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Previous: AMERICREDIT CORP, SC 13D/A, 1998-02-24 |
Next: GENERAL AMERICAN LIFE INSURANCE CO SEPARATE ACCOUNT ELEVEN, NSAR-U, 1998-02-24 |
<PAGE> 1
GENERAL AMERICAN CAPITAL COMPANY
February, 1998
Dear Shareholder:
We are pleased to bring you this Annual Report for General American Capital
Company, covering financial results through December 31, 1997. General
American Capital Company is an underlying investment vehicle for variable
universal life insurance and variable annuity products offered by General
American Life Insurance Company.
As in previous annual reports, this edition includes management commentary on
the investment performance of each fund, plus historical graphs charting the
growth of a $10,000 investment from fund inception through December 31, 1997.
Preceding the management discussion of each fund is a two-page Economic
Overview. Following the management discussion section are the audited
financial statements and footnotes, and the schedule of investments for each
fund.
We hope you find this report informative. Thank you for choosing our
investment funds. We look forward to continued asset growth in 1998, our
eleventh year of operation.
/s/ RICHARD A. LIDDY
Richard A. Liddy
Chairman of the Board
1
<PAGE> 2
ECONOMIC OVERVIEW
In 1998, we can expect to see a significant, sustained slowdown in the
economy, primarily as a result of the continued tight labor markets. The
unemployment rate is at its lowest since the 1970s and the labor pool simply
is not large enough to accommodate continued strong growth. As a result, some
firms will not be able to meet orders, simply because they do not have a
sufficiently trained work force.
A second reason for the slowdown is the Asian market meltdown. No one can
fully know the impact the Asian crisis will have on the U.S. economy but, as
we have already seen, some U.S. corporations and some bond market investors
are already beginning to factor in a significant slowdown effect.
Finally, most analysts agree that there will be some type of year 2000 effect
on the economy. As companies devote full resources in 1998 and 1999 to
addressing potential year 2000 problems, they will decrease spending on other
technology. With these three forces combined, we expect GDP growth to slow
from the estimated 3.7 percent in 1997 to an expected 2.1 percent in 1998.
Those who are predicting 5.0 to 5.25 percent 30-year treasury rates at the
end of 1998 are also expecting gross domestic product (GDP) growth in the 1.8
percent range, with continued low inflation. The effects of a non-farm
payroll jump in November and December were offset by a recent slowing of
manufacturing, as evidenced by the various purchasing managers' indexes.
This, coupled with the weak showing of Christmas sales, has led the markets
to see little upside to inflation. Our expectation of 2.0 to 2.3 percent GDP
growth lies with the expected resiliency of the American consumer.
2
<PAGE> 3
We expect the American consumer to remain in a buying mood for most of 1998,
spurred by low interest rates, low unemployment, and high consumer
confidence. By mid-year, we believe rates will rise from the January levels
(5.38 percent 10-year yield and 5.70 percent 30-year yield). We believe
consumer spending will remain resilient even in the face of a substantial
drag from falling net exports. The growth rate of real wages has accelerated
to over 2 percent, its fastest rate in 20 years. Thanks largely to the stock
market, the gain in real household net worth since 1994 has probably been the
largest three-year increase of the postwar era. The housing sector will
receive a boost, and a refinancing boom caused by low interest rates should
free up additional cash flow for consumer spending.
While GDP growth will be at a lower rate than last year, we expect minimal
growth in inflation. Commodity prices will exhibit a downward bias during the
first half of the year and wage pressures will move upward. In addition,
health care costs for Fortune 1000 companies are expected to rise 4 percent
in 1998, compared with 3 percent in 1997, according to a recent survey by
Towers Perrin, a management consulting company. December's Producer Price
Index (PPI) report culminated a year-over-year 1.2 percent decline in 1997
with the exception of food and energy, whose PPI was up 0.1 percent
year-over-year, and resulted in increased speculation of deflation in 1998.
We are not in the deflationary camp. We expect a slightly positive PPI number
in 1998 and approximately a 2.4 percent CPI rate.
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
General American Capital Company:
We have audited the statements of assets and liabilities, including the
schedules of investments, of the S & P 500 Index, Money Market, Bond Index,
Managed Equity, Asset Allocation, International Index, Mid-Cap Equity and
Small Cap Equity Funds of General American Capital Company as of December 31,
1997, the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights information for the periods
presented. These financial statements and the financial highlights
information are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence
with the custodians and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights information
referred to above present fairly, in all material respects, the financial
position of the S & P 500 Index, Money Market, Bond Index, Managed Equity,
Asset Allocation, International Index, Mid-Cap Equity and Small-Cap Equity
Funds of General American Capital Company as of December 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the years in the two year period then ended and the
financial highlights information for the periods presented, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 2, 1998
4
<PAGE> 5
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
MANAGEMENT DISCUSSION
This fund finished the year with another strong performance, posting a 32.8
percent net return, closely matching the benchmark S&P 500's results for
1997. This was despite a highly volatile fourth quarter in which the
well-publicized "Asian flu" of economic distress in the Asian Rim countries
roiled financial markets worldwide. The Asian crisis triggered a
roller-coaster ride for the U.S. stock market, with a record drop of 554
points on October 28th followed by the largest single-day gain ever of 337
points. The subsequent rally moved the Dow Jones Industrial Average to a high
of 8149 on December 5th from the October 28th low of 7161, an increase of
13.8 percent. Trading volume also reached record levels in the fourth quarter.
One billion shares were traded in one day for the first time on October 22,
and the billion-share level was topped six more times before year's end.
In some respects the third and fourth quarter results reversed themselves.
Mid-cap and small-cap stocks outperformed large-cap stocks in the third
quarter, led by a 16.1 percent increase in the S&P 400 Index of mid-cap
issues. Large-caps took back the advantage in the fourth quarter, albeit
with much lower returns (2.9 percent for the S&P 500 Index vs. 0.8 percent
for the S&P 400). Similar results were achieved in growth-style and
value-style equities; value outperformed growth 9.2 percent (Barra Value
Index) to 5.9 percent (Barra Growth Index) in the third quarter, and then
growth topped value (by the same indexes) 3.5 percent to 2.2 percent in the
fourth quarter. After outperforming other sectors in the third quarter,
financial services and technology reacted negatively to the economic downturn
in Asia in the fourth quarter.
GROWTH OF A $10,000 INVESTMENT
[graph]
<TABLE>
<CAPTION>
EQUITY INDEX
Date FUND S&P500 INDEX
<S> <C> <C>
10/01/87 10,000.00 10,000.00
12/31/87 7,795.43 7,750.00
12/31/88 9,093.16 9,036.50
12/31/89 11,798.92 11,901.07
12/31/90 11,348.52 11,532.14
12/31/91 14,776.50 15,049.44
12/31/92 15,877.00 16,193.20
12/31/93 17,438.45 17,828.71
12/31/94 17,639.52 18,060.48
12/31/95 24,139.29 24,825.03
12/31/96 29,665.30 30,553.65
12/31/97 39,395.99 40,708.46
</TABLE>
<TABLE>
ANNUAL RETURNS
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Annual Returns 32.80% 19.93% 17.59% 14.31%
</TABLE>
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
5
<PAGE> 6
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedule)
Common Stocks $493,602,537
Short term securities 6,848,967
------------
Total investments 500,451,504
Cash 687,973
Dividends receivable 608,181
------------
Total assets 501,747,658
------------
LIABILITIES:
Payable for daily variation on futures contracts 44,400
Payable to Conning Asset
Management Company 104,923
Payable to General American
Life Insurance Company 20,985
------------
Total liabilities 170,308
------------
Total net assets $501,577,350
============
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 12,731,685
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 39.40
TOTAL AMORTIZED COST OF INVESTMENTS $259,690,422
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 7,388,094
Interest 198,942
------------
Total investment income 7,587,036
------------
EXPENSES:
Investment management charge 1,069,692
Administrative charge 213,938
------------
Total expenses 1,283,630
------------
Net investment income 6,303,406
------------
NET REALIZED GAIN:
Net realized gain on investments 15,385,330
Net realized gain on futures contracts 69,799
------------
NET REALIZED GAIN 15,455,129
------------
NET UNREALIZED GAIN (LOSS):
Net unrealized gain on investments 94,632,706
Net unrealized loss on futures contracts (44,400)
------------
NET UNREALIZED GAIN 94,588,306
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $116,346,841
============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 6,303,406 $ 5,745,449
Net realized gain 15,455,129 4,669,772
Net unrealized gain 94,588,306 50,373,722
------------ ------------
Net increase in net assets from operations 116,346,841 60,788,943
Capital share transactions 45,029,520 32,099,056
------------ ------------
Net increase in net assets 161,376,361 92,887,999
Net assets, beginning of year 340,200,989 247,312,990
------------ ------------
Net assets, end of year $501,577,350 $340,200,989
============ ============
See accompanying notes to financial statements beginning on page 57.
</TABLE>
6
<PAGE> 7
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND <F*>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 29.67 $ 24.14 $ 17.64 $ 17.44 $ 15.88
-------- -------- -------- -------- --------
Income from operations:
Net investment income .52 0.53 0.46 0.44 0.41
Net realized and unrealized gain (loss)
on investments 9.21 5.00 6.04 (0.24) 1.15
-------- -------- -------- -------- --------
Net increase in asset value per share 9.73 5.53 6.50 0.20 1.56
-------- -------- -------- -------- --------
Net asset value, end of year $ 39.40 $ 29.67 $ 24.14 $ 17.64 $ 17.44
======== ======== ======== ======== ========
Total return <F2> 32.80% 22.89% 36.85% 1.15% 9.83%
Net assets, end of year (in thousands) $501,577 $340,201 $247,313 $169,303 $161,761
Ratio of expenses to average net assets <F3> .30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income to average
net assets <F3> 1.48% 1.97% 2.19% 2.50% 2.47%
Portfolio turnover rate 12.61% 8.93% 4.75% 7.38% 2.56%
Average commission rate <F4> $ 0.04 $ 0.04 -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 14.78 $ 11.35 $ 11.80 $ 9.09 $ 7.80
-------- -------- ------- ------- -------
Income from operations:
Net investment income 0.39 0.38 0.38 0.37 0.36
Net realized and unrealized gain (loss)
on investments 0.71 3.05 (0.83) 2.34 0.93
-------- -------- ------- ------- -------
Net increase (decrease) in asset value per share 1.10 3.43 (0.45) 2.71 1.29
-------- -------- ------- ------- -------
Net asset value, end of year $ 15.88 $ 14.78 $ 11.35 $ 11.80 $ 9.09
======== ======== ======= ======= =======
Total return <F2> 7.45% 30.21% -3.82% 29.76% 16.65%
Net assets, end of year (in thousands) $123,458 $102,076 $72,665 $65,211 $28,917
Ratio of expenses to average net assets <F3> 0.30% 0.30% 0.30% 0.32% 0.30%
Ratio of net investment income to average
net assets <F3> 2.67% 2.89% 3.35% 3.57% 4.15%
Portfolio turnover rate 4.38% 3.92% 4.39% 20.56% 8.41%
Average commission rate <F4> -- -- -- -- --
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
<F*>This Fund formerly known as the Equity Index Fund.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
7
<PAGE> 8
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (1.48%)
Boeing Co. 65,280 $ 3,194,607
Crane & Co. 3,000 130,125
General Dynamics Corp. 4,100 354,392
Lockheed Martin Corp. 12,703 1,251,246
Rockwell International Corp. 13,650 713,213
Textron Inc. 10,800 675,000
United Technologies Corp. 15,400 1,121,305
-----------
7,439,888
-----------
Air Transport (0.50%)
AMR Corp.<F*> 6,000 771,000
Delta Air Lines Inc. 4,800 571,200
Federal Express Corp.<F*> 7,500 457,965
Southwest Airlines 14,250 350,906
US Air Group<F*> 5,900 368,750
-----------
2,519,821
-----------
Apparel (0.46%)
CVS Corp. 11,200 717,494
Jostens Inc. 2,500 57,655
Liz Claiborne Inc. 4,500 188,154
Nike Inc. Class B 18,800 737,900
Reebok Intl. Inc.<F*> 3,600 103,723
Russell Corp. 2,300 61,093
Springs Industries 1,300 67,600
VF Corp. 8,200 376,683
-----------
2,310,302
-----------
Business Machines (3.20%)
Apple Computer Inc.<F*> 8,300 108,937
Bay Networks Inc.<F*> 13,700 350,199
Cincinnati Milacron 2,500 64,843
Compaq Computer Corp. 49,340 2,784,602
DSC Communications<F*> 7,600 182,400
Data General Corp.<F*> 3,100 54,055
Digital Equipment Corp.<F*> 9,900 366,300
EMC Corp/Mass<F*> 32,100 880,728
Honeywell Inc. 8,300 568,550
IBM Corp. 64,040 6,696,150
Oracle Corp.<F*> 63,862 1,424,889
Pitney Bowes Inc. 9,400 845,408
Unisys Corp.<F*> 11,400 158,175
Xerox Corp. 21,175 1,562,969
-----------
16,048,205
-----------
Business Services (5.88%)
Adobe Systems Inc. 4,700 193,875
Automatic Data Processing Inc. 19,100 1,172,262
Browning-Ferris Industries Inc. 12,900 477,300
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Business Services (continued)
Cabletron Systems<F*> 10,200 $ 153,000
Cendant Corp.<F*> 64,242 2,208,319
Ceridian Corp.<F*> 5,000 229,060
Cisco Systems Inc.<F*> 65,500 3,651,625
Clear Channel Communications<F*> 6,400 508,397
Cognizant Corp. 10,700 476,813
Computer Assoc. Intl. 35,600 1,882,350
Dell Computers<F*> 21,600 1,814,400
De Luxe Check Printers 5,400 186,300
Dun & Bradstreet Corp. 11,075 342,627
Equifax Inc. 9,800 347,283
First Data Corp. 28,900 845,325
HBO & Co. 12,900 619,200
Microsoft Corp.<F*> 78,200 10,107,350
Millipore Corp. 2,800 95,024
Moore Corp. Limited 5,700 86,213
National Service Inds. Inc. 2,900 143,730
Nextlevel Systems Inc.<F*> 9,600 171,600
Novell Inc.<F*> 22,700 170,250
Sun Microsystems Inc.<F*> 24,000 957,000
Tellabs<F*> 11,800 623,925
Thermo Electron<F*> 9,800 436,100
3Com Corp. 22,500 786,082
Waste Management Inc. 29,500 811,250
-----------
29,496,660
-----------
Chemicals (2.78%)
Air Products & Chemicals Inc. 7,200 592,200
Alliedsignal Inc. 36,900 1,436,775
Dow Chemical Co. 14,937 1,516,105
E I Du Pont De Nemours & Co. 73,800 4,432,576
Eastman Chemical 5,075 302,277
Ecolab Inc. 4,200 232,835
B F Goodrich 3,500 145,030
W.R. Grace (new) 4,800 386,098
Great Lakes Chemical 3,900 175,013
Hercules Inc. 6,500 325,403
Mallinckrodt Inc. 4,800 182,400
Monsanto 38,450 1,614,900
Morton International Inc. 8,700 299,063
Nalco Chemicals 4,300 170,117
Owens Corning 3,500 119,438
PPG Industries Inc. 11,700 668,362
Rohm & Hass Co. 4,000 383,000
Rubbermaid Inc. 9,700 242,500
Safety-Kleen 3,800 104,261
Sigma-Aldrich 6,500 258,375
Union Carbide Corp. 8,100 347,790
-----------
13,934,518
-----------
(continued)
8
<PAGE> 9
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Banking (7.54%)
BB&T Corp. 8,900 $ 570,152
Banc One Corp. 37,976 2,062,553
Bank of New York 24,800 1,433,738
BankAmerica Corp. 45,544 3,324,712
Bankboston Corp. 9,500 892,401
Banker's Trust New York Corp. 6,500 730,840
Barnett Banks Inc. 13,000 934,375
Chase Manhattan Corp. (new) 27,662 3,028,989
Citicorp 29,900 3,780,466
Comerica Inc. 6,900 622,725
Corestate Financial Corp. 13,200 1,056,818
Fifth Third Banc 10,100 825,675
First Chicago NBD Corp. 19,264 1,608,544
First Union Corp. 41,000 2,101,250
Huntington Bancshares 12,400 446,400
Keycorp 14,200 1,005,530
Mellon Bank Corp. 16,400 994,250
J P Morgan & Co. Inc. 11,700 1,320,638
National City Corp. 14,000 920,500
Nationsbank Corp. 46,466 2,825,690
PNC Financial Corp. 20,000 1,141,240
Suntrust Banks Inc. 14,000 999,250
Synovus Financial Corp. 11,400 373,350
US Bancorp 15,973 1,787,970
Wachovia Corp. 13,300 1,078,962
Wells Fargo & Co. 5,733 1,945,992
-----------
37,813,010
-----------
Construction (0.86%)
Case Corp. 4,900 296,141
Centex Corp. 1,900 119,580
Fluor Corp. 5,500 205,563
Home Depot Inc. 47,600 2,802,450
Masco Corp. 10,800 549,450
Pulte Home Corp. 1,400 58,537
Stanley Works 5,800 273,685
-----------
4,305,406
-----------
Consumer Durables (0.18%)
Black & Decker Corp. 6,100 238,278
Maytag Corp. 6,400 238,797
Snap-On Inc. 4,000 174,500
Whirlpool Corp. 4,900 269,500
-----------
921,075
-----------
Containers (0.19%)
Crown Cork & Seal 8,400 421,050
Newell Co. 10,400 442,000
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Containers (continued)
Stone Container Corp.<F*> 6,472 $ 67,548
-----------
930,598
-----------
Domestic Oil (1.72%)
Amerada Hess Corp. 6,000 329,250
Amoco Corp. 32,000 2,724,000
Apache 5,900 206,866
Ashland Inc. 4,900 263,066
Arco 20,900 1,674,612
Kerr-McGee Corp. 3,100 196,267
Oryx Energy<F*> 6,800 173,400
Pennzoil Co. 3,100 207,117
Phillips Petroleum Co. 17,200 836,350
Rowan Companies Inc.<F*> 5,600 170,800
Sun Company Inc. 4,700 197,691
USX-Marathon Group 18,759 633,116
Union Pacific Resources Group 16,474 399,494
Unocal Corp. 16,100 624,873
-----------
8,636,902
-----------
Drugs & Medicines (8.89%)
Abbott Laboratories 50,200 3,291,212
Allergan Inc. 4,200 140,960
Alza Corp.<F*> 5,500 174,966
American Home Products Corp. 42,300 3,235,950
Bard C R Inc. 3,700 115,854
Bausch & Lomb Inc. 3,600 142,650
Baxter International 18,200 917,953
Becton Dickinson & Co. 8,000 400,000
Boston Scientific Corp.<F*> 12,700 582,613
Columbia HCA/Healthcare 42,586 1,261,610
Guidant Corp. 9,700 603,825
Healthsouth Corp.<F*> 25,200 699,300
Humana Inc.<F*> 10,600 219,950
Johnson & Johnson 86,800 5,717,950
Eli Lilly & Co. 72,600 5,054,775
Merck & Co. Inc. 78,825 8,375,156
Pharmacia-Upjohn Inc. 33,105 1,212,471
Pfizer Inc. 84,300 6,285,577
St Jude Medical<F*> 6,000 183,000
Schering-Plough Corp. 47,800 2,969,575
Tenet Healthcare<F*> 19,700 652,562
US Surgical 4,700 137,766
Warner-Lambert Co. 17,700 2,194,800
-----------
44,570,475
-----------
(continued)
9
<PAGE> 10
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (5.01%)
Advanced Micro Devices Inc.<F*> 9,100 $ 163,227
AMP Inc. 14,300 600,600
Andrew Corp. 5,800 139,200
Applied Materials Inc.<F*> 23,700 713,962
Emerson Electric Co. 28,900 1,631,029
General Signal Corp. 3,300 139,217
Harris Corp. 5,200 238,550
Hewlett-Packard Co. 67,900 4,243,750
Intel Corp. 106,500 7,481,625
KLA-Tencor Corp.<F*> 5,400 208,575
LSI Logic Corp.<F*> 9,200 181,700
Medtronic Inc. 30,500 1,595,516
Micron Technology Inc.<F*> 13,700 356,200
Motorola Inc. 38,800 2,214,006
Northern Telecom Ltd. 17,100 1,521,900
Parametric Technology Corp.<F*> 8,300 393,213
Perkin-Elmer Corp. 2,900 206,080
Raytheon Co. 15,300 772,650
Seagate Technology Inc.<F*> 15,900 306,075
Silicon Graphics<F*> 11,500 143,025
Texas Instruments Inc. 25,000 1,125,000
Thomas & Betts Corp. 3,600 170,100
Williams Companies Inc. 20,800 590,200
-----------
25,135,400
-----------
Energy & Utilities (1.75%)
American Electric Power Co., Inc. 12,300 634,987
Baltimore Gas & Electric Co. 9,600 326,995
Burlington Resources 11,492 514,980
Central & South West Corp. 13,800 373,456
Coastal Corp. 6,950 430,462
Columbia Gas System Inc. 3,600 282,823
Consolidated Edison Inc. 15,300 627,300
Consolidated Natural Gas Co. 6,200 375,100
Dominion Resources Inc. 12,100 515,000
Edison International 25,800 701,425
Enron Corp. 19,900 827,084
Entergy Corp. 15,700 470,011
FPL Group Inc. 11,900 704,325
Houston Industries Inc. 18,518 494,190
Niagara Mohawk Power Corp.<F*> 9,400 98,700
Northern States Power Co. (Minn.) 4,800 279,600
Pacific Enterprises 5,400 203,175
Sonat Inc. 5,600 256,200
Texas Utilities Co. 15,705 652,731
-----------
8,768,544
-----------
Energy Raw Materials (1.08%)
Baker Hughes Inc. 11,000 479,875
Dresser Industries Inc. 11,400 478,082
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Energy Raw Materials (continued)
Halliburton Co. 16,500 $ 856,961
McDermott Intl. 3,600 131,850
Nacco Industries Inc. 600 64,312
Occidental Petroleum Corp. 21,600 633,139
Oneok 2,000 80,750
Peoples Energy Corp. 2,300 90,563
Schlumberger 32,300 2,600,150
-----------
5,415,682
-----------
Finance (Non - Banking) (3.64%)
H F Ahmanson & Company 6,400 428,397
H & R Block Inc. 6,800 304,722
Chubb Corp. 11,300 854,563
Cincinnati Financial Corp. 3,600 506,700
Countrywide Credit 7,000 300,125
Fleet Financial Group Inc. 16,342 1,224,620
Golden West Financial 3,700 361,904
Green Tree Financial 8,800 230,446
MBIA Inc. 5,800 387,510
MBNA Corp. 32,650 891,737
Morgan Stanley, Dean Witter,
Discover & Co. 38,294 2,264,133
Norwest Corp. 48,900 1,888,763
Progressive Corp. 4,700 563,413
Providian Financial Corp. 6,100 275,641
Republic New York Corp. 3,600 411,073
Safeco Corp. 9,100 443,625
Schwab (Charles) Corp. 17,250 723,413
State Street Corp. 10,500 610,964
Sunamerica, Inc. 12,700 542,925
Travelers Inc. 74,597 4,018,913
Washington Mutual Inc. 16,310 1,040,774
-----------
18,274,361
-----------
Food & Agriculture (5.52%)
Archer-Daniels-Midland Co. 36,466 790,838
Bestfoods 9,400 1,015,200
Campbell Soup Co. 30,000 1,743,750
Coca-Cola Company 161,800 10,779,925
Conagra Inc. 30,800 1,010,610
Adolph Coors 2,400 79,800
Darden Restaurants 9,900 123,750
Fleming Companies Inc. 2,400 32,249
General Mills Inc. 10,400 744,900
Giant Food Inc. 3,900 131,379
H J Heinz Co. 24,050 1,222,029
Hershey Foods Corp. 9,300 576,014
(continued)
10
<PAGE> 11
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Food & Agriculture (continued)
Kellogg Co. 26,900 $ 1,334,913
Pepsico Inc. 99,800 3,636,413
Pioneer Hi-Bred International 4,300 461,175
Quaker Oats Co. 9,000 474,750
Ralston Purina Co. 7,000 650,559
Sara Lee Corp. 31,300 1,762,566
Sysco Corp. 11,400 519,407
Wm. Wrigley Jr. Co. 7,600 604,671
-----------
27,694,898
-----------
Gold (0.17%)
Barrick Gold Corp. 24,300 452,587
Battle Mountain Gold Co. 14,900 87,537
Echo Bay Mines Ltd.<F*> 9,000 21,933
Homestake Mining Co. 9,500 84,313
Placer Dome Inc. 15,600 197,917
-----------
844,287
-----------
Government & State Agency (1.17%)
Federal Home Loan
Mortgage Corp. 45,300 1,899,746
Federal National Mortgage Assoc. 69,200 3,948,690
-----------
5,848,436
-----------
Industrial Miscellaneous (2.30%)
Aeroquip-Vickers Inc. 1,800 88,312
American Greetings 4,900 191,712
Amgen 17,300 936,362
Anadarko Petroleum Co. 3,900 236,679
Armstrong World Industries, Inc. 2700 201,825
Asarco Inc. 2,700 60,580
Autodesk Inc. 3,100 114,700
Avery Dennison Corp. 6,700 299,825
Ball Corp. 1,900 67,093
Biomet Inc. 7,200 184,500
Briggs & Stratton 1,700 82,555
Circuit City Stores Inc. 6,400 227,597
Computer Sciences<F*> 5,000 417,500
Cooper Tire & Rubber 5,100 124,313
Corning Inc. 15,000 556,875
Cummins Engine 2,500 147,655
EG & G 2,900 60,355
Engelhard Corp. 9,350 162,456
Fleetwood Enterprises 2,300 97,605
Foster Wheeler 2,600 70,361
Freeport McMoran 12,900 203,175
Fruit Of The Loom<F*> 4,700 120,437
John H. Harland Co. 2,000 42,000
Harnischfeger Industries Inc. 3,200 112,998
Harrahs Entertainment, Inc. 6,500 122,688
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (continued)
Helmerich & Payne 1,600 $ 108,600
Ikon Office Solutions Inc. 8,600 241,875
Laidlaw Inc. 21,400 291,575
Loews Corp. 7,500 795,937
Lowes Companies Inc. 11,300 538,863
Manor Care 4,100 143,500
Mattel Inc. 18,887 703,541
Mead Corp. 6,800 190,400
National Semiconductor Corp.<F*> 10,500 272,339
Northrop Corp. 4,400 506,000
Praxair 10,300 463,500
Raytheon Co.-Class A 3,032 149,527
Rite Aid Corp. 8,000 469,496
Ryder System Inc. 5,000 163,750
Service Corp International 16,400 605,767
Shared Medical Systems Corp. 1,600 105,600
Sherwin-Williams 11,200 310,800
Tektronix Inc. 3,200 126,998
Timken Co. 4,100 140,937
Western Atlas Inc.<F*> 3,500 259,000
-----------
11,518,163
-----------
Insurance (3.03%)
Aetna Inc. 9,822 693,060
Allstate Insurance 28,448 2,585,212
American International Group Inc. 45,768 4,977,272
Aon Corp. 10,950 641,944
Cigna Corp. 4,900 848,004
General Re Corp. 5,200 1,102,400
Jefferson Pilot Corp. 4,600 358,225
Kaufman & Broad Homebuilders 2,500 56,093
Lincoln National Corp. 6,700 523,438
MGIC Investment Corp. 7,500 498,750
Marsh & McLennan Cos. Inc. 11,000 820,182
St Paul Companies Inc. 5,500 451,341
Torchmark Corp. 9,000 378,558
UNUM Corp. 9,100 494,812
USF & G Corp. 7,200 158,846
United Healthcare 12,200 606,181
-----------
15,194,318
-----------
International Oil (5.34%)
Chevron Corp. 42,700 3,287,900
Exxon Corp. 161,400 9,875,582
Mobil Corp. 51,300 3,703,193
Royal Dutch Petroleum Co. 139,900 7,580,761
Tenneco Inc. 11,100 438,450
Texaco Inc. 34,500 1,875,937
-----------
26,761,823
-----------
(continued)
11
<PAGE> 12
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Liquor (0.49%)
Anheuser-Busch Companies Inc. 32,050 $ 1,410,200
Brown Forman Corp. 'B' 4,500 248,625
Seagram Co. Ltd. 24,100 778,719
-----------
2,437,544
-----------
Media (2.29%)
CBS Corp. 46,000 1,354,102
Comcast Corp. 22,700 716,457
R R Donnelley & Sons Co. 9,500 353,875
Dow Jones & Co. 6,300 338,228
Gannett Co. Inc. 18,500 1,143,522
Harcourt General Inc. 4,600 251,850
Interpublic Group Co. 8,100 403,477
King World Productions 2,400 138,600
Knight Ridder Inc. 5,700 296,400
McGraw-Hill Inc. 6,500 481,000
Meredith Corp. 3,500 124,904
New York Times Co. 6,300 416,588
Omnicom Group 10,000 423,750
Tele Communications Inc.
New Class `A'<F*> 33,000 921,921
Time Warner Inc. 36,480 2,261,760
Times Mirror Co. 6,300 387,450
Tribune Co. 8,000 498,000
Viacom Class B<F*> 23,000 953,051
-----------
11,464,935
-----------
Miscellaneous & Conglomerates 0.79%)
Hartford Financial Services Group 7,700 720,427
ITT Industries Inc. 7,700 241,588
ITT Corp. (new)<F*> 7,600 629,850
Minnesota Mining & Mfg. 27,150 2,227,983
Whitman Corp. 6,600 172,009
-----------
3,991,857
-----------
Miscellaneous Finance (1.36%)
American Express Co. 30,600 2,731,050
American General Corp. 16,226 877,210
Beneficial Corp. 3,500 290,937
Household International Inc. 7,000 892,934
Merrill Lynch & Co. Inc. 21,600 1,575,439
Transamerica Corp. 4,200 447,300
-----------
6,814,870
-----------
Motor Vehicles (1.99%)
Chrysler Corp. 43,950 1,546,469
Dana Corp. 6,800 323,000
Eaton Corp. 5,100 455,175
Echlin Inc. 4,100 148,367
Ford Motor Co. 77,900 3,792,717
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Motor Vehicles (continued)
General Motors 47,550 $2,882,719
Genuine Parts Co. 11,725 397,911
TRW Inc. 8,000 427,000
----------
9,973,358
----------
Non-Durables & Entertainment (0.73%)
Brunswick Corp. 6,400 193,997
Costco Companies Inc.<F*> 13,803 615,959
Hasbro Inc. 8,300 261,450
McDonald's Corp. 44,900 2,143,975
Mirage Resorts Inc.<F*> 11,600 263,900
Wendy's International Inc. 8,575 206,332
----------
3,685,613
----------
Non-Ferrous Metals (0.46%)
Alcan Aluminum Limited 14,725 406,778
Aluminum Co. of America 11,400 802,275
Cyprus Amax Minerals Co. 6,050 93,019
Inco Ltd. 10,800 183,600
Newmont Mining Corp. 10,177 298,949
Phelps Dodge Corp. 3,900 242,775
Reynolds Metals Co. 4,800 288,000
----------
2,315,396
----------
Optical Photographic Equipment (0.29%)
Eastman Kodak Co. 21,300 1,295,296
Polaroid Corp. 2,945 143,383
----------
1,438,679
----------
Paper & Forest Products (1.17%)
Bemis Co. Inc. 3,400 149,811
Boise Cascade Corp. 3,566 107,872
Champion International 6,200 280,934
Fort James Corp. 12,300 470,475
Georgia-Pacific Corp. 6,000 364,500
Georgia-Pacific (Timber Grp)<F*> 6,000 136,122
International Paper Co. 19,676 848,528
Kimberly-Clark Corp. 36,272 1,788,645
Louisiana Pacific Corp. 7,100 134,900
Potlatch Corp. 1,900 81,700
Temple Inland Inc. 3,700 193,554
Union Camp Corp. 4,500 241,592
Westvaco Corp. 6,625 208,270
Weyerhaeuser Co. 13,050 640,259
Willamette Industries 7,200 231,746
----------
5,878,908
----------
(continued)
12
<PAGE> 13
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Producer Goods (4.83%)
Caterpillar Inc. 24,500 $ 1,189,769
Conseco Inc. 12,200 554,331
Cooper Industries Inc. 8,000 392,000
Deere & Co. 16,400 956,317
Dover Corp. 14,500 523,812
FMC Corp.<F*> 2,400 161,549
General Electric Corp. 213,600 15,672,900
W W Grainger Inc. 3,300 320,717
Illinois Tool Works Inc. 16,300 980,038
Ingersoll-Rand Co. 10,800 437,400
Johnson Controls Inc. 5,500 262,625
Navistar Intl. Corp.<F*> 4,700 116,616
Owens-Illinois Inc.<F*> 9,100 345,227
Pall Corp. 8,200 169,633
Parker Hannifin Corp. 7,325 336,034
Raychem Corp. 5,700 245,453
Tyco International Ltd. 34,700 1,563,651
-----------
24,228,072
-----------
Railroads & Shipping (0.69%)
Burlington Northern Santa Fe 10,208 948,701
CSX Corp. 14,200 766,800
Norfolk Southern Corp. 24,550 756,435
Union Pacific Corp. 16,100 1,005,236
-----------
3,477,172
-----------
Retail (3.78%)
Albertsons Inc. 16,000 758,000
American Stores Co. 17,700 363,947
Autozone Inc.<F*> 9,800 284,200
Cardinal Health Inc. 7,100 533,388
Charming Shoppes<F*> 6,800 31,872
Dayton-Hudson Corp. 14,200 958,500
Dillard's Inc. 7,300 257,325
Federated Department Stores 13,600 585,643
Gap Inc. 26,250 930,221
Great Atlantic & Pacific Tea Co. 2,500 74,218
K Mart Corp.<F*> 31,700 366,515
Kroger Co.<F*> 16,600 613,154
Limited Inc. 17,700 451,350
Longs Drug Store 2,500 80,313
May Department Stores Co. 15,184 799,999
Mercantile Stores Inc. 2,400 146,100
Nordstrom Inc. 5,000 301,875
J C Penney Co. Inc. 16,200 977,054
Pep Boys 4,100 97,888
Sears Roebuck & Co. 25,500 1,153,875
Supervalu Inc. 3,900 163,312
TJX Cos Inc. 10,600 364,375
Tandy Corp. 6,900 266,078
<CAPTION>
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Retail (continued)
Toys 'R' Us<F*> 18,612 $ 585,105
Tricon Global Restaurants<F*> 9,990 290,329
Tupperware Inc. 3,900 108,712
Wal-Mart Stores Inc. 147,700 5,824,845
Walgreen Co. 32,100 1,007,138
Winn-Dixie Stores Inc. 9,700 423,764
Woolworth Corp.<F*> 8,700 177,262
-----------
18,976,357
-----------
Soaps & Cosmetics (4.47%)
Alberto Culver Co. 'B' 3,600 115,423
Avon Products Inc. 8,600 527,825
Bristol-Myers Squibb Co. 65,080 6,158,195
Clorox Co. 6,800 537,622
Colgate-Palmolive Co. 19,300 1,418,550
Gillette Co. 36,500 3,665,951
International Flavors & Fragrances 7,100 365,650
Procter & Gamble Co. 88,100 7,031,437
Unilever NV 41,800 2,609,867
-----------
22,430,520
-----------
Steel (0.20%)
Allegheny Teledyne Inc. 11,400 294,975
Armco Inc.<F*> 6,900 34,065
Bethlehem Steel Corp.<F*> 7,300 62,963
Inland Steel Industries Inc. 3,100 53,088
Nucor Corp. 5,700 275,378
USX US Steel 5,571 174,094
Worthington Industries, Inc. 6,300 103,950
-----------
998,513
-----------
Telephone (7.72%)
A T & T Corp. 105,947 6,489,254
Airtouch Communications, Inc.<F*> 32,864 1,365,894
Alltel 12,200 500,956
Ameritech Corp. 35,896 2,889,628
Bell Atlantic Corp. 50,620 4,606,420
Bellsouth Corp. 64,694 3,643,049
Frontier Corp. 10,700 257,463
GTE Corp. 62,400 3,260,400
Lucent Technologies 41,841 3,342,050
MCI Communications Corp. 45,100 1,930,821
SBC Communications Inc. 59,581 4,364,308
Scientific Atlanta 5,000 83,750
Sprint Corp. 28,100 1,647,363
US West Communications Group 31,264 1,410,788
US West Media Group<F*> 39,464 1,139,523
Worldcom Inc.<F*> 58,800 1,778,700
-----------
38,710,367
-----------
(continued)
13
<PAGE> 14
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY S & P 500 INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Tires Rubber Goods (0.13%)
Goodyear Tire & Rubber Co. 10,172 $ 647,194
------------
Tobacco (1.60%)
Fortune Brands Inc. 11,200 415,094
Philip Morris Companies Inc. 158,050 7,161,562
UST Inc. 12,000 443,244
------------
8,019,900
------------
Travel & Recreation (1.08%)
Walt Disney Productions 44,100 4,368,634
Hilton Hotels Corp. 16,300 484,925
Marriott International Inc. 8,350 578,238
------------
5,431,797
------------
Trucking & Freight (0.12%)
CNF Transportation Inc. 4,000 153,500
Caliber Systems Inc. 2,500 121,718
Eastern Enterprises 1,300 58,500
Paccar Inc. 5,100 267,750
------------
601,468
------------
Utilities, Electrical & Gas (1.53%)
Ameren Corp. 6,600 285,450
Carolina Power & Light Co. 9,900 420,126
Cinergy Corp. 10,308 394,920
DTE Energy Co. 9,400 326,058
Duke Energy Corp. 23,441 1,298,045
Firstenergy Corp. 15,000 435,000
GPU Inc. 7,900 332,788
Nicor Inc. 3,200 134,998
PECO Energy Co. 14,500 351,625
P G & E Corp. 28,600 870,498
P P & L Resources Inc. 10,700 256,126
Pacificorp 19,300 527,122
Public Service Enterprise Group 15,050 476,889
Southern Co. 44,600 1,154,025
Unicom Corp. 14,100 433,575
------------
7,697,245
------------
TOTAL COMMON STOCK (98.41%)
(COST $252,841,292) 493,602,537
------------
<CAPTION>
- ------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
Treasury Bill (0.04%)
5.33%, due 8/20/98 $ 200,000 $ 193,304
------------
Commercial Paper (1.33%)
Countrywide Home Loans, Inc.,
6.51%, due 1/5/98 1,225,000 1,224,107
JLUS Funding Corp.,
6.50%, due 3/12/98 5,500,000 5,431,556
------------
6,655,663
------------
TOTAL SHORT TERM SECURITIES (1.37%)
(AMORTIZED COST $6,849,130) 6,848,967
------------
TOTAL INVESTMENTS (99.78%)
(AMORTIZED COST $259,690,422) 500,451,504
Other net assets (0.22%) 1,125,846
------------
TOTAL NET ASSETS (100.00%) $501,577,350
============
<CAPTION>
- ----------------------------------------------------------------------------------------
EXPIRATION UNDERLYING FACE UNREALIZED
FUTURES CONTRACTS DATE AMOUNT AT VALUE GAIN/(LOSS)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASED
22 S&P 500
Index Contracts Mar. 1998 $5,385,050 $(44,400)
<CAPTION>
The face value of futures purchased as a percentage of total
net assets--1.07%.
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
14
<PAGE> 15
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
MANAGEMENT DISCUSSION
This fund produced a net return of 5.7 percent in 1997. Benign inflation
kept money market rates from rising during the year. Fixed income
investments with maturities greater than a year saw their yields decline as
the year progressed. Except for a single interest rate hike in March, the
Federal Reserve remained quiet for the rest of the year. Inflation remained
subdued, reducing the need for the Fed to make additional interest rate
hikes.
Domestic financial markets went through some peaks and valleys, but ended up
with respectable gains. Despite this volatility, the DJIA was still able to
show a double digit gain for the year. The currency crisis in Southeast Asia
came to the forefront in October, fueling volatility in both the stock and
bond market. While stock and bond prices bounced up and down, money market
rates stayed within a narrow range during 1997.
Asia's difficulties will slow U.S. economic growth to some degree, but it
should not result in the Federal Reserve lowering interest rates. Offsetting
wage pressure from tight domestic labor markets leads us to believe that the
Fed will be confined to leaving rates unchanged for the next quarter or two.
Money market funds continue to provide an attractive haven for those
investors looking for some solitude in these volatile times. It is likely
that yields on money market instruments will remain within a narrow range in
the coming months.
GROWTH OF A $10,000 INVESTMENT
[graph]
<TABLE>
<CAPTION>
MONEY MARKET
Date FUND INDEX
<S> <C> <C>
10/01/87 10,000.00 10,000.00
12/31/87 10,185.98 10,000.00
12/31/88 10,976.41 10,000.00
12/31/89 12,025.34 10,000.00
12/31/90 13,039.40 10,000.00
12/31/91 13,846.36 10,000.00
12/31/92 14,359.74 10,000.00
12/31/93 14,801.27 10,000.00
12/31/94 15,423.93 10,000.00
12/31/95 16,342.94 10,000.00
12/31/96 17,242.96 10,000.00
12/31/97 18,226.60 10,000.00
</TABLE>
<TABLE>
ANNUAL RETURNS
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Annual Returns 5.71% 4.89% 5.99% 6.03%
</TABLE>
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
15
<PAGE> 16
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Short term securities $174,446,286
------------
Total investments 174,446,286
Cash 342,536
Interest receivable 128,250
------------
Total assets 174,917,072
------------
LIABILITIES:
Payable to Conning Asset
Management Company 18,604
Payable to General American
Life Insurance Company 11,906
Broker Payable 316,060
------------
Total liabilities 346,570
------------
Total net assets $174,570,502
============
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 9,577,790
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 18.23
TOTAL AMORTIZED COST OF INVESTMENTS $174,432,557
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Interest $6,108,752
----------
Total investment income 6,108,752
----------
EXPENSES:
Investment management charge 131,728
Administrative charge 84,306
----------
Total expenses 216,034
----------
Net investment income 5,892,718
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $5,892,718
==========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 5,892,718 $ 3,957,199
------------ ------------
Net increase in net assets from operations 5,892,718 3,957,199
Capital share transactions 67,252,183 26,894,392
------------ ------------
Net increase in net assets 73,144,901 30,851,591
Net assets, beginning of year 101,425,601 70,574,010
------------ ------------
Net assets, end of year $174,570,502 $101,425,601
============ ============
See accompanying notes to financial statements beginning on page 57.
</TABLE>
16
<PAGE> 17
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 17.24 $ 16.34 $ 15.42 $ 14.80 $ 14.36
Income from operations:
Net investment income 0.99 0.90 0.92 0.62 0.44
-------- -------- -------- -------- --------
Net asset value, end of year $ 18.23 $ 17.24 $ 16.34 $ 15.42 $ 14.80
======== ======== ======== ======== ========
Total return <F2> 5.71% 5.51% 5.96% 4.21% 3.07%
Net assets, end of period (in thousands) $174,571 $101,426 $ 70,574 $ 93,339 $ 84,430
Ratio of expenses to average net assets <F3> 0.21% 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income to average
net assets <F3> 5.60% 5.37% 5.78% 4.17% 3.06%
Portfolio turnover rate <F4> <F4> <F4> <F4> <F4>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 13.85 $ 13.04 $ 12.03 $ 10.98 $ 10.18
Income from operations:
Net investment income 0.51 0.81 1.01 1.05 0.80
------- ------- ------- ------- -------
Net asset value, end of year $ 14.36 $ 13.85 $ 13.04 $ 12.03 $ 10.98
======= ======= ======= ======= =======
Total return <F2> 3.71% 6.19% 8.43% 9.56% 7.76%
Net assets, end of year (in thousands) $84,880 $84,090 $85,901 $53,648 $52,323
Ratio of expenses to average net assets <F3> 0.21% 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income to average
net assets <F3> 3.68% 6.10% 8.17% 9.26% 7.46%
Portfolio turnover rate <F4> <F4> <F4> <F4> <F4>
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> A portfolio turnover rate is not calculated for securities on which the
maturity or expiration dates at the time of acquisition were one year or
less.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
17
<PAGE> 18
<TABLE>
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PAR INTEREST MATURITY MARKET
SHORT TERM SECURITIES VALUE RATE (%) DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Finance (82.08%)
AGA Capital Inc.<F*> $3,000,000 6.27 01/07/98 $2,996,875
AGA Capital Inc.<F*> 500,000 6.28 01/16/98 498,698
AGA Capital Inc.<F*> 5,000,000 6.52 01/12/98 4,990,069
Allomon Funding<F*> 3,300,000 6.05 01/12/98 3,293,930
Allomon Funding<F*> 1,000,000 6.03 02/17/98 992,193
Anchor Funding<F*> 950,000 6.57 02/09/98 943,310
Anchor Funding<F*> 1,099,000 6.59 02/20/98 1,089,078
Anchor Funding<F*> 1,474,000 6.65 04/29/98 1,446,137
Apex Funding<F*> 2,500,000 7.02 01/06/98 2,497,569
Apex Funding<F*> 789,000 6.42 02/02/98 784,547
Apex Funding<F*> 1,500,000 6.45 02/10/98 1,489,333
Apex Funding<F*> 1,000,000 6.38 05/15/98 978,618
Apex Funding<F*> 1,000,000 6.43 05/15/98 978,618
Apex Funding<F*> 1,000,000 6.52 04/30/98 980,942
Banca CRT 885,000 6.12 02/26/98 876,817
Banner Receivables<F*> 1,000,000 6.24 01/13/98 997,933
Banner Receivables<F*> 3,000,000 6.24 01/16/98 2,992,250
BMW US Capital 5,000,000 6.11 01/06/98 4,995,764
Broadway Capital<F*> 1,500,000 6.68 01/12/98 1,496,952
Broadway Capital<F*> 1,500,000 6.42 01/16/98 1,496,013
Broadway Capital<F*> 5,000,000 6.06 02/24/98 4,955,000
Creative Capital<F*> 1,366,000 7.51 01/06/98 1,364,577
Creative Capital<F*> 2,000,000 7.01 01/06/98 1,998,056
Creative Capital<F*> 600,000 6.54 01/15/98 598,483
Creative Capital<F*> 3,000,000 6.42 02/05/98 2,981,479
Creative Capital<F*> 1,000,000 7.10 01/20/98 996,279
Crown International Finance 1,430,000 6.37 01/08/98 1,428,234
Crown International Finance 4,950,000 6.01 01/08/98 4,944,225
Crown International Finance 1,440,000 6.04 01/22/98 1,434,960
Dynamic Fund Corp. "A"<F*> 1,500,000 5.96 01/05/98 1,499,033
Falcon Asset Securitization Corp.<F*> 8,000,000 6.31 01/05/98 7,994,400
Fayette Funding 4,000,000 6.05 01/30/98 3,980,667
Frontier Funding Corp.<F*> 2,000,000 6.52 02/06/98 1,987,100
Frontier Funding Corp.<F*> 2,088,000 6.60 02/27/98 2,068,007
General Motors Acceptance Corp. 1,900,000 6.02 01/21/98 1,893,667
General Motors Acceptance Corp. 700,000 5.73 01/15/98 698,448
Goldman Sachs Group 8,700,000 7.75 01/02/98 8,698,127
Gotham Funding<F*> 3,000,000 6.26 01/29/98 2,985,533
Gotham Funding<F*> 1,000,000 6.27 02/10/98 993,111
JLUS funding Corp. 3,500,000 6.61 03/02/98 3,465,361
Lehman Holdings Co. 5,000,000 6.47 01/09/98 4,992,833
Merrill Lynch & Co. 6,130,000 6.16 01/08/98 6,122,670
(continued)
18
<PAGE> 19
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------
PAR INTEREST MATURITY MARKET
SHORT TERM SECURITIES VALUE RATE (%) DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance (continued)
Mitsubishi Motors $1,000,000 5.77 01/13/98 $ 998,084
Monte Rosa Capital Corp.<F*> 2,000,000 6.04 01/27/98 1,991,333
Oak Funding 2,000,000 6.44 01/13/98 1,995,733
Oak Funding 1,000,000 6.36 03/17/98 986,806
Pooled Accounts Receivable<F*> 2,000,000 6.04 01/22/98 1,993,000
Progress Funding Corp. "B"<F*> 2,000,000 6.30 02/12/98 1,985,417
Progress Funding Corp. "B"<F*> 1,850,000 6.42 02/05/98 1,838,579
Progress Funding Corp. "B"<F*> 1,650,000 6.26 02/05/98 1,640,055
Riverside Funding Inc. 2,000,000 7.05 01/05/98 1,998,444
Seven Hills Funding Corp.<F*> 5,000,000 6.16 01/09/98 4,993,167
Strategic Asset Funding Corp.<F*> 2,500,000 7.04 01/29/98 2,486,389
Strategic Asset Funding Corp.<F*> 1,097,000 6.56 02/03/98 1,090,465
Strategic Asset Funding Corp.<F*> 3,000,000 6.57 02/03/98 2,982,125
Triple-A Funding<F*> 2,925,000 8.00 01/02/98 2,924,350
Wood Street Funding<F*> 2,000,000 6.12 01/08/98 1,997,628
Wood Street Funding<F*> 4,000,000 6.33 01/16/98 3,989,500
Working Capital Management<F*> 1,500,000 5.79 01/26/98 1,494,010
Yorkshire Building Society 1,000,000 6.16 01/02/98 999,828
------------
143,280,809
------------
Industrial Miscellaneous (2.17%)
Bridgestone/Firestone, Inc. 1,500,000 7.05 01/14/98 1,496,208
Bridgestone/Firestone, Inc. 2,300,000 7.05 01/15/98 2,293,739
------------
3,789,947
------------
Miscellaneous and Conglomerates (4.38%)
Mitsui & Co. (USA) Inc. 660,000 6.30 01/22/98 657,594
Mitsui & Co. (USA) Inc. 2,000,000 6.26 02/13/98 1,985,189
Pacific Dunlop Holding<F*> 5,000,000 6.52 01/05/98 4,996,389
------------
7,639,172
------------
Mortgage Backed Securities (4.58%)
Countrywide Home Loans 6,000,000 6.63 01/02/98 5,998,896
Countrywide Home Loans 2,000,000 6.07 01/09/98 1,997,311
------------
7,996,207
------------
Motor Vehicles (4.43%)
Cooperative Association of Tractor
Dealers "A" 6,000,000 6.36 01/06/98 5,994,708
Cooperative Association of Tractor
Dealers "B" 1,750,000 6.28 01/16/98 1,745,443
------------
7,740,151
------------
TOTAL COMMERCIAL PAPER (97.64%)
(AMORTIZED COST $170,047,616) 170,446,286
------------
(continued)
19
<PAGE> 20
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------
PAR INTEREST MATURITY MARKET
SHORT TERM SECURITIES VALUE RATE (%) DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TIME DEPOSITS
Commercial Banking
Banco Espirito Santo Euro $1,000,000 6.00 06/22/98 $ 1,000,000
Banco Espirito Santo Euro 1,000,000 6.06 06/12/98 1,000,000
Banco Espirito Santo Euro 1,000,000 5.84 12/09/98 1,000,000
Banco Espirito Santo Euro 1,000,000 6.06 01/09/98 1,000,000
------------
TOTAL TIME DEPOSITS (2.29%)
(AMORTIZED COST $4,000,000) 4,000,000
------------
TOTAL INVESTMENTS (99.93%)
(AMORTIZED COST $174,432,557) 174,446,286
Other net assets (0.07%) 124,216
------------
TOTAL NET ASSETS (100.00%) $174,570,502
============
<FN>
<F*> Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "accredited
investors". This security has been determined to be liquid under guidelines
established by the board of directors.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
20
<PAGE> 21
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND
MANAGEMENT DISCUSSION
After a negative first quarter, the Bond Index Fund posted solid quarterly
net gains of 3.6 percent, 3.4 percent and 3.0 percent to finish 1997 with a
net return of 9.3 percent for the year. This was very close to the benchmark
yield of 9.8 percent from the Lehman Brothers Government & Corporate Bond
Index. Inflation remained low throughout the year, prompting the Federal
Reserve to leave interest rates alone in the fourth quarter despite signs of
vigorous economic growth. The hands-off approach led to a slow, steady
decline in the benchmark 30-year Treasury bond, from 6.8 percent at mid-year
to 5.9 percent at year-end. Long-term Treasury issues outperformed corporate
bonds in both the third and fourth quarters. The market's reaction to the
financial and economic turmoil in Asia was a flight to quality as investors
moved away from corporate bonds in favor of Treasury securities.
GROWTH OF A $10,000 INVESTMENT
[graph]
<TABLE>
<CAPTION>
LEHMAN BROS
BOND INDEX GOV/CORP BOND
Date FUND INDEX
<S> <C> <C>
10/01/87 10,000.00 10,000.00
12/31/87 10,460.26 10,460.00
12/31/88 11,169.81 11,157.68
12/31/89 12,321.98 12,582.52
12/31/90 13,442.44 13,735.08
12/31/91 15,324.22 15,743.15
12/31/92 16,331.31 16,919.16
12/31/93 18,028.20 18,785.34
12/31/94 17,300.55 18,125.97
12/31/95 20,590.49 21,613.41
12/31/96 21,212.89 22,241.50
12/31/97 23,193.17 24,410.71
</TABLE>
<TABLE>
ANNUAL RETURNS
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Annual Returns 9.34% 7.27% 8.29% 8.55%
</TABLE>
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
21
<PAGE> 22
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Bonds $45,937,197
Short term securities 1,648,790
-----------
Total investments 47,585,987
Cash 6,829
Interest receivable 748,970
-----------
Total assets 48,341,786
-----------
LIABILITIES:
Payable to Conning Asset
Management Company 10,080
Payable to General American
Life Insurance Company 2,016
-----------
Total liabilities 12,096
-----------
Total net assets $48,329,690
===========
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 2,083,790
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 23.19
TOTAL AMORTIZED COST OF INVESTMENTS $46,321,989
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Interest $2,496,554
----------
Total investment income 2,496,554
----------
EXPENSES:
Investment management charge 94,380
Administrative charge 18,876
----------
Total expenses 113,256
----------
Net investment income 2,383,298
----------
NET REALIZED LOSS ON INVESTMENTS:
Net realized gain on investments 50,805
----------
NET UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net unrealized gain from investments 990,628
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,424,731
==========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 2,383,298 $ 2,333,970
Net realized gain (loss) on investments 50,805 390,747
Net unrealized gain on investments 990,628 (1,705,044)
------------ ------------
Net increase in net assets from operations 3,424,731 1,019,673
Capital share transactions 6,890,277 (2,321,034)
------------ ------------
Net increase in net assets 10,315,008 (1,301,361)
Net assets, beginning of year 38,014,682 39,316,043
------------ ------------
Net assets, end of year $ 48,329,690 $ 38,014,682
============ ============
See accompanying notes to financial statements beginning on page 57.
</TABLE>
22
<PAGE> 23
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND <F*>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 21.21 $ 20.59 $ 17.30 $ 18.03 $ 16.33
------- ------- ------- ------- -------
Income from operations:
Net investment income 1.39 1.29 1.25 1.06 1.07
Net realized and unrealized gain (loss)
on investments .59 (0.67) 2.04 (1.79) 0.63
------- ------- ------- ------- -------
Net increase (decrease) in asset value per share 1.98 0.62 3.29 (0.73) 1.70
------- ------- ------- ------- -------
Net asset value, end of year $ 23.19 $ 21.21 $ 20.59 $ 17.30 $ 18.03
======= ======= ======= ======= =======
Total return <F2> 9.34% 3.02% 19.02% -4.04% 10.39%
Net assets, end of period (in thousands) $48,330 $38,015 $39,316 $26,458 $47,636
Ratio of expenses to average net assets <F3><F*> 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income to average
net assets <F3> 6.25% 6.26% 6.43% 6.19% 6.11%
Portfolio turnover rate 47.40% 44.28% 35.35% 46.42% 8.80%
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year <F1> $ 15.32 $ 13.44 $ 12.32 $11.17 $10.46
------- ------- ------- ------ ------
Income from operations:
Net investment income 1.09 1.08 1.03 0.98 0.90
Net realized and unrealized gain (loss)
on investments (0.08) 0.80 0.09 0.17 (0.19)
------- ------- ------- ------ ------
Net increase in asset value per share 1.01 1.88 1.12 1.15 0.71
------- ------- ------- ------ --------
Net asset value, end of year $ 16.33 $ 15.32 $ 13.44 $12.32 $11.17
======= ======= ======= ====== ======
Total return <F2> 6.57% 14.00% 9.09% 10.32% 6.78%
Net assets, end of year (in thousands) $20,217 $14,438 $11,137 $9,545 $6,571
Ratio of expenses to average net assets <F3><F*> 0.39% 0.42% 0.42% 0.43% 0.43%
Ratio of net investment income to average
net assets <F3> 6.89% 7.63% 8.12% 8.24% 8.25%
Portfolio turnover rate 43.50% 2.23% 18.88% 28.57% 71.30%
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F*>Name and investment objective changed from Intermediate Bond Fund on October
1, 1992. The Investment advisor charges changed from .375 percent to .250
percent of the average daily value of the net assets on October 1, 1992. The
objective of the Bond Index Fund is to provide a rate of return that reflects
the performance of the publicly traded bond market as a whole.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
23
<PAGE> 24
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PAR MARKET
BONDS VALUE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS
Commercial Banking (5.42%)
First National Bank Omaha, 7.320%, due 12/01/2010 $1,500,000 $1,560,450
Wells Fargo Capital, 7.950%, due 12/01/2026 1,000,000 1,058,780
----------
2,619,230
----------
Business Machines (1.04%)
Comdisco Inc., 6.500%, due 06/15/2000 500,000 502,375
----------
Drugs & Medicines (2.04%)
Medpartners Inc., 7.375%, due 10/01/2006 1,000,000 986,050
----------
Finance (Non - Banking) (2.19%)
Lehman Bros. Holdings Inc., 8.875%, due 03/01/2002 500,000 541,745
Merrill Lynch & Co. Inc., 8.250%, due 11/15/1999 500,000 518,740
----------
1,060,485
----------
Industrial Miscellaneous (8.56%)
Dual Drilling Co., 9.875%, due 01/15/2004 1,000,000 1,077,500
Ikon Office Solutions Inc., 6.750%, due 12/01/2025 1,000,000 962,800
Norfolk Southern, 7.875%, due 02/15/2004 1,000,000 1,075,530
Potash Corp., 7.125%, due 06/15/2007 1,000,000 1,022,760
----------
4,138,590
----------
Insurance (0.61%)
Torchmark Corp., 7.875%, due 05/15/2023 280,000 295,882
----------
Motor Vehicles (0.56%)
General Motors, 9.125%, due 07/15/2001 250,000 271,988
----------
Retail (1.05%)
Rite-Aid Corp., 6.875%, due 08/15/2013 500,000 505,635
----------
Travel & Recreation (1.48%)
Hertz Corp., 7.000%, due 04/15/2001 700,000 714,259
----------
Utilities, Electrical & Gas (7.75%)
Hydro Quebec, 8.400%, due 01/15/2022 1,000,000 1,177,920
Pacific Gas & Electric, 8.000%, due 10/01/2025 500,000 524,144
Pacific Gas & Electric, 7.250%, due 08/01/2026 500,000 513,680
Philadelphia Electric, 8.625%, due 06/01/2022 938,000 997,610
Texas Utilities Electric, 8.125%, due 02/01/2002 500,000 533,890
----------
3,747,244
----------
TOTAL CORPORATE BONDS (30.70%) (AMORTIZED COST $14,285,990) 14,841,738
----------
(continued)
24
<PAGE> 25
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------
PAR MARKET
BONDS VALUE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES
United States Government Securities (59.73%)
US Treasury Bonds, 10.750%, due 02/15/2003 $1,000,000 $1,218,440
US Treasury Bonds, 9.875%, due 11/15/2015 500,000 711,640
US Treasury Bonds, 9.250%, due 02/15/2016 500,000 678,435
US Treasury Bonds, 7.500%, due 11/15/2016 1,000,000 1,167,190
US Treasury Bonds, 8.125%, due 08/15/2019 500,000 625,625
US Treasury Bonds, 7.875%, due 02/15/2021 200,000 245,562
US Treasury Bonds, 7.250%, due 08/15/2022 1,000,000 1,155,160
US Treasury Notes, 6.625%, due 03/31/2002 1,000,000 1,032,340
US Treasury Notes, 6.625%, due 05/15/2007 750,000 793,830
US Treasury Notes, 5.750%, due 09/30/1999 1,000,000 1,001,410
US Treasury Notes, 7.500%, due 11/15/2001 1,250,000 1,325,200
US Treasury Notes, 6.375%, due 01/15/1999 500,000 503,830
US Treasury Notes, 7.500%, due 05/15/2002 1,000,000 1,067,190
US Treasury Notes, 6.000%, due 10/15/1999 400,000 402,248
US Treasury Notes, 5.750%, due 08/15/2003 1,500,000 1,500,930
US Treasury Notes, 5.125%, due 11/30/1998 600,000 597,372
US Treasury Notes, 5.875%, due 02/15/2004 1,000,000 1,008,750
US Treasury Notes, 6.750%, due 05/31/1999 1,000,000 1,014,690
US Treasury Notes, 6.875%, due 07/31/1999 1,000,000 1,017,810
US Treasury Notes, 7.250%, due 08/15/2004 2,000,000 2,161,560
US Treasury Notes, 7.500%, due 10/31/1999 1,000,000 1,030,940
US Treasury Notes, 7.750%, due 12/31/1999 1,000,000 1,038,910
US Treasury Notes, 6.500%, due 08/15/2005 750,000 782,580
US Treasury Notes, 6.125%, due 09/30/2000 1,000,000 1,010,470
US Treasury Notes, 5.625%, due 11/30/2000 1,000,000 998,120
US Treasury Notes, 6.375%, due 03/31/2001 500,000 509,375
US Treasury Notes, 6.375%, due 05/15/1999 500,000 504,610
US Treasury Notes, 8.000%, due 08/15/1999 450,000 465,890
US Treasury Notes, 6.500%, due 05/31/2001 1,000,000 1,023,750
US Treasury Notes, 8.500%, due 02/15/2000 650,000 686,153
US Treasury Notes, 8.875%, due 05/15/2000 500,000 535,155
US Treasury Notes, 6.500%, due 10/15/2006 1,000,000 1,047,030
----------
28,862,195
----------
Other Government Securities (2.56%)
State Of Israel, 6.375%, due 12/15/2005 1,000,000 968,780
Manitoba Province, 9.000%, due 12/15/2000 250,000 269,345
----------
1,238,125
----------
TOTAL GOVERNMENT SECURITIES (62.29%) (AMORTIZED COST $29,486,546) 30,100,320
----------
AGENCY SECURITIES
Government & State Agency (2.06%)
FNMA, 8.100%, due 08/12/2019 500,000 606,405
FNMA, 8.950%, due 02/12/2018 300,000 388,734
----------
995,139
----------
TOTAL GOVERNMENT AND STATE AGENCY (2.06%) (AMORTIZED COST $900,663) 995,139
----------
TOTAL BONDS (95.05%) (AMORTIZED COST $44,673,199) 45,937,197
----------
25
<PAGE> 26
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY BOND INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (3.41%)
Countrywide Home Loans, Inc., 6.60%, due 01/05/1998 $1,650,000 $ 1,648,790
TOTAL SHORT TERM SECURITIES (3.41%) (AMORTIZED COST $1,648,790) 1,648,790
-----------
TOTAL INVESTMENTS (98.46%) (AMORTIZED COST $46,321,989) 47,585,987
Other net assets (1.54%) 743,703
-----------
TOTAL NET ASSETS (100.00%) $48,329,690
===========
See accompanying notes to financial statements beginning on page 57.
</TABLE>
26
<PAGE> 27
GENERAL AMERICAN CAPITAL COMPANY MANAGED EQUITY FUND
MANAGEMENT DISCUSSION
In another outstanding year for equity returns, the Managed Equity Fund
increased 23.3 percent in 1997. It was a challenging year for active
managers, however, as the benchmark S&P 500 and S&P 500/Barra Value Indexes
returned 33.2 percent and 30.0 percent respectively. The fourth quarter was
extremely volatile, beginning with the 500 point decline on October 28th.
As a value fund, the Managed Equity Fund outperformed by 100 basis points
during that drop. However, the subsequent rally was very narrowly defined
and masked severe weakness in the broader market. The return for the fourth
quarter was -0.8 percent compared to 2.9 percent for the S&P 500. The
performance for the Fund lagged mostly due to exposure to the technology
sector where blue chip tech companies such as Intel, Oracle, Texas
Instruments and Quantum fell sharply. Exposure to the technology sector has
since been reduced. A major contributor to the performance of the Fund was
the outstanding performance of many companies within the financial services
sector.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
MANAGED S&P
Date EQUITY FUND INDEX
<S> <C> <C>
10/01/87 10,000.00 10,000.00
12/31/87 7,823.73 7,750.00
12/31/88 8,732.70 9,036.50
12/31/89 11,446.01 11,901.07
12/31/90 11,103.73 11,532.14
12/31/91 14,015.70 15,049.44
12/31/92 14,949.31 16,193.20
12/31/93 16,274.61 17,828.71
12/31/94 15,691.58 18,057.99
12/31/95 20,927.72 24,821.61
12/31/96 25,306.26 30,549.44
03/01/97 26,785.00 32,706.00
12/31/97 31,200.62 40,702.85
<FN>
<F*>On March 1, 1997 Conning Asset Management Company assumed portfolio
management duties from the former sub-advisor of the fund, Morgan Stanley
Asset Management.
</TABLE>
<TABLE>
ANNUAL RETURNS
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Annual Returns 23.29% 15.85% 14.84% 11.74%
</TABLE>
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
27
<PAGE> 28
GENERAL AMERICAN CAPITAL COMPANY MANAGED EQUITY FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Common stocks $56,448,059
Short term securities 2,932,875
-----------
Total investments 59,380,934
Cash 11,699
Receivable from Broker 1,056,091
Dividends receivable 57,580
-----------
Total assets 60,506,304
-----------
LIABILITIES:
Payable to Conning Asset
Management Company 14,488
Payable to General American
Life Insurance Company 4,945
Payable to broker 1,348,769
-----------
Total liabilities 1,368,202
-----------
Total net assets $59,138,102
===========
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 1,895,414
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 31.20
TOTAL AMORTIZED COST OF INVESTMENTS $43,377,172
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,265,292
Interest 163,390
-----------
Total investment income 1,428,682
-----------
EXPENSES:
Investment management charge 168,326
Administrative charge 55,314
-----------
Total expenses 223,640
-----------
Net investment income 1,205,042
-----------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,667,587
-----------
NET UNREALIZED GAIN ON INVESTMENTS:
Net unrealized gain on investments 7,544,604
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $11,417,233
===========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 1,205,042 $ 1,337,649
Net realized gain on investments 2,667,587 3,654,582
Net unrealized gain on investments 7,544,604 3,638,272
----------- -----------
Net increase in net assets from operations 11,417,233 8,630,503
Capital share transactions (866,166) (945,697)
----------- -----------
Net increase in net assets 10,551,067 7,684,806
Net assets, beginning of year 48,587,035 40,902,229
----------- -----------
Net assets, end of year $59,138,102 $48,587,035
=========== ===========
See accompanying notes to financial statements beginning on page 57.
</TABLE>
28
<PAGE> 29
GENERAL AMERICAN CAPITAL COMPANY MANAGED EQUITY FUND
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $ 25.31 $ 20.93 $ 15.69 $ 16.27 $ 14.95
------- ------- ------- ------- -------
Income from operations:
Net investment income .63 0.68 0.58 0.43 0.32
Net realized and unrealized gain (loss)
on investments 5.26 3.70 4.66 (1.01) 1.00
------- ------- ------- ------- -------
Net increase (decrease) in asset value per share 5.89 4.38 5.24 (0.58) 1.32
------- ------- ------- ------- -------
Net asset value, end of year $ 31.20 $ 25.31 $ 20.93 $ 15.69 $ 16.27
======= ======= ======= ======= =======
Total return<F2> 23.29% 20.92% 33.37% -3.58% 8.87%
Net assets, end of period (in thousands) $59,138 $48,587 $40,902 $31,487 $32,885
Ratio of expenses to average net assets<F3><F5> 0.41% 0.47% 0.48% 0.49% 0.50%
Ratio of net investment income to average
net assets<F3> 2.19% 2.97% 3.14% 2.65% 2.07%
Portfolio turnover rate 49.43% 36.44% 44.82% 103.93% 25.89%
Average commission rate<F4> $ 0.06 $ 0.04 -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1992 1991 1990 1989 1988
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $ 14.02 $ 11.10 $ 11.45 $ 8.73 $ 7.82
------- ------- ------- ------- ------
Income from operations:
Net investment income 0.35 0.38 0.38 0.26 0.28
Net realized and unrealized gain (loss)
on investments 0.58 2.54 (0.73) 2.46 0.63
------- ------- ------- ------- ------
Net increase (decrease) in asset value per share 0.93 2.92 (0.35) 2.72 0.91
------- ------- ------- ------- ------
Net asset value, end of year $ 14.95 $ 14.02 $ 11.10 $ 11.45 $ 8.73
======= ======= ======= ======= ======
Total return<F2> 6.66% 26.23% -2.99% 31.07% 11.62%
Net assets, end of year (in thousands) $29,401 $22,006 $14,769 $11,785 $7,303
Ratio of expenses to average net assets<F3> 0.51% 0.53% 0.57% 0.60% 0.60%
Ratio of net investment income to average
net assets<F3> 2.55% 2.99% 3.47% 2.62% 3.24%
Portfolio turnover rate 9.34% 12.15% 28.38% 51.26% 15.54%
Average commission rate<F4> -- -- -- -- --
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
<F5> On March 1, 1997, Conning Asset Management Company took over the asset
management of the Managed Equity Fund. The management fee was reduced to .40
percent on the first $10 million of assets, .30 percent on the balance over
$10 million and less than $30 million and .25 percent on the balance in
excess of $30 million.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
29
<PAGE> 30
GENERAL AMERICAN CAPITAL COMPANY MANAGED EQUITY FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- ------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (3.19%)
Rockwell International Corp. 26,400 $1,379,400
United Technologies Corp. 7,000 509,684
----------
1,889,084
----------
Air Transport (1.91%)
AMR Corp.<F*> 8,800 1,130,800
----------
Business Machines (3.05%)
Oracle Corp.<F*> 40,500 903,636
Quantum Corp.<F*> 45,000 902,790
----------
1,806,426
----------
Business Services (2.91%)
Cisco Systems Inc.<F*> 30,900 1,722,675
----------
Chemicals (3.34%)
Dow Chemical Co. 10,800 1,096,200
Eastman Chemical 14,800 881,518
----------
1,977,718
----------
Commercial Banking (9.21%)
BankAmerica Corp. 16,800 1,226,400
Bankboston Corp. 12,000 1,127,244
Chase Manhattan Corp. (new) 11,600 1,270,200
Mellon Bank Corp. 30,100 1,824,813
----------
5,448,657
----------
Domestic Oil (6.16%)
Ashland Inc. 24,400 1,309,963
Arco 21,600 1,730,700
Sun Company Inc. 14,300 601,486
----------
3,642,149
----------
Drugs & Medicines (7.63%)
Bausch & Lomb Inc. 29,700 1,176,863
Baxter International 16,200 817,079
Medpartners Inc.<F*> 55,000 1,230,625
Merck & Co. Inc. 12,100 1,285,625
----------
4,510,192
----------
Electronics (4.61%)
Harris Corp. 36,400 1,669,850
Intel Corp. 15,000 1,053,750
----------
2,723,600
----------
Energy & Utilities (2.32%)
Sonat Inc. 30,000 1,372,500
----------
Finance (Non - Banking) (6.38%)
Associates First Capital Corp. 15,000 1,066,875
<CAPTION>
- ------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance (Non-Banking) (continued)
SLM Holding Corp. 9,700 $1,349,513
Washington Mutual Inc. 21,300 1,359,195
----------
3,775,583
----------
Food & Agriculture (1.93%)
Archer-Daniels-Midland Co. 52,500 1,138,568
----------
Government & State Agency (1.42%)
Federal Home Loan Mortgage Corp. 20,000 838,740
----------
Industrial Miscellaneous (1.89%)
Raytheon Co. - Class A 1,045 51,572
Ryder System Inc. 32,500 1,064,375
----------
1,115,947
----------
Insurance (5.07%)
Lincoln National Corp. 20,000 1,562,500
St Paul Companies Inc. 17,500 1,436,085
----------
2,998,585
----------
International Oil (2.81%)
Exxon Corp. 15,800 966,755
Mobil Corp. 9,600 692,995
----------
1,659,750
----------
Media (3.11%)
CBS Corp. 35,000 1,030,295
McGraw-Hill Inc. 10,900 806,600
----------
1,836,895
----------
Miscellaneous Finance (2.18%)
American General Corp. 23,900 1,292,082
----------
Motor Vehicles (1.68%)
General Motors 16,400 994,250
----------
Non-Durables & Entertainment (1.74%)
Costco Companies Inc.<F*> 23,000 1,026,375
----------
Paper & Forest Products (2.79%)
Kimberly-Clark Corp. 33,500 1,651,952
----------
Producer Goods (2.17%)
Deere & Co. 22,000 1,282,864
----------
Retail (5.66%)
J C Penney Co. Inc. 26,500 1,598,268
TJX Cos Inc. 34,000 1,168,750
Woolworth Corp.<F*> 28,550 581,706
----------
3,348,724
----------
(continued)
30
<PAGE> 31
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY MANAGED EQUITY FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Soaps & Cosmetics (1.98%)
Clorox Co. 14,800 $ 1,170,118
-----------
Telephone (4.57%)
Sprint Corp. 23,100 1,354,238
US West Communications Group 29,900 1,349,236
-----------
2,703,474
-----------
Tobacco (2.96%)
Philip Morris Companies Inc. 38,600 1,749,043
-----------
Utilities, Electrical & Gas (2.78%)
Nipsco Industries Inc. 33,200 1,641,308
-----------
TOTAL COMMON STOCK (95.45%)
(COST $40,444,297) $56,448,059
-----------
<CAPTION>
- ------------------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (4.96%)
Countrywide Home Loans, Inc.,
6.51%, due 1/ 5/98 2,935,000 $ 2,932,875
-----------
TOTAL SHORT TERM SECURITIES (4.96%)
(AMORTIZED COST $2,932,875) 2,932,875
-----------
TOTAL INVESTMENTS (100.41%)
(AMORTIZED COST $43,377,172) 59,380,934
Other net liabilities (-0.41%) (242,832)
-----------
TOTAL NET ASSETS (100.00%) $59,138,102
===========
<FN>
<F*>Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
31
<PAGE> 32
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
MANAGEMENT DISCUSSION
A severe downturn in the Technology sector during the fourth quarter slowed
the performance of this blended fund of equities and fixed-income
investments. The fund finished with a net return of 18.7 percent, which was
slightly lower than the benchmark Lipper Flexible Portfolio Funds Average of
18.9 percent. The equity portion of the fund enjoyed a strong year, returning
24.9 percent gross, while the Barra Growth Index returned 36.5 percent over
the same period. The fixed income segment of the portfolio, meanwhile,
performed in line with the Lehman Brothers Government & Corporate Bond Index
for the full year, maintaining a mix of high quality corporates and
intermediate U.S. Treasury securities.
At year-end the fund maintained an asset mix of 69 percent stocks, 27 percent
bonds, and 4 percent cash.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROS
INTERMEDIATE
ASSET S&P GOV/CORP
Date ALLOCATION FUND INDEX BOND INDEX
<S> <C> <C> <C>
10/01/87 10,000.00 10,000.00 10,000.00
12/31/87 10,047.25 7,750.00 10,460.00
12/31/88 10,895.36 9,036.50 11,157.68
12/31/89 13,065.06 11,901.07 12,582.52
12/31/90 13,387.65 11,532.14 13,735.08
12/31/91 16,040.07 15,049.44 15,743.15
12/31/92 17,107.66 16,193.20 16,871.93
12/31/93 18,740.80 17,828.71 18,354.97
12/31/94 18,001.07 18,057.99 18,000.72
12/31/95 23,199.95 24,821.61 20,760.23
12/31/96 26,834.15 30,549.44 21,599.98
12/31/97 31,860.06 40,702.85 23,706.63
</TABLE>
<TABLE>
ANNUAL RETURNS
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Annual Returns 18.73% 13.24% 12.23% 11.97%
</TABLE>
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
32
<PAGE> 33
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Bonds $ 29,855,519
Common stocks 75,252,489
Preferred stocks 1,050,000
Short term securities 4,491,722
------------
Total investments 110,649,730
Cash 65,464
Dividends and interest receivable 610,303
------------
Total assets 111,325,497
------------
LIABILITIES:
Payable to Conning Asset
Management Company 46,783
Payable to General American
Life Insurance Company 9,356
------------
Total liabilities 56,139
------------
Total net assets $111,269,358
============
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 3,492,441
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 31.86
TOTAL AMORTIZED COST OF INVESTMENTS $ 84,305,286
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,433,355
Interest 2,443,544
-----------
Total investment income 3,876,899
-----------
EXPENSES:
Investment management charge 508,306
Administrative charge 101,661
-----------
Total expenses 609,967
-----------
Net investment income 3,266,932
-----------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 726,549
-----------
NET UNREALIZED GAIN ON INVESTMENTS:
Net unrealized gain on investments 13,145,289
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $17,138,770
===========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------ -----------
1997 1996
------------ -----------
<S> <C> <C>
Operations:
Net investment income $ 3,266,932 $ 2,958,739
Net realized gain on investments 726,549 2,367,380
Net unrealized gain on investments 13,145,289 6,114,663
------------ -----------
Net increase in net assets from operations 17,138,770 11,440,782
Capital share transactions 7,939,435 1,363,412
------------ -----------
Net increase in net assets 25,078,205 12,804,194
Net assets, beginning of year 86,191,153 73,386,959
------------ -----------
Net assets, end of year $111,269,358 $86,191,153
============ ===========
See accompanying notes to financial statements beginning on page 57.
</TABLE>
33
<PAGE> 34
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $ 26.83 $ 23.20 $ 18.00 $ 18.74 $ 17.11
-------- ------- ------- ------- -------
Income from operations:
Net investment income 0.96 0.93 0.82 0.68 0.60
Net realized and unrealized gain (loss)
on investments 4.07 2.70 4.38 (1.42) 1.03
-------- ------- ------- ------- -------
Net increase (decrease) in asset value per share 5.03 3.63 5.20 (0.74) 1.63
-------- ------- ------- ------- -------
Net asset value, end of year $ 31.86 $ 26.83 $ 23.20 $ 18.00 $ 18.74
======== ======= ======= ======= =======
Total return<F2> 18.73% 15.66% 28.88% -3.95% 9.55%
Net assets, end of year (in thousands) $111,269 $86,191 $73,387 $59,975 $65,070
Ratio of expenses to average net assets<F3> 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income to average
net assets<F3> 3.24% 3.77% 3.92% 3.70% 3.33%
Portfolio turnover rate 36.34% 32.78% 33.74% 75.24% 27.59%
Average commission rate<F4> $ 0.06 $ 0.04 -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------
1992 1991 1990 1989 1988
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $ 16.04 $ 13.39 $ 13.07 $10.90 $10.05
------- ------- ------- ------ ------
Income from operations:
Net investment income 0.62 0.65 0.69 0.60 0.57
Net realized and unrealized gain (loss)
on investments 0.45 2.00 (0.37) 1.57 0.28
------- ------- ------- ------ ------
Net increase in asset value per share 1.07 2.65 0.32 2.17 0.85
------- ------- ------- ------ ------
Net asset value, end of year $ 17.11 $ 16.04 $ 13.39 $13.07 $10.90
======= ======= ======= ====== ======
Total return<F2> 6.66% 19.81% 2.47% 19.91% 8.44%
Net assets, end of year (in thousands) $53.369 $21,149 $12,545 $5,244 $1,440
Ratio of expenses to average net assets<F3> 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment income to average
net assets<F3> 3.80% 4.37% 5.41% 4.82% 5.04%
Portfolio turnover rate 12.14% 5.14% 15.46% 28.06% 13.52%
Average commission rate<F4> -- -- -- -- --
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
34
<PAGE> 35
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PAR MARKET
BONDS VALUE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Government & State Agency
FNMA, 8.350%, due 11/10/1999 $ 150,000 $ 154,337
TOTAL GOVERNMENT & STATE AGENCY (0.14%)
(AMORTIZED COST $149,664) 154,337
----------
US Government Securities
US Treasury Bonds, 7.250%,
due 05/15/2016 1,500,000 1,708,590
US Treasury Notes, 7.125%,
due 10/15/1998 1,000,000 1,011,410
US Treasury Notes, 6.375%,
due 08/15/2002 1,000,000 1,025,780
US Treasury Notes, 5.750%,
due 08/15/2003 1,000,000 1,000,620
US Treasury Notes, 5.875%,
due 08/15/1998 1,000,000 1,001,410
US Treasury Notes, 8.000%,
due 08/15/1999 1,000,000 1,035,310
US Treasury Notes, 6.125%,
due 08/31/1998 2,500,000 2,507,800
----------
TOTAL GOVERNMENT SECURITIES (8.35%)
(AMORTIZED COST $9,107,156) 9,290,920
----------
CORPORATE BONDS
Aerospace & Military Technology (0.45%)
Rohr Industries, 9.250%,
due 03/01/2017 500,000 506,875
----------
Air Transport (1.07%)
Delta Airlines, 9.200%,
due 09/23/2014 1,000,000 1,186,100
----------
Commercial Banking (0.23%)
Nationsbank, 6.750%,
due 03/15/2003 250,000 253,657
----------
Finance (Non - Banking) (1.84%)
Associates Corp., 6.875%,
due 02/01/2003 500,000 512,535
Bear Stearns Co., 6.750%,
due 04/15/2003 1,000,000 1,014,520
Merrill Lynch & Co, Inc.,
7.375%, due 08/17/2002 500,000 521,950
----------
2,049,005
----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PAR MARKET
BONDS VALUE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (4.51%)
Canadian National Railway,
6.625%, due 05/15/2003 $ 500,000 $ 505,245
Celulosa Arauco & Constitucio,
7.000%, due 12/15/2007 1,000,000 996,160
Coca-Cola Company, 6.625%,
due 10/01/2002 500,000 509,745
Disney Spin III, 14.000%,
due 03/01/2000 1,000,000 1,093,437
Dual Drilling Co, 9.875%,
due 01/15/2004 500,000 1,077,500
E I Dupont De Nemours & Co.,
8.250%, due 09/15/2006 250,000 282,683
Seagram Company Ltd., 8.350%,
due 11/15/2006 500,000 558,150
----------
5,022,920
----------
Liquor (0.45%)
Anheuser-Busch Companies Inc.,
6.900%, due 10/01/2002 500,000 503,100
----------
Media (1.00%)
Continental Cablevision,
11.000%, due 06/01/2007 1,000,000 1,110,360
----------
Miscellaneous & Conglomerates (0.47%)
Hanson Overseas BV, 7.375%,
due 01/15/2003 500,000 522,000
----------
Motor Vehicles (0.95%)
Enterprise Rent A Car, 7.500%,
due 06/15/2003 1,000,000 1,052,380
----------
Municipality (0.95%)
Province of Quebec - Series A,
8.100%, due 04/23/2002 1,000,000 1,060,470
----------
Retail (0.46%)
Dayton Hudson Corp., 7.500%,
due 03/01/1999 500,000 507,280
----------
Telephone (1.45%)
GTE Southwest, 6.540%,
due 12/01/2005 500,000 502,910
----------
US West Communications,
8.875%, due 06/01/2031 1,000,000 1,110,660
----------
1,613,570
----------
(continued)
35
<PAGE> 36
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------
PAR MARKET
BONDS VALUE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities, Electrical & Gas (2.25%)
Consolidated Edison, 7.375%,
due 09/15/2000 $ 500,000 $ 514,960
Northern States Power, 6.125%,
due 12/01/2005 500,000 497,540
Philadelphia Electric, 8.625%,
due 06/01/2022 448,000 476,470
Texas Utilities Co., 7.375%,
due 08/01/2001 500,000 516,545
Virginia Electric Power Co.,
6.250%, due 08/01/1998 500,000 500,945
-----------
2,506,460
-----------
TOTAL CORPORATE BONDS (16.08%)
(AMORTIZED COST $17,547,123) 17,894,177
-----------
MORTGAGE BACKED SECURITIES AND CMO'S
Government & State Agency (2.26%)
FHLMC 1505-E PAC, 6.500%,
due 10/15/2019 1,000,000 1,007,180
FNMA 1992-128G, 6.000%,
due 02/25/2022 500,000 487,655
FNMA 1992-146 PH, 7.500%,
due 09/25/2019 1,000,000 1,021,250
-----------
TOTAL MORTGAGE BACKED SECURITES AND CMO'S (2.26%)
(AMORTIZED COST $2,467,887) 2,516,085
-----------
TOTAL BONDS (26.83%)
(AMORTIZED COST $29,271,830) 29,855,519
-----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (2.46%)
Boeing Co. 6,452 315,742
Rockwell International Corp. 17,300 903,925
United Technologies Corp. 20,800 1,514,490
-----------
2,734,157
-----------
Air Transport (1.04%)
AMR Corp.<F*> 9,000 1,156,500
-----------
Business Machines (2.47%)
IBM Corp. 12,000 1,254,744
Oracle Corp.<F*> 49,200 1,097,750
Quantum Corp.<F*> 20,000 401,240
-----------
2,753,734
-----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Business Services (2.07%)
CSG Systems International<F*> 20,000 $ 800,000
Cisco Systems Inc.<F*> 27,000 1,505,250
----------
2,305,250
----------
Chemicals (2.27%)
Eastman Chemical 15,200 905,342
Monsanto 38,500 1,617,000
----------
2,522,342
----------
Commercial Banking (8.23%)
Bankamerica Corp. 26,400 1,927,200
Chase Manhattan Corp. (new) 17,900 1,960,050
First of America Bank 36,600 2,822,775
Mellon Bank Corp. 40,300 2,443,187
----------
9,153,212
----------
Domestic Oil (2.80%)
Ashland Inc. 25,100 1,347,544
Arco 22,000 1,762,750
----------
3,110,294
----------
Drugs & Medicines (6.53%)
Bausch & Lomb Inc. 23,500 931,188
Baxter International 25,000 1,260,925
Immunex Corp.<F*> 10,000 540,000
Medpartners Inc.<F*> 77,600 1,736,300
Merck & Co. Inc. 14,400 1,530,000
Pfizer Inc. 17,000 1,267,554
----------
7,265,967
----------
Electronics (6.63%)
Harris Corp. 43,600 2,000,150
Input/Output Inc.<F*> 80,000 2,374,960
Intel Corp. 16,400 1,152,100
Texas Instruments Inc. 41,000 1,845,000
----------
7,372,210
----------
Energy & Utilities (0.86%)
Sonat Inc. 21,000 960,750
----------
Energy Raw Materials (0.93%)
KCS Energy Inc. 50,000 1,037,500
----------
Finance (Non - Banking) (2.04%)
SLM Holding Corp. 16,300 2,267,737
----------
(continued)
36
<PAGE> 37
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food & Agriculture (1.30%)
Conagra Inc. 30,000 $ 984,360
H J Heinz Co. 9,150 464,930
----------
1,449,290
----------
Industrial Miscellaneous (3.30%)
Circuit City Stores Carmax<F*> 45,300 407,700
Diamond Offshore Drilling Inc. 40,000 1,925,000
Raytheon Co. - Class A 1,397 68,867
Ryder System Inc. 38,800 1,270,700
----------
3,672,267
----------
Insurance (3.15%)
American International Group Inc. 15,000 1,631,250
Lincoln National Corp. 24,000 1,875,000
----------
3,506,250
----------
International Oil (1.91%)
Exxon Corp. 31,800 $1,945,747
Royal Dutch Petroleum Co. 3,200 173,398
----------
2,119,145
----------
Miscellaneous Finance (1.52%)
American General Corp. 31,300 1,692,141
----------
Motor Vehicles (1.19%)
General Motors 21,900 1,327,688
----------
Non-Durable & Entertainment(1.20%)
Costco Companies Inc.<F*> 30,000 1,338,750
----------
Optical Photographic Equipment (0.81%)
Eastman Kodak Co. 14,900 906,099
----------
Paper & Forest Products (1.11%)
Kimberly-Clark Corp. 25,000 1,232,800
----------
Producer Goods (1.41%)
Deere & Co. 27,000 1,574,424
----------
Retail (3.71%)
J C Penney Co. Inc. 20,500 1,236,396
TJX Cos. Inc. 69,200 2,378,750
Woolworth Corp.<F*> 25,350 516,506
----------
4,131,652
----------
Soaps & Cosmetics (1.11%)
Bristol-Myers Squibb Co. 13,000 1,230,125
----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Telephone (3.78%)
Bell Atlantic Corp 13,977 $1,271,907
Lucent Technologies 4,115 328,686
Sitel Corp.<F*> 82,500 752,812
Sprint Corp. 27,600 1,618,050
US West Media Group<F*> 8,100 233,887
----------
4,205,342
----------
Tobacco (2.38%)
Philip Morris Companies Inc. 41,100 1,862,323
RJR Nabisco Holdings 21,000 787,500
----------
2,649,823
----------
Utilities, Electrical & Gas (1.42%)
Nipsco Industries Inc. 31,900 1,577,040
----------
TOTAL COMMON STOCK (67.63%)
(COST $49,471,734) 75,252,489
----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MARKET
PREFERRED STOCK SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Oil (0.94%)
Lasmo PLC Series A 40,000 1,050,000
------------
TOTAL PREFERRED STOCK (0.94%)
(COST $1,070,000) 1,050,000
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (4.04%)
Countrywide Home Loans, Inc.,
6.50%, due 01/05/1998 $1,625,000 $ 1,623,826
6.60%, due 01/05/1998 2,870,000 2,867,896
------------
TOTAL SHORT TERM SECURITIES (4.04%)
(AMORTIZED COST $4,491,722) 4,491,722
------------
TOTAL INVESTMENTS (99.44%)
(AMORTIZED COST $84,305,286) $110,649,730
------------
Other net assets (0.56%) 619,628
------------
TOTAL NET ASSETS (100.00%) $111,269,358
============
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
37
<PAGE> 38
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND
MANAGEMENT DISCUSSION
After posting strong returns in the second quarter, this fund experienced a
modest negative return in the third quarter (-1.3 percent net) and a larger
loss in the fourth (-7.5 percent net). This produced a net return for year of
2.3 percent, compared to the benchmark EAFE Index (Morgan Stanley Capital
International Europe, Australia, and Far East Index) return of 2.1 percent.
The Asian financial crisis was severe enough in its impact on the portfolio
to nearly offset the significant gains made by the European markets, which
were led by Switzerland (up 58.9 percent gross, measured in U.S. dollars),
Germany (up 47.1 percent gross) and France (up 29.5 percent gross). The
European markets were bouyed by a surge in the Financial sector that resulted
from a flurry of merger and acquisition activity. On the negative side,
Japan--the largest component of the index--fell 21 percent for the year,
driven by continued distress in the Japanese financial system.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL EUROPE, AUSTRALIA,
Date INDEX FUND FAR EAST INDEX
<S> <C> <C>
02/16/93 10,000.00 10,000.00
12/31/93 13,102.85 13,260.00
12/31/94 13,944.32 14,294.28
12/31/95 15,108.98 15,919.54
12/31/96 16,226.91 16,930.11
12/31/97 16,595.09 17,279.72
<FN>
<F*>On January 1, 1997 Conning Asset Management Company assumed portfolio
management duties from the former sub-advisor of the fund, Provident Capital
Management, Inc. On January 1, 1997 the fund also changed its investment
objective to be one which parallels the price and yield performance of the
publicly-traded common stocks in the Morgan Stanley Capital International
Europe, Australia, and Far East Index ("EAFE" Index").
</TABLE>
ANNUAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR LIFE OF FUND
Annual Returns 2.27% 10.95%
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
38
<PAGE> 39
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Common stocks $8,124,485
Warrants 204
Short term securities 264,805
----------
Total investments 8,389,494
Cash 22,350
Dividends receivable 20,643
----------
Total assets 8,432,487
----------
LIABILITIES:
Payable to Conning Asset
Management Company 3,545
Payable to General American
Life Insurance Company 2,127
----------
Total liabilities 5,672
----------
Total net assets $8,426,815
==========
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 507,790
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 16.60
TOTAL AMORTIZED COST OF INVESTMENTS $7,935,373
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 161,805
Interest 21,757
---------
Total investment income 183,562
---------
EXPENSES:
Investment management charge 39,558
Administrative charge 23,735
---------
Total expenses 63,293
---------
Net investment income 120,269
---------
NET REALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain on investments 576,408
Net realized loss on foreign currency conversions (480,622)
---------
NET REALIZED GAIN FROM INVESTMENTS AND FOREIGN
CURRENCY 95,786
---------
NET UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net unrealized gain on investments 113,859
Net unrealized loss on foreign currency
conversions (178,855)
---------
NET UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND
FOREIGN CURRENCY (64,996)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 151,059
=========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 120,269 $ 97,174
Net realized gain on investments and foreign currency conversions 95,786 76,406
Net unrealized gain on investments and foreign currency (64,996) 272,411
---------- ----------
Net increase in net assets from operations 151,059 445,991
Capital share transactions 1,260,794 1,108,829
---------- ----------
Net increase in net assets 1,411,853 1,554,820
Net assets, beginning of year 7,014,962 5,460,142
---------- ----------
Net assets, end of year $8,426,815 $7,014,962
========== ==========
See accompanying notes to financial statements beginning on page 57.
</TABLE>
39
<PAGE> 40
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND<F*>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
FEBRUARY 16
(INCEPTION)
TO
YEAR ENDED DECEMBER 31 DECEMBER 31
-------------------------------------------------- -----------
1997 1996 1995 1994 1993
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $16.23 $15.11 $ 13.94 $13.10 $10.00
------ ------ ------- ------ ------
Income from operations:
Net investment income 0.26 0.24 0.25 0.13 0.14
Net realized and unrealized gain
on investments 0.11<F**> 0.88<F**> 0.92<F**> 0.71<F**> 2.96<F**>
------ ------ ------- ------ ------
Net increase in asset value per share 0.37 1.12 1.17 0.84 3.10
------ ------ ------- ------ ------
Net asset value, end of period $16.60 $16.23 $ 15.11 $13.94 $13.10
====== ====== ======= ====== ======
Total return<F2> 2.27% 7.40% 8.35% 6.42% 31.03%
Net assets, end of period (in thousands) $8,427 $7,015 $ 5,460 $4,242 $3,295
Ratio of expenses to average net assets<F3><F*> 0.80% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to average
net assets<F3> 1.53% 1.57% 1.79% 0.98% 1.38%
Portfolio turnover rate 57.70% 19.53% 113.91% 46.19% 26.97%
Average commission rate<F4> $ 0.01 $ 0.02 -- -- --
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the eleven months ended December 31,
1993. The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
<F*> Name and investment objective changed from the International Equity Fund on
January 1, 1997. The investment advisor charges changed from .70% to .50% on
the first $10 million of the average daily value of the net assets on
January 1, 1997. The fund's investment advisor became Conning Asset
Management on January 1, 1997. The objective of the International Index Fund
is to obtain investment results that parallel the price and yield
performance of publicly traded common stocks in the EAFE Index.
<F**>Also includes net realized and unrealized gain (loss) on foreign currency
conversions.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
40
<PAGE> 41
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Australia (1.89%)
Broken Hill Properties 4,191 $ 38,914
News Corp. Ltd. Au 6,227 34,367
Telstra Corp.<F*> 13,400 28,290
Western Mining Ltd. 4,131 14,401
Westpac Banking 6,706 42,892
----------
158,864
----------
Austria (0.24%)
Bank Austria AG 400 20,236
----------
Belgium (0.99%)
Electrabel Sa 200 46,262
Petrofina Sa 100 36,910
----------
83,172
----------
Denmark (1.09%)
Den Danske Bank 200 26,668
Novo-Nordisk 315 45,084
Tele Danmark 319 19,800
----------
91,552
----------
Finland (0.60%)
Nokia AB - A Shares 400 28,428
Rauma Oy 30 468
UPM - Kymmene Corp 1,100 22,019
----------
50,915
----------
France (7.65%)
Alcatel Alsthom 450 57,224
AXA UAP 550 42,577
Carrefour Supermarche 50 26,098
Cie Generale Des Eaux 300 41,890
Elf Aquitaine 500 58,180
France Telecom SA<F*> 2,440 88,542
Groupe Danone 250 44,674
L'Air Liquide 300 46,976
L'Oreal 100 39,147
LVMH Moet-Hennessy
Louis Vuitton 200 33,213
Rhone-Poulenc A 1,100 49,297
Societe Generale Paris 400 54,523
St. Gobain 250 35,531
Total SA - B 250 27,220
----------
645,092
----------
Germany (10.18%)
Allianz AG 300 77,419
BASF AG 900 32,136
Bayer AG 1,300 48,262
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Germany (continued)
Daimler-Benz AG 900 $ 63,571
Deutsche Bank AG 1,150 80,462
Deutsche Telekom AG 2,450 45,375
Dresdner Bank AG 800 36,396
Mannesmann AG Dm 50 25,111
Metro AG 1,650 58,548
RWE AG 1,450 77,823
SAP AG 200 60,679
SAP AG-Vorzug 150 48,737
Siemens AG 1,550 93,534
VEBA AG 800 54,505
VIAG AG 50 27,392
VolkswAGen AG 50 27,948
----------
857,898
----------
Great Britain (20.84%)
Abbey National PLC 2,691 48,311
Barclays PLC 4,067 108,284
BAT Industries 6,572 59,913
BG PLC (ADR) 1,323 30,015
British Gas PLC 6,927 31,234
British Petroleum 12,591 165,753
British Sky Broadcasting PLC 2,769 20,778
British Telecommunications 12,921 101,739
BTR PLC Ord 25p 10,455 31,656
Cable & Wireless 5,500 48,420
Centrica PLC<F*> 7,851 11,563
Diago PLC 9,724 89,527
General Electric PLC 7,574 49,168
Glaxo Holdings PLC 4,600 109,001
HSBC Holdings 1,000 25,671
HSBC Holdings 2,300 56,847
Lloyds Tsb Group 3,853 49,898
Marks & Spencer 10,201 100,550
Pearson PLC 3,100 40,351
Prudential Corporation PLC 6,933 83,739
Reuters Holdings PLC 6,068 66,402
Rio Tinto PLC- Reg 3,869 47,686
Royal Sun Alliance Insurance 4,100 41,358
Smithkline Beecham PLC 10,074 103,276
Tesco 4,900 39,913
Unilever PLC 10,736 92,043
Vodafone Group 5,102 36,857
Zeneca Group PLC 1,900 66,814
----------
1,756,767
----------
(continued)
41
<PAGE> 42
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Hong Kong (3.16%)
Bank of East Asia 7,400 $ 17,334
CDL Hotels International 1,000 303
Cheung Kong 8,000 52,399
China Light & Power 5,500 30,523
Hang Seng Bank 3,200 30,872
Hong Kong Telecom 12,600 25,938
HSBC Holdings 200 4,930
Hutchison Whampo 6,000 37,635
New World Development 5,000 17,294
Sun Hung Kai Properties 3,000 20,908
Swire Pacific "A" 3,500 19,198
Wharf Holdings 4,000 8,776
----------
266,110
----------
Ireland (0.41%)
Allied Irish 3,528 34,199
----------
Italy (3.17%)
Assicurazioni Generali 2,800 68,812
Edison Spa 2,500 15,130
Ente Nazionale Idrocarburi 14,587 82,753
Fiat Spa Itl1000 7,700 22,408
Telecom Italia Mobile 9,198 42,478
Telecom Italia Spa 5,556 35,508
----------
267,089
----------
Japan (24.15%)
Asahi Bank 8,000 32,610
Asahi Glass Co. Ltd. 4,000 19,074
Bank of Tokyo-Mitsubishi 7,000 96,907
Canon 1,000 23,381
Daiwa Securities 5,000 17,305
Denso Corp. 3,000 54,222
East Japan Railway 14 63,421
Fuji Bank 5,000 20,304
Fuji Photo 2,000 76,911
Fujitsu 6702 3,000 32,302
Hitachi Ltd. 12,000 85,832
Honda Motors 1,000 36,840
Industrial Bank Japan 5,000 35,763
Ito Yokado 8264 1,000 51,146
Japan Air Lines<F*> 9,000 24,573
Kansai Electric Power 3,400 57,791
Kinki Nippon Railway 3,000 16,082
Komatsu Ltd. 12,000 60,452
Maruko Co Ltd. 50 273
Marutomi Group 75 115
Matsushita Electric (ADR) 200 30,400
Matsushita Electronics 5,000 73,450
Mitsubishi Chemical Corp. 157 226
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Japan (continued)
Mitsubishi Corp. 6,000 $ 47,531
Mitsubishi Electric 7,000 17,982
Mitsubishi Estate Co. 5,000 54,607
Mitsubishi Heavy Industries 15,000 62,759
Mitsubishi Trust 4,000 40,301
Mitsui Co. 6,000 35,625
NEC Corp. 4,000 42,762
Nippon Steel Corp. 24,000 35,625
Nippon Telegraph & Telephone 12 103,368
Nissan 7201 9,000 37,379
Nissen<F*> 50 87
Nomura Securities 6,000 80,295
Sakura Bank 12,000 34,425
Sankyo Co., Ltd. 2,000 45,377
Sanyo Electric Co. Ltd. 25,000 65,374
Sharp Corp. 4,000 27,626
Sony Corp. 500 44,608
Sumitomo Bank Ltd. 2,000 22,919
Tohoku Electric Power 1,100 16,751
Tokai Bank 3,000 14,028
Tokio Marine & Fire 6,000 68,297
Tokyo Electric Power 4,600 84,202
Toyota Motor Corp. 5,000 143,823
----------
2,035,131
----------
Malaysia (0.86%)
Malayan Banking Berhad 2,000 5,806
Sime Darby Berhad 6,000 5,765
Telekom Malaysia 13,500 39,886
TenAGa Nasional Berhad 9,000 19,192
United Engineers (Malaysia) 2,000 1,665
----------
72,314
----------
Netherlands (5.10%)
ABN Amro Holdings 1,756 34,216
Akzo 135 23,281
Elsevier 1,359 21,989
ING Groep N.V. 1,034 43,559
Koninklijke Ptt Nederland 600 25,039
Philips Electronics 436 26,153
Royal Dutch Petroleum 2,828 155,267
Unilever Nv 1,336 82,380
Wolters Kluwer-Cva 136 17,570
----------
429,454
----------
New Zealand (0.30%)
Telecom Corp. of New Zealand 5,300 25,698
----------
(continued)
42
<PAGE> 43
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY INTERNATIONAL INDEX FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Norway (0.41%)
Norsk Hydro 700 $ 34,135
----------
Singapore (0.99%)
Oversea-Chinese Banking Corp. 4,800 27,919
Singapore Airlines Ltd. 2,000 13,057
Singapore Telecommunications 23,000 42,863
----------
83,839
----------
Spain (4.09%)
Banco Bilbao Vizcaya 2,331 75,398
Empresa Nacional Electric 2,920 51,823
Repsol Sa 562 23,967
Repsol (ADR) 800 34,050
Telefonica De Despana 1,440 41,098
Telefonica (ADR) 1,300 118,381
----------
344,717
----------
Sweden (2.20%)
ABB AB 2,500 29,618
Astra AB - A 3,200 55,455
Ericsson LM B 1,800 67,719
Volvo AB SEK5 1,200 32,215
----------
185,007
----------
Switzerland (8.10%)
ABB AG 20 25,163
Credit Suisse Group 600 92,972
Nestle SA 60 90,051
Novartis AG 110 178,745
Roche Holding AG 2 30,854
Roche Holding AG 10 99,451
Schweizerische Bankgesellschaft 30 43,442
Schweizerischer Bankverein<F*> 150 46,692
Swiss Reinsurance 40 74,926
----------
682,296
----------
TOTAL COMMON STOCK (96.42%)
(COST $7,670,353) 8,124,485
----------
<CAPTION>
- -----------------------------------------------------------------------------------
MARKET
WARRANTS SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Warrants (0.00%)
Compangie Gen De Eaux Wt
2001<F*> 300 $204
----
TOTAL WARRANTS (0.00%)
(AMORTIZED COST $215) 204
----
<CAPTION>
- -----------------------------------------------------------------------------------
PAR MARKET
SHORT TERM INVESTMENTS VALUE VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (3.14%)
Countrywide Home Loans, Inc.,
due 01/05/1998 300,000 $ 264,805
----------
TOTAL SHORT TERM INVESTMENTS (3.14%)
(AMORTIZED COST $264,805) 264,805
----------
TOTAL INVESTMENTS (99.56%)
(AMORTIZED COST $7,935,373) 8,389,494
Other net assets ( 0.44%) 37,321
----------
TOTAL NET ASSETS (100.00%) $8,426,815
==========
<F*>Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
43
<PAGE> 44
GENERAL AMERICAN CAPITAL COMPANY MID-CAP EQUITY FUND
MANAGEMENT DISCUSSION
The Mid-Cap Equity Fund turned in a strong performance in 1997 with a return
of 34.5 percent, outperforming the benchmark S&P 400 Mid-Cap, which finished
the year up 32.3 percent. After achieving outstanding returns in the second
and third quarters, up 19.2 percent and 13.2 percent respectively, the fourth
quarter returns were virtually flat. Throughout the year, an overweight in
the top performing financial services sector contributed significantly to the
Fund's returns. Also contributing significantly was the performance of
companies within telecommunications sector. In the fourth quarter, the
reversal of fortunes in the previously stellar technology and energy sectors
caused a severe drag on performance as concerns over weakness in the Asian
economies sent earnings expectations and oil prices sharply downward.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
MID-CAP EQUITY
Date FUND RUSSELL 2000 S&P400 INDEX
<S> <C> <C> <C>
02/16/93 10,000.00 10,000.00 10,000.00
12/31/93 11,444.23 11,501.00 11,548.00
12/31/94 11,349.55 11,291.68 11,133.43
12/31/95 13,743.06 14,503.03 14,575.89
12/31/96 16,416.86 15,161.03 17,377.38
12/31/97 22,074.52 18,551.19 22,981.59
<FN>
<F*>On January 1, 1997 Conning Asset Management Company assumed portfolio
management duties from the former sub-advisor of the fund, Provident Capital
Management, Inc. On January 1, 1997 the fund also changed its investment
objective to be one which seeks sustained growth of capital by investing
primarily in common stocks of United States-based publicly traded companies
with medium market capitalizations, as defined by the S & P Mid Cap 400 Index
</TABLE>
ANNUAL RETURNS
PERIODS ENDED DECEMBER 31, 1997 PAST 1 YEAR LIFE OF FUND
Annual Returns 34.46% 17.64%
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
44
<PAGE> 45
GENERAL AMERICAN CAPITAL COMPANY MID-CAP EQUITY FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedules)
Common stocks $6,421,808
Short term securities 413,698
----------
Total investments 6,835,506
Cash 18,583
Dividends receivable 1,665
----------
Total assets 6,855,754
----------
LIABILITIES:
Payable to Conning Asset
Management Company 3,083
Payable to General American
Life Insurance Company 561
----------
Total liabilities 3,644
----------
Total net assets $6,852,110
==========
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 310,408
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 22.07
TOTAL AMORTIZED COST OF INVESTMENTS $5,137,740
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 41,992
Interest 32,563
----------
Total investment income 74,555
----------
EXPENSES:
Investment management charge 27,991
Administrative charge 5,089
----------
Total expenses 33,080
----------
Net investment income 41,475
----------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 266,957
----------
NET UNREALIZED GAIN ON INVESTMENTS:
Net unrealized gain on investments 1,114,477
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,422,909
==========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
----------- ----------
1997 1996
----------- ----------
<S> <C> <C>
Operations:
Net investment income $ 41,475 $ 41,481
Net realized gain on investments 266,957 730,854
Net unrealized gain on investments 1,114,477 19,822
---------- ----------
Net increase in net assets from operations 1,422,909 792,157
Capital share transactions 1,309,029 (932,433)
---------- ----------
Net increase (decrease) in net assets 2,731,938 (140,276)
Net assets, beginning of year 4,120,172 4,260,448
---------- ----------
Net assets, end of year $6,852,110 $4,120,172
========== ==========
See accompanying notes to financial statements beginning on page 57.
</TABLE>
45
<PAGE> 46
GENERAL AMERICAN CAPITAL COMPANY MID-CAP EQUITY FUND<F*>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
FEBRUARY 16
(INCEPTION)
TO
YEAR ENDED DECEMBER 31 DECEMBER 31
-------------------------------------------------- -----------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year<F1> $16.42 $13.74 $11.35 $11.44 $10.00
------ ------ ------ ------ ------
Income from operations:
Net investment income 0.16 0.15 0.05 0.10 0.06
Net realized and unrealized gain
(loss) on investments 5.49 2.53 2.34 (0.19) 1.38
------ ------ ------ ------ ------
Net increase (decrease) in asset value per share 5.65 2.68 2.39 (0.09) 1.44
------ ------ ------ ------ ------
Net asset value, end of period $22.07 $16.42 $13.74 $11.35 $11.44
====== ====== ====== ====== ======
Total return<F2> 34.46% 19.46% 21.09% -0.83% 14.44%
Net assets, end of period (in thousands) $6,852 $4,120 $4,260 $3,279 $1,998
Ratio of expenses to average net assets<F3> 0.65% 0.65% 0.65% 0.65% 0.64%
Ratio of net investment income to average
net assets<F3> .81% 1.02% 0.75% 0.85% 0.64%
Portfolio turnover rate 62.22% 56.31% 28.48% 29.48% 22.64%
Average commission rate<F4> $ 0.05 $ 0.06 -- -- --
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the eleven months ended December 31,
1993. The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
<F*> Name and investment objective changed from the Special Equity Fund
effective January 1, 1997. The investment advisor changed to Conning Asset
Management. The investment objective is long term capital appreciation,
which it pursues through investment primarily in common stocks of US - based
publicly traded companies with medium market capitalizations.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
46
<PAGE> 47
GENERAL AMERICAN CAPITAL COMPANY MID-CAP EQUITY FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Air Transport (1.09%)
America West Holdings Corp.-B<F*> 4,000 $ 74,500
----------
Business Machines (5.10%)
Computer Horizons Corp. 1,998 89,910
Gateway 2000 Inc. 3,000 97,875
Plantronics 2,280 91,200
Quantum Corp. 3,500 70,217
----------
349,202
----------
Business Services (10.67%)
CSG Systems International<F*> 4,400 176,000
Data Transmission Network Corp.<F*> 4,100 114,800
Integrated Health Services 2,200 68,611
Intermedia Communications Inc.<F*> 3,600 218,700
Networks Associates<F*> 2,900 153,338
----------
731,449
----------
Chemicals (1.55%)
Crompton & Knowles Corp. 4,000 106,000
----------
Commercial Banking (4.11%)
Albank Financial 1,812 93,204
Bankatlantic Bancorp Inc. 3,326 55,711
Bankatlantic Bancorp Inc. - A 2,824 46,065
Commerce Bancorp 1,698 86,597
----------
281,577
----------
Consumer Durables (4.46%)
Furniture Brands International<F*> 7,500 153,750
Lennar Corp. 7,055 152,120
----------
305,870
----------
Domestic Oil (7.45%)
Basin Exploration Inc.<F*> 5,000 88,750
Domain Energy Corp.<F*> 9,000 141,750
Pride International Inc.<F*> 3,320 83,830
R & B Falcon Corp. 5,600 196,347
----------
510,677
----------
Drugs & Medicines (6.79%)
Aronex Pharmaceuticals Inc.<F*> 8,000 34,000
Beckman Instruments 1,110 44,400
IDEC Pharmaceuticals Corp.<F*> 1,500 51,563
Immunex Corp.<F*> 3,000 162,000
Medpartners Inc.<F*> 5,800 129,775
Sierra Health Services<F*> 1,300 43,712
----------
465,450
----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (6.45%)
Belden Inc. 3,290 $115,973
Dallas Semiconductor Corp. 3,900 158,925
Lattice Semiconductor<F*> 900 42,638
MEMC Electronics Materials Inc.<F*> 2,700 41,175
Globalstar Telecommunications 1,700 83,512
--------
442,223
--------
Energy Raw Materials (1.51%)
KCS Energy Inc. 5,000 103,750
--------
Finance (Non - Banking) (5.52%)
Astoria Financial Corp. 800 44,600
Peoples Heritage Financial Group 2,300 105,800
Susquehanna Banchsares Inc. 1,950 74,588
Webster Financial Corp. 2,300 152,950
--------
377,938
--------
Food & Agriculture (4.41%)
The Earthgrains Company 2,000 94,000
Suiza Foods Corp.<F*> 3,500 208,467
--------
302,467
--------
Industrial Miscellaneous (7.12%)
Circuit City Stores Carmax<F*> 7,700 69,300
Diamond Offshore Drilling Inc. 3,000 144,375
Flowserve Corp. 4,172 116,553
LAMResearch Corp.<F*> 1,900 55,575
Libbey 2,700 102,263
--------
488,066
--------
Insurance (9.68%)
Berkley Corp. 2,895 127,018
CMAC Investment Corp. 2,000 120,750
Enhance Financial Services Group 3,000 178,500
PMI Group Inc. 1,000 72,312
State Auto Financial 5,115 164,959
--------
663,539
--------
Media (1.57%)
Primedia Inc.<F*> 8,500 107,313
--------
Paper & Forest Products (0.74%)
Pentair Inc. 1,400 50,312
--------
(continued)
47
<PAGE> 48
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY MID-CAP EQUITY FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate (1.11%)
Equity Office Properties Trust 2,400 $ 75,749
----------
Retail (4.30%)
Ethan Allen Interiors 3,700 142,679
Zale Corp.<F*> 6,600 151,800
----------
294,479
----------
Telephone (4.19%)
ICG Communications Inc.<F*> 4,000 109,000
P-Com Inc. 4,500 77,625
Sitel Corp.<F*> 11,000 100,375
----------
287,000
----------
Tobacco (1.92%)
Universal Corp. 3,200 131,600
----------
Travel & Recreation (1.23%)
K2 Inc. 3,700 84,175
----------
Trucking & Freight (2.35%)
Eastern Enterprises 1,510 67,950
Midwest Express Holdings 2,400 93,149
----------
161,099
----------
Utilities, Electrical & Gas (0.40%)
Sierra Pacific Resources 730 27,373
----------
TOTAL COMMON STOCK (93.72%)
(COST $4,724,042) 6,421,808
----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (6.04%)
Banca Crt Financial Corp.,
6.12%, due 2/26/98 $115,000 $ 113,918
Countrywide Home Loans, Inc.,
6.61%, due 1/ 5/98 300,000 299,780
----------
413,698
----------
TOTAL SHORT TERM SECURITIES (6.04%)
(AMORTIZED COST $413,698) 413,698
----------
TOTAL INVESTMENTS (99.76%)
(AMORTIZED COST $5,137,740) 6,835,506
Other net assets (0.24%) 16,604
----------
TOTAL NET ASSETS (100.00%) $6,852,110
==========
<FN>
<F*> Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
48
<PAGE> 49
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
MANAGEMENT DISCUSSION
The Small-Cap Equity Fund, which joined the Capital Company lineup on May
1st, had a very strong year, sharply outperforming the benchmark Russell 2000
index. The fund's net return for the year was 31.0 percent compared to 22.4
percent for the Russell 2000. The objective of this fund is to provide a
rate of return and a level of risk that corresponds with that of the
small-cap universe. For May and June, the Fund generated a 17.7 percent net
return and added a 15.1 percent net return in the third quarter as small-cap
stocks outperformed the large-cap market for the first time in two years.
Returns in the small-cap sector declined in the fourth quarter, largely because
of a downturn in technology stocks, which reacted to slowing demand growth in
Asia. The continued strong performance of this Fund can be attributed primarily
to the strength and dominance of the largest holdings in the portfolio.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
SMALL-CAP EQUITY
Date FUND RUSSELL 2000
<S> <C> <C>
05/01/97 10,000.00 10,000.00
12/31/97 13,102.61 12,236.10
</TABLE>
ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1997 LIFE OF FUND
Return <F*> 31.03%
[FN]
<F*> The Small Cap Equity Fund began operations on May 1, 1997. Return
reflects eight months of operations and is not annualized.
The fund's performance reflects administrative and management charges, while
such charges are not reflected in the performance of the index.
Past performance is no assurance of future results.
49
<PAGE> 50
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND<F*>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31, 1997
<S> <C>
ASSETS:
Investments, at market value:
(see accompanying schedule)
Common Stocks $75,858,924
Short term securities 1,698,753
-----------
Total investments 77,557,677
Cash 39,504
Broker Receivable 27,000
Dividends receivable 57,158
-----------
Total assets 77,681,339
-----------
LIABILITIES:
Payable to Conning Asset
Management Company 16,054
Payable to General American
Life Insurance Company 3,211
Broker Payable 16,552
-----------
Total liabilities 35,817
-----------
Total net assets $77,645,522
===========
TOTAL SHARES OF CAPITAL STOCK OUTSTANDING 1,608,466
Net asset value per share (Total net
assets divided by total shares of
capital stock outstanding) $ 48.27
TOTAL AMORTIZED COST OF INVESTMENTS $59,104,048
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the eight months ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 514,360
Interest 63,108
-----------
Total investment income 577,468
-----------
EXPENSES:
Investment management charge 114,841
Administrative charge 22,968
-----------
Total expenses 137,809
-----------
Net investment income 439,659
-----------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 10,577,133
-----------
NET UNREALIZED GAIN ON INVESTMENTS:
Net unrealized gain on investments 5,750,172
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $16,766,964
===========
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
EIGHT MONTHS
ENDED
DECEMBER 31
-----------
1997
-----------
<S> <C>
Operations:
Net investment income $ 439,659
Net realized gain on investments 10,577,133
Net unrealized gain on investments 5,750,172
-----------
Net increase in net assets from operations 16,766,964
Capital share transactions 6,441,988
-----------
Net increase in net assets 23,208,952
Net assets, beginning of period<F**> 54,436,570
-----------
Net assets, end of period $77,645,522
===========
<FN>
<F*> Small-Cap Equity Fund began operations May 1, 1997.
<F**> On May 1, 1997, the assets of General American Separate Account No. 20
were exchanged for shares in the Small-Cap Equity Fund. The net assets,
beginning of period, are equal to the market value of the net assets
transferred on April 30, 1997. In exchange for the net assets transferred,
1,477,554 shares of the Small-Cap Equity Fund were issued to the General
American Separate No. 20.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
50
<PAGE> 51
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND<F*>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
EIGHT
MONTHS
ENDED
DECEMBER 31
-----------
1997
-----------
<S> <C>
Net asset value, beginning of period<F1> $ 36.84
-------
Income from operations:
Net investment income 0.29
Net realized and unrealized gain on investments 11.14
-------
Net increase in asset value per share 11.43
-------
Net asset value, end of period $ 48.27
=======
Total return<F2> 31.03%
Net assets, end of period (in thousands) $77,646
Ratio of expenses to average net assets<F3> 0.30%
Ratio of net investment income to average
net assets<F3> 0.97%
Portfolio turnover rate 24.47%
Average commission rate<F4> 0.03%
<FN>
Notes:
<F1> Components are computed and accumulated on a daily basis.
<F2> Total return is not annualized for the eight months ended December 31,
1997. The total return information shown in this table does not reflect
expenses that apply to the separate accounts investing in the Fund or to the
insurance or variable annuity contracts. Inclusion of these charges would
reduce the total return figures for all periods shown.
<F3> Computed on an annualized basis.
<F4> Computed only for funds that invest greater than 10 percent of the value
of average net assets in equity securities. Computation represents total
commissions paid divided by the sum of shares purchased and sold for which
commissions were charged.
<F*> Small-Cap Equity Fund began operations May 1, 1997.
See accompanying notes to financial statements beginning on page 57.
</TABLE>
51
<PAGE> 52
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
<TABLE>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology (1.67%)
Banner Aerospace<F*> 21,400 $ 236,727
Fairchild Corp.<F*> 24,600 611,925
Hi-shear Industries<F*> 300 600
Talley Industries<F*> 13,700 161,824
Transtechnology Corp. 10,000 283,120
-----------
1,294,196
-----------
Air Transport (1.27%)
Continental Airlines<F*> 19,800 957,825
World Corp.<F*> 22,900 25,763
-----------
983,588
-----------
Apparel (4.55%)
Chaus (bernard)<F*> 1,560 3,412
Chic By HIS Inc.<F*> 9,900 72,389
Dyersburg Corp. 11,600 131,950
Galey & Lord Inc.<F*> 16,000 286,000
Genesco Inc.<F*> 38,100 485,775
Johnson Industries Inc. 11,100 48,563
Oneita Industries Inc.<F*> 1,100 275
Pillowtex Corp. 20,100 700,988
Rexel Inc.<F*> 41,310 929,475
Salant Corp.<F*> 4,600 8,050
Shelby Williams 11,300 186,450
Signal Apparel Co. Common<F*> 4,600 5,750
Syms Corp.<F*> 29,800 353,875
Texfi Industries 8,100 28,852
Tultex Corp.<F*> 42,100 171,010
Worldtex Inc.<F*> 15,210 120,721
-----------
3,533,535
-----------
Business Machines (0.90%)
Applied Magnetics Corp.<F*> 37,785 420,358
EA Industries Inc.<F*> 3,450 23,933
ECC International<F*> 6,325 19,367
Nashua Corp.<F*> 5,300 62,275
QMS Inc.<F*> 12,000 30,744
Titan Corp.<F*> 23,100 144,375
-----------
701,052
-----------
Business Services (4.29%)
Allerion Inc.<F*> 14,600 73
Ameriquest<F*> 1,700 398
Bush Industries 15,150 393,900
Computer Task Group 35,800 1,273,120
Dycom Industries 16,800 362,242
Hospital Staffing Services<F*> 3,200 1,798
ITT Educational Services Inc.<F*> 38,450 857,896
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Business Services (continued)
National Media Corp.<F*> 22,900 $ 74,425
Rightchoice Managed Care<F*> 4,600 44,275
Wackenhut Corp. 13,900 322,299
----------
3,330,426
----------
Chemicals (1.71%)
LSB Industries Inc. 1,400 5,687
Lea Ronal Inc. 18,900 444,150
Whittaker Corp.<F*> 11,900 130,900
Wynn's International Inc. 23,537 750,242
----------
1,330,979
----------
Commercial Banking (2.85%)
American Banknote Corp.<F*> 16,400 82,000
Coast Savings Financial Inc.<F*> 4,700 322,241
First Banks America Inc.<F*> 3,400 78,836
Firstfed Financial<F*> 18,600 720,750
Oriental Financial Group 15,400 455,255
Sterling Bancorp 10,700 256,800
Toronto Dominion Bank 7,889 297,313
Unionfed Financial Corp.<F*> 440 4
----------
2,213,199
----------
Construction (5.59%)
Beazer Homes USA Inc.<F*> 14,800 295,068
Berlitz International<F*> 17,400 452,400
Cavalier Homes Inc. 18,212 177,567
Congoleum Corp.<F*> 2,800 30,800
Continental Homes Holding Corp. 14,200 571,550
Corrpro Companies Inc.<F*> 13,800 203,550
Elcor Corp. 24,150 579,600
Giant Group Ltd.<F*> 5,150 36,050
ICF Kaiser International<F*> 500 1,156
International Aluminum Corp. 8,500 265,625
Mdc Holings Inc. 25,900 390,106
M/I Schottenstein Homes Inc.<F*> 16,400 307,500
Presley Companies<F*> 800 600
Puerto Rican Cement Co. Inc. 11,400 572,132
Terex Corp.<F*> 19,600 460,599
----------
4,344,303
----------
Consumer Durables (0.28%)
Craig Corp.<F*> 9,800 199,058
TCC Industries Inc.<F*> 3,200 19,398
----------
218,456
----------
(continued)
52
<PAGE> 53
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Containers (0.00%)
Sun Coast Industries Inc.<F*> 300 $ 1,744
-----------
Domestic Oil (6.32%)
Burling Resources Coal Seam Gas 12,000 73,500
Cross Timbers Royalty Trust 12,000 195,000
Furon Co. 30,000 626,250
Getty Realty Corp. 21,500 475,688
Giant Industries 17,700 336,300
Goodrich Petroleum Corp.<F*> 16,300 16,300
HS Resources Inc.<F*> 18,000 248,616
Howell Corp. 10,800 186,970
Huntway Partners<F*> 400 1,050
Kaneb Services<F*> 30,500 158,204
Kinder Morgan Energy Partners 20,700 701,213
RPC Energy Services Inc. 40,600 479,567
Swift Energy Co.<F*> 14,877 313,339
Tokheim Corp.<F*> 14,300 295,824
Torch Energy Royalty Trust 10,900 68,801
Unit Corp.<F*> 30,300 291,638
Wainoco Oil Corp.<F*> 29,900 237,314
Wiser Oil Co. 14,400 203,400
-----------
4,908,974
-----------
Drugs & Medicines (3.46%)
Advocat Inc.<F*> 6,800 57,800
Comprehensive Care<F*> 4,600 30,760
Cooper Co. Inc.<F*> 21,400 874,725
Grc International<F*> 14,400 88,200
Graham Field Health Products<F*> 23,900 398,819
Maxxim Medical<F*> 16,000 348,000
Molecular Biosystems<F*> 18,000 153,000
OEC Medical Systems<F*> 20,300 404,721
PHP Healthcare Corp.<F*> 20,400 307,265
Pharmaceutical Resources<F*> 18,200 27,300
-----------
2,690,590
-----------
Electronics (4.95%)
American Precision Industries<F*> 12,800 266,394
Aydin Corp.<F*> 8,050 95,087
Bell Industries Inc.<F*> 14,412 198,165
CTS Corp. 34,552 1,103,487
Chyron Corp.<F*> 41,700 185,023
Ddl Electronics Inc.<F*> 10,800 8,100
Daniel Industries Inc. 22,400 431,200
Esco Electronics Corp.<F*> 17,200 290,250
Kent Electronics<F*> 5,800 145,725
Kollmorgen Corp. 16,900 309,473
Rex Stores Corp.<F*> 15,400 157,850
Sparton<F*> 11,600 118,169
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (continued)
Sterling Electronics 11,610 $ 242,359
Tech-Sym<F*> 11,500 292,525
----------
3,843,807
----------
Energy & Utilities (0.55%)
Cascade Natural Gas Corp. 13,900 260,625
Compania Boliviana Energia<F*> 3,900 166,725
----------
427,350
----------
Energy Raw Materials (0.66%)
Dravo Corp.<F*> 20,800 228,800
Wilshire Oil Co. Of Texas 10,672 58,024
Zapata Corp. 33,640 227,070
----------
513,894
----------
Finance (Non - Banking) (4.66%)
Advest Group 13,800 340,681
American Select Portfolio 22,200 260,850
Atlanta Sosnoff Capital 5,700 68,400
DVI<F*> 12,100 223,850
Delaware Group Global D & I Fund 11,100 209,513
Duff & Phelps Credit Rating 10,800 438,750
First Republic Bank<F*> 15,260 487,359
Gabelli Global Multimedia 4,400 38,500
Hallwood<F*> 3,500 130,375
Liberty Term Trust 1999 2,700 22,613
Mcdonald & Co. Investments Inc. 29,260 830,253
National Discount Brokers Group<F*> 19,500 259,584
Pimco Commercial Mortgage 16,800 229,942
Rodman & Renshaw Capital Group<F*> 1,637 332
Scudder Global High Income Fund 5,380 75,990
----------
3,616,992
----------
Food & Agriculture (5.65%)
Cke Restaurants Inc. 48,150 2,028,319
Chock Full O Nuts Co.<F*> 13,814 96,698
Cooker Restaurant Corp. 11,500 109,963
Foodmaker Inc.<F*> 65,300 983,549
RLI Corp. 15,150 754,652
Spaghetti Warehouse Inc.<F*> 6,900 39,675
Super Food Services Inc.<F*> 10,100 155,288
Tcby Enterprises 28,700 217,028
----------
4,385,172
----------
Gold (0.03%)
Campbell Resources Inc.<F*> 45,800 20,015
----------
(continued)
53
<PAGE> 54
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (17.92%)
American Waste Services<F*> 48,200 $ 78,325
Ameron International 8,563 541,661
Amre Inc.<F*> 14,400 14
Aquarion Company 12,100 418,200
Aviall Inc.<F*> 32,900 491,427
Bairnco Corp. 9,700 96,389
Bluegreen Corp.<F*> 15,048 65,835
Carlyle Industries Inc.<F*> 2,300 3,450
Chase Industries Inc.<F*> 17,000 433,500
Coachmen Industries Inc. 26,900 580,018
Coastcast<F*> 15,000 208,125
Continental Can Inc.<F*> 6,900 173,790
Crown Crafts Inc. 12,600 196,875
Datapoint<F*> 15,800 54,305
EDO Corp. 9,000 78,750
Environmental Elements Corp.<F*> 400 1,400
Esterline Technologies Corp.<F*> 12,800 460,800
Farah Inc.<F*> 10,100 56,176
Fuqua Enterprises Inc. 8,300 286,350
Gleason Corp. 17,400 468,704
Hexcel Corp.<F*> 14,817 369,492
Interlake Inc.<F*> 19,800 92,803
International Technology Corp.<F*> 3,975 29,813
Monarch Machine Tool Co. 5,500 43,654
Morgan Products<F*> 7,900 41,965
National-Standard Co.<F*> 5,400 37,460
Nortek<F*> 22,800 605,614
Northgate Exploration Ltd.<F*> 16,435 12,326
OHM Corp.<F*> 19,100 145,638
Oil-Dri Corp. 13,100 216,150
Oneida Ltd. 26,719 713,063
Orange Co. 6,800 54,822
Par Technology<F*> 13,300 120,525
Pittston Minerals Group 12,100 90,750
Playboy Enterprises<F*> 2,800 38,850
Playboy Enterprises 'b'<F*> 40,700 638,461
Portec Inc. 8,157 118,277
Premiumwear Inc. 2,474 13,142
Publicker Inds Inc.<F*> 12,300 16,913
Raytech Corp.-del<F*> 200 1,075
Republic Group Inc. 21,729 355,812
Robertson Ceco Corp.<F*> 25,000 243,750
Royal Appliance Mfg Co.<F*> 35,900 237,838
Rymer Foods Inc.<F*> 116 145
Sl Industries Inc. 11,208 132,389
SPS Technologies Inc.<F*> 20,000 872,500
Safeguard Scientifics<F*> 2,300 72,163
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Miscellaneous (continued)
Scott's Liquid Gold Inc.<F*> 300 $ 956
Spartech Corporation 15,500 234,438
Starrett Ls 13,500 493,587
Trc Companies Inc.<F*> 1,000 4,250
Thomas Industries 25,450 502,638
Toastmaster Inc. 500 2,094
Tyler Corp.<F*> 15,700 86,350
URS Corp.<F*> 7,642 118,925
Usx-Delphi Group 18,200 373,100
United Industrial Corp. 19,600 213,150
Wackenhut Corp. 13,618 287,680
Wahlco Environmental Systems<F*> 11,000 4,125
Watsco Inc. 17,850 440,663
Waxman Industries<F*> 11,800 43,507
Windmere 30,200 681,372
World Fuel Services Corp. 19,725 414,219
-----------
13,910,538
-----------
Insurance (4.43%)
Acceptance Insurance Co.<F*> 19,328 467,486
Amerus Life Holdings Inc-a 13,044 481,018
Fidelity National Financial Inc. 28,896 899,388
Hilb, Rogal And Hamilton Company 26,500 511,768
MMI Companies Inc. 16,500 414,563
Stewart Info Services 10,300 298,700
Titan Holdings Inc. 16,135 350,936
United American Healthcare<F*> 9,000 19,683
-----------
3,443,542
-----------
Media (0.33%)
American Media Inc.<F*> 33,000 255,750
-----------
Miscellaneous Finance (0.58%)
Interstate Securities 11,300 299,450
Stifel Financial 8,957 151,149
-----------
450,599
-----------
Mortage Backed Securities (0.47%)
Thornburg Asset Mortgage 22,000 363,000
-----------
Motor Vehicles (0.10%)
Lamson & Sessions Co.<F*> 13,600 79,043
-----------
(continued)
54
<PAGE> 55
<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-Durables & Entertainment (0.50%)
Galoob (Lewis) Toys Inc.<F*> 18,300 $ 186,422
General Housewares Corp. 5,200 54,600
John Q Hammons Hotels<F*> 8,100 72,900
J. Alexanders Corp.<F*> 4,900 24,191
Tandycrafts Inc.<F*> 10,300 46,989
-----------
385,102
-----------
Non-Ferrous Metals (1.99%)
Atlas Corp.<F*> 15,800 2,370
Benguet Corp.-b<F*> 1,400 262
Ekco Group Inc.<F*> 21,900 169,725
Nord Resources Corp.<F*> 19,900 36,059
Rmi Titanium Co.<F*> 27,600 552,000
Tremont Corp.<F*> 12,100 632,225
United Park City Mines Co.<F*> 4,540 123,715
Zemex Corp.<F*> 3,598 31,482
-----------
1,547,838
-----------
Paper & Forest Products (0.22%)
Chesapeake Utilities Corp. 3,900 79,950
Griffin Land & Nurseries, Inc.<F*> 6,000 93,000
-----------
172,950
-----------
Producer Goods (6.99%)
Acme Electric Corp.<F*> 5,553 27,071
Aeroflex<F*> 13,285 116,244
Allied Products Corp. 20,250 486,000
Ampco-Pittsburgh Corp. 14,000 273,868
Artra Group Inc.<F*> 9,100 35,263
Brown & Sharpe Mfg. Co.<F*> 7,300 74,365
Fansteel Inc.<F*> 8,600 73,100
Genrad Inc.<F*> 33,400 1,008,246
Hughes Supply Inc. 17,650 616,638
IMO Industries<F*> 15,300 68,850
Insteel Industries 8,100 55,688
Katy Inds. Inc. 13,100 266,913
Kuhlman Corp. 12,988 508,156
Mestek Inc.<F*> 13,000 243,750
Scotsman Industries 16,200 395,879
Sequa Corp.<F*> 6,900 510,600
Twin Disc Inc. 5,000 163,750
Union Corp.<F*> 10,200 320,657
Whitehall Corp.<F*> 10,100 181,798
-----------
5,426,836
-----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Railroads & Shipping (0.87%)
Sea Containers Ltd. 600 $ 19,012
Sea Containers Ltd. - Class A 19,470 623,040
Todd Shipyards Corp.<F*> 7,900 33,077
----------
675,129
----------
Real Estate (3.20%)
American Real Estate Partners<F*> 20,000 196,240
Amrep Corp.<F*> 6,100 35,838
Chateau Communities Inc. 12,942 407,673
Christiana Cos. Inc.<F*> 10,700 423,988
DVI Inc.<F*> 64 4
G & L Realty Corp. 9,700 205,514
Grubb & Ellis Co.<F*> 16,000 218,992
Home Properties Inc. 11,800 320,807
Lexington Corporate Properties 17,000 262,429
Malan Realty Investors Inc. 4,000 72,500
Storage Trust Realty 12,900 339,424
----------
2,483,409
----------
Retail (3.64%)
Carr-Gottstein Foods<F*> 22,600 111,576
Catalina Lighting Inc.<F*> 2,000 7,124
Chart House Enterprises<F*> 13,200 83,318
Cole National Corp.<F*> 18,800 562,816
Kenneth Cole Productions-a<F*> 20,800 334,090
Converse Inc.<F*> 27,600 165,600
Fabri-Centers Of America<F*> 17,200 383,766
General Host Corp. 3,900 20,963
Gottschalks Inc.<F*> 9,700 81,238
Hi-lo Automotive<F*> 2,600 10,886
Hills Stores Co.<F*> 11,900 37,925
Intertan Inc.<F*> 3,100 16,663
La Gear<F*> 11,000 660
Luria & Son<F*> 300 2
Mortons Restaurant Group<F*> 12,100 245,025
O'Sullivan Industries<F*> 23,000 230,000
Piccadilly Cafeterias Inc. 7,600 99,750
Rowe Furniture Corp. 19,800 158,400
Sizzler International Inc.<F*> 41,500 111,511
Sport Supply Group Inc.<F*> 11,100 84,638
Uno Restaurant Corp.<F*> 11,450 78,717
----------
2,824,668
----------
(continued)
55
<PAGE> 56
GENERAL AMERICAN CAPITAL COMPANY SMALL-CAP EQUITY FUND
<CAPTION>
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
MARKET
COMMON STOCK SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Steel (1.72%)
Cold Metal Products<F*> 200 $ 1,012
Huntco Inc. 6,200 104,625
Keystone Consolidated Industries<F*> 8,600 103,200
NS Group Inc.<F*> 25,300 433,263
Reliance Steel & Aluminum 23,300 693,175
-----------
1,335,275
-----------
Telephone (0.05%)
Intellicall Inc.<F*> 7,715 39,539
-----------
Tobacco (0.61%)
Brooke Group Ltd. 23,800 205,275
Standard Commercial Corp.<F*> 16,144 267,377
-----------
472,652
-----------
Travel & Recreation (0.37%)
Jackpot Enterprises<F*> 14,119 159,714
K2 Inc. 1 23
PS Group Holdings Inc. 10,100 126,250
-----------
285,987
-----------
Trucking & Freight (0.15%)
International Shipholding 6,525 112,556
US 1 Industries Inc. 6,600 1,234
-----------
113,790
-----------
Utilities, Electrical & Gas (4.17%)
Bangor Hydro Electric<F*> 7,300 45,165
Central Vermont Public Service 18,400 280,600
Chart Industries 24,650 562,316
Green Mountain Power Corp. 9,500 173,964
Nui Corp. 17,800 510,629
North Carolina Natural Gas 11,900 413,525
St Joseph Light & Power 12,800 227,994
Southern California Water And Gas 13,500 339,188
TNP Enterprises Inc. 20,500 681,624
-----------
3,235,005
-----------
TOTAL COMMON STOCK (97.70%)
(AMORTIZED COST $57,405,295) 75,858,924
-----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PAR MARKET
SHORT TERM SECURITIES VALUE VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (2.19%)
Countrywide Home Loans, Inc.,
6.61%, due 1/5/98 $ 1,700,000 $ 1,698,753
-----------
TOTAL SHORT TERM SECURITIES (2.19%)
(AMORTIZED COST $1,698,753) 1,698,753
-----------
TOTAL INVESTMENTS (99.89%)
(AMORTIZED COST $59,104,048) $77,557,677
Other net assets (0.11%) 87,845
-----------
TOTAL NET ASSETS (100.00%) $77,645,522
===========
<FN>
<F*>Non-income producing securities.
See accompanying notes to financial statements beginning
on page 57.
</TABLE>
56
<PAGE> 57
GENERAL AMERICAN CAPITAL COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1-ORGANIZATION
General American Capital Company (the Company), commenced operations on
October 1, 1987, and is registered under the Investment Company Act of 1940
as amended, as an open-end diversified management investment company.
The Company offers to its shareholders eight separate investment funds (the
Funds) which operate as distinct investment vehicles. These are the S & P
500 Index Fund, Money Market Fund, Bond Index Fund, Managed Equity Fund,
Asset Allocation Fund, International Index Fund, Mid-Cap Equity Fund and
Small-Cap Equity Fund. The name of the Mid-Cap Equity Fund was changed from
the Special Equity Fund. The International Index and Mid-Cap Equity Funds
began operations on February 16, 1993. The Small-Cap Equity Fund began
operations on May 1, 1997. As of December 31, 1997, the Company sells its
shares to separate accounts established by General American Life Insurance
Company (General American), RGA Reinsurance Company (RGA) a wholly owned
subsidiary of Reinsurance Group of America, Inc., which is a majority owned
subsidiary of General American, Security Equity Life Insurance Company
(Security Equity) a wholly owned subsidiary of General American Life
Insurance Company and Cova Financial Services Life Insurance Company (Cova) a
wholly owned subsidiary of General American Life Insurance Company.
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Company in the preparation of financial statements. The policies are in
conformity with generally accepted accounting principles.
A. INVESTMENTS:
Common stocks of domestic companies are valued based on the closing sale
price on the New York Stock Exchange for securities traded on that
exchange, and for securities not so traded, at the last bid price of
over-the-counter market quotations as of the close of business on
December 31. Common stocks of foreign companies are valued based on
the closing sale price on the primary exchange for which the security
is listed. The market values for bonds and short term securities
with maturities of 60 days or more at date of valuation are
determined daily by an independent pricing service based on current
market conditions. Short term securities with maturities of less
than 60 days at date of valuation are valued at amortized cost, which
approximates market value.
B. REPURCHASE AGREEMENTS:
Short term investments include repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in U.S. Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the underlying U.S. Government securities at a
mutually agreed upon time and price.
C. FOREIGN CURRENCY TRANSLATIONS:
Securities and other assets and liabilities denominated in foreign
currencies are translated each business day into U.S. dollars based
upon the closing rate of exchange. Foreign currency amounts related
to the purchase or sale of securities and income and expenses are
translated into U.S. dollars based upon the prevailing exchange rate
on the respective dates of the transactions.
In accordance with Statement of Position (SOP) 93-4: Foreign Currency
Accounting and Financial Statement Presentation for Investment
Companies, reported net realized gains or losses from foreign
currency transactions arise from sales of portfolio securities and
the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent actually received or paid. Reported net unrealized
gains and losses from foreign currency transactions arise from
changes in the value of assets and liabilities, including investments
in securities at December 31, resulting from changes in the exchange
rate.
D. DERIVATIVE FINANCIAL INSTRUMENTS:
A derivative financial instrument in very general terms refers to a
security whose value is "derived" from the value of an underlying
asset, reference rate or index.
The Capital Company has a variety of reasons to use derivative
instruments, such as to attempt to protect the Company against
possible changes in the market value of its portfolio and to manage
the portfolio's effective yield, maturity and duration. All of the
Company's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the
unrealized appreciation/depreciation on securities. Upon
disposition, a realized gain or loss is recognized accordingly,
except when taking delivery of a security underlying a futures
contract. In these instances the recognition of gain or loss is
postponed until the disposal of the security underlying the futures
contract. The Capital Company's utilization of derivative financial
instruments is substantially limited to the use of forward exchange
contracts to hedge foreign currency transactions, interest rate
futures contracts to manage interest rate risk and S&P 500 Index
futures contracts to manage performance.
Forward Foreign Currency Contracts:
The International Index Fund enters into forward exchange contracts to
hedge foreign currency transactions and not to engage in currency
speculation. The Fund's forward exchange contracts do not subject
the company to risk from exchange rate movements because gains and
losses on such contracts offset losses and gains, respectively, on
the assets being hedged. At
57
<PAGE> 58
December 31, the company had no open foreign currency exchange
contracts that obligate it to receive or deliver currency at
specified future dates. The forward exchange contracts generally
require the company to exchange U.S. dollars for foreign currencies
at maturity, at rates agreed to at inception of the contracts. The
U.S. dollar value of foreign currency underlying all contractual
commitments held by the fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. If the
counterparties to the exchange contracts (primarily AA rated
international banks) do not fulfill their obligations to deliver the
contracted currencies, the company could be at risk for any currency
related fluctuations.
Futures Contracts:
A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price.
The Company generally invests in futures on U. S. Treasury Bonds and
the S&P 500 Index and typically closes the contract prior to the
delivery date. Upon entering into futures contracts, the Company
maintains, in a segregated account with a custodian, securities with
a value equal to its obligation under the futures contracts. During
the period the futures contract is open, payments are received from
or made to the custodian based upon changes in the value of the
contract (the variation margin). U. S. Treasury Bond futures
contracts are entered into in the Asset Allocation Fund to hedge
market price risks of fixed-rate bonds. S&P 500 Index futures
contracts are entered into in the S&P 500 Index Fund to manage and
more closely track the performance of the S&P 500 Index.
For the S&P 500 Fund and the Asset Allocation Fund transactions in
futures contracts for the year ended December 31, 1997, were as
follows:
<TABLE>
<CAPTION>
Contracts
-------------------------------------------------------
<S> <C>
Outstanding at December 31, 1996 0
Futures Opened 78
Futures Closed (56)
Outstanding at December 31, 1997 22
</TABLE>
The number of futures contracts outstanding in the S&P 500 Fund as of
December 31, 1997, the description, total market value and unrealized
depreciation are as follows:
<TABLE>
<CAPTION>
# Long Contracts: Market Unrealized
Value Depreciation
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
22 S&P 500 Index Futures, March 1998
(Notional Value of
$244,775 per contract) $5,385,050 (44,400)
</TABLE>
At December 31, 1997, the Company had no open U. S. Treasury Bond
futures contracts.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are recorded on a trade date basis (date the
order to buy or sell is executed). Dividends are recognized as
income on the ex-dividend date while interest income and amortization
of premium and discount are recorded on an accrual basis.
F. FEDERAL INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS:
No provision for Federal income taxes is necessary because each Fund
qualifies as a "regulated investment company" under Subchapter M of
the Internal Revenue Code and intends to distribute each year
substantially all of its net investment income and realized gains to
its shareholders. At December 31, 1997, the Bond Index Fund had an
accumulated capital loss carryforward for tax purposes of $2,011,877.
Of this amount, $1,829,527 and $182,350 will expire on December 31,
2002, and 2003 respectively.
G. CONSENT DIVIDENDS:
The Funds follow the accounting practice known as consent dividending,
whereby substantially all of its net investment income and realized
gains are treated as being distributed daily to their shareholders
and are immediately reinvested in that Fund.
H. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
increase and decrease in net assets from operations during the
period. Actual results could differ from those estimates.
NOTE 3-MANAGEMENT AND ADMINISTRATIVE FEES
The Company has entered into an Investment Advisory Agreement with Conning
Asset Management Company (Investment Advisor) with respect to all of its
Funds. Certain officers and directors of the Company are also officers and
directors of the Investment Advisor. For its services to the Funds, the
Investment Advisor charges a fee which is accrued daily against each Fund.
The fees charged each Fund, stated as an annual percentage of the average
daily value of the net assets, are:
<TABLE>
<S> <C>
S & P 500 Index Fund .250 Percent
Money Market Fund .125 Percent
Bond Index Fund .250 Percent
Asset Allocation Fund .500 Percent
Small-Cap Equity .250 Percent
</TABLE>
58
<PAGE> 59
The fee (percentage effective March 1, 1997) charged the Managed Equity
Fund is stated as a series of annual percentages of the average daily net
assets of that Fund. The percentages decrease with respect to assets of the
Fund above certain amounts as follows:
<TABLE>
<CAPTION>
Investment
Assets Fee
---------------------------------------------
<S> <C>
First $10 million .40%
Next $20 million .30%
Balance over $30 million .25%
</TABLE>
The fee charged the International Index Fund is stated as a series of annual
percentages of the average daily net assets of that Fund. The percentages
decrease with respect to assets of the fund above certain amounts as
follows:
<TABLE>
<CAPTION>
Investment
Assets Fee
---------------------------------------------
<S> <C>
First $10 million .50%
Next $10 million .40%
Balance over $20 million .30%
</TABLE>
The fee charged for the Mid-Cap Equity Fund is stated as a series of annual
percentages of the average daily net assets of that Fund. The percentages
decrease with respect to assets of the Fund above certain amounts as
follows:
<TABLE>
<CAPTION>
Investment
Assets Fee
---------------------------------------------
<S> <C>
First $10 million .55%
Next $10 million .45%
Balance over $20 million .40%
</TABLE>
All operational expenses of the Company are paid by General American, which
charges administrative fees to each Fund in return. Certain officers and
directors of the Company are also officers and directors of General American,
RGA, Security Equity and Cova.
The administrative expenses are charged at an annual rate based on the
average daily value of the net assets in each Fund, as follows:
<TABLE>
<S> <C>
S & P 500 Index Fund .05 Percent
Money Market Fund .08 Percent
Bond Index Fund .05 Percent
Managed Equity Fund .10 Percent
Asset Allocation Fund .10 Percent
International Index Fund .30 Percent
Mid-Cap Equity Fund .10 Percent
Small-Cap Equity Fund .05 Percent
</TABLE>
NOTE 4 - INVESTMENT OBJECTIVES AND MANAGER CHANGES
Effective January 1, 1997, the International Equity Fund became the
International Index Fund. The investment objective of the International
Index Fund is to obtain investment results that parallel the price and yield
performance of publicly-traded common stocks in the Morgan Stanley Capital
International Europe, Australia, and Far East Index ("EAFE Index"). The
portfolio manager of the International Index Fund is Conning Asset
Management. The total investment advisor fees were reduced as a result of
the changes.
Effective January 1, 1997, the Special Equity Fund became the Mid-Cap Equity
Fund. The investment objective of the Mid-Cap Equity Fund is to seek
sustained growth of capital by investing 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 range of the S&P MidCap 400 at the time of
the Fund's investment. The portfolio manager of Mid-Cap Equity Fund is
Conning Asset Management Company and the total management fee rate remains
unchanged from that of the Special Equity Fund.
Effective March 1, 1997, the portfolio manager for the Managed Equity Fund
became Conning Asset Management Company. The total investment advisor charges
were reduced due to this change.
The Small-Cap Equity Fund commenced operations on May 1, 1997 subsequent to a
transfer of assets from General American Life Insurance Company Separate
Account No. 20, which had similar investment objectives, policies, and
limitations, in exchange for shares of the Small-Cap Equity Fund. Separate
Account No. 20 was not registered under the Registered Investment Company Act
of 1940 and has a different fee and expense structure than the Small-Cap
Equity Fund. While Separate Account No. 20 continues to exist, its assets
now consist solely of shares of the Small-Cap Equity Fund. The Small-Cap
Equity Fund's portfolio of investments on May 1, 1997 was the same as the
portfolio of Separate Account No. 20 immediately prior to the transfer.
Separate accounts which invested in Separate Account No. 20 prior to the
transfer now invest directly in the Small-Cap Equity Fund. The Small-Cap
Equity Fund seeks to provide a rate of return that corresponds to the
performance of the common stock of small companies, while incurring a level
of risk that is generally equal to the risks associated with small company
common stock. The Fund attempts to duplicate the performance of the smallest
20% of companies, based on capitalization size, that are based in the United
States and listed on the New York Stock Exchange.
59
<PAGE> 60
NOTE 5-INVESTMENTS
The amortized cost of investments for federal income tax purposes as of
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
S & P 500 MONEY BOND MANAGED
INDEX MARKET INDEX EQUITY
FUND FUND FUND FUND
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Bonds $ -0- $ -0- $44,673,199 $ -0-
Common stocks 252,841,292 -0- -0- 40,444,297
Preferred stocks -0- -0- -0- -0-
Short term
securities 6,849,130 174,432,557 1,648,790 2,932,875
------------ ------------ ----------- -----------
Total $259,690,422 $174,432,557 $46,321,989 $43,377,172
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ASSET INTERNATIONAL MID-CAP SMALL-CAP
ALLOCATION INDEX EQUITY EQUITY
FUND FUND FUND FUND
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Bonds $29,271,830 $ -0- $ -0- $ -0-
Common stocks 49,471,734 7,670,353 4,724,042 57,405,295
Preferred stocks 1,070,000 -0- -0- -0-
Warrants -0- 215 -0- -0-
Short term
securities 4,491,722 264,805 413,698 1,698,753
----------- ---------- ---------- -----------
Total $84,305,286 $7,935,373 $5,137,740 $59,104,048
=========== ========== ========== ===========
</TABLE>
Gross unrealized gains and losses by fund for the period ended December 31,
1997 are as follows:
<TABLE>
<CAPTION>
S & P 500 BOND MANAGED
INDEX INDEX EQUITY
FUND FUND FUND
------------ ---------- -----------
<S> <C> <C> <C>
Unrealized gains $243,924,839 $1,314,425 $16,687,294
Unrealized losses 3,208,157 50,427 683,532
------------ ---------- -----------
Net unrealized
gain on
investments $240,716,682 $1,263,998 $16,003,762
============ ========== ===========
<CAPTION>
ASSET INTERNATIONAL MID-CAP SMALL-CAP
ALLOCATION INDEX EQUITY EQUITY
FUND FUND FUND FUND
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Unrealized gains $27,697,322 $1,566,484 $1,902,452 $22,462,229
Unrealized losses 1,352,878 1,112,363 204,686 4,008,600
----------- ---------- ---------- -----------
Net unrealized
gain on
investments $26,344,444 $ 454,121 $1,697,766 $18,453,629
=========== ========== ========== ===========
</TABLE>
Purchases and proceeds from sales and maturities of other than short term
securities and United States government obligations for the period ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
S & P 500 BOND MANAGED
INDEX INDEX EQUITY
FUND FUND FUND
------------ ---------- -----------
<S> <C> <C> <C>
Purchases $103,907,306 $9,090,944 $25,721,032
============ ========== ===========
Sales and
Maturities $ 53,038,437 $6,629,733 $27,379,093
============ ========== ===========
</TABLE>
<TABLE>
<CAPTION>
ASSET INTERNATIONAL MID-CAP SMALL-CAP
ALLOCATION INDEX EQUITY EQUITY
FUND FUND FUND FUND
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Purchases $44,259,903 $6,496,460 $4,062,661 $63,034,729
=========== ========== ========== ===========
Sales and
Maturities $34,312,093 $4,316,714 $2,815,078 $16,206,567
=========== ========== ========== ===========
</TABLE>
Purchases and proceeds from sales and maturities of United States government
obligations for the period ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
S & P 500 MONEY BOND MANAGED
INDEX MARKET INDEX EQUITY
FUND FUND FUND FUND
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Purchases $ -0- $ -0- $16,186,367 $ -0-
=========== =========== =========== ===========
Sales and
Maturities $ -0- $ -0- $10,704,055 $ -0-
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ASSET INTERNATIONAL MID-CAP SMALL-CAP
ALLOCATION INDEX EQUITY EQUITY
FUND FUND FUND FUND
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Purchases $ -0- $ -0- $ -0- $ -0-
=========== =========== =========== ===========
Sales and
Maturities $ -0- $ -0- $ -0- $ -0-
=========== =========== =========== ===========
</TABLE>
60
<PAGE> 61
NOTE 6-CAPITAL STOCK
As of December 31, 1997, in the aggregate, there were one billion, five
hundred million (1,500,000,000) shares of $.01 par value capital stock
authorized. On May 1, 1997 shares of the Company, as noted below, were
exchanged for cash and invested assets, less any investment related
liabilities of General American Separate Account No. 20. The unrealized
appreciation at the time of the exchange was $12,703,457 for Separate Account
No. 20.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
S & P 500 INDEX FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,288,656 $ 80,197,159 2,237,429 $ 59,163,958
Shares redeemed (1,024,948) (35,167,639) (1,014,699) (27,064,902)
---------- ------------ ---------- ------------
Net increase 1,263,708 $ 45,029,520 1,222,730 $ 32,099,056
========== ============ ========== ============
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
----------------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 18,831,392 $ 335,912,294 13,172,752 $ 222,132,928
Shares redeemed (15,135,851) (268,660,111) (11,608,821) (195,238,536)
----------- ------------- ----------- -------------
Net increase 3,695,541 $ 67,252,183 1,563,931 $ 26,894,392
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
BOND INDEX FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 875,433 $ 19,458,750 573,137 $ 11,704,734
Shares redeemed (583,698) (12,568,473) (690,509) (14,025,768)
-------- ------------ -------- ------------
Net increase
(decrease) 291,735 $ 6,890,277 (117,372) $ (2,321,034)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED EQUITY FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 292,535 $ 8,324,432 368,070 $ 8,358,789
Shares redeemed (317,082) (9,190,598) (402,562) (9,304,486)
-------- ----------- -------- -----------
Net (decrease) (24,547) $ 866,166) (34,492) $ (945,697)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 676,658 $ 19,798,368 561,055 $ 13,777,778
Shares redeemed (396,211) (11,858,933) (512,299) (12,414,366)
-------- ------------ -------- ------------
Net increase 280,447 $ 7,939,435 48,756 $ 1,363,412
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL INDEX FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 120,074 $2,031,933 99,486 $1,546,190
Shares redeemed (44,588) (771,139) (28,566) (437,361)
------- ---------- ------- ----------
Net increase 75,486 $1,260,794 70,920 $1,108,829
======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
MID-CAP EQUITY FUND
----------------------------------------------------------------------
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 123,498 $ 2,489,536 79,204 $ 1,152,102
Shares redeemed (64,062) (1,180,507) (138,239) (2,084,535)
------- ----------- -------- -----------
Net increase
(decrease) 59,436 $ 1,309,029 (59,035) $ (932,433)
======= =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL-CAP EQUITY FUND
----------------------------------
Eight Months ended
December 31, 1997
----------------------------------
Shares Amount
---------- ------------
<S> <C> <C>
Shares sold 223,963 10,480,160
Shares redeemed (93,051) (4,038,172)
------- -----------
Net increase 130,912 $ 6,441,988
======= ===========
</TABLE>
61
<PAGE> 62
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
December 31, 1997
BOARD OF DIRECTORS
Theodore M. Armstrong
Alan C. Henderson
Richard A. Liddy, Chairman
Matthew P. McCauley
Harry E. Rich
INVESTMENT ADVISOR
Conning Asset Management Company
SAFEKEEPER OF SECURITIES
Bank of New York
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington D.C.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
If distributed to perspective investors, this report must be preceded or
accompanied by a current prospectus. The prospectus is incomplete without
reference to the financial data contained in this annual report.
62
<PAGE> 63
APPENDIX
Pages 5, 15, 21, 27, 32, 38, 44 and 49 of the printed Annual Report for
General American Capital Company contain a stock performance. The information
contained in these graphs has been presented in a tabular format that may
be processed by the EDGAR System.
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