<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commissioner Only (as permitted
by Rule 14a-6(e)(2)
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
GENERAL AMERICAN CAPITAL COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: $0
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0- 11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE> 2
November 20, 1996
GENERAL AMERICAN CAPITAL COMPANY
INTERNATIONAL EQUITY FUND
SPECIAL EQUITY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the shareholders of the International Equity Fund
and the Special Equity Fund of General American Capital Company ("Capital
Company") will be held at the home office of General American Life Insurance
Company, at 700 Market Street, St. Louis, Missouri, at 10:30 A.M. Central
Daylight Time, on Monday, December 16, 1996 for the following purposes:
1. INTERNATIONAL EQUITY FUND
a. To consider and act upon a proposal to change the investment
strategy of the International Equity Fund from an actively-
managed international equity strategy to a passively-managed
international index strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the International Equity Fund are
interdependent. In other words, shareholder approval of the change in the
investment strategy is contingent upon shareholder approval of the change in
the portfolio manager and, visa versa, shareholder approval of the change in
the portfolio manager is contingent upon shareholder approval of the change
in investment strategy.
2. SPECIAL EQUITY FUND
a. To consider and act upon a proposal to change the investment
strategy of the Special Equity Fund from a "small-cap" equity
strategy to a "mid-cap" equity strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the Special Equity Fund are interdependent.
In other words, shareholder approval of the change in the investment strategy
is contingent upon shareholder approval of the change in the portfolio manager
and, visa versa, shareholder approval of the change in the portfolio manager is
contingent upon shareholder approval of the change in investment strategy.
You are entitled to vote at the meeting and any adjournments of the
meeting if you owned shares of the International Equity Fund or the
Special Equity Fund at the close of business on October 31, 1996. If you
attend the meeting, you may vote. If you do not expect to attend the
meeting, please complete, date, sign, and return the enclosed proxy card in
the enclosed postage paid envelope. Your vote is very important to us,
regardless of the number of shares you own. Please mark, sign, date and
return the proxy card today in the enclosed postage-paid envelope. If you
have any questions regarding the enclosed materials or the special meeting,
please call Capital Company at 314-231-1700. We look forward to receiving
your proxy card very soon.
/s/ Matthew P. McCauley
---------------------------------
Matthew P. McCauley
Member & Secretary
Board of Directors
General American Capital Company
<PAGE> 3
GENERAL AMERICAN CAPITAL COMPANY
700 Market Street
St. Louis, Missouri
Telephone: (314) 231-1700
------------------------
PROXY STATEMENT
November 20, 1996
------------------------
We at General American Life Insurance Company have tried to make the
proxy statement you are now reading easy to understand, because it contains
important information about certain changes that have been proposed for
General American Capital Company, the mutual fund that you have invested in
through your variable life insurance contract. This proxy statement is in
question-and-answer format. However, if you have additional questions about
any of the information contained in this proxy statement, please call us at the
above telephone number or write us at the above address.
1. WHY HAVE I BEEN SENT THIS PROXY STATEMENT?
General American Capital Company ("Capital Company"), is an underlying
investment fund for variable life insurance and variable annuity contracts
offered by General American Life Insurance Company ("General American," "we,"
"us," or "our"), its subsidiaries, and unaffiliated insurance companies. Two
of the investment funds of the Capital Company -- the International Equity
Fund and the Special Equity Fund -- have experienced relatively slow growth
in assets. The Board of Directors of Capital Company has decided that these
two funds might grow faster under different investment strategies, and that
the resulting growth (if any) would benefit shareholders.
You have been sent this proxy statement because you have invested money
through your variable life insurance contract in either the International
Equity Fund or the Special Equity Fund, or, perhaps, both of these funds. The
Board of Directors of Capital Company has recommended that the funds'
investment strategies be changed, and that the investment portfolios of these
two funds be managed by Conning Asset Management Company ("Conning") (formerly
known as General American Investment Management Company), the funds' current
investment adviser, instead of by Provident Capital Management, Inc. ("PCM"),
the funds' current sub-adviser.
2
<PAGE> 4
These are the two proposals that shareholders are being asked to vote
on:
<TABLE>
<CAPTION>
=====================================================================================
Proposal
=======================================-------------------------------------------------------------------------------------
<S> <C>
International Equity Fund
a. To consider and act upon a proposal to change the investment
strategy of the International Equity Fund from an actively-
managed international equity strategy to a passively-managed
international index strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the International Equity Fund are
interdependent. In other words, shareholder approval of the change in the
investment strategy is contingent upon shareholder approval of the change in
the portfolio manager and, visa versa, shareholder approval of the change in
the portfolio manager is contingent upon shareholder approval of the change
in investment strategy.
Special Equity Fund
a. To consider and act upon a proposal to change the investment
strategy of the Special Equity Fund from a "small-cap" equity
strategy to a "mid-cap" equity strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the Special Equity Fund are interdependent.
In other words, shareholder approval of the change in the investment strategy
is contingent upon shareholder approval of the change in the portfolio manager
and, visa versa, shareholder approval of the change in the portfolio manager is
contingent upon shareholder approval of the change in investment strategy.
============================================================================================================================
</TABLE>
Please read this proxy statement carefully. Then, if you agree that
the investment strategy of your fund (or funds) should be changed and that
Conning should take over the fund's portfolio management, mark the box noted
"For" on the enclosed proxy card corresponding to your fund. If you do not
agree that the investment strategy of your fund(s) should be changed and that
Conning should take over the fund's portfolio management, mark the box noted
"Against." If you decide you want to abstain from voting either "For" or
"Against," mark the box "Abstain." After you have marked the card (or
cards), please send the card (or cards) back to us in the enclosed
postage-paid envelope. The Board of Directors recommends that you vote "FOR"
each proposal.
2. WHY HAS THE BOARD OF DIRECTORS RECOMMENDED THAT THE INVESTMENT
STRATEGY, AS WELL AS THE PORTFOLIO MANAGEMENT, OF THE INTERNATIONAL EQUITY
FUND BE CHANGED?
The current investment objective of the International Equity Fund is to
obtain long-term capital appreciation by investing primarily in foreign
equity securities. The fund seeks to achieve this objective by investing in
companies located in countries included in the Morgan Stanley Capital
International, Europe, Australia, and Far East Index (the "EAFE Index").
The International Equity Fund is currently sub-advised by PCM. PNC
Bank Corporation, the parent corporation of PCM, is restructuring its asset
management business, and, as part of that restructuring, has organized a new
offshore investment advisory firm for the purpose of managing international
investments. Capital Company's Board of Directors has taken this opportunity
to reevaluate the fund's investment strategy and how the fund's portfolio
should be managed. Rather than continuing to operate the International
Equity Fund as an
3
<PAGE> 5
international equity fund whose portfolio is actively managed by an outside
sub-adviser, the Board of Directors is now recommending that the fund become an
international equity index fund, and that Conning, a General American affiliate,
manage the fund's investment portfolio. Under this new investment strategy, the
fund would seek to obtain investment results that parallel the price and yield
performance of publicly-traded common stocks in the EAFE Index, and Conning,
which has had experience managing other investment portfolios of Capital Company
that are operated as index funds, would manage the fund's investment portfolio.
It has been the Board of Directors' experience that shareholders find
index funds attractive. Index funds generally have lower transaction costs,
and since an index fund is passively managed, instead of actively managed as
the International Equity Fund currently is, advisory fees can in some cases
be reduced. Therefore, the Board of Directors has determined, and is now
recommending that shareholders approve, changing the investment strategy of
the International Equity Fund to an investment strategy of replicating to the
extent possible the performance of the EAFE Index. The Board believes that
fund assets may grow more rapidly under an index-based approach, similar to
other index funds managed by Conning.
Under the proposed investment strategy, the fund would initially invest
in a statistically selected sample of approximately 100 securities, holding
under normal market conditions stocks in the EAFE Index and related
derivative securities. If the fund's assets were to grow as expected, the
number of different securities held by the fund would increase. The fund
could also invest up to 20% of its total assets in stock index options or
futures contracts to maintain cash-like reserves while remaining fully
invested, to facilitate trading, or to reduce transaction costs. In addition,
the fund could invest up to 10% of its total assets in index and currency
exchange rate swap agreements. The fund would also reserve the right to invest
in foreign currency exchange transactions using currencies, options, futures
contracts, or options on futures contracts, or forward contracts for any
purpose, including to protect against foreign currency exchange risks
involving securities the fund owns or plans to own.
Under the proposed investment strategy, the fund would not seek to
outperform the EAFE index, but to match it. Accordingly, the fund's assets
could decline in value when the prices of international common stocks generally
decline. In addition, there is no guarantee that the fund will be able to
track the EAFE Index, due to transaction costs, changes in either the make-up
of the index or the number of shares outstanding for the components of the
index, the inability to purchase all of the stock represented in the EAFE
Index, and the timing and amount of contributions to and redemptions from the
fund by shareholders. Investments in foreign securities can be more volatile
and involve additional risks than U.S. investments. There are no guarantees
that the use of derivatives to hedge transactions will successfully protect
investments, or lead to better fund performance. Consequently, you may
experience a loss of principal by investing in the fund.
The Board of Directors has also determined that the services of PCM,
the fund's current sub-adviser, would no longer be required if the fund were
changed to an international equity index fund. Currently, Conning serves as
the investment adviser to the fund, providing
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<PAGE> 6
investment advice and some administrative services to the fund and overseeing
the performance of PCM, which manages the fund's portfolio. The Board has
proposed that Conning advise the fund under its new passive investment strategy.
Because of the anticipated savings from the passive investment strategy and
from having the same adviser provide investment advice as well as providing
administrative services to the fund, the advisory fee could be reduced from
0.70% to 0.50%. A lower advisory fee and increased growth (if any) may result in
savings from achieving economies of scale (that is, fixed fund expenses being
spread out over a larger asset base). At the same time, investors could
continue to achieve investment diversification by investing in international
securities markets.
3. WHAT OTHER CHANGES WOULD BE MADE?
If shareholders approve the change in the investment strategy of the
International Equity Fund, the name of the fund would be changed to the
"International Index Fund."
4. WHY HAS THE BOARD OF DIRECTORS RECOMMENDED THAT THE INVESTMENT STRATEGY
OF THE SPECIAL EQUITY FUND BE CHANGED?
The current investment objective of the Special Equity Fund is
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. The fund seeks to achieve this investment objective by
investing in companies having a market capitalization size of $750 million or
less. The fund has experienced a relatively slow growth in assets. For the
reasons discussed below, Capital Company's Board of Directors has proposed that
the fund become a mid-capitalization growth fund, and that Conning, the fund's
current investment adviser, manage the fund's assets. The fund's current
sub-advisory agreement with PCM, which currently manages the fund's portfolio,
would be terminated.
Under the proposed investment strategy, the Special Equity Fund would
invest primarily in common stocks of United States-based publicly-traded
companies with medium market capitalizations. Medium market capitalization
companies are those whose market capitalization falls within the
capitalization range of the S&P MidCap 400 at the time of the fund's
investment. Those companies whose capitalization moves outside this range
after purchase by the fund would continue to be considered medium-capitalized
for purposes of the fund's investment policy. The fund would attempt to
outperform the S&P 500 stock index. Income would be a secondary objective.
For temporary defensive purposes, the fund may invest in short-term money
market instruments consisting of U.S. government securities, high quality
commercial paper, and banker's acceptances. All short-term securities would
have maturities of one year or less.
Under the new investment strategy, the Special Equity Fund would invest
substantially all of its assets in common stocks selected for their growth
potential. The Board contemplates that under the proposed investment
objective the fund would seek to invest in stocks of mid-sized companies that
have above-average growth potential but that are undervalued in the
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<PAGE> 7
market, and therefore reasonably priced. Fundamental, or "bottom-up" analysis
would be used to build a portfolio of stocks with an investment style
characterized as "growth at a reasonable price." Stocks with an excessive
relative premium for earnings growth would be avoided; instead, the fund would
seek stocks with valuation discrepancies and, therefore, an improved risk-reward
profile. The fund's investment could include "special situation" stocks, such as
the stock of a company that has been affected by a particular risk factor, that
is a member of an industry that is out of favor, or that is at the bottom of
a economic cycle, but that may hold sustained growth potential and consistent
profitability. The purchase of foreign stocks would not be permitted.
The Board of Directors believes that investing in mid-capitalization
companies would allow the Special Equity Fund to continue to benefit from the
higher potential for growth that is associated with smaller companies, but
would also afford the fund the advantages of the greater financial stability
associated with larger business entities. In determining to propose the
change in investment strategy, the Board considered certain factors about
mid-sized companies, including the fact that such companies have completed
their "start-up" cycle and are poised for growth with established product
lines and experienced management. The Board of Directors also considered
that under the proposed new investment strategy, the fund would seek to
minimize turnover. The Board also considered that investing in medium
capitalization stocks may involve greater risk than investing in large
capitalization stocks, since they can be subject to more abrupt or erratic
movements, but that medium capitalization stocks tend to involve less risk
than stocks of small capitalization companies.
5. WHAT OTHER CHANGES WOULD BE MADE?
If shareholders approve the change in the investment strategy and
portfolio management of the Special Equity Fund, the name of the fund would be
changed to the "Mid-Cap Equity Fund."
6. WHAT ELSE DO I NEED TO KNOW ABOUT THE PROPOSED CHANGES BEFORE I DECIDE
HOW TO VOTE?
Capital Company's Board of Directors has recommended that the fund's
sub-advisory agreement with PCM be terminated and that Conning manage the
portfolios of the two funds. We think it is important for you to know more
about Conning and PCM and the investment advisory agreement and sub-advisory
agreement, respectively, under which they now serve.
CONNING ASSET MANAGEMENT COMPANY
- --------------------------------
Conning is currently the investment adviser of the International Equity
Fund and the Special Equity Fund under an investment advisory agreement (the
"Advisory Agreement") last approved by the Board of Directors, including a
majority of the non-interested Directors, on July 24, 1996. The Advisory
Agreement was last approved by the shareholders of each of these funds at a
shareholders meeting held July 21, 1993. The Advisory Agreement terminates
automatically in the event there has been an assignment of the contract
(which could happen, for example, if there were a change in control of the
investment adviser). The agreement also terminates as to either fund upon
sixty (60) days' notice given by Capital
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<PAGE> 8
Company's Board of Directors or by Conning, as the case may be. The agreement
may also be terminated by majority vote (as that term is defined in the
Investment Company Act of 1940 (the "1940 Act")) of Capital Company's shares.
If the Advisory Agreement is not terminated, the Advisory Agreement will
continue in force with respect to either fund so long as its continuance is
approved at least annually by a majority of the "non-interested" members of
Capital Company's Board of Directors, and by (i) a majority vote (as defined in
the 1940 Act) of the fund's shareholders, or (ii) a majority of Capital
Company's Board of Directors. The discussion of the Advisory Agreement in this
proxy statement is qualified by the actual Advisory Agreement, which may be
found at Exhibit A.
Conning is a wholly-owned subsidiary of Conning Corporation, which, in
turn, is a wholly-owned subsidiary of General American Holding Company, which,
in turn, is wholly owned by General American. Conning, formerly known as
General American Investment Management Company, is located at 700 Market
Street, St. Louis, Missouri 63101. Conning, a registered investment adviser
under the Investment Advisers Act of 1940, serves as investment adviser for all
of the funds offered by Capital Company. Conning has day-to-day responsibility
for making investment decisions and placing investment orders for all of
Capital Company's funds. With respect to the International Equity Fund and
Special Equity Fund, however, it generally adheres to the recommendations
concerning the purchase, sale, and retention of common stocks that are made by
PCM, the investment sub-adviser to these funds.
PROVIDENT CAPITAL MANAGEMENT, INC.
- ----------------------------------
The International Equity Fund and Special Equity Fund are currently
managed by PCM under an investment sub-advisory agreement (the "Sub-Advisory
Agreement") with Conning and Capital Company, a copy of which is set forth on
attached Exhibit C. PCM is not affiliated with General American, but is an
indirect, wholly-owned subsidiary of PNC Bank, a Pennsylvania multi-bank holding
company. PCM has offices at Suite 2720, 1700 Market Street, Philadelphia,
Pennsylvania 19103. Its direct parent is PNC Institutional Management
Corporation ("PIMC"), which owns all of PCM's stock and is located at 103
Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank, N.A., Broad and
Chestnut Streets, Philadelphia, Pennsylvania, owns PIMC.
The Sub-Advisory Agreement, dated January 29, 1993, among Conning,
Capital Company, and PCM was last approved by the Board of Directors,
including a majority of the non-interested Directors, on July 24, 1996, and
was last approved by the funds' shareholders at a shareholders' meeting held
July 21, 1993. The Sub-Advisory Agreement terminates automatically in the
event of assignment or if the Sub-Advisory Agreement is terminated, with
respect to any fund, upon sixty (60) days' notice given by Capital Company's
Board of Directors or by Conning, as the case may be, or PCM, or by majority
vote (as defined in the 1940 Act) of a fund's shares. Otherwise, the
Sub-Advisory Agreement will continue in force with respect to either fund so
long as its continuance is approved at least annually by a majority of the
"non-interested" members of Capital Company's Board of Directors, and by (i)
a majority vote (as defined in the 1940 Act) of the fund's shareholders or (ii)
a majority of Capital Company's Board of Directors. The discussion of the
Sub-Advisory Agreement
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contained in this proxy statement is qualified by the actual Sub-Advisory
Agreement itself, which may be found at Exhibit C.
PCM makes recommendations as to which securities should be bought and
which sold in pursuit of the objectives of the funds. PCM is responsible for
the selection of brokers to execute securities transactions on behalf of the
funds. PCM's choices of securities and the performance of chosen brokers are
reviewed by Conning and, ultimately, by the Board of Capital Company. PCM
also advises similar investment portfolios sponsored by the PNC family of
funds.
PRESENT ADVISORY FEES
- ---------------------
Conning charges the International Equity Fund and the Special Equity
Fund an investment advisory fee that is accrued daily against each fund. Out
of this fee, Conning pays an investment sub-advisory fee to PCM. We have set
forth in the table below the fees now charged each fund, stated as an annual
percentage of the average daily value of the net assets:
<TABLE>
--------------------------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL EQUITY FUND ASSETS PERCENTAGE PAID TO PCM PAID TO CONNING
---------- ----------- ---------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .70% .60% .10%
--------------------------------------------------------------------------------------------------------
Next $10 million .60% .55% .05%
--------------------------------------------------------------------------------------------------------
Balance over $20 million .50% .45% .05%
========================================================================================================
<CAPTION>
SPECIAL EQUITY FUND ASSETS PERCENTAGE PAID TO PCM PAID TO CONNING
---------- ----------- ---------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .55% .45% .10%
--------------------------------------------------------------------------------------------------------
Next $10 million .45% .40% .05%
--------------------------------------------------------------------------------------------------------
Balance over $20 million .40% .35% .05%
--------------------------------------------------------------------------------------------------------
</TABLE>
During the fiscal year ended December 31, 1995, Capital Company paid
Conning fees for the two funds totaling $54,159, consisting of $33,616 for
the International Equity Fund and $20,543 for the Special Equity Fund.
For its services, PCM charges a fee to Conning, which is reflected in
the table above. During the fiscal year ended December 31, 1995, Conning
paid PCM fees totaling $31,414, consisting of $20,219 for the International
Equity Fund and $11,195 for the Special Equity Fund.
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<PAGE> 10
PROPOSED ADVISORY FEES
- ----------------------
If shareholders approve the new investment strategies for and change
in portfolio management of the International Equity Fund and the Special Equity
Fund, and the sub-advisory agreement with PCM is terminated, Conning will
manage each fund's investment portfolio. Because the International Equity Fund
would be passively managed, rather than actively managed, Conning has agreed to
a reduction in the advisory fees it receives from that fund from 0.70% to
0.50%. We have set forth the fees that each fund would pay to Conning in the
table below, stated as an annual percentage of the average daily value of the
net assets:
<TABLE>
------------------------------------------------------
<CAPTION>
INTERNATIONAL EQUITY FUND ASSETS PERCENTAGE
----------
------------------------------------------------------
<S> <C>
First $10 million .50%
------------------------------------------------------
Next $10 million .40%
------------------------------------------------------
Balance over $20 million .30%
------------------------------------------------------
------------------------------------------------------
<CAPTION>
SPECIAL EQUITY FUND ASSETS PERCENTAGE
----------
------------------------------------------------------
<S> <C>
First $10 million .55%
------------------------------------------------------
Next $10 million .45%
------------------------------------------------------
Balance over $20 million .40%
------------------------------------------------------
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
- --------------------------------
The officers and directors of Conning are set forth below. Unless
otherwise specified, the address of each officer and director of Conning is
700 Market Street, Saint Louis, Missouri.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Name of Director or Other Business
Officer of Position at Profession, Vocation or
Conning Asset Conning Asset Employment during Past
Management Company Management Company Two Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Douglas R. Koester Senior Vice President and Director Senior Portfolio Manager Vice President, General American
Life Insurance
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<PAGE> 11
- ------------------------------------------------------------------------------------------------------------------------------------
Company; Treasurer and Director of Cova Corporation; Chief
Investment Officer and Director of Cova Investment Advisory
Corporation (IL); and Director of Conning Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew P. McCauley General Counsel Associate General Counsel and Vice President, General
American Life Insurance Company. Also, Director, Vice
President, General Counsel, and Secretary for several other
General American subsidiaries all at 700 Market Street, St.
Louis, MO 63101, including Equity Intermediary Company,
Red Oak Realty Company, and White Oak Royalty Company;
General American Holding Company, 13045 Tesson Ferry Road,
St. Louis, MO 63128; and Paragon Life 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
Corporation. Director for RGA Reinsurance Company,
10
<PAGE> 12
- ------------------------------------------------------------------------------------------------------------------------------------
Walnut Street Advisers, Inc. and Walnut Street Securities,
Inc., 670 Mason Ridge Center Drive, Suite 300, St. Louis,
MO 63141. Secretary to The Walnut Street Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Leonard M. Rubenstein Chief Executive Officer and Director Executive Vice President and Director, General American
Life Insurance Company. Also, Director of several 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.
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. Director, Cova
Financial Services 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 Corporation.
Director for the following: General Life Insurance Company,
Security Equity Life Insurance Company, BHIF America de
11
<PAGE> 13
- ------------------------------------------------------------------------------------------------------------------------------------
Vida Seguros S.A. (Chile), Manatial 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Maurice W. Slayton President and Director Director of GAN National Insurance Company, and GAN North
American Insurance Company, 120 Wall Street, New York, NY
10005; Director of Cox Insurance Holdings Plc., 34
Leadenhall Street, London, EC3A 1AT, England; Director of
MedSpan, Inc., 55 Farmington Avenue, Suite 601, Hartford,
CT 06105; President/CEO, Director of Conning & Company,
CityPlace II, 185 Asylum Street, Hartford, CT 06103;
Director of Tennant Risk Services, Inc., CityPlace II, 185
Asylum Street, Hartford, CT 06103; Director of PennCorp
Financial, 745 Fifth Avenue, Suite 500, New York, NY 10151;
Director of Arlberg Holding Company, Inc. 520 Pike Street,
20th Floor, Seattle, WA 98104-4004; Director of Robert Plan
Corporation, 8 Freer Street, Lynbrook, NY 11563; Director
and President of Conning Corporation, 700 Market Street,
St. Louis, MO 63101.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Hansen Executive Vice President and Director of Western
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<PAGE> 14
- ------------------------------------------------------------------------------------------------------------------------------------
Director Indemnity Insurance Company, 820
Gessner, Suite 1000, Houston, TX 77279; Director of
Conning, Inc. and Conning Corporation, 700 Market Street,
St. Louis, MO 63101. Executive Vice President and Director
of Conning & Company, 185 Asylum Street, Hartford, CT
06103.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald L. McDonald Senior Vice President Senior Vice President of Conning & Company, 185 Asylum
Street, Hartford, CT 06103.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. McLellan Senior Vice President and Director President of Red Oak Realty and White Oak Realty, 700
Market Street, St. Louis, MO 63101; and Director of Conning
Corporation, 700 Market Street, St. Louis, MO 63101.
- ------------------------------------------------------------------------------------------------------------------------------------
David N. Reid Senior Vice President Senior Vice President of Conning & Company, 185 Asylum
Street, Hartford, CT 06103.
- ------------------------------------------------------------------------------------------------------------------------------------
William C. Shenton Senior Vice President Senior Vice President of Conning & Company, 185 Asylum
Street, Hartford, CT 06103.
- ------------------------------------------------------------------------------------------------------------------------------------
Joann T. Tanaka Senior Vice President and Director Director of Conning Corporation, 700 Market Street, St.
Louis, MO 63101.
- ------------------------------------------------------------------------------------------------------------------------------------
Fred M. Schpero Vice President, Secretary and Chief Secretary of Conning, Inc.; Vice President of Conning
Financial Officer Corporation; and Vice President, Secretary and Chief
Financial Officer of Conning & Company, 185 Asylum St.,
Hartford, CT 06103.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
EXECUTIVE OFFICERS AND DIRECTORS
- --------------------------------
The officers and directors of PCM are set forth below. Unless
otherwise specified, the address of each officer and Director of PCM is 1600
Market Street, 27th Floor, Philadelphia, PA 19103.
<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.
- ------------------------------------------------------------------------------------------------------------------------------------
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.
14
<PAGE> 16
- ------------------------------------------------------------------------------------------------------------------------------------
Young D. Chin Chairman, President, & CEO & Director Managing Director, & Chief Equity Officer, PNC Asset
Management Group, Inc.; Director & Chairman, PNC Equity
Advisors Company; Senior Vice President, PNC Bank, National
Association; Vice President, PNC Bank Corp.; Director,
Castle International Asset Management, Limited.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
If the proposals described in this proxy statement are approved by
shareholders, the Advisory Agreement will be amended to reflect the reduction
in the International Equity Fund's investment advisory fee, to restate the
Special Equity Fund's advisory fee, and to change each fund's name. The
Board approved the proposed amendment, attached hereto as Exhibit B, at a
Board meeting held on October 23, 1996. The proposed amendment as it relates
to each fund will take effect for such fund, if the proposed amendment is
approved by vote of a majority of outstanding voting securities of such fund,
on January 1, 1997.
7. WHAT FACTORS DID THE BOARD OF DIRECTORS CONSIDER IN DETERMINING TO
RECOMMEND TO SHAREHOLDERS THAT THE PROPOSALS DESCRIBED IN THIS PROXY
STATEMENT BE APPROVED?
In determining to recommend the proposed changes described in this
proxy statement, the Board considered: the relatively slow growth in assets
of the International Equity Fund and the Special Equity Fund; shareholder
preference for index funds; the reorganization and movement of PCM offshore;
the proposed reduction in investment advisory fees for the International
Equity Fund; Conning's expertise in managing index and mid-sized funds; the
financial strength and asset size of Conning; and Conning's past experience
as adviser to Capital Company and its supervision in connection with
sub-advisory services provided to the funds. In this regard, representatives
of Conning met with the Board at the October 23, 1996 meeting, at which time
such representatives described the resources available to Conning to secure
for each fund investment research and investment advice.
Based upon its review, the Board of Directors concluded that the
proposed changes in investment strategies of each fund, and the provision of
portfolio management services by Conning instead of PCM, would be in the best
interests of each fund and its shareholders. Accordingly, after
consideration of the above factors, and such other factors and information
that the Directors deemed relevant, the Directors, including the
disinterested Directors, unanimously approved the proposed changes and voted
to recommend their approval to the shareholders of the funds.
In the event that shareholders of the International Equity Fund do not
approve the proposed changes with respect to such fund, PCM would continue to
serve as sub-adviser for the
15
<PAGE> 17
fund and the change in investment strategy would not be made. Likewise, if
shareholders of the Special Equity Fund do not approve the proposed changes with
respect to such fund, PCM would continue to serve as sub-adviser for the Special
Equity Fund and the change in investment strategy would not be made. However,
PCM has indicated that it would terminate the sub-advisory agreement if Capital
Company does not terminate the agreement, and, therefore, even if shareholders
of a fund do not approve the proposed changes, PCM would continue to serve only
until it terminated the sub-advisory agreement.
Under the current advisory agreement, Conning furnishes to Capital
Company and its Board of Directors such statistical information and reports
as Conning may deem appropriate or as may be requested by Capital Company.
Conning is also responsible for seeing to it that purchases and sales of fund
investments are made in a manner consistent with the current investment
objectives and policies of each fund. PCM is responsible for the execution
of securities transactions for 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 Capital
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 which 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 the 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: International Equity Fund--.30%; Special Equity Fund--.10%.
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 its 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 Conning. Such expenses are
calculated daily and charged to Capital Company monthly. They are reflected
in the value of the Capital Company's assets.
Conning currently manages the assets of all of the General American
separate accounts (except Separate Accounts Two and Eleven, which are unit
investment trusts). As of December 1995, there were 20 separate accounts
under management. Conning also has clients that are not affiliated with
General American. All of the individuals who work for Conning are General
American employees who keep time records which are used by General American's
cost accounting staff to establish a cost basis for Conning's work.
16
<PAGE> 18
8. WHEN WILL THE MEETING BE HELD?
The special meeting of shareholders of each fund is scheduled to be
held on Monday, December 16, 1996 beginning at 10:30 a.m. (Central time) at
700 Market Street, St. Louis, Missouri. Your proxy is being solicited for
the purposes set forth in the accompanying Notice of Special Meeting.
Shareholders of record at the close of business on October 31, 1996
(the "Record Date") are entitled to notice of and to vote at the special
meeting or any adjournment(s) thereof. As of the Record Date, there were
3,375,425 outstanding shares of the International Equity Fund, and 3,666,828
outstanding shares of the Special Equity Fund. This proxy is being mailed to
shareholders on or about November 20, 1996. Each full share outstanding
is entitled to one vote and each fractional share outstanding is entitled to
a proportionate share of one vote.
Capital Company is sending this proxy solicitation to variable life
contract holders who own units in the separate accounts which invest in a fund.
The number of votes which may be cast under a contract will be determined by
the dollar value of the shares credited to the shareholder. Thus, voting
rights equitably reflect differences in share values for different categories
of contracts or for different funds, and all shares are in the same class for
voting on Capital Company business.
A majority of shares of stock outstanding on the Record Date,
represented in person or by proxy, of a fund must be present to transact the
business related to such fund at the special meeting. In the event that a
quorum is present at the special meeting but sufficient votes to approve the
proposals set forth below are not received, the persons named as proxies may
propose one or more adjournments of the special meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares represented at the special meeting in
person or by proxy. A shareholder vote may be taken on the proposals in this
proxy statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
General American, through certain of its separate accounts, owns all of
the shares of the International Equity Fund and the Special Equity Fund and
has undertaken to vote the shares in accordance with voting instructions
received on a timely basis from the holders of variable life insurance
contracts who have put money into one or more of the separate accounts that
invest in the these funds. General American will vote the shares of a fund for
which no timely instructions are received, and any shares owned exclusively by
General
17
<PAGE> 19
American, in proportion to the voting instructions that are received with
respect to all contracts participating in a fund. Proxy cards that are properly
executed and returned but that have no voting specification will be voted "For"
the related proposal.
SUBSTANTIAL INTERESTS
- ---------------------
To the knowledge of Capital Company, other than as listed below, no
person has the right to instruct General American with respect to 5% or more of
the shares of either fund. However, the proportionate voting policy will
result in certain contract holders' instructions affecting the vote of 5% or
more of total outstanding shares. These particular contract holders and the
percentage of votes which their instruction may affect will depend upon which
contract holders provide instructions and which contract holders do not.
General American will vote in accordance with the directions as indicated on
your enclosed voting instruction form provided it is received properly
executed.
<TABLE>
<CAPTION>
Title Amount and Percent
of Name and Address of Nature of of
Class Beneficial Owner Ownership Class
----- ---------------- --------- -----
<C> <S> <C> <C>
International Corestates Bank Trustee $348,484.09 10.3%
Equity Fund 2005 Market Street
Philadelphia, PA 19103
Special Equity Corestates Bank Trustee $557,928.34 15.2%
Fund 2005 Market Street
Philadelphia, PA 19103
</TABLE>
FUND TRANSACTIONS AND BROKERAGE
- -------------------------------
Purchases and sales of securities on a securities exchange are effected
by brokers, and Capital Company will pay a brokerage commission for this
service. In the over-the-counter market, securities generally are traded on
a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at
a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On
occasion, certain money market instruments are purchased directly from an
issuer, in which case no commissions or discounts are paid.
During the fiscal year ended December 31, 1995, Capital Company paid a
total of $2,200,477 in commissions, none of it to brokers or dealers
affiliated with General American, Conning, or PCM. Allocation of brokerage
business was not based on research services provided, although such services
were received.
Under the Investment Advisory Agreement and as permitted by Section
28(e) of the Securities Exchange Act of 1934, Conning may cause a fund to pay
a broker-dealer that provides brokerage and research services to Conning a
commission for effecting a securities transaction larger than the commission
other broker-dealers would have charged for the same transaction. Conning
will do so when it has determined in good faith that the greater commission
is reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer, viewed either in terms of a
particular transaction or of Conning's overall responsibilities to Capital
Company and to its other clients. The term "brokerage and research services"
includes advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
of purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of funds; and effecting securities
transactions and performing functions incidental thereto such as clearance
and settlement.
18
<PAGE> 20
Research provided by brokers may be used for the benefit of all of
Conning's clients and not solely or necessarily for the benefit of Capital
Company. Conning's personnel attempt to evaluate the quality of research
provided by brokers. Results of this effort are sometimes used by Conning as
a consideration in the selection of brokers to execute portfolio
transactions.
In certain instances, there may be securities that are suitable for a
fund's portfolio as well as for that of another fund, for General American's
general account, or for other accounts served by Conning. Investment
decisions for a fund and for Conning's other clients are made with a view to
achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought or sold for one or more clients when one or
more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or
sale of the same security, the securities are allocated among clients in a
manner believed to be equitable to each. It is recognized that in some cases
this system could have a detrimental effect on the price or volume of the
security in a particular transaction as far as a fund is concerned. Capital
Company believes that, over time, its ability to participate in larger
transactions will produce better executions for the funds.
The investment advisory fee that Capital Company pays to Conning will
not be reduced as a consequence of Conning's receipt of brokerage and
research services. To the extent Capital Company's portfolio transactions
are used to obtain such services, the brokerage commissions paid by Capital
Company will exceed those that might otherwise be paid, by an amount which
cannot be presently determined. Such services would be useful and of value
to Conning in advising both Capital Company and other clients and,
conversely, such services obtained by the placement of brokerage business of
other clients would be useful to Conning in carrying out its obligations to
Capital Company.
SHAREHOLDER PROPOSALS
Any shareholder wishing to recommend a proposal at the annual meeting
to be held in 1997 (if any) and to have such proposal included in the proxy
material distributed in 1997 should notify Capital Company in writing at 700
Market Street, St. Louis, Missouri 63101 at least 90 days before May 1, 1997.
CAPITAL COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT AND SEMI-ANNUAL REPORT UPON REQUEST. TO REQUEST AN ANNUAL REPORT AND
A SEMI-ANNUAL REPORT, PLEASE CALL GENERAL AMERICAN AT 1-800-638-9294.
19
<PAGE> 21
EXHIBIT A
---------
ADVISORY AGREEMENT
------------------
<PAGE> 22
INVESTMENT ADVISORY AGREEMENT
-----------------------------
INVESTMENT ADVISORY AGREEMENT made as of the twenty-first day of July,
1993, by and between GENERAL AMERICAN CAPITAL COMPANY ("Company"), a Maryland
corporation, and GENERAL AMERICAN INVESTMENT MANAGEMENT COMPANY ("Adviser"),
a Missouri corporation which is registered as an investment adviser under the
Investment Advisers Act of 1940, whereby the Adviser will act as investment
adviser to the Company as follows:
ARTICLE I
Advisory Services
-----------------
The Company is an open-end, diversified management investment company,
incorporated under the laws of the State of Maryland on November 15, 1985.
The Company hereby employs the Adviser to act as the investment adviser to
and manager of the Company, and, subject to the supervision of the Board of
Directors of the Company ("Board"), to manage the investment and reinvestment
of the assets of the funds currently offered for sale by the Company
("Funds") for the period and on the terms and conditions set forth in this
Agreement. The Adviser hereby accepts such employment and agrees during such
period, at its own expense, to render the services and to assume the
obligations herein set forth for the compensation provided for herein. The
Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized
herein, have no authority to act for or represent the Company in any way or
otherwise be deemed an agent of the Company. The Adviser shall, for purposes
of this Agreement, have and exercise full investment discretion and
A-1
<PAGE> 23
authority to act as agent for the Company in buying, selling or otherwise
disposing or managing the Company's investments, subject to the supervision of
the Board.
A. Duties of Adviser. In carrying out its obligations to manage the
-----------------
investment and reinvestment of the assets of the Company, the Adviser shall,
as appropriate and consistent with the limitations set forth in Section C
hereof:
(a) perform research and obtain and evaluate
pertinent economic, statistical, and financial data relevant to
the investment policies of each Fund of the Company as set forth
in the prospectus for the Company, as amended from time to time;
(b) consult with the Board and furnish to the Board
recommendations with respect to an overall investment strategy
for each Fund of the Company for approval, modification, or
rejection by the Board;
(c) seek out specific investment opportunities and take such
steps as are necessary to implement any overall investment
strategies approved by the Board, including making and carrying
out day-to-day decisions to acquire or dispose of permissible
investments, management of investments and any other property of
the Company, and providing or obtaining such services as may be
necessary in managing, acquiring or disposing of investments;
(d) regularly report to the Board with respect to the
implementation of any approved overall investment strategy and
any other activities in connection with management of the assets
of the Company; and
(e) furnish to regulatory authorities having jurisdiction such
information as may be requested in order for such authorities to
ascertain that variable insurance operations are being conducted
in accordance with applicable laws and regulations.
A-2
<PAGE> 24
B. Employment of Sub-Adviser(s). The Adviser shall have the
----------------------------
authority to employ, at its expense, one or more sub-advisers. Where
applicable, reference herein to the Adviser shall include any sub-advisers
employed by the Adviser. Any agreement between the Adviser and any
sub-adviser shall be subject to the terms for approval, renewal, termination
and amendment as provided herein with respect to the Adviser, and such
sub-adviser shall at all times be subject to the direction of the Adviser and
the Board, and any duly constituted committee thereof, or any officer of the
Company acting pursuant to like authority.
C. Limitations on Advisory Services. The Adviser shall perform the
--------------------------------
services under this Agreement subject to the supervision and review of the
Board and in a manner consistent with the investment objectives, policies,
and restrictions of each Fund of the Company as stated in its Registration
Statement, as amended from time to time, filed with the Securities and
Exchange Commission, its Articles of Incorporation and By-Laws, as amended
from time to time, the provisions of the Investment Company Act of 1940, as
amended (the "Investment Company Act") and the applicable requirements of the
Internal Revenue Code of 1986, as amended.
The Company has furnished or will furnish the Adviser with copies of
the Company's Prospectus, Articles of Incorporation, and By-Laws as currently
in effect and agrees during the continuance of the Agreement to furnish the
Adviser with copies of any amendments or supplements thereto before or at the
time the amendments or supplements become effective. The Adviser will be
entitled to rely on all documents furnished by the Company.
A-3
<PAGE> 25
ARTICLE II
Compensation of the Adviser
---------------------------
A. Investment Advisory Fee. As compensation for its services to the
-----------------------
Company, the Adviser shall receive monthly compensation based on an annual
percentage of the average daily value of the net assets of the Funds of the
Company as shown below:
<TABLE>
<S> <C>
Equity Index Fund .25 Percent
Money Market Fund .125 Percent
Bond Index Fund .25 Percent
Asset Allocation Fund .50 Percent
Managed Equity Fund Assets
--------------------------
First $10 million .50%
Next $20 million .35%
Balance over $30 million .30%
International Equity Fund Assets
--------------------------------
First $10 million .70%
Next $20 million .60%
Balance over $30 million .50%
Special Equity Fund Assets
--------------------------
First $10 million .55%
Next $20 million .45%
Balance over $30 million .40%
</TABLE>
B. Allocation of Expenses. The Adviser shall be responsible for
----------------------
payment of all expenses it may incur in performing the services set forth in
Article I hereunder. Except for expenses specifically assumed by the Adviser
as stated above, the Company shall be responsible for all expenses associated
with the operations of the Company.
The Board shall determine the manner in which expenses are
allocated to the Funds of the Company, and the determination of the Board
shall be final and binding.
A-4
<PAGE> 26
ARTICLE III
Fund Transactions and Brokerage
-------------------------------
The Adviser agrees to determine the securities to be purchased or sold
by each Fund of the Company, subject to the provisions of Article I, and to
place orders pursuant to its determinations either directly with the issuer,
with any broker-dealer or underwriter that specializes in the securities for
which the order is made, or with any other broker or dealer selected by the
Adviser, subject to the following limitations.
The Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for each Fund of the
Company and will use its best efforts to obtain the most favorable price and
efficient execution of the Company's orders, taking into account all
appropriate factors, including: price; dealer spread or commission, if any;
size and difficulty of the transaction; 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 the Company.
Subject to the above requirements, nothing shall prohibit the Adviser
from selecting brokers or dealers with which it or the Company are affiliated
and from selecting brokers or dealers by virtue of sales of insurance
policies of General American Life Insurance Company or its affiliates by such
broker-dealers or their affiliates.
A-5
<PAGE> 27
ARTICLE IV
Activities of the Adviser
-------------------------
The services of the Adviser to the Company under this Agreement are not
to be deemed exclusive and the Adviser will be free to render similar
services to others so long as its services under this Agreement are not
impaired. It is understood that directors, officers, employees and
shareholders of the Company are or may become interested in the Adviser, as
directors, officers, employees or shareholders or otherwise, and that
directors, officers, employees or shareholders of the Adviser are or may
become similarly interested in the Company.
It is agreed that the Adviser may use any supplemental investment
research obtained for the benefit of the Company in providing investment
advice to its other investment advisory accounts. The Adviser or its
subsidiaries may use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of
business for the Adviser or other entities advised by the Adviser will be
considered by and may be useful to the Adviser in carrying out its
obligations to the Company.
Securities held by a Fund may also be held by separate investment
accounts or other investment companies for which the Adviser may act as an
adviser or by the Adviser or its affiliates. Because of different investment
objectives or other factors, a particular security may be bought by the
Adviser or its affiliates or for one or more clients when one or more clients
are selling the same security. If purchases or sales of securities for the
Company or other entities for which the Adviser or its affiliates act as
investment adviser or for their advisory clients arise for consideration at
or about the same time, the Company agrees that the Adviser may make
transactions in such securities, insofar as feasible, for the respective
entities and clients in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one client of the Adviser during the same
period may increase the demand for securities being purchased or
A-6
<PAGE> 28
the supply of securities being sold, the Company recognizes that there may be an
adverse effect on price.
It is agreed that, on occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of the Company as well as
other accounts or companies, it may, to the extent permitted by applicable
laws and regulations, but will not be obligated to, aggregate the securities
to be so sold or purchased for the Company with those to be sold or purchased
for other accounts or companies in order to obtain favorable execution and
lower brokerage commissions. In that event, allocation of the securities
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Company and to such other
accounts or companies. The Company recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for a Fund
of the Company.
A-7
<PAGE> 29
ARTICLE V
Effectiveness of the Agreement
------------------------------
This Agreement shall not become effective unless and until it is
approved by the Company's Board (including a majority of directors who are
not parties to this Agreement or interested persons of any such party to this
Agreement), and by the Company's shareholders, and this Agreement shall come
into full force and effect on the date on which it is so approved, provided
that it shall not become effective as to any subsequently created Fund until
it has been approved by the Board specifically for such Fund, and that
implementation of any changes from prior Agreements may be delayed until the
start of the next month after a change is approved by the shareholders.
ARTICLE VI
Term of the Agreement
---------------------
As to each Fund of the Company, this Agreement shall continue in effect
from year to year so long as its continuance is approved annually by a
majority of the votes cast by those persons having voting rights in respect
of the Fund or by a vote by a majority of the members of the Board, but in
either event by the vote of a majority of the Board who are not "interested
persons" (as defined in the Investment Company Act) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting such
approval.
As to each Fund of the Company, this Agreement:
(1) may be terminated without the payment of any penalty upon 60
days' written notice to the Adviser either by the Board or by a majority vote
of those persons having voting rights in respect of the affected Fund(s) of
the Company:
A-8
<PAGE> 30
(2) shall automatically terminate if it is assigned (within the
meaning of the Investment Company Act) by the Adviser;
(3) may be terminated by the Adviser without payment of any penalty
upon 60 days' written notice to the Secretary of the Board of the Company;
and
(4) may be amended, changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. An amendment of this
Agreement shall not be effective until approved by (a) vote of the holders of
a majority of the outstanding voting securities of the Fund or Funds
affected; and (b) a majority of those directors of the Company who are not
parties to this Agreement or interested persons of such a party, cast in
person at a meeting called for the purpose of voting on such approval.
ARTICLE VII
Recordkeeping
-------------
The Adviser agrees to preserve for the period prescribed by the rules
and regulations of the Securities and Exchange Commission all records the
Adviser maintains for the Company as are required to be maintained pursuant
to said rules. The Adviser agrees that all such records shall be the
property of the Company and shall be made available, within five (5) business
days of the request, to the Company's accountants or auditors during regular
business hours at the Adviser's offices upon such prior written notice. In
the event of termination for any reason, all such records shall be returned
promptly to the Company, free from any claim or retention of rights by the
Adviser. In addition, the Adviser will provide any materials, reasonably
related to the investment advisory services provided hereunder, as may be
reasonably requested in writing
A-9
<PAGE> 31
by the directors or officers of the Company or as may be required by any
governmental agency having jurisdiction. Adviser will keep any information
obtained in the course of performing under this Agreement in confidence, and
will not use such information for its own benefit nor disclose it except as
authorized by Company or as required by regulatory authorities having
jurisdiction.
ARTICLE VIII
Liability of the Adviser
------------------------
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Adviser (or
its officers, directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations
under this Agreement), neither the Adviser nor any of its officers,
directors, employees or agents shall be subject to liability to the Company
or to any shareholder or to any other person with a beneficial interest in
the Company for any act or omission in the course of, or connected with,
rendering advisory services hereunder, including without limitation any error
or judgment or mistake of law or for any loss suffered by the Company or any
shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the
Investment Company Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. The
provisions of this Article VIII shall not apply to services other than those
relating solely to the provision of investment advice rendered by the Adviser
pursuant to this Agreement.
A-10
<PAGE> 32
ARTICLE IX
Governing Law
-------------
While this Agreement is intended by the parties to be governed by
Missouri law as to matters of state law, this Investment Advisory Agreement
is also subject to the provisions of the Investment Company Act, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder, including such exemptions therefrom as the Securities and
Exchange Commission may grant. Words and phrases used herein shall be
interpreted in accordance with that Act and those rules and regulations. As
used with respect to the Company and the holders of voting shares of any
class of the Company's Capital Stock, the term "majority of the outstanding
voting shares" means the lesser of (i) 67% or more of the voting shares
represented at a meeting at which the holders of more than 50% of the
outstanding voting shares are represented or (ii) more than 50% of the
outstanding voting shares.
IN WITNESS WHEREOF, the parties have caused this Investment Advisory
Agreement to be signed by their respective officials duly authorized, as of
the day and year first above written.
Attest: GENERAL AMERICAN CAPITAL COMPANY
/s/ Matthew P. McCauley By: /s/ Richard A. Liddy
- ---------------------------------- ----------------------------------
Matthew P. McCauley, Secretary Richard A. Liddy, President
GENERAL AMERICAN INVESTMENT
Attest: MANAGEMENT COMPANY
/s/ Joyce W. Hillebrand By: /s/ Leonard M. Rubenstein
- ---------------------------------- ----------------------------------
Joyce W. Hillebrand, Assistant Leonard M. Rubenstein, President
Secretary
A-11
<PAGE> 33
EXHIBIT B
---------
FORM OF AMENDMENT NO. 1 TO ADVISORY AGREEMENT
---------------------------------------------
<PAGE> 34
AMENDMENT NO. 1
---------------
to the
INVESTMENT ADVISORY AGREEMENT
-----------------------------
Amendment No. 1 made as of the ----------- day of -----------, 1996, by
and between GENERAL AMERICAN CAPITAL COMPANY ("Company"), a Maryland
corporation, and CONNING ASSET MANAGEMENT COMPANY ("Adviser"), formerly known
as General American Investment Management Company, a Missouri corporation
which is registered as an investment adviser under the Investment Advisers
Act of 1940, amends the Investment Advisory Agreement, dated as of the
twenty-first day of July, 1993, by and between the Company and the Adviser,
as follows:
(i) ARTICLE II is hereby amended to change the name of the Equity
Index Fund to the S&P 500 Index Fund, the International Equity
Fund to the International Index Fund, and the Special Equity
Fund to the Mid-Cap Equity Fund; and
(ii) ARTICLE II is hereby amended to change the investment advisory
fee rates for the International Index Fund and the Mid-Cap Equity
Fund to read as follows:
<TABLE>
<S> <C>
International Index Fund Assets
-------------------------------
First $10 million .50%
Next $10 million .40%
Balance over $20 million .30%
Mid-Cap Equity Fund Assets
--------------------------
First $10 million .55%
Next $10 million .45%
Balance over $20 million .40%
</TABLE>
B-1
<PAGE> 35
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the
Investment Advisory Agreement to be signed by their respective officials duly
authorized, as of the day and year first above written.
Attest: GENERAL AMERICAN CAPITAL COMPANY
By:
- ---------------------------------- ----------------------------------
Matthew P. McCauley, Secretary Richard A. Liddy, President
CONNING ASSET MANAGEMENT
Attest: COMPANY
By:
- ---------------------------------- ----------------------------------
Joyce W. Hillebrand, Assistant Leonard M. Rubenstein, Chief
Secretary Executive Officer
B-2
<PAGE> 36
EXHIBIT C
---------
SUB-ADVISORY AGREEMENT
----------------------
<PAGE> 37
INVESTMENT SUB-ADVISORY AGREEMENT
---------------------------------
INVESTMENT SUB-ADVISORY AGREEMENT, made as of the 29th day of January,
1993, by, between and among GENERAL AMERICAN CAPITAL COMPANY (the "Company"),
a Maryland corporation, GENERAL AMERICAN INVESTMENT MANAGEMENT COMPANY, a
Missouri corporation registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Adviser"), and PROVIDENT CAPITAL MANAGEMENT INC.,
a Pennsylvania corporation registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Sub-Adviser").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end diversified management
investment company;
WHEREAS, the Adviser is the investment adviser to the Company; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it
with investment advice and services with respect to two new investment funds
- - the Special Equity Fund and the International Equity Fund (the "Funds" or,
separately, a "Fund"), to supplement the Adviser's investment advisory and
management activities on behalf of the Company, and the Sub-Adviser desires
to furnish such services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
ARTICLE I
Appointment and Services of Sub-Adviser
---------------------------------------
A. Appointment of Sub-Adviser
--------------------------
In accordance with and subject to the Investment Advisory
Agreement between the Company and the Adviser ("Advisory Agreement"), the
Adviser hereby appoints the Sub-Adviser as sub-adviser with respect to the
Funds subject to the supervision of the Adviser and the Board of Directors
of the Company ("Board"), for the period and on the terms and conditions set
forth in this Agreement. The Sub-Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein for the compensation provided for
herein. The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company or the
Adviser in any way or otherwise be deemed an agent of the Company or the
Adviser.
B. Investment Advisory Services
----------------------------
In carrying out its obligations to provide investment advisory
assistance and management advice with respect to the Funds, the Sub-Adviser
shall:
(1) obtain and provide investment research as to the
investments of each of the Funds;
(2) obtain and arrange for the evaluation of pertinent information
about significant economic developments affecting Fund
securities with the help of statistical and financial data,
and furnish the Adviser or the Company with whatever
statistical information with respect to the securities a Fund
may
C-1
<PAGE> 38
hold or contemplate purchasing, as the Adviser or the Company
may reasonably request;
(3) recommend industries and companies to be represented in the
Funds, and recommend nations for investment by the
International Equity Fund, and regularly report such
recommendations to the Adviser;
(4) recommend and implement programs for the purchase and sale of
the securities included or to be included in the Funds and
regularly report on such programs to the Adviser; such reports
shall include notice of all particulars by 4:00 p.m.
Philadelphia time on the day any security is bought or sold so
that the Adviser can give timely notice to the custodians of
the Company's securities and to individuals at General
American Life Insurance Company responsible for calculating
Fund valuations each day.
(5) maintain books and records with respect to each Fund's
portfolio transactions; and make such books and records
available to Adviser for inspection at such reasonable times
and places as Adviser shall require; and
(6) furnish to regulatory authorities having jurisdiction such
information as may be requested in order for such authorities
to ascertain that variable insurance operations are being
conducted in accordance with applicable laws and regulations.
C. General Standards
-----------------
The Sub-Adviser shall have complete discretion concerning the
selection of securities, composition of the Funds, and selection of brokers,
subject to its obligations under this Agreement, and the supervision and
review of the Adviser and the Board. The Sub-Adviser shall exercise its
discretion in a manner consistent with (l) the investment objectives,
policies, and restrictions of each Fund as stated in the Company's
Registration Statement, as amended from time to time, on file with the
Securities and Exchange Commission; (2) the Company's Articles of
Incorporation and By-Laws, as amended from time to time; (3) the provisions
of the l940 Act, as amended, including the regulations thereunder, as
interpreted by the staff of the Securities and Exchange Commission; and (4)
the applicable requirements of the Internal Revenue Code of 1986, as amended.
The Sub-Adviser shall use the same skill and care in formulating
and executing its recommendations for the Funds as it uses in connection with
other accounts for which it has full discretionary investment responsibility.
The Adviser has furnished or will furnish the Sub-Adviser with copies of the
Company's Registration Statement, Articles of Incorporation, and By-Laws as
currently in effect and agrees during the continuance of this Agreement to
furnish the Sub-Adviser with copies of any amendments or supplements thereto.
The Sub-Adviser will be entitled to rely on all such documents furnished by
the Adviser.
ARTICLE II
Compensation and Expenses
-------------------------
A. Compensation
------------
For the services provided under this Agreement the Adviser will
pay the Sub-Adviser, as full compensation, a fee at an annual rate equal to a
percentage of the average daily value of the net assets attributable to each
Fund. The fee will be calculated as follows:
C-2
<PAGE> 39
<TABLE>
<CAPTION>
International Equity Fund Special Equity Fund
Annual Fee Annual Fee
---------- ----------
Assets Percentage Percentage
------ ---------- ----------
<S> <C> <C>
First $l0 million .60% .45%
Next $l0 million .55% .40%
Balance over $20 million .45% .35%
</TABLE>
The Sub-Adviser's fee will be computed as of 4:00 p.m. New York
time on the last day of each month that both the Adviser and the New York
Stock Exchange are open for business. The fee will be payable monthly in
arrears and will not be an obligation of the Fund or the Company, being
instead paid by the Adviser from its own fee or other assets.
B. Expenses.
--------
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement.
ARTICLE III
Activities of the Sub-Adviser
-----------------------------
The Sub-Adviser's obligation to make and implement recommendations
shall be continuous. The Adviser shall retain not only the responsibility
for evaluating the Sub-Adviser's recommendations, but also responsibility for
evaluating Sub-Adviser's selection of brokers and the level of brokerage fees
and such periodic and special reports as the Board may require. Sub-Adviser
will keep any information obtained in the course of performing under this
Agreement in confidence, and will not use such information for its own
benefit nor disclose it except as authorized by Company or Adviser, or as
required by regulatory authorities having jurisdiction.
The Adviser understands that the Sub-Adviser now acts, will continue to
act, or may act in the future, as investment adviser to fiduciary and other
managed accounts including other investment companies, and the Adviser has no
objection to the Sub-Adviser's so acting, provided that the Sub-Adviser duly
performs all obligations under this Agreement.
The Adviser understands that the persons employed by the Sub-Adviser to
assist in the performance of its duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Adviser or any of its affiliates to engage in
and devote time and attention to other businesses or to render services of
whatever kind or nature, provided that the Sub-Adviser duly performs all
obligations under this Agreement.
ARTICLE IV
Liability of the Sub-Adviser
----------------------------
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Sub-Adviser
(or its officers, directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Sub-Adviser
or retained by it to perform or assist in the performance of its obligations
under this Agreement), neither the Sub-Adviser nor any of its officers,
directors, employees or agents shall be subject to liability to the Adviser
or the Company or to any shareholder or to any owner of a policy issued by
the shareholder for any act or omission in the course of, or connected with,
rendering advisory services hereunder, including without limitation any error
of judgment or mistake of law or for any loss suffered by the Adviser or the
Fund or any shareholder or policy
C-3
<PAGE> 40
owner or other person in connection with the matters to which this Agreement
relates, except to the extent specified in Section 36(b) of the l940 Act
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. The provisions of this Article IV shall
not apply to services other than those relating solely to the provision of
investment advice rendered by the Sub-Adviser pursuant to this Agreement.
ARTICLE V
Term of the Agreement
---------------------
A. Effectiveness
-------------
This Investment Sub-Advisory Agreement shall not become effective
unless and until it is approved by the Board, including a majority of
directors who are not parties to this Agreement or interested persons of any
such party to this Agreement, and this Agreement shall come into full force
and effect on the date on which it is so approved. Implementation of any
changes may be delayed, in Company's discretion, until the start of the next
month after a change is approved by the shareholders.
B. Term
----
This Agreement shall continue in effect from year to year so long
as its continuance is approved annually (l) by the vote of the majority of
the Board, or by vote of a majority of the outstanding voting securities of
the Fund in question, and (2) by the vote of a majority of the members of
the Board, who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement:
(1) shall be subject to termination, without the payment of any
penalty, by a majority of the Board, by the Adviser, or by
vote of a majority of the outstanding voting securities of the
Fund in question, on sixty days' written notice to the
Sub-Adviser;
(2) shall be subject to termination by the Sub-Adviser on sixty
days' written notice to both the Adviser and the Company;
and
(3) shall automatically terminate upon assignment by either
party or upon termination of the Investment Advisory
Agreement between the Company and the Adviser.
C. Amendment
---------
No provision of this Agreement may be amended, changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
No amendment of this Agreement shall be effective until approved
by (1) vote of the holders of a majority of the outstanding voting
securities of the affected Fund; and (2) a majority of those directors of
the Company who are not parties to this Agreement or interested persons of
such a party, cast in person at a meeting called for the purpose of voting on
such approval.
C-4
<PAGE> 41
ARTICLE VI
Miscellaneous
-------------
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Missouri. If any provision of this
Agreement shall be held or made invalid by a court decision, statute,
regulation or otherwise, the remainder of this Agreement shall not be
affected thereby.
Notices of any kind to be given to the Sub-Adviser by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the
Sub-Adviser at l700 Market Street, Suite 2720, Philadelphia, Pennsylvania
19103-3898, Attention: Thomas S. Stewart, or at such other address or to such
other individual as shall be specified by the Sub-Adviser to the Adviser.
Notices of any kind to be given to the Adviser by the Sub-Adviser shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 700
Market Street, St. Louis, Missouri 63101, Attention: President.
This Investment Sub-Advisory Agreement is subject to the
provisions of the l940 Act, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder, including such exemptions
therefrom as the Securities and Exchange Commission may grant. Words and
phrases used herein shall be interpreted in accordance with that Act and
those rules and regulations. The term "majority of the outstanding voting
securities" means the lesser of (l) 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.
The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
IN WITNESS WHEREOF, the parties have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials duly
authorized, on the day and year first above written.
Attest: GENERAL AMERICAN CAPITAL COMPANY
/s/ Matthew P. McCauley By: /s/ Richard A. Liddy
- ---------------------------------- ----------------------------------
Matthew P. McCauley, Secretary Richard A. Liddy, President
Attest: GENERAL AMERICAN INVESTMENT
MANAGEMENT COMPANY
/s/ Joyce W. Hillebrand By: /s/ Leonard M. Rubenstein
- ---------------------------------- ----------------------------------
Joyce W. Hillebrand, Assistant Leonard M. Rubenstein, President
Secretary
Attest: PROVIDENT CAPITAL MANAGEMENT INC.
/s/ J. William Erb By: /s/ Robert B. Trempe
- ---------------------------------- ----------------------------------
J. William Erb Robert B. Trempe
C-5
<PAGE> 42
November 20, 1996
Dear Policyholder Owner:
Because you have invested money through your variable life
insurance policy in General American Capital Company's
International Equity Fund, Special Equity Fund, or both funds
(referred to below as the "funds"), you are entitled to instruct
us how to vote the shares of the funds that support your policy
at a Special Meeting of Shareholders to be held on 16 December
1996. To assist you in giving those instructions, we have
enclosed the following:
(1) A Notice of the Special Meeting;
(2) A Proxy Statement; and
(3) A Voting Instruction Form.
The Special Meeting is being held for the following purposes:
1. INTERNATIONAL EQUITY FUND
a. To consider and act upon a proposal to change the investment
strategy of the International Equity Fund from an actively-
managed international equity strategy to a passively-managed
international index strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the International Equity Fund are
interdependent. In other words, shareholder approval of the change in the
investment strategy is contingent upon shareholder approval of the change
in the portfolio manager and, visa versa, shareholder approval of the
change in the portfolio manager is contingent upon shareholder approval of
the change in investment strategy.
2. SPECIAL EQUITY FUND
a. To consider and act upon a proposal to change the investment
strategy of the Special Equity Fund from a "small-cap" equity
strategy to a "mid-cap" equity strategy.
b. To consider and act upon a proposal to have Conning Asset
Management Company, the fund's current adviser, take over the
fund's portfolio management from the fund's current investment
sub-adviser, Provident Capital Management, Inc.
The two proposals relating to the Special Equity Fund are interdependent.
In other words, shareholder approval of the change in the investment
strategy is contingent upon shareholder approval of the change in the
portfolio manager and, visa versa, shareholder approval of the change in
the portfolio manager is contingent upon shareholder approval of the change
in investment strategy.
Please read the enclosed Notice of the Special Meeting and the
Proxy Statement for details about the Special Meeting.
To be given effect at the Special Meeting, a properly executed
Voting Instruction Form must be received by us at General American
Life Insurance Company, P.O. Box 14490, St. Louis, Missouri 63178-9816,
no later than December 13, 1996.
We shall vote shares of the funds in accordance with voting
instructions received on a timely basis. We shall vote the
shares of a fund for which no timely instructions are received,
and any shares that General American Life Insurance Company owns
on its own behalf, in the same proportion as dictated by the
voting instructions that are received. Voting Instruction Forms that
<PAGE> 43
are properly executed and returned but that have no voting
specification will be voted "For" the related proposal.
Please complete the enclosed Voting Instruction Form and promptly
return it in the enclosed postage paid envelope. Your
instructions and participation are very important and we would
appreciate your return of the form as soon as possible.
Thank you for your cooperation.
Very truly yours,
/s/ Matthew P. McCauley
________________________________
Matthew P. McCauley
Member & Secretary
Board of Directors
General American Capital Company
P.S. YOU WILL RECEIVE A SEPARATE VOTING INSTRUCTION FORM FOR
EACH OF THE TWO FUNDS INTO WHICH YOU HAVE DIRECTED PREMIUM
DOLLARS. IT IS IMPORTANT YOU RETURN A SIGNED VOTING INSTRUCTION
FORM FOR EACH FUND.
<PAGE> 44
<TABLE>
<S> <C>
General American Capital Company Voting Instructions Solicited on Behalf of the Board of Directors
("Capital Company") for a Special Meeting of Shareholders of the
International Equity Fund General American Capital Company
December 16, 1996
</TABLE>
Please fold and detach form at perforation before mailing.
INTERNATIONAL EQUITY FUND
I hereby instruct General American Life Insurance Company ("General
American") to vote the shares of the International Equity Fund (the "Fund")
as to which I am entitled to give instructions, as shown below, at a Special
Meeting of the Shareholders of the Fund ("the Meeting") to be held at 10:30
a.m. on December 16, 1996, Central Time and any adjournments thereof at 700
Market Street, St. Louis, Missouri 63101 as indicated on the reverse side.
I hereby revoke any and all voting instructions with respect to such
share previously given by me. I acknowledge receipt of the Proxy Statement
dated November 20, 1996. THIS INSTRUCTION WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THIS INSTRUCTION WILL BE VOTED "FOR" EACH
PROPOSAL.
This instruction may be revoked at any time prior to the Meeting by
executing a subsequent voting instruction form, by notifying the Secretary of
Capital Company in writing, or by voting in person at the Meeting.
PLEASE SIGN, DATE AND RETURN
THIS FORM PROMPTLY.
Date: ---------------------------------------------
Signature should be exactly as name appears on this
Voting Instruction Form. If the individual signing
the form is a fiduciary (e.g., attorney, executor,
trustee, guardian, etc.), the individual's
signature must be follow by his full title.
---------------------------------------------------
---------------------------------------------------
Contract Holder Signature
<PAGE> 45
PLEASE SIGN AND DATE THIS FORM ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Please fold and detach form at perforation before mailing
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS A VOTE FOR ALL PROPOSALS.
PLEASE USE BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
FOR AGAINST ABSTAIN
To change the investment strategy of the
International Equity Fund from an / / / / / /
actively-managed international equity
strategy to a passively-managed
international index strategy.
FOR AGAINST ABSTAIN
To have Conning Asset Management Company,
the fund's current adviser, take over the / / / / / /
fund's portfolio management from the fund's
current investment sub-adviser, Provident
Capital Management, Inc.
The two proposals relating to the International Equity Fund are
interdependent. In other words, shareholder approval of the change in the
investment strategy is contingent upon shareholder approval of the change in
the portfolio manager and, visa versa, shareholder approval of the change in
the portfolio manager is contingent upon shareholder approval of the change
in investment strategy.
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE> 46
<TABLE>
<S> <C>
General American Capital Company Voting Instructions Solicited on Behalf of the Board of Directors
("Capital Company") for a Special Meeting of Shareholders of the
Special Equity Fund General American Capital Company
December 16, 1996
</TABLE>
Please fold and detach form at perforation before mailing.
SPECIAL EQUITY FUND
I hereby instruct General American Life Insurance Company ("General
American") to vote the shares of the Special Equity Fund (the "Fund") as to
which I am entitled to give instructions, as shown below, at a Special
Meeting of the Shareholders of the Fund ("the Meeting") to be held at 10:30
a.m. on December 16, 1996, Central Time and any adjournments thereof at 700
Market Street, St. Louis, Missouri 63101 as indicated on the reverse side.
I hereby revoke any and all voting instructions with respect to such
share previously given by me. I acknowledge receipt of the Proxy Statement
dated November 20, 1996. THIS INSTRUCTION WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THIS INSTRUCTION WILL BE VOTED "FOR" EACH
PROPOSAL.
This instruction may be revoked at any time prior to the Meeting by
executing a subsequent voting instruction form, by notifying the Secretary of
Capital Company in writing, or by voting in person at the Meeting.
PLEASE SIGN, DATE AND RETURN
THIS FORM PROMPTLY.
Date: -------------------------------------------------
Signature should be exactly as name appears on this
Voting Instruction Form. If the individual signing the
form is a fiduciary (e.g., attorney, executor, trustee,
guardian, etc.), the individual's signature must be
follow by his full title.
-------------------------------------------------------
-------------------------------------------------------
Contract Holder Signature
<PAGE> 47
PLEASE SIGN AND DATE THIS FORM ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Please fold and detach form at perforation before mailing
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS A VOTE FOR ALL PROPOSALS.
---
PLEASE USE BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
FOR AGAINST ABSTAIN
To change the investment strategy of
the Special Equity Fund from a / / / / / /
"small-cap" equity strategy to a
"mid-cap" equity strategy.
FOR AGAINST ABSTAIN
To have Conning Asset Management Company,
the fund's current adviser, take over the / / / / / /
fund's portfolio management from the fund's
current investment sub-adviser, Provident
Capital Management, Inc.
The two proposals relating to the Special Equity Fund are
interdependent. In other words, shareholder approval of the change in the
investment strategy is contingent upon shareholder approval of the change in
the portfolio manager and, visa versa, shareholder approval of the change in
the portfolio manager is contingent upon shareholder approval of the change
in investment strategy.
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
