<PAGE> 1
SCHEDULE 14A
(RULE 14a-1-1)
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:
/x/ Preliminary Proxy Statement. / / Confidential, for Use of the
/ / Definitive Proxy Statement. Commissioner Only (as permitted
/ / Definitive Additional Materials. by Rule 14a-6(e)(2).
/ / 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):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 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
GENERAL AMERICAN CAPITAL COMPANY
700 Market Street
St. Louis Missouri 63101
MATTHEW P. MCCAULEY
MEMBER & SECRETARY
BOARD OF DIRECTORS
PHONE: (314) 444-0647
Fax: (314) 444-0510
March 31, 1997
Dear Policy/Contract Holder:
Because you have invested money through your variable life insurance policy
or variable annuity contract in General American Capital Company's Managed
Equity Fund (referred to below as the "Fund"), you are entitled to instruct
us how to vote the shares of the Fund at a special meeting of shareholders to
be held on 28 April 1997. To assist you in giving those instructions, we have
enclosed the following:
(1) A Notice of the Special Meeting;
(2) A Proxy Statement;
(3) A Voting Instruction Form; and
(4) A postage-paid return envelope.
The special meeting is being held for the following purpose:
To consider and act upon a proposal to have Conning Asset Management
Company (the investment adviser of the Managed Equity Fund as well
as the investment adviser and portfolio manager of each of Capital
Company's other funds) take over the portfolio management of the Managed
Equity Fund.
Please read the enclosed Notice of the Special Meeting and the Proxy
Statement for details about the special meeting.
In order 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 no later than April 25, 1997.
----------------------------
We shall vote shares of the Fund in accordance with voting instructions
received on a timely basis. We shall vote the shares of the Fund for which
no timely instructions are received, and any shares that General American
Life Insurance Company owns on behalf of group pension customers, in the
same proportion as dictated by the voting instructions that are received.
Voting Instruction Forms that are properly executed and returned but that have
no voting specification will be voted "For" the proposal.
<PAGE> 3
Please complete, sign, and date 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,
- -------------------------------
Matthew P. McCauley
Member & Secretary
Board of Directors
General American Capital Company
2
<PAGE> 4
MARCH 31, 1997
GENERAL AMERICAN CAPITAL COMPANY
MANAGED EQUITY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the shareholders of the Managed Equity Fund of
General American Capital Company ("Capital Company") will be held at the home
office of General American Life Insurance Company, located at 700 Market
Street, St. Louis, Missouri, on Monday, April 28, 1997 at 11:00 a.m., Central
Time, for the following purpose:
TO CONSIDER AND ACT UPON A PROPOSAL TO HAVE CONNING ASSET
MANAGEMENT COMPANY (THE INVESTMENT ADVISER OF THE MANAGED
EQUITY FUND AS WELL AS THE INVESTMENT ADVISER AND PORTFOLIO
MANAGER OF EACH OF CAPITAL COMPANY'S OTHER FUNDS) TAKE OVER
THE PORTFOLIO MANAGEMENT OF THE MANAGED EQUITY FUND.
You are entitled to vote at the meeting and any adjournments of the
meeting if you owned shares of the Managed Equity Fund at the close of
business on January 31, 1997. 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 Voting Instruction Form in the enclosed postage-paid
envelope. Your vote is very important to us, regardless of the number of
shares you own. 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 Voting Instruction Form very soon.
----------------------------------
Matthew P. McCauley
Member & Secretary
Board of Directors
General American Capital Company
<PAGE> 5
GENERAL AMERICAN CAPITAL COMPANY
700 MARKET STREET
ST. LOUIS, MISSOURI
TELEPHONE: (314) 231-1700
------------------------
PROXY STATEMENT
MARCH 31, 1997
------------------------
We at General American Life Insurance Company (referred to in this
proxy statement as "General American") have tried to make this proxy statement
you are now reading easy to understand because it contains important
information about a change to General American Capital Company (referred to
in this proxy statement as "Capital Company"). Capital Company is the
mutual fund in which you have invested through your variable life insurance
policy or variable annuity contract. In order to make this proxy statement
easier to read and understand, we present the information in question and
answer format. 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?
Capital Company offers a series of investment funds for variable life
insurance policies and variable annuity contracts sold by General American and
its affiliate insurance companies. This proxy statement relates to a change to
one of Capital Company's funds, the Managed Equity Fund (sometimes referred to
in this proxy statement as the "Fund"). As more specifically described below,
this proxy statement has been sent to you because the Board of Directors of
Capital Company has voted to change the portfolio manager of the Managed
Equity Fund. Because you have invested money through your variable life
insurance policy or variable annuity contract in the Managed Equity Fund, you
are entitled to vote on the change in the Fund's portfolio manager.
At its January 1997 meeting, the Board of Directors of Capital Company
unanimously voted to have the investment portfolio of the Managed Equity Fund
be managed by Conning Asset Management Company (referred to in this proxy
statement as "Conning," and formerly known as General American Investment
Management Company) instead of by Morgan Stanley Asset Management, Inc.
(referred to in this proxy statement as "Morgan Stanley"). Conning is the
current investment adviser of the Managed Equity Fund as well as the
investment adviser and portfolio manager of each of Capital Company's other
funds. Pursuant to the vote of Capital Company's Board of Directors, Conning
took over active portfolio management of the Managed Equity Fund on March 1,
1997. Under the Investment Company Act of 1940, as amended (the "1940 Act"),
Conning may act as portfolio manager of the Fund for a maximum of 120 days
before receiving ratification of the shareholders of the Fund. You have been
sent
2
<PAGE> 6
this proxy statement to enable you to vote on whether to ratify Conning as
the portfolio manager of the Managed Equity Fund.
This is the proposal that shareholders of the Managed Equity Fund are
being asked to vote on:
To have Conning Asset Management Company (the investment adviser of the
Managed Equity Fund as well as the investment adviser and portfolio
manager of each of Capital Company's other insurance-dedicated funds)
take over the portfolio management of the Managed Equity Fund from
Morgan Stanley Asset Management, Inc.
Please read this proxy statement carefully. Then, if you agree with
the Board of Directors that Conning should take over the portfolio management
of the Managed Equity Fund, mark the boxes noted "FOR" on the enclosed Voting
Instruction Sheet. If you do not agree that Conning should take over the
Fund's portfolio management, mark the boxes noted "AGAINST." If you decide you
want to abstain from voting either "For" or "Against," mark the box noted
"ABSTAIN." After you have marked, signed, and dated the Voting Instruction
Sheet, please send it back to us in the enclosed postage-paid envelope. The
Board of Directors of Capital Company recommends that you vote "FOR" the
proposal.
2. WHY HAS THE BOARD OF DIRECTORS VOTED TO CHANGE THE
PORTFOLIO MANAGER OF THE MANAGED EQUITY FUND?
Prior to March 1, 1997, the Managed Equity Fund was advised by Conning
and sub-advised by Morgan Stanley. As the investment adviser, Conning
provides investment advice and some administrative services to the Fund and
oversaw the performance of Morgan Stanley. As the sub-adviser, Morgan
Stanley managed the Fund's portfolio under the supervision of Conning. At
its January 1997 meeting, the Board of Directors unanimously voted to replace
Morgan Stanley as the Fund's portfolio manager with Conning assuming direct
portfolio management of the Fund. In accord with Board authorization,
Conning took over direct portfolio management of the Fund on March 1, 1997.
The Board of Directors now recommends that shareholders of the Fund ratify
the change in portfolio managers. If ratified by the shareholders of the
Fund, Conning would continue to directly manage the Fund's investment
portfolio. The investment objective of the Fund has not been affected, nor
will it be affected, by the change in the Fund's portfolio manager.
The Board of Directors determined that by directly managing the Fund,
Conning could eliminate a level of fund administration and management, thus
lowering the overall cost of managing the Fund, which savings could be passed
to the shareholders of the Fund. Because of the anticipated savings from
having a single adviser provide investment advice as well as providing
administrative services to the Fund, the base advisory fee has been reduced
from 0.50% to 0.40%. See the discussion of the Fund's aggregate advisory fee
prior to and after the change in portfolio managers on pages 6 and 7 of this
proxy statement. The new lower advisory fee will directly affect the net
return that policyholders and contract holders will
3
<PAGE> 7
achieve on funds allocated to the Managed Equity Fund. Conning has
experience directly managing other investment portfolios and is currently
acting as the portfolio manager of each of the other Capital Company
funds. More information regarding Conning is set forth under Question 4 below.
For the reasons discussed above, Capital Company's Board of Directors
recommends that shareholders of the Fund ratify the Fund's change in
portfolio managers.
3. WHAT OTHER CHANGES WOULD BE MADE?
No other changes to the Managed Equity Fund or to Capital Company's
other funds would be made if shareholders approve the change in the Fund's
portfolio manager.
4. WHAT ELSE DO I NEED TO KNOW ABOUT THE PROPOSED CHANGE BEFORE
I DECIDE HOW TO VOTE?
We believe that it is important for you to know more about Conning and
Morgan Stanley and the investment advisory agreement under which Conning
serves and the sub-advisory agreement under which Morgan Stanley previously
served. We also believe that it is important for you to know the Fund's
aggregate advisory fees before the change in portfolio managers and the
Fund's reduced advisory fees that result from the change in portfolio
managers.
CONNING ASSET MANAGEMENT COMPANY.
- --------------------------------
Conning, an indirect subsidiary of General American, is located at
700 Market Street, St. Louis, Missouri 63101. Conning is a registered
investment adviser under the Investment Advisers Act of 1940. As of December
1996, Conning provided investment advice to 30 separate accounts of General
American and 45 clients that were unaffiliated with General American.
Conning serves as the investment adviser for all of the funds offered by
Capital Company, including the Managed Equity Fund. As the investment adviser,
Conning has day-to-day responsibility for making investment decisions and
placing investment orders for all of Capital Company's funds. Prior to March
1, 1997, however, with respect to the Managed Equity Fund, it generally adhered
to the recommendations concerning the purchase, sale, and retention of common
stocks that were made by Morgan Stanley, the Fund's former investment
sub-adviser.
Conning is currently the investment adviser of the Managed 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 Capital Company's funds at a shareholders
meeting held July 21, 1993. Amendment No. 1 to the Advisory Agreement was
4
<PAGE> 8
approved by the Board of Directors on October 23, 1996 and by the effected
shareholders on December 16, 1996. Amendment No. 2 to the Advisory Agreement
effects the change in investment advisory fees that result from the change in
portfolio managers as set forth in this proxy statement. Amendment No. 2 was
approved by the Board of Directors as of February 28, 1997 and will be voted
upon by the shareholder of the Fund at the Special Meeting on April 28, 1997
as described in this proxy statement. The discussion in this proxy statement
of the Advisory Agreement and its amendments is qualified by the actual
Advisory Agreement, Amendment No. 1, and Amendment No. 2, which may be found
at Exhibit A.
---------
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 Advisory Agreement
also terminates as to the Fund upon sixty (60) days' notice given by Capital
Company's Board of Directors or by Conning, as the case may be. The Advisory
Agreement may also be terminated by majority vote (as that term is defined in
the 1940 Act) of the shares of Capital Company. If the Advisory Agreement is
not terminated, the Advisory Agreement will continue in force with respect to
the 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.
MORGAN STANLEY ASSET MANAGEMENT COMPANY, INC.
- ---------------------------------------------
The portfolio of the Managed Equity Fund was formerly managed by Morgan
Stanley under an investment sub-advisory agreement (the "Sub-Advisory
Agreement") with Conning and Capital Company, a copy of which is set forth in
Exhibit B. Morgan Stanley is not affiliated with General American, but is a
- ---------
wholly-owned subsidiary of Morgan Stanley Group, Inc., a Delaware corporation
which engages in the securities business through a number of subsidiaries both
inside and outside of the United States. Morgan Stanley has offices at 122
Avenue of the Americas, New York, New York 10020.
The Sub-Advisory Agreement, dated July 24, 1991, by and among Conning,
Capital Company, and Morgan Stanley 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 Fund's shareholders at a shareholders'
meeting held July 21, 1993. Pursuant to the terms of the Sub-Advisory
Agreement, and the vote of Capital Company's Board of Directors, the
Sub-Advisory Agreement terminated as of March 1, 1997. The discussion of the
terminated Sub-Advisory Agreement contained in this proxy statement is
qualified by the actual terminated Sub-Advisory Agreement itself, which may
be found at Exhibit B.
---------
Prior to the termination of the Sub-Advisory Agreement, Morgan Stanley
made recommendations as to which securities should be bought and which sold
in pursuit of the objectives of the Fund. Morgan Stanley was responsible for
the selection of brokers to execute securities transactions on behalf of the
Fund. Morgan Stanley's choices of securities
5
<PAGE> 9
and the performance of chosen brokers was reviewed by Conning and,
ultimately, by the Board of Capital Company. Morgan Stanley continues to
advise similar investment portfolios.
ADVISORY FEES PRIOR TO THE CHANGE IN PORTFOLIO MANAGERS.
- -------------------------------------------------------
For its services as the investment adviser to the Managed Equity Fund,
Conning charges the Fund an investment advisory fee that is accrued daily
against the Fund. Prior to the change in portfolio managers on March 1,
1997, Conning paid an investment sub-advisory fee to Morgan Stanley out of
the fee that it received from the Fund. We have set forth in the table below
the fees that were charged the Fund prior to the change in portfolio
managers, stated as an annual percentage of the average daily value of the
net assets:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
MANAGED EQUITY TOTAL PAID TO PAID TO
FUND ASSETS PERCENTAGE MORGAN CONNING
STANLEY
------------------------------------------------------------------------------
<S> <C> <C> <C>
First $10 million .50% .40% .10%
------------------------------------------------------------------------------
Next $20 million .35% .30% .05%
------------------------------------------------------------------------------
Balance over $30 .30% .25% .05%
million
------------------------------------------------------------------------------
</TABLE>
Based upon the investment management rates reflected in the above
table, during the fiscal year ended December 31, 1996, Capital Company paid
Conning fees totaling $165,862 for investment management services relating to
the Managed Equity Fund, out of which amount Morgan Stanley earned
approximately $138,000 for its services as the Fund's investment sub-adviser.
ADVISORY FEES AFTER THE CHANGE IN PORTFOLIO MANAGERS.
- ----------------------------------------------------
If shareholders ratify the Managed Equity Fund's change in portfolio
managers, Conning will continue to manage the Fund's investment portfolio.
Because the change in portfolio managers removes a level of fund administration
and management, certain administrative efficiencies will result which can be
passed on to the shareholders of the Fund. Accordingly, Conning has agreed to
a reduction in the base aggregate advisory fees of the Fund from 50 basis
points (0.50%) to 40 basis points (0.40%). We have set forth Conning's
graduated fees rates to manage and administer the Fund in the table below,
stated as an annual percentage of the average daily value of the net assets:
6
<PAGE> 10
<TABLE>
<CAPTION>
--------------------------------------------------------------------
MANAGED EQUITY TOTAL PAID TO
FUND ASSETS PERCENTAGE CONNING
--------------------------------------------------------------------
<S> <C> <C>
First $10 million .40% .40%
--------------------------------------------------------------------
Next $20 million .30% .30%
--------------------------------------------------------------------
Balance over $30 .25% .25%
million
--------------------------------------------------------------------
</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 Senior Portfolio Manager
Director Vice President, General
American Life Insurance
Company; Treasurer &
Director of Cova
Corporation; Chief
Investment Officer &
Director of Cova
Investment Advisory Corp.
(IL); and Director of
Conning Corp.
-----------------------------------------------------------------------------------------
Matthew P. McCauley General Counsel Associate General Counsel
& Vice President, General
American Life Insurance
Company. Director, Vice
President, General
Counsel, & Secretary for
several other General
American subsidiaries all
at 700 Market Street, St.
Louis, MO 63101,
including Equity
Intermediary Co., Red Oak
Realty Co., & White Oak
Royalty Co.; General
American Holding Co.,
13045 Tesson Ferry Road,
St. Louis, MO 63128; &
Paragon Life Insurance
Co., 100 S. Brentwood, St.
Louis, MO 63105. General
Counsel & Secretary,
Reinsurance Group of
-----------------------------------------------------------------------------------------
7
<PAGE> 11
-----------------------------------------------------------------------------------------
America, Inc., 660 Mason
Ridge Center Drive, St.
Louis, MO 63141 and Security
Equity Life Insurance
Company (New York).
Director & Secretary,
General American Capital
Company, General Life
Insurance Company of
America, General Life
Insurance Company
(Edwardsville, IL),
Cova Corporation;
Assistant Secretary &
Director, Cova Financial
Services Life Insurance
Co., Cova Financial Life
Insurance Co., and First
Cova Life Insurance Co.
General Counsel &
Secretary, Conning
Corporation. Director for
RGA Reinsurance Co.,
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 Executive Vice President &
and Director Director, General American
Life Insurance Co. Also,
Director of several
General American
subsidiaries, all at 700
Market Street, St. Louis,
MO 63101; except Paragon
Life and General American
Holding Co., whose
addresses are given for
Mr. McCauley. Treasurer,
General American Capital
Company. Vice President
& Director, Reinsurance
Group of America, Inc.,
whose address is listed
under Mr. McCauley.
Director, Cova Financial
Services Life Insurance
Co., First Cova Life
Insurance Co., Cova
Investment Advisory
Corp., and Cova Investment
Allocation Corp. Chief
Executive Officer,
Chairman, & Director for
Conning Corp. Director
for the following:
General Life Insurance
Co., Security Equity Life
Insurance Co., BHIF
America de Vida Seguros
S.A.
-----------------------------------------------------------------------------------------
8
<PAGE> 12
-----------------------------------------------------------------------------------------
(Chile), Manantial
Seguros de Vida S.A.
(Argentina), Red Oak
Realty Co., General Life
Insurance Co. of America,
and RGA Reinsurance Co.,
Secretary & Director for
RGA Sudamerica S.A.
-----------------------------------------------------------------------------------------
Maurice W. Slayton President and Director Director of GAN National
Insurance Co., and GAN
North American Insurance
Co., 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 Ave., Suite
601, Hartford, CT 06105;
President, CEO, &
Director of Conning & Co.,
CityPlace II, 185 Asylum
Street, Hartford, CT
06103; Director of Tenant
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 Co., Inc. 520 Pike
Street, 20th Floor,
Seattle, WA 98104-4004;
Director of Robert Plan
Corp., 8 Freer Street,
Lynbrook, NY 11563;
Director & President of
Conning Corp., 700 Market
Street, St. Louis, MO
63101.
-----------------------------------------------------------------------------------------
Mark E. Hansen Executive Vice President Director of Western
and Director Indemnity Insurance Co.,
820 Gessner, Suite 1000,
Houston, TX 77279;
Director of Conning, Inc.
& Conning Corp., 700
Market Street, St. Louis,
MO 63101. Executive Vice
President & Director of
Conning & Co., 185 Asylum
Street, Hartford, CT
06103.
-----------------------------------------------------------------------------------------
9
<PAGE> 13
-----------------------------------------------------------------------------------------
Donald L. McDonald Senior Vice President Senior Vice President of
Conning & Co., 185 Asylum
Street, Hartford, CT
06103.
-----------------------------------------------------------------------------------------
Michael D. McLellan Senior Vice President and President of Red Oak
Director Realty & White Oak Realty,
700 Market Street, St.
Louis, MO 63101 and
Director of Conning Corp.,
700 Market Street, St.
Louis, MO 63101.
-----------------------------------------------------------------------------------------
David N. Reid Senior Vice President Senior Vice President of
Conning & Co., 185 Asylum
Street, Hartford, CT
06103.
-----------------------------------------------------------------------------------------
William C. Shenton Senior Vice President Senior Vice President of
Conning & Co., 185 Asylum
Street, Hartford, CT
06103.
-----------------------------------------------------------------------------------------
J. Terri Tanaka Senior Vice President and Director of Conning Corp.,
Director 700 Market Street, St.
Louis, MO 63101.
-----------------------------------------------------------------------------------------
Fred M. Schpero Vice President, Secretary Secretary of Conning,
and Chief Financial Inc.; Vice President of
Officer Conning Corp.; & Vice
President, Secretary &
Chief Financial Officer of
Conning & Co., 185 Asylum
St., Hartford, CT 06103.
-----------------------------------------------------------------------------------------
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS.
- --------------------------------
The officers and directors of Morgan Stanley are set forth below.
Unless otherwise specified, the address of each officer and Director of
Morgan Stanley is 122 Avenue of the Americas, New York, New York 10020.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Name of Director
or Officer of Position at Other Business Profession,
Morgan Stanley Asset Morgan Stanley Asset Vocation, or Employment
Management, Inc. Management, Inc. During Past Two Years
-----------------------------------------------------------------------------------------
<S> <C> <C>
James M. Allwin President and Director Managing Director, Morgan
Stanley & Co. Inc.;
President of Morgan
Stanley Realty Inc.; head
of Morgan Stanley & Co.
Inc.'s Merchant Banking &
Venture Capital Divisions;
Member of Morgan Stanley
Group, Inc.'s Operating
-----------------------------------------------------------------------------------------
10
<PAGE> 14
-----------------------------------------------------------------------------------------
Committee.
-----------------------------------------------------------------------------------------
Barton M. Biggs Chairman and Director Managing Director, Morgan
Stanley & Co. Inc.; Morgan
Stanley Asset Management
Ltd.; Chairman & Director,
the India Magnum Fund
N.V., Morgan Stanley
Off-Shore Investment Co.
Ltd., Morgan Stanley
Emerging Markets Funds,
Inc., Latin American
Discovery Fund, Inc.,
Morgan Stanley Africa
Investment Funds, Inc.,
Morgan Stanley
Asia-Pacific Fund, Inc.,
Morgan Stanley India
Investment Fund, Inc.,
and Morgan Stanley
Emerging Markets Debt
Fund, Inc.; Member of the
International Advisory
Council of the Thailand
Fund; Chairman, Morgan
Stanley Fund, Inc.
-----------------------------------------------------------------------------------------
Gordon S. Gray Director Managing Director, Morgan
Stanley & Co. Inc. and
Director, Morgan Stanley
Asset Management, Ltd.
-----------------------------------------------------------------------------------------
Dennis G. Sherva Director Managing Director, Morgan
Stanley & Co. Inc.
Chairman of the Morgan
Stanley Emerging Growth
Portfolio.
-----------------------------------------------------------------------------------------
Peter A. Nadosy Vice Chairman and Managing Director, Morgan
Director Stanley & Co., Inc.;
Director, Morgan Stanley
Asset Management Ltd.,
Morgan Stanley Off-Shore
Investment Co. Ltd., and
Morgan Stanley High Yield
Institutional Portfolio.
Advisory Director of
Collateralized Bond
Obligations N.V., Central
Secured Investments N.V.,
and YCM Investments N.V.
Chairman, Morgan Stanley
High Yield Fund, Inc. and
Morgan Stanley Global
Opportunity Bond Funds.
Inc.
-----------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 15
5. WHAT FACTORS DID THE BOARD OF DIRECTORS CONSIDER IN
DECIDING TO RECOMMEND TO SHAREHOLDERS THAT THE PROPOSAL
DESCRIBED IN THIS PROXY STATEMENT BE APPROVED?
In determining to recommend the change in portfolio manager described
in this proxy statement, the Board considered: (i) the reduction in
aggregate investment advisory fees for the Managed Equity Fund; (ii)
administrative efficiencies created by having a single adviser perform both
the administrative duties and portfolio management duties for the Fund; (iii)
administrative efficiencies created by having a single adviser perform the
administrative duties and portfolio management of each of Capital Company's
funds; (iv) Conning's ability to manage the Fund; (v) the financial
strength and asset size of Conning; (vi) and Conning's past experience as
adviser to Capital Company and its supervision in connection with
sub-advisory services provided to the Fund. In this regard, representatives
of Conning met with the Board at its January 1997 meeting, at which time such
representatives described the resources available to Conning to secure for
the Fund investment research and investment advice.
Based upon its review, the Board of Directors concluded that the
proposed change in portfolio management services would be in the best
interests of the 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 Conning to take over as the Fund's portfolio
manager.
In the event that shareholders of the Managed Equity Fund do not
approve the change in portfolio management, Conning would be required to
discontinue acting as the Fund's portfolio manager and a new portfolio
manager would have to be found to managed the Fund by no later than June 28,
1997. In such a situation, the Board of Directors would be required to
appoint a new investment manager to act as the Fund's portfolio manager and
the shareholders of the Fund would then be required to ratify the new
portfolio manager within 120 days of its appointment.
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 of Capital Company's funds.
Conning and General American perform a number of administrative
functions and pay a number of administrative expenses for Capital Company
such as: (i) acting as the transfer and dividend-disbursing agent for Capital
Company; (ii) recording the issuance and redemption of shares of Capital
Company; (iii) valuing the liabilities of each fund; (iv) computing the daily
income and net asset value of each fund; (v) recommending independent
auditors and custodians; (vi) coordinating and supervising the activities of
the independent auditors and custodians; (vii) maintaining records not
otherwise maintained; (viii) preparing and filing tax returns and reports and
filings that pertain to federal and state securities laws; (ix) scheduling
and planning the agenda for meetings of Capital Company's directors and
shareholders; (x) paying directors who
12
<PAGE> 16
are not interested persons of General American, including any travel
expenses they may have; (xi) paying the costs of printing and distributing
communications to current shareholders of Capital Company; (xii) paying
insurance premiums; (xiii) paying charges and expenses of the custodian,
accountants, and counsel; (xiv) paying transfer taxes, other state, federal,
and local taxes and filing fees; and (xv) paying 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. 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 the
Managed Equity Fund, of 10 basis points (.10%).
Capital Company also directly pays the brokerage commissions, 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.
6. WHEN WILL THE MEETING BE HELD?
The special meeting of shareholders of the Managed Equity Fund is
scheduled to be held on Monday, April 28, 1997 beginning at 11:00 a.m.,
Central Time, at 700 Market Street, St. Louis, Missouri. Your proxy is being
solicited for the purpose set forth in the accompanying Notice of Special
Meeting.
Shareholders of record at the close of business on January 31, 1997
(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
1,929,662 outstanding shares of the Managed Equity Fund. This proxy is
being mailed to shareholders on or about March 31, 1997. 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
policyholders and variable annuity contract holders who own units in the
separate accounts that invest in the Fund. The number of votes that 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, must be present to transact the business related to the
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
13
<PAGE> 17
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 Managed 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 and variable annuity contracts
who have put money into one or more of the separate accounts that invest in
the Fund. General American will vote the shares the Fund for which no timely
instructions are received, and any shares owned by separate accounts used by
qualified plans, in proportion to the voting instructions that are received
with respect to all policies and contracts participating in the Fund. Voting
Instruction Forms that are properly executed and returned but that have no
voting specification will be voted "For" the proposal.
SUBSTANTIAL INTERESTS.
- ---------------------
To the knowledge of Capital Company no person has the right to instruct
General American with respect to 5% or more of the shares of the 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 that
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.
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, 1996, Capital Company paid a
total of $128,797 in commissions, none of it to brokers or dealers affiliated
with General American, Conning, or Morgan Stanley. 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
14
<PAGE> 18
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.
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 1998 (if any) and to have such proposal included in any proxy
material distributed in 1998 should
15
<PAGE> 19
notify Capital Company in writing at 700 Market Street, St. Louis, Missouri
63101 at least 90 days before May 1, 1998.
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.
16
<PAGE> 20
Exhibit A
---------
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 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
A-1
<PAGE> 21
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.
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.
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:
Equity Index Fund .25 Percent
Money Market Fund .125 Percent
Bond Index Fund .25 Percent
Asset Allocation Fund .50 Percent
A-2
<PAGE> 22
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%
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.
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-3
<PAGE> 23
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 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-4
<PAGE> 24
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:
(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.
A-5
<PAGE> 25
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 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.
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
A-6
<PAGE> 26
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-7
<PAGE> 27
AMENDMENT NO. 1
---------------
TO THE
INVESTMENT ADVISORY AGREEMENT
-----------------------------
Amendment No. 1 made as of the 1st day of January, 1997, 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:
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%
A-8
<PAGE> 28
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
/s/ Matthew P. McCauley By: /s/ Richard A. Liddy
- ----------------------------------- -----------------------------
Matthew P. McCauley, Richard A. Liddy,
Secretary President
Attest: CONNING ASSET MANAGEMENT COMPANY
/s/ Joyce W. Hillebrand By: /s/ Leonard M. Rubenstein
- ----------------------------------- -----------------------------
Joyce W. Hillebrand, Leonard M. Rubenstein,
Assistant Secretary Chief Executive Officer
A-9
<PAGE> 29
AMENDMENT NO. 2
---------------
TO THE
INVESTMENT ADVISORY AGREEMENT
-----------------------------
Amendment No. 2 made as of the first day of March, 1997, 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, as amended by Amendment No. 1 dated as of the first day of
January, 1997, by and between the Company and the Adviser, as follows:
(i) ARTICLE II is hereby amended to add the Small-Cap Equity Fund to
the list of Company funds managed by Adviser under the
Investment Advisory Agreement; and
(ii) ARTICLE II is hereby amended to change the investment advisory
fee rates for the Managed Equity Fund and to add the investment
advisory fee rate for the Small-Cap Equity Fund as follows:
Managed Equity Fund Assets
--------------------------
First $10 million .40%
Next $20 million .30%
Balance over $30 million .25%
Small-Cap Equity Fund .25%
---------------------
A-10
<PAGE> 30
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 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
/s/ Matthew P. McCauley By: /s/ Richard A. Liddy
- ---------------------------------- -----------------------------
Matthew P. McCauley, Richard A. Liddy,
Secretary President
Attest: CONNING ASSET MANAGEMENT COMPANY
/s/ Joyce W. Hillebrand By: /s/ Leonard M. Rubenstein
- ----------------------------------- -----------------------------
Joyce W. Hillebrand, Leonard M. Rubenstein,
Assistant Secretary Chief Executive Officer
A-11
<PAGE> 31
Exhibit B
---------
INVESTMENT SUB-ADVISORY AGREEMENT
---------------------------------
INVESTMENT SUB-ADVISORY AGREEMENT, made as of the twenty-fourth day of
July, 1991, 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
Investment Advisers Act of 1940 (the "Adviser"), and MORGAN STANLEY ASSET
MANAGEMENT INC., a Delaware 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 with five investment funds;
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 with respect to the Managed Equity Fund of the Company
(the "Fund"), in connection with 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
Fund 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-1
<PAGE> 32
B. INVESTMENT ADVISORY SERVICES.
-----------------------------
In carrying out its obligations to provide investment advisory
assistance and management advice with respect to the Fund, the Sub-Adviser
shall:
(1) obtain and provide investment research as to the Fund's
investments;
(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 the Fund may hold or
contemplate purchasing, as the Adviser or the Company may
reasonably request;
(3) recommend industries and companies to be represented in the
Fund and regularly report such recommendations to the
Adviser;
(4) recommend programs for the purchase and sale of the
securities included or to be included in the Fund and
regularly report on such programs to the Adviser; and
(5) 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 perform its obligations under this
Agreement subject to the supervision and review of the Adviser and the Board
and in a manner consistent with (1) the investment objectives, policies, and
restrictions of the Fund as stated in the Company's Registration Statement,
as amended from time to time, filed 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 1940 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 its
recommendations for the Fund as it uses in connection with other accounts for
which it has full discretionary investment responsibility.
B-2
<PAGE> 33
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 the
Fund. The fee will be calculated as follows:
ASSETS PERCENTAGE
------ ----------
First $10 million .40%
Next $20 million .30%
Balance over $30 million .25%
The Sub-Adviser's fee will be computed as of 4 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 recommendations shall be
continuous, provided that the Adviser shall be free at all times to accept or
decline such recommendations. The Adviser shall retain not only the
responsibility for evaluating the Sub-Adviser's recommendations, but also
responsibility for (1) the selection of brokers; (2) the maintenance of books
and records with respect to the portfolio transactions of the Fund; and (3)
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.
B-3
<PAGE> 34
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 the 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 Company 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 policyowner or other person in connection with the
matters to which this Agreement relates, except to the extent specified in
Section 36(b) of the 1940 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 by the vote of the Fund's shareholders, 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-4
<PAGE> 35
B. TERM.
-----
This Agreement shall continue in effect from year to year so long
as its continuance is approved annually (1) by the vote of the majority of
the Board, or by vote of a majority of the outstanding voting securities of
the Fund, 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, 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 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.
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 provisions 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 122 Avenue of the Americas, New York, New York 10020,
Attention: Secretary and General Counsel, or at such other
B-5
<PAGE> 36
address or to such other individual as shall be specified by the Sub-Adviser
to the Adviser. Notices of any kind to be given if mailed or delivered to
the Adviser at P.O. Box 396, St. Louis, Missouri 63166, Attention:
President.
This Investment Sub-Advisory Agreement is subject to the provisions of
the 1940 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 (1) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (2) more than 50% of
the outstanding shares.
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, Richard A. Liddy,
Secretary President
Attest: GENERAL AMERICAN INVESTMENT
MANAGEMENT COMPANY
/s/ Joyce W. Hillebrand By: /s/ Leonard M. Rubenstein
- ----------------------------- -----------------------------
Joyce W. Hillebrand, Leonard M. Rubenstein,
Assistant Secretary President
Attest: MORGAN STANLEY ASSET MANAGEMENT INC.
/s/ Harold J. Schaaff By: /s/ Peter A. Nadosy
- ----------------------------- -----------------------------
Harold J. Schaaff, Secretary Peter A. Nadosy, President
B-6
<PAGE> 37
General American Capital Company Voting Instructions Solicited on Behalf of
("Capital Company") the Board Directors for a Special Meeting of
Managed Equity Fund Shareholders of General American Capital
Company
April 28, 1997
MANAGED EQUITY FUND
I hereby instruct General American Life Insurance Company ("General
American") to vote the shares of the Managed 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 11:00
a.m. on April 28, 1997, Central Time and any adjournments thereof at 700
Market Street, St. Louis, Missouri 63101 as indicated below.
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
March 31, 1997. THIS INSTRUCTION WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS INSTRUCTION WILL BE VOTED "FOR" THE 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.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS A VOTE FOR THE PROPOSAL.
---
Please use blue or black ink or dark pencil. Do not use red ink.
FOR AGAINST ABSTAIN
To have Conning Asset Management Company (the
investment adviser of the Managed Equity Fund
as well as the investment adviser and portfolio
manager of each of Capital Company's other / / / / / /
funds) take over the portfolio management of
the Managed Equity Fund.
MANAGED EQUITY FUND total votes/value
as of January 31, 1997 is $ \------------\.
NOTE: The amount shown reflects the value of this Fund, it does not take into
consideration surrender charges or outstanding loans.
PLEASE SIGN AND DATE THIS FORM AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
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 followed by his
full title.
\policy plan no.\ ---------------------------------------------------
\owner name\
\address1\
\address2\ ---------------------------------------------------
\city state zip\ Contract/Annuity Holder Signature
