all non-audit services provided constitute not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the services are provided to Great-West Funds, Great-West Funds investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser if that entity provides ongoing services to Great-West Funds; (b) these services were not recognized by Great-West Funds at the time of the engagement to be non-audit services; and (c) the services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.
Funds. 4 The Audit Committee may approve audit and non-audit services on a case-by-case basis or adopt pre-approval policies and procedures that are detailed as to a particular service, provided that the Audit Committee is informed promptly of each service, or use a combination of these approaches.
Delegation. The Audit Committee may delegate pre-approval authority to one or more of the Audit Committees members. Any member or members to whom such pre-approval authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
(e) |
(2) 100% of the services described pursuant to paragraphs (b) through (d) of this Item 4 of Form N-CSR were approved by the Audit Committee, and no such services were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) |
Not Applicable. |
(g) |
The aggregate non-audit fees billed by the registrants accountant for services rendered to the registrant, and rendered to the registrants investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for fiscal year 2011 equaled $2,329,700 and for fiscal year 2012 equaled $1,680,600. |
(h) |
The registrants Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrants investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountants independence. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | INVESTMENTS. |
(a) |
The schedule is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) |
Not applicable. |
4 No pre-approval is required by the Audit Committee as to non-audit services provided to any Great-West Funds sub-adviser that primarily provides portfolio management services and is under the direction of another investment adviser and is not affiliated with Grea-West Funds primary investment adviser.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrants board of directors as described in general instructions on Form N-CSR, Item 10.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) |
The registrants principal executive officer and principal financial officer have concluded, based upon their evaluation of the registrants disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures provide reasonable assurance that material information required to be disclosed by the registrant in the report it files or submits on Form N-CSR is recorded, processed, summarized and reported, within the time periods specified in the commissions rules and forms and that such material information is accumulated and communicated to the registrants management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions regarding required disclosure. |
(b) |
The registrants principal executive officer and principal financial officer are aware of no changes in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a) |
(1) Code of Ethics required by Item 2 of Form N-CSR is filed herewith. |
(2) A separate certification for each principal executive and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto.
(3) Not applicable.
(b) A separate certification for each principal executive and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREAT-WEST FUNDS, INC. | ||
By: | /s/ M.T.G. Graye | |
M.T.G. Graye | ||
President and Chief Executive Officer | ||
Date: | February 26, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ M.T.G. Graye | |
M.T.G. Graye | ||
President and Chief Executive Officer | ||
Date: | February 26, 2013 | |
By: | /s/ M.C. Maiers | |
M.C. Maiers | ||
Chief Financial Officer & Treasurer | ||
Date: | February 26, 2013 |
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