EXHIBIT (d)(2)
INVESTMENT SUBADVISORY AGREEMENT
BY AND AMONG
GENERAL AMERICAN CAPITAL COMPANY,
CONNING ASSET MANAGEMENT COMPANY, AND
STATE STREET RESEARCH & MANAGEMENT COMPANY
INVESTMENT SUBADVISORY AGREEMENT made as of the 19th day of September, 2000,
by and among GENERAL AMERICAN CAPITAL COMPANY (the "Company"), a Maryland
corporation, CONNING ASSET MANAGEMENT COMPANY (the "Adviser"), a Missouri
corporation that is registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act"), and STATE STREET RESEARCH &
MANAGEMENT COMPANY (the "Subadviser"), a Delaware corporation that is
registered as an investment adviser under the Advisers Act, as follows:
ARTICLE I - Advisory Services
-----------------
The Company is an open-end, diversified management investment company,
incorporated under the laws of the State of Maryland on November 15, 1985.
the Company has employed the Adviser to act as the investment adviser to and
manager of the Company, and subject to the supervision of the Board of
Directors of the Company (the "Board"), to manage the investment and
reinvestment of the assets of the funds currently offered for sale by the
Company (the "Funds") pursuant to an investment advisory agreement dated
September 19, 2000 (the "Advisory Agreement"). Pursuant to its authority
under Article I B of the Advisory Agreement, the Adviser hereby employs the
Subadviser to act as the investment subadviser and, subject to the
supervision of the Board and the Adviser, to manage the day-to-day
investment and reinvestment of the Funds listed on Exhibit A to this
Subadvisory Agreement (as Exhibit A may be amended from time to time) (such
Funds collectively referred to as the "Subadvised Funds").
The Subadviser hereby accepts such employment and agrees during such period,
at its own expense, to render the services and to assume the obligations
herein set forth for the compensation provided for herein. The Subadviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized herein, have no
authority to act for or represent the Company or the Adviser in any way or
otherwise be deemed an agent of the Company or the Adviser. The Subadviser
shall, for purposes of this Subadvisory Agreement, have and exercise full
investment discretion and authority to act as agent for the Company in
buying, selling or otherwise disposing or managing the Subadvised Fund's
investments, subject to the supervision of the Board and the Adviser.
C-18
A. Duties of the Subadviser. In carrying out its obligations to manage
------------------------
the investment and reinvestment of the Company's assets, the Subadviser shall,
as appropriate and consistent with the limitations set forth in Section C
hereof:
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies
of each Subadvised Fund as set forth in the Company's prospectus,
as amended from time to time;
(b) consult with the Adviser and the Board and furnish to the
Adviser and the Board recommendations with respect to an overall
investment strategy for each Subadvised Fund for approval,
modification, or rejection by the Adviser and/or the Board;
(c) seek out specific investment opportunities and take such steps
as are necessary to implement any overall investment strategies
approved by the Adviser or the Board, including making and carrying
out day-to-day decisions to acquire or dispose of permissible
investments, management of investments and any other Company
property, and providing or obtaining such services as may be
necessary in managing, acquiring or disposing of investments;
(d) regularly report to the Adviser and/or the Board with respect
to the implementation of any approved overall investment strategy
and any other activities in connection with management of the
Subadvised Fund's assets; and
(e) furnish to regulatory authorities having jurisdiction such
information as may be requested in order for such authorities to
ascertain that Funds that support variable insurance operations are
being conducted in accordance with applicable laws and regulations.
B. Employment of Other the Subadviser(s). The Subadviser shall have the
-------------------------------------
authority to employ, at its expense or otherwise, one or more subadvisers to
provide any services to a Subadvised Fund, only upon the consent of the Adviser
and any necessary approvals from the Board and shareholders of the Funds.
C. Limitations on Advisory Services. The Subadviser shall perform the
--------------------------------
services under this Subadvisory Agreement subject to the supervision and
review of the Adviser and the Board and in a manner consistent with the
investment objectives, policies, and restrictions of each Subadvised Fund as
stated in its Registration Statement, as amended from time to time, filed
with the Securities and Exchange Commission, the Company's Articles of
Incorporation and By-Laws, each as amended from time to time, the provisions
of the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and the applicable requirements of the Internal Revenue Code of 1986,
as amended.
The Company or the Adviser has furnished or will furnish the Subadviser with
copies of the Company's Prospectus, Articles of Incorporation, and By-Laws
as currently in effect, and each agrees during the continuance of the
Subadvisory Agreement to furnish the Subadviser with copies of any
amendments or supplements thereto before or at the time the amendments or
supplements become effective. The Subadviser will be entitled to rely on all
documents furnished by the Company or the Adviser.
C-19
ARTICLE II - Compensation by the Adviser of the Subadviser
---------------------------------------------
A. Investment Subadvisory Fee. As compensation for its services to the
--------------------------
Company, the Adviser shall pay the Subadviser the monthly compensation based
on an annual percentage of the average daily value of the net assets of the
Subadvised Funds as shown below:
Asset Allocation Fund 0.50 percent up to $500 million
0.40 percent $500 million to $1 billion
0.35 percent $1 billion and up
Managed Equity Fund 0.40 Percent up to $10 million
0.30 Percent $10 million up to $30 million
0.25 Percent $30 million and up
Provided that effective January 6, 2002, the subadvisory fees shall be:
0.40 percent up to $250 million
0.35 percent $250 million to $750 million
0.30 percent $750 million and up
Mid-Cap Equity Fund 0.45 percent up to $20 million
0.40 percent $20 million to $750 million
0.35 percent $750 million and up
Provided that effective January 6, 2002, the subadvisory fees shall be:
0.45 percent up to $250 million
0.40 percent $250 million to $750 million
0.35 percent $750 million and up
Small-Cap Equity Fund 0.65 percent up to $250 million
0.60 percent $250 million to $750 million
0.55 percent $750 million and up
B. Allocation of Expenses. The Subadviser shall be responsible for
----------------------
payment of all expenses it may incur in performing the services set forth in
Article I hereunder. Except for expenses specifically assumed by the Adviser
as stated above, the Company shall be responsible for all expenses associated
with the Company's operations.
The Board shall determine the manner in which expenses are allocated to the
Subadvised Funds, and the determination of the Board shall be final and
binding.
C-20
ARTICLE III - Fund Transactions and Brokerage
-------------------------------
The Subadviser agrees to determine the securities to be purchased or sold by
each Subadvised Fund, subject to the provisions of Article I, and to place
orders pursuant to its determinations either directly with the issuer, with
any broker-dealer or underwriter that specializes in the securities for
which the order is made, or with any other broker or dealer selected by the
Adviser or the Subadviser, as the case may be, subject to the following
limitations.
The Subadviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for each Subadvised
Fund and will use its best efforts to obtain the most favorable price and
efficient execution of the Company's orders, taking into account all
appropriate factors, including: price; dealer spread or commission, if any;
size and difficulty of the transaction; the nature of the market for the
security; the reliability, financial condition and general execution and
operational capabilities of the broker-dealer; and the research,
statistical, and economic data furnished by the broker-dealer to the
Company.
Subject to the above requirements, nothing shall prohibit The Subadviser
from selecting brokers or dealers with which it or the Company are
affiliated and from selecting brokers or dealers by virtue of sales of
insurance policies of General American Life Insurance Company or its
affiliates by such broker-dealers or their affiliates.
ARTICLE IV - Activities of the Subadviser
----------------------------
The Subadviser's services to the Company under this Subadvisory Agreement
are not to be deemed exclusive, and the Subadviser will be free to render
similar services to others so long as its services under this Subadvisory
Agreement are not impaired. It is understood that the Company's directors,
officers, employees and shareholders are or may become interested in the
Subadviser, as directors, officers, employees or shareholders or otherwise,
and that directors, officers, employees or shareholders of the Subadviser
are or may become similarly interested in the Company.
It is agreed that the Subadviser may use any supplemental investment
research obtained for the benefit of the Company in providing investment
advice to its other investment advisory accounts. The Subadviser or its
subsidiaries may use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of
business for the Subadviser or other entities advised by the Subadviser will
be considered by and may be useful to the Subadviser in carrying out its
obligations to the Company.
Securities held by a Subadvised Fund may also be held by separate investment
accounts or other investment companies for which the Subadviser may act as
an adviser or by the Subadviser or its affiliates. Because of different
investment objectives or other factors, a particular security may be bought
by the Subadviser or its affiliates for one or more clients when one or more
clients are selling the same security. If purchases or sales of securities
for the Subadvised Funds or other entities for which the Subadviser or its
affiliates act as investment adviser or for their advisory clients arise for
consideration at or about the same time, the Company agrees that the
Subadviser
C-21
may make transactions in such securities, insofar as feasible, for the
respective entities and clients in a manner deemed equitable to all.
To the extent that transactions on behalf of more than one client of the
Subadviser during the same period may increase the demand for securities
being purchased or the supply of securities being sold, the Company
recognizes that there may be an adverse effect on price.
It is agreed that, on occasions when the Subadviser deems the purchase or
sale of a security to be in the best interests of a Subadvised Fund as well
as other accounts or companies, it may, to the extent permitted by
applicable laws and regulations, but will not be obligated to, aggregate the
securities to be so sold or purchased for the Subadvised Funds with those to
be sold or purchased for other accounts or companies in order to obtain
favorable execution and lower brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the manner it
considers to be most equitable and consistent with its fiduciary obligations
to the Company and to such other accounts or companies. The Company
recognizes that in some cases this procedure may adversely affect the size
of the position obtainable for a Subadvised Fund.
ARTICLE V - Effectiveness of the Subadvisory Agreement
------------------------------------------
This Subadvisory Agreement shall not become effective unless and until it is
approved by the Company's Board (including a majority of directors who are
not parties to this Subadvisory Agreement or interested persons of any such
party to this Subadvisory Agreement), and by the Company' shareholders, and
this Subadvisory Agreement shall come into full force and effect on the date
on which it is so approved, or such later date as the Board may determine,
provided that it shall not become effective as to any subsequently created
fund until it has been approved specifically for such fund by the Board and
its shareholder(s), as required, and that implementation of any changes from
prior Subadvisory Agreements may be delayed until the start of the next
month after a change is approved by the shareholders.
ARTICLE VI - Term of the Subadvisory Agreement
---------------------------------
As to each Subadvised Fund, this Subadvisory Agreement shall continue in
effect from year to year so long as its continuance is approved annually by
a majority of the votes cast by those persons having voting rights in
respect of the Subadvised Fund or by a vote by a majority of the members of
the Board, but in either event by the vote of a majority of the Board who
are not "interested persons" (as defined in the Investment Company Act) of
any party to this Subadvisory Agreement, cast in person at a meeting called
for the purpose of voting such approval.
As to each Subadvised Fund, this Subadvisory Agreement:
(1) may be terminated without the payment of any penalty upon 60
days' written notice to the Subadviser either by the Board, the
Adviser, or by a majority vote of those persons having voting
rights in respect of the affected Subadvised Fund(s);
C-22
(2) shall automatically terminate if it is assigned (within the
meaning of the Investment Company Act) by the Subadviser;
(3) may be terminated by the Subadviser without payment of any
penalty upon 60 days' written notice to the other parties; and
(4) may be amended, changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is
sought. An amendment of this Subadvisory Agreement shall not be
effective until approved by (a) vote of the holders of a majority
of the outstanding voting securities of the Subadvised Fund(s)
affected; and (b) a majority of those directors of the Company who
are not parties to this Subadvisory Agreement or interested persons
of such a party, cast in person at a meeting called for the purpose
of voting on such approval.
ARTICLE VII - Recordkeeping
-------------
The Subadviser agrees to preserve for the period prescribed by the rules and
regulations of the Securities and Exchange Commission all records the
Subadviser maintains for the Company as are required to be maintained
pursuant to said rules. The Subadviser agrees that all such records shall be
the property of the Company and shall be made available, within five (5)
business days of the request, to the Company' accountants or auditors during
regular business hours at the Subadviser's offices upon such prior written
notice. In the event of termination for any reason, all such records shall
be returned promptly to the Company, free from any claim or retention of
rights by the Subadviser. In addition, Subadviser will provide any
materials, reasonably related to the investment advisory services provided
hereunder, as may be reasonably requested in writing by the directors or
officers of the Company or as may be required by any governmental agency
having jurisdiction. The Subadviser will keep any information obtained in
the course of performing under this Subadvisory Agreement in confidence and
will not use such information for its own benefit nor disclose it except as
authorized by the Company or the Adviser or as required by regulatory
authorities having jurisdiction.
ARTICLE VIII - Liability of the Subadviser
---------------------------
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Subadviser
(or its officers, directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Subadviser
or retained by it to perform or assist in the performance of its obligations
under this Subadvisory Agreement), neither the Subadviser nor any of its
officers, directors, employees or agents shall be subject to liability to
the Company or to any shareholder or to any other person with a beneficial
interest in the Company for any act or omission in the course of, or
connected with, rendering advisory services hereunder, including without
limitation any error or judgment or mistake of law or for any loss suffered
by the Company or any shareholder or other person in connection with the
matters to which this Subadvisory Agreement relates, except to the extent
specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services. The provisions
C-23
of this Article VIII shall not apply to services other than those relating
solely to the provision of investment advice rendered by the Subadviser
pursuant to this Subadvisory Agreement.
ARTICLE IX - Governing Law
-------------
While this Subadvisory Agreement is intended by the parties to be governed
by Missouri law as to matters of state law, this Subadvisory Agreement is
also subject to the provisions of the Investment Company Act, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder, including such exemptions therefrom as the Securities and
Exchange Commission may grant. Words and phrases used herein shall be
interpreted in accordance with the Investment Company Act and those rules
and regulations. As used with respect to the Company and the holders of
voting shares of any class of the Company's capital stock, the term
"majority of the outstanding voting shares" means the lesser of (i) 67% or
more of the voting shares represented at a meeting at which the holders of
more than 50% of the outstanding voting shares are represented or (ii) more
than 50% of the outstanding voting shares.
IN WITNESS WHEREOF, the parties have caused this Investment Subadvisory
Agreement to be signed by their respective officials duly authorized, as of
the day and year first above written.
Attest: GENERAL AMERICAN CAPITAL COMPANY
/s/ Xxxxxxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. XxXxxxxx
------------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, Secretary Xxxxxxx X. XxXxxxxx, Vice President
Attest: CONNING ASSET MANAGEMENT
COMPANY
/s/ Xxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------- ---------------------------------
Xxxx X. Xxxxxx, Senior Vice President Xxxxx X. Xxxxxxxx, President and
Executive Officer Chief and Chief Financial Officer
Attest: STATE STREET RESEARCH &
MANAGEMENT COMPANY
/s/ Xxxxxxx X. XxXxxxxx, III By: /s/ Xxxxxx X. Xxxx
------------------------------------- ---------------------------------
Xxxxxxx X. XxXxxxxx, III, Secretary Xxxxxx X. Xxxx, Executive Vice
President, Finance and
Administration
C-24
