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
The S&P 500
®
Index closed at a record high on December 31st capping a 32.39% gain for
all of 2013; the strongest year since 1997. Large-caps and the Growth style led the overall market in the fourth quarter, while small caps growth stocks as measured by the Russell 2000
®
Growth
Index finished the year up 43.30% and outperformed the other eight Morningstar style boxes. The Great-West Small Cap Growth Fund rose 44.82% during 2013, outperforming the benchmark by 152 basis points.
2013 started out with better than expected economic news coupled with reasonable valuations, steady job growth, rising home prices, monetary stimulus
and improving global economic momentum which propelled equity markets higher into early May. As the year progressed into the summer months, manufacturing activity in particular showed steady reacceleration, and the overall pace of domestic growth
remained below the historical average (but still growing) and soft relative to the Federal Reserve’s expectations. This prompted the FOMC to postpone the expected reduction in quantitative easing only to reverse course in the fourth quarter.
Under this backdrop – steady economic growth, low inflation, gradually improving housing market, and accommodative monetary policy, equities flourished and small cap growth companies led the way. Inflation remained relatively controlled and
below the central bank’s domestic target.
The Fund’s shareholders benefited from positive stock selection in seven of the nine economic
sectors that the Fund invested in during the year. The returns from consumer staples, financials, healthcare and telecommunication services’ sectors were especially strong rising more than sixty percent in 2013. Additionally, the Fund owned
approximately 54 stocks that gained over 50%.
The Fund’s overweighting within the financials sector relative to the Russell 2000
®
Growth Index added value. This overweighting is atypical; however, there was abundance of investment opportunities within the sector. The key metrics for financial stocks - capital ratios, loan
growth, credit conditions, yield curve and valuations were all attractive making the sector ripe for selective stock picking. The Fund’s financial stocks rose by 62.5% versus 33.7% for the index’s financial stocks. Investments within debt
collection (Encore Capital Group, Portfolio Recovery Associates), financial services (E*Trade, eHealth), and banking (PrivateBancorp, MB Financial) were especially profitable for the Fund’s shareholders. Additionally, within the consumer
sectors investments in apparel, entertainment/media, fast casual restaurants, automotive and education also performed well during the year.
Looking
forward into 2014, the investment team believes that the companies owned in the Fund will continue to grow revenues at an above average rate, take market share, and leverage their unique disruptive products and services to exceed investor
expectations and grow earnings. The Fund’s strategic focus seeks to derive the majority of outperformance through stock selection and to minimize the impact of unintended style bias and/or macroeconomic risks. While equity valuations have
increased, they are roughly in line with 10 and 15 year medians. Stronger future economic growth is expected to provide additional tailwinds to stocks going forward, though a repeat of 2013’s performance appears unlikely.
The views and opinions in this report were current as of December 31, 2013 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 Fund’s 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.
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.
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 29, 2013 to
December 31, 2013).
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.
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual
expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s 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.
*Expenses are equal to the Fund’s annualized expense ratio of 1.10% for the Initial Class shares, multiplied by the
average account value over the period, multiplied by 186/365 days to reflect the one-half year 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.
Annual Report - December 31, 2013
GREAT-WEST FUNDS, INC.
GREAT-WEST SMALL CAP GROWTH FUND
Schedule of Investments
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount
|
|
Fair Value
|
|
|
|
|
|
|
|
Reverse Repurchase Agreements — (continued)
|
|
|
$
|
|
1,594,992
|
|
Undivided interest of 6.49% in a reverse repurchase agreement (principal amount/value $24,572,243 with a maturity value of
$24,572,257) with HSBC Securities (USA) Inc, 0.01%, dated 12/31/13 to be repurchased at $1,594,992 on 1/2/14 collateralized by a U.S. Treasury security, 0.88%, 9/15/16, with a value of
$25,063,775.
(c)
|
|
$
|
|
|
1,594,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHORT TERM INVESTMENTS — 7.22%
(Cost $6,715,752)
|
|
|
|
$
|
|
|
6,715,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS — 106.56%
(Cost $76,558,334)
|
|
$
|
|
|
|
|
99,168,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS & LIABILITIES, NET — (6.56)%
|
|
$
|
|
|
|
|
(6,105,631)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NET ASSETS — 100.00%
|
|
$
|
|
|
|
|
93,063,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
All or a portion of the security is on loan at December 31, 2013.
|
|
(b)
|
Non-income producing security.
|
|
(c)
|
Collateral received for securities on loan.
|
|
(d)
|
The rate of the reverse repurchase agreement was less than 0.01%.
|
Security classes presented herein are not necessarily
the same as those used for determining the Fund’s 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, 2013
GREAT-WEST FUNDS, INC.
Statement of Assets and Liabilities
As of December 31, 2013
|
|
|
|
|
|
|
|
|
Great-West Small
Cap Growth Fund
|
|
|
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
Investments in securities, fair value (including $6,541,902 of securities on
loan)
(a)
|
|
|
$92,452,952
|
|
|
Reverse repurchase agreements, fair value
(b)
|
|
|
6,715,752
|
|
|
Cash
|
|
|
1,048,647
|
|
|
Subscriptions receivable
|
|
|
6,674
|
|
|
Dividends receivable
|
|
|
26,959
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
100,250,984
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
Payable to investment adviser
|
|
|
88,041
|
|
|
Payable upon return of securities loaned
|
|
|
6,715,752
|
|
|
Redemptions payable
|
|
|
384,118
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
7,187,911
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
$93,063,073
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS REPRESENTED BY:
|
|
|
|
|
|
Capital stock, $0.10 par value
|
|
|
$426,967
|
|
|
Paid-in capital in excess of par
|
|
|
70,309,461
|
|
|
Net unrealized appreciation on investments
|
|
|
22,610,370
|
|
|
Accumulated net realized loss on investments
|
|
|
(283,725)
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
$93,063,073
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL STOCK:
|
|
|
|
|
|
Authorized
|
|
|
90,000,000
|
|
|
Issued and Outstanding
|
|
|
4,269,672
|
|
|
|
|
|
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE:
|
|
|
$21.80
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Cost of investments
|
|
|
$69,842,582
|
|
|
(b)
Cost of reverse repurchase agreements
|
|
|
$6,715,752
|
|
See Notes to Financial
Statements.
Annual Report - December 31, 2013
GREAT-WEST FUNDS, INC.
Statement of Operations
For the fiscal year ended December 31, 2013
|
|
|
|
|
|
|
|
|
Great-West Small
Cap Growth Fund
|
|
|
|
|
|
|
|
|
INVESTMENT INCOME:
|
|
|
|
|
|
Interest
|
|
|
$231
|
|
|
Income from securities lending
|
|
|
134,575
|
|
|
Dividends
|
|
|
237,557
|
|
|
|
|
|
|
|
|
Total Income
|
|
|
372,363
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
Management fees
|
|
|
929,287
|
|
|
Audit fees
|
|
|
20,667
|
|
|
Bank and custodian fees
|
|
|
18,926
|
|
|
Investment administration fees
|
|
|
100,579
|
|
|
Other
|
|
|
52,130
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
1,121,589
|
|
|
|
|
|
|
|
|
|
|
|
Less amount reimbursed by investment adviser
|
|
|
45,571
|
|
|
|
|
|
|
|
|
|
|
|
Net Expenses
|
|
|
1,076,018
|
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS
|
|
|
(703,655)
|
|
|
|
|
|
|
|
|
|
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
|
|
|
|
|
|
Net realized gain on investments
|
|
|
24,243,192
|
|
|
Net change in unrealized appreciation on investments
|
|
|
13,578,283
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized and Unrealized Gain on Investments
|
|
|
37,821,475
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
|
$37,117,820
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
Annual Report - December 31, 2013
GREAT-WEST FUNDS, INC.
Statement of Changes in Net Assets
For the fiscal years ended
December 31, 2013 and 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Great-West Small Cap Growth Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATIONS:
|
|
|
|
|
|
|
|
|
|
Net investment loss
|
|
|
$(703,655)
|
|
|
|
$(41,970)
|
|
|
Net realized gain on investments
|
|
|
24,243,192
|
|
|
|
11,777,107
|
|
|
Net change in unrealized appreciation on investments
|
|
|
13,578,283
|
|
|
|
3,380,629
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Net Assets Resulting from Operations
|
|
|
37,117,820
|
|
|
|
15,115,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
From return of capital
|
|
|
(485,806)
|
|
|
|
–
|
|
|
From net investment income
|
|
|
(7,204,975)
|
|
|
|
–
|
|
|
From net realized gains
|
|
|
(16,038,562)
|
|
|
|
(5,435,401)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions
|
|
|
(23,729,343)
|
|
|
|
(5,435,401)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS:
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
22,352,881
|
|
|
|
16,684,199
|
|
|
Shares issued in reinvestment of distributions
|
|
|
23,729,343
|
|
|
|
5,435,401
|
|
|
Shares redeemed
|
|
|
(74,002,979)
|
|
|
|
(25,560,769)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Net Assets Resulting from Capital Share Transactions
|
|
|
(27,920,755)
|
|
|
|
(3,441,169)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Increase (Decrease) in Net Assets
|
|
|
(14,532,278)
|
|
|
|
6,239,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS:
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
107,595,351
|
|
|
|
101,356,155
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
$93,063,073
|
|
|
|
$107,595,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS - SHARES:
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
948,857
|
|
|
|
829,698
|
|
|
Shares issued in reinvestment of distributions
|
|
|
1,094,022
|
|
|
|
273,548
|
|
|
Shares redeemed
|
|
|
(3,095,568)
|
|
|
|
(1,253,685)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Decrease
|
|
|
(1,052,689)
|
|
|
|
(150,439)
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
Annual Report - December 31, 2013
GREAT-WEST FUNDS, INC.
Financial Highlights
Selected data for a share of capital stock of the
Fund throughout the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended December 31,
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Great-West Small Cap Growth Fund - Initial Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE, BEGINNING OF YEAR
|
|
|
$20.22
|
|
|
|
$18.52
|
|
|
|
$18.63
|
|
|
|
$15.06
|
|
|
|
$11.40
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
|
|
|
(0.17)
|
(a)
|
|
|
(0.01)
|
(a)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
9.19
|
|
|
|
2.77
|
|
|
|
(0.11)
|
|
|
|
3.57
|
|
|
|
3.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total From Investment Operations
|
|
|
9.02
|
|
|
|
2.76
|
|
|
|
(0.11)
|
|
|
|
3.57
|
|
|
|
3.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS DISTRIBUTIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From return of capital
|
|
|
(0.11)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
From net investment income
|
|
|
(2.30)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
From net realized gains
|
|
|
(5.03)
|
|
|
|
(1.06)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions
|
|
|
(7.44)
|
|
|
|
(1.06)
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE, END OF YEAR
|
|
|
$21.80
|
|
|
|
$20.22
|
|
|
|
$18.52
|
|
|
|
$18.63
|
|
|
|
$15.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN
(b) (c)
|
|
|
44.82%
|
|
|
|
15.01%
|
|
|
|
(0.59%)
|
|
|
|
23.71%
|
|
|
|
32.11%
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DATA AND RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (000)
|
|
|
$93,063
|
|
|
|
$107,595
|
|
|
|
$101,356
|
|
|
|
$120,883
|
|
|
|
$93,533
|
|
|
|
|
Ratio of expenses to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before reimbursement
|
|
|
1.15%
|
|
|
|
1.11%
|
|
|
|
1.11%
|
|
|
|
1.14%
|
|
|
|
1.18%
|
|
|
|
|
After reimbursement
|
|
|
1.10%
|
|
|
|
1.09%
|
|
|
|
1.10%
|
|
|
|
1.10%
|
|
|
|
1.10%
|
|
|
|
|
Ratio of net investment loss to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before reimbursement
|
|
|
(0.77%)
|
|
|
|
(0.06%)
|
|
|
|
(0.61%)
|
|
|
|
(0.65%)
|
|
|
|
(0.78%)
|
|
|
|
|
After reimbursement
|
|
|
(0.72%)
|
|
|
|
(0.04%)
|
|
|
|
(0.60%)
|
|
|
|
(0.61%)
|
|
|
|
(0.70%)
|
|
|
|
|
Portfolio turnover rate
|
|
|
94%
|
|
|
|
64%
|
|
|
|
91%
|
|
|
|
153%
|
|
|
|
126%
|
|
|
|
|
(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)
|
Performance shown net of expenses reimbursed. Without the expense reimbursement, the return shown would have been lower.
|
See Notes to Financial
Statements.
Annual Report - December 31, 2013
GREAT-WEST FUNDS, INC.
GREAT-WEST SMALL CAP GROWTH FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Great-West Funds, Inc. (Great-West Funds), a Maryland corporation, was 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 presently consists of sixty-two funds. Interests in the Great-West Small Cap Growth Fund (the Fund) are included herein and are represented by a separate class
of beneficial interest of Great-West Funds. The investment objective of the Fund is to seek long-term capital growth. 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 Great-West Funds.
The Fund offers two share classes, referred to as Initial Class and Class L shares. This report includes
information for the Initial Class; Class L has not yet been capitalized.
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.
Security Valuation
The Fund generally
values its securities based on market prices determined at the close of regular trading on the New York Stock Exchange (NYSE) on each day the NYSE is open for trading. The net asset value of each class of the Fund’s shares is determined by
dividing the net assets attributable to each class of shares of the Fund by the number of issued and outstanding shares of each class of the Fund 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.
Short term securities purchased with less than 60 days remaining until maturity and all U.S. Treasury Bills are valued on the basis of
amortized cost, which approximates fair value. Short term securities purchased with more than 60 days remaining until maturity are valued using pricing services, or in the event a price is not available from a pricing service, may be
priced using other methodologies approved by the Board of Directors, including model pricing or pricing on the basis of quotations from brokers or dealers, and will continue to be priced until final maturity.
Foreign equity securities are generally valued using an adjusted systematic fair value price from an independent pricing service. Foreign exchange
rates are determined at a time that corresponds to the closing of the NYSE.
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. The fair value for some 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. Broker quotes are analyzed through an internal review process, which includes a review of known market conditions and other relevant data. Developments that might trigger fair value pricing could be natural
disasters, government actions or fluctuations in domestic and foreign markets.
Annual Report - December 31, 2013
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:
|
|
|
|
Domestic Common Stock
|
|
Exchange traded close or bid price.
|
|
|
|
|
Foreign Common Stock
|
|
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.
|
|
|
|
|
Short Term Investments
|
|
Maturity date, credit quality and interest rates.
|
The Fund classifies its valuations into three levels based upon the transparency of inputs to the valuation of the
Fund’s investments. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. Classification is based on the lowest level of input significant to the fair value measurement. 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.
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 Fund’s own assumptions and would be based on the best information available under the circumstances.
As of December 31, 2013, the inputs used to value the Fund’s investments are detailed in the following table. More information regarding the
sector and industry classifications, as applicable, are included in the Schedule of Investments. 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
|
|
$
|
|
|
91,055,296
|
|
|
$
|
|
|
|
|
—
|
|
|
$
|
|
|
|
|
—
|
|
|
$
|
|
|
|
|
91,055,296
|
|
|
Foreign Common Stock
|
|
|
|
|
1,397,656
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
1,397,656
|
|
|
Short Term Investments
|
|
|
|
|
—
|
|
|
|
|
|
|
|
6,715,752
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
6,715,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
|
|
92,452,952
|
|
|
$
|
|
|
|
|
6,715,752
|
|
|
$
|
|
|
|
|
0
|
|
|
$
|
|
|
|
|
99,168,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse Repurchase Agreements
The Fund may engage in reverse repurchase agreement transactions with institutions that the Fund’s investment adviser has determined are
creditworthy. The Fund will purchase securities at a specified price with an agreement to sell the securities to the same counterparty at a specified time, price and interest rate. The Fund’s custodian and/or securities lending agent receives
delivery of the underlying securities collateralizing a reverse repurchase agreement. Collateral is at least equal to the value of the repurchase obligation including interest. A reverse 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 Fund’s 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 Great-West Funds, may invest in reverse repurchase
agreement transactions and/or hold reverse repurchase agreement positions as a form of securities lending collateral, that are jointly collateralized by various U.S. Government or U.S. Government Agency securities.
Annual Report - December 31, 2013
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 and
Distributions to Shareholders
The Fund’s 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, 2013, 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 Fund’s U.S. Federal tax returns remain open
for the fiscal years ended 2010 through 2013. The statute of limitations on the Fund’s Colorado tax returns remain open for an additional year.
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 and distribution adjustments. 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.
For the year ended December 31, 2013, the Fund reclassified permanent book and tax differences of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in Capital
|
|
|
Overdistributed
Net Investment
Income
|
|
|
Accumulated Net
Realized Loss on
Investments
|
|
|
|
|
|
|
$
|
(485,806)
|
|
|
$
|
8,394,436
|
|
|
$
|
(7,908,630)
|
|
|
|
The tax character of distributions paid during the years ended December 31, 2013 and 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
2012
|
|
|
|
|
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
|
|
7,781,376
|
|
|
$
|
|
|
2,683,748
|
|
|
|
|
|
|
Long-term capital gain
|
|
|
|
|
15,462,161
|
|
|
|
|
|
2,751,653
|
|
|
|
|
|
|
Return of capital
|
|
|
|
|
485,806
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
23,729,343
|
|
|
$
|
|
|
5,435,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Report - December 31, 2013
As of December 31, 2013, the components of distributable earnings on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed ordinary income
|
|
$
|
|
|
–
|
|
|
|
|
|
|
Undistributed capital gains
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net accumulated earnings
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation on investments
|
|
|
|
|
22,326,645
|
|
|
|
|
|
|
Capital loss carryforward
|
|
|
|
|
–
|
|
|
|
|
|
|
Post-October losses
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax composition of capital
|
|
$
|
|
|
22,326,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Application of Recent Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (ASU) 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 adopted ASU No. 2011-11 for
its fiscal year beginning January 1, 2013. The adoption of ASU No. 2011-11 did not have an impact on the Fund’s financial position or the results of its operations.
In January 2013, the Financial Accounting Standards Board issued ASU No. 2013-01
“Balance Sheet (Topic 210): Clarifying the Scope of
Disclosures about Offsetting Assets and Liabilities”
(ASU No. 2013-01). ASU No. 2013-01 clarifies that the scope of ASU No. 2011-11 applies to derivatives, repurchase agreements, reverse repurchase agreements, securities
borrowing and securities lending transactions that are either offset or subject to an enforceable master netting arrangement or similar agreement. ASU No. 2013-01 was effective for fiscal years and interim periods within those years beginning
on or after January 1, 2013. The Fund adopted ASU No. 2013-01 for its fiscal year beginning January 1, 2013. The adoption of ASU No. 2013-01 did not have an impact on the Fund’s financial position or the results of its
operations.
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), a wholly-owned subsidiary of
Great-West Life & Annuity Insurance Company (GWL&A). As compensation for its services to Great-West Funds, the Adviser receives monthly compensation at the annual rate of 0.95% 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 1.10% 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 Silvant Capital Management, 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.
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. The total compensation paid to the independent directors with respect to all sixty-two funds for which they serve as directors was $318,850 for the year
ended December 31, 2013.
3. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investments (excluding all U.S. Government
securities and short-term securities) were $89,845,825 and $140,976,814, respectively. For the same period, there were no purchases or sales of long-term U.S. Government securities.
Annual Report - December 31, 2013
4. UNREALIZED APPRECIATION (DEPRECIATION)
At December 31, 2013, the U.S. Federal income tax cost basis was $76,842,059. The Fund had gross appreciation of investments in which there was an
excess of value over tax cost of $23,178,928 and gross depreciation of investments in which there was an excess of tax cost over value of $852,283 resulting in net appreciation of $22,326,645.
5. SECURITIES LOANED
The Fund has entered into a
securities lending agreement with its custodian as securities lending agent. Under the terms of the agreement the Fund receives income, recorded monthly, after deductions of other amounts payable to the securities lending agent or to the borrower
from lending transactions. In exchange for such fees, the securities lending agent 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, 2013 the Fund had securities on loan valued at $6,541,902 and received collateral of $6,715,752 for such loan which was invested in
reverse repurchase agreements collateralized by U.S. Government or U.S. Government Agency securities. The reverse 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 Fund’s securities on loan is included in the Schedule of Investments.
6. 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, 2013, 3% qualifies for the dividend received deduction available to the Fund’s corporate shareholders.
Annual Report - December 31, 2013
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 Small Cap Growth Fund (the
Fund), one of the funds of Great-West Funds, Inc. as of December 31, 2013, 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 the Fund’s 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 our audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund
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 the Fund’s 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, 2013, 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 Small Cap Growth Fund as of December 31, 2013, 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 19, 2014
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 following table
provides information about each of the Directors and executive officers of Great-West Funds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Directors*
|
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Name, Address, and Year of Birth
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Position(s) Held with Great-West Funds
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Term of Office and Length of Time
Served
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Principal
Occupation(s) During
Past 5
Years
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Number of Funds in Fund Complex Overseen by Director
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Other Directorships Held
by
Director
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Gail H. Klapper
8515 East Orchard Road, Greenwood Village, CO 80111
1943
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Independent Director
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Since 2007
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Managing Attorney, Klapper Law Firm; Member, The Colorado Forum; President, Ward Lake, Inc.; Manager, 6K Ranch, LLC
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62
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Director, Guaranty Bancorp
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Stephen G. McConahey
8515 East Orchard Road, Greenwood Village, CO 80111
1943
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Independent Director
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Since 2011
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Chairman, SGM Capital, LLC; Partner, Iron Gate Capital, LLC; Director, The IMA Financial Group, Inc.
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62
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Director, Guaranty Bancorp
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Sanford Zisman
8515 East Orchard Road, Greenwood Village, CO 80111
1939
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Lead Independent Director
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Since 1982
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Attorney, Law Firm of Zisman, Ingraham & Mong, P.C.
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62
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N/A
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Interested Directors**
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Name, Address, and Age
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Position(s) Held with Great-West Funds
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Term of Office and Length of Time
Served
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Principal
Occupation(s) During
Past 5
Years
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Number of Funds in Fund Complex Overseen by Director
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Other Directorships Held
by
Director
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Mitchell T.G. Graye
8515 East Orchard Road, Greenwood Village, CO 80111
1955
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Chairman, President & Chief Executive Officer
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Since 2000 (as Director)
Since 2008 (as Chairman)
Since 2008 (as President and Chief Executive Officer)
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President and Chief Executive Officer, Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance Company of New York, and
GWL&A Financial, Inc.; President and Chief Executive Officer, U.S. Operations, The Great-West Life Assurance Company, The Canada Life Assurance Company, Crown Life Insurance Company, and London Life Insurance Company
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62
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N/A
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Charles P. Nelson
8515 East Orchard Road, Greenwood Village, CO 80111
1961
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Director
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Since 2008
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President, Retirement Services, Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York; Chairman and
President, Advised Assets Group, LLC, EMJAY Corporation, and FASCore, LLC; Chairman, President and Chief Executive Officer, GWFS Equities, Inc.; Manager, Great-West Capital Management, LLC
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62
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N/A
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Officers
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Name, Address, and Age
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Position(s) Held with Great-West Funds
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Term of Office and Length of Time
Served
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Principal
Occupation(s) During
Past 5
Years
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Number of Funds in Fund Complex Overseen by Director
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Other Directorships Held
by
Director
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Beverly A. Byrne
8515 East Orchard Road, Greenwood Village, CO 80111
1955
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Chief Legal Counsel & Chief Compliance Officer
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Since 2004 (as Chief Compliance Officer)
Since 2011 (as Chief Legal Counsel)
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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
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N/A
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N/A
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John A. Clouthier
8515 East Orchard Road, Greenwood Village, CO 80111
1967
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Assistant Treasurer
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Since 2007
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Director, Fund Administration, Great-West Life & Annuity Insurance Company; Assistant Treasurer, Great-West Capital Management, LLC
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N/A
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N/A
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Ryan L. Logsdon
8515 East Orchard Road, Greenwood Village, CO 80111
1974
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Assistant Vice President, Counsel & Secretary
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Since 2010
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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
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N/A
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N/A
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Mary C. Maiers
8515 East Orchard Road,
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Chief Financial Officer & Treasurer
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Since 2008 (as Treasurer)
Since 2011 (as Chief
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Vice President, Investment Operations, Great-West Life & Annuity Insurance Company and Great-West Life & Annuity
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N/A
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N/A
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Greenwood Village, CO 80111
1967
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Financial Officer)
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Insurance Company of New York; Vice President and
Treasurer, GWFS Equities, Inc. and Great-West Trust Company, LLC; Chief Financial Officer & Treasurer, Great-West Capital Management, LLC; formerly Investment Operations Compliance Officer, Great-West Capital Management, LLC and Great-West
Funds
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David G. McLeod
8515 East Orchard Road, Greenwood Village, CO 80111
1962
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Managing Director
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Since 2012
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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
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N/A
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N/A
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Joel L. Terwilliger
8515 East Orchard Road, Greenwood Village, CO 80111
1968
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Assistant Chief Compliance Officer
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Since 2011
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Assistant Vice President and Associate Chief Compliance Officer, Great-West Life & Annuity Insurance Company; Associate Chief Compliance Officer &
Secretary, Advised Assets Group, LLC; Assistant Chief Compliance Officer, Great-West Capital Management, LLC
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N/A
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N/A
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*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 Great-West Capital Management, LLC, GWFS Equities, Inc. or their affiliates.
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 Fund’s web site at
http://www.greatwestfunds.com
.
Availability of Quarterly Portfolio 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 Commission’s website at
http://www.sec.gov
, and may be reviewed and copied at
the Commission’s 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 Commission’s website at
http://www.sec.gov
.
Availability of Proxy Voting Record
Information regarding how Great-West Funds voted 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 Commission’s website at
http://www.sec.gov
.
Investment Advisory Contract Approval
The death of The Honorable Paul G. Desmarais on October 8, 2013 resulted in a change in the ultimate control of Power Corporation of Canada, the
ultimate parent company of Great-West Capital Management, LLC (“GWCM”), the Fund’s investment adviser. The voting securities of Power Corporation of Canada held directly or indirectly by Mr. Desmarais were transferred to The
Desmarais Family Residuary Trust, which was created on October 8, 2013 under the Last Will and Testament of Mr. Desmarais (the “Trust”). As a result, the Trust has voting control of Power Corporation of Canada.
The transfer of voting control over Power Corporation of Canada resulted in a change of control of GWCM and, therefore, constituted an
“assignment” of the investment advisory agreement between GWCM and Great-West Funds, Inc. (the “Company”) and the sub-advisory agreement among the Company, GWCM and Silvant Capital Management, LLC (the
“Sub-Adviser”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). An investment advisory or sub-advisory agreement automatically terminates upon its “assignment” under the 1940 Act.
In order to avoid disruption of the investment management program of the Fund, the Board of Directors (the “Board”) of the Company,
including the Directors who are not interested persons of the Fund (the “Independent Directors”), at meetings held on October 16, 2013 and December 5, 2013, respectively, approved (i) an interim investment advisory agreement
(the “Interim Advisory Agreement”) between the Company and GWCM and an interim sub-advisory agreement (the “Interim Sub-Advisory Agreement”) with the Sub-Adviser (ii) a new investment advisory agreement (the “New
Advisory Agreement”) between the Company and GWCM and a new sub-advisory agreement (the “New Sub-Advisory Agreement”) with the Sub-Adviser. The same portfolio management team continues to manage the Fund’s portfolio and the
management fees, investment objectives, principal investment strategies and investment policies of the Fund remained the same.
The Interim Advisory Agreement became effective on October 8, 2013 and remains in effect for 150 days
or until shareholders of the Fund approve the New Advisory Agreement. The Interim Sub-Advisory Agreement became effective on October 8, 2013 and remained in effect until December 5, 2013 when the New
Sub-Advisory
Agreement took effect. Pursuant to the terms of an exemptive order granted by the U.S. Securities and Exchange Commission, GWCM and the Company are permitted, under certain conditions and subject
to the approval of the Board of the Company, to enter into new sub-advisory agreements with sub-advisers to the Funds without obtaining shareholder approval.
In considering the approval of the New Advisory Agreement and the New Sub-Advisory Agreement, the Board took into account certain information and
materials relating to GWCM and the Sub-Adviser that the Board had received and considered in connection with the annual evaluation of the prior investment advisory agreement (the “Prior Advisory Agreement”) between the Company and GWCM and
the prior sub-advisory agreement (the “Prior Sub-Advisory Agreement”) with the Sub-Adviser at the in-person meetings held on March 21, 2013 and April 18, 2013. The Board, including the Independent Directors, at a meeting held on
April 18, 2013 (the “Annual Meeting”), approved the continuation of the Prior Advisory Agreement between the Company and GWCM and the Prior Sub-Advisory Agreement with the Sub-Adviser. At its December 5, 2013 meeting, the Board
determined that the factors considered in connection with the Annual Meeting were applicable to its review of the New Advisory Agreement and the New Sub-Advisory Agreement.