<PAGE> 1
As Filed with the Securities and Exchange Commission on April 30, 1998.
Registration No. 33--28888
811-5816
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Securities and Exchange Commission
Washington, D.C. 20549
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FORM N-1A
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 11
and/or
Registration Statement Under The Investment Company Act Of 1940
Amendment No. 12
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CANADA LIFE OF AMERICA SERIES FUND, INC.
(Exact Name of Registrant)
330 UNIVERSITY AVENUE
TORONTO, CANADA M5G 1R8
(Address of Principal Executive Office)
Registrant's Telephone Number: (416) 597-1456
Roy W. Linden
330 University Avenue
Toronto, Canada M5G 1R8
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill, & Brennan, LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
___ on May 1, 1998 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
___ on pursuant to _________ paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on ________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate check the following box:
___ this Post-Effective Amendment designates a new effective
date for a new effective date for a previously filed
Post-Effective Amendment.
Title of Securities Being Registered:
Common Stock of:
Canada Life of America Series Fund, Inc.
Money Market Portfolio
Bond Portfolio
Value Equity Portfolio
Managed Portfolio
Capital Portfolio
International Portfolio
<PAGE> 2
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Showing Location In Part A (Prospectus) And
Part B (Statement of Additional Information) of Registration
Statement of Information Required By Form N-1A
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PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-1A PROSPECTUS CAPTION
- ----------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Synopsis
3. Condensed Financial Information CONDENSED FINANCIAL INFORMATION
4. General Description Of Registrant INTRODUCTION; THE FUND; INVESTMENT OBJECTIVES, POLICIES AND
RISKS; INVESTMENT RESTRICTIONS; DESCRIPTION OF CERTAIN
INVESTMENT PRACTICES
5. Management of the Fund MANAGEMENT OF THE FUND
6. Capital Stock and Other Securities CAPITAL STOCK AND SHAREHOLDER INFORMATION; DIVIDENDS; TAXES
7. Purchase of Securities Being Offered PURCHASES AND REDEMPTION OF SHARES; VALUATION OF SHARES
8. Redemption or Repurchase PURCHASE AND REDEMPTION OF SHARES
9. Pending Legal Proceedings LEGAL PROCEEDINGS
PART B
<CAPTION>
ITEM OF FORM N-1A STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ----------------- -------------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents TABLE OF CONTENTS
12. General Information and History See Prospectus - THE FUND
13. Investment Objectives and Policies INVESTMENT POLICIES; INVESTMENT PRACTICES; INVESTMENT
RESTRICTIONS; SERIES TURNOVER
14. Management Of The Fund MANAGEMENT OF THE FUND - Directors And Officers
15. Control Persons And Principal Holders Of Securities Not Applicable
16. Investment Advisory And Other Services MANAGEMENT OF THE FUND - Custodian, Accounting Services,
Investment Adviser, Sub-Adviser, Advisory Fees And Expenses,
Investment Advisory Agreement, Sub-Advisory Agreement, and
Securities Activities Of The Adviser And Sub-Adviser; GENERAL
INFORMATION -
</TABLE>
Page 2
<PAGE> 3
<TABLE>
<S> <C>
Financial Statements
17. Brokerage Allocation MANAGEMENT OF THE FUND - Series Transactions And Brokerage
18. Capital Stock And Other Securities GENERAL INFORMATION - Capital Stock
19. Purchase, Redemption and Pricing PURCHASE AND REDEMPTION OF SHARES; DETERMINATION OF NET ASSET
VALUE
20. Tax Status TAXES
21. Underwriters PURCHASE AND REDEMPTION OF SHARES
22. Calculation Of Performance Data SERIES TURNOVER; INVESTMENT EXPERIENCE INFORMATION
23. Financial Statements GENERAL INFORMATION - Financial Statements
</TABLE>
Page 3
<PAGE> 4
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
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CANADA LIFE OF AMERICA SERIES FUND, INC.
ADMINISTRATIVE OFFICE: 6201 Powers Ferry Road, NW, Atlanta, GA 30339
PHONE: 1-800-905-1959
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PROSPECTUS FOR FUND
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Canada Life of America Series Fund, Inc. (The "Fund"), is a diversified open-end
management investment company, commonly known as a mutual fund. Shares of the
Fund are not offered directly to the public, but are sold only to insurance
companies and their separate accounts. The Fund is intended to meet a wide range
of investment objectives by dividing its assets and liabilities into six
different portfolios: Money Market Portfolio; Bond Portfolio; Value Equity
Portfolio; Managed Portfolio; Capital Portfolio; and International Equity
Portfolio. Each portfolio generally operates as a separate fund and issues its
own shares.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks the highest possible level of current income
consistent with preservation of capital and liquidity by investing in money
market instruments maturing in thirteen months or less.
BOND PORTFOLIO
The Bond Portfolio seeks as high a level of current income and capital
appreciation as is consistent with preservation of principal, by investing
primarily in fixed income debt instruments.
VALUE EQUITY PORTFOLIO
The Value Equity Portfolio seeks long-term growth of capital and income by
investing in equity securities which are believed to have appreciation
potential.
MANAGED PORTFOLIO
The Managed Portfolio seeks as high a level of return as possible through
capital appreciation and income, consistent with prudent investment risk and
preservation of capital, by investing in equities, fixed income debt instruments
and money market instruments.
CAPITAL PORTFOLIO
The Capital Portfolio seeks capital appreciation, not current income, by
investing in common stocks and securities convertible into or exchangeable for
common stocks, in common stock purchase warrants, in debt securities and in
preferred stocks believed to provide capital appreciation opportunities.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks long-term capital appreciation by
investing in equity or equity type securities of companies located outside of
the United States.
The investment objectives of each portfolio are not fundamental policies and may
be changed without shareholder approval. There can be no assurance that any
portfolio will achieve its objectives or that the Money Market Portfolio will be
able to maintain a stable net asset value of $10.00 per share. An investment in
the Money Market Portfolio is neither insured nor guaranteed by the U.S.
Government.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. PLEASE READ THIS PROSPECTUS
CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. A Statement of Additional
Information dated May 1, 1998, which contains further information about the
Fund, has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. A copy of the Statement of
Additional Information may be obtained without charge by writing or calling us
at the address or phone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE AVAILABLE AND ARE BEING MARKETED EXCLUSIVELY AS A POOLED
FUNDING VEHICLE FOR CERTAIN LIFE INSURANCE COMPANIES ISSUING VARIABLE POLICIES.
THIS PROSPECTUS SHOULD BE ACCOMPANIED BY A CURRENT PROSPECTUS OR INFORMATION
STATEMENT FOR THE CORRESPONDING VARIABLE POLICY. BOTH DOCUMENTS SHOULD BE READ
CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THE SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED.
THEY ARE SUBJECT TO MARKET FLUCTUATION, REINVESTMENT RISK AND POSSIBLE LOSS OF
PRINCIPAL INVESTED.
The date of this Prospectus is May 1, 1998.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
CONDENSED FINANCIAL INFORMATION.........................................................................................3
THE FUND................................................................................................................9
INVESTMENT OBJECTIVES, POLICIES AND RISKS...............................................................................9
Money Market Portfolio...........................................................................................9
Bond Portfolio..................................................................................................10
Value Equity Portfolio..........................................................................................11
Managed Portfolio...............................................................................................11
Capital Portfolio...............................................................................................12
International Equity Portfolio..................................................................................13
INVESTMENT RESTRICTIONS................................................................................................14
DESCRIPTION OF CERTAIN INVESTMENT PRACTICES............................................................................14
When-Issued Securities..........................................................................................14
Loans of Portfolio Securities...................................................................................15
Put And Call Options............................................................................................15
Stock Index Futures, Options On Stock Index Futures, And Stock Index Options....................................15
International Investments.......................................................................................16
Currency Hedging................................................................................................17
Repurchase Agreements...........................................................................................17
MANAGEMENT OF THE FUND.................................................................................................17
Investment Adviser..............................................................................................17
Capital Portfolio Sub-Adviser...................................................................................18
International Equity Portfolio Sub-Adviser......................................................................18
Advisory Fees And Expenses......................................................................................19
Custodian.......................................................................................................19
Transfer Agent And Dividend Disbursing Agent....................................................................19
CAPITAL STOCK AND SHAREHOLDER INFORMATION..............................................................................19
PERFORMANCE INFORMATION................................................................................................20
PURCHASES AND REDEMPTIONS OF SHARES....................................................................................22
VALUATION OF SHARES....................................................................................................22
DIVIDENDS..............................................................................................................22
TAXES..................................................................................................................22
LEGAL PROCEEDINGS......................................................................................................23
REGISTRATION STATEMENT.................................................................................................23
</TABLE>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND OR THE INVESTMENT ADVISER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
2
<PAGE> 7
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The following information for the Money Market, Managed, Bond, Value Equity,
Capital, and International Equity Portfolios has been audited by Ernst & Young
LLP, whose unqualified report thereon for the five year period ended December
31, 1997 and other financial statements of these Portfolios are included in the
Statement of Additional Information. The Capital Portfolio commenced operations
on May 1, 1993 and the International Equity Portfolio commenced operations on
May 1, 1995.
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from Investment Operations
Net Investment Income 0.48 0.45 0.49 0.34
Net Gains or Losses on Securities
(both realized and unrealized) 0.00 0.00 0.00 0.00
Total From Investment Operations 0.48 0.45 0.49 0.34
Less Distributions
Dividends (from net investment (0.48) (0.45) (0.49) (0.34)
income)
Distributions (from capital gains) 0.00 0.00 0.00 0.00
Returns of Capital 0.00 0.00 0.00 0.00
Total Distributions (0.48) (0.45) (0.49) (0.34)
Net Asset Value, End of Period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Total Return 4.95% 4.58% 4.95% 3.40%
Ratios/Supplemental Data
Net Assets, End of Period $9,149,393 $ 7,599,213 $ 4,608,718 $5,057,319
Ratio of Expenses to Average Net Assets* 0.75%** 0.75% 0.75% 0.75%
Ratio of Net Investment Income to 4.78% 4.54% 4.98% 3.43%
Average Net
Assets*
Portfolio Turnover Rate --
<CAPTION>
Period
Year Ended Year Ended Year Ended Year Ended 12/4/89 to
12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 *
Income from Investment Operations
Net Investment Income 0.23 0.27 0.52 0.68 0.05
Net Gains or Losses on Securities
(both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
Total From Investment Operations 0.23 0.27 0.52 0.68 0.05
Less Distributions
Dividends (from net investment (0.23) (0.27) (0.52) (0.68) (0.05)
income)
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
Returns of Capital 0.00 0.00 0.00 0.00 0.00
Total Distributions (0.23) (0.27) (0.52) (0.68) (0.05)
Net Asset Value, End of Period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Total Return 2.29% 2.71% 5.25% 6.76% 7.12% ***
Ratios/Supplemental Data
Net Assets, End of Period $ 4,513,726 $ 2,728,842 $ 2,250,519 $ 2,095,711 $ 2,000,000
Ratio of Expenses to Average Net Assets* 0.75% 0.92% 1.25% 1.25% 1.25% ***
Ratio of Net Investment Income to 2.29% 2.81% 4.80% 6.78% 6.90% ***
Average Net
Assets*
Portfolio Turnover Rate
* The Fund commenced operations on December 4, 1989.
** Absent the reimbursement of the Fund's expenses, the Money Market Portfolio expenses would have been 1.16 %.
*** 1989 amounts annualized from December 4, 1989.
</TABLE>
3
<PAGE> 8
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(Continued)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.80 $ 12.37 $ 12.01 $ 12.77 $ 12.14 $ 11.59
$
Income from Investment Operations
Net Investment Income 0.34 0.32 0.40 0.32 0.31 0.35
Net Gains or Losses on Securities 1.66 0.27 2.38 (0.39) 0.74 0.65
(realized and unrealized)
Total From Investment Operations 2.00 0.59 2.78 (0.07) 1.05 1.00
Less Distributions
Dividends (from net investment (0.34) (0.32) (0.41) (0.32) (0.31) (0.35)
income)
Distributions (from capital gains) (1.01) (0.84) (2.01) (0.37) (0.11) (0.10)
Returns of Capital 0.00 0.00 0.00 0.00 0.00 0.00
Total Distributions (1.35) (1.16) (2.42) (0.69) (0.42) (0.45)
Net Asset Value, End of Period $ 12.45 $ 11.80 $ 12.37 $ 12.01 $ 12.77 $ 12.14
Total Return 17.61% 5.75% 21.92% -0.25% 8.24% 8.02%
Ratios/Supplemental Data
Net Assets, End of Period $15,277,567 $15,972,639 $17,033,045 $15,192,354 $17,164,547 $11,986,858
Ratio of Expenses to Average Net 0.90%** 0.90% 0.90% 0.97% 1.25%
Assets* 1.15%
Ratio of Net Investment Income to 2.74% 2.53% 3.06% 2.51% 2.50% 2.97%
Average Net
Assets*
Portfolio Turnover Rate 82.80% 144.67% 145.14% 27.31% 38.20% 39.62%
Average Commission Rate Paid $ 0.0570 $ .0600 $ 0.0611 $ 0.0735 $ 0.0899 $ 0.1009
<CAPTION>
Year Ended Year Ended 12/4/89 to
12/31/91 12/31/90 12/31/89
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.66 $ 9.99 $ 10.00 *
Income from Investment Operations
Net Investment Income 0.45 0.50 0.04
Net Gains or Losses on Securities 1.98 (0.34) (0.02)
(realized and unrealized)
Total From Investment Operations 2.43 0.16 0.02
Less Distributions
Dividends (from net investment (0.46) (0.49) (0.03)
income)
Distributions (from capital gains) (0.04) 0.00 0.00
Returns of Capital 0.00 0.00 0.00
Total Distributions (0.50) (0.49) (0.03)
Net Asset Value, End of Period $ 11.59 $ 9.66 $ 9.99
Total Return 23.40% 1.63% 3.02% ***
Ratios/Supplemental Data
Net Assets, End of Period $ 8,534,720 $3,958,203 $3,995,145
Ratio of Expenses to Average Net 1.25% 1.25% 1.25% ***
Assets*
Ratio of Net Investment Income to 4.12% 5.22% 5.40% ***
Average Net
Assets*
Portfolio Turnover Rate 71.33% 39.98% 5.90%
Average Commission Rate Paid $ 0.1038 $ 0.1205 $ 0.1588
</TABLE>
* The Fund commenced operations on December 4, 1989.
** Absent the reimbursement of the Funds' expenses the Managed Portfolio
expenses would have been 0.95%.
*** 1989 amounts annualized from December 4, 1989.
4
<PAGE> 9
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(Continued)
BOND PORTFOLIO
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.36 $ 10.45 $ 9.75 $ 10.74 $ 10.64 $ 10.65
Income from Investment Operations
Net Investment Income 0.60 0.60 0.65 0.51 0.57 0.65
Net Gains or Losses on Securities
(both realized and unrealized) 0.23 (0.09) 1.09 (0.99) 0.56 0.23
Total From Investment Operations 0.83 0.51 1.74 (0.48) 1.13 0.88
Less Distributions
Dividends (from net investment
income) (0.60) (0.60) (0.64) (0.51) (0.57) (0.65)
Distributions (from capital gains) 0.00 0.00 (0.15) 0.00 (0.46) (0.24)
Returns of Capital 0.00 0.00 (0.25) 0.00 0.00 0.00
Total Distributions (0.60) (0.60) (1.04) (0.51) (1.03) (0.89)
Net Asset Value, End of Period $ 10.59 $10.36 $ 10.45 $ 9.75 $ 10.74 $ 10.64
Total Return 8.09% 4.66% 16.77% -3.94% 10.35% 6.65%
Ratios/Supplemental Data
Net Assets, End of Period $7,065,818 $6,712,914 $5,493,594 $3,985,744 $4,203,387 $3,277,660
Ratio of Expenses to Average Net Assets* 0.90%** 0.90% 0.88% 0.96% 1.16% 1.25%
Ratio of Net Investment Income to 5.70% 5.73% 6.06% 5.01% 5.01% 6.01%
Average Net
Assets*
Portfolio Turnover Rate 127.63% 284.11% 245.32% 43.89% 84.77% 79.77%
<CAPTION>
Period
Year Ended Year Ended 12/4/89 to
12/31/91 12/31/90 12/31/89
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.78 $ 9.93 $10.00 *
Income from Investment Operations
Net Investment Income 0.68 0.71 0.05
Net Gains or Losses on Securities
(both realized and unrealized) 0.91 (0.16) (0.07)
Total From Investment Operations 1.59 0.55 (0.02)
Less Distributions
Dividends (from net investment
income) (0.69) (0.70) (0.05)
Distributions (from capital gains) (0.03) 0.00 0.00
Returns of Capital 0.00 0.00 0.00
Total Distributions (0.72) (0.70) (0.05)
Net Asset Value, End of Period $ 10.65 $ 9.78 $ 9.93
Total Return 16.21% 5.48% -2.08% ***
Ratios/Supplemental Data
Net Assets, End of Period $2,318,565 $1,963,858 $1,986,257
Ratio of Expenses to Average Net Assets* 1.25% 1.25% 1.26% ***
Ratio of Net Investment Income to 6.58% 7.17% 7.22% ***
Average Net
Assets*
Portfolio Turnover Rate 112.36% 47.25% 1.10%
</TABLE>
* The Fund commenced operations on December 4, 1989. ** Absent the reimbursement
of the Fund's expenses, the Bond Portfolio expenses would have been 1.02% ***
1989 amounts annualized from December 4, 1989.
5
<PAGE> 10
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(Continued)
VALUE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Period
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.00 $ 13.51 $ 13.46 $ 13.60 $ 13.15 $ 12.26
Income from Investment Operations
Net Investment Income 0.04 0.02 0.12 0.14 0.14 0.14
Net Gains or Losses on Securities
(both realized and unrealized) 3.44 0.80 3.17 0.13 0.61 0.92
Total From Investment Operations 3.48 0.82 3.29 0.27 0.75 1.06
Less Distributions
Dividends (from net investment (0.04) (0.02) (0.12) (0.14) (0.14) (0.14)
income)
Distributions (from capital gains) (1.73) (1.31) (3.12) (0.27) (0.16) (0.03)
Returns of Capital 0.00 0.00 0.00 0.00 0.00 0.00
Total Distributions (1.77) (1.33) (3.24) (0.41) (0.30) (0.17)
Net Asset Value, End of Period $ 14.71 $ 13.00 $ 13.51 $ 13.46 $ 13.60 $ 13.15
Total Return 26.93% 6.94% 23.66% 2.03% 5.44% 8.37%
Ratios/Supplemental Data
Net Assets, End of Period $10,146,856 $8,518,192 $8,244,957 $7,379,295 $7,062,948 $4,711,271
Ratio of Expenses to Average Net Assets* 0.90%** 0.90% 0.90% 0.96% 1.14% 1.25%
Ratio of Net Investment Income to 0.28% 0.17% 0.81% 1.03% 1.07% 1.10%
Average Net
Assets*
Portfolio Turnover Rate 50.97% 46.78% 103.07% 35.99% 23.70% 6.25%
Average Commission Rate Paid $ 0.0560 $ 0.0600 $ 0.0608 $ 0.0738 $ 0.0909 $ 0.1050
<CAPTION>
Period
Year Ended Year Ended 12/4/89 to
12/31/91 12/31/90 12/31/89
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.38 $10.06 $10.00 *
Income from Investment Operations
Net Investment Income 0.15 0.22 0.02
Net Gains or Losses on Securities
(both realized and unrealized) 3.16 (0.67) 0.05
Total From Investment Operations 3.31 (0.45) 0.07
Less Distributions
Dividends (from net investment (0.17) (0.21) (0.01)
income)
Distributions (from capital gains) (0.26) (0.02) 0.00
Returns of Capital 0.00 0.00 0.00
Total Distributions (0.43) (0.23) (0.01)
Net Asset Value, End of Period $ 12.26 $ 9.38 $ 10.06
Total Return 34.95% -4.45% 9.85% **
Ratios/Supplemental Data
Net Assets, End of Period $ 2,874,635 $1,882,680 $2,012,684
Ratio of Expenses to Average Net Assets* 1.25% 1.25% 1.23% **
Ratio of Net Investment Income to 1.39% 2.23% 2.73% **
Average Net
Assets*
Portfolio Turnover Rate 36.16% 36.39% 13.13%
Average Commission Rate Paid $ $0.0939 $0.1201 $ 0.1580
</TABLE>
* The Fund commenced operations on December 4, 1989.
** 1989 amounts annualized from December 4, 1989.
6
<PAGE> 11
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(Continued)
CAPITAL PORTFOLIO
<TABLE>
<CAPTION>
Period
Year Ended Year Ended Year Ended Year Ended 5/1/93 to
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 13.96 $ 13.55 $ 10.48 $ 11.06 $ 10.00 *
Income from Investment Operations
Net Investment Income 0.00 0.03 0.02 0.01 (0.02)
Net Gains or Losses on Securities
(both realized and unrealized) 2.75 1.68 3.56 (0.46) 1.32
Total From Investment Operations 2.75 1.71 3.58 (0.45) 1.30
Less Distributions
Dividends (from net investment 0.00 (0.03) (0.01) (0.01) 0.00
income)
Distributions (from capital gains) (2.56) (1.27) (0.50) (0.12) (0.24)
Returns of Capital 0.00 0.00 0.00 0.00 0.00
Total Distributions (2.56) (1.30) (0.51) (0.13) (0.24)
Net Asset Value, End of Period $ 14.15 $ 13.96 $ 13.55 $ 10.48 $ 11.06
Total Return 21.14% 12.65% 33.99% (4.11)% 18.42 %**
Ratios/Supplemental Data
Net Assets, End of Period $6,494,058 $6,676,516 $6,366,302 $3,847,365 $2,917,531
Ratio of Expenses to Average Net Assets* 0.90%** 0.90% 0.88% 0.92 % 1.01 %**
Ratio of Net Investment Income to 0.03% 0.19% 0.11% 0.09 % (0.21)%**
Average Net
Assets*
Portfolio Turnover Rate 84.39% 54.11% 33.42% 55.99 % 21.87 %
Average Commission Rate Paid $ 0.0490 $ 0.0564 $ 0.0562 $0.0568 $ 0.0585
</TABLE>
* The Fund commenced operations on May 1, 1993.
** 1993 amounts annualized from May 1, 1993.
7
<PAGE> 12
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(Continued)
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Year Ended Year Ended Period
12/31/97 12/31/96 5/1/95 to
12/31/95
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.82 $ 10.09 $ 10.00 *
Income from Investment Operations
Net Investment Income 0.07 0.16 0.10
Net Gains or Losses on Securities
(both realized and unrealized) 0.56 1.83 0.49
Total From Investment Operations 0.63 1.99 0.59
Less Distributions
Dividends (from net investment (0.07) (0.16) (0.10)
income)
Distributions (from capital gains) (0.74) (0.10) (0.40)
Returns of Capital 0.00 0.00 0.00
Total Distributions (0.81) (0.26) (0.50)
Net Asset Value, End of Period $ 11.64 $ 11.82 $10.09
Total Return 4.32% 19.44% 8.53% ***
Ratios/Supplemental Data
Net Assets, End of Period $4,771,122 $3,305,190 $2,085,588
Ratio of Expenses to Average Net Assets* 1.20%** 1.20% 1.20% ***
Ratio of Net Investment Income to 0.57% 1.44% 1.43% ***
Average Net
Assets *
Portfolio Turnover Rate 37.73% 56.28% 33.56%
Average Commission Rate Paid $ 0.0380 $ 0.1961 $ 0.1951
</TABLE>
* The Fund commenced operations on May 1, 1995.
** Absent the reimbursement of the Fund's expenses, the International Equity
Portfolio expenses would have been 1.32% *** 1995 amounts annualized from May 1,
1995.
8
<PAGE> 13
THE FUND
Canada Life of America Series Fund, Inc., a Maryland corporation formed on
February 23, 1989, is a diversified open-end investment company. The Fund
currently has six portfolios, which in many ways operate as separate funds.
These portfolios are the Bond Portfolio, the Capital Portfolio, the
International Equity Portfolio, the Managed Portfolio, the Money Market
Portfolio, and the Value Equity Portfolio. An interest in the Fund is limited to
the assets of the particular portfolios in which shares are held. Shares of the
Fund are not offered directly to the public, but are currently sold only to
Canada Life Insurance Company of America (the "Company"), Canada Life Insurance
Company of New York ("CLNY"), and to certain of their separate accounts to fund
the benefits under certain variable policies (the "policies") issued by the
respective insurance companies. The separate accounts invest in shares of the
Fund in accordance with instructions received from owners of the policies.
Shares of the Fund may also be sold to The Canada Life Assurance Company
("Canada Life"), its affiliates and their separate accounts. The Company and
CLNY are wholly-owned subsidiaries of Canada Life. Canada Life commenced
operations in 1847 and has been actively operating in the United States since
1889. Canada Life is one of the largest life insurance companies in North
America with consolidated assets as of December 31, 1997 of approximately $27.7
billion (U.S. dollars).
Policyowners should consider that the investment return experience of the
particular portfolios they select will affect the value of the policy and the
amount of benefits received under a policy. See the attached Prospectus for the
policy for a description of the relationship between increases or decreases in
the net asset value of Fund shares (and any distributions on such shares) and
the benefits provided under a policy.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Each portfolio has a different investment objective which it pursues through
separate investment policies. The different investment objectives and policies
among the various portfolios will affect the investment return of each
portfolio. There is no assurance that the investment objective of any portfolio
will be realized. The investment objective of each portfolio is not a
fundamental policy and may be changed without shareholder approval; however,
shareholders will be notified promptly of any such changes.
Each portfolio is subject to a different degree of market and financial risk.
Market risk refers to the volatility of the reaction of the price of a security
to changes in conditions in the securities market in general and, particularly
in the case of debt securities, changes in the overall level of interest rates.
Financial risk refers to the ability of an issuer of a debt security to pay
principal and interest on such security and to the earnings stability and
overall financial soundness of an issuer of an equity security. Current income
volatility refers to the degree and rapidity with which changes in the overall
level of interest rates become reflected in the level of current income of the
portfolios. This factor will depend upon the overall maturity of the securities
in the portfolio, since changing interest rates will not affect the current
income levels of a pre-existing portfolio of fixed rate securities.
MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to provide the highest
possible level of current income, consistent with preservation of capital and
liquidity. The Money Market Portfolio seeks to achieve its objective by
investing in high quality money market instruments, including:
1. obligations issued or guaranteed as to principal and interest by
the United States Government or any agency or authority
controlled or supervised by and acting as an instrumentality of
the U.S. Government pursuant to authority granted by Congress;
2. obligations, such as certificates of deposit and banker's
acceptances, of U.S. or Canadian banks, U.S. savings and loans
associations, and Canadian trust companies which at the date of
investment have capital, surplus and undistributed profits as of
the date of their most recent published financial statements of
$500,000,000 or greater;
3. commercial paper or bank loan participations;
4. corporate obligations;
5. obligations issued or guaranteed as to principal and interest by
the Government of Canada, the government of any province of
Canada, or any Canadian or provincial Crown agency; and
6. repurchase agreements that mature within seven days.
Money Market instruments are described more fully in the Statement of Additional
Information.
9
<PAGE> 14
All investments of the Money Market Portfolio will be denominated in U.S.
currency, and the Portfolio will limit its investments to instruments which the
Board of Directors determines present minimal risks and which generally are, at
the time of acquisition, either:
1. rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO); or
2. by one NRSRO if that NRSRO is the only NRSRO that has rated the
instrument or issuer; or
3. if the instrument is not rated, is of comparable quality as determined
by the Board of Directors; or
4. issued by an issuer that has received a rating of the type described
in "1" or "2" above on other securities that are comparable in
priority and security to the instrument.
All of the money market investments will mature in thirteen months or less. The
Money Market Portfolio will use the amortized cost method of securities
valuation. See "Valuation of Shares."
Because of the short-term nature of the Money Market Portfolio's investments, a
portfolio turnover rate is not applicable. Investment in shares of the Money
Market Portfolio should be subject to relatively little market risk and
financial risk, but a high level of current income volatility.
BOND PORTFOLIO
The investment objective of the Bond Portfolio is to provide as high a level of
current income and capital appreciation, as is consistent with preservation of
principal. The Bond Portfolio will seek to achieve its objective by investing
primarily in fixed income debt instruments. All debt instruments will be
denominated in U.S. currency. At least 80% of the assets of the Bond Portfolio
will be invested in the following:
1. obligations issued or guaranteed as to principal and interest by the
United States Government or any agency or authority controlled or
supervised by and acting as an instrumentality of the U.S. Government
pursuant to authority granted by Congress;
2. publicly-traded debt instruments which are rated within the four
highest categories by Moody's Investors Service or Standard & Poor's
Corporation, or Duff & Phelps;
3. obligations issued or guaranteed as to principal and interest by the
Government of Canada, the government of any province of Canada, or any
Canadian or provincial Crown agency.
The remaining 20% of total assets of the Bond Portfolio may be invested in lower
quality debt instruments of high yield debt instruments. Generally, these
provide higher yields but are subject to greater market fluctuations and risk of
loss of income and principal than higher quality debt instruments. The Bond
Portfolio will not invest in any instruments which are rated lower than "B." The
Bond Portfolio will not directly purchase common stocks. However, it may retain
up to 20% of the value of its total assets in debt instruments or preferred
shares which are convertible into common shares. The Bond Portfolio may also
invest up to 10% of its total assets in privately placed debt instruments which
carry registration rights exercisable within twelve months of the date of
investment.
Cash and money market instruments of the type in which the Money Market
Portfolio may invest may be held pending investment in accordance with the Bond
Portfolio's investment policies, and to provide for expenses and anticipated
redemption payments. In managing its portfolio, the Bond Portfolio may enter
into repurchase agreements, engage in options trading to the extent described
under "Put And Call Options," and may make loans of portfolio securities.
Investment in shares of the Bond Portfolio should generally be subject to
relatively low financial risk, moderately high market risk and moderately low
current income volatility. However, to the extent the Bond Portfolio invests up
to 20% of its assets in lower quality debt instruments, these instruments could
increase financial risk and income volatility. The Bond Portfolio may have more
than 20% of its assets in lower quality debt instruments if debt instruments
rated in the fourth highest category when purchased are subsequently downgraded.
See "Lower Quality Debt Instruments" in the Statement of Additional Information.
10
<PAGE> 15
PORTFOLIO MANAGER
Robert N. Kase, CFA, is responsible for the day-to-day investment management and
trading activities of the Bond Portfolio. Mr. Kase has been the portfolio
manager for the Bond and Money Market Funds of CL Capital Management, Inc.
("CLCM") since August 1990. Prior to joining the company, he served as a bond
trader in the regional brokerage community. CLCM became responsible for
rendering investment advice on behalf of the Fund on May 1, 1995.
VALUE EQUITY PORTFOLIO
The investment objective of the Value Equity Portfolio is to provide long-term
growth and income by investing in equity securities which are believed to have
appreciation potential. The Investment Adviser's equity investment philosophy is
based upon a fundamental value approach to security evaluation, designed to
preserve capital with a focus on a long-term investment horizon. The Adviser
attempts to accomplish this objective through the purchase of stocks that have
poor current market psychology and are undervalued relative to normal earnings
power. The Value Equity Portfolio will pursue its objective by investing
primarily in common stocks, but may invest in other securities, including
rights, warrants, preferred stock and debt securities convertible into or
carrying rights or warrants to purchase common stock or to participate in
earnings. In selecting investments, emphasis will be placed on companies with
good financial resources, satisfactory rate of return on capital, good industry
position, and superior management skills. The Value Equity Portfolio's
investments are not limited to any particular type or size of company.
Investments will be made primarily in equity securities of companies which are
publicly traded on a U.S. stock exchange or in the over-the-counter market of
the National Association of Securities Dealers. Up to 20% of the Value Equity
Portfolio, by market value, may be invested from time to time in equity
securities listed on Canadian or other foreign stock exchanges.
To provide a prudent degree of diversification, the Value Equity Portfolio will
maintain at all times investments in no less than 30 individual companies, and
will limit holdings in individual companies to 5% of the assets of the Value
Equity Portfolio, by market value. The Value Equity Portfolio may also maintain
up to 25% of its market value in cash or money market instruments, either
pending selection of particular equity investments, or for defensive purposes.
Such money market instruments would be of the type eligible for investment by
the Money Market Portfolio. In managing its portfolio, the Value Equity
Portfolio may enter into repurchase agreements, engage in options trading to the
extent described under "Put And Call Options," and may make loans of portfolio
securities. In addition, the Value Equity Portfolio may invest in stock index
futures, options on stock index futures, and stock index options. See
"Description of Certain Investment Practices."
Investment in shares of the Value Equity Portfolio should be subject to moderate
levels of both market and financial risk.
PORTFOLIO MANAGER
Craig Merrigan, CFA, is the Vice President and Chief Investment Officer of CLCM.
In his role as Chief Investment Officer, Mr. Merrigan is responsible for setting
overall investment policies, client communication, and determination of the
asset mix and the day-to-day investment management of the Value Equity
Portfolio. as well as other equity and balanced accounts managed by CLCM. Mr.
Merrigan is also responsible for the management of the Managed Portfolio,
Capital Portfolio and the International Equity PORTFOLIO.MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to achieve as high a level
of return as possible, through capital appreciation and income, consistent with
prudent investment risk and preservation of capital. This Portfolio will seek to
achieve its objective by following a fully managed investment policy through
investment in three sectors:
1. the Money Market Sector, which will consist of money market
instruments and other debt instruments, of the type eligible for
investment by the Money Market Portfolio, with maturities not
exceeding one year;
2. the Bond Sector, which will consist of bonds and other debt
securities, of the type eligible for investment by the Bond
Portfolio, with maturities exceeding one year; and
3. the Equity Sector, which will consist of common stocks,
securities convertible into common stocks and warrants, of the
type eligible for investment by the Value Equity Portfolio.
11
<PAGE> 16
There are no minimum or maximum percentages as to the amount of the Managed
Portfolio's assets which may be invested in each of the sectors. The asset mix
of the Managed Portfolio will be adjusted based on the Investment Adviser's
analysis of the political and economic outlook over the next six to eighteen
months, taking into account such factors as inflation, growth, trends in
currency values, commodity prices and relative values of stocks and bonds. In
managing its portfolio, the Managed Portfolio may enter into repurchase
agreements, engage in options trading to the extent described under "Put and
Call Options," and may make loans of portfolio securities. In addition, the
Managed Portfolio may invest in stock index futures, options on stock index
futures, and stock index options. See "Description of Certain Investment
Practices."
Investment in shares of the Managed Portfolio should generally be subject to
moderate levels of both market and financial risk and relatively high levels of
current income volatility. However, should the Managed Portfolio invest a
substantial portion of its assets in lower quality debt instruments, market and
financial risk could increase. See "Lower Quality Debt Instruments" in the
Statement of Additional Information.
PORTFOLIO MANAGER
Craig Merrigan, CFA, is the Vice President and Chief Investment Officer of CLCM.
In his role as Chief Investment Officer, Mr. Merrigan is responsible for setting
overall investment policies, client communication, and determination of the
asset mix and the day-to-day investment management of the Managed Portfolio, as
well as other equity and balanced accounts managed by CLCM. Mr. Merrigan is also
responsible for the management of the Value Equity Portfolio, Capital Portfolio
and the International Equity Portfolio.
CAPITAL PORTFOLIO
The investment objective of the Capital Portfolio is to provide capital
appreciation, not current income, by investing in common stocks and securities
convertible into or exchangeable for common stocks, in common stock purchase
warrants, in debt securities and in preferred stocks believed to provide capital
appreciation opportunities. Common stocks, for the most part, are selected for
their near or intermediate-term prospects. They may be stocks believed to be
underpriced or stocks of growth companies, cyclical companies, or companies
believed to be undergoing a basic change for the better. They may be stocks of
established, well-known companies or of newer, less-seasoned companies believed
to have better-than-average prospects. The principal criterion for choice of
investments is capital appreciation potential.
The Capital Portfolio may, pending investment and for temporary defensive
purposes, hold cash and invest without limitation in high-grade, short-term
money market instruments, including repurchase agreements, of the types in which
the Money Market Portfolio may invest.
Investment in shares of the Capital Portfolio should generally be subject to
moderate levels of both market and financial risk.
PORTFOLIO MANAGER
Craig Merrigan, CFA, is the Vice President and Chief Investment Officer of CLCM.
In his role as Chief Investment Officer, Mr. Merrigan is responsible for setting
overall investment policies, client communication, and determination of the
asset mix and the day-to-day investment management of the Capital Portfolio, as
well as other equity and balanced accounts managed by CLCM. Mr. Merrigan is also
responsible for the management of the Value Equity Portfolio, Managed Portfolio
and the International Equity Portfolio. The Capital Portfolio is also
sub-advised by J. & W. Seligman & Co. Incorporated.
SUB-ADVISER PORTFOLIO MANAGER
Richard R. Schmaltz, Director and Managing Director, Director of Investments of
the Sub-Adviser, is responsible for the Sub-Adviser's day-to-day investment
management of the Capital Portfolio, which position he has held since January,
1998. He is also responsible for the management of Seligman Growth Fund, Inc.
and the Seligman Capital Portfolio of Seligman Portfolios, Inc. Additionally, he
is responsible for directing and overseeing the domestic investments of the
Seligman Henderson Global Growth Opportunities Fund, a series of Seligman
Henderson Global Fund Series, Inc., and the Seligman Henderson Global Growth
Opportunities Portfolio of Seligman Portfolios, Inc.
12
<PAGE> 17
INTERNATIONAL EQUITY PORTFOLIO
The investment objective of the International Equity Portfolio is to provide
long-term capital appreciation by investing in equity or equity type securities
of companies located outside of the United States. The International Equity
Portfolio seeks diversification by purchasing securities from various countries
that offer different investment opportunities and are affected by different
economic trends. Although the International Equity Portfolio will normally
invest in issuers in developed countries, the Fund may also invest in developing
countries. Investments in developing markets provide greater opportunities for
growth although they are expected to be more volatile than securities in
developed markets. Investing in foreign securities may involve greater risk than
investing in domestic securities because of the possibilities of exchange rate
fluctuations, currency exchange controls, lack of uniformity of accounting,
auditing and financial reporting standards, war, expropriation, and less
securities regulations. See "Developing Countries".
The International Equity Portfolio is intended for investors who can accept the
risks involved in investments in equity and equity-related securities of issuers
located outside the United States, as well as in foreign currencies and in the
active management techniques that the International Equity Portfolio generally
employs.
The equity and equity-related securities in which the International Equity
Portfolio will primarily invest are common stock, preferred stock, convertible
preferred stock and warrants or other rights to acquire stock that the
Sub-Adviser believes offer the potential for long-term capital appreciation. The
International Equity Portfolio also may invest in securities of foreign issuers
in the form of sponsored and unsponsored American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or other similar instruments representing
securities of foreign issuers. EDRs are receipts issued by a European financial
institution evidencing an arrangement similar to ADRs. Generally, ADRs, in
registered form, are designed for trading in U.S. securities markets and EDRs,
in bearer form, are designed for trading in European securities markets.
As to any specific investment, the Sub-Adviser's analysis will focus on
evaluation of the fundamental value of an enterprise. The International Equity
Portfolio will purchase securities for its portfolio when their market price
appears to be less than their fundamental value in the judgment of the
Sub-Adviser. In selecting specific investments, the Sub-Adviser will attempt to
identify securities with strong potential for appreciation relative to their
downside exposure.
Investment in the International Equity Portfolio will involve the greatest
degree of market and financial risk of any of the Portfolios.
As a nonfundamental policy, the International Equity Portfolio:
1. will limit its exposure to developing markets to a maximum of 30% of
its net assets;
2. will limit its exposure to a single industry group to 25% of its net
assets;
3. will limit its exposure to a single currency, excluding the Japanese
yen, to 20% of the International Equity Portfolio;
4. will normally maintain a minimum of 40 individual company holdings in
the International Equity Portfolio;
5. will maintain exposure to a minimum of 5 of the 8 industry groups as
defined by Morgan Stanley (Appendix A);
6. may, for defensive purposes only, hedge the International Equity
Portfolio currency exposure through the use of futures, options, or
currency contracts (see "Currency Hedging"); and
7. may, for short-term investment or defensive purposes only, invest in
short-term instruments of U.S. or foreign issuers.
PORTFOLIO MANAGER
Craig Merrigan, CFA, is the Vice President and Chief Investment Officer of CLCM.
In his role as Chief Investment Officer, Mr. Merrigan is responsible for setting
overall investment policies, client communication, and determination of the
asset mix and the day-to-day investment management of the International Equity
Portfolio, as well as other equity and balanced accounts managed by CLCM. Mr.
Merrigan is also responsible for the management of the Value Equity Portfolio,
Managed Portfolio and the Capital Portfolio. The International Equity Portfolio
is also sub-advised by INDAGO Capital Management Inc.
13
<PAGE> 18
SUB-ADVISER PORTFOLIO MANAGER
Thomas Tibbles, CFA, joined INDAGO Capital Management Inc. (INDAGO) as Vice
President, Foreign Equities on August 1, 1996. Mr. Tibbles has 10 years of
investment EXPERIENCE, most recently as Vice President, International Equities
at Sun Life Investment Management. For most of his career, he has focused on
research and portfolio management activities related to the international
capital markets. Mr. Tibbles is responsible for the Sub-Adviser's day-to-day
investment management of the International Equity Portfolio.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of restrictions in pursuing its investment
objectives and policies. The following is a brief summary of certain
restrictions. A complete list of the investment restrictions is set forth in the
Statement of Additional Information. There are two classes of investment
restrictions in implementing the investment policies of the portfolios:
fundamental and nonfundamental. Nonfundamental restrictions may be changed by
the Fund's Board of Directors without shareholder approval. Shareholders will be
notified promptly of any such changes. Fundamental restrictions may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of each portfolio affected by the change. A change in a fundamental
policy affecting only one portfolio may be effected with the affirmative vote of
the majority of the outstanding securities of that portfolio only. See "Capital
Stock" in the Statement of Additional Information for more information.
The Fund's fundamental investment restrictions provide that no portfolio of the
Fund will:
1. invest more than 25% of its total assets in securities of issuers
primarily engaged in any one industry, excluding obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, obligations of banks or savings and loan
associations, and instruments secured by these instruments, such
as repurchase agreements for U.S. government securities; or
2. invest more than 5% of its total assets in securities of any one
issuer or purchase more than 10% of the outstanding voting
securities of an issuer, excluding obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities; or
3. borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes (but not for investment or
leveraging), or pledge or mortgage more than 15% of total assets
as security for such indebtedness.
The Fund's nonfundamental restrictions provide that no portfolio of the Fund
will:
1. lend portfolio securities in an amount greater that 30% of total
assets; or
2. invest more than 20% of total assets in securities of foreign
issuers with the exception of the International Equity Portfolio
which may invest 100% of total assets in foreign securities.
The percentage limitations for fundamental and nonfundamental restrictions, as
well as the investment policies and practices discussed elsewhere in the
Prospectus and the Statement of Additional Information, apply at the time of
investment.
DESCRIPTION OF CERTAIN INVESTMENT PRACTICES
The following describes certain investment practices that the portfolios may use
in an effort to achieve their respective investment objectives. For more
information regarding investment practices of the portfolios, please see the
Statement of Additional Information.
WHEN-ISSUED SECURITIES
From time to time, in the ordinary course of business, any of the portfolios may
purchase securities, which are defined as permissible portfolio investments, on
a "when-issued" or delayed delivery basis; that is, securities purchased for
delivery beyond the normal settlement date, which usually would occur within
three business days of purchase. Debt instruments are often issued on this
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time a commitment to purchase is made, but delivery and payment for
the when-issued securities take place at a later date. The delayed settlement
date usually occurs within one month of the purchase. During the period between
purchase and settlement, no payment is made by a portfolio and no interest
accrues to the portfolio.
14
<PAGE> 19
To the extent that assets of a portfolio are held in cash pending the settlement
of a purchase of securities, that portfolio would earn no income; however, it is
the Investment Adviser's intention that each portfolio will be fully invested to
the extent practicable and subject to the policies stated above. While
when-issued securities may be sold prior to the settlement date, the Investment
Adviser intends to purchase such securities with the purpose of actually
acquiring them, unless the sale appears desirable for investment reasons.
At the time a portfolio makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the amount due and
the value of the security in determining its net asset value. The market value
of the when-issued securities may be more or less than the purchase price
payable at the settlement date. The Investment Adviser does not believe that a
portfolio's net asset value or income will be adversely affected by the purchase
of securities on a when-issued basis. Each portfolio will establish a segregated
account with the Fund's custodian bank in which it will maintain cash and U.S.
Government securities or other high-grade debt obligations at least equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
LOANS OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each portfolio may lend
securities from its portfolio (but not in excess of 30% of its total assets) to
nonaffiliated brokers, dealers, and financial institutions. Any such loans will
be continuously secured by collateral at least equal to the current market value
of the securities loaned plus accrued interest. The Investment Adviser will
review the creditworthiness of the borrower and must have found such
creditworthiness satisfactory. The risk associated with securities lending
undertaken by the Fund should be minimized, because the loans will be fully
secured and the creditworthiness of the borrowers will, in each case, have been
found to be satisfactory.
PUT AND CALL OPTIONS
Each portfolio, with the exception of the Money Market Portfolio, may invest in
options in an attempt to enhance performance or to reduce the risks associated
with investments. A portfolio, with the exception of the Money Market Portfolio,
may invest up to 5% of its assets in premiums on put options, including put
options on stock index futures contracts and put options on stock indices,
provided that the portfolio purchasing put options owns the securities
underlying the puts or securities substantially similar to such underlying
securities. A portfolio may also write call options on securities held by the
portfolio, or on securities which can be readily acquired by exercise of
conversion privileges on convertible securities, provided that not more than 25%
of the total assets of a portfolio would be subject to call options, including
call options on stock index futures contracts and call options on stock indices.
The Fund will not sell put options or purchase call options unless the
transaction is for the purpose of closing out existing options positions. The
Fund may enter into closing transactions, exercise its options or permit them to
expire. For information regarding investment by the Value Equity, Managed,
Capital, and International Equity Portfolios in stock index futures, options on
stock index futures, and stock index options, see below.
STOCK INDEX FUTURES, OPTIONS ON STOCK INDEX FUTURES, AND STOCK INDEX OPTIONS
The Value Equity, Managed, Capital, and International Equity Portfolios may
purchase and sell stock index futures contracts, options on stock index futures
contracts, and stock index options, as described below.
Stock index futures and options thereon will be traded in U.S. domestic markets
such as the Chicago Board of Trade, the International Monetary Market of the
Chicago Mercantile Exchange, and the New York Futures Exchange. A stock index
futures contract does not require the physical delivery of securities, but
merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading day
to the respective accounts of the parties to the contract. On the contract's
expiration date, a final cash settlement occurs and the futures positions are
simply closed out. Changes in market value of a particular index futures
contract reflect changes in the specified index of securities on which the
futures contract is based.
The Value Equity, Managed, Capital, and International Equity Portfolios may also
purchase or sell options on stock index futures. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any time
during the option exercise
15
<PAGE> 20
period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put). Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The portfolio will not sell put options on futures contracts or purchase call
options on futures contracts unless the transaction is for the purpose of
closing out existing options positions.
The Value Equity, Managed, Capital, and International Equity Portfolios may also
purchase or sell stock index options. Stock index options will also be traded in
national U.S. markets. Stock index options are similar to options on securities
except that on exercise or assignment, the parties to the contract pay or
receive an amount of cash equal to the difference between the closing value of
the index and the exercise price of the option times a specified multiple.
The portfolios may engage in transactions in futures contracts, options on
futures contracts, and stock index options only for hedging purposes, and not
for speculation. There can be no guarantee that the objectives sought to be
obtained from the use of these instruments will be achieved. For example,
hedging may not be fully effective to the extent that the movements in the
prices of securities being hedged do not correlate perfectly with movements in
the price of futures contracts.
A portfolio will not purchase or sell futures or options on futures if,
thereafter, the sum of amounts of initial margin deposits and premiums paid for
options on futures would exceed 5% of the market value of the portfolios'
assets. In addition, not more than 25% of the total assets of a portfolio may be
subject to long and short futures contracts. Pursuant to regulations and/or
positions of the Commodity Futures Trading Commission and the Securities and
Exchange Commission, a portfolio may be required to segregate cash, U.S.
Government securities, or other appropriate high-grade debt obligations in
connection with its futures, options on futures, and stock index options
transactions in an amount generally equal to the value of the portfolio's
potential obligation under the futures contract or option. The segregation of
such assets will have the effect of limiting the portfolio's ability to
otherwise invest those assets.
Successful use of stock index futures, options on stock index futures, and stock
index options by the portfolios is subject to the ability to correctly predict
movements in the direction of the market. In addition, a lack of correlation
between the index or instrument underlying an options or futures contract and
the assets being hedged, or unexpected adverse price movements, could render a
portfolio's hedging strategy unsuccessful and could result in losses. Moreover,
when an option has been written, in the event of a decline, the underlying
position is only hedged to the extent of the amount of premium received. Also,
there can be no assurance that a liquid secondary market will exist for any
contract purchased or sold, and a portfolio may be required to maintain a
position until exercise or expiration, which could result in losses. Finally, if
a broker or clearing member of an options or futures clearing corporation were
to become insolvent, the portfolio could experience delays and might not be able
to trade or exercise options or futures purchased through that broker.
INTERNATIONAL INVESTMENTS
With the exception of the International Equity Portfolio which may have 100% of
its assets in the securities of foreign issuers, each portfolio may invest up to
20% of its assets in securities of foreign issuers to the extent the purchase of
such foreign securities is otherwise consistent with the portfolio's objectives.
With respect to quality and risk, the Investment Adviser will attempt to select
investments in foreign securities on the same basis that it selects investments
in domestic securities.
Investment in foreign securities presents certain risks including those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, the imposition of foreign taxes, future political and economic
developments including war, expropriations, nationalization, the possible
imposition of currency exchange controls and other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, and
the fact that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. In addition,
transactions in foreign securities may be subject to higher costs, and the time
for settlement of transactions in foreign securities may be longer than the
settlement period for domestic issuers. The Fund's investment in foreign
securities may also result in higher custodial costs and the costs associated
with currency conversions.
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<PAGE> 21
DEVELOPING COUNTRIES
Investing in developing countries entails even greater risk than investing in
foreign securities in general. The International Equity Portfolio may invest in
securities of companies located in countries with developing economies or
securities markets. These countries are located in the Asia-Pacific region,
Eastern Europe, Central and South America and Africa. Political and economic
structures in many of these countries may be undergoing significant evolution
and rapid development, and such countries may lack the social, political and
economic stability characteristic of more developed countries. Certain of these
countries may have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies. As a
result, the risks of foreign investment generally including the risks of
nationalization or expropriation of assets, may be heightened.
The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make the International Equity Portfolios' investments in such countries
illiquid and more volatile than investments in developed countries, and the
Portfolio may be required to establish special custody arrangements before
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in such
countries, and it may be difficult as a result to assess the value or prospects
of an investment in such issuers. The laws of some foreign countries may limit
the availability of the International Equity Portfolio to invest in securities
of certain issuers located in those countries.
CURRENCY HEDGING
The International Equity Portfolio may engage in currency hedging to manage
exposure to currency fluctuations. The International Equity Portfolio may buy
and sell options and futures contracts relating to foreign currencies or enter
into forward currency contracts (agreements to exchange one currency for another
at a future date). The International Equity Portfolio may not hedge more than
100% of the assets of any one currency. There is no assurance that management of
currency exposure will be done at the appropriate time or that exchange rates
will be predicted accurately.
REPURCHASE AGREEMENTS
As part of its investment practices, each portfolio may enter into repurchase
agreements. A repurchase agreement is a transaction where a portfolio buys a
security and simultaneously agrees to sell that same security back to the
original owner at a specified price and date. The repurchase price determines
the yield during the period that the security is held by the portfolio. That
yield is determined by current short-term rates and may be more or less than the
interest rate on the underlying security. Should the issuer fail to repurchase
the underlying obligation, the loss to the portfolio, if any, would be the
difference between the repurchase price and the underlying obligation's market
value. The portfolio might experience delays in recovering its money and may
incur costs in enforcing its rights. To minimize this risk, the Investment
Adviser will review the creditworthiness of the bank, broker or dealer with whom
the agreement was entered into, and must find such creditworthiness satisfactory
before a portfolio may enter into the repurchase agreement.
MANAGEMENT OF THE FUND
The Board of Directors supervises the business affairs and investments of the
Fund, which are managed on a daily basis by the Fund's Investment Adviser. The
Board consists of five individuals. Information about the Directors and
Executive Offices of the Fund is contained in the Statement of Additional
Information.
INVESTMENT ADVISER
The Fund's Investment Adviser is CL Capital Management, Inc. (the "Adviser").
The Adviser is a wholly-owned subsidiary of the Company, which in turn is a
wholly-owned subsidiary of Canada Life. The address of the Adviser is 6151
Powers Ferry Road, N.W., Atlanta, Georgia 30339. Subject to the control and
supervision of the Fund's Board of Directors, the Adviser provides management
and investment advisory services to the Fund for the Money Market, Bond, Value
Equity, and Managed Portfolios, and management services for the Capital and
International Equity Portfolios. Management services include management and
administrative services necessary for
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<PAGE> 22
the operation of the Fund, such as processing shareholder orders and
administering shareholder accounts. Investment advisory services include
providing the Fund with investment research, advice and supervision,
continuously furnishing the Fund with an investment program for each portfolio,
and determining from time to time which securities shall be purchased, sold or
exchanged and what portions of the portfolio will be held in the various
securities in which the portfolio invests. In addition, the Adviser provides the
Fund with office space, equipment and facilities necessary for the Fund's
operation.
The Adviser was incorporated on March 1, 1989 and began rendering investment
advisory services on behalf of the Fund on May 1, 1995. The Adviser has rendered
investment advisory services on behalf of separate accounts sponsored by
Confederation Life Insurance Company (U.S.) in Rehabilitation ("Confederation
Life") since CLCM's incorporation in 1989. The Confederation Life separate
accounts advised by CLCM are invested in domestic and international equity
portfolios, long and short term bond portfolios, money market and small company
capital stock portfolios. Canada Life is one of the largest life insurance
companies in North America, with consolidated assets as of December 31, 1997 of
approximately $ 27.7 billion (U.S. dollars), of which in excess of $5.3 billion
is in U.S. assets.
CAPITAL PORTFOLIO SUB-ADVISER
The Capital Portfolio Sub-Adviser is J. & W. Seligman & Co. Incorporated (the
"Capital Portfolio Sub-Adviser"). The address of the Capital Portfolio
Sub-Adviser is 100 Park Avenue, New York, New York, 10017. Pursuant to a
Sub-Advisory Agreement between the Investment Adviser and the Capital Portfolio
Sub-Adviser, the Capital Portfolio Sub-Adviser provides investment advisory
services to the Capital Portfolio. The investment advisory services include
providing the Capital Portfolio with investment research, advice and
supervision, continuously furnishing an investment program, and determining from
time to time which securities shall be purchased, sold or exchanged.
The Capital Portfolio Sub-Adviser was incorporated on April 20, 1978. The
Capital Portfolio Sub-Adviser also serves as manager of eighteen investment
companies in the Seligman Group, the aggregate assets of which were
approximately $18.0 billion at December 31, 1997. The Capital Portfolio
Sub-Adviser also provides investment management or advice to institutional and
other accounts having a December 31, 1997 value of approximately $6.3 billion.
INTERNATIONAL EQUITY PORTFOLIO SUB-ADVISER
The International Equity Portfolio Sub-Adviser is INDAGO Capital Management Inc.
(the "International Equity Portfolio Sub-Adviser"). The address of the
International Equity Portfolio Sub-Adviser is 130 Adelaide Street West, Suite
3000, Toronto, Ontario, Canada, M5H 3P5. Pursuant to a Sub-Advisory agreement
between the Investment Adviser and the International Equity Portfolio
Sub-Adviser, the International Equity Portfolio Sub-Adviser provides investment
advisory services to the International Equity Portfolio. The investment advisory
services include providing the International Equity Portfolio with investment
research, advice and supervision, continuously furnishing an investment program,
and determining from time to time which securities shall be purchased, sold, or
exchanged.
Effective July 15, 1997, the International Equity Portfolio Sub-Adviser changed
its name from Canada Life Investment Management Limited to INDAGO Capital
Management Inc. The name change was executed in connection with the sale of
fifty percent of the International Equity Portfolio Sub-Adviser's outstanding
common stock to certain of its executive employees (the "Executive Employees").
The International Equity Portfolio Sub-Adviser is jointly owned by the Executive
Employees and The Canada Life Assurance Company.
The International Equity Portfolio Sub-Adviser was incorporated on February 24,
1977. The International Equity Portfolio Sub-Adviser also serves as manager of
assets of The Canada Life Assurance Company, the aggregate assets of which were
approximately Canadian $5.5 billion at December 31, 1997. The International
Equity Portfolio Sub-Adviser also provides investment management to individual
and institutional accounts having a December 31, 1997 value of approximately
Canadian $1.1 billion.
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<PAGE> 23
ADVISORY FEES AND EXPENSES
The Fund pays the Adviser, as full compensation for all facilities and services
it provides to the Fund, a monthly fee computed for each portfolio on a daily
basis, at an annual rate of 0.50% of the net assets of the portfolio except the
International Equity Portfolio which has an annual rate of 0.80%*. With respect
to the Capital Portfolio, the Adviser in turn pays the Capital Portfolio
Sub-Adviser, as full compensation for investment advisory services to the
Capital Portfolio, a monthly fee computed on a daily basis, at an annual
effective rate of 0.25% of the net assets of the Capital Portfolio. With respect
to the International Equity Portfolio, the Adviser in turn pays the
International Equity Portfolio Sub-Adviser, as full compensation for investment
advisory services to the International Equity Portfolio, a monthly fee computed
on a daily basis, at an annual effective rate of 0.30% of the net assets of the
International Equity Portfolio. The Fund incurs certain operating and general
administrative expenses in addition to the Adviser's fee. These expenses, which
are accrued daily, include but are not limited to: taxes; expenses for legal and
auditing services; costs of printing; charges for custodial services; transfer
agent fees, if any; expenses of redemption of shares; Securities and Exchange
Commission fees; expenses of registering shares under federal and state
securities laws; accounting costs; insurance; interest; brokerage costs; and
other expenses properly payable by the Fund. Certain expenses are paid by the
particular portfolio that incurs them, while other expenses are allocated among
the portfolios on the basis of the asset size of the respective portfolio, or by
the Board of Directors as appropriate. At the current time, Canada Life of
America (CLICA) is reimbursing the Fund for expenses (other than advisory fees)
that exceed 0.40% of the Managed, Bond, Value Equity, Capital, and International
Equity Portfolio, and 0.25% of the Money Market Portfolio. However, CLICA
reserves the right to discontinue this reimbursement at anytime.
* The investment advisory fee for the International Equity Portfolio exceeds
the industry average of investment advisory fees for domestic funds but
does not exceed the industry average of advisory fees for international
funds.
CUSTODIAN
The Chase Manhattan Bank, N.A., Chase Manhattan Plaza, New York, New York,
10081, acts as custodian of the Fund's assets. The Chase Manhattan Bank, N.A.,
is authorized to use the facilities of the Depository Trust Company, the
book-entry system of the Federal Reserve Banks, sub-custodians, and other
depositories as necessary in foreign markets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
CL Capital Management, Inc. serves as the Fund's Transfer Agent and Dividend
Disbursing Agent.
CAPITAL STOCK AND SHAREHOLDER INFORMATION
The Fund is a "series" company which issues shares in separate portfolios of the
same class. Shares of four different portfolios were originally authorized by
the Board of Directors; shares of a fifth portfolio were authorized by the Board
of Directors on February 25, 1993; and shares of a sixth portfolio were
authorized by the Board of Directors on February 23, 1995. The Board of
Directors is authorized to create new portfolios of shares without the necessity
of a vote of shareholders of the Fund. The Board of Directors may change the
designation of any portfolio and may increase or decrease the number of shares
of any portfolio, but may not decrease the number of shares of a portfolio below
the number then outstanding.
The assets received by the Fund on the sale of shares of each portfolio and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are allocated to each portfolio, and constitute the assets of such
portfolio. The assets of each portfolio are required to be segregated on the
Fund's books of account.
The shares of each portfolio have equal rights and privileges with all other
shares of that portfolio. Each share of a portfolio represents an equal
proportionate interest in that portfolio with each other share. Upon liquidation
of the Fund or any portfolio, shareholders of a portfolio are entitled to share
pro rata in the net assets of that portfolio available for distribution to
shareholders. Shares have no preemptive or conversion rights. The right of
redemption is described under "Purchases And Redemptions of Shares." Shares of
each
19
<PAGE> 24
portfolio are fully paid and non-assessable by the Fund. The Board of Directors
is authorized to classify unissued shares of the Fund by assigning them to a
portfolio for issuance.
Currently, shares of the Fund are being offered to Variable Annuity Account 1
and Annuity Account 2 of the Company, and to Variable Annuity Account 1 of CLNY.
Shares of the Fund may in the future be sold to other separate accounts,
including separate accounts established to receive and invest premiums received
under variable life insurance policies issued by the Company, CLNY, or Canada
Life. It is conceivable that, in the future, it may become disadvantageous for
variable life insurance separate accounts, variable annuity separate accounts,
and group annuity separate accounts to invest in the Fund simultaneously.
Although neither the Company, CLNY, or the Fund currently foresees any such
disadvantages, either to variable life insurance policyowners or to variable
annuity policyowners, if Fund shares are sold to both types of separate
accounts, the Fund's Board of Directors intends to monitor events in order to
identify any material conflicts between the variable life policyowners and the
variable annuity policyowners and to determine what actions, if any, should be
taken in response thereto. Such action could include the sale of Fund shares by
one or more of the separate accounts, which could have adverse consequences.
Material conflicts could result from, for example: 1) changes in state insurance
laws; 2) changes in federal income tax laws; or 3) differences in voting
instructions between those given by variable life insurance policyowners,
variable annuity policyowners, and group annuity participants. If the Board of
Directors were to conclude that separate funds should be established for
variable life, variable annuity separate accounts, and group annuity separate
accounts the Company and CLNY will bear the attendant expenses, but variable
life insurance policyowners, variable annuity policyowners, and group annuity
participants would no longer have the economies of scale resulting from a larger
combined fund.
Each share will have a vote, and fractional shares will be counted. When issued,
shares do not have cumulative voting rights. On matters affecting a particular
portfolio, only the shareholders of that portfolio will be entitled to vote. On
matters relating to all of the portfolios, but affecting each portfolio
differently, separate votes by portfolio will be required. Shareholders have the
right to vote on the election of Directors and on any and all matters on which
by law or the provisions of the Fund's by-laws they may be entitled to vote.
Shareholders of all portfolios vote for a single set of Directors. The present
Board of Directors was elected at a meeting of shareholders held on October 15,
1990, and will serve for terms of unlimited duration (subject to certain removal
procedures by the Directors or the shareholders). Under applicable law, the Fund
is not generally required to hold annual shareholders' meetings, and does not
generally hold such meetings unless legally required to do so. The Board of
Directors has the power to alter the number of Directors and to appoint
successor Directors, provided that immediately after the appointment of any
successor Director at least two-thirds of the Directors have been elected by the
shareholders of the Fund. However, if at any time less than a majority of
Directors holding office has been elected by the shareholders, the Directors are
required to call a special meeting of shareholders for the purpose of electing
Directors to fill any existing vacancies in the Board.
Individual policyowners, and group annuity participants are not the
"shareholders" of the Fund. Rather, the Company, CLNY, and their separate
accounts are the shareholders. The Company and CLNY own Fund shares attributable
to policies participating in their registered separate accounts. In addition,
amounts may be held in these separate accounts, or in the general account of the
Company or CLNY, reflecting charges deducted from policies and amounts allocated
by the Company or CLNY to facilitate commencement of operations. The Company and
CLNY intend to vote all such Fund shares held in registered separate accounts,
or in the general accounts of the Company or CLNY, in accordance with
instructions received from policyowners, to the extent required by law. Shares
for which no voting instructions are received shall be voted by the Company (or
other shareholders) in proportion to the shares for which voting instructions
are received. Fund shares also may be offered to unregistered separate accounts
of the Company, Canada Life or its affiliates. To the extent that the shares of
the Fund are sold in the future to such unregistered separate accounts, those
shares will be voted by the shareholders at their discretion.
PERFORMANCE INFORMATION
The Fund may, from time to time, include quotations of the total return or yield
of the portfolios, along with the performance of the relevant insurance company
separate account, in advertisements, sales literature or reports to policyowners
or to prospective investors. Total return and yield quotations for all
portfolios reflect only the performance of a hypothetical investment in the
portfolios during the particular time period shown as calculated based on the
historical performance of the portfolios during that period. SUCH QUOTATIONS DO
NOT, IN ANY WAY, INDICATE OR PROJECT FUTURE PERFORMANCE. Quotations of total
return and yield of the Fund's portfolios will not reflect charges or deductions
against the separate accounts of the Company or CLNY or charges and deductions
against the policies. Where relevant, the Prospectuses for the policies contain
performance information about the policies.
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<PAGE> 25
The total return of a portfolio refers to the average annual percentage change
in value of an investment in the portfolio held for various periods of time
including, but not limited to, a period measured from the date a portfolio began
operations, as of a stated ending date. When a portfolio has been in operation
1, 5, and 10 years, respectively, the average annual total return for these
periods will always be provided. Total return quotations will be expressed as
average annual compound rates of return for each of the periods quoted, will
reflect the deduction of a proportional share of portfolio expenses, and will
assume that all dividends and capital gains distributions during the period are
reinvested in the portfolio when made. Quotations of total return may also be
shown for other periods.
The Fund may, from time to time, compare performance information for a
portfolio, in advertisements, sales literature and reports to policyowners or
to prospective investors to:
1. the Standard & Poor's composite index of 500 common stocks, a widely used
index to measure stock market performance. This unmanaged index does not
reflect any "deduction" for the expense of operating or managing a fund;
2. the Lehman Brothers Government/Corporate Bond Index, an index that includes
the Lehman Brothers Government Bond and Corporate Bond Indices. These
indices are total rate of return indices. The Government Bond Index
includes the Treasury Bond Index (public obligations of the U.S. Treasury)
and the Agency Bond Index (publicly issued debt of U.S. Government
agencies, quasi-federal corporations, and corporate debt guaranteed by the
U.S. Government). The Corporate Bond Index includes publicly issued, fixed
rate, nonconvertible investment grade dollar-denominated, SEC registered
corporate debt. All issues have at least a one-year maturity, and all
returns are at market value inclusive of accrued interest. Other
independent indices such as those prepared by Lehman Brothers Bond Indices
may also be used as a source of performance comparison;
3. the Dow Jones Industrial Average, a stock average of 30 blue chip stock
companies that does not represent all new industries. Other independent
averages such as those prepared by Dow Jones & Company, Inc. may also be
used as a source of performance comparison. Day to day changes may not be
reflective of the overall market when an average is composed of a small
number of companies;
4. the Morgan Stanley Capital International EAFE index which represents the
stock markets of Europe, Australia, New Zealand, and the Far East and is
widely used to measure performance of world stock markets excluding the
U.S. market. This unmanaged index does not reflect any "deduction" for the
expense of operating or managing a fund;
5. groups of mutual funds whose performance is reported by Lipper Analytical
Services, a widely quoted independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets, or
reported by other services, companies, publications, or individuals who
rank mutual funds by overall performance of other criteria; and
6. the Consumer Price Index. Other services or publications may also be cited
in advertisements, sales literature, and reports to policyowners or
prospective investors.
The Money Market Portfolio yield quotation refers to the income generated by a
hypothetical investment in the Portfolio over a specified seven-day period if
that level of income were generated for 52 consecutive weeks and expressed as an
annual percentage rate of return. The quotation of compound effective yield for
the Money Market Portfolio refers to the same calculation adjusted to reflect
the compounding effect of earnings on reinvested dividends.
The Bond, Managed, Value Equity, Capital, and International Equity Portfolios
yield quotations refers to the income generated by a hypothetical investment in
the Portfolio over a specified 30 day or one month period expressed as a
percentage rate of return for that period. The yield is calculated by dividing
the net investment income per share for the period by the price per share on the
last day of that period.
See the Statement of Additional Information for more information about the
Fund's performance.
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PURCHASES AND REDEMPTIONS OF SHARES
The Fund currently offers its shares, without sales charge, only for purchase by
the Company, CLNY, and their separate accounts. Shares may also be sold to
Canada Life, its affiliates and their separate accounts. The Fund continuously
offers shares in each of its portfolios at prices equal to their respective net
asset values per share next determined after the request is deemed received by
the Fund.
The Fund redeems all full and fractional shares of the Fund for cash. No
redemption fee is charged, although there may be a contingent deferred sales
charge applicable to surrenders or withdrawals under the policies, as described
in the Policy Prospectus. The redemption price is the net asset value per share
of the respective portfolio next determined after the request for redemption is
deemed received. Payment for shares redeemed will generally be made within seven
days after receipt of a proper notice of redemption. The right to redeem shares
or to receive payment with respect to any redemption may be suspended or
postponed for any period during which: 1) trading on the New York Stock Exchange
is restricted, as determined by the Securities and Exchange Commission, or such
Exchange is closed for other than weekends and holidays; 2) an emergency exists,
as determined by the Commission, as a result of which disposal of securities
owned by the Fund is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or 3)
the Commission by order so permits for the protection of shareholders of the
Fund.
VALUATION OF SHARES
The net asset value of each portfolio's shares is determined once daily as of
the close of the New York Stock Exchange (usually at 4:00 p.m. Eastern Time) on
each day on which the Exchange is open for trading.
The net asset value of a share is computed by dividing the value of the net
assets of the portfolio by the total number of shares outstanding. Securities
held by the Bond, Value Equity, Managed, Capital, and International Equity
Portfolios, except for money market instruments maturing in 60 days or less, are
valued at their market value if market quotations for the securities are readily
available. Otherwise, such securities are valued at fair value as determined in
good faith by or under the supervision of the Board of Directors. Actual
calculations of fair value may be made by persons acting pursuant to and under
the direction of the Board. Securities held by the Money Market Portfolio, and
money market instruments maturing in 60 days or less that are held by the other
portfolios of the Fund, are valued on an amortized cost basis. The amortized
cost method of valuation involves valuing a security at cost on the date of
acquisition and thereafter assuming a constant accretion of a discount or
amortization of a premium to maturity. The Money Market Portfolio seeks to
maintain a constant net asset value of $10 per share. The Money Market Portfolio
will not maintain a dollar-weighted average portfolio maturity which exceeds 90
days.
For additional information on the valuation of securities, refer to the
Statement of Additional Information.
DIVIDENDS
Dividends from investment income and any net realized capital gains of the Money
Market Portfolio shall be declared daily and reinvested monthly in additional
shares of the Money Market Portfolio at net asset value. Dividends from
investment income and any net realized capital gains of the Value Equity, Bond,
Managed, Capital, and International Equity Portfolios shall be declared and
reinvested annually in additional shares of the respective Portfolio at its net
asset value.
TAXES
Each portfolio is treated as a separate entity for Federal income tax purposes.
Each portfolio intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code. Dividends
derived from investment income or any realized capital gains are taxable to the
Fund's shareholders, i.e., the Company, CLNY, their separate accounts, and
Canada Life, its affiliates and their separate accounts, and are therefore not
directly taxable to policyowners.
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<PAGE> 27
LEGAL PROCEEDINGS
There are at present no legal proceedings to which the Fund is a party.
REGISTRATION STATEMENT
The Statement of Additional Information and this Prospectus do not include all
the information contained in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further information
with respect to the Fund and the securities offered hereby. The Registration
Statement is available for inspection by the public at the Securities and
Exchange Commission in Washington, DC.
APPENDIX A
The following Morgan Stanley industry sectors represent a reasonable
cross-section of economic activity:
Energy
Materials
Capital Equipment
Consumer Goods
Services
Finance
Multi-Industry
Gold Mines
23
<PAGE> 28
PART B
INFORMATION REQUIRED TO BE IN THE
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 29
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
CANADA LIFE OF AMERICA SERIES FUND, INC.
(THE "FUND")
This Statement of Additional Information is not a prospectus, and should be read
in conjunction with the Fund's current Prospectus dated May 1, 1998. A copy of
the Prospectus may be obtained by contacting the Fund at 6201 Powers Ferry Road,
NW, Atlanta, Georgia, 30339, or at (800) 905-1959.
The date of this Statement of Additional Information is May 1, 1998.
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT POLICIES.....................................................................................................3
Obligations Of The U.S. Government, Its Agencies And Instrumentalities.........................................3
Certificates Of Deposit........................................................................................3
Banker's Acceptances...........................................................................................3
Commercial Paper...............................................................................................3
Corporate Obligations..........................................................................................3
Canadian And Provincial Government And Crown Agency Obligations................................................3
Repurchase Agreements..........................................................................................4
INVESTMENT PRACTICES....................................................................................................4
Loans Of Portfolio Securities..................................................................................4
Put And Call Options...........................................................................................4
Stock Index Futures, Options On Stock Index Futures, And Stock Index Options...................................5
International Investments......................................................................................7
Currency Hedging...............................................................................................7
GNMA Certificates..............................................................................................7
Warrants...................................................................................................... 8
Lower Quality Debt Instruments.................................................................................8
INVESTMENT RESTRICTIONS.................................................................................................9
PORTFOLIO TURNOVER.....................................................................................................10
INVESTMENT EXPERIENCE INFORMATION......................................................................................11
Performance Quotations........................................................................................11
AVERAGE ANNUAL COMPOUNDED RATES OF RETURN..............................................................................11
Money Market Portfolio Yield Quotations.......................................................................12
Other Portfolio Yield Quotations..............................................................................12
MANAGEMENT OF THE FUND.................................................................................................13
Directors and Officers........................................................................................13
Custodian.....................................................................................................14
Accounting Services...........................................................................................14
Investment Adviser............................................................................................14
Capital Portfolio Sub-Adviser.................................................................................14
International Equity Portfolio Sub-Adviser....................................................................15
Advisory Fee And Expenses.....................................................................................15
Investment Advisory Agreement.................................................................................15
Capital Portfolio Sub-Advisory Agreement......................................................................16
International Equity Portfolio Sub-Advisory Agreement.........................................................16
Securities Activities Of The Adviser And Sub-Advisers.........................................................17
Portfolio Transactions And Brokerage..........................................................................17
PURCHASE AND REDEMPTION OF SHARES......................................................................................18
DETERMINATION OF NET ASSET VALUE.......................................................................................18
Money Market Portfolio........................................................................................18
Other Portfolios..............................................................................................19
TAXES ..............................................................................................................19
GENERAL INFORMATION....................................................................................................20
Capital Stock.................................................................................................20
Additional Information........................................................................................20
Financial Statements..........................................................................................20
APPENDIX A.............................................................................................................22
Standard & Poor's Corporation ("S&P").........................................................................22
Moody's Investment Service, Inc. ("Moody's")..................................................................22
Duff & Phelps (D&P) Fixed Income Rating Scale.................................................................23
</TABLE>
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INVESTMENT POLICIES
The following supplements the Fund's "Investment Objectives, Policies and Risks"
set forth in the Prospectus.
Certain money market instruments are described below. They may be used
extensively by the Money Market Portfolio, and may also be used by the other
portfolios, as outlined in the Prospectus.
OBLIGATIONS OF THE U.S. GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES
U.S. Government obligations are debt securities issued or guaranteed as to
principal and interest by the U.S. Treasury. These securities include treasury
bills, notes and bonds. U.S. Government agency obligations are debt securities
issued or guaranteed as to principal and interest by an agency or
instrumentality of the U.S. Government pursuant to authority granted by
Congress. U.S. Government agency obligations include, but are not limited to,
obligations of the Federal Home Loan Banks, Federal Intermediate Credit Banks,
and the Federal National Mortgage Association. U.S. instrumentality obligations
include, but are not limited to, obligations of the Export-Import Bank and
Farmers Home Administration. Some obligations issued or guaranteed by U.S.
Government agencies or instrumentalities are supported by the right of the
issuer to borrow from the U.S. Treasury or the Federal Reserve Banks, such as
those issued by Federal Intermediate Credit Banks; others are supported by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others are supported only by the credit of
the agency or instrumentality. The foregoing types of instruments are hereafter
collectively referred to as "obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities."
CERTIFICATES OF DEPOSIT
A certificate of deposit is a short-term, interest bearing, negotiable
certificate issued by a bank or a savings and loan association against funds
deposited in the issuing institution.
BANKER'S ACCEPTANCES
A banker's acceptance is a short-term credit instrument evidencing the
obligation of a bank to pay a draft which has been drawn on it by a customer.
These instruments reflect the obligation of both the bank and the drawer to pay
the face amount of the instrument upon maturity. They are primarily used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
COMMERCIAL PAPER
Commercial paper consists of unsecured promissory notes issued by corporations
to finance short-term credit needs. Commercial paper is issued in bearer form,
is usually sold on a discount basis, and has a maturity at the time of issuance
not exceeding nine months.
CORPORATE OBLIGATIONS
Corporate obligations include bonds and notes issued by corporations, generally
to finance long-term credit needs.
CANADIAN AND PROVINCIAL GOVERNMENT AND CROWN AGENCY OBLIGATIONS
Canadian Government obligations are debt securities issued or guaranteed as to
principal and interest by the Government of Canada pursuant to authority granted
by the Parliament of Canada and approved by the Governor in Council where
necessary. These securities include treasury bills, notes, bonds, debentures and
marketable Government of Canada loans. Canadian Crown agency obligations are
debt securities issued or guaranteed by a Crown corporation, company or agency
("Crown agencies") pursuant to authority granted by the Parliament of Canada and
approved by the governor in Council, where necessary.
Provincial Government obligations are debt securities issued or guaranteed as to
principal and interest by the government of any province of Canada pursuant to
authority granted by the Legislature of any such province and approved by the
Lieutenant Governor in Council of any such province, where necessary. These
securities include treasury bills, notes, bonds and debentures.
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Provincial Crown agency obligations are debt securities issued or guaranteed by
a provincial Crown corporation, company or agency pursuant to authority granted
by a provincial Legislature and approved by the Lieutenant Governor in Council
of such province, where necessary. Certain provincial Crown agencies are by
statute agents of Her Majesty in right of a particular province of Canada, and
their obligations, when properly authorized, constitute direct obligations of
such province. Other provincial Crown agencies, which are not by law agents of
Her Majesty in right of a particular province of Canada, may issue obligations
which by statute the Lieutenant Governor in Council of such province may
guarantee, or may authorize the Treasurer thereof to guarantee, on behalf of the
government of such province.
Finally, other provincial Crown agencies which are not by law agencies of Her
Majesty may issue or guarantee obligations not entitled to be guaranteed by a
provincial government. No assurance can be given that the government of any
province of Canada will support the obligations of provincial Crown agencies
which are not agents of Her Majesty, or which it has not guaranteed, as it is
not obligated to do so by law. Provincial Crown agency obligations described
above include, but are not limited to, those issued or guaranteed by a
provincial railway corporation, a provincial hydroelectric or power commission
or authority, a provincial municipal financing corporation or agency and a
provincial telephone commission or authority.
Any Canadian or Provincial government or Crown Agency obligation acquired by a
Fund portfolio will be denominated in U.S. currency.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction where a portfolio buys a security at one
price and simultaneously agrees to sell that same security back to the original
owner at a specified price and date. Generally, repurchase agreements are of
short duration, often less than one week but on occasion may be for longer
periods. The repurchase price reflects an agreed upon interest rate unrelated to
the coupon rate on the underlying obligation. Repurchase agreements entered into
by the Fund will be with banks, brokers or dealers. All repurchase agreements
entered into by a portfolio will be subject to the Adviser evaluating the
creditworthiness and financial responsibility of the bank, broker or dealer with
whom the agreement was entered into. The Fund's Board of Directors establishes
the standards utilized by the Adviser and Sub-Advisers in evaluating the credit
worthiness of the issuer. Repurchase agreements will be fully collateralized at
all times. Should an issuer of a repurchase agreement fail to repurchase the
underlying obligation, the loss to the portfolio, if any, would be the
difference between the repurchase price and the underlying obligation's market
value. A portfolio might also incur certain costs in liquidating the underlying
obligation. Moreover, if bankruptcy or other insolvency proceedings should be
commenced with respect to the seller, realization upon the underlying obligation
by the Fund might be delayed or limited.
INVESTMENT PRACTICES
LOANS OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each portfolio may lend
securities from its portfolio (but not in excess of 30% of its total assets), to
brokers, dealers, and financial institutions. Any such loans will be
continuously secured by collateral at least equal to the current market value of
the securities loaned plus accrued interest. The portfolio may, at any time,
call the loan and regain the securities loaned. The Investment Adviser or
Sub-Advisers will review the creditworthiness of the borrower and must have
found such creditworthiness satisfactory prior to entering into any loan. The
Fund's Board of Directors establishes the standards utilized by the Adviser and
Sub-Advisers in evaluating the creditworthiness of the borrower. The risk
involved in loans of portfolio securities is minimized because, if the borrower
were to default, the collateral held by the portfolio should satisfy the
obligation.
The portfolio will retain all rights of beneficial ownership in the loaned
securities, including voting rights and rights to interest or other
distributions, and will have the right to regain record ownership of loaned
securities to exercise such beneficial rights.
PUT AND CALL OPTIONS
Each portfolio, with the exception of the Money Market Portfolio, may invest up
to 5% of its assets in premiums on put options, provided that the portfolio owns
the securities underlying the puts or securities substantially similar to such
underlying securities. Each portfolio, with the exception of the Money Market
Portfolio, may also write call options on securities held by it, or which can be
readily acquired by exercise of conversion privileges on convertible securities,
provided that not more than 25% of the total assets of a portfolio would be
subject to call options. The Fund will not sell put options or purchase call
options unless the transaction is for the purpose of closing out
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existing options positions. Put options purchased by the portfolio and call
options written by the portfolio, and the securities underlying such options,
will be listed on national securities exchanges or traded in the
over-the-counter market. The Fund may enter into closing transactions, exercise
its options or permit them to expire.
A put option gives the holder (buyer) the right to sell a security at a
specified price (the "exercise" price) at any time until a certain date (the
expiration date). In effect, the buyer of a put who also owns the related
security is protected by ownership of a put option against any decline in that
security's price below the exercise price less the amount paid for the option.
The ability to purchase put options allows a portfolio to protect capital gains
in an appreciated security it owns, without being required to actually sell that
security.
In writing "covered" call options, a portfolio gives the holder (purchaser) the
right to purchase the underlying security at a specified price (the "exercise"
price) at any time prior to the expiration of the option, normally within nine
months. Immediately upon writing the option, the portfolio receives a payment
from the purchaser of the option known as a "premium." If the option is not
exercised, the premium will generate additional revenues for the portfolio or,
if the market price of the underlying security declines, it reduces the amount
of loss the portfolio would otherwise incur. However, if the market price of the
underlying security rises above the exercise price and the option is exercised,
the portfolio will lose the opportunity to profit from that portion of the rise
which is in excess of the exercise price plus the premium for the call.
Therefore, a portfolio will write call options only when the Adviser believes
that the option premium will yield a greater return to the portfolio than any
capital appreciation that might occur on the underlying security during the life
of the option, or when the Adviser believes that the option will reduce the risk
involved in owning the underlying security. For information regarding investment
by the Value Equity, Managed, Capital and International Equity Portfolios in
stock index futures, options on stock index futures, and stock index options,
see below.
STOCK INDEX FUTURES, OPTIONS ON STOCK INDEX FUTURES, AND STOCK INDEX OPTIONS
Purchase or sales of stock index futures contracts may be used by the Value
Equity, Managed, Capital, and International Equity Portfolio to attempt to
protect the portfolio's current or intended investments from fluctuations in
securities prices. By establishing an appropriate "short" position in index
futures, a portfolio may seek to protect the value of its portfolio against an
overall decline in the market for such securities. Alternatively, in
anticipation of a generally rising market, a portfolio can seek to avoid losing
the benefit of apparently low current prices by establishing a "long" position
in stock index futures and later liquidating that position as particular
securities are in fact acquired. To the extent that these hedging strategies are
successful, the portfolio will be effected to a lesser degree by adverse overall
market price movements than would otherwise be the case.
A portfolio will incur brokerage fees when it purchases and sells futures
contracts, and it will be required to maintain margin deposits. Initially, when
purchasing or selling futures contracts the portfolio will be required to
deposit with the broker an amount of cash or U.S. Government securities equal to
approximately 5% to 10% of the contract amount. This amount is subject to change
by the exchange or board of trade on which the contract is traded and members of
such exchange or board of trade may impose their own higher requirements. This
amount is known as "initial margin" and is in the nature of a performance bond
or good faith deposit on the contract, which is returned to the portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin," to and from
the broker will be made daily as the price of the index of securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "mark-to-market." At
any time prior to the expiration of a futures contract, the portfolio may elect
to close the position by taking an opposite position at the then prevailing
price, which will operate to terminate the portfolio's' existing position in the
contract.
The Value Equity, Managed, Capital, and International Equity Portfolios may also
purchase and write call and put options on stock index futures contracts in
order to hedge the portfolio's investments. A call option on a futures contract
gives the purchaser the right, in return for the premiums paid, to purchase a
futures contract (assume a "long" position) at a specified exercise price at any
time before the option expires. A put option gives the purchaser the right, in
return for the premium paid, to sell a futures contract (assume a "short"
position), for a specified exercise price, at any time before the option
expires.
The Value Equity, Managed, Capital, and International Equity Portfolios may also
purchase and sell options on stock indices. Options on stock indices are similar
to options on stock except that: (a) the expiration cycles of stock index
options are monthly, while those of stock options are currently quarterly; and
(b) the delivery requirements are different. Instead of giving the right to take
or make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to:
(a) the amount, if any, by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of exercise; multiplied by (b) a fixed
"index multiplier." Receipt of this cash amount will
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depend upon the closing level of the stock index upon which the option is based
being greater than (in the case of a call) or less than (in the case of a put)
the exercise price of the option. The amount of cash received will be equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or, in the case
of options owned by the portfolio, it may let the option expire unexercised.
When a portfolio has a long position in a futures contract, the portfolio will
either cover the position, or establish a segregated asset account containing
cash, U.S. Government securities, or other appropriate high grade debt
obligations equal in value to the purchase price of the contract (less any
margin on deposit). When a portfolio has a short position in a futures contract,
the portfolio will either cover the position, or establish a segregated asset
account with cash, U.S. Government securities, or other appropriate high-grade
debt obligations equal to the market value of the instruments underlying the
futures contract (less any margin on deposit). Call options sold by a portfolio
with respect to futures contracts will be covered by, among other things:
entering into a long position in the same contract at a price no higher than the
strike price of the call option; or by ownership of the instruments underlying,
or instruments, the prices of which are expected to move relatively consistently
with the instruments underlying, the futures contracts. Call options sold by a
portfolio on a stock index will be covered by the portfolio's holding a
portfolio of stocks substantially replicating the movement of the index
underlying the call option. Put options sold by the portfolio with respect to
futures contracts or stock indices will be written only to close out existing
positions.
There can be no assurance of the Value Equity, Managed, Capital, and
International Equity Portfolios' successful use of stock index futures, options
on stock index futures, or stock index options as hedging devices. For example,
if the portfolio has hedged against the possibility of a decline in the market
adversely affecting stocks held in its portfolio and stock prices increase
instead, the portfolio will lose part or all of the benefit of the increased
value of its stocks which it has hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if the portfolio has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The portfolio may have to sell
securities at a time when it may be disadvantageous to do so.
Additional risks arise because of the imperfect correlation between movements in
the price of the stock index option or stock index future and movements in the
price of the securities which are the subject of the hedge. In addition to the
possibility that there may be an imperfect correlation, or no correlation at
all, between movements in the index and the portion of the portfolio being
hedged, the price of stock index options or futures may not correlate perfectly
with the movement in the stock index due to certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the index and
futures markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures, a correct forecast of general market trends still
may not result in a successful hedging transaction.
In addition, there can be no assurance that a liquid secondary market will exist
for any contract purchased or sold, and a portfolio may be required to maintain
a position until exercise or expiration, which could result in losses. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit. Futures contract prices could move to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions. If a futures market were to become
unavailable, in the event of an adverse movement, the portfolio would be
required to continue to make daily cash payments of variation margin if it could
not close a futures position. If an options market were to become unavailable
and a closing transaction could not be entered into, an option holder would be
able to realize profits or limit losses only by exercising an option, and an
option writer would remain obligated until exercise or expiration. Finally, if a
broker or clearing member of an options or futures clearing corporation were to
become insolvent, the portfolio could experience delays and might not be able to
trade or exercise options or futures purchased through that broker. In addition,
the portfolio could have some or all of their positions closed out without their
consent. If substantial and widespread, these insolvencies could ultimately
impair the ability of the clearing corporations to effect the portfolios'
futures transactions. While the principal purpose of hedging is to limit the
affects of adverse market movements, the attendant expense may cause the
portfolios' returns to be less than if hedging had not taken place. The overall
effectiveness of hedging therefore depends on
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the portfolios' accuracy in predicting future changes in interest rate levels or
securities price movements, as well as on the expense of hedging.
INTERNATIONAL INVESTMENTS
The following information is of particular importance to the International
Equity Portfolio. International investments can involve significant risks in
addition to those inherited in U.S. investments. The value of assets denominated
in foreign currencies can fluctuate significantly as a result of changes in
value of foreign currencies against the U.S. dollar. Many international markets
have less trading volume and liquidity than U.S. Markets which may result in
volatile security prices. Accounting and disclosure standards in many
international markets are neither uniform nor comparable to U.S. standards, and
it may be difficult to obtain reliable information about a company's operations
and financial condition. The costs of investing in international markets
(brokerage commissions, custodian fees, withholding taxes, etc.) are higher than
similar costs of investing in the U.S. International markets and may offer less
investor protection than U.S. markets. It may be difficult to enforce legal
rights in foreign countries. There may be less government supervision and
regulation of companies, brokers, and markets. Trading and settlement practices
may result in increased risk because of failed trades or broker insolvency.
Investing in developing countries entails even greater risk. The International
Equity Portfolio may invest in securities of companies located in countries with
developing economies or securities markets. These countries are located in the
Asia-Pacific region, Eastern Europe, Central and South America and Africa.
Political and economic structures in many of these countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Certain of these countries may have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks of foreign investment
generally including the risks of nationalization or expropriation of assets, may
be heightened.
The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make the International Equity Portfolio's investments in such countries
illiquid and more volatile than investments in developed countries, and this
Portfolio may be required to establish special custody arrangements before
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in such
countries, and it may be difficult as a result to assess the value or prospects
of an investment in such issuers. The laws of some foreign countries may limit
the availability of the International Equity Portfolio to invest in securities
of certain issuers located in those countries.
CURRENCY HEDGING
Because investment in foreign securities will usually involve currencies of
foreign countries, the value of the assets of the International Equity Portfolio
as measured in U.S. dollars will be affected by changes in foreign currency
exchange rates. To manage exposure to currency fluctuations, the International
Equity Portfolio may buy and sell options and futures relating to foreign
currencies or enter into forward currency contracts (agreements to exchange one
currency for another at a future date).
Successful hedging will depend on the International Equity Portfolio
Sub-Adviser's skill in analyzing and predicting exchange rates, and could result
in an opportunity loss to the International Equity Portfolio if currencies do
not perform as expected. For example, if a currency rose in value against the
U.S. dollar at a time when the currency had been hedged by selling that currency
for dollars, the Portfolio would not have an opportunity to benefit from the
currency's appreciation.
GNMA CERTIFICATES
The Bond, Managed, and Capital Portfolios may each invest in securities of the
Government National Mortgage Agency ("GNMA"), a government corporation within
the U.S. Department of Housing and Urban Development. GNMA Certificates are
mortgage-backed securities representing part ownership in a pool of mortgage
loans. These loans, which are issued by lenders such as mortgage bankers,
commercial banks, and savings and loan associations, are either insured by the
Federal Housing Administration or guaranteed by the Veterans Administration. A
pool of these mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. The timely payment of interest
and principal on each mortgage is guaranteed by GNMA and backed by the full
faith and credit of the U.S. Government.
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GNMAs are called "pass-through" securities because both interest and principal
payments, including prepayments, are passed through to the holder of the
security. The payment of principal on the underlying mortgages may exceed the
minimum required by the schedule of payments for the mortgages. Such prepayments
are made at the option of the mortgagors for a wide variety of reasons
reflecting their individual circumstances. A portfolio, when such prepayments
are passed through to it, may be able to reinvest them only at a lower rate of
interest. The Adviser or Sub-Advisers, in determining the attractiveness of GNMA
Certificates in comparison to alternative fixed-income securities, and in
choosing specific GNMA Certificates issues, will make assumptions as to the
likely speed of prepayment. Actual experience may vary from this assumption,
resulting in a higher or lower investment return than anticipated.
WARRANTS
The Value Equity, Managed, Capital, and International Equity Portfolios may
invest in warrants. A warrant is a right to buy a certain security at a set
price during a certain time period. Warrants purchased by these Portfolios will
be traded on a national securities exchange or in the over-the-counter market.
LOWER QUALITY DEBT INSTRUMENTS
Up to 20% of the total assets of the Bond Portfolio may be invested in lower
quality debt instruments (i.e. BB or B as rated by Standard & Poors and Duff &
Phelps or Ba or B as rated by Moody's Investors Service) and the Managed
Portfolio also may invest a substantial portion of its assets in such
instruments. Furthermore, debt instruments with higher ratings, and especially
those rated as investment grade but not high quality (i.e., rated BBB by
Standard & Poors and Duff & Phelps or Baa by Moody's Investor Service) may,
after purchase by either Portfolio, have their ratings lowered due to the
deterioration of the issuer's financial position. The Bond and Managed
Portfolios may both invest without limit in investment grade debt instruments
that are not "high quality" debt instruments and that may be downgraded to lower
quality at any time after being purchased by a Portfolio.
Lower quality debt instruments entail certain risks. These lower-rated
fixed-income securities are considered, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and will generally involve more credit risk than
securities in the higher rating categories. The market values of such securities
tend to reflect individual corporate developments to a greater extent than do
higher-rated securities, which react primarily to fluctuations in the general
level of interest rates. Such lower-rated securities also tend to be more
sensitive to economic conditions than higher-rated securities. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis,
regarding lower-rated bonds may depress prices and liquidity for such
securities. To the extent a portfolio invests in these securities, factors
adversely affecting the market value of high-yielding securities will adversely
affect a portfolio's net asset value. In addition, a portfolio may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings. Although some
risk is inherent in all securities ownership, holders of fixed-income securities
have a claim on the assets of the issuer prior to the holders of common stock.
Therefore, an investment in fixed-income securities generally entails less risk
than an investment in common stock of the same issuer.
High-yielding securities may be issued by corporations in the growth stage of
their development. They may also be issued in connection with a corporate
reorganization or as part of a corporate takeover. Companies that issue such
high-yielding securities are often highly leveraged and may not have more
traditional methods of financing available to them. Therefore, the risk
associated with acquiring the securities of such issuers generally is greater
than is the case with higher-rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, highly leveraged
issuers of high-yielding securities may experience financial stress. During such
periods, such issuers may not have sufficient revenues to meet their interest
payment obligations. The issuer's ability to service its debt obligations may
also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high-yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuers.
High-yielding securities frequently have call or buy-back features that would
permit an issuer to call or repurchase the security from a portfolio. If a call
were exercised by the issuer during a period of declining interest rates, a
portfolio would likely have to replace such called security with a lower
yielding security, thus decreasing the net investment income to the portfolio.
A portfolio may have difficulty disposing of certain high-yielding securities
for which there is a thin trading market. Because not all dealers maintain
markets in all high-yielding securities, there is no established retail
secondary market for many of these securities, and the Fund anticipates that
they could be sold only to a limited number of dealers or institutional
investors. To the extent there is a secondary
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trading market for high-yielding securities, it is generally not as liquid as
that for higher-rated securities. The lack of a liquid secondary market for
certain securities may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing a portfolio's assets. Market
quotations are generally available on many high-yield issues only from a limited
number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales.
The market for high-yielding securities has not weathered a major economic
recession, and it is not known how one might affect that market. It is likely,
however, that any such recession could severely affect the market for and the
values of such securities, as well as the ability of the issuers of such
securities to repay principal and pay interest thereon.
A portfolio may acquire high-yielding securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. A portfolio may incur special costs in disposing of such securities,
but will generally incur no costs when the issuer is responsible for registering
the securities.
A portfolio also may acquire high-yielding securities during an initial
underwriting. Such securities involve special risks because they are new issues.
The Fund has no arrangement with any person concerning the acquisition of such
securities, and the Investment Adviser will carefully review the credit and
other characteristics pertinent to such new issues.
From time to time, there have been proposals for legislation designed to limit
the use of certain high-yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals, if enacted into law, could
generally reduce the market for such securities, could negatively affect the
financial condition of issuers of high-yielding securities by removing or
reducing a source of future financing, and could negatively affect the value of
specific high-yield issues. However, the likelihood of any such legislation or
the effect thereof is uncertain.
INVESTMENT RESTRICTIONS
The Fund is subject to two classes of investment restrictions in implementing
the investment policies of the portfolios: fundamental and nonfundamental.
Nonfundamental restrictions may be changed by the Fund's Board of Directors
without shareholder approval. Shareholders will be notified promptly of any such
changes. Fundamental restrictions may not be changed without the affirmative
vote of a majority of the outstanding voting securities of each portfolio
affected by the change. A change in a fundamental policy affecting only one
portfolio may be effected with the affirmative vote of the majority of the
outstanding securities of that portfolio only.
The Fund's fundamental investment restrictions provide that no portfolio of the
Fund will:
1. issue senior securities, except to the extent that the borrowing of
money, as permitted in restriction 6, may constitute the issuance of a
senior security;
2. invest more than 25% of its total assets in securities of issuers
primarily engaged in any one industry, excluding obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
obligations of banks or savings and loan associations, and instruments
secured by these instruments, such as repurchase agreements for U.S.
government securities. For purposes of this restriction, neither
finance companies nor utilities, as a group, are considered to be a
single industry. Such companies will be grouped instead according to
their services; for example, gas, electric and telephone utilities
will each be considered a separate industry;
3. invest more than 5% of its total assets in securities of any one
issuer or purchase more than 10% of the outstanding voting securities
of an issuer, excluding obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
4. purchase or sell commodities, commodity contracts, real estate or real
estate mortgages, interests in oil, gas or other mineral exploration
or development programs, except that each portfolio may purchase
securities of issuers which invest or deal in any of the above, and
except that each portfolio may invest in securities secured by real
estate or real estate mortgages. This restriction does not apply to
purchases and sales of covered call options and put options to the
extent described in restriction 9; moreover, the Value Equity,
Managed, Capital, and International Equity Portfolios may purchase and
sell stock index futures contracts, options on stock index futures
contracts, and stock index options as described in the Prospectus and
in the Statement of Additional Information. This restriction also does
not apply to obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities;
5. underwrite securities of other issuers except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in selling
shares of each portfolio;
9
<PAGE> 38
6. borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes (but not for investment or
leveraging), or pledge or mortgage more than 15% of total assets as
security for such indebtedness. The aggregate amount of any such
indebtedness may not exceed 10% of total assets at the time a loan is
made, and a portfolio may not make additional investments during any
period that its borrowings exceed 5% of total assets. Borrowings in
relation to the entry into stock index futures contracts, options on
stock index futures contracts, and stock index options shall not be
deemed to be a violation of this restriction, and the Value Equity,
Managed, Capital, and International Equity Portfolios entry into
collateral arrangements with respect to stock index futures contracts,
options on stock index futures contracts, and stock index options with
respect to initial or variation margins will not be deemed to be
pledges of these portfolio's assets;
7. purchase securities on margin, make short sales of securities, or
maintain a short position, except that the Fund may obtain short term
credit as may be necessary for the clearance of securities
transactions, and except that the Value Equity, Managed, Capital, and
International Equity Portfolios may purchase or sell stock index
futures contracts and may make initial and variation margin payments
in connection with purchases or sales of stock index futures
contracts, options on stock index futures contracts, and stock index
options;
8. lend money, except through the purchase of obligations in which a
portfolio is authorized to invest or by entering into repurchase
agreements; and
9. write call options if more than 25% of the value of a portfolio's
total assets would be subject to call options. Call options may only
be written on securities held, or which can be readily acquired by
exercise of conversion privileges on convertible securities or, in the
case of options written on stock indices, written on an index the
movement of which is substantially replicated by a portfolio of stocks
held by the portfolio. Put options may only be purchased if 5% or less
of total assets would be invested in premiums on put options. The
Value Equity, Managed, Capital, and International Equity Portfolios
may purchase or sell options on stock index futures contracts and
stock index options as described in the Prospectus and Statement of
Additional Information. Call options may be purchased and put options
may be sold only for the purpose of closing out existing options
positions.
The Fund's nonfundamental restrictions provide that no portfolio of the Fund
will:
1. invest more than 10% of total assets in securities or other
investments, including repurchase agreements, that are subject to
legal or contractual restrictions upon resale or are otherwise not
readily marketable;
2. invest more than 5% of total assets in securities of other investment
companies, or purchase more than 3% of the total outstanding voting
stock of any single investment company, or invest more than 10% of
total assets in securities issued by investment companies, other than
in connection with a merger, consolidation, acquisition or
reorganization;
3. lend portfolio securities in an amount greater than 30% of total
assets; or
4. invest more than 20% of total assets in securities of foreign issuers
with the exception of the International Equity Portfolio which may
invest 100% of total assets in foreign securities.
If a percentage restriction (for either a fundamental or nonfundamental
restriction) is adhered to at the time of investment, a later increase or
decrease in percentage beyond the specified limit resulting from a change in
values of assets or amount of total assets shall not be considered a violation
of the restriction.
In addition to the investment restrictions described above, the Fund will comply
with restrictions contained in any current insurance laws in order that the
assets of the separate accounts of the Company, CLNY and their affiliates may be
invested in shares of the Fund.
PORTFOLIO TURNOVER
Normally, the annual rate of portfolio turnover will differ for each portfolio
and will vary from year to year. Portfolio turnover is calculated by dividing
the lesser of purchases or sales of portfolio securities during the fiscal year
by the monthly average of the value of the portfolio's securities, excluding
from the computation all securities, including options, with maturities at the
time of acquisition of one year or less. A high rate of portfolio turnover
generally involves correspondingly greater brokerage commission expenses, which
are borne directly by the portfolios. The rate of portfolio turnover will not be
a limiting factor when it is deemed appropriate to purchase or sell securities
for a portfolio.
10
<PAGE> 39
No portfolio turnover rate can be calculated for the Money Market Portfolio due
to the short maturities of the instruments purchased. Portfolio turnover should
not affect the income or net asset value of the Money Market Portfolio because
brokerage commissions are not normally charged on the purchase or sale of money
market instruments.
During the year 1995, the assets of the Value Equity Fund were re-structured
which resulted in a higher portfolio turnover of 103.07% in 1995 verses 35.99%
in 1994. In 1996, the Portfolio Turnover rate returned to a more normal rate of
46.78%. In 1997, the Portfolio Turnover rate was 50.97%.
INVESTMENT EXPERIENCE INFORMATION
THE INFORMATION PROVIDED IN THIS SECTION SHOWS THE HISTORICAL INVESTMENT
EXPERIENCE OF THE FUND. IT DOES NOT REPRESENT OR PROJECT FUTURE INVESTMENT
PERFORMANCE.
The Fund commenced operations on December 4, 1989. The rates of return shown
below depict the actual investment experience of each portfolio of the Fund for
the periods shown. The Capital Portfolio commenced operations on May 1, 1993 and
the International Equity Portfolio commenced operations on May 1, 1995.
PERFORMANCE QUOTATIONS
The rates of return shown below are based on actual investment performance,
after the deduction of investment advisory fees and direct Fund expenses of the
portfolios of the Fund. The rates are average annual compounded rates of return
for the period ending on December 31, 1997.
These rates of return figures do not reflect charges or deductions against the
separate accounts of the Company or CLNY or charges and deductions against the
policies. Accordingly, these rates of return do not illustrate how actual
investment performance will affect benefits or Policy values. Where relevant,
the prospectuses for the Policies also contain performance information.
Moreover, these rates of return are not an estimate, projection or guarantee of
future performance.
AVERAGE ANNUAL COMPOUNDED RATES OF RETURN
<TABLE>
<CAPTION>
YEAR ENDED FIVE YEAR PERIOD 12/4/89 (INCEPTION)
FUND PORTFOLIO 12/31/97 ENDED 12/31/97 TO 12/31/97
-------------- ---------- ---------------- ------------
<S> <C> <C> <C>
Value Equity 26.93% 12.55% 12.23%
Bond 8.09% 6.97% 7.75%
Managed 17.61% 10.36% 11 94%
Money Market 4.95% 4.06% 4.43%
Capital 21.14% *** 15.55%*
International Equity 4.32% *** 10.81%**
</TABLE>
* Calculated from May 1, 1993 to December 31, 1997.
** Calculated from May 1, 1995 to December 31, 1997.
*** Five Year Average Annual Total Return information is not available
for the Capital and International Equity Portfolios.
Additional information regarding the investment performance of the portfolios of
the Fund appears in the Fund Prospectus. The total return figures shown above
are in part a function of the Fund's expenses and have been reduced by the
advisory fees. If not for this reimbursement, the figures shown above would have
been smaller.
11
<PAGE> 40
MONEY MARKET PORTFOLIO YIELD QUOTATIONS
The Fund may make current yield and effective yield quotations available for the
Money Market Portfolio. Current annualized yield quotations for the Money Market
Portfolio are based on the portfolio's net investment income per share for a
seven day period and exclude any realized or unrealized gains or losses on
portfolio securities. The yield is computed by determining the net change in
value for a hypothetical account having a balance of one share at the beginning
of the period, excluding any realized or unrealized gains or losses, and
dividing by the price per share at the beginning of the period (expected to
remain constant at $10). The net change is then annualized by multiplying it by
365/7, with the current yield figure carried to the nearest one-hundredth of one
percent. The effective yield of the Money Market Portfolio for a seven day
period is computed by expressing the unannualized return for that period on a
compounded, annualized basis.
The Money Market portfolio's actual yields will fluctuate, and are not
necessarily indicative of future actual yields. Actual yields are dependent on
such variables as portfolio quality, average portfolio maturity, the type of
instruments in which investments are made, changes in interest rates on money
market instruments, portfolio expenses and other factors. In addition, the yield
quotation does not reflect the charges deducted from the Separate Account (see
the Prospectus for the policy). If these charges were deducted to reflect the
effective yield to a policyowner, that yield would be lower than the yield
calculated for the Money Market Portfolio.
OTHER PORTFOLIO YIELD QUOTATIONS
The yield quotations of the Bond, Managed, Value Equity, Capital, and
International Equity Portfolios are based on a specified 30 day or one month
period and are computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last date of
the period, according to the following equation:
6
YIELD = 2((a-b/cd+1) -1)
Where:
a = dividends and interest earned during the period by the
Portfolio.
b = expenses accrued for the period (net of reimbursements).
c = the
average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
TOTAL RETURN QUOTATIONS
Total return quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following equation:
N
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
N = number of years.
ERV = ending redeemable value (at the end of the applicable period
of a hypothetical $1,000 payment made at the beginning of the
applicable period).
The total return quotation calculations reflect the deduction of a proportional
share of portfolio expenses and assffume that all dividends and capital gains
during the period are invested in the portfolio when made. The calculations also
assume a complete redemption as of the end of the particular period.
12
<PAGE> 41
<PAGE> 42
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund and their principal occupations
for at least the last five years are set forth below. Unless otherwise noted
below, the address of each director and executive officer is 330 University
Avenue, Toronto, Canada, M5G 1R8.
<TABLE>
<CAPTION>
NAME, AGE AND ADDRESS POSITION(S) WITH THE FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
<S> <C> <C>
R. W. Morrison,* 56 Director and Chairman Vice-President and Treasurer, Canada Life.
R. E. Beettam,* 40 ** Director and President Vice-President and Director, U.S. Division, Canada Life.
E. Y. Baker, 63 Director President, OHA Investment Management Limited; Senior
Vice-President, Finance, Ontario Hospital Association. Formerly
Vice-President, Investments, Ontario Hospital Association, Trustee
Rogers Sugar Income Fund.
J. S. Clarke, 60 Director Associate Treasurer for Investments, Cornell University. Formerly
Senior Investment Officer, Cornell University.
D. H. Harris, 73 Director Formerly, Director, Chairman and CEO, The Equitable Foundation;
Executive Vice-President and Chief of Staff, and Director, The
Equitable Life Assurance Society of the U.S.
C.A. Merrigan,* 38*** Vice-President and Vice-President and Chief Investment Officer, CL Capital
Assistant Treasurer Management, Inc.
D. V. Rough, 51 Treasurer Associate Treasurer, Investment Services, Canada Life.
</TABLE>
* Director who is an "interested person", as defined in the Investment
Company Act of 1940, as amended, because of the Director's affiliation with
the Company or the Adviser.
** The business address is 6201 Powers Ferry Road, N.W., Atlanta, Georgia
30339.
*** The business address is 6151 Powers Ferry Road, N.W., Suite 550, Atlanta,
Georgia 30339.
As of the date of this Statement of Additional Information, officers and
directors of the Fund do not own any of the outstanding shares of the Fund.
Directors who are not officers or employees of the Company or the Adviser are
paid a fee plus actual out-of-pocket expenses by the Fund for each meeting of
the Board of Directors attended.
<TABLE>
<CAPTION>
===================================================================================================================================
COMPENSATION TABLE *
===================================================================================================================================
Name/Title Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation from
from Series Fund Benefits Accrued as Benefits Upon Retirement Series Fund to Directors
Part of Fund Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Y. Baker, Director $ 10,000 N/A N/A $ 10,000
- -----------------------------------------------------------------------------------------------------------------------------------
J. S. Clarke, Director $ 10,000 N/A N/A $ 10,000
- -----------------------------------------------------------------------------------------------------------------------------------
D. H. Harris, Director $ 10,000 N/A N/A $ 10,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* There are no direct employees of the Fund and the only people compensated
directly by the Fund are the non-affiliated directors.
13
<PAGE> 43
CUSTODIAN
The Chase Manhattan Bank, N.A., Chase Manhattan Plaza, New York, NY, 10081, acts
as custodian of the Fund's assets. The Chase Manhattan Bank, N.A. is authorized
to use the facilities of the Depository Trust Company, the book-entry system of
the Federal Reserve Banks, sub-custodians, and other depositories as necessary
in foreign markets.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with Canada Life
Insurance Company of America (the "Company"), whereby the Company provides
certain accounting and record keeping services to the Fund.
INVESTMENT ADVISER
The Fund has entered into an Investment Advisory Agreement ("the Agreement")
with CL Capital Management, Inc., (the "Adviser"). The principal business
address of the Adviser is 6151 Powers Ferry Road, N.W., Suite 550, Atlanta,
Georgia 30339. The Adviser is a wholly-owned subsidiary of the Company, which is
a wholly-owned subsidiary of The Canada Life Assurance Company ("Canada Life").
The principal executive officers of the Adviser are:
<TABLE>
<CAPTION>
NAME POSITION WITH ADVISER
<S> <C>
R. W. Morrison Chairman
C. A. Merrigan Vice-President and Chief Investment Officer
R. E. Beettam President
D. V. Rough Treasurer
</TABLE>
Pursuant to the Agreement, the Fund has retained the Adviser to provide
management and investment advisory services to the Fund for the Money Market,
Bond, Value Equity and Managed Portfolios, and management services for the
Capital and International Equity Portfolios. As part of the investment advisory
services provided to the Fund, the Adviser directs the investment of the Fund's
assets, including the placing of orders for the purchase and sale of securities.
The Adviser also continuously furnishes an investment program for each portfolio
(except the Capital and International Equity Portfolio), and has responsibility
for making decisions to buy, sell or hold any particular security. The Adviser
obtains and evaluates such information and advice relating to the economy,
securities markets, and specific securities as it considers necessary or useful
to continuously manage the assets of the portfolios in a manner consistent with
their investment objectives, policies and restrictions. The Adviser considers
analysis from various sources, makes necessary investment decisions and effects
transactions accordingly. The Sub-Investment Adviser, J. & W. Seligman & Co.
Incorporated, provides investment advisory services for the Capital Portfolio
and the Sub-Investment Adviser, INDAGO Capital Management Inc., provides
investment advisory services for the International Equity Portfolio. The Adviser
also determines the manner in which voting rights and any other rights
pertaining to the Fund's portfolio securities will be exercised. The Adviser
also performs certain management services for the Fund, including processing
shareholder orders, administering shareholder accounts, handling shareholder
relations, conducting relations with custodians, depositories, transfer agents,
dividend disbursing agents, accountants, attorneys, brokers and dealers,
insurers, and other persons. The Adviser is, at all times, subject to the
direction and supervision of the Board of Directors of the Fund.
CAPITAL PORTFOLIO SUB-ADVISER
The Sub-Investment Adviser of the Capital Portfolio (the "Capital Portfolio
Sub-Adviser") is J. & W. Seligman & Co. Incorporated. Their address is 100 Park
Avenue, New York, New York, 10017. Pursuant to a Sub-Advisory Agreement between
the Adviser and the Capital Portfolio Sub-Adviser, the Capital Portfolio
Sub-Adviser provides investment advisory services to the Capital Portfolio.
These services include providing investment research, advice and supervision,
continuously furnishing an investment program, and determining from time to time
which securities shall be purchased, sold or exchanged.
The Capital Portfolio Sub-Adviser was incorporated on April 20, 1978. They also
serve as manager of eighteen investment companies in the Seligman Group (the
aggregate assets of which were approximately $18.0 billion at December 31,
1997), and provide investment management or advice to institutional and other
accounts (having a December 31, 1997 value of approximately $6.3 billion). A
majority of the outstanding voting securities of the Capital Portfolio
Sub-Adviser are owned by William C. Morris.
14
<PAGE> 44
INTERNATIONAL EQUITY PORTFOLIO SUB-ADVISER
The Sub-Investment Adviser of the International Equity Portfolio (the
"International Equity Portfolio Sub-Adviser") is INDAGO Capital Management Inc.
Its address is 130 Adelaide Street West, Suite 3000, Toronto, Ontario, Canada,
M5H 3P5. Pursuant to a Sub-Advisory Agreement between the Adviser and the
International Equity Portfolio Sub-Adviser, the International Equity Portfolio
Sub-Adviser provides investment advisory services to the International Equity
Portfolio. These services include providing investment research, advice and
supervision, continuously furnishing an investment program, and determining from
time to time which securities shall be purchased, sold, or exchanged. The
advisory fee is deducted from net assets.
Effective July 15, 1997, the International Equity Portfolio Sub-Adviser changed
its name from Canada Life Investment Management Limited to INDAGO Capital
Management Inc. The name change was executed in connection with the sale of
fifty percent of the International Equity Portfolio Sub-Adviser's outstanding
common stock to certain of its executive employees (the "Executive Employees").
The International Equity Portfolio Sub-Adviser is jointly owned by the Executive
Employees and The Canada Life Assurance Company.
The International Equity Portfolio Sub-Adviser was incorporated on February 24,
1977. It also serves as manager of assets of The Canada Life Assurance Company
(the aggregate assets of which were approximately Canadian $5.5 billion at
December 31, 1997) and provides investment management to individual and
institutional accounts (having a December 31, 1997 value of approximately
Canadian $1.1 billion). The principal executive officers of the International
Equity Portfolio Sub-Adviser are: J.K. S. Fleming, President; and G.V. Kondrat,
CFA, Vice-President and Chief Investment Officer.
ADVISORY FEE AND EXPENSES
The Fund pays the Adviser, as full compensation for all services and facilities
provided by the Adviser to the Fund and expenses of the Fund assumed by the
Adviser, a monthly fee computed for each portfolio on a daily basis, at an
annual rate of 0.50% of the net assets of each portfolio except the
International Equity Portfolio which has an annual rate of 0.80%. With respect
to the Capital and International Equity Portfolio, the Adviser in turn pays the
Sub-Advisers, as full compensation for investment advisory services to the
respective Portfolio, a monthly fee computed on a daily basis, at an annual rate
of 0.25% of the net assets of the Capital Portfolio and 0.30% of the net assets
of the International Equity Portfolio.
The aggregate total advisory fees incurred by the Fund were $297,589, $262,822
and $217,612 for the fiscal years ended December 31, 1997, 1996, and 1995,
respectively.
Each portfolio is charged for the expenses incurred in its operations as well as
for a portion of the Fund's general administrative expenses, allocated on the
basis of the asset size of the respective portfolio, or by the Board of
Directors as appropriate. Expenses other than the Adviser's fee that are borne
directly and paid individually by a portfolio include, but are not limited to,
brokerage commissions, dealer markups, taxes, custody fees, and other costs
properly payable by the portfolio. Expenses which are allocated among the
portfolios include, but are not limited to, Directors' fees and expenses,
independent accountant fees, transfer agent fees, expenses of redemption,
Securities and Exchange Commission fees, registration costs, insurance costs,
legal fees, and all other costs of the Fund's operation properly payable by the
Fund and allocable among the portfolios.
INVESTMENT ADVISORY AGREEMENT
The Agreement was initially approved by the Fund's Board of Directors, including
a majority of the Directors who are not interested persons of the Adviser, on
February 23, 1995. On April 13, 1995, the Agreement was approved by an
affirmative vote of a majority of outstanding securities, with the Company
voting Fund shares attributable to policies participating in its registered
separate accounts in accordance with instructions received from policyowners, as
required by law. Unless terminated earlier, as described below, the Agreement
thereafter will continue in effect from year to year if approved annually by the
Board of Directors of the Fund or by a majority of the outstanding shares of
each portfolio, and by a majority of the Directors who are not parties to the
Agreement or interested persons, as defined by the Investment Company Act of
1940, as amended, of any such party. The Agreement is not assignable and may be
terminated without penalty by the Fund or the Adviser on 60 days notice. The
Agreement may be terminated by the Fund for cause at any time.
The Agreement in no way restricts the Adviser from acting as investment manager
or adviser to others. If the question of continuance of the Agreement (or
adoption of any new agreement) is presented to shareholders, continuance (or
adoption) with respect to a portfolio shall
15
<PAGE> 45
be effective only if approved by an affirmative vote of a majority of the
outstanding voting securities of that portfolio. If the shareholders of any one
or more of the series should fail to approve the Agreement, the Adviser may
nonetheless serve as Adviser with respect to any portfolio whose shareholders
approved the Agreement.
The Agreement provides that the Adviser shall not be liable to the Fund or to
any shareholder of the Fund for any error of judgment or mistake of law or for
any act or omission in the management of the Fund, except for willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the Adviser in the performance of its duties thereunder, and except for
negligence or misconduct in connection with management services.
CAPITAL PORTFOLIO SUB-ADVISORY AGREEMENT
The Capital Portfolio Sub-Advisory Agreement was initially approved by the
Fund's Board of Directors, including a majority of the directors who are not
interested persons of the Fund, the Adviser, or the Capital Portfolio
Sub-Adviser on February 23, 1995. On April 13, 1995, the Agreement was approved
by an affirmative vote of a majority of outstanding shares of the Capital
Portfolio, with the Company voting Fund shares attributable to policies
participating in its registered separate accounts in accordance with
instructions received from policyowners, as required by law. Unless terminated
earlier, as described below, the Agreement will continue in effect from year to
year if approved annually by the Board of Directors of the Fund including a
majority of the Directors who are not parties to the Agreement or interested
persons, as defined by the Investment Company Act of 1940, as amended, of any
such parties or by a majority of the outstanding shares of the Capital
Portfolio. The Agreement is not assignable and may be terminated at any time
without penalty by the Board of Directors of the Fund or by vote of a majority
of the outstanding shares of the Capital Portfolio, or by the Investment Adviser
or Capital Portfolio Sub-Adviser on 60 days notice to the other party. The
Agreement may be terminated by the Fund for cause at any time.
The services of the Capital Portfolio Sub-Adviser to the Capital Portfolio are
not deemed to be exclusive, and they are free to render services to others.
Securities held by the Capital Portfolio may also be held by separate investment
accounts or other mutual funds for which the Capital Portfolio Sub-Adviser may
act as an adviser or by the Capital Portfolio Sub-Adviser or its affiliates.
The Agreement provides that the Capital Portfolio Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Fund, and
the performance of its duties under the Agreement except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Agreement.
INTERNATIONAL EQUITY PORTFOLIO SUB-ADVISORY AGREEMENT
The International Equity Portfolio Sub-Advisory Agreement was approved by the
Fund's Board of Directors, including a majority of the directors who are not
interested persons of the Fund, the Adviser, or the International Equity
Portfolio Sub-Adviser on May 21, 1997. On July 16, 1997, the Agreement was
approved by an affirmative vote of a majority of outstanding shares of the
International Equity Portfolio, with the Company voting Fund shares attributable
to policies participating in its registered separate accounts in accordance with
instructions received from policyowners, as required by law. Unless terminated
earlier, as described below, the Agreement will continue in effect from year to
year if approved annually by the Board of Directors of the Fund including a
majority of the Directors who are not parties to the Agreement or interested
persons, as defined by the Investment Company Act of 1940, as amended, of any
such parties or by a majority of the outstanding shares of the International
Equity Portfolio. The Agreement is not assignable and may be terminated at any
time without penalty by the Board of Directors of the Fund or by vote of a
majority of the outstanding shares of the International Equity Portfolio, or by
the Adviser or International Equity Portfolio Sub-Investment Adviser on 60 days
notice to the other party. The Agreement may be terminated by the Fund for cause
at any time.
The services of the International Equity Portfolio Sub-Investment Adviser to the
International Equity Portfolio are not deemed to be exclusive, and they are free
to render services to others. Securities held by the International Equity
Portfolio may also be held by separate investment accounts or other mutual funds
for which the International Equity Portfolio Sub-Investment Adviser may act as
an adviser or by the International Equity Portfolio Sub-Investment Adviser or
its affiliates.
The Agreement provides that the International Equity Portfolio Sub-Investment
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
management of the Fund, and the performance of its duties under the Agreement
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of reckless disregard of its obligations and duties
under the Agreement.
16
<PAGE> 46
SECURITIES ACTIVITIES OF THE ADVISER AND SUB-ADVISERS
Securities held by the Fund may also be held by the Company, CLNY, their
affiliates and separate accounts, or by other separate accounts or mutual funds
for which the Adviser or Sub-Advisers act as an adviser. Because of different
investment objectives or other factors, a particular security may be bought by
the Company, the Adviser, or the Sub-Advisers for one or more of their clients,
when one or more other clients are selling the same security. If purchases or
sales of securities for one or more of the Fund's portfolios or for other
entities for which the Adviser, Sub-Advisers, or their affiliates act as an
investment adviser are made at or about the same time, transactions in such
securities will be made, insofar as being feasible, for the Fund's portfolios,
the Company, and other clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of the Adviser or
Sub-Advisers during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.
The Adviser or Sub-Advisers may manage other portfolios than the Fund's.
Although investment recommendations or determinations for the Fund's portfolios
will be made by the Adviser or Sub-Advisers independently from the investment
recommendations and determinations made by it for any other portfolio,
investments deemed appropriate for the Fund's portfolios may also be deemed
appropriate for other portfolios. This may result in the same security being
purchased or sold at or about the same time for both the Fund and such other
portfolios.
On occasions when the Adviser or Sub-Advisers deem the purchase or sale of a
security to be in the best interests of the Fund as well as other accounts or
companies, they may determine that orders for the purchase or sale of the same
security for the Fund's portfolios and one or more other portfolios should be
combined, in which event, the transactions will be priced and allocated, and
expenses will be allocated, in a manner deemed by them to be equitable and in
the best interests of the Fund's portfolios and such other portfolios. While in
some instances, combined orders could adversely impact the price or the volume
of a security obtainable for a portfolio of the Fund, the Fund believes that its
participation in such transactions on balance will produce better overall
results for the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser or Sub-Advisers are responsible for placing all orders for the
purchase and sale of portfolio securities of the Fund. The Adviser or
Sub-Advisers have no formula for the distribution of the Fund's brokerage
business, their intention being to place orders for the purchase and sale of
securities with the primary objective of obtaining the most favorable net
results for the Fund. The cost of securities transactions for each portfolio
will consist primarily of brokerage commissions or dealer or underwriter
spreads. Bonds and money market instruments are generally traded on a net basis
and do not normally involve either brokerage commissions or transfer taxes.
In placing orders, consistent with obtaining the most favorable net results, the
Adviser or Sub-Advisers will take into account various factors, including price,
dealers spread or commission, if any, size of the transaction and difficulty of
execution. While the Adviser or Sub-Advisers generally seek reasonably
competitive spreads or commissions, the portfolio will not necessarily be paying
the lowest spread or commission available.
Although the Adviser or Sub-Advisers seek to obtain the most favorable net
results in effecting transactions for each portfolio, brokers who provide
supplemental investment research to them may receive orders for transactions by
the Fund. Such supplemental research ordinarily consists of assessments and
analyses of the business or prospects of a company, industry, or economic
sector. If, in the judgment of the Adviser or Sub-Advisers, the Fund will be
benefited by such supplemental research services, they are authorized to pay
commissions to brokers furnishing such services which are in excess of
commissions which another broker may charge for the same transaction. However,
the Adviser or Sub-Advisers shall only select brokers whose commissions are
believed to be reasonable. Information so received will be in addition to and
not in lieu of the services required to be performed by the Adviser or
Sub-Advisers under the Agreement. The expenses of the Adviser or Sub-Adviser
will not necessarily be reduced as a result of the receipt of such supplemental
information. In some cases, the Adviser or Sub-Advisers may use such
supplemental research in providing investment advice to other advisory accounts
and they will periodically evaluate the statistical data, research and other
investment services provided by brokers.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the Adviser or
Sub-Advisers will, where possible, deal directly with dealers who make a market
in the securities unless better prices and execution are available elsewhere.
Such dealers usually act as principals for their own account.
The total aggregate brokerage commissions paid by the Fund were $67,604, $48,793
and $79,440 for the fiscal years ended December 31, 1997, 1996 and 1995
respectively.
17
<PAGE> 47
PURCHASE AND REDEMPTION OF SHARES
The Fund currently offers its shares, without sales charge, only for purchase by
the Company, CLNY, and their separate accounts. The Fund may also offer its
shares to Canada Life, its affiliates and their separate accounts. It is
possible that, subject to obtaining any required regulatory approvals, at some
later date the Fund may offer shares to other investors. The Fund continuously
offers shares in each of the portfolios at prices equal to the net asset value
of the respective portfolio. The Fund does not have a principal underwriter.
The Fund will redeem all full and fractional shares of the Fund for cash. No
redemption fee is charged, although there may be a contingent deferred sales
charge applicable to surrenders or withdrawals under the policies, as described
in the Policy Prospectus. The redemption price is the net asset value of the
respective portfolio next determined after the request is deemed to be received.
Payment for shares redeemed will generally be made within seven days after
receipt of a proper notice of redemption. However, the Fund may suspend the
right of redemption or postpone the date of payment beyond seven days during any
period when:
(a) trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission, or such
Exchange is closed for other than weekends and holidays;
(b) an emergency exists, as determined by the Commission, as a result
of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Fund to fairly determine the value of its net assets; or
(c) the Commission by order so permits for the protection of security
holders of the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of each portfolio's shares is determined once daily as of
the close of the New York Stock Exchange (usually 4:00 p.m. Eastern Time) on
each day on which the Exchange is open for trading. The net asset value of a
share is computed by dividing the value of the net assets of the portfolio by
the total number of shares outstanding.
MONEY MARKET PORTFOLIO
The net asset value per share of the Money Market Portfolio is computed by
dividing the total value of the portfolio's securities and other assets, less
liabilities (including dividends payable), by the number of shares outstanding.
The value of the assets is determined by valuing the portfolio securities at
amortized cost, pursuant to Rule 2a-7 under the Investment Company Act. The
amortized cost method of valuation involves valuing a security at cost at the
time of purchase and thereafter assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
The purpose of the amortized cost method of valuation is to attempt to maintain
a constant net asset value per share of $10. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the portfolio
would receive if it sold its portfolio securities. Under the direction of the
Board of Directors, certain procedures have been adopted to monitor and
stabilize the price per share. Calculations are made to compare the value of the
portfolio securities, valued at amortized cost, with market values. Market
valuations are obtained by using actual quotations provided by market makers,
estimates of market value, or values obtained from yield data relating to
classes of money market instruments published by reputable sources at the bid
prices for those instruments. If a deviation of 1/2 of 1% or more between the
portfolio $10 per share net asset value and the net asset value calculated by
reference to market valuations has occurred, or if there are any other
deviations which the Board of Directors believes will result in dilution or
other unfair results material to shareholders, the Board of Directors will
consider what action, if any, should be initiated.
The market value of debt securities usually reflects yields generally available
on securities of similar quality. When yields decline, the market value of a
portfolio holding higher yielding securities can be expected to increase; when
yields increase, the market value of a portfolio invested at lower yields can be
expected to decline. In addition, if the portfolio has net redemptions at a time
when interest rates have increased, the portfolio may be forced to sell
portfolio securities prior to maturity at a price below the portfolio's carrying
value. Also, because the portfolio generally will be valued at amortized cost
rather than market value, any yield quoted may be different from the yield that
would result if the entire portfolio were valued at market value, since the
amortized cost method does not take market fluctuations into consideration.
18
<PAGE> 48
OTHER PORTFOLIOS
The net asset value per share of the portfolios other than the Money Market
Portfolio is computed by dividing the total value of the portfolio's securities
and other assets, less liabilities, by the number of portfolio shares then
outstanding. Securities other than money market instruments maturing in 60 days
or less which are traded on a national exchange are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last bid price. Securities (other than money
market instruments maturing in 60 days or less) traded in the over-the-counter
market are valued at the last bid price or at yield equivalent as obtained from
one or more dealers that make markets in the securities. Securities which are
traded both in the over-the-counter market and on a national exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the Board of Directors. Money market instruments with maturities of 60 days or
less are valued using the amortized cost method of valuation.
TAXES
Each portfolio of the Fund intends to qualify as a "regulated investment
company" under the provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). Under such provisions, a regulated investment
company will not be subject to federal income tax on such part of its net
investment income and net realized capital gains that it distributes to
shareholders. Each portfolio intends to distribute to shareholders substantially
all such net investment income and capital gains.
To qualify for treatment as a regulated investment company, each portfolio must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities, or foreign
currencies, and other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the close
of each quarter of its taxable year, (i) at least 50% of the value of its total
assets consists of cash, cash items, U.S. Government Securities, and other
securities limited generally with respect to any one issuer to not more than 5%
of the total assets of the portfolio and not more than 10% of the outstanding
voting securities of such issuer and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government Securities). Moreover, in order to receive the favorable tax
treatment accorded regulated investment companies and their shareholders, a
portfolio must in general distribute to its shareholders at least 90% of its
interest, dividends, net short-term capital gain, and certain other income each
year.
To ensure that the Fund is not subject to a nondeductible 4% excise tax, each
portfolio intends to distribute at least 98% of ordinary income for any year by
the end of that calendar year and at least 98% of capital gain net income for
the one year period ending October 31 of such year, unless an election is made
to use the company's taxable year, plus certain other amounts. A regulated
investment company will be considered to have paid dividends for purposes of
these rules if the company pays the dividends by the end of any January and if
such dividends were declared in the preceding December and were payable to
shareholders of record on a date in December.
Section 817(h) of the Code and regulations of the Code issued by the Treasury
Department impose additional diversification requirements upon each portfolio.
These requirements are in addition to the diversification requirements under
Subchapter M of the Code and the Investment Company Act of 1940, and effect
federal tax treatment at the shareholder level. Since the only shareholders of
the Fund are insurance companies and their separate accounts, no discussion is
included herein regarding federal income tax consequences to shareholders. Each
portfolio intends to comply with the requirements of Section 817(h). For
information concerning the consequences of failure to meet the requirements of
Section 817(h), see the Prospectus for the policy.
The discussions of "Taxes" in the Prospectus and the foregoing are general and
abbreviated summaries of the applicable provisions of the Code and Treasury
Regulations currently in effect, as interpreted by the courts and the Internal
Revenue Service. Neither is intended as a complete explanation or as a
substitute for consultation with individual tax advisers.
19
<PAGE> 49
GENERAL INFORMATION
CAPITAL STOCK
The Fund was incorporated on February 23, 1989 under the laws of Maryland with
four portfolios: Money Market; Managed; Bond; and Value Equity. The Capital
Portfolio was authorized by the Fund's Board of Directors on February 25, 1993
and the International Equity Portfolio was authorized by the Fund's Board of
Directors on February 23, 1995. The authorized stock of the Fund consists of one
billion (1,000,000,000) shares of common stock, with a par value of one cent. A
total of 90,000,000 shares of the authorized capital stock is currently divided
into the following classes:
<TABLE>
<CAPTION>
Portfolio Shares
--------- ------
<S> <C>
Money Market 20,000,000
Managed 20,000,000
Bond 10,000,000
Value Equity 10,000,000
Capital 20,000,000
International Equity 10,000,000
</TABLE>
The Board of Directors may change the designation of any portfolio and may
increase or decrease the number of shares of any portfolio, but may not decrease
the number of shares then outstanding.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective portfolio and, upon
liquidation or dissolution, in the net assets of such portfolio remaining after
satisfaction of outstanding liabilities.
All shares of common stock have equal voting rights (regardless of the net asset
value per share), except that on matters effecting only one portfolio only
shares of the respective portfolio are entitled to vote. The shares do not have
cumulative voting rights. Accordingly, the holders of more than 50% of the
shares of the Fund voting for the election of directors can elect all of the
directors of the Fund if they choose to do so, and in such event the holders of
the remaining shares would not be able to elect any directors.
Matters in which the interests of all portfolios are substantially identical
(such as the election of directors or the approval of independent auditors) will
be voted on by all shareholders without regard to the separate portfolio.
Matters that effect all the portfolios but where the interests of the portfolios
are not substantially identical (such as approval of the investment advisory
agreement) would be voted on separately by each portfolio. Matters effecting
only one portfolio, such as a change in its fundamental policies, are voted on
separately by each portfolio.
Matters requiring separate shareholder voting by a portfolio shall have been
effectively acted upon with respect to any portfolio if a majority of the
outstanding voting securities of that portfolio votes for approval of the
matter, notwithstanding that: 1) the matter has not been approved by a majority
of the outstanding voting securities of any other portfolio; or 2) the matter
has not been approved by a majority of the outstanding voting securities of the
Fund.
The phrase "a majority of the outstanding voting securities" of a portfolio (or
of the Fund) means the vote of the lesser of: 1) 67% of the shares of a
portfolio (or of the Fund) present at a meeting if the holders of more than 50%
of the outstanding shares are present in person or by proxy; or 2) more than 50%
of the outstanding shares of a Portfolio (or the Fund).
ADDITIONAL INFORMATION
This Statement of Additional Information and the Prospectus do not contain all
the information set forth in the registration statement and exhibits relating
thereto, which the Fund has filed with the Securities and Exchange Commission,
Washington, DC, under the Securities Act of 1933 and the Investment Company Act
of 1940, to which reference is hereby made.
FINANCIAL STATEMENTS
The Fund's statement of assets and liabilities, including the schedules of
investments, as of December 31, 1997, and the related statement of operations
for the year then ended, the statements of changes in net assets and the
financial highlights for the periods indicated therein,
20
<PAGE> 50
as well as the Report of Independent Auditors, are contained herein. Ernst &
Young LLP, 600 Peachtree Street, Atlanta, Georgia, 30308, serves as independent
auditors for the Fund.
21
<PAGE> 51
APPENDIX A
DEBT INSTRUMENT RATINGS
The Fund will invest in certain instruments that are rated by investment rating
services. Definitions of such ratings appear below.
STANDARD & POOR'S CORPORATION ("S&P")
COMMERCIAL PAPER
A-1 The rating A-1 is the highest rating assigned by S&P to commercial paper
which is considered by S&P to have the following characteristics: Liquidity
ratios of the issuer are adequate to meet cash requirements. Long-term
senior debt is rated "A" or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned.
A-2 This designation indicates that capacity for timely payment of debt having
an original maturity of no more than 365 days is strong; however, the
relative degree of safety is not as high as for issues designated A-1.
BONDS
AAA This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
BB Bonds rated BB, B, CCC, and CC are regarded, on balance, as predominantly
speculative with respect to the issuer's
B capacity to pay interest and repay principal in accordance with the terms
of the obligations. BB indicates the lowest
CCC degree of speculation and CC the highest degree of speculation. While such
bonds will likely have some quality and
CC protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
NR Not rated by the indicated rating agency.
MOODY'S INVESTMENT SERVICE, INC. ("MOODY'S")
COMMERCIAL PAPER
P-1 The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the
following: 1) evaluation of the management of the issuer; 2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; 3)
evaluation of the issuer's products in relation to competition and customer
acceptance; 4) liquidity; 5) amount and quality of long-term debt; 6) trend
of earnings over a period of ten years; 7) financial strength of a parent
company and the relationships which exist with the issuer; and 8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations.
P-2 The rating P-2 indicates that, in Moody's opinion, the issuer or supporting
institution has a strong ability for repayment of senior short-term debt
obligations. Strong ability for repayment will normally be evidenced by
many of the characteristics listed under the description of P-1. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
effected by external conditions. Ample alternate liquidity is maintained.
22
<PAGE> 52
BONDS
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to a "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa by Moody's are judged to be of high
quality by all standards. Together with the Aaa group, they
comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics as well.
Ba Bonds which are rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during other good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B Bonds which are rated B by Moody's generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa by Moody's are of poor standing . Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca by Moody's represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated C by Moody's are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
DUFF & PHELPS (D&P) FIXED INCOME RATING SCALE
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of
AA- economic conditions.
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic
A- stress.
BBB+ Below average protection factors, but still considered sufficient
BBB for prudent investment. Considerable variability in risk BBB during
BBB- economic cycles.
BB+ Below investment grade, but deemed likely to meet obligations when
BB due. Present or prospective financial protection BB factors
BB- fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently BB- within this
category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will B fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent B- changes in
quality rating within this category or into a higher or lower
quality rating grade.
CCC Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of interest,
preferred dividends and/or principal. Protection factors are narrow
and risk can be substantial with unfavorable economic/industry
conditions, and/or with unfavorable company developments.
23
<PAGE> 53
CANADA LIFE OF AMERICA SERIES FUND, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors.............................................. 1
Audited Financial Statements
Statement of Assets and Liabilities
as of December 31, 1997 .............................................. 2
Statement of Operations for the
year ended December 31, 1997 ......................................... 3
Statements of Changes in Net Assets for the
years ended December 31, 1997 and 1996 ............................... 4
Notes to Financial Statements .............................................. 10
Schedules
Financial Highlights for the years ended
December 31, 1997, 1996, 1995, 1994, and 1993......................... 15
Schedule of Investments as of December 31, 1997 ............................ 21
</TABLE>
<PAGE> 54
FINANCIAL STATEMENTS AND SCHEDULES
CANADA LIFE OF AMERICA SERIES FUND, INC.
DECEMBER 31, 1997
with Report of Independent Auditors
<PAGE> 55
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL STATEMENTS
AND SCHEDULES
DECEMBER 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ................................................. 1
Audited Financial Statements
Statements of Assets and Liabilities ........................................... 2
Statements of Operations ...................................................... 3
Statements of Changes in Net Assets ............................................ 4
Notes to Financial Statements .................................................. 10
Schedules
Financial Highlights - Money Market Series ..................................... 15
Financial Highlights - Managed Series .......................................... 16
Financial Highlights - Bond Series ............................................. 17
Financial Highlights - Value Equity Series ..................................... 18
Financial Highlights - Capital Series .......................................... 19
Financial Highlights - International Equity Series ............................. 20
Schedule of Investments - Money Market Series Portfolio ........................ 21
Schedule of Investments - Managed Series Portfolio ............................. 22
Schedule of Investments - Bond Series Portfolio ................................ 25
Schedule of Investments - Value Equity Series Portfolio ........................ 26
Schedule of Investments - Capital Series Portfolio ............................. 29
Schedule of Investments - International Equity Series Portfolio................. 33
</TABLE>
<PAGE> 56
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Canada Life of America Series Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of Canada Life of America Series Fund, Inc.
(comprising, respectively, the Money Market, Managed, Bond, Value Equity,
Capital and International Equity Series) as of December 31, 1997, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Company'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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. 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 each
of the respective series constituting the Canada Life of America Series Fund,
Inc. at December 31, 1997, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
/s/ Ernest & Young LLP
Atlanta, Georgia
January 30, 1998
<PAGE> 57
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY VALUE INTERNATIONAL
MARKET MANAGED BOND EQUITY CAPITAL EQUITY
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value
(Identified cost - See accompanying Schedules of
Investments - Series Portfolios) $9,274,293 $17,120,133 $7,652,238 $11,405,492 $7,745,689 $ 4,738,180
Cash - 31,808 2,291 31,884 451,027 668,081
Receivables:
Dividends and interest - 88,967 89,081 16,316 2694 5,918
Due from brokers for investments sold - 154,660 - - - 12,686
---------- ----------- ---------- ------------ ----------- ------------
Total assets 9,274,293 17,395,568 7,743,610 11,453,692 8,199,410 5,424,865
---------- ----------- ---------- ------------ ----------- ------------
LIABILITIES
Cash overdraft 39,573 - - - - -
Payables:
Investment advisory fees [Note 2] 5,407 7,604 3,355 5,020 3,455 3,683
Other accrued expenses 13,922 51,162 14,433 33,853 25,536 9,463
Directors' fees and expenses payable 7,902 10,765 4,265 5,962 4,470 3,810
Dividends declared 58,096 1,754,044 409,020 1,234,740 1,263,229 286,240
Due to brokers for investments purchased - 294,426 246,719 27,261 408,662 350,547
Total liabilities ---------- ----------- ---------- ------------ ---------- -----------
124,900 2,118,001 677,792 1,306,836 1,705,352 653,743
---------- ----------- ---------- ------------ ---------- -----------
NET ASSETS
$9,149,393 $15,277,567 $7,065,818 $ 10,146,856 $6,494,058 $ 4,771,122
========== =========== ========== ============= ========== ===========
NET ASSETS CONSIST OF:
Capital shares $ 9,149 $ 12,274 $ 6,675 $ 6,899 $ 4,588 $ 4,100
Additional paid-in capital 9,140,244 13,761,539 6,872,823 8,348,816 4,760,414 4,578,757
Net unrealized appreciation on investments and
foreign currencies - 1,503,754 186,320 1,791,141 1,729,056 188,265
---------- ----------- ---------- ----------- ---------- -----------
Total net assets $9,149,393 $15,277,567 $7,065,818 $10,146,856 $6,494,058 $ 4,771,122
========== =========== ========== =========== ========== ===========
Shares authorized ($.01 par value) 20,000,000 20,000,000 10,000,000 10,000,000 20,000,000 $10,000,000
=========== =========== ========== =========== ========== ===========
Shares outstanding 914,939 1,227,438 667,495 689,924 458,845 410,055
========== =========== ========== =========== ========== ===========
Net asset value per share $ 10.00 $ 12.45 $ 10.59 $ 14.71 $ 14.15 $ 11.64
========== =========== ========== =========== ========== ===========
</TABLE>
See accompanying notes 2
<PAGE> 58
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
MONEY VALUE INTERNATIONAL
MARKET MANAGED BOND EQUITY CAPITAL EQUITY
SERIES SERIES SERIES SERIES SERIES SERIES
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $594,895 $503,626 $474,087 $ 30,045 $ 5,441 $ 15,450
Dividends - 88,463 - 98,696 70,792 63,904
-------- -------- -------- ---------- ---------- -------------
Total investment income 594,895 592,089 474,087 128,741 76,233 79,354
-------- -------- -------- ---------- ---------- -------------
Expenses:
Investment advisory fees [note 2] 53,800 82,339 36,148 50,926 38,267 36,109
Directors' fees and expenses 6,840 10,440 4,680 6,480 4,680 2,880
Custodian fees and expenses 44,872 15,727 11,184 13,522 9,769 9,552
Audit and legal fees 6,878 10,498 4,706 6,516 4,706 2,896
Accounting and administration [note 2] 22,800 34,800 15,600 21,600 15,600 9,600
Miscellaneous 1,900 2,900 1,300 1,800 1,300 800
-------- --------- ------- ---------- ---------- -------------
Total Expenses 137,090 156,704 73,618 100,844 74,322 61,837
Expense reimbursement [note 1] 56,390 8,493 8,551 - - 7,673
-------- --------- -------- ---------- ---------- -------------
Net expenses 80,700 148,211 65,067 100,844 74,322 54,164
-------- --------- -------- ---------- ---------- -------------
Net investment income 514,195 443,878 409,020 27,897 1,911 25,190
-------- --------- -------- ---------- ---------- -------------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on investments - 1,310,166 (10,025) 1,206,843 1,261,328 261,050
and foreign currencies - 863,708 166,988 1,203,076 225,500 (229,603)
-------- ---------- -------- ---------- ---------- -------------
Net change in unrealized appreciation (depreciation)
on investments and foreign currencies
Net gain on investments - 2,173,874 156,963 2,409,919 1,486,818 31,447
-------- ---------- -------- ---------- ---------- -------------
Net increase in net assets resulting
from operations $514,195 $2,617,752 $565,983 $2,437,816 $1,488,729 $ 56,637
======== ========== ======== ========== ========== =============
</TABLE>
See accompanying notes 3
<PAGE> 59
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
MONEY MARKET SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 514,195 $ 272,568
------------- -------------
Net increase in net assets resulting from operations 514,195 272,568
------------- -------------
Dividends to shareholders from:
Net investment income (514,195) (272,568)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 129,231,519 14,764,456
Reinvestment of dividends to shareholders 521,937 267,368
Payments for shares redeemed (128,203,276) (12,041,329)
------------- -------------
1,550,180 2,990,495
------------- -------------
Total increase in net assets 1,550,180 2,990,495
Net assets:
Beginning of period 7,599,213 4,608,718
------------- -------------
End of period $ 9,149,393 $ 7,599,213
============= =============
</TABLE>
See accompanying notes. 4
<PAGE> 60
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
MANAGED SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 443,878 $ 474,521
Net realized gain on investments 1,310,166 1,259,103
Net change in unrealized appreciation (depreciation)
on investments 863,708 (660,286)
------------- -------------
Net increase in net assets resulting from operations 2,617,752 1,073,338
------------- -------------
Dividends to shareholders from:
Net investment income (443,878) (474,521)
Net realized gain on investments (1,310,166) (1,259,103)
------------- -------------
(1,754,044) (1,733,624)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 3,402,203 3,887,311
Reinvestment of dividends to shareholders 1,733,625 3,120,898
Payments for shares redeemed (6,694,608) (7,408,329)
------------- -------------
(1,558,780) (400,120)
------------- -------------
Total (decrease) in net assets (695,072) (1,060,406)
Net assets:
Beginning of period 15,972,639 17,033,045
------------- -------------
End of period $ 15,277,567 $ 15,972,639
============= =============
</TABLE>
See accompanying notes. 5
<PAGE> 61
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
BOND SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 409,020 $ 376,138
Net realized loss on investments (10,025) (13,809)
Net change in unrealized appreciation (depreciation)
on investments 166,988 (40,529)
------------- -------------
Net increase in net assets resulting from operations 565,983 321,800
------------- -------------
Dividends to shareholders from:
Net investment income (409,020) (376,138)
------------- -------------
(409,020) (376,138)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 1,649,293 1,825,512
Reinvestment of dividends to shareholders 376,138 490,594
Payments for shares redeemed (1,829,490) (1,042,448)
------------- -------------
195,941 1,273,658
------------- -------------
Total increase in net assets 352,904 1,219,320
Net assets:
Beginning of period 6,712,914 5,493,594
------------- -------------
End of period $ 7,065,818 $ 6,712,914
============= =============
</TABLE>
See accompanying notes. 6
<PAGE> 62
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
VALUE EQUITY SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 27,897 $ 16,233
Net realized gain on investments 1,206,843 933,644
Net change in unrealized appreciation (depreciation)
on investments 1,203,076 (338,105)
------------- -------------
Net increase in net assets resulting from operations 2,437,816 611,772
------------- -------------
Dividends to shareholders from:
Net investment income (27,897) (16,233)
Net realized gain on investments (1,206,843) (933,644)
------------- -------------
(1,234,740) (949,877)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 2,609,978 1,841,769
Reinvestment of dividends to shareholders 949,877 1,896,996
Payments for shares redeemed (3,134,267) (3,127,425)
------------- -------------
425,588 611,340
------------- -------------
Total increase in net assets 1,628,664 273,235
Net assets:
Beginning of period 8,518,192 8,244,957
------------- -------------
End of period $ 10,146,856 $ 8,518,192
============= =============
</TABLE>
See accompanying notes. 7
<PAGE> 63
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
CAPITAL SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 1,911 $ 13,202
Net realized gain on investments 1,261,318 614,518
Net change in unrealized appreciation on investments 225,500 142,801
------------- -------------
Net increase in net assets resulting from operations 1,488,729 770,521
------------- -------------
Dividends to shareholders from:
Net investment income (1,911) (13,202)
Net realized gain on investments (1,261,318) (614,518)
------------- -------------
(1,263,229) (627,720)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 1,293,829 1,452,011
Reinvestment of dividends to shareholders 627,720 227,281
Payments for shares redeemed (2,329,507) (1,511,879)
------------- -------------
(407,958) 167,413
------------- -------------
Total increase (decrease) in net assets (182,458) 310,214
Net assets:
Beginning of period 6,676,516 6,366,302
============= =============
End of period $ 6,494,058 $ 6,676,516
============= =============
</TABLE>
See accompanying notes. 8
<PAGE> 64
CANADA LIFE OF AMERICA SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 25,190 $ 38,882
Net realized gain on investments and foreign currencies 261,050 25,289
Net change in unrealized appreciation (depreciation) on
investments and foreign currencies (229,603) 400,317
------------- -------------
Net increase in net assets resulting from operations 56,637 464,488
------------- -------------
Dividends to shareholders from:
Net investment income (25,190) (38,882)
Net realized gain on investments and foreign currencies (261,050) (25,289)
------------- -------------
(286,240) (64,171)
------------- -------------
Fund share transactions [note 4]:
Proceeds from sales of shares 18,000,433 1,079,475
Reinvestment of dividends to shareholders 64,171 101,690
Payments for shares redeemed (16,369,069) (361,880)
------------- -------------
1,695,535 819,285
------------- -------------
Total increase in net assets 1,465,932 1,219,602
Net assets:
Beginning of period 3,305,190 2,085,588
------------- -------------
End of period $ 4,771,122 $ 3,305,190
============= =============
</TABLE>
See accompanying notes. 9
<PAGE> 65
CANADA LIFE OF AMERICA SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Canada Life of America Series Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company. The Fund was incorporated on February 23, 1989
and commenced operations on December 4, 1989, with the exception of the Capital
Series and International Equity Series which commenced operations on April 23,
1993 and April 24, 1995, respectively. The shares of the Fund are sold only to
Canada Life Insurance Company of America and Canada Life Insurance Company of
New York to certain of their separate accounts to fund the benefits under
certain variable annuity contracts. The Fund's shares are offered in six
different Series - Money Market Series, Managed Series, Bond Series, Value
Equity Series, Capital Series and International Equity Series. The financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions at
the date of the financial statements. The policies described below are followed
by the Fund in conformity with generally accepted accounting principles.
SECURITIES VALUATION
Securities listed or traded on the New York or American Stock Exchanges are
valued at the last sale price on that Exchange, or if there were no sales, at
the closing bid price. Securities traded only in the over-the-counter market are
valued at the last bid price. Money market instruments with a remaining maturity
of 60 days or less held by the Value Equity, Bond, Managed, Capital, and
International Equity Series and all instruments held by Money Market Series are
valued at amortized cost, which approximates market.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currency are
translated into U.S. dollars at the prevailing rates of exchange at end of
period. Purchases and sales of investment securities, income and expenses are
translated into U.S. dollars at the rate of exchange prevailing on the
respective dates of such transactions.
Net realized gains and losses on foreign currency transactions represent net
gains and losses from sales and maturities of investments in foreign securities
usually denominated in foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of net investment income accrued and the U.S.
dollar amount actually received. The effects of changes in foreign currency
exchange rates on investments in securities are included with the net realized
and unrealized gain or loss on investment securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date (the date the order to
buy or sell is executed), and dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. Gains and losses on
sales of investments are calculated on the identified cost basis for financial
reporting and tax purposes. Bond premiums and discounts are amortized for both
financial and tax reporting purposes.
10
<PAGE> 66
FEDERAL INCOME TAXES
It is the policy of the Fund to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute all of its taxable income. Therefore, no
provision for income taxes has been recorded.
DISTRIBUTION OF INCOME AND GAINS
Dividends from net investment income and any net realized capital gains in the
Money Market Series are declared daily and paid quarterly. Effective May 1,
1997, dividends declared in the Money Market Series are paid monthly. Dividends
from net investment income and any net realized capital gains in the Managed,
Bond, Value Equity, Capital, and International Equity Series are declared and
paid annually. Dividends from net investment income and capital gains
distributions are recorded on the ex-dividend date. All dividends and
distributions are reinvested in additional shares of the respective Series at
the net asset value per share.
EXPENSES
Allocable expenses of the Fund are charged to each Series based on the ratio of
the net assets of each Series to the combined net assets of the Fund.
Non-allocable expenses are charged to each Series based on specific
identification. All expenses are accrued daily.
Prior to May 1995, Canada Life Insurance Company of America has agreed to
reimburse the Managed, Bond, Value Equity and Capital Series for operating
expenses, exclusive of the advisory fee, that exceed .50% of the average daily
net assets of each respective series; subsequent to this date, Canada Life
Insurance Company of America increased the reimbursement amount to cover
operating expenses that exceed .40% of the average daily net assets of each
respective series including the International Equity Series. With respect to the
Money Market Series, Canada Life Insurance Company of America has agreed to
reimburse for operating expenses, exclusive of the advisory fee, that exceed
.25% of its average daily net assets. For the year ended December 31, 1997, the
amounts reimbursed were as follows: Money Market Series - $56,390; Managed
Series - $8,493; Bond Series - $8,551; and International Equity Series - $7,673.
2. INVESTMENT ADVISORY AND DIRECTORS' FEES AND OTHER TRANSACTIONS WITH
AFFILIATED COMPANIES
INVESTMENT ADVISORY FEES
Prior to May 1995, Canada Life of America Investment Management, Inc.
("Advisor") served as investment manager of the Fund, and as such received from
the Fund a monthly fee computed for each of the Series on a daily basis, at an
annual rate of .50% of the net assets of each Series. Effective May 1, 1995, the
Advisor merged with CL Capital Management Inc., which became the investment
advisor for the Fund, and which is a wholly owned subsidiary of Canada Life
Insurance Company of America. CL Capital Management Inc. ("Advisor") receives
from the Fund a monthly fee computed for each of the Series on a daily basis, at
an annual rate of .50% of the net assets of each series except for International
Equity Series computed at an annual rate of .80% of its net assets.
With respect to the Capital Series, the Advisor in turn pays J. & W. Seligman &
Co. (the "Sub-Advisor"), as full compensation for investment advisory services
to the Capital Series, a monthly fee computed on a daily basis, at an annual
effective rate of .25% of the net assets of such series.
With respect to the International Equity Series, the Advisor in turn pays INDAGO
Capital Management, Inc. (the "Sub-Advisor"), 50% owned by Canada Life Assurance
Company, as full compensation for investment advisory to the International
Equity Series, a monthly fee computed on a daily basis, at an annual effective
rate of .30% of the net assets of such series.
11
<PAGE> 67
For the year ended December 31, 1997, the investment advisory fee incurred by
the Fund was as follows: Money Market Series - $53,800; Managed Series -
$82,339; Bond Series - $36,148; Value Equity Series - $50,926; Capital Series -
$ 38,267; and International Equity Series - $36,109.
ACCOUNTING SERVICES
Under an accounting services agreement, Canada Life Insurance Company of America
provides accounting and administrative services to the Fund. For the year ended
December 31, 1997, the related expenses incurred by the Fund were as follows:
Money Market Series - $22,800; Managed Series - $34,800; Bond Series - $15,600;
Value Equity Series - $21,600; Capital Series - $15,600; and International
Equity Series - $9,600.
DIRECTORS' FEES
Each director who is not an affiliated person receives fees from the Fund for
services as a director.
OTHER
On January 11, 1996, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Managed Series in
the amount of $500,000. This capital share transaction is reflected in shares
redeemed.
On April 17, 1996, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Managed Series in
the amount of $500,000. This capital share transaction is reflected in shares
redeemed.
On July 8, 1996, the General Account of Canada Life Insurance Company of America
withdrew a portion of its initial investment in the Managed Series in the amount
of $500,000. This capital share transaction is reflected in shares redeemed.
On November 15, 1996, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Managed Series in
the amount of $500,000. This capital share transaction is reflected in shares
redeemed.
On March 27, 1997, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Money Market Series,
Bond Series, Value Equity Series, Capital Series and International Equity Series
in the amount of $100,000 in each fund for a total amount of $500,000. These
capital share transactions are reflected in shares redeemed.
On July 25, 1997, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Money Market Series,
Bond Series, Value Equity Series, Capital Series and International Equity Series
in the amount of $100,000 in each fund for a total amount of $500,000. These
capital share transactions are reflected in shares redeemed.
On October 24, 1997, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Money Market Series,
Bond Series, Value Equity Series, Capital Series and International Equity Series
in the amount of $100,000 in each fund for a total amount of $500,000. These
capital share transactions are reflected in shares redeemed.
On December 8, 1997, the General Account of Canada Life Insurance Company of
America withdrew a portion of its initial investment in the Money Market Series,
Bond Series, Value Equity Series, Capital Series and International Equity Series
in the amount of $100,000 in each fund for a total amount of $500,000. These
capital share transactions are reflected in shares redeemed.
12
<PAGE> 68
3. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales (excluding short term
investments) for all Series, for the year ended December 31, 1997 are presented
below:
<TABLE>
<CAPTION>
PROCEEDS
COST OF FROM
SECURITIES SECURITIES
PURCHASED SOLD
--------- ----
<S> <C> <C>
MANAGED SERIES
US Gov't & Its Agencies Bonds $ 7,550,007 $ 8,154,158
All other Investments 4,486,591 6,900,524
============= =============
TOTAL $ 12,036,598 $ 15,054,682
============= =============
BOND SERIES
US Gov't & Its Agencies Bonds $ 6,963,284 $ 7,571,618
All other Investments - -
============= =============
TOTAL $ 6,963,284 $ 7,571,618
============= =============
VALUE EQUITY SERIES
All other Investments $ 5,370,231 $ 6,069,771
------------- -------------
TOTAL $ 5,370,231 $ 6,069,771
============= =============
CAPITAL SERIES
All other Investments $ 7,148,382 $ 7,407,070
============= =============
TOTAL $ 7,148,382 $ 7,407,070
============= =============
INTERNATIONAL EQUITY SERIES
All other Investments $ 3,446,159 $ 1,808,023
------------- -------------
TOTAL $ 3,446,159 $ 1,808,023
============= =============
</TABLE>
The information in the following table is presented on the basis of cost for
federal income tax purposes as of December 31, 1997.
<TABLE>
<CAPTION>
IDENTIFIED
COST OF GROSS GROSS NET
SECURITIES UNREALIZED UNREALIZED UNREALIZED
OWNED APPRECIATION (DEPRECIATION) APPRECIATION
----- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Money Market Series $9,274,293 $ - $ - $ -
Managed Series 15,616,379 1,959,200 (455,446) 1,503,754
Bond Series 7,465,918 189,618 (3,298) 186,320
Value Equity Series 9,614,351 2,120,030 (328,889) 1,791,141
Capital Series 6,016,633 1,938,326 (209,270) 1,729,056
International Equity Series 4,549,915 756,373 (568,108) 188,265
</TABLE>
13
<PAGE> 69
4. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1997 1996 1996
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
MONEY MARKET SERIES
Shares sold 12,923,152 $ 129,231,519 1,476,446 $ 14,764,456
Shares issued in reinvestment
of dividends 52,194 521,937 26,737 267,368
------------ ------------- ----------- ------------
12,975,346 129,753,456 1,503,183 15,031,824
Shares redeemed (12,820,328) (128,203,276) (1,204,133) (12,041,329)
------------ ------------- ----------- ------------
Net increase 155,018 $ 1,550,180 299,050 $ 2,990,495
============ ============= =========== ============
MANAGED SERIES
Shares sold 271,028 $ 3,402,203 314,608 $ 3,887,311
Shares issued in reinvestment
of dividends 146,936 1,733,625 253,408 3,120,898
------------ ------------- ----------- ------------
417,964 5,135,828 568,016 7,008,209
Shares redeemed (544,308) (6,694,608) (591,398) (7,408,329)
------------ ------------- ----------- ------------
Net (decrease) (126,344) $ (1,558,780) (23,382) $ (400,120)
============ ============= =========== ============
BOND SERIES
Shares sold 155,402 $ 1,649,293 173,803 $ 1,825,512
Shares issued in reinvestment
of dividends 36,305 376,138 46,932 490,594
------------ ------------- ----------- ------------
191,707 2,025,431 220,735 2,316,106
Shares redeemed (172,144) (1,829,490) (98,327) (1,042,448)
------------ ------------- ----------- ------------
Net increase 19,563 $ 195,941 122,408 $ 1,273,658
============ ============= =========== ============
VALUE EQUITY SERIES
Shares sold 179,856 $ 2,609,978 135,689 $ 1,841,769
Shares issued in reinvestment
of dividends 73,088 949,877 141,566 1,896,996
------------ ------------- ----------- ------------
252,944 3,559,855 277,255 3,738,765
Shares redeemed (218,446) (3,134,267) (232,199) (3,127,425)
------------ ------------- ----------- ------------
Net increase 34,498 $ 425,588 45,056 $ 611,340
============ ============= =========== ============
CAPITAL SERIES
Shares sold 85,047 $ 1,293,829 99,373 $ 1,452,011
Shares issued in reinvestment
of dividends 44,978 627,720 16,700 227,281
------------ ------------- ----------- ------------
130,025 1,921,549 116,073 1,679,292
Shares redeemed (149,567) (2,329,507) (107,398) (1,511,879)
------------ ------------- ----------- ------------
Net increase (decrease) (19,542) $ (407,958) 8,675 $ 167,413
============ ============= =========== ============
INTERNATIONAL EQUITY SERIES
Shares sold 1,381,876 $ 18,000,433 95,832 $ 1,079,475
Shares issued in reinvestment
of dividends 5,428 64,171 10,013 101,690
------------ ------------- ----------- ------------
1,387,304 18,064,604 105,845 1,181,165
Shares redeemed (1,256,820) (16,369,069) (32,929) (361,880)
------------ ------------- ----------- ------------
Net increase 130,484 $ 1,695,535 72,916 $ 819,285
============ ============= =========== ============
</TABLE>
14
<PAGE> 70
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
MONEY MARKET SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.48 0.45 0.49 0.34 0.23
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.48 0.45 0.49 0.34 0.23
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.48) (0.45) (0.49) (0.34) (0.23)
---------- ---------- ---------- ---------- ----------
Total distributions (0.48) (0.45) (0.49) (0.34) (0.23)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
========== ========== ========== ========== ==========
Total return 4.95% 4.58% 4.95% 3.40% 2.29%
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 9,149 $ 7,599 $ 4,609 $ 5,057 $ 4,514
Ratio of expenses to average net assets 0.75%* 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to average net 4.78% 4.54% 4.98% 3.43% 2.29%
assets
</TABLE>
* Ratio shown is after expense reimbursement. Ratio of expenses to
average net assets before expense reimbursement is 1.16% for 1997.
See accompanying notes. 15
<PAGE> 71
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
MANAGED SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.80 $ 12.37 $ 12.01 $ 12.77 $ 12.14
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.34 0.32 0.40 0.32 0.31
Net realized and unrealized gain (loss)
on investments 1.66 0.27 2.38 (0.39) 0.74
--------- --------- --------- --------- ---------
Total from investment operations 2.00 0.59 2.78 (0.07) 1.05
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.34) (0.32) (0.41) (0.32) (0.31)
Distributions from net realized gains (1.01) (0.84) (2.01) (0.37) (0.11)
--------- --------- --------- --------- ---------
Total distributions (1.35) (1.16) (2.42) (0.69) (0.42)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 12.45 $ 11.80 $ 12.37 $ 12.01 $ 12.77
========= ========= ========= ========= =========
Total return 17.61% 5.75% 21.92% -0.25% 8.24%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (000's omitted) $ 15,278 $ 15,973 $ 17,033 $ 15,192 $ 17,165
Ratio of expenses to average net assets 0.90%* 0.90% 0.90% 0.97% 1.15%
Ratio of net investment income to average 2.74% 2.53% 3.06% 2.51% 2.50%
net assets
Portfolio turnover rate 82.80% 144.67% 145.14% 27.31% 38.20%
Average commission rate paid $ 0.0570 $ 0.0600 $ 0.0611 $ 0.0735 $ 0.0899
</TABLE>
* Ratio shown is after expense reimbursement. Ratio of expenses to
average net assets before expense reimbursement is 0.95% for 1997.
See accompanying notes. 16
<PAGE> 72
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
BOND SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.36 $ 10.45 $ 9.75 $ 10.74 $ 10.64
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.60 0.60 0.65 0.51 0.57
Net realized and unrealized
gain (loss) on investments 0.23 (0.09) 1.09 (0.99) 0.56
--------- --------- --------- --------- ---------
Total from investment operations 0.83 0.51 1.74 (0.48) 1.13
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.60) (0.60) (0.64) (0.51) (0.57)
Distributions from net realized gains - - (0.15) - (0.46)
Distributions from paid-in capital - - (0.25) - -
--------- --------- --------- --------- ---------
Total distributions (0.60) (0.60) (1.04) (0.51) (1.03)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.59 $ 10.36 $ 10.45 $ 9.75 $ 10.74
========= ========= ========= ========= =========
Total return 8.09% 4.66% 16.77% -3.94% 10.35%
RATIO TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 7,066 $ 6,713 $ 5,494 $ 3,986 $ 4,204
Ratio of expenses to average net assets 0.90%* 0.90% 0.88% 0.96% 1.16%
Ratio of net investment income to average net
assets 5.70% 5.73% 6.06% 5.01% 5.01%
Portfolio turnover rate
127.63% 284.11% 245.32% 43.89% 84.77%
</TABLE>
* Ratio shown is after expense reimbursement. Ratio of expenses to
average net assets before expense reimbursement is 1.02% for 1997.
See accompanying notes. 17
<PAGE> 73
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
VALUE EQUITY SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.00 $ 13.51 $ 13.46 $ 13.60 $ 13.15
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.04 0.02 0.12 0.14 0.14
Net realized and unrealized gain
on investments 3.44 0.80 3.17 0.13 0.61
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.48 0.82 3.29 0.27 0.75
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.04) (0.02) (0.12) (0.14) (0.14)
Distributions from net realized gains (1.73) (1.31) (3.12) (0.27) (0.16)
---------- ---------- ---------- ---------- ----------
Total distributions (1.77) (1.33) (3.24) (0.41) (0.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.71 $ 13.00 $ 13.51 $ 13.46 $ 13.60
========== ========== ========== ========== ==========
Total return 26.93% 6.94% 23.66% 2.03% 5.44%
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 10,147 $ 8,519 $ 8,245 $ 7,379 $ 7,063
Ratio of expenses to average net assets 0.90% 0.90% 0.90% 0.96% 1.14%
Ratio of net investment income to
average net assets 0.28% 0.17% 0.81% 1.03% 1.07%
Portfolio turnover rate 50.97% 46.78% 103.07% 35.99% 23.70%
Average commission rate paid $ 0.0560 $ 0.0600 $ 0.0608 $ 0.0738 $ 0.0909
</TABLE>
See accompanying notes. 18
<PAGE> 74
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
CAPITAL SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
FOR THE
PERIOD
APRIL 23,
1993
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31 TO DECEMBER
1997 1996 1995 1994 1993*
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.96 $ 13.55 $ 10.48 $ 11.06 $ 10.00
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.00 0.03 0.02 0.01 (0.02)
Net realized and unrealized gain (loss)
on investments 2.75 1.68 3.56 (0.46) 1.32
----------- ----------- ----------- ----------- -----------
Total from investment operations 2.75 1.71 3.58 (0.45) 1.30
----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income 0.00 (0.03) (0.01) (0.01) -
Distributions from net realized gains (2.56) (1.27) (0.50) (0.12) (0.24)
----------- ----------- ----------- ----------- -----------
Total distributions (2.56) (1.30) (0.51) (0.13) (0.24)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.15 $ 13.96 $ 13.55 $ 10.48 $ 11.06
=========== =========== =========== =========== ===========
Total return 21.14% 12.65% 33.99% -4.11% 18.42%**
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 6,494 $ 6,677 $ 6,366 $ 3,847 $ 2,918
Ratio of expenses to average net assets 0.90% 0.90% 0.88% 0.92% 1.01%**
Ratio of net investment income to average net
assets 0.03% 0.19% 0.11% 0.09% -0.21%**
Portfolio turnover rate 84.39% 54.11% 33.42% 55.99% 21.87%
Average commission rate paid $ 0.0490 $ 0.0564 $ 0.0562 $ 0.0568 $ 0.0585*
</TABLE>
* The fund commenced operations on April 23, 1993. The net asset value at the
beginning of the 1993 period is as of the close of business on April 23, 1993.
** 1993 amounts annualized from April 23, 1993.
See accompanying notes. 19
<PAGE> 75
CANADA LIFE OF AMERICA SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY SERIES
The following financial highlights are computed on the basis of a share
outstanding throughout the period.
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 24, 1995
(COMMENCEMENT OF
OPERATIONS) TO
Year ended December 31 DECEMBER 31
1997 1996 1995 *
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period
$ 11.82 $ 10.09 $ 10.00
----------- ----------- -----------
Income from investment operations:
Net investment income 0.07 0.16 0.10
Net realized and unrealized gain
on investments 0.56 1.83 0.49
----------- ----------- -----------
Total from investment operations 0.63 1.99 0.59
----------- ----------- -----------
Less distributions:
Dividends from net investment income (0.07) (0.16) (0.10)
Distributions from net realized gains (0.74) (0.10) (0.40)
----------- ----------- -----------
Total distributions (0.81) (0.26) (0.50)
----------- ----------- -----------
Net asset value, end of period $ 11.64 $ 11.82 $ 10.09
=========== =========== ===========
Total return 4.32% 19.44% 8.53%**
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (000's omitted) $ 4,771 $ 3,305 $ 2,086
Ratio of expenses to average net assets $ 1.20%*** 1.20% 1.20%**
Ratio of net investment income to average 0.57% 1.44% 1.43%**
net assets
Portfolio turnover rate 37.73% 56.28% 33.56%
Average commission rate paid $ 0.0380 $ 0.1961 $ 0.1951*
</TABLE>
* The fund commenced operations on April 24, 1995. The net asset value at the
beginning of the 1995 period is as of the close of business on April 24,
1995.
** 1995 amounts annualized from April 24, 1995.
*** Ratio shown is after expense reimbursement. Ratio of expenses to average
net assets before expense reimbursement is 1.32% for 1997.
See accompanying notes. 20
<PAGE> 76
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - MONEY MARKET SERIES PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------
<S> <C> <C>
U.S. GOVERNMENT & ITS AGENCIES - 101.4%
U.S. Treasury Bills (5.110% due 01/22/9) $ 2,000,000 $1,994,014
Federal Farm Credit Banks (5.650% due 01/27/98) 1,000,000 995,907
Federal Farm Credit Banks (5.620% due 01/08/98) 1,000,000 998,893
Federal Home Loan Bank (5.610% due 01/22/98) 1,200,000 1,196,056
Federal Home Loan Mortgage Corp. (5.700% due 01/09/98) 1,000,000 998,724
Federal Home Loan Mortgage Corp. (5.720% due 01/07/98) 1,100,000 1,098,948
Federal National Mortgage Association (5.700% due 01/27/98) 2,000,000 1,991,751
----------
9,274,293
Total Securities (identified cost - $9,274,293)
OTHER NET LIABILITIES - (1.4)% (124,900)
----------
Total net assets $9,149,393
==========
</TABLE>
See accompanying notes. 21
<PAGE> 77
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - MANAGED SERIES PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------------------------
<S> <C> <C>
SHORT TERM NOTES - 19.0%
Federal Farm Credit Banks (5.650% due 01/27/98) $ 600,000 $ 597,544
Federal Farm Credit Banks (5.700% due 01/09/98) 110,000 109,861
Federal Farm Credit Banks (5.670% due 01/06/98) 2,200,000 2,198,238
----------
TOTAL SHORT TERM NOTES 2,905,643
----------
BONDS - 34.8%
U.S. GOVERNMENT & ITS AGENCIES - 34.8%
U.S. Treasury Bonds (6.250% due 08/15/23) 500,000 515,469
U.S. Treasury Bonds (7.125% due 02/15/23) 150,000 171,188
U.S. Treasury Bonds (6.875% due 05/15/06) 550,000 588,844
U.S. Treasury Bonds (6.500% due 05/31/01) 450,000 460,828
Federal Home Loan Bank (6.200% due 07/02/02) 125,000 125,505
Federal Home Loan Bank (6.790% due 02/05/02) 250,000 250,240
Federal Home Loan Mortgage Corp. (7.750% due 02/05/07) 200,000 200,200
Federal Home Loan Mortgage Corp. (7.440% due 09/20/06) 175,000 181,475
Federal Home Loan Mortgage Corp. (7.585% due 09/19/06) 150,000 156,755
Federal National Mortgage Association (7.000% due 12/01/27) 200,000 201,300
Federal National Mortgage Association (7.000% due 09/01/27) 202,000 203,641
Federal National Mortgage Association (7.500% due 11/01/26) 174,816 179,022
Federal National Mortgage Association (6.500% due 02/01/24) 250,000 246,719
Federal National Mortgage Association (5.820% due 11/25/23) 75,000 72,938
Federal National Mortgage Association (7.750% due 10/25/18) 11,721 11,805
Federal National Mortgage Association (7.230% due 01/24/07) 200,000 203,579
Federal National Mortgage Association (7.070% due 10/24/06) 100,000 102,550
Federal National Mortgage Association (7.690% due 09/13/06) 200,000 209,000
Federal National Mortgage Association (7.220% due 05/07/04) 250,000 250,743
Federal National Mortgage Association (7.170% due 06/29/01) 100,000 100,727
Federal National Mortgage Association (6.140% due 04/06/00) 200,000 200,342
Government National Mortgage Association (8.000% due 11/15/26) 147,593 153,220
Government National Mortgage Association (7.500% due 11/15/26) 156,725 160,692
Government National Mortgage Association (7.000% due 10/15/25) 378,250 381,560
----------
TOTAL BONDS 5,328,342
----------
</TABLE>
See accompanying notes.
22
<PAGE> 78
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - MANAGED SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------------------
<S> <C> <C>
COMMON STOCKS - 58.2%
AEROSPACE & DEFENSE - 3.1%
Aerospace & Defense - 3.1%
AlliedSignal Inc. 12,400 $ 482,825
----------
CONSTRUCTION & REAL ESTATE - 2.5%
Engineering & Construction - 2.5%
Granite Construction Inc. 16,850 387,550
----------
ENERGY - 3.4%
Oil & Gas - 3.4%
Patina Oil & Gas Corp. 21,800 167,587
Pride International Inc. 6,300 159,075
Snyder Oil Corp. 10,500 191,625
----------
518,287
----------
FINANCE - 19.3%
Banks - 2.5%
Fund American Enterprises HL 2,000 242,000
Webster Financial Corp. 2,200 146,300
----------
388,300
----------
Credit & Other Finance - 2.5%
H & R Block Inc. 3,500 156,844
Pioneer Group Inc. 8,000 225,000
----------
381,844
----------
Insurance - 14.3%
Berkshire Hathaway Inc. 160 246,240
Leucadia National Corp. 25,400 876,300
Markel Corporation 6,000 936,750
Mid Ocean Ltd. 2,200 119,350
----------
2,178,640
----------
TOTAL FINANCE 2,948,784
----------
HEALTH - 3.7%
Hospital Services - 3.7%
Matria Healthcare Inc. 63,500 357,188
Tenet Healthcare Corp. 6,300 208,687
----------
565,875
----------
INDUSTRIAL MACHINERY & EQUIPMENT - 2.3%
Industrial Machinery & Equipment - 2.3%
Crane Co. 4,000 173,500
Danaher Corp. 2,800 176,750
----------
350,250
----------
</TABLE>
See accompanying notes. 23
<PAGE> 79
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - MANAGED SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------------------
<S> <C> <C>
MEDIA & LEISURE - 3.7%
Entertainment - 1.3%
King World Productions Inc. 3,300 $ 190,575
------------
Leisure Durables 8 Toys - 1.3%
Mattel Inc. 5,300 197,425
------------
Publishing - 1.1%
Knight - Ridder Inc. 3,300 171,600
------------
TOTAL MEDIA & LEISURE 559,600
------------
POLLUTION CONTROL - 6.0%
Dames & Moore Inc. 68,800 911,600
------------
RETAIL & WHOLESALE - 10.9%
Apparel Stores - 1.3%
Catherines Stores Corp. 28,300 198,100
------------
Retail & Wholesale, Miscellaneous - 9.6%
Ellett Brothers Inc. 51,800 286,518
Falcon Products Inc. 20,790 294,958
Hasbro Inc. 3,600 113,400
InterTAN Inc. 88,300 474,613
Nike Inc. 3,400 133,450
Richfood Holdings Inc. 5,600 158,200
------------
1,461,139
------------
TOTAL RETAIL & WHOLESALE 1,659,239
------------
SERVICES - 1.5%
Human Resources - 1.5%
Manpower Inc. 6,600 232,650
------------
TRANSPORTATION - 1.8%
Air Transportation - 1.2%
Offshore Logistics Inc. 8,300 177,413
------------
Railroads - 0.6%
Kansas City Southern Industry 2,900 92,075
------------
TOTAL TRANSPORTATION 269,488
------------
TOTAL COMMON STOCKS 8,886,148
------------
Total Securities (identified cost - $15,616,379) 17,120,133
OTHER NET LIABILITIES - (12%) (1,842,566)
------------
Total net assets $ 15,277,567
============
</TABLE>
See accompanying notes. 24
<PAGE> 80
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - BOND SERIES PORTFOLIO
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<S> <C> <C>
SHORT TERM NOTES - 27.1%
Federal Farm Credit Banks (5.610% due 01/12/98) $ 671,000 $ 669,844
Federal Farm Credit Banks (5.700% due 01/06/98) 348,000 347,724
Federal Home Loan Mortgage Corp. (5.700% due 01/07/98) 400,000 399,620
Federal Home Loan Mortgage Corp. (5.720% due 01/07/98) 500,000 499,522
-----------
TOTAL SHORT TERM NOTES 1,916,710
-----------
BONDS - 81.1%
U.S. GOVERNMENT & ITS AGENCIES - 78.5%
U. S. Treasury Bonds (6.250% due 08/15/23) 500,000 515,469
U. S. Treasury Bonds (6.875% due 05/15/06) 450,000 481,782
U. S. Treasury Bonds (7.125% due 02/15/23) 350,000 399,438
Federal Home Loan Bank (6.515% due 10/01/02) 250,000 251,505
Federal Home Loan Bank (6.200% due 07/02/02) 125,000 125,505
Federal Home Loan Bank (6.790% due 02/05/02) 250,000 250,240
Federal Home Loan Mortgage Corp (7.750% due 02/05/07) 200,000 200,200
Federal Home Loan Mortgage Corp (7.440% due 09/20/06) 175,000 181,475
Federal Home Loan Mortgage Corp (7.585% due 09/19/06) 150,000 156,755
Federal Home Loan Mortgage Corp (6.690% due 08/14/01) 200,000 202 581
Federal National Mortgage Association (7.000% due 12/01/27) 200,000 201 300
Federal National Mortgage Association (7.000% due 09/01/27) 202,000 203,641
Federal National Mortgage Association (7.500% due 11/01/26) 174,816 179,022
Federal National Mortgage Association (7.690% due 09/13/06) 200,000 209,000
Federal National Mortgage Association (6.500% due 02/01/24) 250,000 246,718
Federal National Mortgage Association (5.820% due 11/25/23) 75,000 72,937
Federal National Mortgage Association (7.750% due 10/25/18) 10,315 10,389
Federal National Mortgage Association (7.230% due 01/24/07) 200 000 203,579
Federal National Mortgage Association (7.070% due 10/24/06) 100,000 102,550
Federal National Mortgage Association (7.220% due 05/07/04) 250,000 250,743
Federal National Mortgage Association (7.170% due 06/29/01) 100,000 100,728
Federal National Mortgage Association (6.65% due 03/26/01) 250,000 250,558
Federal National Mortgage Association (6.140% due 04/06/00) 200,000 200,342
Govemment National Mortgage Association (8.000% due 11/1526) 147,593 153,220
Govemment National Mortgage Association (7.500% due 11/15/26) 156,725 160,692
Govemment National Mortgage Association (7.000% due 10/15/25) 236,406 238,475
-----------
5,548,844
-----------
CORPORATE - 2.6%
GE Capital Mortgage Services (6.500% due 04/25/08) 192,457 186,684
-----------
TOTAL BONDS 5,735,528
-----------
Total Securities (identified cost - $7,465,918) 7,652,238
-----------
OTHER NET LIABILITIES - (8.2)% (586,420)
-----------
Total net assets $ 7,065,818
===========
</TABLE>
25
See accompanying notes.
<PAGE> 81
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - VALUE EQUITY SERIES PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
SHORT TERM NOTES - 7.9%
Federal Farm Credit Banks (5.700% due 01/09/98) $ 250,000 $ 249,683
Federal Farm Credit Banks (5.700% due 01/06/98) 250,000 249,802
Federal Home Loan Mortgage Corp. (5.680% due 01/20/98) 300,000 299,050
-----------
TOTAL SHORT TERM NOTES 798,535
-----------
SHARES
--------
COMMON STOCKS - 104.5%
AEROSPACE & DEFENSE - 5.8%
Aerospace & Defense - 5.8%
AlliedSignal Inc. 15,000 584,062
-----------
CONSTRUCTION & REAL ESTATE - 5.0%
Engineering & Construction - 5.0%
Granite Construction Inc. 22,100 508,300
-----------
Energy - 6.6%
Oil & Gas - 6.6%
Patina Oil & Gas Corp. 29,800 229,088
Pride International Inc. 7,500 189,375
Snyder Oil Corp. 13,900 253,675
-----------
672,138
-----------
FINANCE - 32.8%
Banks - 6.5%
Andover Bancorp Inc. 4,760 191,590
Fund American Enterprises HL 2,200 266,200
Webster Financial Corp. 3,000 199,500
-----------
657,290
-----------
Credit & Other Finance - 5.1%
H & R Block Inc. 4,700 210,619
Pioneer Group Inc. 11,000 309,375
-----------
519,994
-----------
Insurance - 21.2%
Berkshire Hathaway Inc. 250 384,750
Leucadia National Corp. 19,200 662,400
Markel Corp. 6,000 936,750
Mid Ocean Ltd. 3,100 168,175
-----------
2,152,075
-----------
TOTAL FINANCE 3,329,359
-----------
</TABLE>
See accompanying notes.
26
<PAGE> 82
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - VALUE EQUITY SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
HEALTH - 7.0%
Hospital Services - 4.7%
Matria Healthcare Inc. 84,300 $ 474,188
-----------
Medical Facilities Management - 2.3%
Tenet Healthcare Corp. 6,900 228,562
-----------
TOTAL HEALTH 702,750
-----------
INDUSTRIAL MACHINERY & EQUIPMENT - 4.4%
Industrial Machinery & Equipment - 4.4%
Crane Co. 5,100 221,213
Danaher Corp. 3,600 227,250
-----------
448,463
-----------
MEDIA & LEISURE - 7.6%
Entertainment - 2.4%
King World Productions Inc. 4,300 248,325
-----------
Leisure Durables & Toys - 3.1%
Mattel Inc. 8,400 312,900
-----------
Publishing - 2.1%
Knight - Ridder Inc. 4,100 213,200
-----------
TOTAL MEDIA & LEISURE 774,425
-----------
POLLUTION CONTROL - 6.0%
Dames & Moore Inc. 46,600 617,450
-----------
RETAIL & WHOLESALE - 22.7%
Apparel Stores - 2.7%
Catherines Stores Corp. 38,400 268,800
-----------
Retail & Wholesale, Miscellaneous - 20.0%
Ellett Brothers Inc. 62,900 347,915
Falcon Products Inc. 24,530 348,019
Hasbro Inc. 11,200 352,800
InterTAN Inc. 95,300 512,238
Nike Inc. 4,700 184,475
Richfood Holdings Inc. 10,200 288,150
-----------
2,033,597
-----------
TOTAL RETAIL & WHOLESALE 2,302,397
-----------
</TABLE>
See accompanying notes.
27
<PAGE> 83
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - VALUE EQUITY SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
Services - 2.8%
Human Resources - 2.8%
Manpower Inc. 8,100 $ 285,525
-----------
TRANSPORTATION - 3.8%
Air Transportation - 2.2%
Offshore Logistics Inc. 10,300 220,163
-----------
Railroads - 1.6%
Kansas City Southern Industry 5,100 161,925
-----------
TOTAL TRANSPORTATION 382,088
-----------
TOTAL COMMON STOCKS 10,606,957
-----------
Total Securities (identified cost - $9,614,351) 11,405,492
OTHER NET LIABILITIES - (12.4%) (1,258,636)
-----------
Total net assets $10,146,856
===========
</TABLE>
See accompanying notes.
28
<PAGE> 84
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - CAPITAL SERIES PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------------------
<S> <C> <C>
COMMON STOCKS - 119.3%
AEROSPACE & DEFENSE - 1.9%
Aerospace & Defense - 1.9%
Gulfstream Aerospace Corp. 4,200 $ 122,850
----------
BASIC INDUSTRIES - 6.9%
Chemicals & Plastics - 3.3%
Minerals Technologies Inc. 2,800 127,225
Olin Corp. 1,900 89,063
----------
216,288
----------
Iron & Steel - 1.3%
Nucor Corp. 1,700 82,131
----------
Packaging & Containers - 2.3%
Crown Cork & Seal Co., Inc. 3,000 150,375
----------
TOTAL BASIC INDUSTRIES 448,794
----------
CONSTRUCTION & REAL ESTATE - 2.0%
Engineering & Construction - 2.0%
Masco Corp. 2,600 132,275
----------
DURABLES - 2.6%
Autos, Tires, & Accessories - 1.1%
Echlin Inc. 1,900 68,756
----------
Consumer Electronics - 1.5%
Newell Co. 2,300 97,750
----------
TOTAL DURABLES 166,506
----------
ENERGY - 4.0%
Oil & Gas - 4.0%
Barrett Resources Corp. 3,300 99,825
Bayard Drilling Technologies 3,100 50,375
EVI Inc. 600 31,050
Transocean Offshore Inc. 1,600 77,100
----------
258,350
----------
FINANCE - 32.3%
Credit & Other Finance - 19.7%
Donaldson, Lufkin & Jenrette Inc. 1,700 135,150
Greenpoint Financial Corp. 2,300 166,894
MBNA Corp. 6,900 188,456
Ocwen Financial Corp. 4,000 101,750
Peoples Heritage Financial Group 1,900 87,400
Southtrust Corporation 1,700 107,844
St. Paul Bancorp Inc. 3,337 87,596
TCF Financial Corp. 3,200 108,600
Travelers Group Inc. 5,550 299,006
----------
1,282,696
----------
</TABLE>
See accompanying notes. 29
<PAGE> 85
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - CAPITAL SERIES PORTFOLIO (CONTINUED)
DECEMBER 31 , 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------------------------
<S> <C> <C>
Insurance - 12.6%
Aflac Inc. 1,800 $ 92,025
Amerin Corp. 1,200 33,600
Nationwide Financial Service 3,900 140,888
Old Republic International Corp. 2,200 81,813
Provident Companies Inc. 2,800 108,150
Progressive Corp. 2,100 251,738
Washington Mutual Inc. 1,700 108,481
----------
816,695
----------
TOTAL FINANCE 2,099,391
----------
HEALTH - 15.5%
Drugs & Pharmaceuticals - 8.3%
Biogen Inc. 1,700 61,838
Cardinal Health Inc. 1,200 90,150
Covance Inc. 6,700 133,163
Kos Pharmaceuticals Inc. 2,300 35,506
Mckesson Corp. 1,100 119,006
Pfizer Inc. 1,300 96,931
----------
536,594
----------
Medical Equipment & Supplies - 1.8%
US Surgical Corp. 4,200 123,113
----------
Medical Facilities Management - 5.4%
Humana Inc. 6,100 126,575
Universal Health Services Inc. 4,400 221,650
----------
348,225
----------
TOTAL HEALTH 1,007,932
----------
MEDIA & LEISURE - 9.8%
Entertainment - 5.9%
Activision Inc. 5,600 100,100
American Skiing Corp. 5,300 78,838
Capstar Hotel Co. 2,400 82,350
Mirage Resorts Inc. 5,400 122,850
----------
384,138
----------
Leisure Durables & Toys - 3.9%
Harley Davidson Inc. 2,900 79,387
Mattel Inc. 4,675 174,144
----------
253,531
----------
TOTAL MEDIA & LEISURE 637,669
----------
</TABLE>
See accompanying notes. 30
<PAGE> 86
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - CAPITAL SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------------------
<S> <C> <C>
NON-DURABLES - 3.3%
Household products - 3.3%
Clorox Co. 1,200 $ 94,875
The Dial Corp. 5,600 116,550
--------
211,425
--------
RETAIL & WHOLESALE - 13.5%
Apparel Stores - 3.0%
Jones Apparel Group Inc. 3,800 163,400
Liz Clairborne Inc. 800 33,450
--------
196,850
--------
Bookstore - 2.0%
Barnes & Noble Inc. 3,800 126,825
--------
General Merchandising - 3.3%
Coca-Cola Enterprises Inc. 6,000 213,375
--------
Retail & Wholesale, Miscellaneous - 5.2%
Estee Lauder Cos. 2,700 138,881
Fresh Del Monte Produce Inc. 7,400 108,225
Kroger Company 2,400 88,650
--------
335,756
--------
TOTAL RETAIL & WHOLESALE 872,806
--------
SERVICES - 6.6%
Advertising - 4.2%
Interpublic Group of Companies Inc. 3,750 186,796
Snyder Communications Inc. 2,300 83,950
--------
270,746
--------
Commercial- 1.4%
Gartner Group Inc. 2,500 93,125
--------
Human Resources- 1.0%
Accustaff Inc. 2,900 66,700
--------
TOTAL SERVICES 430,571
--------
TECHNOLOGY - 17.8%
Communications Equipment- 1.5%
Qualcomm Inc. 1,900 95,950
--------
Computers & Office Equipment- 1.4%
Xilinx Inc. 2,600 91,162
--------
</TABLE>
See accompanying notes. 31
<PAGE> 87
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - CAPITAL SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
-----------------------
<S> <C> <C>
Computer Services & Software - 8.1 %
BMC Software Inc. 1,500 $ 98,437
Ceridian Corp. 2,800 128,275
Fiserv Inc. 3,600 176,850
Symantec Corp. 2,500 54,844
Synopsys Inc. 1,900 67,925
-----------
526,331
-----------
Electronics - 6.8%
Adaptec Inc. 2,200 81,675
Arrow Electronics Inc. 3,200 103,800
Linear Technology Corp. 1,400 80,675
Maxim integrated Products Inc. 2,800 96,600
Vishay Intertechonology Inc. 3,255 76,696
-----------
439,446
-----------
TOTAL TECHNOLOGY 1,152,889
-----------
UTILITIES - 3.1%
Telephone Services - 3.1%
Century Telephone Enterprises 4,100 204,231
-----------
TOTAL COMMON STOCKS 7,745,689
-----------
Total Securities ( identified cost - $6,016,633 ) 7,745,689
OTHER NET LIABILITIES - (19.3%) (1,251,631)
-----------
Total net assets $ 6,494,058
===========
</TABLE>
See accompanying notes. 32
<PAGE> 88
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - INTERNATIONAL EQUITY SERIES PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
<S> <C> <C> <C>
BONDS - 4.9%
CORPORATE CONVERTIBLE BONDS - 4.9%
JAPAN - 4.9%
Sony Corp. (1.400% due on 03/31/05) JP Yen 10,000,000 $114,211
Sumitomo Bank Intl Fin NV (0.750% due on 05/31/01) JP Yen 7,000,000 56,260
Tokyo Electron Ltd. (0.900% due on 09/30/03) JP Yen 6,000,000 66,127
--------
TOTAL BONDS 236,598
--------
<CAPTION>
SHARES
----------
<S> <C> <C>
COMMON STOCKS - 94.4%
ARGENTINA - 0.8%
YPF Sociedad Anonima - sponsored ADR 1,100 37,606
--------
AUSTRALIA - 4.1%
E.R.G. Ltd. 31,700 26,644
News Corp. Ltd. 5,300 105,338
National Australia Bank Ltd. 4,400 61,437
--------
193,419
--------
AUSTRIA - 2.8%
VA Technologie AG 900 136,449
--------
CHINA - 0.5%
Shandong Huaneng Power Co. Ltd. - sponsored ADR 3,800 26,125
--------
FINLAND - 4.3%
Nokia Corp. - sponsored ADR 2,900 203,000
--------
FRANCE - 8.8%
Alcatel Alsthom - sponsored ADR 1,400 35,438
Elf Aquitaine - sponsored ADR 1,800 105,525
ISIS 400 43,884
Michelin (CGDE) 1,700 85,624
SGS-Thomson Microelectronics NV 1,700 104,149
Societe Generale de Paris 150 20,446
Usinor 1,800 26,001
--------
421,067
--------
GERMANY - 8.0%
Bayer A.G. - sponsored ADR 900 33,188
Depfa Bank 1,800 106,616
Prosieben Media AG 2,500 114,708
SOL Carbon AG 450 57,563
Wella Aktiengesellschaft 100 70,632
--------
382,707
--------
</TABLE>
See accompanying notes. 33
<PAGE> 89
CANADA LIFE OF AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - INTERNATIONAL EQUITY SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------------------
<S> <C> <C>
HONG KONG - 7.0%
Hong Kong Telecommunications Ltd. - sponsored ADR 2,247 $ 46,344
Esprit Holdings Ltd. 227,000 73,975
HSBC Holdings PLC 3,649 89,950
Johnson Electric Holdings Ltd. 11,880 34,191
Manhattan Card Co. Ltd. 122,000 42,906
Television Broadcasts Ltd. 17,100 48,773
--------
336,139
--------
INDONESIA - 0.1%
PT Inti Indorayon Utama 25,000 2,501
--------
ITALY - 3.4%
Fila Holding SPA- sponsored ADR 2,900 58,363
Telecom Italia SPA 7,200 31,764
Telecom Italia Mobile SPA 24,700 70,271
--------
160,398
--------
ISRAEL - 0.3%
Teva Pharmaceutical Ind. - sponsored ADR 300 14,194
--------
JAPAN - 15.0%
Autobacs Seven Co. Ltd. 1,000 28,841
Canon Inc. 5,000 116,903
DDI Corp. 15 39,801
Nihon Plast Co. Ltd. 500 1,207
Nomura Securities Co. Ltd. 9,000 120,441
Promise Co. Ltd. 2,640 147,003
Sanyo Coca-Cola Bottling Co. 3,300 27,918
Sangetsu Co. Ltd. 2,000 20 612
Tokyo Style Co Ltd. 5,000 45,377
Toyota Motor Corp. 5,000 143,822
Yamatake-Honeywell 2,000 21,381
--------
713,306
--------
MALAYSIA - 1.0%
Technology Resources Industries 25,000 14,773
Telekom Malaysia 11,000 32,500
--------
47,273
--------
MEXICO - 0.9%
PanAmerican Beverages Inc. 1,300 42,413
--------
NETHERLANDS - 5.7%
Hollandsche Beton Groep NV 4,000 74,387
ING Groep N.V 2,675 112,688
Philips Electronics N.V 1,400 84,700
--------
271,775
--------
</TABLE>
See accompanying notes. 34
<PAGE> 90
CANADA LIFE AMERICA SERIES FUND, INC.
SCHEDULE OF INVESTMENTS - INTERNATIONAL EQUITY SERIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------------------
<S> <C> <C>
SOUTH KOREA - 1.0%
Pohang Iron & Steel Co. Ltd. 1,700 $ 48,120
----------
SINGAPORE - 1.7%
Cerebos Pacific Ltd. 17,300 43,534
Fraser & Neave Ltd. 8,600 37,259
----------
80,793
----------
SPAIN - 0.9%
Telefonica de Espana - sponsored ADR 480 43,710
----------
SWITZERLAND - 6.9%
Nestle SA 73 109,559
Novartis AG 136 220,986
----------
330,545
----------
TAIWAN - 1.1%
China Steel Corp. - GDS 2,350 35,250
President Enterprises - GDS 1,440 17,280
----------
52,530
----------
UNITED KINGDOM - 20.1%
Billiton PLC 10,000 25,668
Diageo PLC - sponsored ADR 1,500 56,813
Elan Corporation PLC 3,000 153,563
EMI Group - sponsored ADR 2,600 44,855
Glaxo Wellcome PLC - sponsored ADR 900 43,088
Iceland Group - sponsored ADR 19,000 41,267
Matthews (Betnar) PLC 54,700 88,203
Mercury Assets Management Group PLC 2,700 75,435
Reuters Holdings PLC 760 50,350
Rolls Royce PLC 12,400 47,947
Smithkline Beecham PLC 800 41,150
United Utilities 3,300 42,353
Vodafone Group PLC - sponsored ADR 2,200 159,500
WPP Group PLC 1,000 45,125
Zeneca Group PLC 1,200 42,195
----------
957,512
----------
TOTAL COMMON STOCKS 4,501,582
----------
Total Securities (identified cost - $4,549,915) 4,738,180
OTHER NET ASSETS - 0.7% 32,942
----------
Total net assets $4,771,122
==========
</TABLE>
See accompanying notes. 35
<PAGE> 91
PART C
OTHER INFORMATION
<PAGE> 92
PART C
CANADA LIFE OF AMERICA SERIES FUND, INC.
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Form of Articles of Incorporation of Canada Life of America
Series Fund, Inc.**
(a) Form of Articles Supplementary**
(b) Amendment to the Articles Supplementary*
(2) By-Laws of Canada Life of America Series Fund, Inc**
(3) Not applicable.
(4) Forms of Certificates for Shares of the Fund**
(5) (a) Form of Investment Advisory Agreement with CL Capital
Management, Inc. (CLCM) and the Series Fund**
(b) Form of Sub-Investment Advisory Agreement between CL Capital
Management, Inc. (CLCM) and Canada Life Investment Management
Limited (CLIM)**
(c) Form of Sub-Investment Advisory Agreement between CL Capital
Management, Inc. (CLCM) and J. & W. Seligman & Co.,
Incorporated (Seligman)**
(d) Form of Sub-Investment Advisory Agreement between CL
Capital Management, Inc. (CLCM) and INDAGO Capital
Management Inc.
(6) Not applicable
(7) Not applicable
(8) Form of Custodian Agreement**
(9) (a) Form of Accounting Services Agreement**
(b) Form of Dividend Disbursing and Transfer Agent Agreement**
(c) Form of Participation Agreement**
(10) Not applicable
(11) Consent of Independent Auditors
(12) Not applicable
(13) Form of Subscription Agreement**
(a) Form of Subscription Agreement for the Capital Series**
(b) Form of Subscription Agreement for the International Series**
(14) Not applicable.
(15) Not applicable.
(16) Sample Performance Data Calculation.
(27) Financial Data Schedules
- -----------------------
* Incorporated herein by reference to exhibits filed with the
Post-Effective Amendment No 5. to this Registration Statement on Form
N-1A (File No. 33-28888), filed on March 5, 1993.
** Incorporated herein by reference to exhibits filed with the
Post-Effective Amendment No. 10 to this Registration Statement on Form
N-1A (File No. 33-288888), filed on April 24, 1997.
<PAGE> 93
Item 25. Persons Controlled by or Under Common Control with Registrant.*
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record
Title of Class Holders
-------------- ----------------
<S> <C>
Money Market Portfolio 2
Equity Portfolio 2
Bond Portfolio 2
Managed Portfolio 2
Capital Portfolio 2
International Equity Portfolio 2
</TABLE>
Item 27. Indemnification
Under Section 2-418 of the Maryland General Corporation Law, with respect to any
proceedings against a present or former director, officer, agent or employee
("corporate representative") of the registrant, except a proceeding brought by
or on the behalf of the registrant, the registrant may indemnify the corporate
representative against expenses, including attorneys' fees and judgments, fines,
and amounts paid in settlement actually and reasonably incurred by the corporate
representative in connection with the proceeding, if: (1) he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the registrant; and (ii) with respect to any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. The registrant
is also authorized under Section 2-418 of the Maryland General Corporation Law
to indemnify a corporate representative under certain circumstances against
expenses incurred in connection with the defense of a suit or action by or in
the right of the registrant.
Article 11.01 of the Registrant's By-Laws (Exhibit (2) to this registration
statement) provides that Registrant shall indemnify its corporate
representatives, in a manner that is consistent with Maryland law. Article 11.02
precludes indemnification for "disabling conduct" (willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of office) and sets forth reasonable and fair means for determining
whether indemnification shall be made. In addition, Section 10 of the By-Laws of
Canada Life Insurance Company of America provides indemnification for directors,
officers, and employees of the Company serving at the request of the Canada Life
Assurance Company, including directors, officers and employees of the
Registrant, and Section 16 of the By-Laws of the Canada Life Assurance Company
provides indemnification for directors, officers and employees serving at the
request of the Canada Life Assurance Company, including directors, officers and
employees of the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions discussed in Item 27 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any such action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has
* Incorporated herein by Reference to Part C of the Post-Effective Amendment
Registration Statement for Canada Life of America Variable Annuity Account 1
on Form N-4 (File No. 33- 28889), filed April 1997.
<PAGE> 94
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and other Connections of Investment Adviser
None
Item 29. Principal Underwriters
None
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act and the rules thereunder will be
maintained at the offices of the Fund at 330 University Avenue,
Toronto, Ontario M5G 1R8 and at 6201 Powers Ferry Road, N.W., Suite
600, Atlanta, Georgia 30339.
Item 31. Management Services
All management-related service contracts are discussed in Part A or
B of this Registration Statement.
Item 32. Undertaking
The Registrant undertakes to furnish a copy of the Registrant's
most recent Annual Report to Shareholder's free of charge upon
request.
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
5 (d) Form of Sub-Investment Advisory Agreement between CL Capital Management, Inc. (CLCM)
and INDAGO Capital Management Inc.
11 Consent of Independent Auditors
16 Sample Performance Data Calculation.
27 Financial Data Schedules
</TABLE>
<PAGE> 96
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and has caused this Post-Effective Amendment Number 11
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and the State of New York, on this 24 day of April, 1998.
CANADA LIFE OF AMERICA SERIES FUND, INC.
<TABLE>
<S> <C>
Attest: By: /s/ Ron Beettam
------------------------------- --------------------------
D.A. Hopkins, Secretary R. E. Beettam, President
Canada Life of America Series Fund, Inc. Canada Life of America Series Fund, Inc.
</TABLE>
As required by the Securities Act of 1933, this Post-Effective Amendment Number
11 has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert W. Morrison Chairman and Director April 24, 1998
- ----------------------------------- ----------------
R. W. Morrison
/s/ Ron Beettam President and Director April 24, 1998
- ----------------------------------- ----------------
R. E. Beettam
/s/ E. Y. Baker Director April 24, 1998
- ----------------------------------- ----------------
E. Y. Baker
/s/ J. S. Clarke Director April 24, 1998
- ----------------------------------- ----------------
J. S. Clarke
/s/ David H. Harris Director April 24, 1998
- ----------------------------------- ----------------
D. H. Harris
/s/ D. V. Rough Treasurer April 24, 1998
- ----------------------------------- ----------------
D. V. Rough
/s/ Don D. Myers Accounting Officer April 24, 1998
- ----------------------------------- ---------------
D. D. Myers
</TABLE>
<PAGE> 1
EXHIBIT 5(d)
FORM OF SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN CL CAPITAL
MANAGEMENT, INC. (CLCM) AND
INDAGO CAPITAL MANAGEMENT INC.
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 17th day of July, 1997 between CL Capital
Management, Inc. (the "Investment Adviser"), a Georgia corporation, and INDAGO
Capital Management Inc. (the "Sub-Investment Adviser"), a Canadian corporation:
W I T N E S S E T H :
WHEREAS, Canada Life of America Series Fund, Inc., a Maryland
Corporation (the "Fund") is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act"); and
WHEREAS, the Fund, a series type of investment company, issues separate
classes (or series) of stock, each of which represents a separate portfolio of
investments; and
WHEREAS, the Fund is currently comprised of six classes of stock
(together with any classes subsequently added, the "Series"), each of which
pursues its investment objectives through separate investment policies; and
WHEREAS, the Sub-Investment Adviser is engaged principally in the
business of rendering advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940; and
WHEREAS, the Fund has employed the Investment Adviser to act as
investment manager of the Fund as set forth in the Investment Advisory Agreement
between the Fund and the Investment Adviser dated May 1, 1995 (the "Investment
Advisory Agreement"); and
WHEREAS, the Fund and the Investment Adviser desire to retain the
Sub-Investment Adviser to render certain investment advisory services to the
International Equity Series in the manner and on the terms hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Investment Adviser and the Sub-Investment Adviser
hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-INVESTMENT ADVISER
The Investment Adviser hereby employs the Sub-Investment Adviser to act
as the investment adviser of the International Equity Series of the Fund, and to
furnish the investment advisory services described below, subject to the
supervision of the Board of Directors of the Fund and the Investment Adviser,
for the period and on the terms and conditions set forth in this Agreement. The
Sub-Investment Adviser hereby accepts such employment and agrees during such
period, at its own expense, to render, or arrange for the rendering of, such
services and to assume the obligations herein set forth for the compensation
provided for herein. The Sub-Investment Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund in
any way or shall in no way be deemed an agent of the Fund.
<PAGE> 3
2
The Sub-Investment Adviser, shall provide the International Equity
Series with such investment research, advice and supervision as the latter may
from time to time consider necessary for the proper supervision of the assets of
such Series, shall furnish continuously an investment program for such Series,
shall determine from time to time which securities shall be purchased, sold or
exchanged, determine how voting and other rights with respect to the securities
of the International Equity Series shall be exercised, and what portions of such
Series shall be held in the various securities in which the Series invests or
cash, and shall take such steps as are necessary to implement any overall
investment plan for such Series, including providing or obtaining such services
as may be necessary in managing, acquiring or disposing of investments. The
Sub-Investment Adviser's services shall be subject always to the control and
supervision of the Board of Directors of the Fund and the Investment Adviser,
the restrictions of the Articles of Incorporation and By-Laws of the Fund, as
amended from time to time, the provisions of the Investment Company Act, the
statements relating to the investment objectives of the International Equity
Series, investment policies and investment restrictions as the same are set
forth in the currently effective registration statement relating to the shares
of the Fund under the Securities Act of 1933, as amended and the Investment
Company Act of 1940, as amended (the "Registration Statement"), appropriate
state insurance laws, and any applicable provisions of the Internal Revenue Code
of 1986. Should the Board of Directors of the Fund at any time make any definite
determination as to investment policy and notify the Sub-Investment Adviser
thereof in writing, the Sub-Investment Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
Investment Adviser acknowledges and agrees that it has sole
responsibility to ensure that Sub-Investment Adviser is properly informed of
such policies and restrictions applicable to the International Equity Series
including without limitation as are, (i) contained in the Fund's Prospectus,
(ii) set forth in the Internal Revenue Code of 1986, as amended, (iii) set forth
pursuant to state insurance laws.
Investment Adviser also acknowledges and agrees that it will be
responsible to provide Sub-Investment Adviser with all necessary compliance
reports to enable Sub-Investment Adviser to make purchases and sales for the
International Equity Series in accordance with the policies and restrictions to
which such Series is subject. Investment Adviser also agrees that it or the Fund
is responsible to provide or contract to provide accounting, custodial and any
other administrative services necessary to administer the business and other
affairs of the Fund.
The Sub-Investment Adviser shall take, on behalf of the International
Equity Series, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders for
the purchase or sale of portfolio securities for the Series' account with
brokers or dealers selected by it, and to that end, the Sub-Investment Adviser
is authorized as the agent of the Fund to give instructions to the Custodian of
the Fund as to deliveries of securities and payments of cash for the account of
the International Equity Series. In connection with the selection of such
brokers or dealers and the placing of such orders with respect to assets of the
International Equity Series, the Sub-Investment Adviser is directed at all
times to seek to obtain best execution and price within the policy guidelines
determined by the Board of Directors of the Fund and set forth in the
Registration Statement. Subject to this requirement and the provisions of the
Investment Company Act, the Securities
<PAGE> 4
3
Exchange Act of 1934, as amended, and other applicable provisions of law, the
Sub-Investment Adviser may select brokers or dealers with which it or the Fund
is affiliated.
In addition to seeking the best price and execution, the Sub-Investment
Adviser may also take into consideration research and statistical information
and wire and other quotation services provided to the Sub-Investment Adviser
which may justify brokerage commissions at a higher cost to the Series then may
result when allocating brokerages to other brokers on the basis of seeking best
price and execution. However, the Sub-Investment Adviser shall select only
brokers whose commissions it believes are reasonable.
The Sub-Investment Adviser will periodically evaluate the statistical
data, research and other investment services provided to it by brokers and
dealers. Such services may be used by the Sub-Investment Adviser in connection
with the performance of its obligations under this Agreement or in connection
with other advisory or investment operations.
ARTICLE II
SUB-INVESTMENT ADVISORY FEE
The payment of investment advisory fees and the allocation of charges
and expenses between the Fund and the Investment Adviser are set forth in the
Investment Advisory Agreement, and nothing in this Sub-Investment Advisory
Agreement shall change or affect that arrangement. The payment of investment
advisory fees and the apportionment of any expenses related to the services of
the Sub-Investment Adviser shall be the sole concern of the Investment Adviser
and the Sub-Investment Adviser and shall not be the responsibility of the Fund.
For the services rendered pursuant to this Agreement, Investment
Adviser will pay the Sub-Investment Adviser at the end of each calendar month, a
fee, calculated daily based upon the average daily value of the net assets of
the International Equity Series of the Fund, as determined and computed in
accordance with the description of the determination of the net asset value
contained in the Registration Statement for the Fund, at the annual rate of
0.30%.
ARTICLE III
LIMITATION OF LIABILITY
Subject to Section 36 of the Investment Company Act of 1940, as
amended, the Sub-Investment Adviser shall not be liable for any error of
judgement or mistake of law or for any loss arising out of any investment or for
any act or omission in the management of the Fund, and the performance of its
duties hereunder except for willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of reckless disregard of its
obligations and duties hereunder.
The federal and state securities laws impose liability under certain
circumstances on persons who act in good faith, and therefore nothing in this
Agreement will waive or limit any rights that the contract holders may have
under those laws.
<PAGE> 5
4
ARTICLE IV
ACTIVITIES OF THE SUB-INVESTMENT ADVISER
The services of the Sub-Investment Adviser to the International Equity
Series are not deemed to be exclusive, and the Sub-Investment Adviser is free to
render services to others.
It is agreed that the Sub-Investment Adviser may use any supplemental
investment research obtained for the benefit of the International Equity Series
in providing investment advice to its other investment advisory accounts. The
Sub-Investment Adviser or its affiliates may use such information in managing
their own accounts. Conversely, such supplemental information obtained by the
placement of business for the Sub-Investment Adviser or other entities advised
by the Sub-Investment Adviser will be considered by and may be useful to the
Sub-Investment Adviser in carrying out its obligations to the International
Equity Series.
Securities held by the International Equity Series may also be held by
separate investment accounts or other mutual funds for which the Sub-Investment
Adviser may act as an adviser or by the Sub-Investment Adviser or its
affiliates. Because of different investment objectives or other factors, a
particular security may be bought by the Sub-Investment Adviser or its
affiliates or for one or more clients when one or more clients are selling the
same security. If purchases or sales of securities for the International Equity
Series or other entities for which the Sub-Investment Adviser or its affiliates
act as investment adviser or for their advisory clients arise for consideration
at or about the same time, the Sub-Investment Adviser may make transactions in
such securities, insofar as feasible, for the respective entities and clients in
a manner deemed equitable to all. To the extent that transactions on behalf of
more than one client of the Sub-Investment Adviser during the same period may
increase the demand for securities being purchased or the supply of securities
being sold, it is recognized that there may be an adverse effect on price.
It is agreed that, on occasions when the Sub-Investment Adviser deems
the purchase or sale of a security to be in the best interest of the
International Equity Series as well as other accounts or companies, it may, to
the extent permitted by applicable laws or regulations, but will not be
obligated to, aggregate the securities to be sold or purchased for other
accounts or companies in order to obtain favourable execution and lower
brokerage commissions. In that event, allocation of the securities purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Sub-Investment Adviser in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the International Equity Series and
to such other accounts or companies. It is recognized that in some cases this
procedure may adversely affect the size of the position obtainable for the
International Equity Series.
<PAGE> 6
5
ARTICLE V
BOOKS AND RECORDS
The Sub-Investment Adviser agrees that all books and records which it
maintains for the International Equity Series shall be made available, within
five business days of a written request, to the Fund's accountants or auditors
during regular business hours at the Sub-Investment Adviser's offices.
The Fund or its authorized representative shall have the right to copy
any records in the possession of the Sub-Investment Adviser which pertain to the
Fund and as the Fund shall require in accordance with applicable law. Such
books, records, information or reports shall be available to properly constitute
governmental authorities consistent with state and federal law and/or
regulations. The Sub-Investment Adviser shall keep confidential and shall not
disclose or use any records or information obtained pursuant to this Agreement
except as expressly required by state or federal law and/or regulations.
In the event of the termination of this Agreement, all such books, records, or
other information shall be returned to the Fund free from any claim or assertion
of rights by the Sub-Investment Adviser. The Fund shall make available to the
Sub-Investment Adviser on a reasonable basis all books and records which it
maintains for the International Equity Series.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above
written, and shall continue in effect until the date of the first annual or
special meeting of shareholders of the International Equity Series, but not
later than sixteen months after the effective date of the Securities Act of 1933
Registration Statement for the International Equity Series. Thereafter, this
Agreement shall continue in effect from year to year with respect to the
International Equity Series so long as such continuance is specifically approved
at least annually by (i) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the International Equity
Series, and (ii) a majority of those Directors of the Fund who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors of the Fund, or by vote of a majority of
the outstanding voting securities of the International Equity Series, or by the
Investment Adviser, on sixty days written notice to the other party. This
Agreement may be terminated for "cause" at any time by the Board of Directors of
the Fund. "Cause" is defined and limited for this purpose to mean wilful
misfeasance, bad faith, or gross negligence by the Sub-Investment Adviser in the
performance of its duties or reckless disregard by it of its obligations and
duties under this Agreement. This Agreement shall automatically terminate in the
event of its assignment or in the event of the termination of the Investment
Advisory Agreement between the Fund and the Investment Adviser. This Agreement
may be terminated without penalty, by Sub-Investment Adviser on sixty days
notice.
<PAGE> 7
6
ARTICLE VII
DEFINITIONS
The terms "assignment," "interested person," and "majority of the
outstanding voting securities," when used in this Agreement, shall have the
respective meanings specified under the Investment Company Act.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
When required by applicable law, this Agreement may be amended by the
parties only if such amendment is specifically approved by (i) the vote of a
majority of the outstanding voting securities shares of the International Equity
Series, and (ii) a majority of those Directors of the Fund who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
The Investment Adviser agrees to advise the Sub-Investment Adviser
immediately:
(a) of any request by the SEC for amendments to the Prospectus or for
additional information.
(b) of the issuance by the SEC of any stop order suspending the
effectiveness of the Fund's Prospectus or the initiation of any proceedings for
that purpose.
(c) of the happening of any material event which makes untrue any
statement made in the Fund's Prospectus or which requires the making of a change
in either of them in order to make the statements therein not misleading.
(d) of all actions of the SEC with respect to any amendments to the
Fund's Prospectus.
(e) of the happening of any event relating to the Investment Adviser
which would have a material effect on its business.
The Sub-Investment Adviser agrees to advise the Investment Adviser
immediately:
(a) of the happening of any material event which makes untrue any
statement made in the Fund's Prospectus or which requires the making of a change
in either of them in order to make the statements therein not misleading, and
(b) of the happening of any event relating to the Sub-Investment
Adviser which would have a material effect on its business.
<PAGE> 8
7
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed and interpreted in accordance with
the laws of the State of Georgia, and the applicable provisions of the
Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
CL CAPITAL MANAGEMENT, INC.
BY:/s/
--------------------------------
/s/
--------------------------------
INDAGO CAPITAL MANAGEMENT, INC.
BY:/s/
--------------------------------
/s/
--------------------------------
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
<PAGE> 2
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Financial Statements" and to the use of our report
dated January 30, 1998 in Post-Effective Amendment No. 11 to the Registration
Statement (Form N-1A No. 33-28888) and related Prospectus of Canada Life of
America Series Fund, Inc. (dated May 1, 1998).
ERNST & YOUNG LLP
Atlanta, Georgia
April 21, 1998
<PAGE> 1
EXHIBIT 16
SAMPLE PERFORMANCE DATA CALCULATION
<PAGE> 2
CANADA LIFE OF AMERICA SERIES FUND, INC.
Money Market Series
7-DAY CURRENT YIELD
Current Yield = ( Base period return / 7) x 365)
where Base period return = the net change, exclusive of
capital changes, in the value of a hypothetical account having
a balance of one share at the beginning of the period,
excluding any realized or unrealized gains or losses, and
dividing by the price per share at the beginning of the
period.
<TABLE>
<CAPTION>
Date Dividend per Share
<S> <C>
Dec. 24 0.001724296
Dec. 26 0.002928524
Dec. 29 0.004321084
Dec. 30 0.001517144
Dec. 31 0.001650459
-----------
0.001041507
</TABLE>
((0.001041507) / 7) x 365 = 5.431831668
5.43% 7-DAY CURRENT YIELD AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE YIELD
365/7
Effective Yield = (Base period return + 1) - 1
where Base period return = the net change, exclusive of
capital changes, in the value of a hypothetical account having
a balance of one share at the beginning of the period,
excluding any realized or unrealized gains or losses, and
dividing by the price per share at the beginning of the
period.
365/7
((0.001041507 / 10) + 1) - 1 = 5.579078358
5.58% 7-DAY EFFECTIVE YIELD AT DECEMBER 31, 1997
<PAGE> 3
CANADA LIFE OF AMERICA SERIES FUND, INC.
Money Market, Managed, Bond, Equity, International Equity and Capital Series
----------------------------------------------------------------------------
TOTAL RETURN
Total
Return = ((ERV / P ) - 1)
where ERV = the value, at the end of the applicable period,
of a hypothetical $1,000 investment made at the
beginning of the applicable period. It is assumed
that all dividends and capital gains distributions
are reinvested.
P = a hypothetical initial investment of $1,000
Total Return to December 31, 1997
---------------------------------
<TABLE>
<CAPTION>
ERV P Return
<S> <C> <C> <C>
Money Market $2,222.77 $1,000.00 122.28%
Managed $2,222.77 $1,000.00 122.28%
Bond $1,827.95 $1,000.00 82.80%
Equity $2,540.90 $1,000.00 154.09%
International Equity $1,318.19 $1,000.00 31.82%
Capital $1,970.44 $1,000.00 97.04%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Total 1 / n
Return = ((ERV/P ) - 1 )
where ERV = the value, at the end of the applicable period,
of a hypothetical $1,000 investment made at the
beginning of the applicable period. It is assumed
that all dividends and capital gains distributions
are reinvested.
P = a hypothetical initial investment of $1,000
n = number of years
= 2949/365 [December 4, 1989 - December 31, 1997]
Average Annual Total Return to December 31, 1997
------------------------------------------------
<TABLE>
<CAPTION>
ERV P Return
<S> <C> <C> <C>
Money Market $2,222.77 $1,000.00 4.50%
Managed $2,222.77 $1,000.00 10.39%
Bond $1,827.95 $1,000.00 7.75%
Value Equity $2,540.90 $1,000.00 12.23%
International Equity $1,318.19 $1,000.00 10.81%
Capital $1,970.44 $1,000.00 15.55%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997 AUDITED
FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 9,274
<INVESTMENTS-AT-VALUE> 9,274
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,274
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 125
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,140
<SHARES-COMMON-STOCK> 915
<SHARES-COMMON-PRIOR> 760
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 9,149
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 595
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 514
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 514
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 514
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,923
<NUMBER-OF-SHARES-REDEEMED> (12,820)
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 1,550
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 137
<AVERAGE-NET-ASSETS> 10,750
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997 AUDITED
FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 2
<NAME> MANAGED
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 15,616
<INVESTMENTS-AT-VALUE> 17,120
<RECEIVABLES> 244
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 32
<TOTAL-ASSETS> 17,396
<PAYABLE-FOR-SECURITIES> 294
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,824
<TOTAL-LIABILITIES> 2,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,762
<SHARES-COMMON-STOCK> 1,227
<SHARES-COMMON-PRIOR> 1,354
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,504
<NET-ASSETS> 15,278
<DIVIDEND-INCOME> 88
<INTEREST-INCOME> 504
<OTHER-INCOME> 0
<EXPENSES-NET> 148
<NET-INVESTMENT-INCOME> 444
<REALIZED-GAINS-CURRENT> 1,310
<APPREC-INCREASE-CURRENT> 864
<NET-CHANGE-FROM-OPS> 2,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 444
<DISTRIBUTIONS-OF-GAINS> 1,310
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 271
<NUMBER-OF-SHARES-REDEEMED> (544)
<SHARES-REINVESTED> 147
<NET-CHANGE-IN-ASSETS> (695)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 82
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 157
<AVERAGE-NET-ASSETS> 16,221
<PER-SHARE-NAV-BEGIN> 11.80
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.66
<PER-SHARE-DIVIDEND> (0.34)
<PER-SHARE-DISTRIBUTIONS> (1.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.45
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997
AUDITED FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC., AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 3
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,466
<INVESTMENTS-AT-VALUE> 7,652
<RECEIVABLES> 89
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3
<TOTAL-ASSETS> 7,744
<PAYABLE-FOR-SECURITIES> 247
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431
<TOTAL-LIABILITIES> 678
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,873
<SHARES-COMMON-STOCK> 667
<SHARES-COMMON-PRIOR> 648
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 186
<NET-ASSETS> 7,066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 474
<OTHER-INCOME> 0
<EXPENSES-NET> 65
<NET-INVESTMENT-INCOME> 409
<REALIZED-GAINS-CURRENT> (10)
<APPREC-INCREASE-CURRENT> 167
<NET-CHANGE-FROM-OPS> 566
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 409
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155
<NUMBER-OF-SHARES-REDEEMED> (172)
<SHARES-REINVESTED> 36
<NET-CHANGE-IN-ASSETS> 353
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 74
<AVERAGE-NET-ASSETS> 7,174
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.23
<PER-SHARE-DIVIDEND> (0.60)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.59
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC. FOR THE
YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 1997 AUDITED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 4
<NAME> VALUE EQUITY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 9,614
<INVESTMENTS-AT-VALUE> 11,405
<RECEIVABLES> 16
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 33
<TOTAL-ASSETS> 11,454
<PAYABLE-FOR-SECURITIES> 27
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,280
<TOTAL-LIABILITIES> 1,307
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,349
<SHARES-COMMON-STOCK> 690
<SHARES-COMMON-PRIOR> 655
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,791
<NET-ASSETS> 10,147
<DIVIDEND-INCOME> 99
<INTEREST-INCOME> 30
<OTHER-INCOME> 0
<EXPENSES-NET> 101
<NET-INVESTMENT-INCOME> 28
<REALIZED-GAINS-CURRENT> 1,207
<APPREC-INCREASE-CURRENT> 1,203
<NET-CHANGE-FROM-OPS> 2,438
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28
<DISTRIBUTIONS-OF-GAINS> 1,207
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 180
<NUMBER-OF-SHARES-REDEEMED> (218)
<SHARES-REINVESTED> 73
<NET-CHANGE-IN-ASSETS> 1,629
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 101
<AVERAGE-NET-ASSETS> 10,023
<PER-SHARE-NAV-BEGIN> 13.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 3.44
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (1.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.71
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1997 AUDITED FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC.
FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 5
<NAME> CAPITAL
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 6,017
<INVESTMENTS-AT-VALUE> 7,746
<RECEIVABLES> 3
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 450
<TOTAL-ASSETS> 8,199
<PAYABLE-FOR-SECURITIES> 409
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,296
<TOTAL-LIABILITIES> 1,705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,760
<SHARES-COMMON-STOCK> 459
<SHARES-COMMON-PRIOR> 478
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,729
<NET-ASSETS> 6,494
<DIVIDEND-INCOME> 71
<INTEREST-INCOME> 5
<OTHER-INCOME> 0
<EXPENSES-NET> 74
<NET-INVESTMENT-INCOME> 2
<REALIZED-GAINS-CURRENT> 1,261
<APPREC-INCREASE-CURRENT> 226
<NET-CHANGE-FROM-OPS> 1,489
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2)
<DISTRIBUTIONS-OF-GAINS> (1,261)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 85
<NUMBER-OF-SHARES-REDEEMED> (150)
<SHARES-REINVESTED> 45
<NET-CHANGE-IN-ASSETS> (182)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 74
<AVERAGE-NET-ASSETS> 7,446
<PER-SHARE-NAV-BEGIN> 13.96
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 2.75
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.56)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.15
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997 AUDITED
FINANCIAL STATEMENTS OF CANADA LIFE OF AMERICA SERIES FUND, INC., AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851085
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<SERIES>
<NUMBER> 6
<NAME> CANADA LIFE OF AMERICA SERIES FUND, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,550
<INVESTMENTS-AT-VALUE> 4,738
<RECEIVABLES> 19
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 668
<TOTAL-ASSETS> 5,425
<PAYABLE-FOR-SECURITIES> 351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 303
<TOTAL-LIABILITIES> 654
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,579
<SHARES-COMMON-STOCK> 410
<SHARES-COMMON-PRIOR> 280
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 188
<NET-ASSETS> 4,771
<DIVIDEND-INCOME> 64
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> 54
<NET-INVESTMENT-INCOME> 25
<REALIZED-GAINS-CURRENT> 261
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 57
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (25)
<DISTRIBUTIONS-OF-GAINS> (261)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,382
<NUMBER-OF-SHARES-REDEEMED> (1,257)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 1,466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62
<AVERAGE-NET-ASSETS> 4,404
<PER-SHARE-NAV-BEGIN> 11.82
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.56
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> (0.74)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
