<PAGE> 1
File Nos: 2-76640
811-3429
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
CAPITAL APPRECIATION FUND
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box);
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 3
CAPITAL APPRECIATION FUND
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
November 13, 1996
To the Shareholders:
Notice is hereby given that the Special Meeting of Shareholders of Capital
Appreciation Fund (the "Trust") will be held at its office at One Tower Square,
Hartford, Connecticut, on Monday, January 6, 1997 at 9:00 a.m. for the following
purposes:
1. To approve the proposed amendment to the Sub-Advisory Agreement
between Travelers Asset Management International Corporation and Janus
Capital Corporation to become effective January 7, 1997.
2. To act on any and all other business as may properly come before
the meeting.
The close of business on November 1, 1996 has been fixed as the record date
for the determination of beneficial Shareholders entitled to notice of and to
vote at said meeting.
By order of the Board of Trustees.
/s/ ERNEST J. WRIGHT
---------------------------
ERNEST J. WRIGHT, SECRETARY
Please complete and return the enclosed proxy card as soon as possible in
the post-paid envelope provided. Your prompt response is appreciated.
203
<PAGE> 4
CAPITAL APPRECIATION FUND
PROXY STATEMENT FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, JANUARY 6, 1997
THE BOARD OF TRUSTEES OF CAPITAL APPRECIATION FUND (THE "TRUST") SOLICITS
YOUR PROXY FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS AND AT ANY ADJOURNMENT
OF IT. The meeting will be held at 9:00 a.m. on Monday January 6, 1997, at the
office of the Trust, One Tower Square, Hartford, Connecticut. This proxy
material is expected to be mailed to Shareholders on or about November 13, 1996.
GENERAL
The purpose of this Special Meeting of Shareholders is to approve an
amendment to the Sub-Advisory Agreement between Travelers Asset Management
International Corporation ("TAMIC") and Janus Capital Corporation ("Janus
Capital") which would lower the sub-advisory fee payable by TAMIC to Janus
Capital.
VOTE BY PROXY
A proxy card is enclosed for use at the meeting. The proxy card may be
revoked at any time before it is voted by sending a written notice of revocation
to the Trust's Secretary or by appearing in person to vote at the meeting. All
proxy cards which are properly executed and received in time and not so revoked
will be voted at the meeting in accordance with the instructions on them, if
any. If no specification is made, the proxy card will be voted for the approval
of the Sub-Advisory Agreement between TAMIC and Janus Capital.
COST OF SOLICITATION
The cost of soliciting these proxies will be borne by the Trust. Pursuant
to a Management Agreement that became effective on May 1, 1993, The Travelers
Insurance Company ("Travelers Insurance") reimburses the Trust for the amount by
which the Trust's aggregate annual expenses (including, among other things, the
costs of printing, preparing and mailing special meeting notices and proxy
solicitation materials) exceed 1.25% of the Trust's average net assets for any
fiscal year during which the Management Agreement remains in effect. Travelers
Insurance is located at One Tower Square, Hartford, Connecticut 06183.
SHAREHOLDERS AND THE VOTE
The Trust has one class of Shares representing the entire beneficial
interest of the Trust. Each Share ranks equally with every other outstanding
Share. Shareholders are entitled to one vote for each full Share owned and
fractional votes for fractional Shares. Only beneficial Shareholders of record
at the close of business on November 1, 1996, (the record date) will be entitled
to notice of and to vote at the meeting. On the record date, there were
5,297,449 shares outstanding and entitled to be voted at the meeting. The number
of full and fractional votes, which you as a
<PAGE> 5
beneficial Shareholder are entitled to provide instructions to cast is set forth
on the enclosed proxy card.
Separate accounts which fund variable annuity contracts and variable life
insurance contracts issued by Travelers Insurance and The Travelers Life and
Annuity Company were the record owners of all of the Shares of the Trust. On
that same date, no single shareholder or group beneficially owned more than 5%
of the outstanding Shares of the Portfolios, other than Travelers Insurance and
The Travelers Life and Annuity Company.
This proxy material is being mailed to the owners of variable annuity and
variable life contracts who had allocated amounts to the Capital Appreciation
Fund through certain separate accounts as of the record date, (i.e. beneficial
owners of the Shares). The shareholders will direct Travelers Insurance
how they wish the Shares in which they have a beneficial interest to be voted.
Travelers Insurance will vote all Shares held by it as instructed by the
contract owners or participants, and intends to vote all Shares for which no
instructions are received in the same proportion as they vote Shares
for which instructions are received.
VOTE REQUIRED
Approval of the Proposal requires the affirmative "vote of a majority of
the outstanding voting securities" of the Trust. Under the Investment Company
Act of 1940 (the "1940 Act"), a "vote of a majority of the outstanding voting
securities" means the affirmative vote of (a) 67% of the outstanding voting
securities represented at the meeting, if more than 50% of the outstanding
voting securities are represented, or (b) more than 50% of the outstanding
voting securities, whichever is less.
ANNUAL AND SEMI-ANNUAL REPORT
The Trust's Annual Report to Shareholders containing financial statements
for the fiscal year ended December 31, 1995 was mailed to all Shareholders of
record as of December 31, 1995 and the Trust's Semi-Annual Report containing
financial statements for the period ended June 30, 1996 was mailed to
Shareholders of record as of June 30, 1996. Copies of the Annual Report and the
Semi-Annual Report may be obtained without charge by writing to The Travelers
Insurance Company, Annuity Services, One Tower Square, Hartford, Connecticut
06183-5030, or by calling 860-277-3525.
1. PROPOSAL TO AMEND SUB-ADVISORY AGREEMENT BETWEEN TAMIC AND JANUS CAPITAL TO
BECOME EFFECTIVE ON JANUARY 7, 1997.
At a meeting held on October 25, 1996, the Board of Trustees of the Trust
unanimously voted to approve an amendment to the Sub-Advisory Agreement between
TAMIC and Janus Capital (the "Proposed Amended Sub-Advisory Agreement") to
become effective on January 7, 1997. The purpose of the Proposed Amended
Sub-Advisory Agreement is to change the subadvisory fee, currently at an annual
rate of 0.55% of the Trust's average daily net assets.
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THE PROPOSED AMENDMENT TO THE SUB-ADVISORY AGREEMENT
The existing sub-advisory fee of an annual rate of 0.55% of the Trust's
average daily net assets is deducted daily and paid monthly to Janus Capital by
TAMIC. For the fiscal year ended December 31, 1995, the total sub-advisory fees
paid to Janus Capital was $551,739. If approved by Shareholders, the Proposed
Amended Sub-Advisory Agreement will replace the Existing Sub-Advisory Agreement
dated July 1, 1996. If the new fees had been in effect under the Existing Sub-
Advisory Agreement, the sub-advisory fee paid to Janus would have been
approximately $547,200. The investment advisory fee paid by the Trust to the
Investment Adviser will not be reduced by the Proposed Amendment to the
Sub-Advisory Agreement.
Paragraph 7 of the Existing Sub-Advisory Agreement is proposed to be
amended to read as follows:
7. Compensation of Sub-Adviser. TAMIC shall pay to the Sub-Adviser a fee
equivalent on an annual basis to the following:
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
ANNUAL VALUE OF THE
SUB-ADVISORY FEE ACCOUNT
- ---------------- -------------------
<C> <S> <C>
0.55% of the first $ 100,000,000
0.50% of the next $ 400,000,000
0.45% of the amount over $ 500,000,000
</TABLE>
The sub-advisory fees will be deducted on each valuation date, and will be
paid monthly.
With the exception of the proposed amendment to paragraph 7 set forth
above, all other terms and conditions of the Existing Sub-Advisory Agreement
will remain the same. A copy of the Sub-Advisory Agreement is included as
Exhibit A.
EFFECT OF AMENDED SUB-ADVISORY AGREEMENT
Set forth below is a chart showing the dollar amount of sub-advisory fees
paid by TAMIC during the Trust's past fiscal year under the Existing
Sub-Advisory Agreement and the amount of fees that would have been paid under
the Proposed Amended Sub-Advisory Agreement. The chart also shows the percentage
difference between the amount that would have been paid under the Amended
Sub-Advisory Agreement from the amount paid under the Existing Sub-Advisory
Agreement. Also set forth below is a comparative fee table showing the amount of
fees and expenses paid by the Trust under the Existing Sub-Advisory Agreement as
a percentage of average net assets and the amount of fees and expenses
shareholders would have paid if the Amended Sub-Advisory Agreement had been in
effect. The information in the table is an estimate based on actual expenses for
the fiscal year ended December 31, 1995. If the proposal is approved, the
existing Advisory Agreement will not change and the level of fees paid by the
Trust for investment advisory services will not be reduced.
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<PAGE> 7
DOLLAR AMOUNT OF ADVISORY FEES PAID
(FISCAL YEAR ENDED DECEMBER 31, 1995)
<TABLE>
<CAPTION>
EXISTING SUB- AMENDED SUB-
ADVISORY AGREEMENT ADVISORY AGREEMENT
------------------ ------------------
<S> <C> <C>
Amount of fees paid or that would have been paid by
TAMIC $551,739 $547,200
Percentage difference from amount paid under the
Existing Sub-Advisory Agreement N/A (1%)
</TABLE>
ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fee 0.75%
Other Expenses 0.10%
Total Annual Expenses 0.85%
</TABLE>
EXAMPLE
The following illustrates the expenses on a $1,000 investment under the
existing and proposed fees and the expenses stated above, assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Existing Fee $ 73 $ 121 $ 172 $262
Proposed Fee $ 73 $ 121 $ 172 $262
</TABLE>
The purpose of this example and the table to assist investors in
understanding the various costs and expenses of investing in shares of the
Trust. The example above should not be considered a representation of past or
future expenses of the Trust. Actual expenses may be higher or lower than those
shown above.
FACTORS CONSIDERED BY THE BOARD OF MANAGERS
The Board of Trustees determined that the terms of the Amended Sub-Advisory
Agreement are fair and reasonable and that the approval of the Amended
Sub-Advisory Agreement on behalf of the Trust is in the best interests of the
Fund.
The Board of Trustees reviewed written materials furnished by TAMIC which
included a chart of advisory and subadvisory fees for comparable mutual funds.
Representatives of TAMIC met with the Board, discussed the materials and
responded to the questions.
In approving the Amended Sub-Advisory Agreement, the Board evaluated a
variety of factors such as similar fee schedules paid by other insurance
companies which have sub-advisory agreements with Janus Capital. If approved,
the investment fee level would continue to be below the median advisory fee for
actively managed equity funds in the capital appreciation and growth
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categories, as discussed with the Board. After carefully evaluating the
foregoing materials and factors, the Board of Trustees approved the Amended
Sub-Advisory Agreement.
BOARD RECOMMENDATION
At its meeting on October 25, 1996, the Board of Trustees unanimously
approved the proposed amendment described above. The Board's conclusion that the
proposed sub-advisory fee structure is appropriate was based on, among other
things, a detailed review of Janus Capital's fee structure compared with other
portfolios managed by Janus and the resulting expense ratio in relation to
fees and expense ratios of other similarly managed investment alternatives.
Accordingly, the Board of Trustees unanimously voted to approve the
proposed amendment to the Sub-Advisory Agreement and to recommend that
Shareholders vote FOR such amendment.
Section 15(a) of the 1940 Act prohibits any person from serving as an
investment adviser to a registered investment company except pursuant to a
written contract that has been approved by a vote of a majority of the
outstanding voting securities of such registered investment company.
Accordingly, the proposed amendment to the Sub-Advisory Agreement is being
submitted to Shareholders to vote on its approval.
If approved by Shareholders, the Proposed Amended Sub-Advisory Agreement
will take effect on January 7, 1997. If the proposed amendment is not approved,
the Existing Sub-Advisory Agreement dated July 1, 1996 (and the current
sub-advisory fee) will remain in effect.
As required by the Investment Company Act of 1940, as amended, the
Sub-Advisory Agreement will continue in effect for a period of more than two
years from the date of its execution only so long as its continuance is
specifically approved at least annually (i) by a vote of a majority of the Board
of Trustees, or (ii) by a vote of a majority of the outstanding voting
securities of the Trust. In addition, and in either event, the terms of the
Sub-Advisory Agreement must be approved annually by a vote of a majority of the
Board of Trustees who are not parties to, or interested persons of any party to,
the Sub-Advisory Agreement, cast in person at a meeting called for the purpose
of voting on such approval and at which the Board of Trustees is furnished such
information as may be reasonably necessary to evaluate the terms of the
Sub-Advisory Agreement. The Sub-Advisory Agreement further provides that it will
terminate automatically upon assignment; may be amended only with prior approval
of a majority of the outstanding voting securities of the Trust; may be
terminated without the payment of any penalty at any time upon sixty days'
notice by the Board of Trustees or by a vote of a majority of the outstanding
voting securities of the Trust; and may not be terminated by TAMIC without prior
approval of a new sub-advisory agreement by a vote of a majority of the
outstanding voting securities of the Trust.
THE INVESTMENT ADVISER
TAMIC, One Tower Square, Hartford, Connecticut, serves as investment
adviser to the Trust pursuant to an Investment Advisory Agreement dated July 1,
1996 (the "Advisory Agreement"). The Advisory Agreement was approved by a vote
of Shareholders at a special meeting held on April 23, 1993.
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<PAGE> 9
Under the terms of the Advisory Agreement, TAMIC is paid an amount
equivalent to 0.75% on an annual basis of the value of Trust's assets. The
advisory fees paid by the Trust for the fiscal year ended December 31, 1995,
were $752,372.
TAMIC is a registered investment adviser which has provided investment
advisory services since its incorporation in 1978. TAMIC currently manages
assets of over $4.6 billion. TAMIC is an indirect wholly owned subsidiary of The
Travelers Insurance Company. (One Tower Square, Hartford, Connecticut), which is
indirectly owned, through a wholly owned subsidiary, by Travelers Group Inc.
(388 Greenwich Street, New York, New York). As of December 31, 1995, no person
or entity was known to be a beneficial owner of 10% or more of the voting
securities of Travelers Group Inc.
The principal executive officers and directors of TAMIC are set forth in
the following table along with their addresses and principal occupations, as
well as their respective positions with registered investment companies for
which TAMIC currently acts as investment adviser.
<TABLE>
<CAPTION>
POSITION WITH
NAME AND ADDRESS OF TRAVELERS
PRINCIPAL EXECUTIVE ASSET MANAGEMENT POSITION WITH
OFFICER AND INTERNATIONAL OTHER INVESTMENT PRINCIPAL
DIRECTORS(1) CORPORATION COMPANIES(2) OCCUPATION
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Marc P. Weill Director and Chairman Senior Vice President
Chief Investment
Officer
Travelers Insurance
David A. Tyson Director and Chief Senior Vice President
Investment Officer Travelers Insurance
F. Denney Voss Director Senior Vice President
Travelers Insurance
Joseph P. Rueli Director and Chief Vice President
Financial Officer Travelers Insurance
John R. Britt Director and Assistant Secretary
Corporate Secretary Travelers Insurance
</TABLE>
- ---------------
(1) The address for all of the named persons is The Travelers Insurance Company,
One Tower Square, Hartford, Connecticut.
(2) Investment companies currently managed by TAMIC: The Quality Bond Account
for Variable Annuities; The Travelers Money Market Account for Variable
Annuities; The Travelers Timed Bond Account for Variable Annuities; Cash
Income Trust; High Yield Bond Trust; Managed Assets Trust and the U.S.
Government Securities Portfolio and three separate series of the Zero Coupon
Bond Fund Portfolio (Series 1998, 2000 and 2005), MFS Emerging Growth
Portfolio, Lazard International Stock Portfolio, Federated High Yield
Portfolio, Federated Stock Portfolio, Large Cap Portfolio, Equity Income
Portfolio and the Travelers Quality Bond Portfolio of The Travelers Series
Trust.
- --------------------------------------------------------------------------------
Investment advice and decisions for each of TAMIC's clients are made in
accordance with their investment objectives and policies. Securities considered
for investment by the Trust are also usually considered appropriate for
investment by other clients served by TAMIC. When the same
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<PAGE> 10
investment advice or decision is made for more than one client at or about the
same time and purchases or sales are made pursuant thereto, transactions in such
securities are generally allocated daily among the clients pro rata in relation
to the size of the order, using the daily average price. It is recognized that
in some cases this practice could have a detrimental effect on the price or
volume of securities being bought or sold by the Trust, while in other cases it
may produce better executions or lower brokerage rates.
THE SUB-ADVISER
Janus Capital Corporation, 100 Fillmore Street, Denver, Colorado 80206 is a
registered investment adviser which has provided advisory services since its
incorporation in 1969. Janus currently manages assets of over $40 billion.
The principal executive officer and directors of Janus are set forth in the
following table along with their address and principal occupations. As of
November 1, 1996, Kansas City Southern Industries, Inc. 114 West 11th Street,
Kansas, Missouri 64105, owns approximately 83% of the outstanding voting stock
of Janus Capital, and Thomas H. Bailey, founder and President, owns
approximately 12% of the outstanding voting stock of Janus Capital.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
PRINCIPAL EXECUTIVE POSITION WITH JANUS PRINCIPAL
OFFICER AND DIRECTORS CAPITAL CORPORATION OCCUPATION
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Thomas H. Bailey President, Chairman and President of Janus Capital
100 Fillmore Street Director; Chief Executive Corporation; Janus Investment
Denver, Colorado Officer Fund and Janus Aspen Series
James P. Craig III Director, Vice President and Vice President and Chief
100 Fillmore Street Chief Investment Officer Investment Officer of Janus
Denver, Colorado Capital Corporation;
Executive Vice President of
Janus Investment Fund and
Janus Aspen Series
Michael E. Herman Director Chairman, Finance Committee
4900 Oak Ewing Marion Kauffman
Kansas City, Missouri Foundation
President of Kansas City
Royals Baseball Team
Kansas City, Missouri
Thomas A. McDonnell Director President, CEO Treasurer and
1055 Broadway Director
Kansas City, Missouri DST Systems Inc.
Executive Vice President and
Director Kansas City
Southern Industries, Inc.
Kansas City, Missouri
Michael Stolper Director President
525 "B" Street, Suite 1080 Stolper & Co., Inc.
San Diego, California President of Seaport
Venture, Inc.
San Diego, California
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
PRINCIPAL EXECUTIVE POSITION WITH JANUS PRINCIPAL
OFFICER AND DIRECTORS CAPITAL CORPORATION OCCUPATION
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Landon H. Rowland Director President and CEO
114 W. 11th St. Kansas City Southern
Kansas City, Missouri Industries
Kansas City, Missouri
</TABLE>
- --------------------------------------------------------------------------------
Janus Capital also acts as investment adviser or sub-adviser to other
investment companies, and provides investment advice to individual, corporate,
charitable and retirement accounts. The advisory fees paid to Janus Capital by
other investment companies (or series of investment companies) with investment
objectives that are similar to the Trust, as well as their respective net assets
at October 24, 1996, are as follows:
The following table provides information on investment companies advised or
sub-advised by Janus Capital Corporation with an investment objective similar to
that of Traveler's Capital Appreciation Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF INVESTMENT COMPANY NET ASSETS ON OCTOBER 24, 1996 ADVISORY OR SUB-ADVISORY FEE RATE*
- ---------------------------------------------------------------------------------------------------------------
Janus Investment Fund $438,445,000 1.00% of first $30 million
-- Janus Olympus Fund .75% of next $270 million
.70% of next $200 million
.65% on assets over $500 million
- ---------------------------------------------------------------------------------------------------------------
Janus Investment Fund $3,953,636,000 1.00% of first $30 million
-- Janus Twenty Fund .75% of next $270 million
.70% of next $200 million
.65% on assets over $500 million
- ---------------------------------------------------------------------------------------------------------------
American Skandia Trust $773,013,000 .60% of first $100 million
-- Jancap Growth Portfolio .55% of next $900 million(1)
.50% on assets over $1 billion
- ---------------------------------------------------------------------------------------------------------------
WRL Series Fund $1,481,494,000 0.40%
-- Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------
IDEX II Series Fund $1,151,983,000 50% of fees received by Adviser
-- IDEX Growth Portfolio less 50% of fee waiver or
reimbursement(2)
</TABLE>
* Monthly compensation at the annual rate of the average daily net assets of the
respective portfolio.
- ---------------
(1)Janus Capital has voluntarily agreed to waive a portion of its fee equal to
.10% of the Portfolio's average daily net assets over $500 million but not in
excess of $1 billion, and .05% of the portion of the Portfolio's average
daily net assets over $1 billion.
(2)Advisers's fee is 1.00% of first $750 million, .90% of next $250 million, and
.85% on assets over $1 billion.
Investment advice and decisions of Janus Capital's clients are made in
accordance with their investment objectives and policies. Securities considered
for investment by the Trust are also usually considered appropriate for
investment by other clients served by Janus Capital. When the same investment
advice or decision is made for more than one client at or about the same time,
and purchases or sales are made pursuant thereto, transactions in such
securities are generally
8
<PAGE> 12
allocated daily among the clients pro rata in relation to the size of the order,
using the daily average price. It is recognized that in some cases this practice
could have a detrimental effect on the price or volume of securities being
bought or sold by the Trust, while in other cases it may produce better
executions or lower brokerage rates.
2. OTHER BUSINESS
The Board of Trustees knows of no other business to be presented at the
meeting. The proxy card gives the persons named in the proxy the discretion to
vote according to their best judgment if any other business properly comes
before the meeting.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
The Trust does not have annual or any other regularly scheduled meetings of
Shareholders, and currently has no plans to hold another meeting of Shareholders
of the Trust. All Shareholders proposals to be included in the Proxy statement
for the next meeting must be received by the Trust's Secretary at One Tower
Square, Hartford, Connecticut 06183 within a reasonable time before the
solicitation is made.
It is suggested that beneficial Shareholders submit their proposals by
Certified Mail -- Return Receipt Requested. The Securities and Exchange
Commission has adopted certain requirements which apply to any proposals of
Shareholders.
9
<PAGE> 13
EXHIBIT A
FORM OF
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 7, 1997 by and between Travelers Asset Management International
Corporation, a New York general business corporation ("TAMIC"), and Janus
Capital Corporation, a Colorado corporation ("Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Capital Appreciation Fund, a Massachusetts
business trust (the "Trust"), pursuant to which TAMIC provides investment
management and advisory services to the Trust;
WHEREAS, the Investment Advisory Agreement provides that TAMIC may engage a
sub-adviser to furnish investment information and advice to assist TAMIC in
carrying out its responsibilities under the Investment Advisory Agreement;
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment advisory
services to TAMIC in the manner and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. Sub-Adviser Services.
(a) Sub-Adviser shall, subject to the supervision of TAMIC and the Board of
Trustees of the Trust (the "Board"), manage the investment and
reinvestment of the assets of the Trust. Subject to the investment
objectives, policies and restrictions set forth in the Trust's
Declaration of Trust and in its registration statement under the
Securities Act of 1933 and the Investment Company Act of 1940, and to
the statement of investment guidelines to be agreed upon from time to
time between TAMIC and Sub-Adviser, and subject further to the
requirements under the Internal Revenue Code of 1986, as amended (the
"Code") described in Section 1(b) below, Sub-Adviser is authorized, in
its discretion and without prior consultation with TAMIC, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Trust, and the majority or the
whole of the Trust's assets may be invested in such proportions of
stocks, bonds, other securities or investment instruments, or cash as
Sub-Adviser shall determine. Sub-Adviser shall furnish TAMIC quarterly
and annual reports concerning transactions and performance of the
Trust.
(b) Sub-Adviser shall manage the investment and reinvestment of the assets
of the Trust in compliance with the diversification requirements of
Sections 817(h) and 851(b)(4) of the Code, and with the annual gross
income qualification requirements of Sections 851(b)(2) and 851(b)(3)
of the Code.
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<PAGE> 14
2. Obligations of TAMIC.
(a) TAMIC shall provide timely information to Sub-Adviser regarding such
matters as the composition of assets in the Trust, cash requirements
and cash available for investment in the Trust, and all other
information as may be reasonably necessary for Sub-Adviser to perform
its responsibilities hereunder.
(b) TAMIC shall furnish Sub-Adviser a copy of the Trust's registration
statement currently in effect and agrees during the continuance of this
Agreement to furnish Sub-Adviser copies of any amendments or
supplements thereto before or at the time the amendments or supplements
become effective. TAMIC shall also furnish Sub-Adviser with minutes of
meetings of the Board to the extent they may affect the duties of
Sub-Adviser, a certified copy of any financial statements or reports
prepared for the Trust by certified or independent public accountants,
and with copies of any financial statements or reports made by the
Trust to its shareholders or to any governmental body or securities
exchange, and any further materials or information which Sub-Adviser
may reasonably request to enable it to perform its functions under this
Agreement.
3. Custodian. TAMIC shall provide Sub-Adviser with a copy of the Trust's
agreement with the Custodian (the "Custodian") designated to hold the
Trust's assets and any modification thereto (the "Custody Agreement") in
advance. The Trust's assets shall be maintained in the custody of the
Custodian identified in, and in accordance with the terms and conditions
of, the Custody Agreement. Sub-Adviser shall have no liability for the acts
or omissions of the Custodian. Any assets added to the Trust shall be
delivered to the Custodian in accordance with the Custody Agreement.
4. Proprietary Rights. TAMIC agrees and acknowledges that Sub-Adviser is the
sole owner of the name and mark "Janus" and that all use of any designation
comprised in whole or part of Janus (a "Janus Mark") under this Agreement
shall inure to the benefit of Sub-Adviser. The use by TAMIC on its own
behalf or on behalf of the Trust of any Janus Mark in any advertisement or
sales literature or other materials promoting the Trust shall be with the
prior written consent of Sub-Adviser. TAMIC shall not, and TAMIC shall use
its best efforts to cause the Trust not to, without the prior written
consent of Sub-Adviser, make representations regarding Sub-Adviser in any
disclosure document, advertisement or sales literature or other materials
promoting the Trust. Upon termination of this Agreement for any reason,
TAMIC shall cease, and TAMIC shall use its best efforts to cause the Trust
to cease, all use of any Janus Mark(s) as soon as reasonably practicable.
5. Expenses. The Trust shall pay all, and Sub-Adviser shall not be obligated
to pay any, of the Trust's organizational, operational and business
expenses pursuant hereto, including, without limitation: (a) interest and
taxes; (b) brokerage fees and commissions and other costs in connection
with the purchase or sale of securities or other investment instruments
with respect to the Trust; and (c) transfer agent, dividend disbursing
agent, and custodian fees and expenses. Any reimbursement of advisory fees
required by any expense limitation provision shall be the sole
responsibility of The Travelers Insurance Company, and shall not be the
11
<PAGE> 15
responsibility of Sub-Adviser. Sub-Adviser shall pay its own expenses for
the services to be provided pursuant to this Agreement.
6. Purchase and Sale of Assets. Absent instructions from TAMIC to the
contrary, Sub-Adviser shall place all orders for the purchase and sale of
securities for the Trust with brokers or dealers selected by Sub-Adviser
which may include brokers or dealers affiliated with Sub-Adviser. Purchase
or sell orders for the Trust may be aggregated with contemporaneous
purchase or sell orders of other clients of Sub-Adviser, provided that any
such purchase or sell orders executed contemporaneously shall be allocated
in a manner that Sub-Adviser reasonably deems to be equitable to all
accounts involved. Sub-Adviser shall use its best efforts to insure that
the Trust shall not be disadvantaged by Sub-Adviser buying or selling a
security for another client before buying or selling such security for the
Trust. Sub-Adviser shall use its best efforts to obtain execution of Trust
transactions at prices which are advantageous to the Trust and at
commission rates that are reasonable in relation to the benefits received.
However, Sub-Adviser may select brokers or dealers on the basis that they
provide brokerage, research, or other services or products to the Trust
and/or other accounts serviced by Sub-Adviser. Sub-Adviser may pay a broker
or dealer an amount of commission for effecting a securities transaction in
excess of the amount of commission or dealer spread another broker or
dealer would have charged for effecting that transaction if Sub-Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research products and/or
services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in
terms of either that particular transaction or the overall responsibilities
which Sub-Adviser and its affiliates have with respect to the Trust and to
accounts over which they exercise investment discretion, and not all such
services or products may be used by Sub-Adviser in managing the Trust.
7. Compensation of Sub-Adviser. TAMIC shall pay to Sub-Adviser a fee
equivalent on an annual basis to the following:
<TABLE>
<CAPTION>
ANNUAL AGGREGATE NET ASSET
SUB-ADVISORY FEE VALUE OF THE ACCOUNT
- ---------------- --------------------
<C> <S> <C>
0.55% of the first $100,000,000, plus
0.50% of the next $400,000,000, plus
0.45% of the amount over $500,000,000
</TABLE>
The advisory fees will be deducted on each valuation date, and will be paid
monthly.
8. Non-Exclusivity. TAMIC agrees that the services of Sub-Adviser are not to
be deemed exclusive and that Sub-Adviser and its affiliates are free to act
as investment manager and provide other services to various investment
companies and managed accounts. This Agreement shall not in any way limit
or restrict Sub-Adviser or any of its directors, officers, employees, or
agents from buying, selling or trading any securities or other investment
instruments for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by Sub-Adviser of its
duties and obligations under this Agreement. TAMIC recognizes and agrees
that Sub-Adviser may provide advice to or take action with respect to other
clients,
12
<PAGE> 16
which advice or action, including the timing and nature of such action, may
differ from or be identical to advice given or action taken with respect to
the Trust.
9. Liability. Except as may otherwise be provided by the Investment Company
Act of 1940 or federal securities laws, neither Sub-Adviser nor any of its
officers, directors, employees or agents shall be subject to any liability
to TAMIC, the Trust or any shareholder of the Trust for any error of
judgment, mistake of law, or any loss arising out of any investment or
other act or omission in the course of, connected with, or arising out of
any services to be rendered under this Agreement, except by reason of
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 this Agreement. TAMIC shall hold harmless and indemnify Sub-Adviser
for any loss, liability, cost, damage or expense (including reasonable
attorneys fees and costs) arising from any claim or demand by the Trust or
any past or present shareholder of the Trust that is not based upon the
Sub-Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or the reckless disregard of its obligations and
duties under this Agreement. TAMIC acknowledges and agrees that Sub-Adviser
makes no representation or warranty, express or implied, that any level of
performance or investment results will be achieved by the Trust or that the
Trust will perform comparably with any standard or index, including other
clients of Sub-Adviser, whether public or private.
10. Termination. If approved by a vote of a majority of the outstanding voting
securities of the Trust (as defined in the Investment Company Act of 1940),
this Agreement shall become effective on January 7, 1997, and:
(a) shall be subject to termination, without the payment of any penalty,
upon sixty days' written notice, by (i) TAMIC or Sub-Adviser, (ii) the
Board, or (iii) by a vote of a majority of the outstanding voting
securities of the Trust;
(b) shall not be amended without prior approval of the Board, a majority of
the outstanding voting securities of the Trust, and Sub-Adviser;
(c) shall automatically terminate upon assignment by either party; and
(d) shall continue in effect for so long as such continuance is
specifically approved (i) at least annually by the vote of a majority
of the Board who are not parties to such agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval and at which the Board has been
furnished such information as may be reasonably necessary to evaluate
the terms of said agreement; or (ii) by a vote of a majority of the
outstanding voting securities of the Trust.
11. General.
(a) Sub-Adviser may perform its services through any employee, officer, or
agent of Sub-Adviser, and TAMIC shall not be entitled to the advice,
recommendation or judgment of any specific person.
(b) If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable
to any extent, the remainder of this
13
<PAGE> 17
Agreement or the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
(c) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Colorado, exclusive of conflicts of laws.
(d) Sub-Adviser agrees that it shall furnish to the California Commissioner
of Insurance any information or reports concerning the Trust as the
Commissioner, in the performance of his or her duties, may reasonably
request.
(e) Sub-Adviser acknowledges that all books and records which it maintains
for the Trust in performing its duties under this Agreement are the
property of the Trust and subject to its control; provided, however,
that during the term of this Agreement the Trust shall not exercise
such control so as to interfere with the performance of Sub-Adviser's
duties hereunder.
(f) This Agreement is subject to the provisions of the Investment Company
Act of 1940, as amended, and the rules and regulations promulgated
thereunder
IN WITNESS WHEREOF, the parties hereto have caused this Sub-Advisory
Agreement to be signed by their respective officials thereunto duly authorized
as of the day and year first above written.
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION
By:
-------------------------------------
Name: David A. Tyson
Title: President
Attest:
- --------------------------------
Title: Corporate Secretary
JANUS CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
Attest:
- --------------------------------
Title:
14
<PAGE> 18
CAPITAL APPRECIATION FUND
PROXY STATEMENT
VG-176 1996
203
<PAGE> 19
CAPITAL APPRECIATION FUND
Proxy for the Special Meeting of Shareholders to be held on January 6, 1997
The undersigned, revoking all proxies heretofore given, hereby appoints Heath
B. McLendon, Robert E. McGill, III, or either one of them, as Proxies, with
full power of substitution, to vote on behalf of the undersigned all shares of
Capital Appreciation Fund which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held at 9:00 a.m. on Monday, January 6,
1997 at One Tower Square, Hartford, Connecticut, and at any adjournment
thereof, in the manner directed below with respect to the matter described in
the Proxy Statement for the Special Meeting, receipt of which is hereby
acknowledged, and in their discretion, upon such other matters as may properly
come before the Special Meeting or any adjournment thereof.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW, AS SHOWN,
USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
1. Approval of the proposal to amend the Sub-Advisory Agreement
between Travelers Asset Management International Corporation
and Janus Capital Corporation effective January 7, 1997. ______ ______ ______
</TABLE>
In their discretion, the Proxies are authorized to vote on any and all other
business as may properly come before the meeting.
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF CARD
203
_______________________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE UNITS
REPRESENTED HEREBY WILL BE VOTED BY THE PROXIES IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS
BELOW.
DATE: __________________________, 1996.
If signing in a representative capacity
(as attorney, executor or
administrator, trustee, guardian or
custodian, corporate officer or general
partner), please indicate such capacity
following signature. Proxies for
custodian accounts must be signed by
the named custodian, not by the minor.
_______________________________________
Signature(s) if held jointly (Titles),
if required)
