<PAGE> 1
File No. 33-10145
As filed with the Securities and Exchange Commission
on April 30, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment NO. 11 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 11 [ X ]
(Check appropriate box or boxes)
GENERAL AMERICAN CAPITAL COMPANY
(Exact Name of Registrant as specified in Charter)
700 Market Street
St. Louis, MO 63101
(Address of principal executive offices)
Registrant's telephone number,
including Area Code: (314) 444-0647
Matthew P. McCauley
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
(Name and address of agent for service)
Approximate Date of Proposed Public offering: 30 April 1996
It is proposed that this filing will become effective (check appropriate
box)
[ X ] immediately upon filing pursuant to paragraph (b)
[ ] on ( ) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on ( ) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on ( ) pursuant to paragraph (a)(2) of Rule 485
under the Securities Act of 1933.
<PAGE> 2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number of shares of capital stock.
The Registrant filed the 24f-2 notice for the fiscal year ended 31 December
1995 on 23 February 1996.
Please send copies of all correspondence to:
Stephen R. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
<PAGE> 3
GENERAL AMERICAN CAPITAL COMPANY
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A Item No. Location
PART A
<S> <C> <C>
Item 1 Cover Page Cover Page
Item 2 Table of Fees and Expenses Table of Fees
and Expenses
Item 3 Condensed Financial Information Condensed
Financial Information
Item 4 General Description of Registrant Investment
Funds; Investment Objectives
and Policies
Item 5 Management of the Fund Management of
the Company
Item 6 Capital Stock and Other Securities Capital Stock
Item 7 Purchase of Securities being Offered Offering and
Redemption of Shares
Item 8 Redemption or Repurchase Offering and
Redemption of Shares
Item 9 Pending Legal Proceedings Pending Legal
Proceedings
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of
Contents
Item 12 General Information and History Business
History
Item 13 Investment Objectives and Policies Investment
Restrictions:
Description of
Certain Investments
Item 14 Management of the Fund Investment
Advisory and Other Services;
Management of the Company
i
<PAGE> 4
Item 15 Control Persons and Principal
Holders of Securities Capital Stock
Item 16 Investment Advisory and Other
Services Investment
Advisory and Other Services
Item 17 Brokerage Allocation Portfolio
Transactions and Brokerage
Allocations
Item 18 Capital Stock and Other Securities Capital Stock
Item 19 Purchase, Redemption, and Pricing
of Securities Being Offered Offering and
Redemption of Shares;
Determination of Net Asset Value
Item 20 Tax Status Taxes
Item 21 Underwriters Offering and
Redemption of Shares
Item 22 Calculations of Yield Quotations
of Money Market Funds Money Market
Yield Information
Item 23 Financial Statements Not Applicable
PART C
An index to Part C is set forth on page C-1 of this Registration Statement.
</TABLE>
ii
<PAGE> 5
GENERAL AMERICAN CAPITAL COMPANY
Prospectus Version A - Variable Life
<PAGE> 6
GENERAL AMERICAN CAPITAL COMPANY
700 Market Street, St. Louis, MO 63101
(314) 231-1700
General American Capital Company ("Capital Company") is an open-end
diversified management investment company which was incorporated in Maryland
on November 15, 1985, and commenced operations on October 1, 1987. Capital
Company offers variable universal life purchasers seven separate Funds which
operate as distinct investment vehicles. The names and investment objectives
of the Funds are as follows:
S & P 500 Index Fund (formerly known as the Equity Index
Fund): The investment objective of this Fund is to provide
investment results that parallel the price and yield performance
of publicly traded common stocks in the aggregate. The Fund uses
the Standard and Poor's 500 Stock Price Index<F*> as its standard
for performance comparison. The Fund attempts to duplicate the
performance of the Index and includes dividend income as the
other component of the Fund's total return.
Money Market Fund: The investment objective of this Fund
is the highest level of current income which is consistent with
the preservation of capital and maintenance of liquidity. This
fund invests primarily in high-quality, short-term money market
instruments. An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government.
Bond Index Fund: The investment objective of this Fund is
to provide a rate of return that reflects the performance of the
publicly-traded bond market as a whole. The Fund uses the Lehman
Brothers Government/Corporate Bond Index as its standard for
performance comparison.
Managed Equity Fund: The investment objective of this Fund
is long-term growth of capital, obtained by investing primarily
in common stocks. Securing moderate current income is a
secondary objective.
Asset Allocation Fund: The investment objective of this
Fund is a high rate of long-term total return composed of
capital growth and income payments. Preservation of capital is
the secondary objective and chief limit on investment risk. The
Fund will invest only in those types of securities that the
other Funds may invest in. The Asset Allocation Fund invests in
a combination of common stocks, bonds, or money market
instruments, in accordance with guidelines established from time
to time by Capital Company's Board of Directors.
International Equity Fund: The investment objective of
this Fund is to provide long-term capital appreciation through
investment primarily in equity securities of issuers in
countries included in the Morgan Stanley Capital International
Europe, Australia, and Far East Index.
Special Equity Fund: The investment objective of this Fund
is capital appreciation, obtained primarily through investment
in common stocks of smaller companies, and securities of such
companies that are convertible into common stocks.
There can be no assurance that the investment objectives of these
Funds will be achieved.
1
<PAGE> 7
This Prospectus sets forth basic information about Capital Company and
its Funds, and information that a prospective investor ought to know before
investing.
A Statement of Additional Information for Capital Company has been
filed with the Securities and Exchange Commission and is incorporated herein
by reference. This Statement is available upon request and without charge
from Capital Company at the address or telephone number above. Other
inquiries about Capital Company should be directed to the company at the
same address or telephone number.
This Prospectus should be read and retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is April 30, 1996.
The Date of The Statement of Additional Information is April 30, 1996.
[FN]
- -------
<F*> "Standard and Poor's" and "Standard and Poor's 500" are trademarks
of the Standard and Poor's Corporation and have been licensed for use by
General American Capital Company. The S & P 500 Index Fund is not
sponsored, sold, or promoted by Standard and Poor's and Standard and
Poor's makes no representation regarding the advisability of investing in
the Fund.
2
<PAGE> 8
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Table of Fees and Expenses 4
Financial Highlights 6
Investment Funds 12
Investment Objectives And Policies 12
The S & P 500 Index Fund
Investment Objective 13
Investment Policies 13
Risk Factors 13
The Money Market Fund
Investment Objective 13
Investment Policies 14
Risk Factors 14
The Bond Index Fund
Investment Objective 14
Investment Policies 15
Risk Factors 15
The Managed Equity Fund
Investment Objective 15
Investment Policies 15
Risk Factors 16
The Asset Allocation Fund
Investment Objective 16
Investment Policies 16
Risk Factors 16
The International Equity Fund
Investment Objective 16
Investment Policies 16
Risk Factors 17
The Special Equity Fund
Investment Objective 17
Investment Policies 17
Risk Factors 18
Investment Restrictions 18
Portfolio Turnover 18
Management of the Company 18
Capital Stock 21
Taxes and Dividends 21
Offering and Redemption of Shares 22
Pending Legal Proceedings 22
Policyholder Inquiries 22
Appendix A-1
</TABLE>
3
<PAGE> 9
TABLE OF FEES AND EXPENSES
Shareholder Transaction Expenses
General American Capital Company makes no charge at the time of sale,
when dividends are reinvested, or upon a redemption or exchange, whether
partial or whole.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
<S> <C>
(as a percentage of average net assets)
Investment Advisory Fees
S & P 500 Index Fund .25 %
Money Market Fund .125%
Bond Index Fund .25 %
Managed Equity Fund .50 %<F*>
Asset Allocation Fund .50 %
International Equity Fund .70 %<F*>
Special Equity Fund .55 %<F*>
Administration Fees
S & P 500 Index Fund .05 %
Money Market Fund .08 %
Bond Index Fund .05 %
Managed Equity Fund .10 %
Asset Allocation Fund .10 %
International Equity Fund .30 %
Special Equity Fund .10 %
Total Fund Operating Expenses
S & P 500 Index Fund .30 %
Money Market Fund .205%
Bond Index Fund .30 %
Managed Equity Fund .60 %
Asset Allocation Fund .60 %
International Equity Fund 1.00 %
Special Equity Fund .65 %
<FN>
- ----------
<F*>Investment Advisory Fees applicable to the Managed Equity Fund, the
International Equity Fund, and the Special Equity Fund decline ratably on
the average daily net assets in excess of $10 million (see pages 19-20).
</TABLE>
Money enters the Funds through separate accounts (see page 12) which
may levy additional fees. The insurance or annuity contract giving access to
the separate account, together with a separate account Prospectus if there
is one, should be consulted for information on such fees.
4
<PAGE> 10
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 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>
S & P 500 Index Fund $ 3.08 $ 9.66 $16.89 $ 38.13
Money Market Fund $ 2.10 $ 6.61 $11.56 $ 26.17
Bond Index Fund $ 3.08 $ 9.66 $16.89 $ 38.13
Managed Equity Fund $ 5.13 $16.08 $28.03 $ 62.94
Asset Allocation Fund $ 6.15 $19.27 $33.57 $ 75.17
International Equity Fund $10.25 $31.99 $55.49 $122.92
Special Equity Fund $ 6.66 $20.87 $36.33 $ 81.24
</TABLE>
Because there is no redemption fee, you would pay the same amounts if
you did not redeem at the end of the time period specified.
This example should not be considered a representation of past or
future expenses. Actual expenses may differ from those in the example.
5
<PAGE> 11
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
S & P 500 INDEX FUND<F*>
------------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
-------- -------- -------- -------- -------- ------- ------- ------- -------
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35 $ 11.80 $ 9.09 $ 7.80 $ 10.00
Income from operations:
Net investment income 0.46 0.44 0.41 0.39 0.38 0.38 0.37 0.36 0.06
Net realized and unrealized gain (loss)
on investments 6.04 (0.24) 1.15 0.71 3.05 (0.83) 2.34 0.93 (2.26)
-------- -------- -------- -------- -------- ------- ------- ------- ------
Net increase in asset value per share 6.50 0.20 1.56 1.10 3.43 (0.45) 2.71 1.29 (2.20)
-------- -------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of period $ 24.14 $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35 $ 11.80 $ 9.09 $ 7.80
======== ======== ======== ======== ======== ======= ======= ======= =======
Total return <F2> 36.85% 1.15% 9.83% 7.45% 30.21% -3.82% 29.76% 16.65% -22.05%
Net assets, end of year (in thousands) $247,313 $169,303 $161,761 $123,458 $102,076 $72,665 $65,211 $28,917 $23,060
Ratio of expenses to average net
assets <F3> 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.32% 0.30% 0.29%
Ratio of net investment income to
average net assets <F3> 2.19% 2.50% 2.47% 2.67% 2.89% 3.35% 3.57% 4.15% 3.40%
Portfolio turnover rate 4.75% 7.38% 2.56% 4.38% 3.92% 4.39% 20.56% 8.41% 2.63%
Average commission rate <F4> $ 0.02 $ 0.02 $ 0.03 $ 0.03 $ 0.03
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in the Financial Highlights table
does not reflect expenses that apply to the separate accounts investing in
the Fund or to the related separate variable universal life contracts.
Inclusion of these charges would reduce the total return figures for all
periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
<F*>This Fund formerly known as the Equity Index Fund.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
6
<PAGE> 12
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
MONEY MARKET FUND
------------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
-------- -------- -------- -------- -------- ------- ------- ------- -------
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04 $ 12.03 $ 10.98 $ 10.18 $ 10.00
Income from operations:
Net investment income 0.92 0.62 0.44 0.51 0.81 1.01 1.05 0.80 0.18
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 16.34 $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04 $ 12.03 $ 10.98 $ 10.18
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F2> 5.96% 4.21% 3.07% 3.71% 6.19% 8.43% 9.56% 7.76% 1.86%
Net assets, end of year (in thousands) $70,574 $93,339 $84,430 $84,880 $84,090 $85,901 $53,648 $52,323 $56,442
Ratio of expenses to average net
assets <F3> 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income to average
net assets <F3> 5.78% 4.17% 3.06% 3.68% 6.10% 8.17% 9.26% 7.46% 7.31%
Portfolio turnover rate <F4> <F3>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in the Financial Highlights table
does not reflect expenses that apply to the separate accounts investing in
the Fund or to the related separate variable universal life contracts.
Inclusion of these charges would reduce the total return figures for all
periods shown.
<F3> Computed on an annualized basis.
<F4> A portfolio turnover rate is not calculated for securities on which the
maturity or expiration dates at the time of acquisition were one year or less.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
7
<PAGE> 13
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
BOND INDEX FUND<F1>
------------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
-------- -------- -------- -------- -------- ------- ------- ------- -------
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F2> $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44 $ 12.32 $ 11.17 $ 10.46 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income 1.25 1.06 1.07 1.09 1.08 1.03 0.98 0.90 0.22
Net realized and unrealized gain
(loss) on investments 2.04 (1.79) 0.63 (0.08) 0.80 0.09 0.17 (0.19) 0.24
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in asset value per share 3.29 (0.73) 1.70 1.01 1.88 1.12 1.15 0.71 0.46
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 20.59 $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44 $ 12.32 $ 11.17 $ 10.46
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F3> 19.02% -4.04% 10.39% 6.57% 14.00% 9.09% 10.32% 6.78% 4.60%
Net assets, end of year (in thousands) $39,316 $26,458 $47,636 $20,217 $14,438 $11,137 $ 9,545 $ 6,571 $ 7,179
Ratio of expenses to average net
assets <F4> 0.30% 0.30% 0.30% 0.39% 0.42% 0.42% 0.43% 0.43% 0.43%
Ratio of net investment income to average
net assets <F4> 6.43% 6.19% 6.11% 6.89% 7.63% 8.12% 8.24% 8.25% 9.11%
Portfolio turnover rate 35.35% 46.42% 8.80% 43.50% 2.23% 18.88% 28.57% 71.30% 11.44%
<FN>
Notes:
<F1> Name and investment objective changed from Intermediate Bond Fund on
October 1, 1992. The investment advisor charges changed from .250 percent
to .375 percent of the average daily value of the net assets on October 1,
1992. The objective of the Bond Index Fund is to provide a rate of return
that reflects the performance of the market in publicly traded bonds as a whole.
<F2> Components are computed and accumulated on a daily basis.
<F3> The total return information shown in the Financial Highlights table
does not reflect expenses that apply to the separate accounts investing in
the Fund or to the related separate variable universal life contracts.
Inclusion of these charges would reduce the total return figures for all
periods shown.
<F4> Computed on an annualized basis.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
8
<PAGE> 14
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
MANAGED EQUITY FUND
------------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
-------- -------- -------- -------- -------- ------- ------- ------- -------
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 15.69 $ 16.27 $ 14.95 $ 14.02 $ 11.10 $ 11.45 $ 8.73 $ 7.82 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income 0.58 0.43 0.32 0.35 0.38 0.38 0.26 0.28 0.06
Net realized and unrealized gain
(loss) on investments 4.66 (1.01) 1.00 0.58 2.54 (0.73) 2.46 0.63 (2.24)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in asset
value per share 5.24 (0.58) 1.32 0.93 2.92 (0.35) 2.72 0.91 (2.18)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 20.93 $ 15.69 $ 16.27 $ 14.95 $ 14.02 $ 11.10 $ 11.45 $ 8.73 $ 7.82
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F2> 33.37% -3.58% 8.87% 6.66% 26.23% -2.99% 31.07% 11.62% -21.76%
Net assets, end of year (in thousands) $40,902 $31,487 $32,885 $29,401 $22,006 $14,769 $11,785 $ 7,303 $ 78
Ratio of expenses to average net
assets <F3> 0.48% 0.49% 0.50% 0.51% 0.53% 0.57% 0.60% 0.60% 0.60%
Ratio of net investment income to
average net assets <F3> 3.14% 2.65% 2.07% 2.55% 2.99% 3.47% 2.62% 3.24% 2.81%
Portfolio turnover rate 44.82% 103.93% 25.89% 9.34% 12.15% 28.38% 51.26% 15.54% 0.00%
Average commission rate <F4> $ 0.04 $ 0.03 $ 0.04 $ 0.04 $ 0.07
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in the Financial Highlights table
does not reflect expenses that apply to the separate accounts investing in
the Fund or to the related separate variable universal life contracts.
Inclusion of these charges would reduce the total return figures for all
periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
9
<PAGE> 15
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
ASSET ALLOCATION FUND
------------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
-------- -------- -------- -------- -------- ------- ------- ------- -------
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39 $ 13.07 $ 10.90 $ 10.05 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income 0.82 0.68 0.60 0.62 0.65 0.69 0.60 0.57 0.14
Net realized and unrealized gain
(loss) on investments 4.38 (1.42) 1.03 0.45 2.00 (0.37) 1.57 0.28 (0.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in asset
value per share 5.20 (0.74) 1.63 1.07 2.65 0.32 2.17 0.85 0.05
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 23.20 $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39 $ 13.07 $ 10.90 $ 10.05
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return <F2> 28.88% -3.95% 9.55% 6.66% 19.81% 2.47% 19.91% 8.44% 0.47%
Net assets, end of year (in thousands) $73,387 $59,975 $65,070 $53,369 $21,149 $12,545 $ 5,244 $ 1,440 $ 402
Ratio of expenses to average net
assets <F3> 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income to
average net assets <F3> 3.92% 3.70% 3.33% 3.80% 4.37% 5.41% 4.82% 5.04% 5.56%
Portfolio turnover rate 33.74% 75.24% 27.59% 12.14% 5.14% 15.46% 28.06% 13.52% 0.00%
Average commission rate <F4> $ 0.03 $ 0.03 $ 0.04 $ 0.06 $ 0.07
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in the Financial Highlights table
does not reflect expenses that apply to the separate accounts investing in
the Fund or to the related separate variable universal life contracts.
Inclusion of these charges would reduce the total return figures for all
periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without charge.
</TABLE>
10
<PAGE> 16
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
INTERNATIONAL EQUITY FUND SPECIAL EQUITY FUND
------------------------------------- -------------------------------------
February 16 February 16
Year Year (inception) Year Year (inception)
ended ended to ended ended to
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period <F1> $ 13.94 $ 13.10 $ 10.00 $ 11.35 $ 11.44 $ 10.00
-------- -------- ------- ------- -------- -------
Income from operations:
Net investment income 0.25 0.13 0.14 0.05 0.10 0.06
Net realized and unrealized gain
(loss) on investments 0.92<F*> 0.71 2.96 2.34 (0.19) 1.38
-------- -------- ------- ------- -------- -------
Net increase (decrease) in asset
value per share 1.17 0.84 3.10 2.39 (0.09) 1.44
-------- -------- ------- ------- -------- -------
Net asset value, end of period $ 15.11 $ 13.94 $ 13.10 $ 13.74 $ 11.35 $ 11.44
======== ======== ======= ======= ======== =======
Total return <F2> 8.35% 6.42% 31.03% 21.09% -0.83% 14.44%
Net assets, end of period (in thousands) $ 5,460 $ 4,242 $ 3,295 $ 4,260 $ 3,279 $ 1,998
Ratio of expenses to average net assets <F3> 1.00% 1.00% 1.00% 0.65% 0.65% 0.64%
Ratio of net investment income to average
net assets <F3> 1.79% 0.98% 1.38% 0.75% 0.85% 0.64%
Portfolio turnover rate 113.91% 46.19% 26.97% 28.48% 29.48% 22.64%
Average commission rate <F4> $ 0.02 $ 0.03 $ 0.03 $ 0.02 $ 0.02 $ 0.01
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for eleven months ended December 31,
1993. Total return information shown in the Financial Highlights table does
not reflect expenses that apply to the separate accounts investing in the
Fund or to the related separate variable universal life contracts. Inclusion
of these charges would reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
<F*> Also includes net realized and unrealized gain (loss) on foreign currency
conversions.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
11
<PAGE> 17
INVESTMENT FUNDS
General American Capital Company ("Capital Company") offers seven
investment funds. These are: the S & P 500 Index Fund, the Money Market
Fund, the Bond Index Fund, the Managed Equity Fund, the Asset Allocation
Fund, the International Equity Fund, and the Special Equity Fund
(collectively called "the Funds").
Shares of the Funds are currently offered only to separate accounts
established by General American Life Insurance Company ("General American")
and its subsidiaries, pursuant to the insurance laws of Missouri. Most of
these separate accounts accept funds only from employee benefit plans. Some
of the separate accounts are not registered with the Securities and Exchange
Commision ("SEC") because they are not offered to the public at large and
will not have more than 100 owners. General American Separate Accounts Two
and Eleven, however, are registered with the SEC as unit investment trusts
having Prospectuses of their own. General American is a mutual insurance
company incorporated in Missouri.
General American has created General American Separate Account Two for
funding variable annuity contracts and Separate Account Eleven for funding
variable life insurance policies. The owners of such contracts or policies
may allocate purchase or premium payments among the General Account of
General American and Divisions of General American Separate Accounts Two and
Eleven which correspond to the Funds. The Company currently does not foresee
any disadvantages to the holders of variable annuity contracts and variable
life insurance policies arising from the fact that the interests of the
holders of such contracts and policies may differ. Nevertheless, Capital
Company's Board of Directors intends to monitor events in order to identify
any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken in response thereto. Actions
might include requiring one separate account to withdraw from the Funds.
Capital Company sells shares to Separate Account One of RGA
Reinsurance Company, a company affiliated with General American. Capital
Company may in the future sell its shares to other insurance companies with
which General American is affiliated, and to separate accounts of
unaffiliated insurance companies. Capital Company may also add or delete
Funds.
Shares of each Fund are both offered and redeemed at their net asset
value without the addition of any sales load or redemption charge. See
"OFFERING AND REDEMPTION OF SHARES" on page 22.
The investment adviser for Capital Company is General American
Investment Management Company (the "Investment Adviser"), a wholly-owned
subsidiary of General American's wholly-owned subsidiary, General American
Holding Company. The Investment Adviser has engaged Morgan Stanley Asset
Management, Inc. ("Morgan Stanley"), an unaffiliated company, to act as a
sub-adviser for the Managed Equity Fund, and Provident Capital Management,
Inc. ("PCM") to act as a sub-adviser for the International Equity Fund and
the Special Equity Fund. The fees of the sub-advisers are paid by the
Investment Adviser. Neither sub-adviser is affiliated with the Investment
Adviser.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described
below. The investment objective of a Fund, and certain investment
restrictions that are discussed in the Statement of Additional Information,
may be changed only with the approval of the shareholders of each Fund that
is affected by such change. The investment policies used to achieve a Fund's
objectives may be changed by Capital Company's Board of Directors without a
vote of shareholders.
Because investment involves both opportunities for gain and risk of
loss, no assurance can be given that the Funds will achieve their
objectives. Prospective purchasers of insurance contracts participating in
the Funds should carefully review the objectives and policies of the Funds
and consider their ability to assume the risks involved before allocating
amounts to Funds other than the General Account. An investment in any Fund
should be considered as a part of an overall investment program rather than
as a complete investment program.
12
<PAGE> 18
The Funds are subject to certain types of risk, including varying
degrees of market risk, financial risk, and current income volatility.
Market risk refers to the possibility the price of the security will decline
in response to changes in conditions in the securities markets in general
and, with particular reference to 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 when due, 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 dividend payments and the overall level of interest rates
become reflected in the level of current income of the Funds.
THE S & P 500 INDEX FUND
Investment Objective. The objective of this Fund, formerly called the
Equity Index Fund, is to obtain investment results that parallel the price
and yield performance of publicly-traded common stocks in the aggregate. The
Fund uses the Standard and Poor's 500 Common Stock Price Index ("S & P 500"
or "Index") as its standard for performance comparison. The Fund attempts to
duplicate the performance of the S & P 500 and includes dividend income as
another component of the Fund's total return. The Fund is not managed by
Standard and Poor's.
Investment Policies. The portfolio will be composed of a large number
of stock issues drawn from the S & P 500. Issues of bankrupt companies and
companies whose stock would not be eligible for purchase under Missouri
insurance law will not be purchased. The Fund may not invest in all the
stocks in the S & P 500. In attempting to parallel the performance of the
Index, the Fund uses a sector sampling method. Sector sampling calls for the
Investment Adviser to maintain approximately the same mix of industrial
sectors in the Fund that the S & P 500 has, while not necessarily holding
all of the stocks in each S & P 500 industrial sector.
The decision on what stocks in a sector the Fund should buy is
affected by the "minimum position size," or minimum dollar amount which the
Fund will invest in round lots (100 shares or multiples of 100) of a stock.
Thus, if a company's stocks represent 40% of its S & P 500 sector, measured
in terms of capitalization, then the Fund will devote a substantial fraction
of the amount it has to invest in that S & P 500 sector to the stocks of
that company. Such a large holding would not exceed the company's proportion
of the S & P 500 (40% of its sector in this example) but, given the
relatively small size of the Fund and its decision not to buy fewer shares
than the minimum position, it might be that purchases of the stocks of
companies that are relatively less important in their sector will be limited
to amounts necessary to make the Fund's sector similar in relative size to
the weight of the same sector in the S & P 500. That is, smaller company
stocks would be used to round out the holdings in a sector dominated by one
or two large companies.
As the Fund grows, it will be able to buy more of the S & P 500 stocks
and make its industrial sectors more closely approximate the composition of
the Index's sectors, at the same time bringing the Fund more closely into
conformity with the overall composition of the Index. Dividend income will
be reinvested in stocks so as to keep the portfolio composition similar to
the Index. The goal is to have all Fund assets invested in qualified stocks
at all times. Stock index futures contracts may be used for hedging, where
the sums involved are too small to be directly invested in a minimum
position size and in proper relation to the Index.
Risk Factors. The Fund will not seek to out-perform the chosen Index
but to match it, before consideration of Fund expenses, which means that the
Fund will be allowed to decline in asset value when the prices of most
common stocks decline. This high level of market risk is offset by the
relatively low degree of risk that the large companies whose shares are
owned will encounter financial difficulty, and the corresponding protection
against financial risk afforded by the Fund's extensive diversification.
There is no guarantee that the Fund will duplicate the performance of the
Index.
THE MONEY MARKET FUND
Investment Objective. The objective of the Money Market Fund is to
obtain the highest level of current income which is consistent with the
preservation of capital and maintenance of liquidity.
13
<PAGE> 19
Investment Policies. The Fund invests only in: (1) obligations of the
U.S. Government; (2) obligations issued by agencies or instrumentalities of the
United States Government; (3) instruments that are secured or collateralized
by obligations of the United States Government, its agencies, or its
instrumentalities; (4) short-term obligations of United States banks and
savings and loan associations and companies having assets of more than
$1,000,000,000; (5) instruments fully secured or collateralized by such bank
and savings and loan obligations; (6) dollar denominated short-term
obligations of foreign banks, foreign branches of foreign or U.S. banks
(referred to as "Eurodollars"), and short-term obligations of U.S. branches
and agencies of foreign banks (referred to as "Yankee dollars"); (7)
commercial paper and short-term corporate debt securities rated in one of
the two highest categories for short term debt securities by at least two
nationally recognized securities rating services or one such service if only
one has rated the security (see the Statement of Additional Information for
a description of commercial paper ratings); (8) corporate or other notes
guaranteed by letters of credit from banks in the United States (satisfying
the criteria described in (4), above) or collateralized by United States
Government obligations; and (9) obligations of (i) consumer and commercial
finance companies, (ii) securities brokerage companies, (iii) leasing
companies, and (iv) insurance companies. Certain of these obligations may
be variable or floating rate instruments.
The Fund will enter into repurchase agreements under which it purchases
securities, subject to agreement by the seller to repurchase the securities
at a higher price on a specified date, with the gain establishing the yield
during the Fund's holding period. The Adviser, under general policies
established by the Company's Directors, reviews the creditworthiness of the
other party to any repurchase agreement, and will only enter into repurchase
agreements with parties whose credit is deemed satisfactory. If the seller
becomes bankrupt, the Fund may experience delays in recovering its money,
fail to recover part or all of its investment, and incur costs in disposing
of the securities used as collateral for the sellers repurchase obligation.
The Fund may also enter into reverse repurchase agreements when the
Adviser considers them to be advantageous to the Fund and only for temporary
liquidity purposes not to exceed 60 days, without renewal or extension.
Reverse repurchase agreements permit the Fund to leverage its investment
portfolio by selling securities while agreeing to repurchase them at an
agreed time and price. The bankruptcy of the other party to a reverse
repurchase agreement could cause the Fund to experience delays in recovering
its securities. If, in the meantime, the value of the securities
fluctuated, the Fund could experience a loss.
The Fund will not invest in "firm commitments" or "when issued"
securities.
The Fund may only invest in U.S. dollar-denominated instruments that
are determined to present minimal credit risks and that, at the time of
acquisition, are rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations ("NRSROs")
or by the only NRSRO that has rated the instrument, or in the case of unrated
instruments, have been determined to be of comparable quality to either of
the above. The Fund's investments must also meet the maturity and
diversification requirements applicable to money market funds.
See "Investment Policies" in the Statement of Additional Information
for information about the quality of the securities in which the Fund may
invest and more complete descriptions of repurchase agreements and other
obligations that the Fund may hold.
Risk Factors. The principal risks associated with the investment in
the Money Market Fund are the risk of fluctuations in the short-term
interest rates, the risks associated with entering into repurchase
agreements described above, and the risk of default among one or more
issuers of securities which comprise the Fund's assets.
THE BOND INDEX FUND
The Bond Index Fund began operations on October 1, 1992. On that date
the portfolio of the Intermediate Bond Fund was adjusted to reflect the
investment objective of the Bond Index Fund and the Intermediate Bond Fund
ceased to exist. The historical performance of the Intermediate Bond Fund,
shown in this Prospectus, should not be viewed as historical financial data
of the Bond Index Fund.
14
<PAGE> 20
Investment Objective. The objective of the Bond Index Fund is to
provide a rate of return that reflects the performance of the
publicly-traded bond market as a whole. The Fund uses the Lehman Brothers
Government/Corporate Bond Index as its standard for performance comparison.
Investment Policies. The portfolio will consist of bond issues drawn
from the Lehman Brothers Government/Corporate Bond Index. This Index is
composed of approximately 5,000 corporate and U.S. Government debt issues
rated Baa or better, with at least one year to maturity and with a total par
value of at least $25 million outstanding. The Index is weighted by the
market value of the issues included in the Index. The Fund will not invest
in all the bonds in the Index. In attempting to parallel the performance of
the Index, the Fund uses a sampling method. Sampling calls for the
Investment Adviser to maintain approximately the same mix of sectors, as
measured by quality and duration, that the Index has, while not holding all
of the bonds in each Index sector. Some money market investments such as
those held by the Money Market Fund may be purchased, but they must meet the
quality criteria set forth above. Fixed income obligations of the U.S.
Government and its agencies and instrumentalities will also be included in
the Fund's portfolio from time to time. The emphasis of the Fund will be on
bonds with maturities in the range of those associated with the Lehman
Brothers Government/Corporate Bond Index.
This Fund will not concentrate in any segment of industry, nor in any
rating category. The Fund will be diversified in accordance with the
diversification of the Lehman Brothers Government/Corporate Bond Index.
Risk Factors. The Fund will not seek to outperform the Index but to
match it, which means the Fund's value will decline when bond prices
decline. Interest rate changes can have a powerful effect on the value of
fixed bond portfolios of this quality level and maturity. Therefore, this
Fund should be regarded as having a moderate level of market risk and
current income volatility, while being subject to relatively little risk
that the bond issuers will default (financial risk).
THE MANAGED EQUITY FUND
Investment Objective. The objective of the Managed Equity Fund is to
obtain long-term growth from investment in common stocks. Securing current
income is a secondary objective.
Investment Policies. This Fund invests in common stocks of companies
that are expected to benefit from changes in secular and cyclical trends and
which are considered to be undervalued based on historical valuation
criteria.
The Fund's investments are made with the philosophy that a
high-quality, diversified portfolio of undervalued securities will
outperform the market over the longer term, as well as preserve principal in a
difficult market environment. The opportunity to purchase securities at less
than their underlying value arises from the market's less-than-perfect ability
to forecast the future, plus the market's bias toward overvaluing exciting
companies and underestimating those which are generally out of favor.
Investments considered attractive for the Fund will normally have the
following characteristics:
1. Stocks selling at a relatively low price-earnings ratio or a
relatively low price-to-book ratio, and having a high dividend yield.
2. Stocks which are undervalued relative to their earning power, break-up
value, and inherent profitability.
3. Stocks which have under-performed the general market due to a lower
level of investor expectations regarding the earnings outlook.
4. Stocks whose issuers are of high quality, exhibiting sound financial
strength.
The stocks will be bought and sold for the Fund by Morgan Stanley
Asset Management Inc., the Fund's sub-adviser ("Morgan Stanley"). Morgan
Stanley takes a long-term investment approach. Emphasis is placed on a
stock's value rather than the potential for a short term change in its
general market price.
15
<PAGE> 21
The staff of the Investment Adviser regularly reviews Morgan Stanley's
transactions. The Fund will invest only in common stocks issued by
companies that the Investment Adviser feels are high in quality, and the
portfolio will be diversified as to types of industries.
Risk Factors. The composition of this Fund will change, as it is not
attempting to parallel an index of identified stocks. Financial risk should
be reduced by the active management of this account but the Fund will be
subject to the risk that the prices of most publicly-traded stocks might
decline (market risk). Portfolio turnover (discussed on the next page) will
be relatively low for this Fund.
THE ASSET ALLOCATION FUND
Investment Objectives. The primary objective of the Fund is to obtain
a high rate of long-term total return, composed of capital growth and income
payments. Preservation of capital is the secondary objective and chief limit
on investment risks.
Investment Policies. This Fund will invest in common stocks, publicly-
traded bonds of intermediate maturity, and money market instruments. It will
observe the same quality restrictions on such investments as are observed by the
related Funds which specialize in one investment medium. The mixture of
investments by type will vary as the Investment Adviser exercises its discretion
in its effort to produce the highest total return consistent with prudence and
preservation of capital. At times, the emphasis will be on capital growth; at
other times, income will be given a higher priority than growth. The Investment
Adviser will respond to economic circumstances in structuring the portfolio,
with total return as the key factor.
Risk Factors. As with the Managed Equity Fund, the active management
of this Fund is apt to produce a higher level of portfolio turnover than the
S & P 500 Index Fund or the Bond Index Fund have. Individuals who direct
premium dollars into this Fund are relying more on the skill of the
Investment Adviser to build and maintain an appropriate portfolio than they
are when they select a fund that is devoted to a single investment medium.
The Fund may, at times, be subject to high levels of market and financial
risk and income volatility. These risks will always be present to some
degree.
THE INTERNATIONAL EQUITY FUND
Investment Objectives. The objective of the Fund is to obtain
long-term capital appreciation through investment primarily in foreign
equity securities.
Investment Policies. This Fund invests primarily in securities issued
by companies located in countries included in the Morgan Stanley Capital
International ("MSCI") Europe, Australia, and Far East Index ("EAFE"). This
index includes over 600 companies from 13 European nations and over 400
companies from Australia, Hong Kong, Japan, New Zealand, and Singapore
Malaysia. Provident Capital Management, Inc. ("PCM") will be the investment
sub-adviser for this Fund. In constructing an international portfolio,
analysis of price-to-earnings ratios is the basic analytical tool PCM
employs. This Fund will emphasize selection of securities (common stock,
generally) whose price is low in relation to current earnings, with
secondary emphasis on macroeconomic factors such as prospects for economic
growth in certain countries, expected levels of inflation, government
policies concerning business, and currency relationships. The Fund does not
trade in securities for short-term profits but, when circumstances warrant,
securities may be sold without regard to the length of time they were held.
Securities of foreign issuers in which the Fund may invest include
common and preferred stock. The Fund does not intend to invest in equity of
issuers incorporated in the United States other than American Depository
Receipts ("ADRs") and in these temporarily, when extraordinary circumstances
prevailing at the same time in a significant number of index countries
render investments in such countries inadvisable. The Fund has no minimum
diversification requirements based on country of issue other than a
requirement that it have minimum
16
<PAGE> 22
holdings at all times in five countries, including Japan, the United
Kingdom, Germany, and France. The Fund may use forward foreign currency
exchange contracts to hedge against movements in the value of foreign
currencies relative to the U.S. dollar in connection with specific portfolio
transactions or with respect to portfolio positions. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the
contract. Foreign currency exchange contracts do not eliminate fluctuations
in the values of portfolio securities but rather allow the Fund to establish
a rate of exchange for a future point in time.
Generally, the use of forward foreign currency contracts involves
investment risks and transaction costs to which the Fund would not be
subject absent the use of such contracts. If PCM enters into a forward
contract on behalf of the Fund and the foreign currency markets do not move
in a direction adverse to the Fund, the Fund could be left in a less
favorable position than if such contracts had not been entered into. The use
of forward foreign currency contracts involves special risks, which include
the risks that: (l) currency markets may not move in the direction
anticipated; (2) there may be imperfect correlation between the price of the
currencies underlying the contract; (3) there may be an absence of a liquid
secondary market for forward contracts at any time; and (4) a need may arise
to defer closing out certain forward contracts to avoid adverse tax
consequences. The skills needed to use forward contracts may differ from
those needed to select portfolio securities. PCM has somewhat limited
experience in the use of forward contracts, and it intends to call upon the
experience of experts to assist it in employing such contracts. PCM will
bear the costs of any separately identifiable expenses incurred in
connection with consultation of such experts. See the Statement of
Additional Information for further information concerning forward foreign
currency contracts.
Risk Factors. The securities of non-U.S. issuers generally will not be
registered with the SEC, nor will these issuers be subject to the SEC's
reporting requirements. Foreign companies are generally not subject to
uniform accounting, auditing, and financial reporting standards such as are
applied to companies organized in the U.S., and there may be less publicly-
available information about non-U.S. issuers. Some foreign securities trade in
markets providing less liquidity and less regulation than American markets do,
so foreign stock prices may be more volatile than comparable U.S. stock prices.
Foreign brokerage commissions may be higher as may the cost of
custodial services, and transaction and settlement costs. Foreign stocks may
be subject to taxes in their country of issue, or other restrictions on the
removal of funds may be imposed by a foreign country. The active management
of PCM may produce a relatively high level of portfolio turnover (see page
18) as part of an effort to deal with the other risks. Fluctuations in
currency exchange rates, as well as political or social instability, will
also have an effect on the value of shares in the Fund. Legal remedies may
be limited in some foreign countries.
THE SPECIAL EQUITY FUND
Investment Objectives. Long-term capital appreciation through
investment primarily in smaller companies and, to a lesser extent, in
securities of such companies that are convertible into common stocks, is the
investment objective of this Fund.
Investment Policies. Smaller companies are ones having market
capitalization of $750,000,000 or less. This Fund will invest in the common
stocks that PCM, the Fund's investment sub-adviser, believes are undervalued
at the time of purchase. The chief measure of value is a low ratio between
the stock's market price and its per-share earnings over the previous four
quarters. This is commonly referred to as a low price-to-earnings or p/e
ratio. The Fund will typically invest in those U.S. stocks traded on
national exchanges whose p/e ratio falls in the lower 40% of all issues
traded on those exchanges as measured by p/e ratio. Issues meeting this test
are screened to ensure that their market capitalization is low in relation
to the markets as a whole and then tested for other measures of fundamental
value including: a low price-to-book ratio; a low price-to-cash flow ratio;
and strong balance sheet characteristics. Stock selection rather than
economic sector alignment will guide PCM's choice of stocks. Stocks will
generally be sold when, in PCM's opinion, their appreciation potential has
been reached.
17
<PAGE> 23
Risk Factors. The securities of smaller companies are less liquid than
those of larger companies that command a larger market, and so their price
movements may be more abrupt or erratic. A fund that specializes in such
securities, and that is active in selling to realize appreciation, may incur
a relatively high degree of portfolio turnover (see below) and related
transaction costs. Market risk the risk that the prices of all stocks will
decline--is a factor for an equity fund such as this. As appreciation is the
Fund's objective, current income may be less than in funds that concentrate
on income.
INVESTMENT RESTRICTIONS
Investments of the Funds are further restricted by certain policies
that may not be changed without a vote of shareholders. See "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.
PORTFOLIO TURNOVER
The annual rate at which the composition of each Fund changes is
referred to as the portfolio turnover rate, which is defined as the lesser
of the purchases or sales of securities in a Fund stated as a percentage of
the assets in the Fund. Portfolio turnover reflects the extent of trading in
the portfolio, and trading is usually accompanied by the payment of
commissions to brokers. Commission expenses will reduce the return on a
Fund. Portfolio turnover should vary among the different Funds, as well as
over time. Actual turnover figures are included in the Financial Highlights
on pages 6 through 11.
The S & P 500 Index Fund is not likely to experience turnover in
excess of 50% per year as its portfolio will always be structured so as to
parallel the Standard and Poor's 500 stocks.
The Bond Index Fund is not likely to experience turnover in excess of
40% as its portfolio will always be structured to parallel the Lehman
Brothers Government/Corporate Bond Index.
The Managed Equity Fund, the Asset Allocation Fund, the International
Equity Fund, and the Special Equity Fund are liable to have turnover in
excess of 200% at times, as they will be actively managed in pursuit of
their objectives.
MANAGEMENT OF THE COMPANY
The Board of Directors of Capital Company is responsible for the
management of Capital Company's business and affairs, and creates and
supervises the execution of the investment policies of Capital Company,
which are administered by the Investment Adviser (General American
Investment Management Company, an affiliate of General American Life
Insurance Company). The Investment Adviser's address is 700 Market Street,
St. Louis, Missouri 63101, the same address as that of General American. The
Investment Adviser provides investment advice and some administrative
services for all of Capital Company's Funds. In addition to selecting
investments for four of the Funds and reviewing the practices of broker-dealers
buying and selling investments for Capital Company, the Investment Adviser
oversees the performance of the sub-advisers for the Managed Equity Fund, the
International Equity Fund, and the Special Equity Fund.
The Investment Adviser was formed in 1982 to manage General American's
separate accounts and the funds of affiliated clients. Its personnel are
General American employees who are also responsible for management of
General American's investments.
The manager of the S & P 500 Index Fund, Money Market Fund, Bond Index
Fund, and Asset Allocation Fund is Douglas R. Koester, CFA, vice president
of General American Investment Managment Company (the Investment Adviser).
He has managed each of those four Funds since their inception October 1,
1987. Mr. Koester earned bachelor's and master's degrees from Washington
University (St. Louis). He has served as vice president of General American
Investment Management Company since 1986.
18
<PAGE> 24
As of December 1995, the Investment Adviser provided investment advice
to 10 clients that were unaffiliated with General American, and to 24
separate accounts of General American.
For its services to the Funds, the Investment Adviser charges a fee
that is accrued daily against each Fund. The fees charged each Fund, except
the Managed Equity Fund, the International Equity Fund, and the Special
Equity Fund, stated as an annual percentage of the average daily value of
the net assets, are:
S & P 500 Index Fund .25 %
Money Market Fund .125%
Bond Index Fund .25 %
Asset Allocation Fund .50 %
The fee charged the Managed Equity Fund is stated as a series of
annual percentages of the average daily value of the net assets of that
Fund. The percentages decrease with respect to assets of the Fund above
certain amounts and are divided between the Investment Adviser and the
Fund's sub-adviser as follows:
<TABLE>
<CAPTION>
Paid to Paid to
Managed Equity Fund Assets Total Fee Sub-Adviser Investment Adviser
-------------------------- --------- ----------- ------------------
<S> <C> <C> <C>
First $10 million .50% .40% .10%
Next $20 million .35% .30% .05%
Balance over $30 million .30% .25% .05%
</TABLE>
The sub-adviser for the Managed Equity Fund is Morgan Stanley Asset
Management Inc., 1221 Avenue of the Americas, 21st floor, New York, New York
10020. Morgan Stanley is a Delaware corporation and a wholly-owned
subsidiary of Morgan Stanley Group, Inc. Affiliated companies of Morgan
Stanley have been in the investment management business with respect to
stocks since 1935.
The manager of the Managed Equity Fund is the value investment team in
the Chicago office of Morgan Stanley. Team members, both of whom share
equally in the management of the Managed Equity Fund, are as follows.
Alford E. Zick, Jr., a Principal of Morgan Stanley, is a graduate of the
University of Illinois, where he majored in Accounting. He joined Morgan
Stanley in 1989. Stephen C. Sexauer, a Principal of Morgan Stanley,
received his BS (Economics) from the University of Illinois, and an MBA in
Economics and Statistics from the University of Chicago, and has worked at
Morgan Stanley since 1989.
Morgan Stanley receives from the Investment Adviser, as compensation,
a fee in the amount described above as the fee for the sub-adviser for the
Managed Equity Fund. The Investment Adviser is responsible for payment of
the fee to Morgan Stanley, and keeps the balance of the investment
management fee for the services it provides to the Managed Equity Fund.
The sub-adviser for the International Equity Fund and for the Special
Equity Fund is Provident Capital Management, Inc., 1700 Market Street, Suite
2720, Philadelphia, Pennsylvania 19103-3398. PCM is an affiliate of PNC
Bank Corp., the twelfth largest bank holding company in the United States.
PCM is a Pennsylvania corporation, and has been in business since 1978.
The manager of the International Equity Fund is W. George Grieg, who
directs PCM's International Group. Prior to joining PCM in July, 1995 (at
which time he began managing the International Equity Fund), Mr. Grieg was
managing partner and founder of Akamai International, an international
equity specialist. Prior to Akamai's formation, he was investment director
at Framlington Group in London and a principal and co-founder of Pilgrim
Baxter & Associates, where he served as research director and managed
domestic portfolios. Mr. Grieg is a graduate of the Massachusetts Institute
of Technology and earned an MBA from the Wharton School.
19
<PAGE> 25
The fee charged the International Equity Fund is also expressed in a
series of annual percentages of the average daily value of the net assets in
the Fund. The overall percentage charged decreases as the size of the Fund
rises above certain levels, and the same is true of the fraction of the fee
paid to the Fund's sub-adviser and to the Investment Adviser. The fee
schedule is as follows:
<TABLE>
<CAPTION>
Paid to Paid to
International Equity Fund Assets Total Fee Sub-Adviser Investment Adviser
-------------------------------- --------- ----------- ------------------
<S> <C> <C> <C>
First $10 million .70% .60% .10%
Next $10 million .60% .55% .05%
Balance over $20 million .50% .45% .05%
</TABLE>
The manager of the Special Equity Fund is Susan D. Menzies, who has
served as a vice president of Provident Capital Management, Inc. (the Fund's
sub-adviser) since 1985. Ms. Menzies has managed the Special Equity Fund
since June 24, 1994. She holds a bachelor's degree in economics and an MBA
in finance from Temple University.
The Special Equity Fund also pays investment management fees according
to a scale based on the size of the Fund, and these fees are also collected
by the Investment Adviser and remitted, in part, to the Fund's sub-adviser,
PCM. Investment management fees are collected and divided for the Special
Equity Fund as follows:
<TABLE>
<CAPTION>
Paid to Paid to
Special Equity Fund Assets Total Fee Sub-Adviser Investment Adviser
-------------------------- --------- ----------- ------------------
<S> <C> <C> <C>
First $10 million .55% .45% .10%
Next $10 million .45% .40% .05%
Balance over $20 million .40% .35% .05%
</TABLE>
The Investment Adviser is responsible for collecting advisory fees
from the International Equity Fund and the Special Equity Fund and for
paying the designated part of these fees to PCM for PCM's services as
sub-adviser to the International Equity Fund and the Special Equity Fund.
General American acts as the transfer and dividend disbursing agent
for Capital Company and performs a number of administrative functions for
Capital Company, such as recording the issuance and redemption of shares of
the company. General American values the liabilities of each Fund; computes
the daily income and net asset value of each Fund; recommends independent
auditors and custodians, and coordinates and supervises their activities;
and maintains records not otherwise maintained. General American also
prepares and files tax returns and reports and filings that pertain to
federal and state securities laws; and schedules and plans the agenda for
meetings of Capital Company's directors and shareholders. General American
pays directors who are not interested persons of Capital Company, including
any travel expenses they may have; costs of printing and distributing
communications to current shareholders of Capital Company; insurance
premiums; and charges and expenses of the custodian, accountants, and
counsel.
General American charges Capital Company a fee for these services and
expenses, at an annual rate based on the average daily value of the net
assets in each Fund, as follows:
S & P 500 Index Fund .05%
Money Market Fund .08%
Bond Index Fund .05%
Managed Equity Fund .10%
Asset Allocation Fund .10%
International Equity Fund .30%
Special Equity Fund .10%
20
<PAGE> 26
Capital Company also pays directly the following expenses: brokerage
commissions and transfer taxes; other state, federal, and local taxes and
filing fees; fees and expenses for qualification of Capital Company and its
shares under federal and state securities laws subsequent to the effective
date of the Prospectus; interest and other borrowing costs; extraordinary or
non-recurring expenses such as those for litigation; and other expenses not
expressly assumed by General American or the Investment Adviser. The total
of these expenses as a percentage of the average daily value of the net
assets in each Fund was as follows in 1995:
S & P 500 Index Fund .01%
Money Market Fund .00%
Bond Index Fund .00%
Managed Equity Fund .09%
Asset Allocation Fund .05%
International Equity Fund .69%
Special Equity Fund .10%
CAPITAL STOCK
Capital Company issues a separate series of capital stock for each
Fund. Each share of capital stock issued with respect to a Fund has a pro
rata interest in the net assets of the Fund. Each share of capital stock is
entitled to one vote on all matters submitted to a vote of shareholders of
Capital Company, and fractional shares are entitled to a corresponding
fractional vote. An affirmative vote of a majority of the outstanding shares
of each Fund affected by any matter is required for any action to be
approved by the shareholders of Capital Company. Shares of a Fund will be
voted separately from shares of other Funds, however, on matters affecting
only that Fund, such as approval of the investment advisory agreement, an
investment sub-advisory agreement, or changes in the fundamental investment
objectives or restrictions of a Fund. The assets of each Fund are charged
with the liabilities of the Fund and a proportionate share of the general
liabilities of Capital Company. All shares may be redeemed at any time.
TAXES AND DIVIDENDS
For federal income tax purposes, each Fund is treated as a separate
entity. Each Fund intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code"). If each Fund qualifies as a "regulated investment company" and
complies with the provisions of the Code relieving regulated investment
companies which distribute substantially all of their net income (both
ordinary income and capital gain) from federal income tax and the 4%
nondeductible federal excise tax, each Fund will be relieved of such taxes
on the amounts distributed. (See the Statement of Additional Information for
a more detailed discussion.)
Since the sole shareholders of Capital Company will be separate
accounts of General American and separate accounts of General American
affiliates, and in the future possibly separate accounts of unaffiliated
companies, no discussion is included herein as to federal income tax
consequences at the shareholder level. For information concerning the
federal tax consequences to purchasers of variable annuity contracts funded
by Separate Account Two or of the flexible premium variable life insurance
policies funded by Separate Account Eleven, see the respective Prospectuses
for those contracts or policies.
21
<PAGE> 27
OFFERING AND REDEMPTION OF SHARES
Shares of capital stock of each Fund of Capital Company are offered to
separate accounts of General American and to separate accounts of insurance
companies affiliated with General American. Shares may, in the future, be
offered to separate accounts of unaffiliated insurance companies.
Shares are sold and redeemed at their net asset value as next
determined following receipt by a separate account of premium payments,
surrender requests under policies, loan payments, transfer requests, and
similar or related transactions. There is no selling commission or
redemption charge.
Net asset value is determined as of the close of trading (4 p.m.
Eastern time) on the New York Stock Exchange on each day during which the
Exchange is open, except the day after Thanksgiving, when Capital Company is
closed.
An equity security listed on a stock exchange is valued at the
composite sale price on all exchanges. Securities traded in the
over-the-counter market are valued at the closing sale price, and if closing
sale prices are not available, at the latest available bid price.
Occasionally, events affecting the values of such securities may occur
after the close of the New York Stock Exchange. If, during such periods,
events occur which materially affect the value of the securities of a Fund,
such securities will be valued at fair value as determined in good faith by
or under the direction of the Board of Directors of Capital Company.
Debt instruments with maturities of 60 days or less are valued on an
amortized cost basis. This means a purchased instrument is valued at cost on
the date of purchase or, in the case of securities purchased more than 60
days prior to maturity, at the market value on the 61st day before maturity.
Thereafter a constant rate of amortization of any discount or premium and of
accrual of interest income is assumed, regardless of any intervening change
in general interest rates or the market value of the instrument. Other debt
instruments are valued at market value, provided market quotations are
readily available.
All other assets are valued at their fair value as determined in good
faith by, or under the direction of, the Board of Directors of Capital
Company.
Further discussion of asset valuation methods is included in the
Statement of Additional Information under the heading "DETERMINATION OF NET
ASSET VALUE."
PENDING LEGAL PROCEEDINGS
There are no legal proceedings pending to which Capital Company is a party.
POLICYHOLDER INQUIRIES
Variable life insurance policyholder inquiries should be directed to:
VUL Administration
General American Life Insurance Company
P.O. Box 14490
St. Louis, Missouri 63178-4490
Telephone: 1-800-638-9294
22
<PAGE> 28
APPENDIX
Description of Corporate Bond Ratings
Moody's Investors Service, Inc.
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are commonly referred
to as "gilt-edged." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuations 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 Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa-Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics as
well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa-Bonds which are rated Caa 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 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 are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, l, 2, and 3, in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier l indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a midrange ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
A-1
<PAGE> 29
Standard & Poor's Corporation
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in 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-B-CCC-CC-Bonds rated BB, B, CCC, and CC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
C-The rating C is reserved for income bonds on which no interest is
being paid.
D-Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
The ratings from "AA" to "B" may be modified by the addition of a plus
or minus sign to relative standing within the major rating categories.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by Standard & Poor's has the following
characteristics. Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. 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.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2, or A-3.
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's Investor's Service, Inc. 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) trends 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 presented or may arise as a result of public
interest questions and preparations to meet such obligations.
A-2
<PAGE> 30
GENERAL AMERICAN CAPITAL COMPANY
Prospectus Version B - Variable Annuity
<PAGE> 31
GENERAL AMERICAN CAPITAL COMPANY
700 Market Street, St. Louis, MO 63101
(314) 231-1700
General American Capital Company ("Capital Company") is an open-end
diversified management investment company which was incorporated in Maryland
on November 15, 1985, and commenced operations on October 1, 1987. Capital
Company offers variable annuity purchasers five separate Funds which operate
as distinct investment vehicles. The names and investment objectives of the
Funds are as follows:
S & P 500 Index Fund (formerly known as the Equity Index
Fund): The investment objective of this Fund is to provide
investment results that parallel the price and yield performance
of publicly traded common stocks in the aggregate. The Fund uses
the Standard and Poor's 500 Stock Price Index<F*> as its standard
for performance comparison. The Fund attempts to duplicate the
performance of the Index and includes dividend income as the
other component of the Fund's total return.
Money Market Fund: The investment objective of this Fund
is the highest level of current income which is consistent with
the preservation of capital and maintenance of liquidity. This
fund invests primarily in high-quality, short-term money market
instruments. An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government.
Bond Index Fund: The investment objective of this Fund is
to provide a rate of return that reflects the performance of the
publicly-traded bond market as a whole. The Fund uses the Lehman
Brothers Government/Corporate Bond Index as its standard for
performance comparison.
Managed Equity Fund: The investment objective of this Fund
is long-term growth of capital, obtained by investing primarily
in common stocks. Securing moderate current income is a
secondary objective.
Asset Allocation Fund: The investment objective of this
Fund is a high rate of long-term total return composed of
capital growth and income payments. Preservation of capital is
the secondary objective and chief limit on investment risk. The
Fund will invest only in those types of securities that the
other Funds may invest in. The Asset Allocation Fund invests in
a combination of common stocks, bonds, or money market
instruments, in accordance with guidelines established from time
to time by Capital Company's Board of Directors.
There can be no assurance that the investment objectives of these
Funds will be achieved.
This Prospectus sets forth basic information about Capital Company and
its Funds, and information that a prospective investor ought to know before
investing.
A Statement of Additional Information for Capital Company has been
filed with the Securities and Exchange Commission and is incorporated herein
by reference. This Statement is available upon request and without charge
from Capital Company at the address or telephone number above. Other
inquiries about Capital Company should be directed to the company at the
same address or telephone number.
This Prospectus should be read and retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------------------
The Date of this Prospectus is April 30, 1996.
The Date of The Statement of Additional Information is April 30, 1996.
[FN]
- ------------------
<F*>"Standard and Poor's," and "Standard and Poor's 500" are trademarks
of the Standard and Poor's Corporation and have been licensed for use by
General American Capital Company. The S & P 500 Index Fund is not
sponsored, sold, or promoted by Standard and Poor's and Standard and
Poor's makes no representation regarding the advisability of investing in
the fund.
<PAGE> 32
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Table of Fees and Expenses 3
Financial Highlights 4
Investment Funds 9
Investment Objectives And Policies 9
The S & P 500 Index Fund
Investment Objective 10
Investment Policies 10
Risk Factors 11
The Money Market Fund
Investment Objective 11
Investment Policies 11
Risk Factors 11
The Bond Index Fund
Investment Objective 12
Investment Policies 12
Risk Factors 12
The Managed Equity Fund
Investment Objective 12
Investment Policies 12
Risk Factors 13
The Asset Allocation Fund
Investment Objective 13
Investment Policies 13
Risk Factors 13
Investment Restrictions 13
Portfolio Turnover 14
Management of the Company 14
Capital Stock 16
Taxes and Dividends 16
Offering and Redemption of Shares 16
Pending Legal Proceedings 17
Contract Owner Inquiries 17
Appendix A-1
</TABLE>
2
<PAGE> 33
TABLE OF FEES AND EXPENSES
Shareholder Transaction Expenses
General American Capital Company makes no charge at the time of sale,
when dividends are reinvested, or upon a redemption or exchange, whether
partial or whole.
<TABLE>
Annual Fund Operating Expenses
<CAPTION>
(as a percentage of average net assets)
<S> <C>
Investment Advisory Fees
S & P 500 Index Fund .25 %
Money Market Fund .125%
Bond Index Fund .25 %
Managed Equity Fund .50 %<F*>
Asset Allocation Fund .50 %
Administration Fees
S & P 500 Index Fund .05 %
Money Market Fund .08 %
Bond Index Fund .05 %
Managed Equity Fund .10 %
Asset Allocation Fund .10 %
Total Fund Operating Expenses
S &P 500 Index Fund .30 %
Money Market Fund .205%
Bond Index Fund .30 %
Managed Equity Fund .60 %<F*>
Asset Allocation Fund .60 %
<FN>
- -----------
<F*>Investment Advisory Fees applicable to the Managed Equity Fund
decline ratably on the average daily net assets in excess of $10 million
(see page 15).
</TABLE>
Money enters the Funds through separate accounts (see page 9) which
may levy additional fees. The insurance or annuity contract giving access to
the separate account, together with a separate account Prospectus if there
is one, should be consulted for information on such fees.
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 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>
S & P 500 Index Fund $3.08 $ 9.66 $16.89 $38.13
Money Market Fund $2.10 $ 6.61 $11.56 $26.17
Bond Index Fund $3.08 $ 9.66 $16.89 $38.13
Managed Equity Fund $5.13 $16.08 $28.03 $62.94
Asset Allocation Fund $6.15 $19.27 $33.57 $75.17
</TABLE>
Because there is no redemption fee, you would pay the same amounts if
you did not redeem at the end of the time period specified.
This example should not be considered a representation of past or
future expenses. Actual expenses may differ from those those in the
example.
3
<PAGE> 34
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
S & P 500 INDEX FUND <F*>
----------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35 $ 11.80 $ 9.09 $ 7.80 $ 10.00
-------- -------- -------- -------- -------- ------- ------- ------- -------
Income from operations:
Net investment income 0.46 0.44 0.41 0.39 0.38 0.38 0.37 0.36 0.06
Net realized and unrealized gain (loss)
on investments 6.04 (0.24) 1.15 0.71 3.05 (0.83) 2.34 0.93 (2.26)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net increase in asset value per share 6.50 0.20 1.56 1.10 3.43 (0.45) 2.71 1.29 (2.20)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of period $ 24.14 $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35 $ 11.80 $ 9.09 $ 7.80
======== ======== ======== ======== ======== ======= ======= ======= =======
Total return 36.85% 1.15% 9.83% 7.45% 30.21% -3.82% 29.76% 16.65% -22.05%
Net assets, end of year (in thousands) $247,313 $169,303 $161,761 $123,458 $102,076 $72,665 $65,211 $28,917 $23,060
Ratio of expenses to average net assets <F2> 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.32% 0.30% 0.29%
Ratio of net investment income to average
net assets <F2> 2.19% 2.50% 2.47% 2.67% 2.89% 3.35% 3.57% 4.15% 3.40%
Portfolio turnover rate 4.75% 7.38% 2.56% 4.38% 3.92% 4.39% 20.56% 8.41% 2.63%
Average commission rate <F3> $ 0.02 $ 0.02 $ 0.03 $ 0.03 $ 0.03
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Computed on an annualized basis.
<F3> Computed only for accounts holding equity securities.
<F*>This Fund formerly known as the Equity Index Fund.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without charge.
</TABLE>
4
<PAGE> 35
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
MONEY MARKET FUND
----------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04 $ 12.03 $ 10.98 $ 10.18 $ 10.00
Income from operations:
Net investment income 0.92 0.62 0.44 0.51 0.81 1.01 1.05 0.80 0.18
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 16.34 $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04 $ 12.03 $ 10.98 $ 10.18
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return 5.96% 4.21% 3.07% 3.71% 6.19% 8.43% 9.56% 7.76% 1.86%
Net assets, end of year (in thousands) $70,574 $93,339 $84,430 $84,880 $84,090 $85,901 $53,648 $52,323 $56,442
Ratio of expenses to average net assets <F2> 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income to average
net assets <F2> 5.78% 4.17% 3.06% 3.68% 6.10% 8.17% 9.26% 7.46% 7.31%
Portfolio turnover rate <F3>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Computed on an annualized basis.
<F3> A portfolio turnover rate is not calculated for securities on which the
maturity or expiration dates at the time of acquisition were one year or less.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
5
<PAGE> 36
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
BOND INDEX FUND <F1>
----------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F2> $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44 $ 12.32 $ 11.17 $ 10.46 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income 1.25 1.06 1.07 1.09 1.08 1.03 0.98 0.90 0.22
Net realized and unrealized gain
(loss) on investments 2.04 (1.79) 0.63 (0.08) 0.80 0.09 0.17 (0.19) 0.24
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in asset value
per share 3.29 (0.73) 1.70 1.01 1.88 1.12 1.15 0.71 0.46
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 20.59 $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44 $ 12.32 $ 11.17 $ 10.46
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return 19.02% -4.04% 10.39% 6.57% 14.00% 9.09% 10.32% 6.78% 4.60%
Net assets, end of year (in thousands) $39,316 $26,458 $47,636 $20,217 $14,438 $11,137 $ 9,545 $ 6,571 $ 7,179
Ratio of expenses to average net assets <F3> 0.30% 0.30% 0.30% 0.39% 0.42% 0.42% 0.43% 0.43% 0.43%
Ratio of net investment income to average
net assets <F3> 6.43% 6.19% 6.11% 6.89% 7.63% 8.12% 8.24% 8.25% 9.11%
Portfolio turnover rate 35.35% 46.42% 8.80% 43.50% 2.23% 18.88% 28.57% 71.30% 11.44%
<FN>
Notes:
<F1> Name and investment objective changed from Intermediate Bond Fund on
October 1, 1992. The investment advisor charges changed from .250 percent
to .375 percent of the average daily value of the net assets on October 1,
1992. The objective of the Bond Index Fund is to provide a rate of return
that reflects the performance of the market in publicly traded bonds as a
whole.
<F2> Components are computed and accumulated on a daily basis.
<F3> Computed on an annualized basis.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
6
<PAGE> 37
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
MANAGED EQUITY FUND
----------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 15.69 $ 16.27 $14.95 $ 14.02 $ 11.10 $ 11.45 $ 8.73 $ 7.82 $ 10.00
------- ------- ------ ------- ------- ------- ------- ------- ------
Income from operations:
Net investment income 0.58 0.43 0.32 0.35 0.38 0.38 0.26 0.28 0.06
Net realized and unrealized gain
(loss) on investments 4.66 (1.01) 1.00 0.58 2.54 (0.73) 2.46 0.63 (2.24)
------- ------- ------ ------- ------- ------- ------- ------- ------
Net increase (decrease) in asset value per
share 5.24 (0.58) 1.32 0.93 2.92 (0.35) 2.72 0.91 (2.18)
------- ------- ------ ------- ------- ------- ------- ------- ------
Net asset value, end of year $ 20.93 $ 15.69 $ 16.27 $ 14.95 $ 14.02 $ 11.10 $ 11.45 $ 8.73 $ 7.82
======= ======= ====== ======= ======= ======= ======= ======= ======
Total return 33.37% -3.58% 8.87% 6.66% 26.23% -2.99% 31.07% 11.62% -21.76%
Net assets, end of year (in thousands) $40,902 $31,487 $32,885 $29,401 $22,006 $14,769 $11,785 $ 7,303 $ 78
Ratio of expenses to average net assets <F2> 0.48% 0.49% 0.50% 0.51% 0.53% 0.57% 0.60% 0.60% 0.60%
Ratio of net investment income to average
net assets <F2> 3.14% 2.65% 2.07% 2.55% 2.99% 3.47% 2.62% 3.24% 2.81%
Portfolio turnover rate 44.82% 103.93% 25.89% 9.34% 12.15% 28.38% 51.26% 15.54% 0.00%
Average commission rate <F3> $ 0.04 $ 0.03 $ 0.04 $ 0.04 $ 0.07
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Computed on an annualized basis.
<F3> Computed only for accounts holding equity securities.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
7
<PAGE> 38
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
(AUDITED)
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------------------------------------
Three
Year Year Year Year Year Year Year Year months
ended ended ended ended ended ended ended ended ended
Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem- Decem-
ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31 ber 31
------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39 $ 13.07 $ 10.90 $ 10.05 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income 0.82 0.68 0.60 0.62 0.65 0.69 0.60 0.57 0.14
Net realized and unrealized gain
(loss) on investments 4.38 (1.42) 1.03 0.45 2.00 (0.37) 1.57 0.28 (0.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in asset value
per share 5.20 (0.74) 1.63 1.07 2.65 0.32 2.17 0.85 0.05
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 23.20 $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39 $ 13.07 $ 10.90 $ 10.05
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return 28.88% -3.95% 9.55% 6.66% 19.81% 2.47% 19.91% 8.44% 0.47%
Net assets, end of year (in thousands) $73,387 $59,975 $65,070 $53,369 $21,149 $12,545 $ 5,244 $ 1,440 $ 402
Ratio of expenses to average net assets <F2> 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income to average
net assets <F2> 3.92% 3.70% 3.33% 3.80% 4.37% 5.41% 4.82% 5.04% 5.56%
Portfolio turnover rate 33.74% 75.24% 27.59% 12.14% 5.14% 15.46% 28.06% 13.52% 0.00%
Average commission rate <F3> $ 0.03 $ 0.03 $ 0.04 $ 0.06 $ 0.07
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Computed on an annualized basis.
<F3> Computed only for accounts holding equity securities.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the General
American Capital Company Annual Report dated December 31, 1995. The annual
report is not included with this prospectus but may be obtained without
charge.
</TABLE>
8
<PAGE> 39
INVESTMENT FUNDS
General American Capital Company ("Capital Company") offers five
investment funds. These are: the S & P 500 Index Fund, the Money Market
Fund, the Bond Index Fund, the Managed Equity Fund, and the Asset Allocation
Fund (collectively called "the Funds").
Shares of the Funds are currently offered only to separate accounts
established by General American Life Insurance Company ("General American")
and its subsidiaries, pursuant to the insurance laws of Missouri. Most of
these separate accounts accept funds only from employee benefit plans. Some
are not registered with the Securities and Exchange Commission ("SEC")
because they are not offered to the public at large and will not have more
than 100 owners. General American Separate Accounts Two and Eleven,
however, are registered with the SEC as unit investment trusts having
Prospectuses of their own. General American is a mutual insurance company
incorporated in Missouri.
General American has created General American Separate Account Two for
funding variable annuity contracts and Separate Account Eleven for funding
variable life insurance policies. The owners of such contracts or policies
may allocate purchase or premium payments among the General Account of
General American and Divisions of General American Separate Accounts Two and
Eleven which correspond to the Funds. The Company currently does not foresee
any disadvantages to the holders of variable annuity contracts and variable
life insurance policies arising from the fact that the interests of the
holders of such contracts and policies may differ. Nevertheless, Capital
Company's Board of Directors intends to monitor events in order to identify
any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken in response thereto. Actions
might include requiring one separate account to withdraw from the Funds.
Capital Company also offers two additional funds, through a separate
prospectus, for variable universal life insurance customers. The financial
results of these two funds are not expected to have any effect on Capital
Company or the Funds described in this version of its Prospectus.
Capital Company sells shares to Separate Account One of RGA
Reinsurance Company, a company affiliated with General American. Capital
Company may in the future sell its shares to other insurance companies with
which General American is affiliated, and to separate accounts of
unaffiliated insurance companies. Capital Company may also add or delete
Funds.
Shares of each Fund are both offered and redeemed at their net asset
value without the addition of any sales load or redemption charge. See
"OFFERING AND REDEMPTION OF SHARES" on pages l6 - 17.
The investment adviser for Capital Company is General American
Investment Management Company (the "Investment Adviser"), a wholly-owned
subsidiary of General American's wholly-owned subsidiary, General American
Holding Company. The Investment Adviser has engaged Morgan Stanley Asset
Management, Inc. ("Morgan Stanley"), an unaffiliated company, to act as a
sub-adviser for the Managed Equity Fund. The fee of the sub-adviser is paid
by the Investment Adviser.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described on
the next few pages. The investment objective of a Fund, and certain
investment restrictions that are discussed in the Statement of Additional
Information, may be changed only with the approval of the shareholders of
each Fund that is affected by such change. The investment policies used to
achieve a Fund's objectives may be changed by Capital Company's Board of
Directors without a vote of shareholders.
Because investment involves both opportunities for gain and risk of
loss, no assurance can be given that the Funds will achieve their
objectives. Prospective purchasers of insurance contracts participating in
the Funds should carefully review the objectives and policies of the Funds
and consider their ability to assume the risks involved
9
<PAGE> 40
before allocating amounts to Funds other than the General Account. An
investment in any Fund should be considered as a part of an overall
investment program rather than as a complete investment program.
The Funds are subject to certain types of risk, including varying
degrees of market risk, financial risk, and current income volatility.
Market risk refers to the possibility the price of the security will decline
in response to changes in conditions in the securities markets in general
and, with particular reference to 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 when due, 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 dividend payments and the overall level of interest rates
become reflected in the level of current income of the Funds.
THE S & P 500 INDEX FUND
Investment Objective. The objective of this Fund, formerly called the
Equity Index Fund, is to obtain investment results that parallel the price
and yield performance of publicly-traded common stocks in the aggregate. The
Fund uses the Standard and Poor's 500 Common Stock Price Index ("S & P 500"
or "Index") as its standard for performance comparison. The Fund attempts to
duplicate the performance of the S & P 500 and includes dividend income as
another component of the Fund's total return. The Fund is not managed by
Standard and Poor's.
Investment Policies. The portfolio will be composed of a large number
of stock issues drawn from the S & P 500. Issues of bankrupt companies and
companies whose stock would not be eligible for purchase under Missouri
insurance law will not be purchased. The Fund may not invest in all the
stocks in the S & P 500. In attempting to parallel the performance of the
Index, the Fund uses a sector sampling method. Sector sampling calls for the
Investment Adviser to maintain approximately the same mix of industrial
sectors in the Fund that the S & P 500 has, while not necessarily holding
all of the stocks in each S & P 500 industrial sector.
The decision on what stocks in a sector the Fund should buy is
affected by the "minimum position size," or minimum dollar amount which the
Fund will invest in round lots (100 shares or multiples of 100) of a stock.
Thus, if a company's stocks represent 40% of its S & P 500 sector, measured
in terms of capitalization, then the Fund will devote a substantial fraction
of the amount it has to invest in that S & P 500 sector to the stocks of
that company. Such a large holding would not exceed the company's proportion
of the S & P 500 (40% of its sector in this example) but, given the
relatively small size of the Fund and its decision not to buy fewer shares
than the minimum position, it might be that purchases of the stocks of
companies that are relatively less important in their sector will be limited
to amounts necessary to make the Fund's sector similar in relative size to
the weight of the same sector in the S & P 500. That is, smaller company
stocks would be used to round out the holdings in a sector dominated by one
or two large companies.
As the Fund grows, it will be able to buy more of the S & P 500 stocks
and make its industrial sectors more closely approximate the composition of
the Index's sectors, at the same time bringing the Fund more closely into
conformity with the overall composition of the Index. Dividend income will
be reinvested in stocks so as to keep the portfolio composition similar to
the Index. The goal is to have all Fund assets invested in qualified stocks
at all times. Stock index futures contracts may be used for hedging, where
the sums involved are too small to be directly invested in a minimum
position size and in proper relation to the Index.
Risk Factors. The Fund will not seek to out-perform the chosen Index
but to match it, which means that the Fund will be allowed to decline in
asset value when the prices of most common stocks decline. This high level
of market risk is offset by the relatively low degree of risk that the large
companies whose shares are owned will encounter financial difficulty, and
the corresponding protection against financial risk afforded by the Fund's
extensive diversification. There is no guarantee that the Fund will
duplicate the performance of the Index.
10
<PAGE> 41
THE MONEY MARKET FUND
Investment Objective. The objective of the Money Market Fund is to
obtain the highest level of current income which is consistent with the
preservation of capital and maintenance of liquidity.
Investment Policies. The Fund invests only in: (1) obligations of the
U.S. Government; (2) obligations issued by agencies or instrumentalities of the
United States Government; (3) instruments that are secured or collateralized
by obligations of the United States Government, its agencies, or its
instrumentalities; (4) short-term obligations of United States banks and
savings and loan associations and companies having assets of more than
$1,000,000,000; (5) instruments fully secured or collateralized by such bank
and savings and loan obligations; (6) dollar denominated short-term
obligations of foreign banks, foreign branches of foreign or U.S. banks
(referred to as "Eurodollars"), and short-term obligations of U.S. branches
and agencies of foreign banks (referred to as "Yankee dollars"); (7)
commercial paper and short-term corporate debt securities rated in one of
the two highest categories for short term debt securities by at least two
nationally recognized securities rating services or one such service if only
one has rated the security (see the Statement of Additional Information for
a description of commercial paper ratings); (8) corporate or other notes
guaranteed by letters of credit from banks in the United States (satisfying
the criteria described in (4), above) or collateralized by United States
Government obligations; and (9) obligations of (i) consumer and commercial
finance companies, (ii) securities brokerage companies, (iii) leasing
companies, and (iv) insurance companies. Certain of these obligations may
be variable or floating rate instruments.
The Fund will enter into repurchase agreements under which it purchases
securities, subject to agreement by the seller to repurchase the securities
at a higher price on a specified date, with the gain establishing the yield
during the Fund's holding period. The Adviser, under general policies
established by the Company's Directors, reviews the creditworthiness of the
other party to any repurchase agreement, and will only enter into repurchase
agreements with parties whose credit is deemed satisfactory. If the seller
becomes bankrupt, the Fund may experience delays in recovering its money,
fail to recover part or all of its investment, and incur costs in disposing
of the securities used as collateral for the sellers repurchase obligation.
The Fund may also enter into reverse repurchase agreements when the
Adviser considers them to be advantageous to the Fund and only for temporary
liquidity purposes not to exceed 60 days, without renewal or extension.
Reverse repurchase agreements permit the Fund to leverage its investment
portfolio by selling securities while agreeing to repurchase them at an
agreed time and price. The bankruptcy of the other party to a reverse
repurchase agreement could cause the Fund to experience delays in recovering
its securities. If, in the meantime, the value of the securities
fluctuated, the Fund could experience a loss.
The Fund will not invest in "firm commitments" or "when issued"
securities.
The Fund may only invest in U.S. dollar-denominated instruments that
are determined to present minimal credit risks and that, at the time of
acquisition, are rated in one of the two highest rating categories by
at least two nationally recognized statistical rating organizations
("NRSROs") or by the only NRSRO that has rated the instrument, or in
the case of unrated instruments, have been determined to be of comparable
quality to either of the above. The Fund's investments must also meet the
maturity and diversification requirements applicable to money market funds.
See "Investment Policies" in the Statement of Additional Information
for information about the quality of the securities in which the Fund may
invest and more complete descriptions of repurchase agreements and other
obligations that the Fund may hold.
Risk Factors. The principal risks associated with the investment in
the Money Market Fund are the risk of fluctuations in the short-term
interest rates, the risks associated with entering into repurchase
agreements described above, and the risk of default among one or more
issuers of securities which comprise the Fund's assets.
11
<PAGE> 42
THE BOND INDEX FUND
The Bond Index Fund began operations on October 1, 1992. On that date
the portfolio of the Intermediate Bond Fund was adjusted to reflect the
investment objective of the Bond Index Fund and the Intermediate Bond Fund
ceased to exist. The historical performance of the Intermediate Bond Fund,
shown in this Prospectus, should not be viewed as historical financial data
of the Bond Index Fund.
Investment Objective. The objective of the Bond Index Fund is to
provide a rate of return that reflects the performance of the
publicly-traded bond market as a whole. The Fund uses the Lehman Brothers
Government/Corporate Bond Index as its standard for performance comparison.
Investment Policies. The portfolio will consist of bond issues drawn
from the Lehman Brothers Government/Corporate Bond Index. This Index is
composed of approximately 5,000 corporate and U.S. Government debt issues
rated Baa or better, with at least one year to maturity and with a total par
value of at least $25 million outstanding. The Index is weighted by the
market value of the issues included in the Index. The Fund will not invest
in all the bonds in the Index. In attempting to parallel the performance of
the Index, the Fund uses a sampling method. Sampling calls for the
Investment Adviser to maintain approximately the same mix of sectors, as
measured by quality and duration, that the Index has, while not holding all
of the bonds in each Index sector. Some money market investments such as
those held by the Money Market Fund may be purchased, but they must meet the
quality criteria set forth above. Fixed income obligations of the U.S.
Government and its agencies and instrumentalities will also be included in
the Fund's portfolio from time to time. The emphasis of the Fund will be on
bonds with maturities in the range of those associated with the Lehman
Brothers Government/Corporate Bond Index.
This Fund will not concentrate in any segment of industry, nor in any
rating category. The Fund will be diversified in accordance with the
diversification of the Lehman Brothers Government/Corporate Bond Index.
Risk Factors. The Fund will not seek to outperform the Index but to
match it, which means the Fund's value will decline when bond prices
decline. Interest rate changes can have a powerful effect on the value of
fixed bond portfolios of this quality level and maturity. Therefore, this
Fund should be regarded as having a moderate level of market risk and
current income volatility, while being subject to relatively little risk
that the bond issuers will default (financial risk).
THE MANAGED EQUITY FUND
Investment Objective. The objective of the Managed Equity Fund is to
obtain long-term growth from investment in common stocks. Securing current
income is a secondary objective.
Investment Policies. This Fund invests in common stocks of companies
that are expected to benefit from changes in secular and cyclical trends and
which are considered to be undervalued based on historical valuation
criteria.
The Fund's investments are made with the philosophy that a
high-quality, diversified portfolio of undervalued securities will
outperform the market over the longer term, as well as preserve principal in a
difficult market environment. The opportunity to purchase securities at less
than their underlying value arises from the market's less-than-perfect ability
to forecast the future, plus the market's bias toward overvaluing exciting
companies and underestimating those which are generally out of favor.
12
<PAGE> 43
Investments considered attractive for the Fund will normally have the
following characteristics:
1. Stocks selling at a relatively low price-earnings ratio or a
relatively low price-to-book ratio, and having a high dividend yield.
2. Stocks which are undervalued relative to their earning power, break-up
value, and inherent profitability.
3. Stocks which have under-performed the general market due to a lower
level of investor expectations regarding the earnings outlook.
4. Stocks whose issuers are of high quality, exhibiting sound financial
strength.
The stocks will be bought and sold for the Fund by Morgan Stanley
Asset Management Inc., the Fund's sub-adviser ("Morgan Stanley"). Morgan
Stanley takes a long-term investment approach. Emphasis is placed on a
stock's value rather than the potential for a short term change in its
general market price.
The staff of the Investment Adviser regularly reviews Morgan Stanley's
transactions. The Fund will invest only in common stocks issued by
companies that the Investment Adviser feels are high in quality, and the
portfolio will be diversified as to types of industries.
Risk Factors. The composition of this Fund will change, as it is not
attempting to parallel an index of identified stocks. Financial risk should
be reduced by the active management of this account but the Fund will be
subject to the risk that the prices of most publicly-traded stocks might
decline (market risk). Portfolio turnover (discussed on the next page) will
be relatively low for this Fund.
THE ASSET ALLOCATION FUND
Investment Objective. The primary objective of the Fund is to obtain a
high rate of long-term total return, composed of capital growth and income
payments. Preservation of capital is the secondary objective and chief limit
on investment risks.
Investment Policies. This Fund will invest in common stocks,
publicly-traded bonds of intermediate maturity, and money market
instruments. It will observe the same quality restrictions on such investments
as are observed by the related Funds which specialize in one investment medium.
The mixture of investments by type will vary as the Investment Adviser exercises
its discretion in its effort to produce the highest total return consistent with
prudence and preservation of capital. At times, the emphasis will be on capital
growth; at other times income will be given a higher priority than growth. The
Investment Adviser will respond to economic circumstances in structuring the
portfolio, with total return as the key factor.
Risk Factors. As with the Managed Equity Fund, the active management
of this Fund is apt to produce a higher level of portfolio turnover than the
S & P 500 Index Fund or the Bond Index Fund have. Individuals who direct
premium dollars into this Fund are relying more on the skill of the
Investment Adviser to build and maintain an appropriate portfolio than they
are when they select a fund that is devoted to a single investment medium.
The Fund may, at times, be subject to high levels of market and financial
risk and income volatility. These risks will always be present to some
degree.
INVESTMENT RESTRICTIONS
Investments of the Funds are further restricted by certain policies
that may not be changed without a vote of shareholders. See "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.
13
<PAGE> 44
PORTFOLIO TURNOVER
The annual rate at which the composition of each Fund changes is
referred to as the portfolio turnover rate, which is defined as the lesser
of the purchases or sales of securities in a Fund stated as a percentage of
the assets in the Fund. Portfolio turnover reflects the extent of trading in
the portfolio, and trading is usually accompanied by the payment of
commissions to brokers. Commission expenses will reduce the return on a
Fund. Portfolio turnover should vary among the different Funds, as well as
over time. Actual turnover figures are included in the Financial Highlights
on pages 4 through 8.
The S & P 500 Index Fund is not likely to experience turnover in
excess of 50% per year as its portfolio will always be structured so as to
parallel the Standard and Poor's 500 stocks.
The Bond Index Fund is not likely to experience turnover in excess of
40% as its portfolio will always be structured to parallel the Lehman
Brothers Government/Corporate Bond Index.
The Managed Equity Fund and the Asset Allocation Fund are liable to
have turnover in excess of 200% at times, as they will be actively managed
in pursuit of their objectives.
MANAGEMENT OF THE COMPANY
The Board of Directors of Capital Company is responsible for the
management of Capital Company's business and affairs, and creates and
supervises the execution of the investment policies of Capital Company,
which are administered by the Investment Adviser (General American
Investment Management Company, an affiliate of General American Life
Insurance Company). The Investment Adviser's address is 700 Market Street,
St. Louis, Missouri 63101, the same address as that of General American. The
Investment Adviser provides investment advice and some administrative
services for all of Capital Company's Funds. In addition to selecting
investments for four of the Funds and reviewing the practices of
broker-dealers buying and selling investments for Capital Company, the
Investment Adviser oversees the performance of the sub-adviser for the Managed
Equity Fund.
The Investment Adviser was formed in 1982 to manage General American's
separate accounts and funds of affiliated clients. Its personnel are General
American employees who also are responsible for management of General
American's investments.
The manager of the S & P 500 Index Fund, Money Market Fund, Bond Index
Fund, and Asset Allocation Fund is Douglas R. Koester, CFA, vice president
of General American Investment Management Company (the Investment Adviser).
He has managed each of those four Funds since their inception October 1,
1987. Mr. Koester earned bachelor's and master's degrees from Washington
University (St. Louis). He has served as vice president of General American
Investment Management Company since 1986.
As of December 1995, the Investment Adviser provided investment advice
to 10 clients that were unaffiliated with General American, and to 24
separate accounts of General American.
For its services to the Funds, the Investment Adviser charges a fee
that is accrued daily against each Fund. The fees charged each Fund, except
the Managed Equity Fund, stated as an annual percentage of the average daily
value of the net assets, are:
S & P 500 Index Fund .25 %
Money Market Fund .125%
Bond Index Fund .25 %
Asset Allocation Fund .50 %
14
<PAGE> 45
The fee charged the Managed Equity Fund is stated as a series of
annual percentages of the average daily value of the net assets of that
Fund. The current fee is .50%. The percentages decrease with respect to
assets of the Fund above certain amounts and are divided between the
Investment Adviser and the Fund's sub-adviser as follows:
<TABLE>
<CAPTION>
Paid to Paid to
Assets Total Fee Sub-Adviser Investment Adviser
------ --------- ----------- ------------------
<S> <C> <C> <C>
First $10 million .50% .40% .10%
Next $20 million .35% .30% .05%
Balance over $30 million .30% .25% .05%
</TABLE>
The sub-adviser for the Managed Equity Fund is Morgan Stanley Asset
Management Inc., 1221 Avenue of the Americas, 21st floor, New York, New York
10020. Morgan Stanley is a Delaware corporation and a wholly-owned
subsidiary of Morgan Stanley Group Inc. Affiliated companies of Morgan
Stanley have been in the investment management business with respect to
stocks since 1935.
The manager of the Managed Equity Fund is the value investment team in
the Chicago office of Morgan Stanley. Team members, both of whom share
equally in the management of the Managed Equity Fund, are as follows.
Alford E. Zick, Jr., a Principal of Morgan Stanley, is a graduate of the
University of Illinois, where he majored in Accounting. He joined Morgan
Stanley in 1989. Stephen C. Sexauer, a Principal of Morgan Stanley,
received his BS (Economics) from the University of Illinois, and an MBA in
Economics and Statistics from the University of Chicago, and has worked at
Morgan Stanley since 1989.
Morgan Stanley receives from the Investment Adviser, as compensation,
a fee in the amount described above as the fee for the sub-adviser for the
Managed Equity Fund. The Investment Adviser is responsible for payment of
the fee to Morgan Stanley, and keeps the balance of the investment
management fee for the services it provides to the Managed Equity Fund.
General American acts as the transfer and dividend disbursing agent
for Capital Company and performs a number of administrative functions for
Capital Company, such as recording the issuance and redemption of shares of
the company. General American values the liabilities of each Fund; computes
the daily income and net asset value of each Fund; recommends independent
auditors and custodians, and coordinates and supervises their activities;
and maintains records not otherwise maintained. General American also
prepares and files tax returns and reports and filings that pertain to
federal and state securities laws; and schedules and plans the agenda for
meetings of Capital Company's directors and shareholders. General American
pays directors who are not interested persons of Capital Company, including
any travel expenses they may have; costs of printing and distributing
communications to current shareholders of Capital Company; insurance
premiums; and charges and expenses of the custodian, accountants, and
counsel.
General American charges Capital Company a fee for these services and
expenses, at an annual rate based on the average daily value of the net
assets in each Fund, as follows:
S & P 500 Index Fund .05%
Money Market Fund .08%
Bond Index Fund .05%
Managed Equity Fund .10%
Asset Allocation Fund .10%
15
<PAGE> 46
Capital Company also pays directly the following expenses: brokerage
commissions and transfer taxes; other state, federal, and local taxes and
filing fees; fees and expenses for qualification of Capital Company and its
shares under federal and state securities laws subsequent to the effective
date of the Prospectus; interest and other borrowing costs; extraordinary or
non-recurring expenses such as those for litigation; and other expenses not
expressly assumed by General American or the Investment Adviser. The total
of these expenses as a percentage of the average daily value of the net
assets in each Fund was as follows in 1995:
S & P 500 Index Fund .01%
Money Market Fund .00%
Bond Index Fund .00%
Managed Equity Fund .09%
Asset Allocation Fund .05%
CAPITAL STOCK
Capital Company issues a separate series of capital stock for each
Fund. Each share of capital stock issued with respect to a Fund has a pro
rata interest in the net assets of the Fund. Each share of capital stock is
entitled to one vote on all matters submitted to a vote of shareholders of
Capital Company, and fractional shares are entitled to a corresponding
fractional vote. An affirmative vote of a majority of the outstanding shares
of each Fund affected by any matter is required for any action to be
approved by the shareholders of Capital Company. Shares of a Fund will be
voted separately from shares of other Funds, however, on matters affecting
only that Fund, such as approval of the investment advisory agreement, an
investment sub-advisory agreement, or changes in the fundamental investment
objectives or restrictions of a Fund. The assets of each Fund are charged
with the liabilities of the Fund and a proportionate share of the general
liabilities of Capital Company. All shares may be redeemed at any time.
TAXES AND DIVIDENDS
For federal income tax purposes, each Fund is treated as a separate
entity. Each Fund intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code"). If each Fund qualifies as a "regulated investment company" and
complies with the provisions of the Code relieving regulated investment
companies which distribute substantially all of their net income (both
ordinary income and capital gain) from federal income tax and the 4%
nondeductible federal excise tax, each Fund will be relieved of such taxes
on the amounts distributed. (See the Statement of Additional Information for
a more detailed discussion.)
Since the sole shareholders of Capital Company will be separate
accounts of General American and separate accounts of General American
affiliates, and in the future possibly separate accounts of unaffiliated
companies, no discussion is included herein as to federal income tax
consequences at the shareholder level. For information concerning the
federal tax consequences to purchasers of variable annuity contracts funded
by Separate Account Two or of the flexible premium variable life insurance
policies funded by Separate Account Eleven, see the respective Prospectuses
for those contracts or policies.
OFFERING AND REDEMPTION OF SHARES
Shares of capital stock of each Fund of Capital Company are offered to
separate accounts of General American and to separate accounts of insurance
companies affiliated with General American. Shares may, in the future, be
offered to separate accounts of unaffiliated insurance companies.
16
<PAGE> 47
Shares are sold and redeemed at their net asset value as next
determined following receipt by a separate account of premium payments,
surrender requests under policies, loan payments, transfer requests, and
similar or related transactions. There is no selling commission or
redemption charge.
Net asset value is determined as of the close of trading (4 p.m.
Eastern time) on the New York Stock Exchange on each day during which the
Exchange is open, except the day after Thanksgiving, when Capital Company is
closed.
An equity security listed on a stock exchange is valued at the
composite sale price on all exchanges. Securities traded in the
over-the-counter market are valued at the closing sale price, and if closing
sale prices are not available, at the latest available bid price.
Occasionally, events affecting the values of such securities may occur
after the close of the New York Stock Exchange. If, during such periods,
events occur which materially affect the value of the securities of a Fund,
such securities will be valued at fair value as determined in good faith by
or under the direction of the Board of Directors of Capital Company.
Debt instruments with maturities of 60 days or less are valued on an
amortized cost basis. This means a purchased instrument is valued at cost on
the date of purchase or, in the case of securities purchased more than 60
days prior to maturity, at the market value on the 61st day before maturity.
Thereafter a constant rate of amortization of any discount or premium and of
accrual of interest income is assumed, regardless of any intervening change
in general interest rates or the market value of the instrument. Other debt
instruments are valued at market value, provided market quotations are
readily available.
All other assets are valued at their fair value as determined in good
faith by, or under the direction of, the Board of Directors of Capital
Company.
Further discussion of asset valuation methods is included in the
Statement of Additional Information under the heading "DETERMINATION OF NET
ASSET VALUE."
PENDING LEGAL PROCEEDINGS
There are no legal proceedings pending to which Capital Company is a party.
CONTRACT OWNER INQUIRIES
Variable annuity contract owner inquiries should be sent to:
Variable Product Administration
P.O. Box 14490
St. Louis, Missouri 63178-4490
Telephone: 1-800-449-6447
17
<PAGE> 48
APPENDIX
Description of Corporate Bond Ratings
Moody's Investors Service, Inc.
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are commonly referred
to as "gilt-edged." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuations 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 Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa-Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics as
well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa-Bonds which are rated Caa 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 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 are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1,2, and 3, in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier l indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a midrange ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
A-1
<PAGE> 49
Standard & Poor's Corporation
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in 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-B-CCC-CC-Bonds rated BB, B, CCC, and CC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
C-The rating C is reserved for income bonds on which no interest is
being paid.
D-Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
The ratings from "AA" to "B" may be modified by the addition of a plus
or minus sign to relative standing within the major rating categories.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by Standard & Poor's has the following
characteristics. Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. 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.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2, or A-3.
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's Investor's Service, Inc. 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) trends 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 presented or may arise as a result of public
interest questions and preparations to meet such obligations.
A-2
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PART B
GENERAL AMERICAN CAPITAL COMPANY
700 Market Street
St. Louis, MO 63101
(314) 231-1700
A No-Load Series Company
with an
S&P 500 Index Fund, Investing in Stocks
Contained in the Standard and Poor's 500 Index,
Money Market Fund, Investing
Primarily in Money Market Instruments,
Bond Index Fund, Investing Primarily in Bonds,
Managed Equity Fund, Investing Primarily in Stocks,
International Equity Fund, Investing in Stocks of Issuers Located
in Europe, Australia, and the Far East,
Special Equity Fund, Investing in Stocks and Convertible
Securities to Obtain Capital Appreciation,
Asset Allocation Fund, Investing in Whatever Combination of
Stocks, Bonds, and Money Market Investments is Expected to
Produce the Highest Return.
This Statement of Additional Information is not a prospectus but
supplements, and should be read in conjunction with the Prospectus for
General American Capital Company. It is incorporated by reference into the
Prospectus. A copy of the Prospectus may be obtained from the Company at
the address and telephone number above.
The date of the Prospectus to which this Statement of Additional Information
relates is 30 April 1996.
The date of this Statement of Additional Information is 30 April 1996.
B-1
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TABLE OF CONTENTS
Page
(B- )
Business History 3
Investment Restrictions 5
Description of Certain Investments 10
United States Government Obligations 10
Bank Obligations 11
Repurchase Agreements 12
Reverse Repurchase Agreements 14
Commercial Paper 15
Stock Index Futures Contracts 18
Forward Foreign Currency Transactions 19
Investment Advisory and Other Services 25
Investment Advisory Agreement and
Investment Sub-Advisory Agreement 25
Accountants 31
Custodian 31
Custodian for International Equity Fund 32
Payment of Expenses 33
Portfolio Transactions and Brokerage Allocations 33
Management of the Company 38
Fund Ownership 38
Capital Stock 39
Persons Controlled by or under Common Control with
Registrant 40
Offering and Redemption of Shares 41
Determination of Net Asset Value 43
Money Market Yield Information 46
Taxes and Dividends 49
Additional Information 51
Legal Matters 51
Reports 51
Other Information 51
Financial Statements 52
B-2
<PAGE> 52
BUSINESS HISTORY
General American Capital Company ("Company") is an open-ended diversified
management investment company established by General American Life Insurance
Company ("General American") to provide for the investment of assets of
separate accounts of General American and affiliated insurance companies.
In addition, it may, in the future, be used for the investment of assets of
separate accounts of insurance companies not affiliated with General
American. Currently, shares are offered to General American Separate
Account Two, General American Separate Account Eleven, unregistered separate
accounts of General American, separate account of RGA Reinsurance Company,
Security Equity Life Insurance Company, Cova Financial Services Life
Insurance Company, Cova Financial Life Insurance Company, and First Cova
Life Insurance Company, all affiliates of General American. Separate
Account Two's assets represent payments for variable annuity contracts, as
do the assets of the Cova separate accounts. Separate Account Eleven's
assets and those of RGA Reinsurance Company, and Security Equity Life
Insurance Company are derived from premium payments made to
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purchase and continue flexible premium variable life insurance policies.
The unregistered separate accounts hold funds for tax-qualified employee
benefit plans, or variable life contracts sold to a limited number of
wealthy and sophisticated purchasers.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of the
Company and may not be changed without approval of a majority of the
outstanding shares of each affected Series (or "Fund"). Each restriction
applies to each Fund of the Company unless otherwise indicated. A change in
policy affecting only one Fund may be affected with the approval of a
majority of the outstanding shares of that Fund only. (As used in the
Prospectus and this Statement of Additional Information, the term "majority
of the outstanding voting shares" means the lesser of: (1) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares are represented; or (2) more than 50% of the outstanding shares.) A
Fund will not:
1. Invest more than 10% of the value of the total assets of the Fund in
securities which are not readily marketable, such as repurchase agreements
having a maturity of more than seven days and securities which are secured
by interests in real estate.
B-4
<PAGE> 54
This restriction does not apply to obligations issued or guaranteed by the
United States government, its agencies, or instrumentalities and does not
apply to the International Equity Fund's entrance into forward foreign
currency contracts as described herein;
In determining the liquidity of Rule 144A Securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the
United States government or its agencies and instrumentalities, the
investment manager, under guidelines established by the board of directors,
will consider any relevant factors including the frequency of trades, the
number of dealers willing to purchase or sell the security and the nature of
marketplace trades.
In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of
1933, the investment manager, under guidelines established by the board of
directors, will evaluate relevant factors such as the issuer and the size
and nature of its commercial paper programs, the willingness and ability of
the issuer or dealer to repurchase the paper, and the nature of the
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clearance and settlement procedures for the paper.
2. Invest more than 5% of the value of the total assets of the Fund in
equity securities which are not readily marketable;
3. Invest in real estate, although it may buy securities of companies
which deal in real estate and securities which are secured by interests in
real estate, including interests in real estate investment trusts;
4. Invest in commodities or commodity contracts, except to the extent
provided in #14 below;
5. Purchase securities of other investment companies if, as a result, the
Fund would own more than 3% of the total outstanding voting stock of any one
investment company, or more than 5% of the Fund's assets would be invested
in any one investment company, or more than 10% of the Fund's assets would
be invested in investment company securities. These limitations do not
apply to securities acquired in connection with a merger, consolidation,
acquisition, or reorganization, or by purchase in the open market of
securities of closed-end investment companies where no underwriter or
dealer's commission or profit, other than customary broker's commission is
involved, and so long as immediately thereafter not more than 10% of such
Fund's total
B-6
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assets, taken at market value, would be invested in such securities;
6. Make loans, except by the purchase of debt obligations customarily
distributed privately to institutional investors, and except that the Fund
may buy repurchase agreements and the International Equity Fund may enter
into forward foreign currency contracts as described herein;
7. As to 75% of the value of the total assets of the Fund, invest more
than 5% of the value of such assets in securities of any one issuer, except
that this restriction shall not apply to securities issued or guaranteed by
the United States Government, its agencies, or instrumentalities;
8. As to 75% of the value of the total assets of the Fund, invest in more
than 10% of the outstanding voting securities of any one issuer;
9. Act as an underwriter of securities of other issuers, except to the
extent that it may be deemed to be an underwriter in reselling securities,
such as restricted securities, acquired in private transactions and
subsequently registered under the Securities Act of 1933;
B-7
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10. Borrow money, except that the Money Market Fund may enter into reverse
repurchase agreements with banks and except that, as a temporary measure for
extraordinary or emergency purposes (such as to permit the fund to honor
redemption requests without being required to dispose of investments in an
inopportune or untimely manner) and not for investment purposes, any Fund
may borrow from banks up to 5% of its assets taken at cost, provided in each
case that the total borrowings have an asset coverage, based on value, of at
least 300% and except that the International Equity Fund may enter into
forward foreign currency contracts in accordance with its investment
policies;
11. Issue securities senior to its common stock except to the extent set
out in paragraph 10 above;
12. Sell securities short, or maintain a short position provided that the
International Equity Fund's use of forward foreign currency contracts as
described herein shall not be deemed to be selling securities short or to be
maintaining a short position;
13. Buy securities on margin, except that it may obtain such short-term
credits as may be necessary for the clearance of
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purchases and sales of securities provided that margin payments and other
deposits in connection with the International Equity Fund's use of forward
foreign currency contracts shall not be deemed to constitute purchasing
securities on margin;
14. Invest in or write puts, calls, straddles, or spreads. However, this
restriction shall not prohibit the Funds (other than the Money Market Fund)
from writing, selling, or purchasing futures contracts in order to close
transactions or to hedge against market risk or interest rate movements nor
shall it prohibit the International Equity Fund from entering into forward
foreign currency contracts as described herein; nor
15. Invest in companies for the purpose of exercising control of
management. If a percentage 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 portfolio securities or amount of
net assets shall not be considered a violation of the restrictions.
In addition to the investment restrictions described above, the Funds will
comply with restrictions contained in any current insurance laws in order
that the assets of insurance company separate accounts may be invested in
Fund shares.
B-9
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DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be
made by the Funds:
UNITED STATES GOVERNMENT OBLIGATIONS
All of the Funds may invest in United States Government obligations. These
consist of both United States Government securities and Government Agency
securities.
Various types of marketable securities are issued by the United States
Treasury, that is, bills, notes, and bonds. Such securities are direct
obligations of the United States Government and differ mainly in the length
of their maturity. Treasury bills, the most frequently issued marketable
government security, have a maturity of up to one year and are issued on a
discount basis. Treasury notes have maturities of more than one and up to
ten years. Treasury bonds have maturities of ten years or more.
Government agency securities are the various types of instruments currently
outstanding or which may be offered in the future issued by agencies and
instrumentalities of the United States
B-10
<PAGE> 60
Government. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmers Home
Administration, Export-Import Bank of the United States, Maritime
Administration, General Services Administration, and Tennessee Valley
Authority. Instrumentalities include, for example, the Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, and the
United States Postal Service. A Fund will purchase such securities only so
long as they are either guaranteed by the United States Treasury (e.g.,
Government National Mortgage Association mortgage-backed securities) or
supported by the issuing agency's or instrumentality's credit or right to
borrow from the United States Treasury (e.g., Federal National Mortgage
Association Discount Notes). Not all securities issued by agencies or
instrumentalities of the United States Government have a guarantee
representing the full faith and credit of the U.S. Government.
BANK OBLIGATIONS
All of the Funds may acquire obligations of banks, which include
certificates of deposit, time deposits, and bankers' acceptances.
B-11
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Certificates of deposit are generally short-term, interest-bearing
negotiable certificates issued by banks or savings and loan associations
against funds deposited in the issuing institution.
Time deposits are funds in a bank or other financial institution for a
specified period of time at a fixed interest rate for which a negotiable
certificate is not received.
A bankers' acceptance is a time draft drawn on a bank which unconditionally
guarantees to pay the draft at its face amount on the maturity date. A bank
customer, which is also liable for the draft, typically uses the funds
represented by the draft to finance the import, export, or storage of goods.
The Funds will not invest in any security issued by a commercial bank unless
the bank is organized and operating in the United States, has total assets
of at least $1 billion, and is a member of the Federal Deposit Insurance
Corporation
REPURCHASE AGREEMENTS
All of the funds may invest in repurchase agreements.
B-12
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A repurchase agreement customarily obligates the seller, at the time it
sells securities to the Fund, to repurchase the securities at a mutually
agreed-upon time and price. The total amount received on repurchase would
be calculated to exceed the price paid by the Fund, reflecting an agreed
interest rate to the settlement date which would not necessarily be related
to the interest rate on the underlying securities. The differences between
the total amount to be received upon repurchase of the securities and the
price which was paid by the Fund upon their acquisition are accrued as
interest and included in the Fund's net income as dividends. The Company
has the right to sell securities subject to repurchase agreements but would
be required to deliver identical securities upon maturity of the repurchase
agreements unless the seller fails to pay the repurchase price. No Fund
will sell securities subject to repurchase agreements prior to the
agreement's maturity unless it is advantageous for the Fund to do so.
During the holding period of a repurchase agreement, the seller must provide
additional collateral if the market value of the obligation falls below the
repurchase price. If a Fund acquires a repurchase agreement and then the
seller defaults at a time when the value of the underlying securities is
less than the
B-13
<PAGE> 63
obligation of the seller, the Company could incur a loss. If the seller
defaults or becomes insolvent, a Fund could experience delays in recovering
its money, may fail to recover part or all of its investment, and may incur
costs in disposing of securities used as collateral. The Funds will enter
into repurchase agreements only with sellers that the Investment Adviser,
applying criteria established by the board of directors, believes to present
minimal credit risks.
REVERSE REPURCHASE AGREEMENTS
The Money Market Fund and the Asset Allocation Fund may enter into reverse
repurchase agreements.
Such agreements involve the sale of money market securities held by the
Company pursuant to an agreement to repurchase the securities at an agreed
upon price, date, and interest payment. Both Funds may use the proceeds of
reverse repurchase agreements for the following purposes: (1) to cover net
redemptions, (2) to avoid a premature sale of securities, and (3) to
purchase other money market securities which either mature, or can be sold
under an agreement to resell, at or prior to the expiration of the reverse
repurchase agreement. The Funds will generally utilize
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<PAGE> 64
reverse repurchase agreements when the interest income to be earned from
the investment of proceeds from the transaction is expected to be greater
than the interest expense of the reverse repurchase transaction. When
effecting reverse repurchase transactions, the Funds will hold cash and
liquid securities in a segregated account at a custodian bank with a dollar
value equal to the Fund's obligations under the revere repurchase
agreements.
COMMERCIAL PAPER
Commercial paper involves an unsecured promissory note issued by a
corporation. It is usually sold on a discount basis and has a maturity at
the time of issuance of one year or less. On the date of investment by the
Fund, such paper must be rated in the highest category for short term debt
securities by at least two nationally recognized securities rating services
such as Standard and Poor's or Moody's Investor's Services (or by one such
rating service, if only one such rating service has rated the security).
The Fund can invest in unrated commercial paper if Board of Directors
determines, in accordance with the procedures of Rule 2a-7, that the unrated
security is of comparable quality to rated securities.
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Commercial paper rated A-1 by Standard & Poor's has the following
characteristics. The issuer's liquidity ratios are adequate to meet cash
requirements, and its long-term senior debt is rated "A" or better, although
in some cases "BBB" credits may be allowed. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow of
the issuer have an upward trend, with allowances 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. Relative strength or weakness of
the above factors determines whether the issuer's commercial paper is rated
A-1, A-2, or A-3.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's Investor's Service, Inc. 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 that 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) trends of earnings
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over a period of ten years; (7) financial strength of any parent company
and the relationships that exist with the issuer; and (8) recognition by the
management of obligations that may be presented or may arise as a result of
public interest questions and preparations to meet such obligations.
B-17
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STOCK INDEX FUTURES CONTRACTS
The S&P 500 Index Fund may purchase stock index futures for the purpose of
hedging against an increase in the price of securities it intends to
purchase, or sell stock index futures for the purpose of hedging against a
decline in values of securities the Fund already owns.
A stock index future obligates the seller to deliver (and the purchaser to
take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
The Fund intends to purchase and sell futures contracts on the Standard &
Poor's 500 Index.
No consideration will be paid or received by the Fund upon the purchase or
sale of a futures contract. Initially, the Fund will be required to deposit
with the broker an amount of cash or cash equivalents equal to 5% to 10% of
the contract amount. This amount is subject to change by the exchange board
of trade on which the contract is traded and members of such exchange board
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of trade may charge a higher amount. 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 Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
Subsequent payments to and from the broker, known as "variation margin,"
will be made daily as the price of the index or securities underlying the
futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
Although the S&P 500 Index Fund intends to purchase or sell futures
contracts only if market conditions are favorable, no assurance can be given
that a liquid market will exist for the contracts at any particular time.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contracts during a single trading day. Once the daily
limit has been reached in a particular contract, no trade may be made that
day at a price beyond that limit. Futures contract prices could move to the
daily limit for several consecutive
B-19
<PAGE> 69
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event and in the event of adverse price
movements, the Fund would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may offset partially or
completely losses on the futures contract.
There can be no assurance of the Fund's success at using stock index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the stock index future and movements in
the price of the securities which are the subject of the hedge. The risk of
imperfect correlation increases as the composition of the Fund's securities
portfolio diverges from the securities included in the index. If the price
of the stock index future moves less than the price of the securities which
are the subject of the hedge, the hedge will not be fully effective but, if
the price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged
at all. If the price of the securities being hedged has moved in a
favorable direction, this advantage will be partially offset by changes in
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the future's value. If the price of the future moves more than the price of
the stock, the Fund will experience either a loss or a gain on the future
which will not be completely offset by movements in the price of the
securities which are the subject of the hedge.
When futures are purchased to hedge against a possible increase in the price
of stocks before the Fund is able to invest its cash (or cash equivalents)
in stocks in an orderly fashion, it is possible that the market may decline
instead; if the Fund then decides not to purchase hedged stocks because of
the concern as to possible further market decline or for other reasons, the
Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
FORWARD FOREIGN CURRENCY TRANSACTIONS
The value of the assets of the International Equity Fund as measured in
United States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Fund may incur costs in connection with conversions between various
currencies.
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<PAGE> 71
The International Equity Fund may use forward contracts to purchase or sell
foreign currencies in an effort to control some of the uncertainties of
foreign currency exchange rate fluctuations. A forward foreign currency
exchange contract will involve an obligation by the Fund to purchase or sell
a specific amount of currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at
a price set at the time of the contract. These contracts are transferable
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally
has no deposit requirements, and no commissions are charged at any stage for
trades. Forward foreign currency transactions will not eliminate
fluctuations in the prices of the Fund's securities or prevent loss if the
prices of such securities should decline.
The International Equity Fund may enter into forward foreign currency
exchange contracts only under two circumstances. First, when the Fund
enters into a contract for the purchase or sale of a security denominated in
a foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. The Fund will then enter into a forward contract for the purchase
or sale, for a fixed amount of dollars, of the amount of foreign currency
B-22
<PAGE> 72
involved in the underlying securities transactions. In this manner the Fund
will be better able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the
subject foreign currency during the period between the date the securities
are purchased or sold and the date on which payment is made or received.
Second, when the Fund's adviser or sub-adviser believes that the currency of
a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell, for a fixed
amount of dollars, the amount of foreign currency approximating the value of
some or all of the Fund's securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the
successful execution of short-term hedging strategy is highly uncertain.
The Fund does not intend to enter into such forward contracts
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<PAGE> 73
under this second circumstance on a regular or continuous basis. The Fund
will also not enter into such forward contracts or maintain a net exposure
to such contracts when the consummation of the contracts would obligate the
Fund to deliver an amount of foreign currency in excess of the value of the
Fund's securities or other assets denominated in that currency. The
sub-adviser believes that it is important to have the flexibility to enter
into such forward contracts when it determines that to do so is in the best
interests of the Fund. The Fund's custodian bank segregates cash or equity
or debt securities in amounts not less than the value of the Fund's total
assets committed to forward foreign currency exchange contracts entered into
under this second type of transaction. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the Fund's commitments with
respect to such contracts. Under normal circumstances, the Fund expects
that any appreciation or depreciation on such forward exchange contracts
will be approximately offset by the depreciation or appreciation in
translation of the underlying foreign investment arising from fluctuations
in foreign currency exchange rates.
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<PAGE> 74
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT
The Company has entered into an Investment Advisory Agreement with General
American Investment Management Company ("Investment Adviser") with respect
to all of its current Funds. The Company and Investment Adviser have also
executed an investment sub-advisory agreement with Morgan Stanley Asset
Management Inc. ("Morgan Stanley") with regard to the Managed Equity Fund,
and an investment sub-advisory agreement with Provident Capital Management,
Inc. ("PCM") with regard to the International Equity Fund and the Special
Equity Fund.
During the year from 1 January 1995 through 31 December 1995, the Company's
Funds charged Investment Adviser these amounts:
<TABLE>
<CAPTION>
<S> <C>
S&P 500 Index Fund $520,640
Money Market Fund $87,548
Bond Index Fund $76,571
Managed Equity Fund $140,974
Asset Allocation Fund $333,640
International Equity Fund $33,616
Special Equity Fund $20,543
</TABLE>
Investment Adviser is wholly owned by General American Holding Company
which, in turn, is wholly owned by General American Life Insurance Company.
Morgan Stanley is a wholly-owned subsidiary of Morgan Stanley Group Inc., a
Delaware corporation which
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<PAGE> 75
engages in the securities business through a number of subsidiaries both
inside and outside the United States. PCM is a wholly-owned subsidiary of
PNC BankCorp, a Pennsylvania bank that, in association with its affiliated
companies, forms one of the largest bank holding companies in the United
States.
Richard A. Liddy, Matthew P. McCauley, and Leonard M. Rubenstein are each
affiliated with both the Company and with General American. Mr. McCauley
and Mr. Rubenstein are also affiliated with Investment Adviser and all three
men are directors and officers of General American Holding Company.
The investment advisory agreement between the Company and Investment Adviser
(the "Investment Advisory Agreement") provides that Investment Adviser,
subject to control and review by the Company's board of directors, is
responsible for the overall management and supervision of each Fund and for
providing certain administrative services to the Company. (See "MANAGEMENT
OF THE COMPANY" in the Prospectus.) Morgan Stanley makes recommendations as
to which securities should be bought or sold for the Managed Equity Fund and
PCM makes recommendations as to which securities should be bought and sold
for the International Equity Fund and the Special Equity Fund, in all cases
subject to
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<PAGE> 76
review by Investment Adviser and, ultimately, by the Company's board of
directors. PCM and Morgan Stanley are responsible for the selection of
brokers and have discretion to execute securities transactions on behalf of
the Funds as to which they are sub-adviser.
Investment Adviser, Morgan Stanley, and PCM may each provide investment
advice to other clients, including, but not limited to, mutual funds,
individuals, pension funds and institutional investors. Occasions may arise
when combined sales or purchases of securities are made for more than one
client in order to obtain favorable execution and low brokerage commissions.
It is the practice of Investment Adviser, Morgan Stanley, and of PCM to
allocate such purchases or sales insofar as feasible among their several
clients in a manner they deem equitable and consistent with their legal
obligations. The goal in making allocations is achieving the same average
price for the principal factors which each company considers in making such
allocation are the investment objectives of the clients, the relative size
of the holdings of each client of the same or comparable securities, and the
availability in each client's account of funds for investment. Despite
these precautions, there may be circumstances when purchases and sales of
securities for one or
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more clients will have an adverse effect on other clients, including a Fund
of the Company.
For its services to the Funds, Investment Adviser charges a fee which is
accrued daily against each Fund. The fees charged each Fund, except the
Managed Equity Fund, International Equity Fund, and Special Equity Fund,
stated as an annual percentage of the average daily value of the Fund's net
assets, are:
<TABLE>
<CAPTION>
<S> <C>
S&P 500 Index Fund .25 percent
Money Market Fund .125 percent
Bond Index Fund .75 percent
Asset Allocation Fund .50 percent
</TABLE>
The fee charged the Managed Equity Fund is stated as a series of annual
percentages of the average daily value of the net assets of that Fund. The
percentages decrease with respect to assets of the Fund above certain
amounts and are divided between Investment Adviser and Morgan Stanley, as
follows:
<TABLE>
<CAPTION>
Paid to
Paid to Investment
Assets Percentage Morgan Stanley Adviser
<S> <C> <C> <C>
First $10 million .50 percent .40% .10%
Next $20 million .35 percent .30% .05%
Balance over $30 .30 percent .25% .05%
million
</TABLE>
Investment Adviser is responsible for payment of the fee to Morgan Stanley.
Morgan Stanley received from Investment Adviser,
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as compensation, a fee as described above for serving as sub-adviser to the
Managed Equity Fund. Under this arrangement Morgan Stanley earned
$117,002.70 during 1995.
During 1995, under a similar arrangement, PCM earned $20,218.54 for services
to the International Equity Fund, and $11,195.50 for services to the Special
Equity Fund.
The advisory fees charged the International Equity Fund and the Special
Equity Fund are each stated as a series of annual percentages of the average
daily value of the net assets of the applicable Fund. The percentages
decrease with respect to the assets of the Fund above certain amounts and
are divided between Investment Adviser and PCM, as follows:
<TABLE>
<CAPTION>
International Paid to
Equity Fund Paid to Investment
Assets Percentage PCM Adviser
<S> <C> <C> <C>
First $10 million .70% .60% .10%
Next $10 million .60% .55% .05%
Balance over $20 million .50% .35% .05%
<CAPTION>
Special Paid to
Equity Fund Paid to Investment
Assets Percentage PCM Adviser
<S> <C> <C> <C>
First $10 million .55% .45% .10%
Next $10 million .45% .40% .05%
Balance over $20 million .40% .35% .05%
</TABLE>
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<PAGE> 79
The Investment Advisory Agreement also obliges Investment Adviser to perform
certain administrative services which are described more completely in the
Prospectus. Neither Investment Adviser, Morgan Stanley, nor PCM is
responsible for providing trading desk services or valuations of assets for
any Fund. As to the performance of these functions, and how the Company
pays for them, see "PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATIONS," in
this Statement of Additional Information.
The Investment Advisory Agreement was approved at the annual meeting of
shareholders of the Company held 22 July 1993. The Investment Sub-Advisory
Agreement with Morgan Stanley was approved at the annual meeting of
shareholders of the Company held 24 July 1991. An Investment Advisory
Sub-Agreement between the Company and PCM was approved by shareholders of
the Funds at the Company's annual meeting held 21 July 1993. These agreements
will continue in effect henceforth from year to year with respect to each
such Fund if approved annually: (1) by the board of directors of the
Company or by a majority of the outstanding shares of that Series, as
determined pursuant to the Investment Company Act of 1940 ("1940 Act"); and
(2) by a majority of the board of directors who are not interested persons,
within the meaning of the 1940 Act, of any party to such Agreements. The
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<PAGE> 80
agreements are not assignable and may be terminated without penalty on 60
days' written notice at the option of any party or, with respect to any
Fund, by the requisite vote of the shareholders of that Fund. See "CAPITAL
STOCK" in this Statement of Additional Information.
ACCOUNTANTS
KPMG Peat Marwick LLP have been selected as the independent public
accountants of the Company, subject to annual ratification by the Company's
shareholders.
CUSTODIAN
All securities which are eligible for deposit at Depository Trust Company of
New York, 55 Water Street, New York, NY are deposited there, in the name and
account of the custodian.
The Bank of New York, 110 Washington Street, New York, NY acts by itself or
in conjunction with Depository Trust Company as custodian of all of the
funds.
B-31
<PAGE> 81
CUSTODIAN FOR INTERNATIONAL EQUITY FUND
The custodian for all securities and assets of the International Equity Fund
is The Bank of New York. Securities purchased for the Fund outside of the
U.S. may be maintained in the custody of foreign banks and trust companies
which are members of The Bank of New York's international custodian network
and foreign depositories (foreign sub-custodians) used by such members. The
Bank of New York has been approved by the Company's board of directors in
accordance with regulations under the Investment Company Act of 1940. If
foreign sub-custodians are used they too will be reviewed and approved by
the Board.
The board of directors will review, at least annually, whether it is in the
best interests of the Fund and its shareholders to maintain the Fund's
assets in each custodial institution. However, with respect to foreign
sub-custodians, there can be no assurance that the Fund and the value of its
shares, will not be adversely affected by acts of foreign governments,
financial or operational difficulties of the foreign sub-custodians,
difficulties and costs of pursuing legal remedies against the foreign
sub-custodians, or application of foreign law to the Fund's foreign
sub-custodial arrangements. Accordingly, an investor should be aware that
non-investment risks attendant to
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<PAGE> 82
holding assets abroad may exceed those associated with investing in the U.S.
PAYMENT OF EXPENSES
General American has paid the organization costs of the Company as well as
the cost of certain administrative expenses, and it may be reimbursed by the
Company for the cost of other administrative expenses, as described in the
Prospectus under the heading "MANAGEMENT OF THE COMPANY."
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATIONS
Under the Investment Advisory Agreement, Investment Adviser has
responsibility for selecting the broker-dealers through which securities are
to be purchased and sold for most of the Funds, subject to the general
control of the board of directors. Morgan Stanley has the primary
responsibility for selecting brokers and supervising transactions for the
Managed Equity Fund, and PCM has similar responsibility for the
International Equity Fund and the Special Equity Fund. No brokerage
commissions were paid on behalf of the Money Market Fund or the Bond Index
Fund.
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<PAGE> 83
The Money Market Fund's investments are usually purchased on a principal
basis directly from issuers, underwriters, or dealers. Accordingly, minimal
brokerage charges are expected to be paid on such transactions. Purchases
from an underwriter generally include a commission or concession paid by the
issuer, and transactions with a dealer usually include the dealer's mark-up.
In placing orders for securities transactions, Investment Adviser's policy
is to attempt to obtain the most favorable price and efficient execution
available. Investment Adviser, subject to the review of the Company's board
of directors, may pay more than the lowest possible commission in order to
obtain better than average execution of transactions or valuable investment
research information, or both. Research information ordinarily consists of
assessments and analyses of the business or prospects of a company,
industry, or economic sector. In the opinion of Investment Adviser,
improved execution and investment research information will benefit the
performance of each of the Funds.
Investment Adviser evaluates factors relating to the liquidity of commercial
paper issued in transactions not involving a public offering under Section
4(2) of the Securities Act of 1933.
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<PAGE> 84
Factors considered include the nature and the size of the issuer and its
commercial paper programs, the willingness and ability of the issuer or
dealer to repurchase the paper, and the nature of the clearance of
settlement procedures for the paper.
When selecting broker-dealers to execute portfolio transactions, Investment
Adviser considers factors including the rate of commission or size of the
broker-dealer's "spread;" the size and difficulty of the order; the nature
of the market for the security, the reliability, financial condition, and
general execution and operational capabilities of the broker-dealer; and the
research, statistical, and economic data furnished by the broker-dealer to
Investment Adviser. In some cases, Investment Adviser may use such
information to assist other investment accounts that it advises and not
exclusively for the Funds. Brokers or dealers which supply research may be
selected for execution of transactions for such other accounts, while the
data may be used by Investment Adviser in providing investment advisory
services to the Funds.
To the best knowledge of management, no director or officer of the Company,
of Investment Adviser, or any person affiliated with either of them has any
material direct or indirect interest in any broker employed by or on behalf
of the Company.
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<PAGE> 85
MANAGEMENT OF THE COMPANY
The directors and officers of the Company, their addresses, their positions
with the Company, and their principal occupations for the past five years
are set forth below:
<TABLE>
<CAPTION>
Position Principal Occupations
During the Last
Five Years
<S> <C> <C>
Theodore M. Armstrong Director Senior Vice President-
424 South Woods Mill Road Finance and
Chesterfield, MO 63017-3467 Administration and Chief
Financial Officer,
Angelica Corporation, St. Louis,
Missouri.
(Uniform manufacture and
sale, and laundry business.)
Alan C. Henderson Director Executive Vice President
7733 Forsyth Blvd. and Chief Financial
Suite 1700 Officer, RehabCare
St. Louis, MO 63105 Corporation, St. Louis,
Missouri (Disability
rehabilitation business).
Prior to June 1991,
Executive Vice President
and Chief Financial Officer,
Comprehensive Care Corporation.
<F*>Richard A. Liddy Chairman, President, and Chief
700 Market Street President Executive Officer,
St. Louis, MO 63101 and Director General American Life
Insurance Company, St. Louis,
Missouri, Jan. 1995 to
present. President and Chief
Executive Officer, May
1992 - Jan. 1995.
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<PAGE> 86
<CAPTION>
Position Principal Occupations
During the Last
Five Years
<S> <C> <C>
<F*>Matthew P. McCauley Director Associate General Counsel
700 Market Street and Secretary and Vice President
St. Louis, MO 63101 General American Life
Insurance Company, St. Louis,
Missouri.
Harry E. Rich Director Executive Vice President
8300 Maryland Avenue and Chief Financial
St. Louis, MO 63105 Officer, Brown Group, Inc.
<F*>Leonard M. Rubenstein Treasurer President, General
700 Market Street American Investment
St. Louis, MO 63101 Management Company;
Executive Vice President-
Investment, General
American Investment
Management Company, St. Louis,
Missouri. Vice President
and Treasurer, Nov. 1984 - Feb. 1991.
John W. Barber Controller Vice President and Controller
<FN>
<F*> Messrs. Liddy, McCauley, and Rubenstein are "interested persons" within
the meaning of Section 2(a)(19) of the 1940 Act since Mr. Liddy is
President, Mr. McCauley is a Vice President, and Mr. Rubenstein is
Executive Vice President of General American Life Insurance Company. Mr.
McCauley is also Vice President and General Counsel, as well as Director, of
Investment Adviser. Mr. Rubenstein is President and a Director of
Investment Adviser.
</TABLE>
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<PAGE> 87
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
Trustees Compensation
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME, TOTAL TOTAL COMPENSATION
POSITION WITH COMPENSATION FROM THE COMPANY
THE COMPANY FROM THE COMPANY<F*> AND FUND COMPLEX<F**>
- -------------------------------------------------------------------------------
<S> <C> <C>
Theodore M. Armstrong $5,500 $8,000
Director
Alan C. Henderson $5,500 $8,000
Director
Richard A. Liddy 0 0
Director and Chairman
Matthew P. McCauley 0 0
Director and Secretary
Harry E. Rich $5,500 $8,000
Director
Leonard M. Rubenstein 0 0
Treasurer
<FN>
- ---------------------------------
<F*> Compensation is the sum paid in 1995.
<F**> Includes compensation from The Walnut Street Prime Reserve Fund, operated
by an affiliate of General American.
</TABLE>
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<PAGE> 88
CAPITAL STOCK
The Company is authorized to issue five hundred million (500,000,000) shares
of capital stock having a par value of one cent ($.01) per share. Of these
authorized shares, one hundred twenty million (120,000,000) have been
allocated to the respective series of stock issued by each of the Company's
Funds, with the balance of the authorized stock available for allocation as
needed in the future.
The present allocations, which are subject to revision by the board of
directors of the Company, are:
<TABLE>
<CAPTION>
Shares Series
<C> <S>
40,000,000 S&P 500 Index Fund
20,000,000 Money Market Fund
10,000,000 Bond Index Fund
20,000,000 Managed Equity Fund
10,000,000 International Equity Fund
10,000,000 Special Equity Fund
10,000,000 Asset Allocation Fund
</TABLE>
The assets received by the Company for the issuance or sale of shares of
each Fund, and all income, earnings, profits and proceeds thereof, are
specifically allocated to each Fund. They constitute the underlying assets
of each Fund, are required to be segregated on the books of account, and are
to be charged with the expenses of such Fund. Any assets which are not
clearly
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<PAGE> 89
allocable to a particular Fund or Funds will be allocated in a manner
determined by the board of directors. General American performs the daily
valuations of assets in each Fund. Accrued liabilities which are not
clearly allocable to one or more funds will generally be allocated among the
Funds in proportion to their relative net assets before adjustment for such
unallocated liabilities. Each issued and outstanding share in a Fund is
entitled to participate equally in dividends and distributions declared with
respect to such Fund, and in the net assets of such Fund remaining after
satisfaction of outstanding liabilities upon liquidation or dissolution.
The shares of each Fund, when issued, will be fully paid and non-assessable,
will have no preference, preemptive, conversion, exchange, or similar
rights, and will be freely transferable. Shares do not have cumulative
voting rights.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Currently, shares of the Funds are sold only to separate accounts of General
American Life Insurance Company and affiliated insurance companies to fund
the benefits under certain variable life insurance policies and variable
annuity contracts. In the
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<PAGE> 90
future, shares of the Funds may also be sold to separate accounts of
unaffiliated insurance companies.
The purchasers of insurance contracts participating in a separate account
that is registered with the Securities and Exchange Commission ("Registered
Separate Account") and invests in one of the Funds will have the right to
instruct General American with respect to the voting of the Registrant's
shares which are held by the separate account on behalf of insurance
contract holders. Shares attributable to policies for which no instructions
are received, and shares that are owned by General American but not
attributable to policies funded by registered separate accounts, will be
voted by General American on each issue in the same proportion as shares for
which there are instructions. General American may form additional separate
accounts which may invest in some or all of the Funds, or its subsidiaries
may form such separate accounts.
OFFERING AND REDEMPTION OF SHARES
The Company is currently offering shares of each Fund without sales charge
and at each Fund's net asset value per share, which is determined in the
manner set forth below under "DETERMINATION
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<PAGE> 91
OF NET ASSET VALUE." Shares in the Company's Funds are sold directly to the
separate accounts; there is no underwriter or distributor. General American
pays any distribution expenses and costs (that is, those arising from any
activity which is primarily intended to result in the sale of shares issued
by the Company), including expenses and costs attributable to the Company,
which are related to the printing and distributing of prospectuses and
periodic reports to new or prospective owners of policies.
The Company redeems all full and fractional shares of its Funds at the net
asset value per share applicable to each Fund next calculated after the
redemption request is received. See "DETERMINATION OF NET ASSET VALUE"
below.
Payment upon redemption is made in cash and ordinarily will occur within
seven days of receipt of a proper notice of redemption. The right to redeem
shares or to receive payment with respect to any redemption of shares of any
Fund may only be suspended: (1) for any period during which trading on the
New York Stock Exchange is restricted or such Exchange is closed, other than
customary weekend and holiday closings; (2) for any period during which an
emergency exists as a result of which disposal of
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<PAGE> 92
securities or determination of the net asset value of that Fund is not
reasonably practicable; or (3) for such other periods as the Securities and
Exchange Commission may by order permit for the protection of shareholders
of that Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Fund of the Company is determined
at the close of trading on the New York Stock Exchange immediately after the
declaration by the Company of dividends, if any, on each day during which
the New York Stock Exchange is open for business, except the day after
Thanksgiving, when the Company is closed. The net asset value per share of
each Fund is computed by dividing the sum of the value of the securities
held by that Fund, plus any cash or other assets and minus all liabilities,
by the total number of outstanding shares of that Fund at such time. Any
expenses borne by the Company, including the investment management fee
payable to Investment Adviser, are accrued daily, except for extraordinary
or non-recurring expenses. See "INVESTMENT ADVISORY AND OTHER SERVICES -
PAYMENT OF EXPENSES," above.
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<PAGE> 93
Fund securities which are traded on national stock exchanges are valued at
the composite sale price on all exchanges as of the close of business of the
New York Stock Exchange on the day prior to the day on which the securities
are being valued. In the absence of any reported sales, Fund securities are
valued at the latest available bid price. Securities traded in the over-the-
counter market for which closing sale prices are available are valued at
such prices. Over-the-counter securities for which closing sales prices are
not available are valued at the latest bid price. 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 direction of the board of
directors of the Company.
The value of a foreign security held by the International Equity Fund is
determined based upon its sale price on the foreign exchange or market on
which it is traded and in the currency of that market, as of the close of
the appropriate exchange or, if there have been no sales during the day, at
the mean of the closing bid and asked prices. Trading in securities on
exchanges and over-the-counter markets in Europe, Australia, and the Far
East is normally completed at various times prior to 3:00 p.m. St. Louis
time, the current closing time of the New York Stock
B-44
<PAGE> 94
Exchange. Trading on foreign exchanges may not take place on every day the
New York Stock Exchange is open. Conversely, trading in various foreign
markets may take place on days when the New York Stock Exchange is not open
and on other days when the Fund's net asset value is not calculated.
Consequently, the calculation of the net asset value for the Fund may not
occur contemporaneously with the determination of the most current market
prices of the securities included in such calculation. In addition, the
value of the net assets held by the Fund may be significantly affected on
days when shares are not available for purchase or redemption.
Quotations of foreign securities in foreign currencies are converted into
the U.S. dollar equivalents at the prevailing market rates as compared by
The Bank of New York, custodian of the assets of the International Equity
Fund at the close of business on the New York Stock Exchange (currently 3:00
p.m., St. Louis time).
Debt instruments with maturities of 60 days or more will be valued at their
market price and there will be no attempt made to keep the value of a share
in any Fund constant.
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<PAGE> 95
Debt instruments with a remaining maturity of less than 60 days held by any
of the Funds are valued on an amortized cost basis. Under this method of
valuation, the security is initially valued at cost on the date of purchase
or, in the case of securities purchased with 60 days or more remaining to
maturity, the market value at the beginning of the 59th day prior to
maturity. Thereafter, straight line amortization of discount or premium is
assumed until maturity regardless of the impact of fluctuating interest
rates on the market value of the security. While valuation at amortized
cost provides a more consistent rate of return, it may result in periods
during which the price which could be received upon sale of the instrument
is higher or lower than its amortized cost value. If for any reason the
fair value of any security is not fairly reflected through the amortized
cost method of valuation, such security will be valued by market quotations,
if available, or otherwise as determined in good faith by or under the
direction of the board of directors.
MONEY MARKET YIELD INFORMATION
The Company may make current yield and effective yield quotations available
for the Money Market Fund. The Money Market Fund's
B-46
<PAGE> 96
yield is its investment income, less expenses, expressed as a percentage of
assets on an annualized basis for a seven-day period. The yield is
expressed as a simple annualized yield and as a compounded effective yield.
The simple annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
seven-day period, subtracting a hypothetical charge reflecting deductions
from the account, dividing the net change in account value by the value of
the account at the beginning of the period, and annualizing the resulting
quotient (base period return) on a 365-day basis (i.e., multiplying it by
365/7). The net change in unit value reflects the value of additional
shares purchased with dividends from the original shares in the account
during the seven-day period, dividends declared on such additional shares
during the period, and expenses accrued during the period.
The compounded effective yield is computed by determining the unannualized
base period return, adding one to the base period return, raising the sum to
a power equal to 365 divided by seven, and subtracting one from the result,
as follows:
B-47
<PAGE> 97
365/7
Effective yield = [(seven day period return + 1) ] - 1
The Money Market Fund's actual yields will fluctuate, and are not
necessarily indicative of future actual yields. Actual yields will depend
on such variables as portfolio quality, average portfolio maturity, the type
of portfolio instruments in which investments are made, changes in interest
rates on money market instruments, portfolio expenses and other factors.
Because the Fund's actual yields will fluctuate, such information may not
provide a basis for comparison with bank deposits, other investments which
pay a fixed yield for a stated period of time, or other investment companies
which may use a different method of determining yield. In addition, the
yield quotation does not reflect the charges deducted from the Separate
Accounts (see the prospectus for the variable life insurance policies or
annuity contracts funded by the Company). If these charges were deducted to
reflect the effective yield to a policy owner, that yield would be lower
than the yield calculated for the Money Market Fund.
B-48
<PAGE> 98
TAXES AND DIVIDENDS
For federal income tax purposes, each Fund of the Company is treated as a
separate entity. Each Fund intends to qualify and elect to be taxed as a
"regulated investment company" under certain provisions of the Internal
Revenue Code (the "Code"). If a Fund qualifies as a "regulated investment
company," and complies with the provisions of the Code relieving regulated
investment companies which distribute substantially all of their net income
(both net ordinary income and net capital gain) from federal income tax, it
will be relieved from such tax on the part of its net ordinary income and
net realized capital gain which it distributes to shareholders. To qualify
for treatment as a "regulated investment company," each Fund must, among
other things, derive in each taxable year at least 90 percent of its gross
income from dividends, interest, payments with respect to securities loans,
and gains from the sale or other disposition of stock or securities or
foreign currencies (subject to the authority of the Secretary of the
Treasury to exclude foreign currency gains which are not ancillary to the
Fund's principal business of investing in stock or securities or options and
futures with respect to such stock or securities), or other income
(including but not limited to gains from options, futures,
B-49
<PAGE> 99
or forward contracts) derived with respect to its investing in such stocks,
securities, or currencies. In addition, to qualify as a "regulated
investment company," each Fund must derive less than 30% of its gross income
in each taxable year from gains (without deduction for losses) from the sale
or other disposition of securities held for less than three months.
The federal tax laws impose a four percent nondeductible excise tax on each
regulated investment company with respect to an amount, if any, by which
such company does not meet distribution requirements specified in such tax
laws. Each Fund of the Company intends to comply with such distribution
requirements and thus does not expect to incur the four percent
nondeductible excise tax.
Since the sole shareholders of the Company will be separate accounts of
General American and separate accounts of General American affiliates and,
possibly in the future, separate accounts of unaffiliated insurance
companies, there is no discussion herein as to the federal income tax
consequences at the shareholder level.
B-50
<PAGE> 100
ADDITIONAL INFORMATION
LEGAL MATTERS
Sutherland, Asbill & Brennan, Washington, DC, has provided advice on certain
matters relating to the federal securities laws.
REPORTS
Annual and semi-annual reports containing financial statements of the
Company, as well as proxy soliciting material for the Company, will be sent
to owners of policies participating in the Funds.
OTHER INFORMATION
This Statement of Additional Information and the Prospectus for the Company
do not contain all the information set forth in the registration statement
and exhibits relating thereto, which the Company has filed with the
Securities and Exchange Commission, Washington, DC, under the Securities Act
of 1933 and the Investment Company Act of 1940. Anyone seeking further
information should refer to this statement and exhibits.
B-51
<PAGE> 101
FINANCIAL STATEMENTS
The audited financial statements for the Company, including the notes
thereto, are included in the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1995. All such financial statements
are incorporated herein by reference. You may receive a copy of such
financial statements without charge upon request to General American Capital
Company at the address and phone number shown on the cover of this
Statement of Additional Information.
B-52
<PAGE> 102
Part C
Consent of Counsel C-3
Accountant's Consent C-4
Financial Statements and Exhibits C-5
Persons Controlled by or Under Common Control
with Registrant C-
Number of Holders of Securities C-
Indemnification C-
Business and Other Connections of Investment Adviser C-
Location of Accounts and Records C-
Management Services C-
Undertakings C-
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS The 1995 financial statements
for the Company are incorporated into Part B of this
Registration Statement by reference from the Annual
Report to Shareholders of the Company for the fiscal
year ended December 31, 1995, as filed with the
Commission pursuant to Rule 30(b-21).
(b) EXHIBITS
1) Articles of Incorporation <F2>
2) Bylaws <F1>
5) Investment Advisory Contracts <F5>
Investment Sub-Advisory Contract with Morgan Stanley Asset
Management, Inc. <F5>
Investment Sub-Advisory Contract with Provident Capital
Management, Inc. <F7>
8) Custodian Agreement <F6>
10) Opinion & Consent of Counsel - filed herewith
12) Consent of the Certified Public Accountant - filed herewith
13) Stock Subscription Agreement with General American Life
regarding Asset Allocation Fund <F1>
16) Diagram of Subsidiaries of General American Life Insurance
Company - filed herewith
17) Management Services Agreement <F2>
C-1
<PAGE> 103
18) Powers of Attorney for:
Theodore M. Armstrong <F4>
Alan C. Henderson <F3>
Richard A. Liddy <F6>
Harry E. Rich <F8>
[FN]
******
<F1> Filed with Registration Statement, 12 November 1986
<F2> Filed with Pre-Effective Amendment No. 1 to the Registration
Statement, 25 June 1987
<F3> Filed with Post-Effective Amendment No. 4, April 1990
<F4> Filed with Post-Effective Amendment No. 5, 25 April 1991
<F5> Filed with Post-Effective Amendment No. 6, 23 April 1992
<F6> Filed with Post-Effective Amendment No. 7, 1 December 1992
<F7> Filed with Post-Effective Amendment No. 8, 28 April 1993
<F8> Filed with Post-Effective Amendment No. 9, 29 April 1994
C-2
<PAGE> 104
April 18, 1996
General American Capital Company
700 Market Street
St. Louis, MO 63101
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of Post-
Effective Amendment No. 11 to the Registration Statement on Form N-1A (File
No. 33-10145) filed by General American Capital Company. In giving this
consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By:
Stephen E. Roth
C-3
<PAGE> 105
The Board of Directors
General American Capital Company:
We consent to the use of our report included herein on the S&P 500 Index, Money
Market, Bond Index, Managed Equity, Asset Allocation, International Equity and
Special Equity Funds of General American Capital Company.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
30 April 1996
C-4
<PAGE> 106
Management's Discussion of Fund Performance
S & P 500 INDEX FUND
This passively-managed fund seeks to obtain investment results that parallel
the overall price and yield performance of common stocks in the Standard &
Poor's 500 Common Stock Price Index (known as the "S & P 500 Index"). Total
return, made up of price appreciation and dividend income, is the measure of
the fund's performance.
For 1995, the S & P 500 Index Fund generated a net return (after expenses)
of 36.85 percent, compared to a 1.15 percent net return for 1994. The S &
P 500 Index itself posted a gain of 37.5 percent for 1995. Factors that
helped sustain the long bull market included the economy's stable growth,
continued low inflation, heavy activity in mergers and acquisitions, and
strong corporate earnings. The 1995 rally was fairly broad-based, and by
year-end the Dow Jones Industrials had already experienced the longest
period of expansion, without at least a 10 percent correction, in its
history. The best performing sectors in 1995 were Financial, Drugs and
Medicines, and Technology. Consumer Cyclicals and Basic Industries (Metal
and Paper) were the weakest performers. At year end, this fund had 458
issues in the portfolio, representing 98 percent of the S & P 500 Index
market capitalization.
During 1995 General American Investment Management Company ("GAIMCO"), the
Investment Adviser (manager) of the S & P 500 Index Fund, continued its
practice of selecting stocks for this fund through the technique of "sector
sampling." This approach relies on a computer model that monitors the
capitalization size of each industrial sector in the S & P 500 Index.
Rather than attempt to replicate the index stock-for-stock, the fund manager
uses the computer model to weight each sector represented in the index,
buying stocks in the same proportions as the overall holdings in the index.
Stock holdings within each sector of the fund reflect the relative size of
those same stocks in the index. The fund manager believes the sector
sampling technique, guided by the computer model, is cost-effective and
efficient in minimizing the amount of tracking error and the number of
transactions necessary to keep the fund in line with the index.
<PAGE> 107
<TABLE>
S&P 500 INDEX FUND
Growth of a $10,000 Investment
10/01/87 - 12/31/95
<CAPTION>
S&P 500 Index
Fund S&P 500 Index
<S> <C> <C>
10/01/87 10,000 10,000
12/31/87 7,795 7,750
12/31/88 9,093 9,037
12/31/89 11,799 11,901
12/31/90 11,349 11,532
12/31/91 14,777 15,049
12/31/92 15,877 16,193
12/31/93 17,438 17,829
12/31/94 17,640 18,060
12/31/95 24,139 24,825
</TABLE>
Fund's performance reflects administrative and management charges, while such
charges are not reflected in the performance of the index. The S & P 500
Index Fund's annual returns for the one- and five- years ended December 31,
1995 were 36.85% and 16.29%, respectively.
Fund began operations on October 1, 1987.
<PAGE> 108
Management's Discussion of Fund Performance
MONEY MARKET FUND
The Money Market Fund had a net return (after expenses) of 5.96 percent in
1995. The fund's performance was consistent through all four quarters,
despite a drop of more than 100 basis points in short-term rates for the
year (including a decline of 30 basis points in the fourth quarter alone).
The Federal Reserve Board lowered the Fed Funds rate 25 basis points in July
and another 25 basis points in December as the slowing economy became more
of a concern than inflation, which remained under control throughout the
year. Average maturity shortened by the end of the fourth quarter to 20.8
days, down from 23.1 days at the end of the second quarter and from 31 days
at the end of 1994.
The fund has an objective of obtaining the highest level of current income
consistent with the preservation of capital and maintenance of liquidity.
During 1995 GAIMCO pursued this objective by continuing a strategy of
investing entirely in high-quality short-term securities. These include
U.S. government obligations or instruments secured by such obligations, and
commercial paper and debt securities that are rated A-1 by Standard & Poor's
or P-1 by Moody's and have an average maturity of no more than 90 days.
<PAGE> 109
<TABLE>
MONEY MARKET FUND
Growth of a $10,000 Investment
10/01/87 - 12/31/95
<CAPTION>
Money Market
Fund
<S> <C>
10/01/87 10,000
12/31/87 10,186
12/31/88 10,976
12/31/89 12,025
12/31/90 13,039
12/31/91 13,846
12/31/92 14,360
12/31/93 14,801
12/31/94 15,424
12/31/95 16,343
</TABLE>
The Money Market Fund's annual returns for the one- and five- years ended
December 31, 1995 were 5.96% and 4.62%, respectively.
Fund began operations on October 1, 1987.
<PAGE> 110
Management's Discussion of Fund Performance
BOND INDEX FUND
The bond market made a dramatic turnaround in 1995, posting one of its best
years ever, following a dismal performance in 1994. The Bond Index Fund
produced a net return of 19.02 percent, compared to a -4.04 percent net
return in 1994. The fund's 1995 returns closely matched the Lehman Brothers
Government/Corporate Bond Index, which is the fund's standard benchmark for
measuring performance. Long-term bonds did especially well, finishing the
year with a total return of 31.4 percent, the best they've done since 1982.
Factors driving the strong market in 1995 included low inflation, moderate
economic growth, a relatively accommodative Federal Reserve Board, inflows
of foreign capital, and anticipation of a federal budget agreement.
The Bond Index Fund is managed by GAIMCO, which selects bond issues for this
fund according to its objective of achieving a rate of return that parallels
the performance of the U.S. bond market as a whole. The Lehman Brothers
Government/Corporate Bond Index is the fund's performance benchmark.
GAIMCO selects bond issues by sampling in the various sectors of the index,
which includes more than 6,000 bonds. The bonds selected for the fund are
chosen on the basis of their quality, maturity, and industrial sector, with
the overall portfolio approximating the mix of quality, maturity, and sector
distribution found in the index.
<PAGE> 111
<TABLE>
BOND INDEX FUND
Growth of a $10,000 Investment
10/01/87 - 12/31/95
<CAPTION>
Lehman Brothers Lehman Brothers
Bond Index Intermediate Gov/Corp Gov/Corp Bond
Fund Bond Index 10/1/87 - 9/30/92 Index 10/1/92 - present
<S> <C> <C> <C>
10/01/87 10,000 10,000
12/31/87 10,460 10,460
12/31/88 11,170 11,158
12/31/89 12,322 12,583
12/31/90 13,442 13,735
12/31/91 15,324 15,743
12/31/92 16,331 16,919
12/31/93 18,028 18,785
12/31/94 17,301 18,126
12/31/95 20,590 21,613
</TABLE>
Fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index. The Bond
Index Fund's annual returns for the one- and five- years ended December 31,
1995 were 19.02% and 8.90%, respectively. On October 1, 1992, the fund
changed its name and investment policies, therefore, it was necessary to use
a new index to reflect this change.
Fund began operations on October 1, 1987.
<PAGE> 112
Management's Discussion of Fund Performance
MANAGED EQUITY FUND
Morgan Stanley Asset Management Inc. actively manages this fund as
sub-adviser under GAIMCO. The Managed Equity Fund has a primary investment
objective of obtaining long-term capital growth through common stocks, with
an emphasis on large cap value stocks. The fund had a net return (after
expenses) of 33.37 percent in 1995. This came in below the S & P 500 Index
(37.5 percent) but outperformed the Lipper Equity Income Index (29.72
percent). The fund's underweighting in the technology sector accounted for
most of the performance difference. Technology stocks normally will be a
lower percentage of assets in a value style equity fund such as this one.
This fund had a higher return than the S & P when comparing them on an
equal-weighted basis (net 33.37 percent for the fund vs. 32.2 percent for
the S & P). At year's end, the fund's largest weightings were in banks,
utilities, and energy. Several drug stocks were sold throughout the year
after significant gains.
Throughout the year, Morgan Stanley continued to pursue a strategy of
investing in common stocks of companies that are expected to benefit from
changes in cyclical trends and which are considered to be undervalued based
on historical valuation criteria. The investments are made with a
philosophy that a high-quality, diversified portfolio of undervalued
securities will outperform the market over the longer term, as well as
preserve principal in a difficult market environment.
<PAGE> 113
<TABLE>
MANAGED EQUITY FUND
Growth of a $10,000 Investment
10/01/87 - 12/31/95
<CAPTION>
Managed
Equity Fund S&P 500 Index
<S> <C> <C>
10/01/87 10,000 10,000
12/31/87 7,824 7,750
12/31/88 8,733 9,037
12/31/89 11,446 11,901
12/31/90 11,104 11,532
12/31/91 14,016 15,049
12/31/92 14,949 16,193
12/31/93 16,275 17,829
12/31/94 15,692 18,058
12/31/95 20,928 24,822
</TABLE>
Fund's performance reflects administrative and management charges, while such
charges are not reflected in the performance of the index. The Managed Index
Fund's annual returns for the one- and five- years ended December 31, 1995
were 33.37% and 13.51%, respectively.
Fund began operations on October 1, 1987.
<PAGE> 114
Management's Discussion of Fund Performance
ASSET ALLOCATION FUND
Like the S & P 500 Index Fund, the Bond Index Fund and the Managed Equity
Fund, the Asset Allocation Fund had one of its best years ever in 1995,
surging to a net return (after expenses) of 28.88 percent. This
outperformed the average U.S. balanced fund return of 24.63 percent, as
measured by Lipper Analytical Service. It also represents a huge swing
upwards from the fund's 1994 return of -3.95 percent. The fund's high
performance in 1995 is attributable in part to the high allocation to stocks
(near 70 percent) and a minimal cash position throughout most of the year.
U.S. equities in general were bolstered by corporations' preference for
stock buybacks and by large inflows to stock mutual funds.
This fund invests in common stocks, publicly-traded bonds of intermediate
maturity, and money market instruments. It observes the same quality
restrictions on such investments as are observed by the other General
American Capital Company funds that specialize in one investment medium. At
year end, the portfolio allocation stood at 68 percent stocks, 31 percent
bonds, and 1 percent cash.
<PAGE> 115
<TABLE>
ASSET ALLOCATION FUND
Growth of a $10,000 Investment
10/01/87 - 12/31/95
<CAPTION>
Lehman Brothers
Asset Allocaction Intermediate Gov/Corp
Fund S&P 500 Index Bond Index
<S> <C> <C> <C>
10/01/87 10,000 10,000 10,000
12/31/87 10,047 7,750 10,460
12/31/88 10,895 9,037 11,158
12/31/89 13,065 11,901 12,583
12/31/90 13,388 11,532 13,735
12/31/91 16,040 15,049 15,743
12/31/92 17,107 16,193 16,872
12/31/93 18,741 17,829 18,355
12/31/94 18,001 18,058 18,001
12/31/95 22,200 24,822 20,760
</TABLE>
Fund's performance reflects administrative and management charges, while such
charges are not reflected in the performance of the index. The Asset
Allocation Fund's annual returns for the one- and five- years ended December
31, 1995 were 28.88% and 11.62%, respectively.
Fund began operations on October 1, 1987.
<PAGE> 116
Management's Discussion of Fund Performance
INTERNATIONAL EQUITY FUND
This fund finished 1995 with a net return (after expenses) of 8.35 percent,
compared with a return of 11.4 percent for the MSCI Europe, Australia, and
Far East Index (EAFE), the benchmark for measuring the fund's performance.
The shortfall occurred in the second half of the year; on June 30 the fund
had a 3.4 percent year-to-date yield, to 2.6 percent for the EAFE Index.
Investors in Great Britain, Europe, and the U.S. reacted to the global
disinflationary environment by increasing their positions in growth and
interest-sensitive sectors of the market. As a result, basic industry
groups lost ground from Europe's price declines in basic economic building
blocks such as steel, chemicals, and semiconductors. The European economy
also suffered from weakness in international trade, continuing problems in
the construction sector, and low levels of business confidence. Meanwhile,
Japan continued to struggle with debt deflation and the slow pace of reform
and restructuring, particularly in the banking sector. However, there were
signs of recovery late in the year in Europe and other Asian developed
markets, aided by lower interest rates.
Provident Capital Management, Inc. (PCM) is the sub-adviser to this fund.
In 1995 it continued to pursue the fund's stated objective of obtaining
long-term capital appreciation through investment in foreign equity
securities. The fund invests primarily in stock issued by companies located
in countries that are part of the EAFE Index maintained by Morgan Stanley
Capital International. Part of the fund's investment strategy is to maintain
at least minimum holdings in France, Germany, Japan, and the United Kingdom.
PCM's value strategy is to select stocks with low price-to-earnings ratios,
with emphasis on macroeconomic factors such as prospects for economic growth
in certain countries, projected levels of inflation, government policies
concerning business, and currency relationships.
<PAGE> 117
<TABLE>
INTERNATIONAL EQUITY FUND
Growth of a $10,000 Investment
02/28/93 - 12/31/95
<CAPTION>
International Europe, Asia,
Equity Fund Far East Index
<S> <C> <C>
02/28/93 10,000 10,000
12/31/93 13,103 13,260
12/31/94 13,944 14,294
12/31/95 15,109 15,919
</TABLE>
Fund's performance reflects administrative and management charges, while such
charges are not reflected in the performance of the index. The
International Equity Fund's annual return for one- year and since inception
ended December 31,1995 were 8.35% and 15.51%
Fund began operations on February 16, 1993.
<PAGE> 118
Management's Discussion of Fund Performance
SPECIAL EQUITY FUND
The Special Equity Fund performed well in 1995, with a net return (after
expenses) of 21.09 percent. The fund, managed by Provident Capital
Management, Inc., concentrates on stocks of smaller companies (market
capitalization of less than $600 million) with low price-to-earnings (p/e)
ratios. After an exceptional third-quarter performance, in which the fund
returned 8.4 percent gross, results tapered off somewhat in the fourth
quarter. For the year, this fund trailed the Russell 2000 Index, which
finished at 28.4 percent. Technology and financial companies continued to
be the top performing sectors, but the fund's weightings in those sectors
were below those of the Russell 2000 Index. Those two sectors represented
more than half of the Russell 2000's performance in 1995.
During 1995, PCM continued to pursue its strategy of investing primarily in
U. S. stocks, traded on national exchanges, whose p/e ratios fall in the
lower 40 percent of all issues traded on those exchanges as measured by p/e
ratio. Issues meeting this test are screened to ensure that their market
capitalization is low in relation to the markets as a whole. Then they are
tested for other measures of fundamental value, including a low
price-to-book ratio, a low price-to-cash flow ratio, and strong balance
sheet characteristics.
<PAGE> 119
<TABLE>
SPECIAL EQUITY FUND
Growth of a $10,000 Investment
02/28/93 - 12/31/95
<CAPTION>
Special
Equity Fund Russell 2000 Index
<S> <C> <C>
02/28/93 10,000 10,000
12/31/93 11,444 11,501
12/31/94 11,350 11,292
12/31/95 13,743 14,503
</TABLE>
Fund's performance reflects administrative and management charges, while such
charges are not reflected in the performance of the index. The Special
Equity Fund's annual returns for one- year and since inception ended December
31, 1995 were 21.09% and 11.21%, respectively.
Fund began operations on February 16, 1993.
<PAGE> 120
Independent Auditors' Report
The Shareholders and Board of Directors
General American Capital Company:
We have audited the statements of assets and liabilities, including the
schedules of investments, of the S & P 500 Index, Money Market, Bond Index,
Managed Equity, Asset Allocation, International Equity and Special Equity
Funds of General American Capital Company as of December 31, 1995, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then
ended, and financial highlights information for the periods presented. These
financial statements and financial highlights information are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial highlights information
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Investment securities held in
custody were confirmed to us by the custodians. As to securities purchased
and sold but not received or delivered, if any, we requested confirmations
from brokers, and where replies were not received, we carried out other
appropriate auditing procedures to verify their existence. 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 information
referred to above present fairly, in all material respects, the financial
position of the S & P 500 Index, Money Market, Bond Index, Managed Equity,
Asset Allocation, International Equity and Special Equity Funds of General
American Capital Company as of December 31, 1995, the results of their
operations for the year then ended, the changes in their net assets for each
of the years in the two year period then ended and financial highlights
information for the periods presented.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 13, 1996
<PAGE> 121
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<CAPTION>
S & P 500 Money Bond Managed Asset International Special
Index Market Index Equity Allocation Equity Equity
Fund<F*> Fund Fund Fund Fund Fund Fund
------------ ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at market value:
(see accompanying schedules)
Bonds $ 0 $ 0 $38,181,824 $ 0 $22,642,536 $ 0 $ 0
Common stocks 246,423,321 0 0 40,317,694 49,860,819 4,883,990 4,058,656
Preferred stocks 0 0 0 0 0 41,049 0
Short term securities 1,949,675 70,304,505 449,926 289,952 384,937 484,921 174,916
------------ ----------- ----------- ----------- ----------- ---------- ----------
Total investments 248,372,996 70,304,505 38,631,750 40,607,646 72,888,292 5,409,960 4,233,572
Cash 0 275,819 34,956 260,139 114,217 11,525 14,307
Receivable from broker 1,152,070 0 0 0 0 39,551 32,295
Dividends and interest receivable 274,169 5,338 659,288 50,812 421,744 17,658 2,919
------------ ----------- ----------- ----------- ----------- ---------- ----------
Total assets 249,799,235 70,585,662 39,325,994 40,918,597 73,424,253 5,478,694 4,283,093
------------ ----------- ----------- ----------- ----------- ---------- ----------
Liabilities:
Bank overdraft 112,099 0 0 0 0 0 0
Payable to General American
Investment Management Company 52,183 7,104 8,292 12,913 31,078 3,163 1,954
Payable to General American
Life Insurance Company 10,437 4,548 1,659 3,455 6,216 1,356 355
Payable to broker 2,311,526 0 0 0 0 14,033 20,336
------------ ----------- ----------- ----------- ----------- ---------- ----------
Total liabilities 2,486,245 11,652 9,951 16,368 37,294 18,552 22,645
------------ ----------- ----------- ----------- ----------- ---------- ----------
Total net assets $247,312,990 $70,574,010 $39,316,043 $40,902,229 $73,386,959 $5,460,142 $4,260,448
============ =========== =========== =========== =========== ========== ==========
Total shares of capital stock
outstanding 10,245,247 4,318,318 1,909,427 1,954,453 3,163,238 361,384 310,007
Net asset value per share (Total
net assets divided by total
shares of capital stock
outstanding) $ 24.14 $ 16.34 $ 20.59 $ 20.93 $ 23.20 $ 15.11 $ 13.74
Total cost of investments $152,618,344 $70,304,505 $36,653,336 $35,786,760 $65,803,800 $5,163,251 $3,670,105
<FN>
<F*>This Fund formerly was known as the Equity Index Fund.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 122
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
S & P 500 Money Bond Managed Asset International Special
Index Market Index Equity Allocation Equity Equity
Fund<F*> Fund Fund Fund Fund Fund Fund
----------- ---------- ---------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 5,086,177 $ 0 $ 0 $ 1,267,081 $ 1,558,392 $ 106,810 $ 33,334
Interest 83,151 4,194,160 2,087,509 68,577 1,456,182 25,985 19,149
Foreign exchange activity, net 0 0 0 0 0 1,051 0
----------- ---------- ---------- ----------- ----------- --------- --------
Total investment income 5,169,328 4,194,160 2,087,509 1,335,658 3,014,574 133,846 52,483
----------- ---------- ---------- ----------- ----------- --------- --------
Expenses:
Investment management charge 520,640 87,548 76,571 140,974 333,640 33,616 20,543
Administrative charge 104,128 56,031 15,314 36,991 66,728 14,407 3,735
----------- ---------- ---------- ----------- ----------- --------- --------
Total expenses 624,768 143,579 91,885 177,965 400,368 48,023 24,278
----------- ---------- ---------- ----------- ----------- --------- --------
Net investment income 4,544,560 4,050,581 1,995,624 1,157,693 2,614,206 85,823 28,205
----------- ---------- ---------- ----------- ----------- --------- --------
Net realized gain (loss) on
investments and foreign currency:
Net realized gain (loss) on
investments 2,122,230 0 (182,350) 3,063,023 3,594,483 289,572 192,065
Net realized gain on
foreign currency conversions 0 0 0 0 0 147,171 0
----------- ---------- ---------- ----------- ----------- --------- --------
Net realized gain (loss)
from investments
and foreign currency 2,122,230 0 (182,350) 3,063,023 3,594,483 436,743 192,065
----------- ---------- ---------- ----------- ----------- --------- --------
Net unrealized gain (loss) on
investments and foreign currency:
Net unrealized gain (loss) on
investments, beginning of year (38,136,860) 0 1,477,929 1,407,363 3,447,896 (369,026)<F**> (63,256)
Net unrealized gain on
investments, end of year 95,754,652 0 1,978,414 4,820,886 7,084,492 356,096 563,467
Net unrealized loss on
foreign currency conversions 0 0 0 0 0 (109,389) 0
----------- ---------- ---------- ----------- ----------- --------- --------
Net unrealized gain (loss)
on investments
and foreign currency 57,617,792 0 3,456,343 6,228,249 10,532,388 (122,319) 500,211
----------- ---------- ---------- ----------- ----------- --------- --------
Net increase in net assets from
operations $64,284,582 $4,050,581 $5,269,617 $10,448,965 $16,741,077 $ 400,247 $720,481
=========== ========== ========== =========== =========== ========= ========
<FN>
<F*>This Fund formerly was known as the Equity Index Fund.
<F**>Represents net unrealized gain on investments and foreign currency at
beginning of year.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 123
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
<CAPTION>
MANAGED
S & P 500 INDEX FUND<F*> MONEY MARKET FUND BOND INDEX FUND EQUITY FUND
-------------------------- ------------------------ ------------------------ ------------------------
1995 1994 1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 4,544,560 $ 4,233,455 $ 4,050,581 $ 2,886,959 $ 1,995,624 $ 2,826,641 $ 1,157,693 $ 857,387
Net realized gain (loss)
on investments and
foreign currency
conversions 2,122,230 2,447,966 0 0 (182,350) (2,163,641) 3,063,023 4,423,280
Net unrealized gain
(loss) on investments
and foreign currency 57,617,792 (4,717,268) 0 0 3,456,343 (2,706,895) 6,228,249 (6,448,976)
------------ ------------ ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets from
operations 64,284,582 1,964,153 4,050,581 2,886,959 5,269,617 (2,043,895) 10,448,965 (1,168,309)
Capital share
transactions 13,725,866 5,577,407 (26,815,810) 6,022,689 7,588,445 (19,134,404) (1,033,582) (230,039)
------------ ------------ ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets 78,010,448 7,541,560 (22,765,229) 8,909,648 12,858,062 (21,178,299) 9,415,383 (1,398,348)
Net assets, beginning
of year 169,302,542 161,760,982 93,339,239 84,429,591 26,457,981 47,636,280 31,486,846 32,885,194
------------ ------------ ----------- ----------- ----------- ----------- ----------- -----------
Net assets, end of year $247,312,990 $169,302,542 $70,574,010 $93,339,239 $39,316,043 $26,457,981 $40,902,229 $31,486,846
============ ============ =========== =========== =========== =========== =========== ===========
<CAPTION>
ASSET INTERNATIONAL SPECIAL
ALLOCATION FUND EQUITY FUND EQUITY FUND
-------------------------- ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 2,614,206 $ 2,353,168 $ 85,823 $ 38,539 $ 28,205 $ 21,251
Net realized gain on investments and
foreign currency conversions 3,594,483 2,747,237 436,743 299,077 192,065 72,295
Net unrealized gain (loss) on investments
and foreign currency 10,532,388 (7,629,430) (122,319) (138,181) 500,211 (105,493)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets from
operations 16,741,077 (2,529,025) 400,247 199,435 720,481 (11,947)
Capital share transactions (3,329,024) (2,566,091) 818,045 747,880 260,826 1,293,458
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets 13,412,053 (5,095,116) 1,218,292 947,315 981,307 1,281,511
Net assets, beginning of year 59,974,906 65,070,022 4,241,850 3,294,535 3,279,141 1,997,630
------------ ------------ ----------- ----------- ----------- -----------
Net assets, end of year $ 73,386,959 $ 59,974,906 $ 5,460,142 $ 4,241,850 $ 4,260,448 $ 3,279,141
============ ============ =========== =========== =========== ===========
<FN>
<F*>This Fund formerly was known as the Equity Index Fund.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 124
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
S & P 500 INDEX FUND <F*>
<CAPTION>
---------------------------------------------------------------------------------
Year Year Year Year Year Year
ended ended ended ended ended ended
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35 $ 11.80
----------- ----------- ----------- ----------- ----------- -----------
Income from operations:
Net investment income 0.46 0.44 0.41 0.39 0.38 0.38
Net realized and unrealized gain
(loss) on investments 6.04 (0.24) 1.15 0.71 3.05 (0.83)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in asset
value per share 6.50 0.20 1.56 1.10 3.43 (0.45)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 24.14 $ 17.64 $ 17.44 $ 15.88 $ 14.78 $ 11.35
=========== =========== =========== =========== =========== ===========
Total return <F2> 36.85% 1.15% 9.83% 7.45% 30.21% -3.82%
Net assets, end of year
(in thousands) $ 247,313 $ 169,303 $ 161,761 $ 123,458 $ 102,076 $ 72,665
Ratio of expenses to average
net assets <F3> 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income
to average net assets <F3> 2.19% 2.50% 2.47% 2.67% 2.89% 3.35%
Portfolio turnover rate 4.75% 7.38% 2.56% 4.38% 3.92% 4.39%
Average commission rate <F4> $ 0.02 $ 0.02 $ 0.03 $ 0.03 $ 0.03 <F5>
<CAPTION>
---------------------------------------
Year Year Three months
ended ended ended
December 31 December 31 December 31
----------- ----------- -----------
1989 1988 1987
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 9.09 $ 7.80 $ 10.00
----------- ----------- -----------
Income from operations:
Net investment income 0.37 0.36 0.06
Net realized and unrealized gain
(loss) on investments 2.34 0.93 (2.26)
----------- ----------- -----------
Net increase (decrease) in asset
value per share 2.71 1.29 (2.20)
----------- ----------- -----------
Net asset value, end of year $ 11.80 $ 9.09 $ 7.80
=========== =========== ===========
Total return <F2> 29.76% 16.65% -22.05% <F3>
Net assets, end of year
(in thousands) $ 65,211 $ 28,917 $ 23,060
Ratio of expenses to average
net assets <F3> 0.32% 0.30% 0.29%
Ratio of net investment income
to average net assets <F3> 3.57% 4.15% 3.40%
Portfolio turnover rate 20.56% 8.41% 2.63%
Average commission rate <F4> <F5> <F5> <F5>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the three months ended December 31, 1987.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
<F5> Information is not required.
<F*> This Fund formerly known as the Equity Index Fund.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 125
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
<CAPTION>
---------------------------------------------------------------------------------
Year Year Year Year Year Year
ended ended ended ended ended ended
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04 $ 12.03
Income from operations:
Net investment income 0.92 0.62 0.44 0.51 0.81 1.01
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 16.34 $ 15.42 $ 14.80 $ 14.36 $ 13.85 $ 13.04
=========== =========== =========== =========== =========== ===========
Total return <F2> 5.96% 4.21% 3.07% 3.71% 6.19% 8.43%
Net assets, end of year
(in thousands) $ 70,574 $ 93,339 $ 84,430 $ 84,880 $ 84,090 $ 85,901
Ratio of expenses to average
net assets <F3> 0.21% 0.21% 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income
to average net assets <F3> 5.78% 4.17% 3.06% 3.68% 6.10% 8.17%
Portfolio turnover rate <F4> <F4> <F4> <F4> <F4> <F4>
<CAPTION>
---------------------------------------
Year Year Three months
ended ended ended
December 31 December 31 December 31
----------- ----------- -----------
1989 1988 1987
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 10.98 $ 10.18 $ 10.00
Income from operations:
Net investment income 1.05 0.80 0.18
----------- ----------- -----------
Net asset value, end of year $ 12.03 $ 10.98 $ 10.18
=========== =========== ===========
Total return <F2> 9.56% 7.76% 1.86%
Net assets, end of year
(in thousands) $ 53,648 $ 52,323 $ 56,442
Ratio of expenses to average
net assets <F3> 0.21% 0.21% 0.21%
Ratio of net investment income
to average net assets <F3> 9.26% 7.46% 7.31%
Portfolio turnover rate <F4> <F4> <F4>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the three months ended December 31,
1987.
<F3> Computed on an annualized basis.
<F4> A portfolio turnover rate is not calculated for securities on which
the maturity or expiration dates at the time of acquisition were one
year or less.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 126
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
BOND INDEX FUND <F1>
<CAPTION>
---------------------------------------------------------------------------------
Year Year Year Year Year Year
ended ended ended ended ended ended
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year <F2> $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44 $ 12.32
----------- ----------- ----------- ----------- ----------- -----------
Income from operations:
Net investment income 1.25 1.06 1.07 1.09 1.08 1.03
Net realized and unrealized gain
(loss) on investments 2.04 (1.79) 0.63 (0.08) 0.80 0.09
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
asset value per share 3.29 (0.73) 1.70 1.01 1.88 1.12
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 20.59 $ 17.30 $ 18.03 $ 16.33 $ 15.32 $ 13.44
=========== =========== =========== =========== =========== ===========
Total return <F3> 19.02% -4.04% 10.39% 6.57% 14.00% 9.09%
Net assets, end of year
(in thousands) $ 39,316 $ 26,458 $ 47,636 $ 20,217 $ 14,438 $ 11,137
Ratio of expenses to average
net assets <F4> 0.30% 0.30% 0.30% 0.39% 0.42% 0.42%
Ratio of net investment income
to average net assets <F4> 6.43% 6.19% 6.11% 6.89% 7.63% 8.12%
Portfolio turnover rate 35.35% 46.42% 8.80% 43.50% 2.23% 18.88%
<CAPTION>
---------------------------------------
Year Year Three months
ended ended ended
December 31 December 31 December 31
----------- ----------- -----------
1989 1988 1987
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F2> $ 11.17 $ 10.46 $ 10.00
----------- ----------- -----------
Income from operations:
Net investment income 0.98 0.90 0.22
Net realized and unrealized gain
(loss) on investments 0.17 (0.19) 0.24
----------- ----------- -----------
Net increase (decrease) in
asset value per share 1.15 0.71 0.46
----------- ----------- -----------
Net asset value, end of year $ 12.32 $ 11.17 $ 10.46
=========== =========== ===========
Total return <F3> 10.32% 6.78% 4.60%
Net assets, end of year
(in thousands) $ 9,545 $ 6,571 $ 7,179
Ratio of expenses to average
net assets <F4> 0.43% 0.43% 0.43%
Ratio of net investment income
to average net assets <F4> 8.24% 8.25% 9.11%
Portfolio turnover rate 28.57% 71.30% 11.44%
<FN>
Notes:
<F1> Name and investment objective changed from Intermediate Bond Fund on
October 1, 1992. The investment advisor charges changed from
.375 percent to .250 percent of the average daily value of the net
assets on October 1, 1992. The objective of the Bond Index Fund
is to provide a rate of return that reflects the performance of the
publicly traded bond market as a whole.
<F2> Components are computed and accumulated on a daily basis.
<F3> Total return is not annualized for the three months ended December 31,
1987.
<F4> Computed on an annualized basis.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 127
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
MANAGED EQUITY FUND
<CAPTION>
---------------------------------------------------------------------------------
Year Year Year Year Year Year
ended ended ended ended ended ended
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 15.69 $ 16.27 $ 14.95 $ 14.02 $ 11.10 $ 11.45
----------- ----------- ----------- ----------- ----------- -----------
Income from operations:
Net investment income 0.58 0.43 0.32 0.35 0.38 0.38
Net realized and unrealized gain
(loss) on investments 4.66 (1.01) 1.00 0.58 2.54 (0.73)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
asset value per share 5.24 (0.58) 1.32 0.93 2.92 (0.35)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 20.93 $ 15.69 $ 16.27 $ 14.95 $ 14.02 $ 11.10
=========== =========== =========== =========== =========== ===========
Total return <F2> 33.37% -3.58% 8.87% 6.66% 26.23% -2.99%
Net assets, end of year
(in thousands) $ 40,902 $ 31,487 $ 32,885 $ 29,401 $ 22,006 $ 14,769
Ratio of expenses to average
net assets <F3> 0.48% 0.49% 0.50% 0.51% 0.53% 0.57%
Ratio of net investment income
to average net assets <F3> 3.14% 2.65% 2.07% 2.55% 2.99% 3.47%
Portfolio turnover rate 44.82% 103.93% 25.89% 9.34% 12.15% 28.38%
Average commission rate <F4> $ 0.04 $ 0.03 $ 0.04 $ 0.04 $ 0.07 <F4>
<CAPTION>
---------------------------------------
Year Year Three months
ended ended ended
December 31 December 31 December 31
----------- ----------- -----------
1989 1988 1987
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 8.73 $ 7.82 $ 10.00
----------- ----------- -----------
Income from operations:
Net investment income 0.26 0.28 0.06
Net realized and unrealized gain
(loss) on investments 2.46 0.63 (2.24)
----------- ----------- -----------
Net increase (decrease) in
asset value per share 2.72 0.91 (2.18)
----------- ----------- -----------
Net asset value, end of year $ 11.45 $ 8.73 $ 7.82
=========== =========== ===========
Total return <F2> 31.07% 11.62% -21.76%
Net assets, end of year
(in thousands) $ 11,785 $ 7,303 $ 78
Ratio of expenses to average
net assets <F3> 0.60% 0.60% 0.60%
Ratio of net investment income
to average net assets <F3> 2.62% 3.24% 2.81%
Portfolio turnover rate 51.26% 15.54% 0.00%
Average commission rate <F4> <F4> <F4> <F4>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the three months ended December 31,
1987.
<F2> Computed on an annualized basis.
<F3> Computed only for accounts holding equity securities.
<F4> Information is not required.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 128
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND
<CAPTION>
---------------------------------------------------------------------------------
Year Year Year Year Year Year
ended ended ended ended ended ended
December 31 December 31 December 31 December 31 December 31 December 31
----------- ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39 $ 13.07
----------- ----------- ----------- ----------- ----------- -----------
Income from operations:
Net investment income 0.82 0.68 0.60 0.62 0.65 0.69
Net realized and unrealized gain
(loss) on investments 4.38 (1.42) 1.03 0.45 2.00 (0.37)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
asset value per share 5.20 (0.74) 1.63 1.07 2.65 0.32
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 23.20 $ 18.00 $ 18.74 $ 17.11 $ 16.04 $ 13.39
=========== =========== =========== =========== =========== ===========
Total return <F2> 28.88% -3.95% 9.55% 6.66% 19.81% 2.47%
Net assets, end of year
(in thousands) $ 73,387 $ 59,975 $ 65,070 $ 53,369 $ 21,149 $ 12,545
Ratio of expenses to average
net assets <F3> 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income
to average net assets <F3> 3.92% 3.70% 3.33% 3.80% 4.37% 5.41%
Portfolio turnover rate 33.74% 75.24% 27.59% 12.14% 5.14% 15.46%
Average commission rate <F4> $ 0.03 $ 0.03 $ 0.04 $ 0.06 $ 0.07 <F5>
<CAPTION>
---------------------------------------
Year Year Three months
ended ended ended
December 31 December 31 December 31
----------- ----------- -----------
1989 1988 1987
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $ 10.90 $ 10.05 $ 10.00
----------- ----------- -----------
Income from operations:
Net investment income 0.60 0.57 0.14
Net realized and unrealized gain
(loss) on investments 1.57 0.28 (0.09)
----------- ----------- -----------
Net increase (decrease) in
asset value per share 2.17 0.85 0.05
----------- ----------- -----------
Net asset value, end of year $ 13.07 $ 10.90 $ 10.05
=========== =========== ===========
Total return <F2> 19.91% 8.44% 0.47%
Net assets, end of year
(in thousands) $ 5,244 $ 1,440 $ 402
Ratio of expenses to average
net assets <F3> 0.60% 0.60% 0.60%
Ratio of net investment income
to average net assets <F3> 4.82% 5.04% 5.56%
Portfolio turnover rate 28.06% 13.52% 0.00%
Average commission rate <F4> <F5> <F5> <F5>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the three months ended December 31,
1987.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
<F5> Information is not required.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 129
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------------------
February 16
Year Year (inception)
ended ended to
December 31 December 31 December 31
----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $13.94 $13.10 $10.00
------ ------ ------
Income from operations:
Net investment income 0.25 0.13 0.14
Net realized and unrealized gain
on investments 0.92 <F*> 0.71 <F*> 2.96 <F*>
------ ------ ------
Net increase in
asset value per share 1.17 0.84 3.10
------ ------ ------
Net asset value, end of year $15.11 $13.94 $13.10
====== ====== ======
Total return <F2> 8.35% 6.42% 31.03%
Net assets, end of year
(in thousands) $5,460 $4,242 $3,295
Ratio of expenses to average
net assets <F3> 1.00% 1.00% 1.00%
Ratio of net investment income
to average net assets <F3> 1.79% 0.98% 1.38%
Portfolio turnover rate 113.91% 46.19% 26.97%
Average commission rate <F4> $0.02 $0.03 $0.03
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the period ended December 31, 1993.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
<F*> Also includes net realized and unrealized gain (loss) on foreign
currency conversions.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 130
GENERAL AMERICAN CAPITAL COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND
-------------------------------------
February 16
Year Year (inception)
ended ended to
December 31 December 31 December 31
----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of year <F1> $11.35 $11.44 $10.00
------ ------ ------
Income from operations:
Net investment income 0.05 0.10 0.06
Net realized and unrealized gain
(loss) on investments 2.34 (0.19) 1.38
------ ------ ------
Net increase (decrease) in
asset value per share 2.39 (0.09) 1.44
------ ------ ------
Net asset value, end of year $13.74 $11.35 $11.44
====== ====== ======
Total return <F2> 21.09% -0.83% 14.44%
Net assets, end of year
(in thousands) $4,260 $3,279 $1,998
Ratio of expenses to average
net assets <F3> 0.65% 0.65% 0.64%
Ratio of net investment income
to average net assets <F3> 0.75% 0.85% 0.64%
Portfolio turnover rate 28.48% 29.48% 22.64%
Average commission rate <F4> $0.02 $0.02 $0.01
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the period ended December 31, 1993.
<F3> Computed on an annualized basis.
<F4> Computed only for accounts holding equity securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 131
GENERAL AMERICAN CAPITAL COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1-Organization
General American Capital Company (the Company), commenced operations on
October 1, 1987, and is registered under the Investment Company Act of 1940
as amended, as an open-end diversified management investment company.
The Company offers to its shareholders seven separate investment funds (the
Funds) which operate as distinct investment vehicles. These are the S & P
500 Index Fund, Money Market Fund, Bond Index Fund, Managed Equity Fund,
Asset Allocation Fund, International Equity Fund, and Special Equity Fund.
The name of the S & P 500 Index Fund was changed from the Equity Index Fund
effective May 1, 1994. The International Equity and Special Equity Funds
began operations on February 16, 1993. As of December 31, 1995, the Company
sells its shares to separate accounts established by General American Life
Insurance Company (General American), RGA Reinsurance Company (RGA) a wholly
owned subsidiary of Reinsurance Group of America, Inc., which is a majority
owned subsidiary of General American, and Security Equity Life Insurance
Company (Security Equity) a wholly owned subsidiary of General American Life
Insurance Company.
Note 2-Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Company in the preparation of financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Investments:
Common stocks of domestic and foreign companies are valued based on the
closing sale price on the Composite Stock Tape for securities traded on a
national or international securities exchange, and for securities not so
traded, at the last bid price of over-the-counter market quotations as of
the close of business on December 31. The market values for bonds and
short term securities with maturities of 60 days or more at date of
valuation are determined daily by an independent broker-dealer based on
current market conditions. Short term securities with maturities of less
than 60 days at date of valuation are valued at amortized cost, which
approximates market value.
B. Repurchase Agreements:
Short term investments include repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in U.S. Government
securities. Under such agreements, the bank or primary dealer agrees to
repurchase the underlying U.S. Government securities at a mutually agreed
upon time and price.
C. Foreign Currency Translations and Foreign Currency Contracts:
Securities and other assets and liabilities denominated in foreign
currencies are translated each business day into U.S. dollars based upon
the closing rate of exchange. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated into
U.S. dollars based upon the prevailing exchange rate on the respective
dates of the transactions.
In accordance with Statement of Position (SOP) 93-4:Foreign Currency
Accounting and Financial Statement Presentation for Investment Companies,
reported net realized gains or losses from foreign currency transactions
arise from sales of portfolio securities and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent actually received or paid.
Reported net unrealized gains and losses from foreign currency transactions
arise from changes in the value of assets and liabilities, including
investments in securities at fiscal year end, resulting from changes in the
exchange rate.
The fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The U.S. dollar value of foreign currency underlying all
contractual commitments held by the fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the
credit risk that the other party will not complete the obligations of the
contract.
At December 31, 1995, the Fund had entered into three foreign currency
exchange contracts that obligate the fund to receive and deliver currency
at specified future dates. The unrealized depreciation of $220 on these
contracts is included in the accompanying financial statements. The terms
of the open contracts are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
In U.S. Dollar
Contracts Exchange Exchange value as of
Sales to deliver for date Dec. 31, 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
French Francs 96,002 $19,501 01/31/96 $19,631
Netherland
Guilder 32,159 20,049 01/04/96 20,063
------- -------
$39,550 $39,694
======= =======
<CAPTION>
---------------------------------------------------------------------------------
In U.S. Dollar
Contracts Exchange Exchange value as of
Buys to receive for date Dec. 31, 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds
Sterling 9,086 $14,033 01/02/96 $14,109
======= =======
</TABLE>
<PAGE> 132
D. Investment Transactions and Related Investment Income:
Investment transactions are recorded on the trade date (date the order to
buy or sell is executed). Dividends are recognized as income on the
ex-dividend date while interest income and amortization of premium and
discount are recorded on an accrual basis.
E. Federal Income Taxes and Distributions to Shareholders:
No provision for Federal income taxes is necessary because each Fund
qualifies as a "regulated investment company" under Subchapter M of the
Internal Revenue Code and intends to distribute each year substantially all
of its net investment income and realized gains to its shareholders.
Shareholders of the funds consist of the separate accounts of General
American, RGA, and Security Equity, each of which are exempt from Federal
income taxes. At December 31, 1995, the Bond Index Fund had an accumulated
capital loss carryforward for tax purposes of $2,361,462. Of this amount,
$15,471, $2,163,641, and $182,350 will expire on December 31, 1997, 2002,
and 2003 respectively.
F. Consent Dividends:
The Funds follow the accounting practice known as consent dividending,
whereby substantially all of its net investment income and realized gains
are treated as being distributed daily to their shareholders and are
immediately reinvested in that Fund.
G. Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets
from operations during the period. Actual results could differ from those
estimates.
Note 3-Management and Administrative Fees
The Company has entered into an Investment Advisory Agreement with General
American Investment Management Company (Investment Advisor) with respect of
all of its Funds. Certain officers and directors of the Company are also
officers and directors of the Investment Advisor. For its services to the
Funds, the Investment Advisor charges a fee which is accrued daily against
each Fund. The fees charged each Fund, stated as an annual percentage of the
average daily value of the net assets, are:
<TABLE>
<S> <C>
S & P 500 Index Fund .250 Percent
Money Market Fund .125 Percent
Bond Index Fund .250 Percent
Asset Allocation Fund .500 Percent
</TABLE>
The fee charged the Managed Equity Fund is stated as a series of annual
percentages of the average daily net assets of that Fund. The percentages
decrease with respect to assets of the Fund above certain amounts and are
divided between the Investment Adviser and the Fund's sub-adviser as follows:
<TABLE>
<CAPTION>
Paid to
Total Paid to Investment
Assets Fee Sub-Adviser Adviser
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .50% .40% .10%
Next $20 million .35% .30% .05%
Balance over $30 million .30% .25% .05%
</TABLE>
The sub-advisor for the Managed Equity Fund is Morgan Stanley Asset
Management Inc.
The fee charged the International Equity Fund is stated as a series of annual
percentages of the average daily net assets of that Fund. The percentages
decrease with respect to assets of the fund above certain amounts and are
divided between the Investment Adviser and the Fund's sub-adviser as follows:
<TABLE>
<CAPTION>
Paid to
Total Paid to Investment
Assets Fee Sub-Adviser Adviser
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .70% .60% .10%
Next $10 million .60% .55% .05%
Balance over $20 million .50% .45% .05%
</TABLE>
The sub-advisor for the International Equity Fund is Provident Capital
Management, Inc.
The fee charged for the Special Equity Fund is stated as a series of annual
percentages of the average daily net assets of that Fund. The percentages
decrease with respect to assets of the Fund above certain amounts and are
divided between the Investment Advisor and the Fund's sub-advisor as follows:
<TABLE>
<CAPTION>
Paid to
Total Paid to Investment
Assets Fee Sub-Adviser Adviser
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .55% .45% .10%
Next $10 million .45% .40% .05%
Balance over $20 million .40% .35% .05%
</TABLE>
The sub-advisor for the Special Equity Fund is Provident Capital Management,
Inc.
All operational expenses of the Company are paid by General American, which
charges administrative fees to each Fund in return. Certain officers and
directors of the Company are also officers and directors of General American,
RGA, and Security Equity.
<PAGE> 133
The administrative expenses are charged at an annual rate based on the
average daily value of the net assets in each Fund, as follows:
<TABLE>
<S> <C>
S & P 500 Index Fund .05 Percent
Money Market Fund .08 Percent
Bond Index Fund .05 Percent
Managed Equity Fund .10 Percent
Asset Allocation Fund .10 Percent
International Equity Fund .30 Percent
Special Equity Fund .10 Percent
</TABLE>
Note 4-Investments
The amortized cost of investments for federal income tax purposes as of
December 31, 1995, is as follows:
<TABLE>
<CAPTION>
S & P 500 Money Bond Managed
Index Market Index Equity
Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Bonds $ -0- $ -0- $ 36,203,410 $ -0-
Common stocks 150,668,669 -0- -0- 35,496,808
Preferred stocks -0- -0- -0- -0-
Short term
securities 1,949,675 70,304,505 449,926 289,952
------------ ------------ ------------ ------------
Total $152,618,344 $ 70,304,505 $ 36,653,336 $ 35,786,760
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Asset International Special
Allocation Equity Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Bonds $ 21,782,310 $ -0- $ -0-
Common stocks 43,636,553 4,642,635 3,495,189
Preferred stocks -0- 35,696 -0-
Short term
securities 384,937 484,920 174,916
-------------- ------------- -------------
Total $ 65,803,800 $ 5,163,251 $ 3,670,105
============== ============= =============
</TABLE>
Gross unrealized gains and losses by fund for the year ended December 31,
1995 excluding the Money Market Fund, which has no unrealized gains or
losses, are as follows:
<TABLE>
<CAPTION>
S & P 500 Bond Managed
Index Index Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Unrealized gains $ 98,896,437 $ 1,994,449 $ 6,515,236
Unrealized losses 3,141,785 16,035 1,694,350
-------------- ------------- -------------
Net unrealized
gain (loss) on
investments $ 95,754,652 $ 1,978,414 $ 4,820,886
============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Asset International Special
Allocation Equity Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Unrealized gains $ 9,068,527 $ 481,265 $ 857,172
Unrealized losses 1,984,035 125,169 293,705
-------------- ------------- -------------
Net unrealized
gain (loss) on
investments $ 7,084,492 $ 356,096 $ 563,467
============== ============= =============
</TABLE>
The "specific identification" method is used to determine the cost of
securities sold.
Purchases and proceeds from sales and maturities of other than short term
securities and United States government obligations for the year ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
S & P 500 Bond Managed
Index Index Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Purchases $ 28,308,192 $ 8,118,974 $ 16,897,109
============== ============= =============
Sales and
Maturities $ 9,806,386 $ 2,467,260 $ 15,983,681
============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Asset International Special
Allocation Equity Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Purchases $ 20,352,752 $ 5,597,275 $ 1,796,024
============== ============= =============
Sales and
Maturities $ 20,535,217 $ 4,916,882 $ 968,743
============== ============= =============
</TABLE>
Purchases and proceeds from sales and maturities of United States government
obligations for the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
S & P 500 Money Bond Managed
Index Market Index Equity
Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Purchases $ -0- $ -0- $ 12,244,453 $ -0-
============ ============ ============ ============
Sales and
Maturities $ -0- $ -0- $ 7,893,266 $ -0-
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Asset International Special
Allocation Equity Equity
Fund Fund Fund
-------------- ------------- -------------
<S> <C> <C> <C>
Purchases $ 3,110,391 $ -0- $ -0-
============== ============= =============
Sales and
Maturities $ 1,273,688 $ -0- $ -0-
============== ============= =============
</TABLE>
<PAGE> 134
Note 5-Capital Stock
As of December 31, 1995, in the aggregate, there were five hundred million
(500,000,000) shares of $.01 par value capital stock authorized.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
S & P 500 INDEX FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,228,987 $ 25,864,766 1,374,183 $ 24,028,846
Shares redeemed (581,653) (12,138,900) (1,052,379) (18,451,439)
----------- ------------ ----------- ------------
Net increase 647,334 $ 13,725,866 321,804 $ 5,577,407
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 12,983,191 $206,236,725 12,171,925 $183,203,312
Shares redeemed (14,716,458) (233,052,535) (11,824,553) (177,180,623)
----------- ------------ ----------- ------------
Net increase
(decrease) (1,733,267) $(26,815,810) 347,372 $ 6,022,689
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
BOND INDEX FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 715,006 $ 13,942,404 374,485 $ 6,610,462
Shares redeemed (334,425) (6,353,959) (1,487,960) (25,744,866)
----------- ------------ ----------- ------------
Net increase
(decrease) 380,581 $ 7,588,445 (1,113,475) ($19,134,404)
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED INDEX FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 247,041 $ 4,557,560 267,617 $ 4,331,670
Shares redeemed (299,196) (5,591,142) (281,653) (4,561,709)
----------- ------------ ----------- ------------
Net increase
(decrease) (52,155) $ (1,033,582) (14,036) $ (230,039)
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 350,026 $ 7,239,131 628,182 $ 11,652,262
Shares redeemed (518,530) (10,568,155) (768,545) (14,218,353)
----------- ------------ ----------- ------------
Net increase
(decrease) (168,504) $ (3,329,024) (140,363) $ (2,566,091)
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 72,666 $ 1,042,914 77,695 $ 1,095,016
Shares redeemed (15,481) (224,869) (24,933) (347,136)
----------- ------------ ----------- ------------
Net increase 57,185 $ 818,045 52,762 $ 747,880
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
SPECIAL EQUITY FUND
----------------------------------------------------------------
Year ended Year ended
December 31, 1995 December 31, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 91,521 $ 1,116,451 135,761 $ 1,530,079
Shares redeemed (70,437) (855,625) (21,391) (236,621)
----------- ------------ ----------- ------------
Net increase 21,084 $ 260,826 114,370 $ 1,293,458
=========== ============ =========== ============
</TABLE>
<PAGE> 135
<TABLE>
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (1.82%)
Boeing Co. 17,175 $ 1,346,091
Crane & Co. 4,200 154,875
General Dynamics Corp. 3,900 230,587
Lockheed Martin Corp. 11,403 900,837
McDonnell Douglas Corp. 6,000 552,000
Rockwell International Corp. 9,950 526,106
Textron Inc. 3,300 222,750
United Technologies Corp. 5,900 559,762
------------
4,493,008
------------
Government & State Agency (1.05%)
Federal Home Loan Mortgage
Corp. 9,500 793,250
Federal National Mortgage
Association 14,500 1,796,187
------------
2,589,437
------------
Air Transport (.36%)
AMR Corp.<F*> 3,400 252,450
Delta Air Lines Inc. 1,400 103,075
Federal Express Corp.<F*> 2,100 155,137
Southwest Airlines 7,300 167,900
US Air Group<F*> 15,100 200,075
------------
878,637
------------
Apparel (.67%)
Jostens Inc. 11,200 271,600
Liz Claiborne Inc. 4,400 121,000
Melville Corp. 4,000 123,000
Nike Inc., Class B 6,000 417,750
Reebok Intl. Inc. 13,500 381,375
Russell Corp. 3,600 99,900
Stride Rite Corp. 12,000 88,500
VF Corp. 3,000 158,250
------------
1,661,375
------------
Commercial Banking (5.62%)
Banc One Corp. 19,615 738,014
Bank of Boston 6,100 282,125
Bank of New York 9,500 463,125
BankAmerica Corp. 19,472 1,260,812
Banker's Trust New York Corp. 5,200 345,800
Barnett Banks Inc. 3,850 227,150
Boatmen's Bancshares 10,200 416,925
Chase Manhattan Corp. 8,900 537,337
Chemical Bank 12,306 722,977
Citicorp 22,700 1,526,575
Comerica Inc. 4,000 160,000
First Bank Systems Inc. 7,100 352,338
First Chicago NBD Corp. 15,464 610,828
First Interstate Bancorp 3,800 518,700
First Union Corporation 8,400 467,250
Keycorp 12,000 435,000
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Banking (continued)
Mellon Bank Corp. 7,500 $ 403,125
J P Morgan & Co. Inc. 8,800 706,200
National City Corp. 7,700 255,062
NationsBank Corp. 16,128 1,122,912
PNC Financial Corp. 12,400 399,900
Suntrust Banks Inc. 7,600 520,600
US Bancorp 12,150 408,544
Wachovia Corp. 8,100 370,575
Wells Fargo & Co. 3,000 648,000
------------
13,899,874
------------
Business Machines (2.89%)
Apple Computer Inc. 5,050 160,969
Compaq Computer Corp.<F*> 14,000 672,000
DSC Communications<F*> 5,000 184,375
Data General Corp.<F*> 20,200 275,225
Digital Equipment Corp.<F*> 7,500 480,937
Honeywell Inc. 5,000 243,125
Intergraph Corp.<F*> 12,200 192,150
IBM Corp. 30,320 2,770,490
Oracle Corporation<F*> 23,050 976,744
Pitney Bowes Inc. 6,900 324,300
Tandem Computers Inc.<F*> 11,600 123,250
Unisys Corp.<F*> 12,200 67,100
Xerox Corp. 5,025 688,425
------------
7,159,090
------------
Business Services (3.98%)
Automatic Data Processing Inc. 7,450 553,162
Browning-Ferris Industries Inc. 9,700 284,937
CUC International<F*> 8,700 296,887
Cabletron Systems<F*> 3,600 291,600
Cisco Systems Inc.<F*> 14,000 1,044,750
Computer Assoc. Intl. 12,000 682,500
De Luxe Check Printers 9,800 284,200
Dun & Bradstreet Corp. 8,275 535,806
First Data Corp. 11,800 789,125
Microsoft Corp.<F*> 32,000 2,808,000
National Service Inds., Inc. 3,600 116,550
Novell Inc.<F*> 17,800 253,650
Sun Microsystems Inc.<F*> 14,800 675,250
Tellabs<F*> 4,900 181,300
3Com Corp.<F*> 5,000 233,125
WMX Technologies Inc. 27,200 809,200
------------
9,840,042
------------
Chemicals (3.40%)
Air Products & Chemicals Inc. 8,100 427,275
Allied-Signal Inc. 14,300 679,250
Dow Chemical Co. 13,237 929,899
E I Du Pont De Nemours & Co. 28,500 1,991,437
(continued)
<PAGE> 136
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Chemicals (continued)
Eastman Chemical 3,875 $ 241,703
B F Goodrich 3,500 238,000
WR Grace & Co. 4,000 236,500
Great Lakes Chemical 3,400 244,800
Hercules Inc. 6,200 349,525
Mallinckrodt Group Inc. 8,400 305,550
Monsanto 5,550 679,875
Morton International Inc. 5,100 182,962
Nalco Chemicals 3,800 114,475
Owens Corning Fiberglas
Corporation<F*> 4,900 219,887
PPG Industries Inc. 13,100 599,325
Rohm & Hass Co. 2,400 154,500
Rubbermaid Inc. 5,800 147,900
Sigma-Aldrich 7,500 371,250
Union Carbide Corp. 7,600 285,000
------------
8,399,113
------------
Construction (.91%)
Corning Inc. 11,400 364,800
Fluor Corp. 2,700 178,200
Home Depot Inc. 24,700 1,179,425
Masco Corp. 6,300 197,662
Pulte Home Corporation 5,200 174,850
Stanley Works 2,800 144,200
------------
2,239,137
------------
Consumer Durables (.42%)
Black & Decker Corp. 5,700 200,925
Maytag Corp. 12,100 245,025
Premark International Inc. 3,900 197,437
Snap-On Inc. 5,600 253,400
Whirlpool Corp. 2,600 138,450
------------
1,035,237
------------
Containers (.16%)
Crown Cork & Seal<F*> 4,600 192,050
Newell Company 5,400 139,725
Stone Container Corp. 3,772 54,222
------------
385,997
------------
Domestic Oil (2.15%)
Amerada Hess Corp. 3,900 206,700
Amoco Corp. 26,700 1,909,050
Ashland Inc. 2,700 94,837
Arco 8,200 908,150
Kerr-McGee Corp. 3,600 228,600
Oryx Energy<F*> 9,400 125,725
Pennzoil Co. 1,900 80,275
Phillips Petroleum Co. 12,500 426,563
Rowan Companies Inc.<F*> 12,700 122,237
Sun Co. Inc. 4,900 134,138
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Domestic Oil (continued)
Tenneco Inc. 8,700 $ 431,738
USX-Marathon Group 15,459 301,451
Unocal Corp. 12,300 358,238
------------
5,327,702
------------
Drugs & Medicines (8.31%)
Abbott Laboratories 40,100 1,669,163
Allergan Inc. 4,100 133,250
Alza Corp.<F*> 3,000 73,500
American Home Products Corp. 16,400 1,590,800
Bard C R Inc. 4,100 132,225
Bausch & Lomb Inc. 8,800 348,700
Baxter International 14,100 590,437
Becton Dickinson & Co. 3,200 240,000
Beverly Enterprises Inc.<F*> 12,700 134,937
Boston Scientific Corp.<F*> 7,800 384,150
Columbia HCA/Healthcare 22,691 1,151,568
Community Psychiatric Centers 10,050 123,113
Humana Inc.<F*> 5,800 158,775
Johnson & Johnson 34,500 2,949,750
Eli Lilly & Co. 14,900 838,125
Merck & Co. Inc. 67,225 4,411,641
Pharmacia & Upjohn Inc. 27,005 1,046,444
Pfizer Inc. 33,400 2,104,200
St. Jude Medical<F*> 3,450 148,350
Schering-Plough Corp. 18,600 1,018,350
Tenet Healthcare<F*> 11,900 245,437
US Healthcare 8,200 381,300
Warner-Lambert Co. 6,900 670,163
------------
20,544,378
------------
Electronics (5.08%)
Advanced Micro Devices Inc. 20,600 339,900
AMP Inc. 9,300 355,725
Applied Materials Inc.<F*> 8,400 330,750
Emerson Electric Co. 11,150 911,512
General Signal Corp. 5,600 181,300
Harris Corp. 3,900 213,038
Hewlett-Packard Co. 26,300 2,202,625
Intel Corp. 43,000 2,440,250
LSI Logic Corp.<F*> 4,100 134,275
Medtronic Inc. 12,000 670,500
Micron Technology Inc. 10,600 420,025
Motorola Inc. 31,000 1,767,000
Northern Telecom Ltd. 12,900 554,700
Perkin-Elmer Corp. 3,500 132,125
Raytheon Co. 13,600 642,600
Silicon Graphics<F*> 7,000 193,375
Teledyne Inc. 13,000 333,125
Texas Instruments Inc. 9,600 494,400
Williams Companies Inc. 5,400 236,925
------------
12,554,150
------------
(continued)
<PAGE> 137
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Energy & Utilities (3.18%)
American Electric Power
Co. Inc. 7,400 $ 299,700
Baltimore Gas & Electric Co. 7,200 205,200
Burlington Resources 6,300 247,275
Central & South West Corp. 10,600 295,475
Coastal Corp. 9,950 368,150
Columbia Gas System Inc.<F*> 6,200 272,025
Consolidated Edison Co.
of N.Y. 10,000 317,500
Consolidated Natural Gas Co. 3,400 154,275
Dominion Resources Inc. 7,800 321,750
Duke Power Co. 9,200 435,850
Enron Corp. 12,300 468,937
Enserch Corp. 9,800 159,250
Entergy Corporation 10,500 307,125
FPL Group Inc. 10,000 463,750
Houston Industries Inc. 10,800 261,900
Niagara Mohawk Power Corp. 18,300 173,850
Northern States Power Co.
(Minn.) 2,500 122,813
Ohio Edison Co. 6,300 148,050
Peco Energy Company 9,100 274,137
Pacific Enterprises 9,100 255,937
Pacific Gas & Electric Co. 19,900 564,663
Pacificorp 10,500 221,813
Public Service Enterprise Group 9,750 298,594
SCE Corp. 25,500 449,438
Sonat Inc. 8,000 285,000
Texas Utilities Co. 12,000 492,000
------------
7,864,457
------------
Energy Raw Materials (1.16%)
Baker Hughes Inc. 9,200 224,250
Dresser Industries Inc. 6,800 165,750
Halliburton Co. 4,800 243,000
Louisiana Land &
Exploration Co. 5,700 244,387
McDermott Intl. 8,900 195,800
Occidental Petroleum Corp. 16,100 344,138
Oneok 9,800 224,175
Peoples Energy Corp. 10,200 323,850
Schlumberger 13,050 903,712
------------
2,869,062
------------
Finance (Non-Banking) (1.99%)
H F Ahmanson & Company 6,500 172,250
H & R Block Inc. 5,300 214,650
Chubb Corp. 3,700 357,975
Corestate Financial Corp. 10,600 401,475
Dean Witter Discover 8,662 407,114
Dial Corp. Arizona 6,400 189,600
Fleet Financial Group Inc. 14,842 604,812
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Finance (Non-Banking) (continued)
Golden West Financial 5,800 $ 320,450
MBNA Corp. 8,400 309,750
Norwest Corporation 19,100 630,300
Republic New York Corp. 2,700 167,737
Safeco Corp. 4,600 158,700
Travelers Inc. 15,944 998,492
------------
4,933,305
------------
Food & Agriculture (5.77%)
Archer-Daniels-Midland Co. 27,453 494,154
CPC International Inc. 9,400 645,075
Campbell Soup Co. 13,500 810,000
Coca-Cola Company 66,400 4,930,200
Conagra Inc. 10,200 420,750
Adolph Coors 4,300 95,137
Fleming Companies Inc. 6,200 127,875
General Mills Inc. 7,500 433,125
Giant Food Inc. 3,900 122,850
H J Heinz Co. 16,650 551,531
Hershey Foods Corp. 3,500 227,500
Kellogg Co. 11,650 899,963
Pepsico Inc. 41,700 2,329,987
Pioneer Hi-Bred International 4,500 250,313
Quaker Oats Co. 5,000 172,500
Ralston Purina Co. 6,000 374,250
Sara Lee Corp. 26,600 851,200
Sysco Corp. 8,800 286,000
Wm. Wrigley Jr. Co. 4,900 257,250
------------
14,279,660
------------
Gold (.47%)
Barrick Gold Corporation 18,000 474,750
Echo Bay Mines Ltd. 15,100 154,775
Homestake Mining Co. 10,600 164,300
Placer Dome Inc. 10,800 260,550
Santa Fe Pacific Gold Corp. 8,067 97,812
------------
1,152,187
------------
Industrial Miscellaneous (4.07%)
Alco Standard Corp. 4,200 191,625
American Greetings 4,800 132,600
Amgen<F*> 13,400 795,625
Asarco Inc. 6,900 220,800
Autodesk Inc. 5,600 191,800
Avery Dennison Corp. 3,400 170,425
Biomet Inc.<F*> 6,800 121,550
Briggs & Stratton 3,600 156,150
Burlington Northern Santa Fe 8,908 694,824
Circuit City Stores Inc. 7,600 209,950
Computer Sciences<F*> 5,700 400,425
Cooper Tire & Rubber 4,000 98,500
Cummins Engine 4,300 159,100
(continued)
<PAGE> 138
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (continued)
EG & G 9,100 $ 220,675
Engelhard Corp. 9,450 205,537
Fleetwood Enterprises 10,600 272,950
Foster Wheeler 3,600 153,000
Freeport McMoran 10,700 300,937
Harnischfeger Industries Inc. 5,800 192,850
Harrahs Entertainment Inc.<F*> 5,200 126,100
Helmerich & Payne 3,900 116,025
Loews Corp. 6,200 485,925
Loral Corp. 8,800 311,300
Lowes Companies Inc. 10,400 348,400
Manor Care 7,100 248,500
Mattel Inc. 9,750 299,813
Mead Corp. 4,100 214,225
National Semiconductor Corp.<F*> 9,900 219,037
Northrop Corp. 4,400 281,600
Panhandle Eastern Corp. 12,200 340,075
Praxair 8,400 282,450
Rite Aid Corp. 13,600 465,800
Ryder System Inc. 4,700 116,325
Service Corp., International 6,700 294,800
Shared Medical Systems Corp. 6,800 369,750
Sherwin-Williams 4,000 163,000
Timken Co. 3,900 149,175
Trinova Corp. 4,500 128,813
Western Atlas Inc. 4,400 222,200
------------
10,072,636
------------
Insurance (3.04%)
Aetna Life & Casualty Co. 4,981 344,934
Alexander & Alexander 9,800 186,200
Allstate Insurance 23,348 960,187
American Intl. Group Inc. 24,412 2,258,110
Cigna Corp. 3,000 309,750
General Re Corp. 4,000 620,000
Jefferson Pilot Corp. 3,600 167,400
Lincoln National Corp. 5,000 268,750
Marsh & McLennan Cos. Inc. 3,000 266,250
Providian Corp. 9,100 370,825
St. Paul Companies Inc. 6,600 367,125
Torchmark Corp. 6,800 307,700
UNUM Corp. 4,000 220,000
USF & G Corp. 9,600 162,000
United Healthcare 8,400 549,150
USLIFE Corp. 5,625 168,047
------------
7,526,428
------------
International Oil (5.99%)
Chevron Corp. 33,600 1,759,800
Exxon Corp. 65,800 5,305,125
Mobil Corp. 22,600 2,525,550
Royal Dutch Petroleum Co. 28,500 4,022,063
Texaco Inc. 15,300 1,201,050
------------
14,813,588
------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Liquor (.67%)
Anheuser-Busch Co. Inc. 13,575 $ 907,827
Brown Forman Corp. `B' 2,400 87,600
Seagram Co. Ltd. 18,900 652,050
------------
1,647,477
------------
Media (2.48%)
Capital Cities/ABC Inc. 9,000 1,110,375
Comcast Corp. 10,800 196,420
R R Donnelley & Sons Co. 7,400 291,375
Dow Jones & Co. 3,500 139,563
Gannett Co. Inc. 6,900 423,487
Harcourt General Inc. 4,000 167,500
Interpublic Group Co. 3,400 147,475
King World Productions<F*> 3,000 116,625
Knight Ridder Inc. 1,800 112,500
McGraw-Hill Inc. 2,500 217,812
Meredith Corporation 9,600 402,000
New York Times Co. 3,100 91,838
Tele Communications Inc.
New Class `A'<F*> 34,100 677,738
Time Warner Inc. 20,380 769,345
Times Mirror Co. 8,100 274,387
Tribune Company 3,100 189,488
Viacom Class B<F*> 17,000 805,375
------------
6,133,303
------------
Miscellaneous Finance (1.19%)
American Express Co. 26,900 1,112,987
American General Corp. 11,400 397,575
Beneficial Corp. 5,000 233,125
Household International Inc. 5,100 303,450
Merrill Lynch & Co. Inc. 9,800 499,800
Salomon Inc. 5,200 183,950
Transamerica Corp. 3,200 233,200
------------
2,964,087
------------
Miscellaneous & Conglomerates (1.00%)
ITT Hartford Group Inc. 5,800 280,575
ITT Industries Inc. 5,800 139,200
ITT Corp. (New) 5,800 307,400
Minnesota Mining &
Manufacturing 21,150 1,403,831
Whitman Corp. 15,100 351,075
------------
2,482,081
------------
Mortgage Backed Securities (.13%)
Morgan Stanley 3,900 314,438
------------
Motor Vehicles (2.31%)
Chrysler Corp. 20,275 1,117,659
Dana Corp. 5,200 152,100
(continued)
<PAGE> 139
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Motor Vehicles (continued)
Eaton Corp. 3,300 $ 176,962
Echlin Inc. 3,700 135,050
Ford Motor Company 56,600 1,634,325
General Motors 38,150 2,017,181
Genuine Parts Co. 5,750 235,750
TRW Inc. 3,300 255,750
------------
5,724,777
------------
Non-Durables & Entertainment (.93%)
Hasbro Inc. 7,600 235,600
McDonald's Corp. 37,000 1,669,625
Price/Costco Inc.<F*> 8,303 126,621
Wendy's International Inc. 12,375 262,969
------------
2,294,815
------------
Non-Ferrous Metals (.65%)
Alcan Aluminum Limited 12,425 386,727
Aluminum Co. of America 7,600 401,850
Cyprus Amax Minerals Co. 4,750 124,094
Inco Ltd. 3,100 103,075
Newmont Mining Corp. 3,744 169,884
Phelps Dodge Corporation 3,400 211,650
Reynolds Metals Co. 3,700 210,438
------------
1,607,718
------------
Optical Photographic Equipment (.58%)
Eastman Kodak Co. 17,300 1,159,100
Polaroid Corp. 5,745 272,169
------------
1,431,269
------------
Paper & Forest Products (1.75%)
Bemis Co. Inc. 5,000 128,125
Boise Cascade Corp. 5,966 205,827
Champion International 3,100 130,200
Federal Paper Board 5,900 306,062
Georgia-Pacific Corp. 4,300 295,088
International Paper Co. 12,200 462,075
James River Corp. 4,100 98,913
Kimberly-Clark Corp. 15,036 1,244,229
Louisiana Pacific Corp. 4,800 116,400
Potlatch Corp. 2,200 88,000
Temple Inland Inc. 6,500 285,187
Union Camp Corp. 3,500 166,687
Westvaco Corp. 8,925 247,669
Weyerhaeuser Co. 9,350 404,388
Willamette Industries 2,800 157,500
------------
4,336,350
------------
Producer Goods (3.95%)
Caterpillar Inc. 9,800 575,750
Cooper Industries Inc. 4,200 154,350
Deere & Co. 14,100 497,025
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Producer Goods (continued)
Dover Corp. 4,800 $ 177,000
FMC Corp.<F*> 2,600 175,825
General Electric Corp. 90,200 6,494,400
W W Grainger Inc. 2,200 145,750
Illinois Tool Works Inc. 4,600 271,400
Ingersoll-Rand Co. 3,500 122,938
Johnson Controls Inc. 2,600 178,750
Navistar Intl. Corp.<F*> 3,630 38,569
Pall Corp. 5,400 145,125
Parker Hannifin Corp. 4,950 169,538
Raychem Corporation 2,800 159,250
Tyco Laboratories Inc. 5,800 206,625
Westinghouse Electric Corp. 15,400 252,175
------------
9,764,470
------------
Railroads & Shipping (.76%)
CSX Corp. 10,000 456,250
Conrail Inc. 3,400 238,000
Norfolk Southern Corp. 7,050 559,594
Union Pacific Corp. 9,600 633,600
------------
1,887,444
------------
Retail (3.76%)
Albertsons Inc. 12,800 420,800
American Stores Co. 5,600 149,800
Charming Shoppes 10,900 31,338
Dayton-Hudson Corp. 2,900 217,500
Dillard Department Stores 5,600 159,600
Federated Department Stores<F*> 10,200 277,950
Gap Inc. 7,000 294,000
Great Atlantic & Pacific Tea
Company Inc. 6,000 138,000
K Mart Corp. 18,100 128,963
Kroger Co.<F*> 8,700 325,163
Limited Inc. 15,200 260,300
May Department Stores Co. 11,684 492,189
Mercantile Stores Inc. 5,000 231,250
Nordstrom Inc. 3,600 145,800
J C Penney Co. Inc. 11,900 566,738
Sears Roebuck & Co. 19,900 776,100
Supervalu Inc. 7,000 220,500
TJX Cos Inc. 4,900 92,488
Tandy Corp. 4,050 168,075
Toys `R' Us<F*> 12,912 280,836
Varity Corp.<F*> 7,200 267,300
Wal-Mart Stores Inc. 124,000 2,759,000
Walgreen Co. 12,400 370,450
Winn-Dixie Stores Inc. 7,200 265,500
Woolworth Corp. 20,200 262,600
------------
9,302,240
------------
(continued)
<PAGE> 140
<CAPTION>
S & P 500 Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Soaps & Cosmetics (3.85%)
Alberto Culver Co. `B' 8,300 $ 285,313
Avon Products Inc. 2,500 188,438
Bristol-Meyers Squibb Co. 27,840 2,390,760
Clorox Co. 2,400 171,900
Colgate-Palmolive Co. 7,300 512,825
Gillette Co. 26,500 1,381,313
International Flavors &
Fragrances 4,500 216,000
Procter & Gamble Co. 36,600 3,037,800
Unilever NV 9,500 1,337,125
------------
9,521,474
------------
Steel (.25%)
Bethlehem Steel Corp.<F*> 10,400 144,300
Inland Steel Industries Inc. 2,200 55,275
Nucor Corp. 4,800 274,200
USX US Steel 4,871 149,783
------------
623,558
------------
Telephone (8.79%)
A T & T Corp. 85,747 5,552,118
Airtouch Communications <F*> 24,964 702,113
Alltel 9,500 280,250
Ameritech Corp. 32,596 1,919,090
Bell Atlantic Corp. 23,064 1,542,405
Bellsouth Corp. 52,094 2,266,089
GTE Corp. 53,800 2,360,475
MCI Communications Corp. 42,600 1,112,925
Nynex Corp. 25,464 1,375,056
Pacific Telesis Group 20,764 695,594
SBC Communications Inc. 33,096 1,894,746
Sprint Corp. 19,600 776,650
U S West Inc. 23,164 825,218
US West Media Group<F*> 23,164 440,116
------------
21,742,845
------------
Tires Rubber Goods (.12%)
Goodyear Tire & Rubber Co. 6,472 293,667
------------
Tobacco (1.96%)
American Brands Inc. 9,900 440,550
Philip Morris Companies Inc. 46,050 4,156,013
UST Inc. 7,800 260,325
------------
4,856,888
------------
Travel & Recreation (.88%)
Walt Disney Productions 27,200 1,601,400
Hilton Hotels Corp. 3,900 239,850
Marriott International Inc. 8,550 327,038
------------
2,168,288
------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Trucking & Freight (.07%)
Paccar Inc. 2,070 $ 87,199
Roadway Services Inc. 1,800 87,975
------------
175,174
------------
Utilities, Electrical & Gas (1.07%)
Carolina Power & Light Co. 6,600 227,700
Cinergy Corp. 4,808 147,245
Detroit Edison Co. 5,700 196,650
General Public Utilities Corp. 5,000 170,000
Nicor Inc. 9,100 250,250
Noram Energy Corp. 15,700 139,338
P P & L Resources Inc. 8,300 207,500
Southern Co. 34,200 842,175
Unicom Corp. 9,200 301,300
Union Electric Company 3,600 150,300
------------
2,632,458
------------
Total common stocks (99.64%)
(cost $150,668,669) 246,423,321
------------
<CAPTION>
- --------------------------------------------------------------------
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (.79%)
AGA Capital Inc.,
5.73%, due 01/02/1996
(amortized cost $1,949,675) $1,950,000 $ 1,949,675
------------
Total investments (100.43%)
(amortized cost $152,618,344) 248,372,996
Other net liabilities (-.43%) (1,060,006)
------------
Total net assets (100.00%) $247,312,990
============
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 141
<TABLE>
Money Market Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Par Interest Maturity Market
Short Term Securities Value Rate (%) Date Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper
Aerospace & Military Technology (2.83%)
International Lease Finance 2,000,000 5.79 01/09/1996 $ 1,997,444
-----------
Energy & Utilities (10.62%)
Southern California Gas<F*> 2,000,000 5.76 01/25/1996 1,992,427
Sony Capital Corporation<F*> 1,000,000 5.81 01/23/1996 996,486
Sony Capital Corporation<F*> 1,500,000 5.70 02/21/1996 1,487,994
Pactel Capital 2,500,000 6.01 01/10/1996 2,496,250
Songs Fuel 525,000 5.80 01/19/1996 523,491
-----------
7,496,648
-----------
Finance (Non-Banking) (36.40%)
Merrill Lynch & Co. 1,280,000 5.80 01/30/1996 1,274,071
Xerox Credit Corp. 2,000,000 5.75 01/26/1996 1,992,083
Xerox Credit Corp. 1,000,000 5.78 01/25/1996 996,167
Panasonic Finance<F*> 2,500,000 6.01 01/04/1996 2,498,750
GE Capital 2,720,000 5.73 02/09/1996 2,703,263
Transcapital Finl. Corp. 1,775,000 5.77 01/30/1996 1,766,893
American General Finance 2,000,000 5.75 01/26/1996 1,992,083
American Express Credit Corp. 2,500,000 5.75 01/25/1996 2,490,500
AGA Capital Inc.<F*> 1,000,000 5.91 01/12/1996 998,213
AGA Capital Inc.<F*> 1,200,000 5.87 02/02/1996 1,193,899
AGA Capital Inc.<F*> 2,390,000 6.00 01/02/1996 2,389,602
Goldman Sachs 1,850,000 5.79 02/09/1996 1,838,536
Goldman Sachs 1,000,000 5.79 02/09/1996 993,803
Ford Motor Credit Corp. 1,350,000 5.77 01/12/1996 1,347,640
Ford Motor Credit Corp. 420,000 5.75 01/19/1996 418,803
Ford Motor Credit Corp. 795,000 5.80 01/26/1996 791,820
-----------
25,686,126
-----------
Food & Agriculture (3.54%)
Cargill Financial Services Co.<F*> 2,500,000 6.45 01/02/1996 2,499,552
-----------
Industrial Miscellaneous (8.21%)
Associates Corp. of North America 2,000,000 5.75 01/25/1996 1,992,400
PHH Group Inc. 735,000 5.85 01/10/1996 733,927
Gannett Co. Inc. 1,775,000 5.83 01/19/1996 1,769,852
South Carolina Electric & Gas 1,300,000 5.84 01/26/1996 1,294,764
-----------
5,790,943
-----------
Insurance (1.41%)
John Hancock Capital Corp.<F*> 1,000,000 5.77 01/11/1996 998,408
-----------
Producer Goods (2.22%)
Dover Corp.<F*> 1,575,000 5.73 01/25/1996 1,569,015
-----------
Telephone (6.92%)
GTE South 2,500,000 5.78 02/07/1996 2,485,277
GTE Northwest Inc. 405,000 5.82 01/03/1996 404,869
Southern New England Telephone<F*> 2,000,000 5.76 01/26/1996 1,992,111
-----------
4,882,257
-----------
(continued)
<PAGE> 142
<CAPTION>
Money Market Fund
Schedule of Investments - December 31, 1995
- -----------------------------------------------------------------------------------------------------------------
Par Interest Maturity Market
Short Term Securities Value Rate (%) Date Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities, Electrical & Gas (23.22%)
Teco Finance Inc.<F*> 2,000,000 5.75 01/31/1996 $ 1,990,517
Baltimore Gas & Electric Co. 1,105,000 5.81 01/18/1996 1,101,984
Interstate Power Company 1,000,000 5.78 01/18/1996 997,308
Interstate Power Company 1,000,000 5.75 01/16/1996 997,625
Appalachian Power Company 1,840,000 6.11 01/04/1996 1,839,065
Indianapolis Power and Light 2,000,000 5.76 01/31/1996 1,990,533
Michigan Consolidated Gas 2,000,000 5.73 01/26/1996 1,992,125
S C Fuel 1,400,000 5.69 02/02/1996 1,392,969
Wisconsin Electric Fuel 1,096,000 5.76 01/24/1996 1,092,030
Pacificorp 2,000,000 5.76 01/18/1996 1,994,636
Pacificorp 1,000,000 5.85 01/30/1996 995,320
-----------
16,384,112
-----------
Total commercial paper (95.37%)
(amortized cost $67,304,505) 67,304,505
Short Term Bond
Government & State Agency ( 4.25%)
Student Loan Marketing Assoc.<F**> 3,000,000 5.26 12/20/1996 3,000,000
-----------
Total investments (99.62%) (amortized cost $70,304,505) 70,304,505
Other net assets (.38%) 269,505
-----------
Total net assets (100.00%) $70,574,010
===========
<FN>
<F*>Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "accredited
investors". This security has been determined to be liquid under guidelines
established by the board of directors.
<F**>Floating rate note with weekly reset and quarterly interest payment.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 143
<TABLE>
Bond Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------------------------------------
<CAPTION>
Par Market
Bonds Value Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds
Air Transport (2.88%)
Delta Air Lines Inc., 9.300%, due 01/02/2011 $ 500,000 $ 588,400
Southwest Air Lines, 7.875%, due 09/01/2007 500,000 544,500
-------------
1,132,900
-------------
Commercial Banking (6.98%)
First National Bank Omaha, 7.320%, due 12/01/2010 1,500,000 1,506,060
NCNB Corp., 9.375%, due 09/15/2009 1,000,000 1,237,500
-------------
2,743,560
-------------
Business Machines (1.30%)
Comdisco Inc., 6.500%, due 06/15/2000 500,000 508,975
-------------
Finance (Non-Banking) (6.28%)
Heller Financial, 7.000%, due 05/15/2002 1,000,000 1,047,020
Lehman Brothers Inc., 7.375%, due 08/15/1997 500,000 510,830
Merrill Lynch & Co. Inc., 8.250%, due 11/15/1999 500,000 540,605
Morgan Stanley, 8.100%, due 06/24/2002 338,000 371,888
-------------
2,470,343
-------------
Industrial Miscellaneous (1.42%)
OC Funding BV, 10.000%, due 06/01/2001 500,000 558,200
-------------
Motor Vehicles (.73%)
General Motors, 9.125%, due 07/15/2001 250,000 285,020
-------------
Railroads & Shipping (2.57%)
Union Pacific Corp., 6.250%, due 03/15/1999 1,000,000 1,011,010
-------------
Retail (2.55%)
Rite-Aid Corp., 6.875%, due 08/15/2013 500,000 493,785
Woolworth Corp., 7.000%, due 06/01/2000 500,000 508,790
-------------
1,002,575
-------------
Travel & Recreation (1.86%)
Hertz Corp., 7.000%, due 04/15/2001 700,000 731,584
-------------
Utilities, Electrical & Gas (7.06%)
Commonwealth Edison, 8.000%, due 05/15/2008 500,000 559,630
Hydro Quebec, 8.400%, due 01/15/2022 1,000,000 1,156,210
Pacific Gas & Electric, 7.250%, due 08/01/2026 500,000 502,515
Virginia Electric Power Company, 7.625%, due 07/01/2007 500,000 559,060
-------------
2,777,415
-------------
Total corporate bonds (33.63%) (amortized cost $12,291,767) 13,221,582
-------------
(continued)
<PAGE> 144
Bond Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------------------------------------
<CAPTION>
Par Market
Bonds Value Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Government Securities
United States Government Bonds (55.15%)
US Treasury Notes, 8.375%, due 08/15/2008 $ 200,000 $ 233,968
US Treasury Notes, 9.250%, due 02/15/2016 500,000 687,265
US Treasury Bonds, 8.125%, due 08/15/2019 1,500,000 1,886,010
US Treasury Notes, 7.500%, due 11/15/2001 250,000 275,353
US Treasury Notes, 6.500%, due 11/30/1996 500,000 505,310
US Treasury Notes, 6.375%, due 01/15/1999 500,000 515,545
US Treasury Notes, 6.750%, due 05/31/1997 1,500,000 1,530,930
US Treasury Notes, 5.625%, due 08/31/1997 1,000,000 1,006,410
US Treasury Notes, 6.000%, due 10/15/1999 400,000 410,000
US Treasury Notes, 6.000%, due 11/30/1997 650,000 659,549
US Treasury Notes, 5.625%, due 01/31/1998 500,000 504,140
US Treasury Notes, 6.250%, due 02/15/2003 1,650,000 1,721,412
US Treasury Notes, 5.125%, due 03/31/1998 400,000 399,312
US Treasury Notes, 5.375%, due 05/31/1998 1,000,000 1,003,280
US Treasury Notes, 5.125%, due 11/30/1998 1,000,000 996,720
US Treasury Notes, 6.750%, due 05/31/1999 1,000,000 1,044,530
US Treasury Notes, 7.250%, due 08/15/2004 1,000,000 1,112,030
US Treasury Notes, 7.250%, due 11/30/1996 1,000,000 1,017,030
US Treasury Notes, 7.500%, due 02/15/2005 2,000,000 2,266,880
US Treasury Notes, 7.375%, due 05/15/1996 500,000 503,830
US Treasury Notes, 7.875%, due 07/15/1996 500,000 506,720
US Treasury Notes, 8.000%, due 08/15/1999 450,000 488,952
US Treasury Notes, 8.000%, due 01/15/1997 550,000 565,036
US Treasury Notes, 8.500%, due 02/15/2000 650,000 724,341
US Treasury Notes, 8.875%, due 05/15/2000 500,000 567,500
US Treasury Bonds, 7.750%, due 02/15/2001 500,000 552,110
-------------
21,684,163
-------------
Other Government Securities (3.28%)
State of Israel, 6.375%, due 12/15/2005 1,000,000 1,003,630
Manitoba Province, 9.000%, due 12/15/2000 250,000 283,750
-------------
1,287,380
-------------
Total government securities (58.43%) (amortized cost $22,014,480) 22,971,543
-------------
Agency Securities
Government & State Agency (5.06%)
FNMA, 8.100%, due 08/12/2019 500,000 604,530
FNMA, 8.950%, due 02/12/2018 300,000 391,359
Tennessee Valley Authority, 5.125%, due 03/04/1998 1,000,000 992,810
-------------
Total government and state agency (5.06%) (amortized cost $1,897,163) 1,988,699
-------------
Total bonds (97.12%) (amortized cost $36,203,410) 38,181,824
-------------
(continued)
<PAGE> 145
Bond Index Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------------------------------------
<CAPTION>
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (1.14%)
John Hancock Capital Corp., 5.90%, due 01/02/1996
(amortized cost $449,926) $ 450,000 $ 449,926
-------------
Total investments (98.26%) (amortized cost $36,653,336) 38,631,750
Other net assets (1.74%) 684,293
-------------
Total net assets (100.00%) $39,316,043
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE> 146
<TABLE>
Managed Equity Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
<CAPTION>
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (3.94%)
Rockwell International Corp. 15,600 $ 824,850
United Technologies Corp. 8,300 787,462
-------------
1,612,312
-------------
Air Transport (1.54%)
AMR Corp.<F*> 8,500 631,125
-------------
Commercial Banking (12.77%)
BankAmerica Corp. 13,100 848,225
Banker's Trust New York Corp. 11,700 778,050
Chemical Bank 14,900 875,375
First of America Bank 21,300 945,188
Mellon Bank Corp. 16,650 894,937
PNC Financial Corp. 27,300 880,425
-------------
5,222,200
-------------
Business Machines (1.51%)
Apple Computer Inc. 19,400 618,375
-------------
Business Services (1.99%)
Ogden Corp. 38,000 812,250
-------------
Chemicals (5.82%)
Eastman Chemical 12,400 773,450
Hanson PLC (ADR) 43,500 663,375
Monsanto 7,700 943,250
-------------
2,380,075
-------------
Domestic Oil (4.42%)
Ashland Inc. 22,400 786,800
Arco 9,200 1,018,900
-------------
1,805,700
-------------
Drugs & Medicines (3.98%)
Bausch & Lomb Inc. 19,200 760,800
Baxter International 20,700 866,812
-------------
1,627,612
-------------
Electronics (1.98%)
Harris Corp. 14,800 808,450
-------------
Energy & Utilities (2.61%)
Texas Utilities Co. 26,000 1,066,000
-------------
Finance (Non-Banking) (2.02%)
Student Loan Marketing Assoc. 12,500 825,000
-------------
Food & Agriculture (3.44%)
Fleming Companies Inc. 39,600 816,750
H J Heinz Co. 17,850 591,281
-------------
1,408,031
-------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (1.97%)
Ryder System Inc. 32,500 $ 804,375
-------------
Insurance (4.14%)
Lincoln National Corp. 17,300 929,875
St. Paul Companies Inc. 13,700 762,063
-------------
1,691,938
-------------
International Oil (4.48%)
Exxon Corp. 4,800 387,000
Royal Dutch Petroleum Co. 4,400 620,950
Texaco Inc. 10,500 824,250
-------------
1,832,200
-------------
Miscellaneous Finance (2.04%)
American General Corp. 23,900 833,513
-------------
Miscellaneous & Conglomerates (2.73%)
Pinnacle West Capital 38,800 1,115,500
-------------
Motor Vehicles (4.76%)
Chrysler Corp. 7,900 435,487
Ford Motor Company 24,700 713,213
General Motors 15,300 808,987
-------------
1,957,687
-------------
Non-Ferrous Metals (1.86%)
Phelps Dodge Corporation 12,200 759,450
-------------
Optical Photographic Equipment (1.46%)
Eastman Kodak Co. 8,900 596,300
-------------
Paper & Forest Products (5.77%)
Louisiana Pacific Corp. 33,100 802,675
Weyerhaeuser Co. 18,100 782,825
Willamette Industries 13,800 776,250
-------------
2,361,750
-------------
Producer Goods (2.12%)
Deere & Co. 24,600 867,150
-------------
Retail (7.34%)
K Mart Corp. 60,500 431,063
J C Penney Co. Inc. 17,100 814,388
TJX Cos. Inc. 56,300 1,062,663
Woolworth Corp. 53,400 694,200
-------------
3,002,314
-------------
Telephone (6.68%)
Nynex Corp. 17,200 928,800
SBC Communications Inc. 15,500 887,375
Sprint Corp. 23,100 915,337
-------------
2,731,512
-------------
(continued)
<PAGE> 147
Managed Equity Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Tobacco (2.10%)
American Brands Inc. 19,300 $ 858,850
-------------
Utilities, Electrical & Gas (5.10%)
General Public Utilities Corp. 31,600 1,074,400
Nipsco Industries Inc. 26,500 1,013,625
-------------
2,088,025
-------------
Total common stocks (98.57%)
(cost $35,496,808) 40,317,694
-------------
<CAPTION>
- ---------------------------------------------------------------------
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (.71%)
John Hancock Capital Corp.,
5.90%, due 01/02/1996
(amortized cost $289,952) $290,000 $ 289,952
------------
Total investments (99.28%)
(amortized cost $35,786,760) 40,607,646
Other net assets (.72%) 294,583
------------
Total net assets (100.00%) $ 40,902,229
============
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 148
<TABLE>
Asset Allocation Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
<CAPTION>
Par Market
Bonds Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Government & State Agency
FNMA, 8.350%, due 11/10/1999 $ 150,000 $ 164,437
Total government & state agency (.22%)
(amortized cost $149,355) 164,437
-------------
US Government Securities
US Treasury Bonds, 7.250%,
due 05/15/2016 1,500,000 1,712,805
US Treasury Notes, 7.125%,
due 10/15/1998 1,000,000 1,048,120
US Treasury Notes, 6.875%,
due 04/30/1997 2,500,000 2,551,550
US Treasury Notes, 7.500%,
due 05/15/2002 1,000,000 1,108,750
US Treasury Notes, 6.375%,
due 08/15/2002 1,000,000 1,048,590
US Treasury Notes, 5.750%,
due 08/15/2003 1,000,000 1,012,030
US Treasury Notes, 5.875%,
due 08/15/1998 1,000,000 1,015,780
US Treasury Notes, 8.000%,
due 08/15/1999 1,000,000 1,086,560
US Treasury Notes, 7.875%,
due 01/15/1998 1,000,000 1,050,780
-------------
Total government securities (15.85%)
(amortized cost $11,224,675) 11,634,965
-------------
Corporate Bonds
Commercial Banking (.35%)
Boatmen's Bancshares, 6.750%,
due 03/15/2003 250,000 254,600
-------------
Finance (Non-Banking) (2.12%)
Associates Corp., 6.875%,
due 02/01/2003 500,000 525,110
Fleet Mortgage Group, 6.125%,
due 08/15/1997 500,000 503,065
Merrill Lynch & Co. Inc, 7.375%,
due 08/17/2002 500,000 530,625
-------------
1,558,800
-------------
Industrial Miscellaneous (2.82%)
Canadian National Railway,
6.625%, due 05/15/2003 500,000 513,715
Coca-Cola Company, 6.625%,
due 10/01/2002 500,000 520,430
E I Dupont de Nemours & Co.,
8.250%, due 09/15/2006 250,000 294,240
Seagram Company Ltd., 8.350%,
due 11/15/2006 500,000 574,400
<CAPTION>
- --------------------------------------------------------------------
Par Market
Bonds Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (continued)
Waste Management, 7.700%,
due 10/01/2002 $ 150,000 $ 163,516
-------------
2,066,301
-------------
Liquor (.72%)
Anheuser-Busch Companies Inc.,
6.900%, due 10/01/2002 500,000 526,260
-------------
Retail (.72%)
Dayton Hudson Corp., 7.500%,
due 03/01/1999 500,000 525,955
-------------
Telephone (.70%)
GTE Southwest, 6.540%,
due 12/01/2005 500,000 513,360
-------------
Utilities, Electrical & Gas (3.89%)
Consolidated Edison, 7.375%,
due 09/15/2000 500,000 530,135
Hydro Quebec, 7.550%,
due 12/10/1998 500,000 523,110
National Rural Utility Coop.,
9.500%, due 05/15/1997 250,000 262,068
Northern States Power, 6.125%,
due 12/01/2005 500,000 503,305
Texas Utilities Co., 7.375%,
due 08/01/2001 500,000 530,435
Virginia Electric Power Co.,
6.250%, due 08/01/1998 500,000 506,620
-------------
2,855,673
-------------
Total corporate bonds (11.32%)
(amortized cost $7,956,355) 8,300,949
-------------
Mortgage Backed Securities & CMO's
Government & State Agency (3.46%)
FHLMC 1505-E PAC, 6.500%,
due 10/15/2019 1,000,000 1,016,250
FNMA 1992-128G, 6.000%,
due 02/25/2022 500,000 487,185
FNMA 1992 146 PH PAC,
7.500%, due 09/25/2019 1,000,000 1,038,750
Total mortgage backed securities &
CMO's (3.46%)
(amortized cost $2,451,925) 2,542,185
-------------
Total bonds (30.85%)
(amortized cost $21,782,310) 22,642,536
-------------
(continued)
<PAGE> 149
Asset Allocation Fund
Schedule of Investments - December 31, 1995
- --------------------------------------------------------------------
<CAPTION>
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (3.12%)
Rockwell International Corp. 17,300 $ 914,737
United Technologies Corp. 14,500 1,375,688
-------------
2,290,425
-------------
Air Transport (1.01%)
AMR Corp.<F*> 10,000 742,500
-------------
Commercial Banking (8.50%)
BankAmerica Corp. 16,400 1,061,900
Banker's Trust New York Corp. 11,400 758,100
Chemical Bank 20,100 1,180,875
First of America Bank 26,700 1,184,812
Mellon Bank Corp. 20,150 1,083,062
PNC Financial Corp. 30,000 967,500
-------------
6,236,249
-------------
Business Machines (1.02%)
Apple Computer Inc. 23,500 749,063
-------------
Business Services (1.36%)
Ogden Corp. 46,700 998,213
-------------
Chemicals (3.95%)
Eastman Chemical 15,200 948,100
Hanson PLC (ADR) 45,000 686,250
Monsanto 10,300 1,261,750
-------------
2,896,100
-------------
Domestic Oil (2.86%)
Ashland Inc. 25,100 881,638
Arco 11,000 1,218,250
-------------
2,099,888
-------------
Drugs & Medicines (2.70%)
Bausch & Lomb Inc. 23,500 931,187
Baxter International 25,000 1,046,875
-------------
1,978,062
-------------
Electronics (1.62%)
Harris Corp. 21,800 1,190,825
-------------
Energy & Utilities (1.68%)
Texas Utilities Co. 30,100 1,234,100
-------------
Finance (Non-Banking) (1.34%)
Student Loan Marketing Assoc. 14,900 983,400
-------------
Food & Agriculture (2.11%)
Fleming Companies Inc. 36,200 746,625
H J Heinz Co. 24,150 799,969
-------------
1,546,594
-------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (1.31%)
Ryder System Inc. 38,800 $ 960,300
-------------
Insurance (2.59%)
Lincoln National Corp. 19,000 1,021,250
St. Paul Companies Inc. 15,800 878,875
-------------
1,900,125
-------------
International Oil (3.36%)
Exxon Corp. 6,000 483,750
Mobil Corp. 2,050 229,088
Royal Dutch Petroleum Co. 5,400 762,075
Texaco Inc. 12,600 989,100
-------------
2,464,013
-------------
Liquor (.25%)
Anheuser-Busch Companies Inc. 2,800 187,250
-------------
Miscellaneous Finance (1.50%)
American General Corp. 31,500 1,098,562
-------------
Miscellaneous & Conglomerates (2.11%)
Pinnacle West Capital 54,000 1,552,500
-------------
Motor Vehicles (3.28%)
Chrysler Corp 10,000 551,250
Ford Motor Company 30,600 883,575
General Motors 18,400 972,900
-------------
2,407,725
-------------
Non-Ferrous Metals (1.12%)
Phelps Dodge Corporation 13,200 821,700
-------------
Optical Photographic Equipment (1.36%)
Eastman Kodak Co. 14,900 998,300
-------------
Paper & Forest Products (3.54%)
Louisiana Pacific Corp. 34,500 836,625
Weyerhaeuser Co. 20,000 865,000
Willamette Industries 16,000 900,000
-------------
2,601,625
-------------
Producer Goods (1.43%)
Deere & Co. 29,700 1,046,925
-------------
Retail (4.78%)
K Mart Corp. 73,800 525,825
J C Penney Co Inc. 20,500 976,313
TJX Cos. Inc. 59,500 1,123,062
Woolworth Corp. 67,700 880,100
-------------
3,505,300
-------------
(continued)
<PAGE> 150
Asset Allocation Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Soaps & Cosmetics (.68%)
Bristol-Meyers Squibb Co. 5,800 $ 498,075
-------------
Telephone (4.75%)
Nynex Corp. 18,200 982,800
SBC Communications Inc. 19,300 1,104,925
Sprint Corp. 27,600 1,093,650
US West Media Group 16,100 305,900
-------------
3,487,275
-------------
Tobacco (1.26%)
American Brands Inc. 20,700 921,150
-------------
Utilities, Electrical & Gas (3.36%)
General Public Utilities Corp. 36,600 1,244,400
Nipsco Industries Inc. 31,900 1,220,175
-------------
2,464,575
-------------
Total common stocks (67.95%)
(cost $43,636,553) 49,860,819
-------------
<CAPTION>
- --------------------------------------------------------------------
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (.52%)
John Hancock Capital Corp.,
5.90%, due 01/02/1996
(amortized cost $384,937) $ 385,000 $ 384,937
-------------
Total investments (99.32%)
(amortized cost $65,803,800) 72,888,292
Other net assets (.68%) 498,667
-------------
Total net assets (100.00%) $ 73,386,959
=============
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 151
<TABLE>
International Equity Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Australia (2.05%)
Australian & New Zealand
Banking Group 21,000 $ 98,572
Orbital Engine Ltd. <F*> 15,000 13,278
-------------
111,850
-------------
Austria (1.22%)
Voest Alpine Stahl <F*> 500 14,349
Oemv AV 600 52,134
-------------
66,483
-------------
Belgium (.65%)
Tessenderlo Chemie 100 35,424
-------------
Denmark (1.00%)
Tele Danmark 1,000 54,675
-------------
Finland (.44%)
Kymme Corp. 900 23,837
-------------
France (5.43%)
Christian Dior 600 64,781
Credit Local De France 500 40,079
Lafarge 360 23,226
Marine Wendel 500 36,603
Sylea 278 20,124
Union Assurance Federale 382 45,697
Usinor Sacilor <F*> 2,500 32,769
St. Gobain 300 33,249
-------------
296,528
-------------
Germany (6.16%)
Bankgesellschaft Berlin AG 135 34,523
Daimler Benz AG 200 101,174
Deutsche Bank 1,500 71,374
Spar Handels 150 32,281
Plettac AG 70 17,363
Mannesmann AG DM 250 79,741
-------------
336,456
-------------
Great Britain (11.30%)
Bank of Ireland 12,500 91,227
Bat Industries 10,000 88,121
British Petroleum 25 209
British Gas PLC 13,800 54,429
Albert Fisher Group 42,000 30,652
London Insurance Market I.T. 25,000 35,714
MFI Furniture 20,000 49,845
Powerscreen 8,000 48,075
Scottish Hydro-Electric PLC 7,000 39,076
Severn Trent 4,500 48,040
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Great Britain (continued)
T & N PLC 10,000 $ 25,155
Tomkins 18,000 78,680
Yorkshire Water 3,000 27,578
-------------
616,801
-------------
Hong Kong (4.25%)
CDL Hotels International 31,000 15,637
South China Morning Post 2,000 1,222
Cheung Kong 10,000 60,916
HSBC Holdings 6,800 102,898
Wheelock & Co. Ltd. 30,000 51,410
-------------
232,083
-------------
Italy (2.10%)
Saipem 4,500 10,382
Telecom Italia Mobile <F*> 20,000 35,237
Olivetti Ing 70,000 56,171
Pirelli <F*> 10,000 12,922
-------------
114,712
-------------
Japan (41.30%)
Bridgestone Corp. 5,000 79,495
Chiba Bank 5,000 45,079
Chugoku Bank Limited 2,000 34,512
Daicel Chemical 7,000 39,835
Daiwa House 1925 3,000 49,442
DDI Corp. 10 77,556
Dowa Fire & Marine Ins. Co. 5,000 27,969
Fuji Photo 3,000 86,669
Horiba 3,000 38,972
Inax 3,000 28,502
Jusco 2,000 52,156
Kao Corporation 5,000 62,045
Makita Corporation 1,000 15,996
Marutomi 75 771
Matsushita Electronics 4,000 65,147
Mitsubishi Electric 8,000 57,624
Mitsubishi Chemical Corp. 800 3,893
Mitsubishi Heavy Industries 12,000 95,743
Mitsubishi Materials 11,000 57,052
NKK Corp. <F*> 20,000 53,901
Nishimatsu Constructions 6,000 70,382
Nissan 7201 5,000 38,439
Nippon Sanso 4,000 19,234
Nippon Steel 19,000 65,205
Nissen 500 11,730
Maruko Co. Ltd. 520 35,338
Orix Corp. 500 20,601
Ricoh 5,000 54,774
Rinnai 2,000 46,727
Ryohin Keikaku Company Limited 1,000 83,372
(continued)
<PAGE> 152
International Equity Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Japan (continued)
Sankyo Co. Ltd., Gunma 1,000 $ 46,533
Sanyo Shinpan 700 57,682
Sekisui Chemical 4,000 58,942
Shiseido Company 5,000 59,621
Sumitomo Marine & Fire 11,000 90,430
Suzuki Motor Corp. 4,000 44,595
Takeda Chemical Industries 5,000 82,403
TDK Corp. 1,000 51,090
THK Company Limited 2,000 57,003
Tokio Marine & Fire 12,000 157,050
Tsukishimo Kikai 3,000 63,983
Yamato Transport Co. 4,000 47,697
Yamanachi Chuo Bank 2,000 19,971
-------------
2,255,161
-------------
Netherlands (3.33%)
DSM NV 800 65,881
Hollandsche Beton Groep NV 235 35,919
Internationale Nederlanden Grp. 1,000 66,879
Konin Bijenkorf Beheer 200 13,226
-------------
181,905
-------------
New Zealand (.75%)
Air New Zealand "B" 12,000 40,795
-------------
Norway (1.35%)
Fokus Bank <F*> 4,250 23,006
Helikopter Services A/S 2,500 30,469
Smedvig 1,000 20,260
-------------
73,735
-------------
Singapore (0.40%)
City Developments 3,000 21,847
-------------
Spain (1.06%)
Aumar - Autopistas Del Mare 250 3,256
Asturiana De Zinc <F*> 2,000 15,859
Sevellana De Electric 5,000 38,824
-------------
57,939
-------------
Sweden (1.52%)
Cardo AB <F*> 2,000 37,271
SKF "B" Free 2,400 45,992
-------------
83,263
-------------
Switzerland (3.06%)
Baloise Holdings 25 52,147
Ciba Geigy 130 114,679
-------------
166,826
-------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
United States (2.08%)
British Gas 750 $ 29,345
Matsushita Electric 200 32,900
Repsol 800 26,300
Telefonica 600 25,125
-------------
113,670
-------------
Total common stocks (89.45%)
(cost $4,642,635) 4,883,990
-------------
<CAPTION>
- --------------------------------------------------------------------
Market
Preferred Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Germany
GEA AG 75 $ 23,058
Jungheinrich 125 17,991
-------------
Total preferred stocks (0.75%)
(cost $35,696) 41,049
-------------
<CAPTION>
- --------------------------------------------------------------------
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (8.88%)
United States
John Hancock Capital Corp.,
5.90%, due 01/02/1996
(amortized cost $484,920) $485,000 $ 484,921
------------
Total investments (99.08%)
(amortized cost $5,163,251) 5,409,960
Other net assets (0.92%) 50,182
------------
Total net assets (100.00%) $ 5,460,142
============
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 153
<TABLE>
Special Equity Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Apparel (3.16%)
Chic By HIS Inc. <F*> 3,020 $ 16,610
Cone Mills Corp. <F*> 3,420 38,475
Jones Apparel Group <F*> 1,500 59,063
Springs Industries 500 20,688
------------
134,836
------------
Commercial Banking (8.46%)
Albank Financial 2,010 60,300
Bankatlantic Bancorp Inc. 1,230 23,062
Banknorth Group Inc. 1,300 50,050
Commerce Bancorp 2,970 65,711
Long Island Bancorp 2,050 54,069
Mercantile Bankshares 700 19,512
Southern National Corp. 1,160 30,450
Standard Federal Bancorporation 1,450 57,094
------------
360,248
------------
Business Machines (6.28%)
AST Research <F*> 2,008 17,068
Computer Horizons Corp. <F*> 2,957 112,366
Conner Peripherals <F*> 2,930 61,530
DH Technology Inc. <F*> 555 13,598
Plantronics <F*> 1,740 62,858
------------
267,420
------------
Business Services (.99%)
GBC Technologies Inc. <F*> 4,600 42,260
------------
Chemicals (3.59%)
Arcadian Corp. 1,990 38,556
LSB Industries Inc. 4,400 19,250
Vigoro Corp. 1,110 68,543
WD-40 Co. 650 26,650
------------
152,999
------------
Construction (2.97%)
BMC West Corp. <F*> 2,860 42,185
Beazer Homes USA Inc. <F*> 2,690 55,481
CMI Corporation <F*> 5,630 28,854
------------
126,520
------------
Containers (1.08%)
Brockway Standard Holdings <F*> 2,970 46,035
------------
Drugs & Medicines (3.56%)
Beckman Instruments 1,510 53,416
Mariner Health Group Inc. <F*> 3,100 51,925
North American Biologicals <F*> 4,310 46,332
------------
151,673
------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Electronics (4.39%)
Belden 1,540 $ 39,655
Cable Design Tech. <F*> 1,290 56,760
Franklin Electronic Publishing <F*> 860 25,370
Lattice Semiconductor <F*> 2,000 65,250
------------
187,035
------------
Energy Raw Materials (.33%)
Oneok 620 14,182
------------
Finance (Non-Banking) (1.14%)
Security Capital Corp. 100 6,025
Susquehanna Banchsares Inc. 1,600 42,400
------------
48,425
------------
Food & Agriculture (1.32%)
Daka International <F*> 2,050 56,375
------------
Industrial Miscellaneous (11.36%)
Alamo Group 2,320 41,760
Crown Crafts Inc. 2,440 28,060
DT Industries Inc. 870 11,745
Dames & Moore 800 9,700
Halophane Corp. <F*> 3,015 65,576
Libbey 2,670 60,075
Lydall Inc. <F*> 2,510 57,102
Marshall Industries <F*> 1,230 39,514
Masland Corp. 2,940 41,160
Seacor Holdings Inc. <F*> 1,700 45,900
Stant Corp. 600 5,850
Velcro Industries 400 24,500
Vons Companies Inc. <F*> 1,880 52,875
------------
483,817
------------
Insurance (11.77%)
American Travellers Corporation <F*> 1,850 52,031
Baldwin & Lyons Class `B' 1,640 26,650
Berkley Corp. 530 28,487
Commerce Group Inc. 2,330 48,056
First Colony Corp. 1,100 27,912
Harleysville Group Inc. 1,230 39,821
Life USA Holdings <F*> 4,280 34,240
National Re 1,220 46,360
PXRE Corp. 1,590 42,135
Paul Revere Corp. 1,230 25,523
Penncorp 1,910 56,345
State Auto Financial 1,910 49,660
United Wisconsin Services 1,100 24,200
------------
501,420
------------
(continued)
<PAGE> 154
Special Equity Fund
Schedule of Investments - December 31, 1995
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Media (1.21%)
King World Productions <F*> 1,330 $ 51,704
------------
Miscellaneous & Conglomerates (.75%)
Physician Corp. of America <F*> 1,880 31,960
------------
Motor Vehicles (2.27%)
Mark IV Industries 1,494 29,506
A O Smith 1,520 31,540
TBC Corporation <F*> 4,150 35,794
------------
96,840
------------
Non-Durables & Entertainment (.62%)
Royal Caribbean Cruises 1,200 26,250
------------
Non-Ferrous Metals (3.17%)
Mueller Industries Inc. <F*> 2,200 64,350
Wolverine Tube Inc. <F*> 1,880 70,500
------------
134,850
------------
Paper & Forest Products (3.62%)
Caraustar Industries Inc. 2,750 55,000
Chesapeake Corp. 1,340 39,697
Pentair Inc. 1,200 59,700
------------
154,397
------------
Producer Goods (1.96%)
BWIP Holding Inc. 1,970 32,505
Charter Power Systems 1,330 38,237
Coltec Industries <F*> 1,080 12,555
------------
83,297
------------
Railroads & Shipping (.99%)
Harmon Industries Inc. 2,680 42,210
------------
Retail (8.89%)
J. Baker 2,880 16,560
Bell Microproducts <F*> 4,100 29,725
Bombay Company <F*> 5,320 33,915
Ethan Allen Interiors <F*> 2,050 41,769
Fingerhut Companies Inc. 2,770 38,434
Fred's Inc. 2,850 21,375
Lillian Vernon Corp. 1,100 14,713
Nine West <F*> 350 13,125
North American Watch 1,390 26,758
Phillips-Van Heusen 3,940 38,908
Roberds, Inc. <F*> 3,900 35,100
Stop & Shop <F*> 2,300 53,188
Value City Department Stores <F*> 2,270 15,323
------------
378,893
------------
<CAPTION>
- --------------------------------------------------------------------
Market
Common Stocks Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
Soaps & Cosmetics (1.35%)
Bush Boake Allen Inc. 2,100 $ 57,487
------------
Steel (2.17%)
Rouge Steel 1,900 45,125
US Can Corporation <F*> 3,520 47,520
------------
92,645
------------
Tobacco (1.31%)
Universal Corp. 2,290 55,819
------------
Travel & Recreation (1.40%)
Anthony Industries Inc. 2,600 59,800
------------
Trucking & Freight (1.80%)
Eastern Enterprises 510 17,978
Midwest Express Holdings <F*> 2,100 58,800
------------
76,778
------------
Utilities, Electrical & Gas (3.35%)
Central Louisiana Electric 510 13,897
Eastern Utilities Association 720 17,010
IES Industries Inc. 720 19,080
Piedmont Natural Gas Co. 1,030 23,948
Public Service Company
of New Mexico <F*> 1,440 25,380
Sierra Pacific Resources 1,030 24,076
UGI Corp. 920 19,090
------------
142,481
------------
Total common stocks (95.26%)
(cost $3,495,189) 4,058,656
------------
<CAPTION>
- --------------------------------------------------------------------
Par Market
Short Term Securities Value Value
- --------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (4.11%)
GTE California,
5.77%, due 01/04/1996
(amortized cost $174,916) $ 175,000 $ 174,916
-----------
Total investments (99.37%)
(amortized cost $3,670,105) 4,233,572
Other net assets (0.63%) 26,876
-----------
Total net assets (100.00%) $ 4,260,448
===========
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 155
GENERAL AMERICAN CAPITAL COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
BOARD OF DIRECTORS
Richard A. Liddy, Chairman
Theodore M. Armstrong
Harry E. Rich
Alan C. Henderson
Matthew P. McCauley
INVESTMENT ADVISOR
General American Investment Management Company
SAFEKEEPER OF SECURITIES
Bank of New York
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington D.C.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
If distributed to perspective investors, this report must be preceded or
accompanied by a current prospectus. The prospectus is incomplete without
reference to the financial data contained in this annual report.
<PAGE> 156
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Because all of the shares of the Funds are sold to separate accounts of
General American and its affiliates, General American may be said to control
General American Capital Company. "Echo voting," the practice under which
General American solicits instructions from purchasers of insurance
contracts for voting shares of the Company, and votes shares attributable to
unregistered separate accounts in accordance with the instructions received,
means that this control is not exercised. Nevertheless, a schedule of
General American's corporate organization is attached. No financial
statements for any of these companies is included in the Company's
Registration Statement because the company is owned and controlled by the
purchasers of participating registered separate accounts.
<TABLE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<CAPTION>
(1) (2)
Number of Record
Holders as of
Title of Class 31 December 1995
<S> <C>
S&P 500 Index Fund Capital Stock Three
($.01 par value)
Money Market Fund Capital Stock Thirteen
($.01 par value)
Bond Index Fund Capital Stock Three
($.01 par value)
Managed Equity Fund Capital Stock Three
($.01 par value)
Asset Allocation Fund Capital Stock Two
($.01 par value)
International Equity Fund Capital Stock Four
($.01 par value)
Special Equity Fund Capital Stock Two
($.01 par value)
</TABLE>
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<PAGE> 157
ITEM 27. INDEMNIFICATION
Reference is made to Article Eight of the Registrant's Articles of
Incorporation, filed previously as Exhibit 1 to this Registration Statement,
and to Article 11 of the Registrant's Bylaws (Exhibit 2). The Articles and
Bylaws provide that the Registrant will indemnify its directors and officers
to the extent permitted or required by Maryland law. A resolution of the
board of directors specifically approving payment or advancement of expenses
to an officer is required by the Bylaws. Indemnification may not be made if
the director or officer has incurred liability by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties in
the conduct of his office ("Disabling Conduct"). The means of determining
whether indemnification shall be made are either: (1) a final decision by a
court or other body before whom the proceeding is brought that the director
or officer was not liable by reason of Disabling Conduct; or (2) in the
absence of such a decision, a reasonable determination, based on a review of
the facts, that the director or officer was not liable by reason of
Disabling Conduct. Such latter determination may be made either by: (a)
vote of a majority of a quorum of directors who are neither interested
persons (as defined in the 1940 Act) nor parties to the proceeding or (b)
any other reasonable and fair means
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<PAGE> 158
consistent with the objectives outlined in the Registrant's Bylaws. The
advancement of legal expenses may not occur unless the director or officer
agrees to repay the advance (if it is determined that he is not entitled to
the indemnification) and one of three other conditions is satisfied: (1) he
provides security for his agreement to repay; (2) the Registrant is insured
against loss by reason of lawful advances; or (3) a majority of a quorum of
the directors who are not interested persons and are not parties to the
proceedings, determine that there is reason to believe that the director or
officer will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("the Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions 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
action, suit or
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<PAGE> 159
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 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
General American Investment Management Company ("Investment Adviser") was
incorporated in Missouri on 13 September 1982. It is registered as an
investment adviser with the SEC and the State of Missouri. It is a wholly-
owned subsidiary of General American Holding Company which, in turn, is
wholly-owned by General American Life Insurance Company.
Investment Adviser serves as investment adviser to all of the General
American separate accounts. Investment Adviser also has clients which are
not affiliated with General American. All of the individuals who work for
Investment Adviser are General American employees, who keep time records
establishing a cost basis for their work which is computed by General
American's cost accounting staff.
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<PAGE> 160
<TABLE>
<CAPTION>
Position
at General Other Business
Name of Director or American Profession, Vocation
Officer of General Investment or Employment
American Investment Management during Past Two
Management Company Company Years
<S> <C> <C>
David L. Herzog Vice Vice President.
President Chief Financial Officer
and Director - Individual, General
American. Director of
White Oak Royalty
Company.
Douglas R. Koester Vice Senior Portfolio Manager
President Vice President, General
and Director American Life Insurance
Company, Treasurer and
Director of Cova
Corporation, Cova
Investment Advisory
Corporation (IL), and
Director of Conning Asset
Management Company
Matthew P. McCauley Vice Associate General
President Counsel, and Vice
General President, General
Counsel, and American Insurance
Secretary Company. Also, Director,
Director Vice President,
General Counsel, and
Secretary for
twelve other
General American
subsidiaries all at 700
Market Street, St. Louis,
MO 63101, including
General American
Investment Management
Company, Equity
Intermediary Company, Red
Oak Realty Company, and
White Oak Royalty; except
General American Holding
Company, 13045 Tesson
Ferry Road, St. Louis, MO
63128; Paragon Life
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<PAGE> 161
Insurance Company, 100 S.
Brentwood, St. Louis, MO
63105. General Counsel
and Secretary,
Reinsurance Group of
America, Incorporated,
660 Mason Ridge Center
Drive, St. Louis, MO
63141. Director and
Secretary, General
American Capital Company,
Cova Corporation;
Assistant Secretary and
Director, Cova Financial
Services Life Insurance
Company, Cova Financial
Life Insurance Company,
and First Cova Life
Insurance Company.
General Counsel and
Secretary, Conning Asset
Management Company.
Director for RGA
Reinsurance
Company, Walnut Street
Advisers, Inc. and Walnut
Street Securities, Inc.,
Suite 220, 1801 Park 270
Drive, St. Louis, MO
63146. Secretary to The
Walnut Street Funds, Inc.
Leonard M. Rubenstein Director, Executive Vice President
President and Director, General
American Life Insurance
Company. Also, Director
of twenty General
American subsidiaries,
all at 700 Market Street,
St. Louis, MO 63101;
except Paragon Life and
General American Holding
Company, whose addresses
are given for Mr. McCauley.
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<PAGE> 162
Treasurer, General
American Capital Company.
Senior Vice President-
Investments, Treasurer,
and Director, Reinsurance
Group of America,
Incorporated, whose
address was previously
listed under Mr.
McCauley. Chairman and
Director, Cova Financial
Services Life Insurance
Company, Cova Financial
Services Life Insurance
Company, Cova Financial
Life Insurance Company,
First Cova Life Insurance
Company, Cova Investment
Advisory Corporation, and
Cova Investment
Allocation Corporation.
Chief Executive Officer,
Chairman, and Director
for Conning Asset
Management Company.
Director for the
following: General Life
Insurance Company,
Security Equity Life
Insurance Company, BHIF
America de Vida Seguros
S.A. (Chile), Manantial
Seguros de Vida S.A.
(Argentina), Red Oak
Royalty Company,
General Life Insurance
Company of America, and
RGA Reinsurance Company,
Secretary and Director
for RGA Sudamerica S.A.
</TABLE>
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<PAGE> 163
The investment sub-adviser for the Managed Equity Fund is Morgan Stanley
Asset Management Inc., a wholly-owned subsidiary of Morgan Stanley Group
Inc.
<TABLE>
<CAPTION>
Name of Director
or Officer of Other Business
Morgan Stanley Position at Profession, Vocation,
Asset Management Morgan Stanley or Employment during
Inc. Management Inc. Past Two Years
<S> <C> <C>
James M. Allwin President Managing Director, Morgan
and Director Stanley & Co.
Incorporated; President
of Morgan Stanley Realty
Inc.,; head of Morgan
Stanley & Co.
Incorporated's Merchant
Banking and Venture
Capital Divisions; member
of Morgan Stanley Group,
Inc.'s Operating
Committee.
Barton M. Biggs Chairman and Managing Director, Morgan
Director Stanley & Co.
Incorporated; Morgan
Stanley Group Inc.;
Morgan Stanley Asset
Management Limited,
Chairman and Director,
The India Magnum Fund
N.V.; Morgan Stanley Off-
Shore Investment Company
Ltd.; Morgan Stanley
Emerging Markets Funds,
Inc., The Latin American
Discovery Fund, Inc.,
Morgan Stanley Africa
Investment Funds, Inc.
and Morgan Stanley Asia-
Pacific Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
Morgan Stanley Emerging
Markets Debt Fund, Inc.
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<PAGE> 164
and Morgan Stanley Africa
Investment Fund, Inc.,
Member of the
International Advisory
Council of The Thailand
Fund; Chairman, Morgan
Stanley Fund, Inc.
Gordon S. Gray Director Managing Director,
Morgan Stanley & Co.
Incorporated and
Director, Morgan Stanley
Asset Management Limited.
Peter A. Nadosy Vice Chairman Managing Director,
and Director Morgan Stanley & Co.
Incorporated; Director,
Morgan Stanley Asset
Management Limited;
Morgan Stanley; Morgan
Stanley Off-Shore
Investment Company Ltd.;
Morgan Stanley High Yield
Institutional Portfolio.
Advisory Director of
Collateralized Bond
Obligations N.V.; Central
Secured Investments N.V.;
YCM Investments N.V.;
Chairman, Morgan Stanley
High Yield Fund, Inc.,
and Morgan Stanley Global
Opportunity Bond Funds,
Inc.
C-
<PAGE> 165
Dennis G. Sherva Director Managing Director,
Morgan Stanley & Co.
Incorporated. Chairman
of the Morgan Stanley
Emerging Growth
Portfolio.
</TABLE>
The investment sub-adviser for the International Equity Fund and the Special
Equity Fund is Provident Capital Management, Inc.
<TABLE>
<CAPTION>
Name of Director Other Business
or Officer of Position at Profession, Vocation,
Provident Capital Provident Capital or Employment During
Management, Inc. Management, Inc. Past Two Years
<S> <C> <C>
Richard C. Caldwell Director Executive Vice President,
PNC BankCorp.; and PNC
Bank, National
Association. Director,
PNC Trust Company of
N.Y., PNC Bank, New
England, National
Association, PNC Equity
Advisors Company, PFPC,
Inc., PNC Institutional
Management Corporation,
and BlackRock Financial
Management, Inc.
Director, Chairman and
CEO, PNC Asset Management
Group, Inc.
Robert J. Christian Director Chairman, Director,
PNC Equity Advisors
Company; Director,
President, CIO, PNC Asset
Management Group, Inc.;
Chief Investment Officer,
PNC Bank, National
Association.
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<PAGE> 166
<CAPTION>
Name of Director Other Business
or Officer of Position at Profession, Vocation,
Provident Capital Provident Capital or Employment During
Management, Inc. Management, Inc. Past Two Years
<S> <C> <C>
Ernest E. Cecilia Director Director, CIO,
President, CEO, PNC
Equity Advisors Company;
Director, Equity
Research, PNC Asset
Management Group, Inc.;
Director, Equity
Research, PNC Bank,
National Association.
Young D. Chin Chairman, Managing Director, &
President, & CEO Chief Equity Officer, PNC
& Director Asset Management Group,
Inc.; Director &
Chairman, PNC Equity
Advisors Company; Senior
Vice President,
PNC Bank, National
Association; Vice
President, PNC Bank
Corp.; Director,
CastleInternational Asset
Management, Limited.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following entities prepare, maintain, and preserve the records required
by Section 31(a) of the 1940 Act for the Registrant. These services are
provided to the Registrant
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<PAGE> 167
through written agreements between the parties to the effect that such
services will be provided to the Registrant for such periods prescribed
under the 1940 Act and such records will be surrendered promptly on request.
General American Life Insurance Company, 700 Market Street, St. Louis,
Missouri 63101 will serve as custodian of the books and records for the
Registrant and in such capacity will keep records regarding securities, bank
statements, and canceled checks.
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<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of St. Louis, and State of Missouri,
on the 22nd day of April 1996.
GENERAL AMERICAN CAPITAL COMPANY
Attest: By: /s/ Richard A. Liddy
--------------------------------
Richard A. Liddy, President
/s/ Matthew P. McCauley
- ----------------------------------
Matthew P. McCauley, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Richard A. Liddy President and Director 4/22/96
- ------------------------- (Principal Executive
Richard A. Liddy Officer)
Matthew P. McCauley Secretary and Director 4/22/96
- -------------------------
Matthew P. McCauley
Leonard M. Rubenstein Principal Financial 4/22/96
- -------------------------
Leonard M. Rubenstein Officer - Treasurer
John W. Barber Principal Accounting 4/22/96
- ------------------------- Officer
John W. Barber
Theodore M. Armstrong <F*> Director
- -------------------------
Theodore M. Armstrong
Alan C. Henderson <F*> Director 4/22/96
- -------------------------
Alan C. Henderson
Harry E. Rich <F*> Director 4/22/96
- -------------------------
Harry E. Rich
By: /s/ Matthew P. McCauley
---------------------------
Matthew P. McCauley
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<PAGE> 169
<FN>
<F*> Original Powers of Attorney, authorizing Matthew P. McCauley and Leonard
M. Rubenstein to sign the Registration Statement and amendments thereto on
behalf of certain members of the Board of General American Capital Company
have been filed with the Securities and Exchange Commission and are
incorporated as an exhibit to this Registration Statement by reference.
</TABLE>
C-
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GACC-S&P 500 INDEX FUND
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 152618
<INVESTMENTS-AT-VALUE> 248373
<RECEIVABLES> 1426
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 249799
<PAYABLE-FOR-SECURITIES> (2312)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (174)
<TOTAL-LIABILITIES> (2486)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10245
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 247313
<DIVIDEND-INCOME> 5086
<INTEREST-INCOME> 83
<OTHER-INCOME> 0
<EXPENSES-NET> (625)
<NET-INVESTMENT-INCOME> 4544
<REALIZED-GAINS-CURRENT> 2122
<APPREC-INCREASE-CURRENT> 57619
<NET-CHANGE-FROM-OPS> 64285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4511
<DISTRIBUTIONS-OF-GAINS> 2392
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25865
<NUMBER-OF-SHARES-REDEEMED> 12139
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 78010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 521
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 625
<AVERAGE-NET-ASSETS> 207771
<PER-SHARE-NAV-BEGIN> 17.640
<PER-SHARE-NII> .460
<PER-SHARE-GAIN-APPREC> 6.040
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.140
<EXPENSE-RATIO> .300
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> GACC-MONEY MARKET FUND
<MULTIPLIER> 1000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 70305
<INVESTMENTS-AT-VALUE> 70305
<RECEIVABLES> 5
<ASSETS-OTHER> 276
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70586
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (12)
<TOTAL-LIABILITIES> (12)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 4318
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 70574
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4194
<OTHER-INCOME> 0
<EXPENSES-NET> (143)
<NET-INVESTMENT-INCOME> 4051
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4107
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206237
<NUMBER-OF-SHARES-REDEEMED> 233052
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (22765)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 87
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 143
<AVERAGE-NET-ASSETS> 70020
<PER-SHARE-NAV-BEGIN> 15.420
<PER-SHARE-NII> .920
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.340
<EXPENSE-RATIO> .210
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> GACC-BOND INDEX FUND
<MULTIPLIER> 1000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 36653
<INVESTMENTS-AT-VALUE> 38632
<RECEIVABLES> 659
<ASSETS-OTHER> 35
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (10)
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<NAME> GACC-SPECIAL EQUITY FUND
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