SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CONSECO FUND GROUP
.................................................................
(Name of Registrant as Specified In Its Charter
CONSECO FUND GROUP
.................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fees required.
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[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.............................................................
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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CONSECO FUND GROUP
Conseco Science & Technology Fund
Conseco 20 Fund
Conseco Large-Cap Fund
Conseco Equity Fund
Conseco Balanced Fund
Conseco Convertible Securities Fund
Conseco High Yield Fund
Conseco Fixed Income Fund
11825 North Pennsylvania Street
Carmel, Indiana 46032
February 12, 2001
Dear Shareholder,
The enclosed proxy materials relate to a special meeting of the
shareholders of the Conseco Mutual Funds listed above ("Funds"). The Funds are
series of the Conseco Fund Group, a Massachusetts business trust ("Trust"). The
meeting will be held on March 29, 2001, at 11825 North Pennsylvania Street,
Carmel, Indiana, 46032, at 11:00 a.m., Eastern Standard Time. The Board of
Trustees of the Trust ("Board") has called this meeting to request shareholder
approval of several proposals relating to the management and operation of the
Funds. With respect to the Funds' investment management arrangements, the Board
seeks shareholder approval of: (a) a new investment management contract between
the Trust and Conseco Capital Management, Inc. ("CCM"); (b) a subadvisory
contract under which Chicago Equity Partners, LLC ("CEP") would serve as
subadviser for the investment portfolios of the Conseco Large-Cap Fund, the
Conseco Equity Fund, and the equity portion of Conseco Balanced Fund; and (c) a
subadvisory contract under which Oak Associates, ltd. ("OAK") would serve as
subadviser for the investment portfolios of the Conseco Science & Technology
Fund and the Conseco 20 Fund. Your Board has approved these new investment
management arrangements, including the appointments of CEP and OAK as
subadvisers for the respective Funds. The shareholders also are being asked to
approve these three new investment management agreements.
The Board also asks shareholder approval to implement an exemptive
order anticipated to be issued by the Securities and Exchange Commission that
would permit CCM and the Board, in the future, to enter into, or make material
changes to, subadvisory agreements without seeking additional shareholder
approval.
Additionally, the Board seeks shareholder approval to re-elect the
current Trustees, to ratify the appointment of PricewaterhouseCoopers LLP as the
Trust's independent accountants, and to change Conseco High Yield Fund's
fundamental policy regarding diversification.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THESE PROPOSALS.
YOUR VOTE IS VERY IMPORTANT. Please take the time to review the
enclosed proxy statement and vote your shares today by signing and returning the
enclosed proxy card or by voting via telephone at 1-888-221-0697. We have
retained Georgeson Shareholder Communications, Inc. ("Shareholder
Communications") to assist us with this proxy solicitation. If we have not
received your vote as the meeting date approaches, you may receive a telephone
call from them to ask for your vote.
Thank you for your attention to this matter and for your continuing
investment in the Funds.
Very truly yours,
Maxwell E. Bublitz
President
CONSECO FUND GROUP
Conseco Science & Technology Fund
Conseco 20 Fund
Conseco Large-Cap Fund
Conseco Equity Fund
Conseco Balanced Fund
Conseco Convertible Securities Fund
Conseco High Yield Fund
Conseco Fixed Income Fund
11825 North Pennsylvania Street
Carmel, Indiana 46032
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
MARCH 29, 2001
To the Shareholders:
NOTICE IS HEREBY GIVEN of a special meeting of Shareholders ("Meeting")
of each of the Conseco Mutual Funds listed above (each a "Fund", collectively,
the "Funds"). The Funds are series of the Conseco Fund Group, a Massachussetts
business trust ("Trust"). The Meeting will be held on March 29, 2001, at 11825
North Pennsylvania Street, Carmel, Indiana, 46032, at 11:00 a.m., Eastern
Standard Time, to vote on the following proposals ("Proposals"):
1. For each Fund, to approve or disapprove a new Investment
Management Contract with Conseco Capital Management, Inc.
("CCM");
2. For Conseco Large-Cap Fund, Conseco Equity Fund, and the
Conseco Balanced Fund, to approve or disapprove Subadvisory
Contracts between CCM and Chicago Equity Partners, LLC;
3. For Conseco Science & Technology Fund and Conseco 20 Fund, to
approve or disapprove Subadvisory Contracts between CCM and
Oak Associates, ltd.;
4. For each Fund, to approve or disapprove a policy to permit CCM
and the Funds' Board of Trustees to appoint and replace
subadvisers, enter into subadvisory contracts, and approve
amendments to subadvisory contracts on behalf of the Funds
without further shareholder approval ("Subadvisory Policy");
5. For each Fund, to elect the Trustees of the Trust;
6. For each Fund, to ratify the appointment of
PricewaterhouseCoopers LLP as the Trust's independent
accountants; and
7. For the Conseco High Yield Fund, to change the Fund's
fundamental policy regarding diversification.
Shareholders of record as of the close of business on January 24, 2001,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and promptly return the accompanying proxy card in the
enclosed envelope, which is being solicited by the Trust's Board of Trustees.
You may also vote your shares by calling 1-888-221-0697. Returning your proxy
card promptly is important to ensure a quorum at the Meeting. You may revoke
your proxy at any time before it is exercised by the subsequent execution and
submission of a revised proxy card, by giving written notice of revocation to
the Funds at any time before the proxy is exercised, or by voting in person at
the Meeting.
By Order of the Board of Trustees,
William P. Kovacs,
Secretary
February 12, 2001
11825 North Pennsylvania Street
Carmel, Indiana 46032
2
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card,
sign and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
VOTED "FOR" THE INVESTMENT MANAGEMENT CONTRACTS, THE SUBADVISORY CONTRACTS, THE
SUBADVISORY POLICY, THE ELECTION OF THE TRUSTEES, THE APPOINTMENT OF THE
INDEPENDENT ACCOUNTANTS, AND IN THE CASE OF THE CONSECO HIGH YIELD FUND ONLY,
THE FUNDAMENTAL POLICY CHANGE, AND "FOR" OR "AGAINST" ANY OTHER BUSINESS WHICH
MAY PROPERLY ARISE AT THE MEETING, IN THE PROXIES' DISCRETION. To avoid the
additional expense of further solicitation, we ask your cooperation in promptly
mailing your proxy card. As an alternative to using the paper proxy card to
vote, you may vote shares that are registered in your name, as well as shares
held in "street name" through a broker, by calling 1-888-221-0697. To vote in
this manner, you will need the 14-digit "control" number(s) that appear on your
proxy card(s).
If you have any questions regarding the Meeting, or the execution of
your proxy, please call toll-free 1-800-986-3384.
If we do not receive your completed proxy cards after several weeks,
our proxy solicitor, Shareholder Communications, may contact you. They will
remind you to vote your shares or will record your vote over the phone if you
choose to vote in that manner.
3
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Funds involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
REGISTRATION VALID SIGNATURE
Corporate Accounts
(1) ABC Corp........................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp........................................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer.................. John Doe
(4) ABC Corp. Profit Sharing Plan...................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership................................ Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account.................................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................ Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.......................................... John B. Smith
(2) Estate of John B. Smith............................ John B. Smith, Jr., Executor
4
CONSECO FUND GROUP
Conseco Science & Technology Fund
Conseco 20 Fund
Conseco Large-Cap Fund
Conseco Equity Fund
Conseco Balanced Fund
Conseco Convertible Securities Fund
Conseco High Yield Fund
Conseco Fixed Income Fund
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
1-800-986-3384
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
MARCH 29, 2001
This Proxy Statement is being furnished to shareholders of the Conseco
Mutual Funds listed above (each a "Fund", collectively, the "Funds") in
connection with the solicitation by their Board of Trustees ("Board") of proxies
to be used at a special meeting of shareholders ("Meeting"), or any adjournments
thereof. The Meeting will be held March 29, 2001, at 11825 North Pennsylvania
Street, Carmel, Indiana, 46032, at 11:00 a.m., Eastern Standard Time. This Proxy
Statement and the accompanying proxy card are first being mailed to shareholders
on or about February 12, 2001.
The following proposals ("Proposals") will be voted upon:
1. For each Fund, to approve or disapprove a new Investment
Management Contract with Conseco Capital Management, Inc.
("CCM");
2. For Conseco Large-Cap Fund, Conseco Equity Fund, and the
Conseco Balanced Fund, to approve or disapprove Subadvisory
Contracts between CCM and Chicago Equity Partners, LLC;
3. For Conseco Science & Technology Fund and Conseco 20 Fund, to
approve or disapprove Subadvisory Contracts between CCM and
Oak Associates, ltd.;
4. For each Fund, to approve or disapprove a policy to permit CCM
and the Funds' Board of Trustees to appoint and replace
subadvisers, enter into subadvisory contracts, and approve
amendments to subadvisory contracts on behalf of the Funds
without further shareholder approval ("Subadvisory Policy");
5. For each Fund, to elect the Trustees of the Trust;
6. For each Fund, to ratify the appointment of
PricewaterhouseCoopers LLP as the Trust's independent
accountants; and
7. For the Conseco High Yield Fund, to change the Fund's
fundamental policy regarding diversification.
This table shows which Proposals apply to your Fund.
- -------------------------------------------------------------------------------
Fund Proposal(s)
- -------------------------------------------------------------------------------
Conseco Science & Technology Fund 1, 3, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco 20 Fund 1, 3, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco Large-Cap Fund 1, 2, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco Equity Fund 1, 2, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco Balanced Fund 1, 2, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco Convertible Securities Fund 1, 4, 5, 6
- -------------------------------------------------------------------------------
Conseco High Yield Fund 1, 4, 5, 6, 7
- -------------------------------------------------------------------------------
Conseco Fixed Income Fund 1, 4, 5, 6
- -------------------------------------------------------------------------------
For each Fund, the presence, in person or by proxy, of a majority of
the shares of the Fund outstanding and entitled to vote will constitute a quorum
for the transaction of business at the Meeting. In the absence of a quorum or in
the event that a quorum is present at the Meeting, but votes sufficient to
approve the proposals are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy. The persons named
as proxies will vote those proxies that they are entitled to vote "FOR" the
Proposals in favor of such an adjournment and will vote those proxies required
to be voted "AGAINST" the proposals against such adjournment. A shareholder vote
may be taken on one or more of the Proposals in this Proxy Statement prior to
any such adjournment if sufficient votes have been received and it is otherwise
appropriate.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present at the Meeting for quorum purposes but will not be voted for
or against any adjournment or Proposal. Accordingly, abstentions and broker
non-votes effectively will be votes against Proposals 1, 2, 3 and 4 because
these Proposals require the affirmative vote of a specified majority of each
Fund's outstanding shares.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. If you execute your proxy
but give no voting instructions, your shares that are represented by proxies
will be voted "FOR" the Investment Management Contracts, "FOR" the Subadvisory
Contracts, "FOR" the Subadvisory Policy, "FOR" the election of the Trustees,
"FOR" the appointment of PricewaterhouseCoopers LLP, in the case of the Conseco
High Yield Fund only, "FOR" the change in fundamental policy, and "FOR" or
"AGAINST" any other business which may properly arise at the Meeting, in the
proxies' discretion. Any person giving a proxy has the power to revoke it at any
time prior to its exercise by executing a superseding proxy card or by
submitting a written notice of revocation to the Secretary of the Trust
("Secretary"). To be effective, such revocation must be received by the
Secretary prior to the Meeting and must indicate your name and account number.
In addition, although mere attendance at the Meeting will not revoke a proxy, a
Shareholder present at the Meeting may withdraw his or her proxy by voting in
person.
Shareholders of record as of the close of business on January 24, 2001
("Record Date"), are entitled to vote at the Meeting. Information as to the
number of outstanding shares for each Fund as of the Record Date is set forth
below:
2
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Fund Total Number Number of Number of Number of Number of
Class A Class B Class C Class Y
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Science & Technology 4,621,121.239 2,850,224.799 697,825.501 755,846.499 317,224.440
Fund
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco 20 Fund 19,511,677.563 3,153,736.279 7,928,478.281 5,811,883.849 2,617,579.154
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Large-Cap Fund 3,003,321.049 1,501,755.749 744,827.812 616,846.553 139,890.935
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Equity Fund 15,861,371.796 1,795,598.644 2,093,175.426 1,572,163.301 10,400,434.425
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Balanced Fund 6,146,018.079 2,230,841.720 1,367,065.133 1,123,682.041 1,424,429.185
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Convertible Securities 5,653,491.411 1,270,330.821 2,589,431.957 986,744.396 806,984.237
Fund
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco High Yield Fund 10,755,962.018 2,385,912.980 5,082,290.543 2,298,714.433 989,044.062
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Conseco Fixed Income Fund 7,677,822.718 3,400,037.814 964,256.676 534,919.447 2,778,608.781
- --------------------------------- --------------- ---------------- ---------------- ----------------- ----------------
Shareholders are entitled to one vote for each full share held and a
fractional vote for each fractional share held. Except as set forth in Appendix
A, as of the Record Date, Conseco Capital Management, Inc. ("CCM" or the
"Adviser"), the investment adviser of the Funds, does not know of any person who
owns beneficially or of record 5% or more of any class of shares of the Funds.
As of that same date, the Trustees and officers of the Funds, as a group, owned
less than 1% of any class of the Funds' outstanding shares.
The solicitation of proxies, the cost of which will be borne by CCM,
will be made by mail and telephone. The Funds' officers and employees of CCM who
assist in the proxy solicitation will not receive any additional or special
compensation for any such efforts. The Funds have engaged the services of
Shareholder Communications to assist them in the solicitation of proxies for the
Meetings. Shareholder Communications will be paid approximately $63,000.00 for
proxy solicitation services. The Funds will request broker/dealer firms,
custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of the shares held of record by such persons. CCM may
reimburse such broker/dealer firms, custodians, nominees and fiduciaries for
their reasonable expenses incurred in connection with such proxy solicitation.
COPIES OF THE FUNDS' MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE FUNDS' ANNUAL AND SEMI-ANNUAL REPORTS BY
WRITING THE FUNDS AT 11825 NORTH PENNSYLVANIA STREET, CARMEL, INDIANA 46032, OR
BY CALLING 1-800-986-3384.
3
INTRODUCTION
On October 19, 2000, CCM filed a prospectus supplement announcing the
departure from the firm of portfolio managers Mr. Thomas J. Pence, Mr. Mark
Babka, Mr. Paul Berg, Mr. Nicholas B. Truitt, Mr. Eric J. Voss, and Mr. Andrew
S. Hadland. These individuals managed, or co-managed, the Conseco Science &
Technology Fund, the Conseco 20 Fund, the Conseco Large-Cap Fund, the Conseco
Equity Fund, and the equity portion of the Conseco Balanced Fund.
CCM appointed Mr. Maxwell E. Bublitz, President of CCM and CFG, as
portfolio manager and sought to hire additional equity portfolio managers.
During the search process for new portfolio managers, CCM recognized that of
approximately 6,700 mutual fund portfolios, 10.7% are currently managed under a
subadvisory contract, with 13.8% of all domestic equity funds managed under
subadvisory contracts. CCM concluded that adopting a subadviser strategy would
more quickly provide highly experienced portfolio managers with long-term
performance records to fund shareholders. In addition, the strategy would allow
CCM increased flexibility to change subadvisers in response to market changes,
performance results, or other factors significant to a portfolio's management.
The Board has approved proposals by CCM to restructure the manner in
which the Funds' assets are managed. To implement new investment management
arrangements for the Funds, the Board, effective November 31, 2000, terminated
the existing investment advisory contracts between the Funds and CCM and
approved a new interim investment management contract with CCM ("Interim
Management Contract") and interim subadvisory contracts between CCM and Chicago
Equity Partners, LLC ("CEP") and Oak Associates, ltd. ("OAK"). Under the Interim
Management Contract, CCM serves as investment adviser and manager for the Funds
and provides portfolio management oversight for those Funds managed by
subadvisers, instead of directly managing those Funds' portfolios. Each Fund
pays CCM the same annual fee under the Interim Management Contract that each
paid under the preceding investment advisory contracts. The annual fees paid to
CCM by each Fund are shown in the table below.
- ----------------------------------------------------------- --------------------------------------------------
Fund % of a Fund's average daily net assets paid to CCM
- ----------------------------------------------------------- --------------------------------------------------
Conseco Science & Technology Fund 1.00%
- ----------------------------------------------------------- -------------------------------------------
Conseco 20 Fund 0.70%
- ----------------------------------------------------------- -------------------------------------------
Conseco Large-Cap Fund 0.70%
- ----------------------------------------------------------- -------------------------------------------
Conseco Equity Fund 0.70%
- ----------------------------------------------------------- -------------------------------------------
Conseco Balanced Fund 0.70%
- ----------------------------------------------------------- -------------------------------------------
Conseco Convertible Securities Fund 0.85%
- ----------------------------------------------------------- -------------------------------------------
Conseco High Yield Fund 0.70%
- ----------------------------------------------------------- -------------------------------------------
Conseco Fixed Income Fund 0.45%
- ----------------------------------------------------------- -------------------------------------------
Under the Interim Subadvisory Contracts, CEP and OAK provide the Funds
listed below ("Subadvised Funds") with a continuous investment program for which
CCM, not the Subadvised Funds, pays CEP and OAK the annual fees shown below.
- ----------------------------------------------------------- ----------------------------------------------
Fund % of a Fund's average daily net assets paid to
subadviser
- ----------------------------------------------------------- ----------------------------------------------
Conseco Science and Technology Fund 0.30%
- ----------------------------------------------------------- ----------------------------------------------
Conseco 20 Fund 0.30%
- ----------------------------------------------------------- ----------------------------------------------
Conseco Large-Cap Fund 0.30%
- ----------------------------------------------------------- ----------------------------------------------
Conseco Equity Fund 0.30%
- ----------------------------------------------------------- ----------------------------------------------
Conseco Balanced Fund* 0.30%
(*equity portion only)
- ----------------------------------------------------------- ----------------------------------------------
4
The Interim Management Contract and Interim Subadvisory Contracts will
terminate automatically on the earlier of 150 days from their effective date or
the date each Subadvised Fund's shareholders, as applicable, approve the new
Investment Management Contracts and the Subadvisory Contracts.
Under the proposal, CEP and OAK, entities unaffiliated with CCM, would
continue to manage the Subadvised Fund's assets as their its investment
subadvisers and CCM would continue to oversee their activities as subadvisers
and evaluate their performance. The Board is also asking the Funds' shareholders
to approve a new Investment Management Contract with CCM to incorporate updated
language about CCM's ability to appoint subadvisers, as described further below.
In addition, the Board is asking the Subadvised Funds' shareholders to approve a
policy that permits CCM and the Board to appoint and replace subadvisers, enter
into subadvisory contracts, and amend subadvisory contracts without further
shareholder approval.
PROPOSAL 1: TO APPROVE OR DISAPPROVE A NEW INVESTMENT MANAGEMENT
CONTRACT BETWEEN CCM AND THE TRUST.
CCM proposed to the Board, and the Board approved at its meeting on
November 28, 2000, an amended Investment Management Contract ("Proposed
Management Contract") between the Trust and CCM. The Proposed Management
Contract is substantially similar to the Funds' current Interim Management
Contract and the Funds' recently terminated Investment Advisory Contracts ("Old
Advisory Contracts"). The nature and scope of services provided by CCM and the
proposed subadvisers under the Proposed Management Contract does not
significantly differ from those previously provided by CCM to the Funds. CCM
will receive the same compensation as under the Interim Management Contract and
the Old Advisory Contracts. A form of the Proposed Management Contract is
attached as Appendix B.
Comparison Between (1) the Old Advisory Contracts and (2) the Interim Management
Contract and the Proposed Management Contract
The main difference between the Interim Management Contract and the
Proposed Management Contract (collectively, the "New Contracts") as compared to
the Old Advisory Contracts is the change of CCM's role under the New Contracts.
Under the Old Advisory Contracts, CCM's role was to provide a continuous
investment program for the Funds, including investment research and management
with respect to all securities, investments and cash equivalents in the Funds,
and to determine what securities and other investments would be purchased,
retained or sold by the Funds. Under the New Contracts, CCM may oversee the
management of the Funds' portfolios by one or more investment subadvisers,
rather than managing the Funds themselves. Such oversight includes reviewing
prospective subadvisers, selecting such subadvisers, and monitoring and
evaluating their performance. CCM will report to the Trust's Board the results
of its evaluation, supervision, and monitoring duties and will make
recommendations to the Board concerning the renewal, modification or termination
of subadvisory agreements.
5
Both the Old Advisory Contracts and the New Contracts permit CCM to
delegate its duties under the Contracts to a subadviser. However, the New
Contracts now specifically anticipate that CCM will delegate some of its
investment management duties to one or more subadvisers. Furthermore, the New
Contracts explicitly permit CCM to delegate its duties to more than one
subadviser. Under the New Contracts, CCM also has the power to allocate and
reallocate responsibility for the management of a specific portion of a Fund's
assets among subadvisers. In addition, the New Contracts provide that CCM can
engage a subadviser subject only to approval of the subadvisory contract by the
Board and to any requirements of the securities laws pertaining thereto. This
would permit CCM to implement Proposal 4, if approved by the Fund Shareholders.
As described in Proposal 4, CCM and the Funds have applied for an application
for an order of exemption from the Securities and Exchange Commission ("SEC")
that would permit the engagement of unaffiliated subadvisers by the Board acting
alone and without the need for approval by the vote of the holders of a majority
of the outstanding shares of the Funds. See Proposal 4 for more information.
Under the New Contracts, for both the services provided to, and the
expenses assumed for the Funds, the Funds will pay a fee to CCM. This fee is
computed daily and paid monthly, at an annual rate of a certain percentage of
the average daily net assets of each Fund. (For the exact percentages paid by
each Fund, refer to the table above.) The new fee is identical to the fee
payable to CCM in the Old Advisory Contracts.
Under both the Old Advisory Contracts and the New Contracts, CCM will
not be liable for any error in judgment or mistake of law or for any loss
suffered by a Fund or its shareholders in connection with the matters to which
the Contracts relate, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of CCM in the performance of its duties or
from reckless disregard by CCM of its obligations and duties under the
Contracts. The only difference between the Contracts with respect to liability
is that the New Contracts specifically extend the limitation of liability to
CCM's officers, directors, employees and delegates and to any subadvisers to the
Funds, whereas the Old Advisory Contracts do not explicitly include such persons
in their corresponding sections. Both the Old Advisory Contracts and the New
Contracts provide that the Board and Fund shareholders will not be liable for
any obligations of the Funds or the Trust under the Contracts, and that CCM will
look only to the assets and property of the Trust in settlement of any rights or
claims under the Contracts.
Both the Old Advisory Contracts and the New Contracts, including the
Interim Contracts, terminate automatically upon assignment and are terminable at
any time without penalty by the Board or by vote of the holders of a majority of
a Fund's outstanding voting securities on 60 days' written notice to CCM (10
days written notice for the Interim Contracts) or, without penalty, by CCM on 60
days' written notice to a Fund.
If approved by a Fund's shareholders, the Proposed Management Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the Proposed Management Contract will
continue in effect if it is approved at least annually by a vote of a Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of those Trustees who are not "interested
persons," as defined by the Investment Company Act of 1940, as amended ("1940
Act"), of a Fund or CCM ("Independent Trustees"), which vote must be cast in
person at a meeting called for the purpose of voting on such approval.
6
The table below provides the effective date of the Old Advisory
Contract for each of the Funds. The effective date of each Old Advisory Contract
is also the date each such contract was last submitted to a vote of
shareholders. Finally, the table displays the investment advisory fees paid to
CCM under the Old Advisory Contract (or accrued during the fiscal year ended
December 31, 2000) by each of the Funds.
EFFECTIVE DATE OF OLD ADVISORY INVESTMENT ADVISORY FEES PAID
PORTFOLIO CONTRACT TO CCM ($):
Conseco Science & Technology Fund June 30, 2000 $ 106,537
Conseco 20 Fund January 2, 1998 $2,690,206
Conseco Large-Cap Fund June 30, 2000 $ 17,469
Conseco Equity Fund March 28, 1997 $1,312,117
Conseco Balanced Fund March 28, 1997 $ 267,560
Conseco Convertible Securities Fund September 28, 1998 $ 636,148
Conseco High Yield January 2, 1998 $ 603,915
Conseco Fixed Income March 28, 1997 $ 176,172
Further information about CCM is set forth in Appendix C.
COMPARISON OF THE INTERIM MANAGEMENT CONTRACT AND THE PROPOSED
MANAGEMENT CONTRACT
The Interim Management Contract and the Proposed Management Contract
are substantially similar, with the only material differences stemming from the
provisional nature of the Interim Management Contract pursuant to the
requirements of Rule 15a-4 under the 1940 Act. The Interim Management Contract
is only effective for 150 days from the termination date of the Old Advisory
Contracts, not two years from the date of adoption as under the Proposed
Management Contract, and only 10 days' written notice is required for
termination of the Interim Management Contract by the Funds, rather than the 60
days' written notice required under the Proposed Management Contract.
Evaluation by the Board
In considering the Proposed Management Contract, the Board reviewed and
analyzed the factors it deemed relevant, including (1) the services now being
provided by CCM; (2) the nature, quality, and scope of such services as well as
the Funds' investment performance; (3) the nature and scope of the services to
be provided to the Funds by CCM under the Proposed Management Contract; (4) the
ability of CCM to provide such services; and (5) the potential effect of the
Proposed Management Contract on shareholders. The Trustees reviewed the proposed
fees payable to CCM under the Proposed Management Contract. The Board also
considered the management or advisory fees paid by other investment companies
with similar objectives and characteristics.
The Board found that CCM provides a high level of management services
to, and should continue to manage, the fixed income series, including the fixed
income portion of the Conseco Balanced Fund, the Conseco Convertible Securities
Fund, the Conseco High Yield Fund, and the Conseco Fixed Income Fund. The Board
also determined that CCM should continue to supervise the equity series,
including the Conseco Science & Technology Fund, the Conseco 20 Fund, the
Conseco Large-Cap Fund, the Conseco Equity Fund, and the equity portion of the
Conseco Balanced Fund. The Board's review also approved the level of services
performed by CCM with regard to all the Funds, including portfolio management,
accounting, and administrative oversight. Additionally, the Funds have performed
well with regard to each Fund's respective benchmark.
7
The Board found that the Proposed Management Contract would leave total
advisory fees unchanged. The nature and scope of the services outlined within
the Proposed Management Contract are different for the fixed income and equity
funds. The fixed income Funds will continue to be managed directly by CCM.
However, CCM will select, supervise and monitor the performance of each equity
subadviser. CCM's oversight of equity subadvisers is similar to CCM's
supervision of individual equity portfolio managers under the Old Advisory
Contracts.
The Board believes that CCM will continue to provide consistent
investment advisory services under the Proposed Management Contract, while
effectively supervising the equity subadvisers. Importantly, under the Proposed
Management Contract, CCM retains the option of changing subadvisers or directly
managing equity securities in the future. This provides CCM and the Funds with
increased flexibility to respond to market fluctuations, performance results, or
other factors significant to the Funds.
After full consideration of these and other factors, the Board,
including the Independent Trustees, approved the Proposed Management Contract
and authorized the submission of the Proposed Management Contract to the Funds'
shareholders for their approval at the Meeting.
Required Vote
Approval of Proposal 1 with regard to any Fund requires the affirmative
vote of the lesser of (1) 67% or more of the shares of a Fund present at the
Meeting, if more than 50% of the outstanding shares of each such Fund are
represented at the Meeting in person or by proxy, or (2) more than 50% of the
outstanding shares of each Fund entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 1.
----------------------------
PROPOSAL 2: TO APPROVE OR DISAPPROVE A SUBADVISORY CONTRACT BETWEEN
CCM AND CEP WITH RESPECT TO THE CONSECO EQUITY FUND, THE CONSECO
LARGE-CAP FUND, AND THE CONSECO BALANCED FUND.
CCM proposed to the Board, and the Board approved at its meeting on
November 28, 2000, a subadvisory contract between CCM and CEP ("Proposed
Subadvisory Contract" or the "Contract") with respect to the Conseco Large-Cap
Fund, the Conseco Equity Fund, and the Conseco Balanced Fund. The Proposed
Subadvisory Contract is substantially similar to the Interim Subadvisory
Contract adopted by the Board on December 1, 2000. A form of a Proposed
Subadvisory Contract is attached as Appendix D.
Further information about CEP is set forth in Appendix E.
Proposed Subadvisory Contract
Under the Proposed Subadvisory Contract, CEP would be responsible,
subject to the supervision of the Board and CCM, for the actual investment
management of all or a designated portion of the assets of the Conseco Large-Cap
Fund, the Conseco Equity Fund, and the equity portion of the Conseco Balanced
Fund, including placing purchase and sell orders for investments and for other
related transactions. CEP agrees to provide a continuous investment program for
each Fund's assets, including investment research and portfolio management. The
Proposed Subadvisory Contract recognizes that CEP may, under certain
circumstances, pay higher brokerage commissions by executing portfolio
transactions with brokers that provide the subadviser with research, analysis,
advice or similar services. The Proposed Subadvisory Contract also provides that
CEP will (1) maintain all books and records required to be maintained by it
pursuant to the 1940 Act and the rules and regulations promulgated thereunder
with respect to transactions the subadviser effects on behalf of each such Fund,
and will furnish the Board and CCM with such periodic and special reports as the
Board or CCM may reasonably request; (2) provide the Board or CCM with economic
and investment analyses and reports, as well as quarterly reports, setting forth
each such Fund's performance with respect to its investments and make available
to the Board and CCM any economic, statistical and investment services that CEP
normally makes available to its institutional investors or other customers; and
(3) provide assistance in the fair valuation of, and use reasonable efforts to
arrange for the provision of a price or prices from one or more parties
8
independent of CEP, for each portfolio security for which the fund administrator
does not obtain prices in the ordinary course of business from an automated
pricing service.
The Proposed Subadvisory Contract provides that CEP will not be liable
for any error of judgment or mistake of law or for any loss suffered by a Fund,
its shareholders, the Trust or CCM in connection with the matters to which the
Contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of CEP in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Contract. In
addition, CEP will not have any responsibilities for any other series of the
Trust, for any portion of a Fund's assets that it does not manage or for the
acts or omissions of any other subadviser for a Fund or the Trust. In
particular, if at any time CEP only manages a portion of a Fund's assets, CEP
will have no responsibility for the Fund being in violation of any law or
regulation or Fund policy or restriction, or for the Fund's failure to qualify
as a "regulated investment company" for federal tax purposes, if the portion of
the Fund's portfolio managed by CEP would not be in such violation or fail to so
qualify if such portion were deemed a separate series of the Trust or a separate
"regulated investment company."
CCM has agreed to indemnify, defend and hold harmless CEP, its
affiliates, and each of their officers, directors, employees, shareholders,
agents, and representatives from and against any and all losses, claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
arising from or related to the services contemplated under the Proposed
Subadvisory Contract, except to the extent that such losses, claims, damages,
liabilities, costs and expenses result from CEP's willful misfeasance, bad
faith, or gross negligence in the performance of its duties or from reckless
disregard by CEP of its obligations and duties under the Contract.
The Proposed Subadvisory Contract provides that each Fund, by the vote
of a majority of the Board or a majority of its outstanding voting securities,
may terminate the Contract, without penalty, on 60 days' written notice to CEP
and CEP may terminate the Contract, without penalty, on 60 days' written notice
to CCM. The Proposed Subadvisory Contract also permits CCM to terminate the
Contract, without penalty, upon material breach by CEP of any of certain
specific representations and warranties in the Contract. These representations
and warranties concern failure to be registered as an investment adviser,
failure to adopt a code of ethics, failure to notify CCM of changes in control
and failure to obtain written consent from CCM before referring to CEP's
relationship with a Fund, the Trust, CCM or any of their affiliates in
promotional materials. CEP may cure such breach within a 20-day period after
notice thereof. Additionally, CCM may terminate the Proposed Subadvisory
Contract without penalty if, in the reasonable judgment of CCM, CEP becomes
unable to discharge its duties and obligations under the Contract, including
circumstances such as financial insolvency of CEP or any other circumstances
which could adversely affect a Fund. In addition, the Proposed Subadvisory
Contract is automatically terminable upon assignment.
Under the Proposed Subadvisory Contract, for the services performed and
the expenses assumed, CEP would receive a subadvisory fee from CCM (not the
Funds), computed daily and paid monthly, at an annual rate of a certain
percentage of the portion of a Fund's average daily net assets under CEP's
management. The fees paid by each Fund are shown in the table below.
9
- ---------------------------------------------------------- ------------------------------------------
Fund % of a Fund's daily net assets paid to CEP
- ---------------------------------------------------------- ------------------------------------------
Conseco Large-Cap Fund 0.30%
- ---------------------------------------------------------- ------------------------------------------
Conseco Equity Fund 0.30%
- ---------------------------------------------------------- ------------------------------------------
Conseco Balanced Fund* 0.30%
(*equity portion only)
- ---------------------------------------------------------- ------------------------------------------
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT
OF MANAGEMENT FEES PAID BY THE FUNDS TO CCM OR CCM'S DUTIES AND RESPONSIBILITIES
TOWARD THE FUNDS UNDER THE PROPOSED MANAGEMENT CONTRACT.
If approved by each Fund's shareholders, the Proposed Subadvisory
Contract will become effective on the date of approval and will remain in effect
for an initial two-year term. Thereafter, the Proposed Subadvisory Contract will
continue in effect if it is approved at least annually by a vote of each Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of the Independent Trustees, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval.
COMPARISON OF THE INTERIM SUBADVISORY CONTRACT AND THE PROPOSED
SUBADVISORY CONTRACT
The Interim Subadvisory Contract and the Proposed Subadvisory Contract
are substantially similar. Some of the differences between these Contracts stem
from the provisional nature of the Interim Subadvisory Contract and the
requirements of Rule 15a-4 of the 1940 Act. The Interim Subadvisory Contract is
only effective for 150 days from the termination date of the Old Advisory
Contracts, not for two years from the date of adoption as under the Proposed
Subadvisory Contract, and only 10 days' written notice is required for
termination of the Interim Subadvisory Contract by a Fund, rather than the 60
days' written notice required under the Proposed Subadvisory Contract. Another
difference is an additional provision in the Proposed Subadvisory Contract that
reflects the Board's ability to amend the Contract without shareholder approval
in accordance with the anticipated SEC order discussed in Proposal 4 (provided
Proposal 4 is approved by shareholders). In addition, the Proposed Subadvisory
Contract specifically states that the Contract will terminate upon its
assignment or the termination of the Proposed Management Contract.
Evaluation by the Board
In determining to approve the Proposed Subadvisory Contract, the Board
analyzed the factors it deemed relevant, particularly CCM's decision to delegate
portfolio advisory services for equity funds, CEP's particular experience in
managing equity assets, its reputation, the past performance of other funds
managed by CEP that invest in equity securities, its overall capabilities to
perform the services under the Proposed Subadvisory Contract and its willingness
to perform those services for the Funds. The Board also considered the
subadvisory fees that would be payable to CEP. The Board reviewed the services
provided by CEP to its other investment company clients, the ability of CEP to
provide these services to the Funds, including its personnel, operations and
financial condition, and other factors that would affect the provision of those
10
services.
The Board's review and analysis revealed that CEP capably manages
equity assets, including those mutual fund assets listed in Appendix E. The
Board concluded that the CEP management team demonstrated capable management
ability by examining, among other factors, its long-standing experience,
exceeding twelve years, of equity management; the long-term past performance of
other mutual funds and accounts managed by CEP; and the fees charged by CEP to
comparable equity clients. Furthermore, CEP represented to the Board, in person
and in writing, that it has a capable and seasoned advisory staff, stable
operations, and a sound financial condition.
After full consideration of these and other factors, the Board,
including a majority of the Independent Trustees, approved the Proposed
Subadvisory Contract and recommended that it be submitted to the shareholders
for approval.
Required Vote
Approval of Proposal 2 requires the affirmative vote of the lesser of
(1) 67% or more of the shares of each of the Conseco Large-Cap Fund, the Conseco
Equity Fund, and the Conseco Balanced Fund, respectively, present at the
Meeting, if more than 50% of the outstanding shares of each such Fund are
represented at the Meeting in person or by proxy, or (2) more than 50% of the
outstanding shares of each such Fund entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2.
----------------------------
PROPOSAL 3: TO APPROVE OR DISAPPROVE A SUBADVISORY CONTRACT BETWEEN
CCM AND OAK WITH RESPECT TO THE CONSECO SCIENCE & TECHNOLOGY FUND AND
THE CONSECO 20 FUND.
CCM proposed to the Board, and the Board approved at its meeting on
November 28, 2000, a subadvisory contract between CCM and OAK ("Proposed
Subadvisory Contract" or the "Contract"). The Proposed Subadvisory Contract is
substantially similar to the Interim Subadvisory Contract adopted by the Board
on December 1, 2000. A form of a Proposed Subadvisory Contract is attached as
Appendix F.
Further information about OAK is set forth in Appendix G.
Proposed Subadvisory Contract
Under the Proposed Subadvisory Contract, OAK would be responsible,
subject to the supervision of the Board and CCM, for the actual investment
management of all or a designated portion of the assets of the Conseco Science &
Technology Fund and the Conseco 20 Fund, including placing purchase and sell
orders for investments and for other related transactions. OAK agrees to provide
a continuous investment program for each Fund's assets, including investment
research and management. The Proposed Subadvisory Contract recognizes that OAK
may, under certain circumstances, pay higher brokerage commissions by executing
portfolio transactions with brokers that provide OAK with research, analysis,
advice or similar services. The Proposed Subadvisory Contract also provides that
OAK will (1) maintain all books and records required to be maintained by it
pursuant to the 1940 Act and the rules and regulations promulgated thereunder
with respect to transactions OAK effects on behalf of each Fund, and will
furnish the Board and CCM with such periodic and special reports as the Board or
CCM may reasonably request; (2) provide the Board or CCM with economic and
investment analyses and reports, as well as quarterly reports, setting forth
each Fund's performance with respect to its investments and make available to
the Board and CCM any economic, statistical and investment services that OAK
normally makes available to its institutional investors or other customers; and
(3) provide assistance in the fair valuation
11
of, and use reasonable efforts to arrange for the provision of a price or prices
from one or more parties independent of OAK, for each portfolio security for
which the fund administrator does not obtain prices in the ordinary course of
business from an automated pricing service.
The Proposed Subadvisory Contract provides that OAK will not be liable
for any error of judgment or mistake of law or for any loss suffered by a Fund,
its shareholders, the Trust or CCM in connection with the matters to which the
Contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of OAK in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Contract. In
addition, OAK will not have any responsibilities for any other series of the
Trust, for any portion of a Fund's assets that it does not manage or for the
acts or omissions of any other subadviser for a Fund or the Trust. In
particular, if at any time OAK only manages a portion of a Fund's assets, OAK
will have no responsibility for the Fund being in violation of any law or
regulation or Fund policy or restriction, or for the Fund's failure to qualify
as a "regulated investment company" for federal tax purposes, if the portion of
the Fund's portfolio managed by OAK would not be in such violation or fail to so
qualify if such portion were deemed a separate series of the Trust or a separate
"regulated investment company."
CCM has agreed to indemnify, defend and hold harmless OAK, its
affiliates, and each of their officers, directors, employees, shareholders,
agents, and representatives from and against any and all losses, claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
arising from or related to the services contemplated under the Proposed
Subadvisory Contract, except to the extent that such losses, claims, damages,
liabilities, costs and expenses result from OAK's willful misfeasance, bad
faith, or gross negligence in the performance of its duties or from reckless
disregard by OAK of its obligations and duties under the Contract.
The Proposed Subadvisory Contract provides that each Fund, by the vote
of a majority of the Board or a majority of its outstanding voting securities,
may terminate the Contract, without penalty, on 60 days' written notice to OAK
and OAK may terminate the Contract, without penalty, on 60 days' written notice
to CCM. The Proposed Subadvisory Contract also permits CCM to terminate the
Contract, without penalty, upon material breach by OAK of any of certain
specific representations and warranties in the Contract. These representations
and warranties concern failure to be registered as an investment adviser,
failure to adopt a code of ethics, failure to notify CCM of changes in control
and failure to obtain written consent from CCM before referring to OAK's
relationship with a Fund, the Trust, CCM or any of their affiliates in
promotional materials. OAK may cure such breach within a 20 day period after
notice thereof. Additionally, CCM may terminate the Proposed Subadvisory
Contract without penalty if, in the reasonable judgment of CCM, OAK becomes
unable to discharge its duties and obligations under the Contract, including
circumstances such as financial insolvency of OAK or any other circumstances
which could adversely affect a Fund. In addition, the Proposed Subadvisory
Contract is automatically terminable upon assignment.
Under the Proposed Subadvisory Contract, for the services performed and
the expenses assumed, OAK would receive a subadvisory fee from CCM (not the
12
Funds), computed daily and paid monthly, at an annual rate of a certain
percentage of the portion of a Fund's average daily net assets under OAK's
management. The fees paid by each Fund are shown in the table below.
- ------------------------------------------------------------ ------------------------------------------
Fund % of a Fund's daily net assets paid to OAK
- ------------------------------------------------------------ ------------------------------------------
Conseco 20 Fund 0.30%
- ------------------------------------------------------------ ------------------------------------------
Conseco Science & Technology Fund 0.30%
- ------------------------------------------------------------ ------------------------------------------
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT
OF MANAGEMENT FEES PAID BY THE FUNDS TO CCM OR CCM'S DUTIES AND RESPONSIBILITIES
TOWARD THE FUNDS UNDER THE PROPOSED MANAGEMENT CONTRACT.
If approved by each Fund's shareholders, the Proposed Subadvisory
Contract will become effective on the date of approval and will remain in effect
for an initial two-year term. Thereafter, the Proposed Subadvisory Contract will
continue in effect if it is approved at least annually by a vote of each Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of the Independent Trustees, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval.
COMPARISON OF THE INTERIM SUBADVISORY CONTRACT AND THE PROPOSED
SUBADVISORY CONTRACT
The Interim Subadvisory Contract and the Proposed Subadvisory Contract
are substantially similar. Some of the differences between these Contracts stem
from the provisional nature of the Interim Subadvisory Contract and the
requirements of Rule 15a-4 of the 1940 Act. The Interim Subadvisory Contract is
only effective for 150 days from the termination date of the Old Advisory
Contracts, not for two years from the date of adoption as under the Proposed
Subadvisory Contract, and only 10 days' written notice is required for
termination of the Interim Subadvisory Contract by a Fund, rather than the 60
days' written notice required under the Proposed Subadvisory Contract. Another
difference is an additional provision in the Proposed Subadvisory Contract that
reflects the Board's ability to amend the Contract without shareholder approval
in accordance with the anticipated SEC exemptive order discussed in Proposal 4
(provided Proposal 4 is approved by shareholders). In addition, the Proposed
Subadvisory Contract specifically states that the Contract will terminate upon
its assignment or the termination of the Proposed Management Contract.
Evaluation by the Board
In determining to approve the Proposed Subadvisory Contract, the Board
analyzed the factors it deemed relevant, particularly CCM's decision to delegate
portfolio advisory services to equity funds, OAK's particular experience in
managing equity assets, its reputation, the past performance of other funds
managed by OAK that invest in equity securities, its overall capabilities to
perform the services under the Proposed Subadvisory Contract and its willingness
to perform those services for the Funds. The Board also considered the
subadvisory fees that would be payable to OAK. The Board reviewed the services
provided by OAK to its other investment company clients, the ability of OAK to
provide these services to the Funds, including its personnel, operations and
13
financial condition, and other factors that would affect the provision of those
services.
The Board's review and analysis revealed that OAK capably manages
equity assets, including those mutual fund assets listed in Appendix G. The
Board concluded that OAK demonstrated capable management ability by examining,
among other factors, its long-standing experience, exceeding sixteen years, of
equity management; the long-term past performance of other mutual funds and
accounts managed by OAK; and the fees charged by OAK to comparable equity
clients. Furthermore, OAK represented to the Board, in person and in writing,
that it has a capable and seasoned advisory staff, stable operations, and a
sound financial condition.
After full consideration of these and other factors, the Board,
including a majority of the Independent Trustees, approved the Proposed
Subadvisory Contract and recommended that it be submitted to the shareholders
for approval.
Required Vote
Approval of Proposal 3 requires the affirmative vote of the lesser of
(1) 67% or more of the shares of each of the Conseco Science & Technology Fund
and the Conseco 20 Fund, respectively, present at the Meeting, if more than 50%
of the outstanding shares of each such Fund are represented at the Meeting in
person or by proxy, or (2) more than 50% of the outstanding shares of each such
Fund entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3.
----------------------------
PROPOSAL 4: TO APPROVE A POLICY TO PERMIT CCM AND THE BOARD TO APPOINT
AND REPLACE SUBADVISERS, TO ENTER INTO SUBADVISORY CONTRACTS AND TO
APPROVE AMENDMENTS TO SUBADVISORY CONTRACTS ON BEHALF OF THE FUNDS
WITHOUT FURTHER SHAREHOLDER APPROVAL.
At its meeting on January 17, 2001, the Board approved, and recommended
that the shareholders of the Funds also be asked to approve, a policy to permit
CCM, subject to the approval of the Board, to appoint and replace subadvisers,
to enter into subadvisory contracts and to amend subadvisory contracts on behalf
of the Funds without further shareholder approval ("Subadviser Approval
Policy"). Shareholders are being asked to approve this policy at the meeting to
permit CCM to make future changes in the subadvisory arrangements for the Funds
without having to incur the expense of another shareholder meeting. If approved
by the Funds' shareholders, the policy would apply only to subadvisers that are
not CCM affiliates and thus would not permit CCM and the Board to appoint any
CCM affiliate to serve as subadviser to the Funds without shareholder approval.
The Anticipated Exemptive Order
On February 12, 2001, the Funds and CCM anticipate filing an
application for an exemptive order from the SEC that would permit CCM and the
Funds' Board to appoint and replace subadvisers that are not affiliated with CCM
and to amend subadvisory contracts with these subadvisers without obtaining
shareholder approval. The Funds' shareholders must approve the Subadviser
Approval Policy before CCM and the Board may implement it. Without the exemptive
order, the provisions of the 1940 Act require that the Funds' shareholders
approve all new subadvisory contracts as well as material amendments to any
existing subadvisory
14
contract. If shareholders approve this proposal, CCM will be authorized to
evaluate, select and retain unaffiliated subadvisers for the Funds, subject to
receipt of the exemptive order from the SEC, and subject to approval by the
Board, including a majority of the Independent Trustees, and to modify the
subadvisory contracts without obtaining further approval of the Funds'
shareholders whenever CCM and the Board believe these actions would benefit the
Funds and their shareholders. As explained below, shareholders would receive
detailed information regarding any new subadviser. There is no guarantee that
CCM and the Funds will receive the exemptive order they have requested from the
SEC.
Current Subadviser Approval Process
Currently, the holders of a majority of a Fund's outstanding shares
must approve any subadvisory contract between CCM and another investment adviser
pursuant to which the other adviser provides a Fund with investment management
services. Shareholder approval is required in addition to approval by the Board
and a majority of the Independent Trustees.
Proposed Subadviser Approval Policy
The proposed Subadviser Approval Policy would permit CCM, subject to
the approval of the Board, including a majority of the Independent Trustees, to
appoint and replace subadvisers and to amend subadvisory contracts without
obtaining shareholder approval. The Subadviser Approval Policy thus would permit
CCM to change subadvisers or subadvisory arrangements in the following types of
situations, among others: (1) the subadviser has a record of substandard
performance; (2) the individual employees responsible for portfolio management
of a Fund have moved from the subadviser to another investment advisory firm;
(3) there is a change of control of the subadviser; (4) CCM decides to diversify
a Fund's management by adding another subadviser; or (5) there is a change in
investment style of a Fund. The Subadviser Approval Policy will not be used to
approve any subadviser that is affiliated with CCM, as that term is used in the
1940 Act, or materially amend any subadvisory contract with an affiliated
subadviser.
Approval of the Subadviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Funds, CCM, any
subadviser, or any subadvisory contract, other than the requirement to call and
hold a meeting of the Fund's shareholders for the purpose of approving a
subadvisory contract. The Board, including the Independent Trustees, will
continue to evaluate and approve all new subadvisory contracts between CCM and
any subadviser as well as all changes to existing subadvisory contracts. In
addition, the Funds and CCM will be subject to several conditions imposed by the
SEC to ensure that the interests of the Fund's shareholders are adequately
protected whenever CCM acts under the Subadviser Approval Policy. Finally,
within 90 days of the appointment of a new subadviser, a Fund will provide its
shareholders with an information statement that contains substantially the same
relevant information about the subadviser, the subadvisory contract and the
subadvisory fee that the Funds' shareholders would receive in a proxy statement.
If a Fund's shareholders are not satisfied with the subadvisory arrangements
that CCM and the Board implement under the Subadviser Approval Policy, they
would, of course, be able to exchange or sell their shares.
15
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT
OF MANAGEMENT FEES PAID BY THE FUNDS TO CCM OR CCM'S DUTIES AND RESPONSIBILITIES
TOWARD THE FUNDS UNDER THE PROPOSED MANAGEMENT CONTRACT.
Benefits of the Subadvisory Approval Policy
The Board believes that it is in the best interests of the Funds'
shareholders to give CCM the maximum flexibility to select, supervise and
evaluate subadvisers without incurring the expense and potential delay of
seeking specific shareholder approval. While Rule 15a-4 under the 1940 Act
provides a limited exception to the shareholder approval requirements for an
interim advisory contract (pursuant to which the Funds' Interim Management
Contract and Interim Subadvisory Contracts were adopted), a Fund's current
advisory contract must be terminated before the Rule can apply and a Fund's
shareholders still must approve both the resultant interim advisory and
subadvisory contracts no later than 150 days after their effective date. Thus,
even when a change in investment management arrangements involving one or more
subadvisers can be put into place promptly on a temporary basis, a fund must
still call and hold a meeting of the Fund's shareholders, create and distribute
proxy materials, and arrange for the solicitation of voting instructions from
shareholders. This process is time-intensive, slow and costly. These costs are
generally borne entirely by a Fund (although in the case of this solicitation,
they are being borne by CCM). If CCM and the Board can rely on the Subadviser
Approval Policy, the Board would be able to act more quickly and with less
expense to appoint an unaffiliated subadviser when the Board and CCM believe
that the appointment would benefit the Funds and their shareholders.
Also, the Board will oversee the subadviser selection process to ensure
that shareholders' interests are protected whenever CCM selects a subadviser or
modifies a subadvisory contract. The Board, including a majority of the
Independent Trustees, will continue to evaluate and approve all new subadvisory
contracts as well as any modification to existing subadvisory contracts. In each
review, the Board will analyze all factors that it considers to be relevant to
the determination, including the nature, quality and scope of services provided
by the subadvisers. The Board will compare the investment performance of the
assets managed by the subadviser with other accounts with similar investment
objectives managed by other advisers and will review the subadviser's compliance
with federal securities laws and regulations. The Board believes that its review
will ensure that CCM continues to act in the best interests of the Funds and
their shareholders.
Required Vote
Approval of Proposal 4 with regard to any Fund requires the affirmative
vote of the lesser of (1) 67% or more of the shares of a Fund present at the
Meeting, if more than 50% of the outstanding shares of such Fund are represented
at the Meeting in person or by proxy, or (2) more than 50% of the outstanding
shares entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 4.
----------------------------
16
PROPOSAL 5: TO ELECT A BOARD OF TRUSTEES.
The Board proposes that shareholders elect the seven individuals named
in the table below as members of the Trust's Board. All Trustees will serve
until their successors are duly elected and qualified. Each nominee currently
serves as a Trustee of the Trust. Each nominee, with the exception of Mr.
Walthall, has served as a Trustee since the Trust's inception in 1996. Mr.
Walthall was elected by the Board, including all of the Trustees who are not
"interested persons" of the Trust within the meaning of the 1940 Act
("Independent Trustees"), on October 12, 1998.
The following information regarding each person nominated for election
as a Trustee includes such person's age, positions with the Adviser (if any),
principal occupation and business experience for the last five years:
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
MAXWELL E. BUBLITZ* 45 Trustee and President of the Trust; Chartered
Financial Analyst; CEO, President and Director, CCM;
Senior Vice President, Investments of Conseco, Inc.;
President and Trustee of three other investment
companies managed by CCM. Address: 11825 North
Pennsylvania Street, Carmel, Indiana 46032.
WILLIAM P. DAVES, Jr. 75 Trustee and Chairman of the Board of the Trust;
Consultant to insurance and healthcare industries;
Director, Chairman and Chief Executive Officer, FFG
Insurance Co.; Chairman of the Board and Trustee of
three other investment companies managed by CCM.
Address: 5723 Trail Meadow, Dallas, Texas 75230.
17
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
GREGORY J. HAHN* 40 Trustee and Vice President of the Trust; Chartered
Financial Analyst; Senior Vice President, CCM, Trustee
of two other investment companies managed by CCM
and officer and portfolio manager of three other
investment companies managed by CCM. Address: 11825
North Pennsylvania Street, Carmel, Indiana 46032.
HAROLD W. HARTLEY 77 Trustee of the Trust; Chartered Financial Analyst;
Director, Ennis Business Forms, Inc.; Retired,
Executive Vice President, Tenneco Financial
Services, Inc.; Trustee of three other investment
companies managed by CCM. Address: 502 Canal Cove
Ct., Ft. Myers Beach, Florida 33913.
DR. R. JAN LECROY 69 Trustee of the Trust; Director, Southwest Securities
Group, Inc.; Retired, President, Dallas Citizens
Council; Trustee of three other investment companies
managed by CCM. Address: 841 Liberty, Dallas,
Texas 75204.
DR. JESS H. PARRISH 73 Trustee of the Trust; Higher Education Consultant;
Former President, Midland College; Trustee of three
other investment companies managed by CCM.
Address: 2805 Sentinel, Midland, Texas 79701.
18
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
DAVID N. WALTHALL 55 Trustee of the Trust; Principal, Walthall Asset
Management; Formerly President, Chief Executive
Officer and Director of Lyrick Corporation;
Formerly, President and CEO, Heritage Media
Corporation; Formerly, Director, Eagle National
Bank; Trustee of three other investment companies
managed by CCM. Address: 1 Galleria Tower, Suite
1050, 13355 Noel Road, Dallas, Texas 75240.
<FN>
* The Trustees so indicated are considered "interested persons," of the Fund as
defined in the 1940 Act, due to their employment with the Adviser.
</FN>
The following information pertaining to each executive officer of the
Trust not listed above includes such person's age, positions with the Adviser
(if any), principal occupation and business experience for the last five years:
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE FOR PAST
NAME AND POSITION WITH FUND AGE FIVE YEARS
WILLIAM P. KOVACS, ESQ. 55 Vice President, General Counsel,
Vice President and Secretary Secretary, Chief Compliance Officer
and Director of CCM. Vice President
and Secretary of three other
investment companies managed by CCM.
Previously, Of Counsel to Shefsky &
Froelich and Rudnick & Wolfe; Prior
thereto, Vice President and
Assistant Secretary, Kemper
Financial Services, Inc.
19
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE FOR PAST
NAME AND POSITION WITH FUND AGE FIVE YEARS
JAMES S. ADAMS 41 Senior Vice President, Chief
Treasurer Accounting Officer and Treasurer
of Conseco, Inc. and various of
its subsidiaries. Treasurer of
three other investment companies
managed by CCM.
WILLIAM T. DEVANNEY 45 Senior Vice President, Corporate
Vice President Taxes, of Conseco Services, LLC
and various of its affiliates.
Vice President of three other
investment companies managed by CCM.
The persons named in the accompanying form of proxy intend to vote each
such proxy for the election of the nominees, unless shareholders specifically
indicate on their proxies the desire to withhold authority to vote for elections
to office. It is not contemplated that any nominee will be unable to serve as a
Board member for any reason, but if that should occur prior to the meeting, your
shares will be voted "FOR" such other nominee or nominees as the Trustees may
recommend.
To the knowledge of the Trust's management, as of the Record Date, the
Trustees and officers of the Trust owned, as a group, less than 1% of the
outstanding shares of the Trust.
There were four meetings of the Board held during the Trust's fiscal
year ended December 31, 2000. Each Trustee attended at least 75% of the total
number of meetings of the Board.
The Trust has an audit committee comprised of all of the Independent
Trustees of the Trust. The audit committee reviews financial statements and
other audit-related matters as they arise throughout the year. The Trust also
has a nominating committee comprised of its Independent Trustees. In addition,
the Trust has a compensation committee comprised of its Independent Trustees. If
shareholders would like to recommend a nominee to the Board, they should send
resumes or other information to William P. Kovacs, Secretary of the Trust, at
Conseco Capital Management, 11825 N. Pennsylvania Street, Carmel, Indiana 46032.
Effective July 1, 2000, each Trustee who is not an "interested person"
of the Trust receives an annual retainer fee of $7,500, a fee of $1,500 for each
Board meeting or Independent Trustee meeting he attends, and a fee of $500 for
Board meetings and separate committee meetings attended that are conducted by
telephone. The Chairman of the Board receives an additional per meeting fee of
$375 for in-person Board meetings. The Trust also reimburses each Trustee who is
not an "interested person" of the Trust for travel and out-of-pocket expenses.
20
The Trust does not pay any other remuneration to its officers and Board
members, and the Trust does not have a bonus, pension, profit-sharing or
retirement plan.
The aggregate amount of compensation paid to each Independent Trustee
by the Trust for the fiscal year ended December 31, 2000, and by all funds in
the Conseco Family of Funds for which such Independent Trustee was a Board
member (the number of which is set forth in parenthesis next to each Trustee's
total compensation) for the year ended December 31, 2000, was as follows:
- ------------------------------------- ----------------------------------- --------------------------------------
Name of Trustee Aggregate Compensation from the Total Compensation from the Trust
Trust* and Fund Complex **
- ------------------------------------- ----------------------------------- --------------------------------------
William P. Daves, Jr. $10,958.67 $38,521.50 (17)
- ------------------------------------- ----------------------------------- --------------------------------------
Harold W. Hartley $10,583.67 $36,834.00 (17)
- ------------------------------------- ----------------------------------- --------------------------------------
Dr. R. Jan LeCroy $10,583.67 $36,834.00 (17)
- ------------------------------------- ----------------------------------- --------------------------------------
Dr. Jess H. Parrish $10,583.67 $36,834.00 (17)
- ------------------------------------- ----------------------------------- --------------------------------------
David N. Walthall $10,583.67 $36,834.00 (17)
- ------------------------------------- ----------------------------------- --------------------------------------
<FN>
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $4,958.86 for all Trustees as a group.
** Represents TOTAL COMPENSATION FROM ALL investment companies in the fund
complex, including the Trust, for which the Trustee serves as a Board member.
The number in parentheses represents the number of investment company series the
Trustee served.
</FN>
REQUIRED VOTE
Proposal 5 requires a plurality vote of the total outstanding shares of
the Trust for each nominee, which means that the seven nominees receiving the
largest number of votes will be elected.
THE TRUST'S BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF EACH
NOMINEE TO SERVE AS A TRUSTEE OF THE TRUST.
-------------------------
21
PROPOSAL 6: TO CONSIDER THE RATIFICATION OF THE SELECTION OF THE
INDEPENDENT ACCOUNTANTS.
The Board, including all of the Independent Trustees, has selected
PricewaterhouseCoopers LLP to continue to serve as the independent accountants
of the Trust for the fiscal year ending December 31, 2001. Apart from fees
received as independent accountants, neither PricewaterhouseCoopers LLP nor any
of its partners has a direct, or material indirect, financial interest in the
Trust. Representatives of PricewaterhouseCoopers LLP are not expected to attend
the Meeting, but have been given the opportunity to make a statement if they so
desire, and will be available should any matter arise requiring their attention.
The employment of PricewaterhouseCoopers LLP is conditioned upon the
right of the Trust, by vote of a majority of its outstanding securities at any
meeting called for that purpose, to terminate such employment forthwith without
penalty. The independent accountants examine annual financial statements for
each Fund and provide other audit and tax-related services. In recommending the
selection of PricewaterhouseCoopers LLP, the Board reviewed the nature and scope
of the services to be provided (including non-audit services) and whether the
performance of such services would affect the accountants' independence.
PricewaterhouseCoopers LLP has acted as independent accountants of the Trust
since the Trust's organization. The Board believes that the continued employment
of PricewaterhouseCoopers LLP for the fiscal year ending December 31, 2001 is in
the best interests of the Trust and each Fund.
REQUIRED VOTE
Approval of Proposal 6 with respect to the Trust requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Trust, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Trust or (2) 67% or more of the
shares of the Trust present at the Meeting if more than 50% of the outstanding
shares of the Trust are represented at the Meeting in person or by proxy.
THE TRUST'S BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS OF THE TRUST.
----------------------------
PROPOSAL 7: TO APPROVE OR DISAPPROVE A CHANGE IN THE CONSECO HIGH
YIELD FUND'S FUNDAMENTAL POLICY CONCERNING DIVERSIFICATION.
The Board has approved a change to the fundamental investment
limitation of the Conseco High Yield Fund concerning diversification. The Board
and CCM believe that the proposed change will provide the Fund with greater
flexibility to respond to certain present and future investment opportunities.
Because the policy in question is fundamental, the change requires shareholder
approval before it can be implemented.
22
The Conseco High Yield Fund's current operating policy with respect to
portfolio diversification is as follows:
As a matter of fundamental policy, the Fund will not purchase the
securities of any issuer if (a) more than 5% of Fund's total assets
would be invested in the securities of that issuer or (b) the Fund
would own more than 10% of the outstanding voting securities of that
issuer; this restriction does not apply to U.S. Government securities.
The proposed change to the investment policy would add the language
below:
With respect to 75% of a Fund's total assets, the Fund will not invest
more than 5% of the value of its assets in the securities of any one
issuer if thereafter the Fund in question would have more than 5% of
its assets in the securities of any issuer or would own more than 10%
of the outstanding voting securities of such issuer; this restriction
does not apply to U.S. Government securities.
The 1940 Act requires all mutual funds to state whether they are
"diversified" or "non-diversified." The Conseco High Yield Fund is diversified
and, accordingly, must restrict the percentage of its assets that can be
invested in any one issuer. Diversified funds are relatively safer than
non-diversified funds, because the risk is spread over a larger number of
issuers. However, any investment in a mutual fund, whether diversified or
non-diversified, involves risk, including the risk that you could lose money.
The 1940 Act permits a fund, in counting the percentage of its assets
invested in various issuers for diversity purposes, to exclude 25% of a fund's
total assets from subjection to the diversification policy. Therefore, if the
proposed change were implemented, the Conseco High Yield Fund would have greater
flexibility in investing the 25% of its total assets that would not be subject
to the restriction on investing in a single issuer. This change would conform
the Conseco High Yield Fund's diversification policy to that of the other
Conseco Funds that are series of the Trust.
REQUIRED VOTE
Approval of the change contemplated by Proposal 7 with respect to the
Conseco High Yield Fund requires the affirmative vote of a "majority of the
outstanding voting securities" of the Conseco High Yield Fund, which for this
purpose means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Conseco High Yield Fund or (2) 67% or more of the
shares of the Conseco High Yield Fund present at the Meeting if more than 50% of
the outstanding shares of the Conseco High Yield Fund are represented at the
Meeting in person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 7.
------------------------
23
OTHER INFORMATION
Shareholder Proposals. As a general matter, the Funds do not hold
regular annual or other regular meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of the Funds'
shareholders should send such proposals to a Fund at 11825 North Pennsylvania
Street, Carmel, Indiana 46032. Proposals must be received a reasonable period of
time prior to any meeting to be included in the proxy materials or otherwise to
be considered at the meeting. Moreover, inclusion of such proposals is subject
to limitations under the federal securities laws. Persons named as proxies for
any subsequent shareholders' meeting will vote in their discretion with respect
to proposals submitted on an untimely basis.
Other Business. The Funds' management knows of no other business to be
presented to the Meeting other than the matters set forth in this Proxy
Statement, but should any other matter requiring a vote of the Funds'
shareholders arise, the proxies will vote thereon according to their best
judgment in the interests of the Funds.
By Order of the Board of Trustees,
----------------------------------
William P. Kovacs, Secretary
February 12, 2001
24
APPENDIX A
As of January 24, 2001, the following shareholders are shown on the
Fund's records as owning more than 5% of a class of its shares:
- -------------------- --------------------------------------- -------------------------------------------------
FUND NAME AND ADDRESS NUMBER AND PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS OF JANUARY 24, 2001
- -------------------- --------------------------------------- -------------------------------------------------
Conseco Science Merrill Lynch, Pierce, Fenner & 37.52% 1,733,788.898
& Technology Smith
Fund 4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Senior Health Insurance Co. 13.22% 610,801.395
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco Life Insurance Co. 12.86% 594,297.399
11815 N. Pennsylvania Street
Carmel, IN 46032
Bankers Life & Casualty 8.66% 400,000.000
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco Annuity Assurance Co. 6.91% 319,305.852
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco Health Insurance Co. 6.75% 312,077.026
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco 20 Merrill Lynch, Pierce, Fenner & 71.02% 13,856,791.000
Fund Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Large- Merrill Lynch, Pierce, Fenner & 47.50% 1,426,532.271
Cap Fund Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Health Insurance Co. 35.89% 1,077,904.996
11815 N. Pennsylvania Street
Carmel, IN 46032
- -------------------- --------------------------------------- -------------------------------------------------
FUND NAME AND ADDRESS NUMBER AND PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS OF JANUARY 24, 2001
- -------------------- --------------------------------------- -------------------------------------------------
Conseco Equity Conseco Save 401k Plan/BNL 60.96% 9,669,333.222
Fund 1700 W. 82nd Street, Suite 125
Bloomington, MN 55431
Merrill Lynch, Pierce, Fenner & 22.62% 3,587,519.815
Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Merrill Lynch, Pierce, Fenner & 37.37% 2,296,993.322
Balanced Fund Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Bankers Life & Casualty 13.10% 804,960.983
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco Save 401k Plan/BNL 17.33% 1,330,508.020
1700 W. 82nd Street, Suite 125
Bloomington, MN 55431
Conseco Merrill Lynch, Pierce, Fenner & 65.14% 3,682,474.765
Convertible Smith
Securities Fund 4800 Deer Lake Drive East
Jacksonville, FL 32246
Bankers Life & Casualty 10.23% 578,090.925
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco High Merrill Lynch, Pierce, Fenner & 75.08% 8,075,799.372
Yield Fund Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Fixed Merrill Lynch, Pierce, Fenner & 29.85% 2,291,757.811
Income Fund Smith
4800 Deer Lake Drive East
Jacksonville, FL 32246
Conseco Health Insurance Co. 18.84% 1,446,518.641
11815 N. Pennsylvania Street
Carmel, IN 46032
Conseco Save 401k Plan/BNL 17.33% 1,330,508.020
1700 W. 82nd Street, Suite 125
Bloomington, MN 55431
Each shareholder listed may be contacted c/o Conseco Capital Management, Inc.,
11825 North Pennsylvania Street, Carmel, Indiana 46032. 1-317-817-4560
* Conseco Services, LLC is the administrator ("Administrator") for each of the
Funds. The Administrator is located at 11815 N. Pennsylvania Street, Carmel,
Indiana 46032. As compensation for administrative services, the Administrator
receives annual fees equal to 0.20% of each Fund's daily net assets.
* Conseco Equity Sales, Inc. is the distributor ("Distributor") for each of the
Funds. The Distributor is located at 11825 N. Pennsylvania Street, Carmel,
Indiana 46032.
* The Administrator and the Distributor will continue services if the Proposals
discussed herein are passed.
APPENDIX B
FORM OF INVESTMENT MANAGEMENT CONTRACT
Contract made as of __________, 2001 ("Contract") between CONSECO FUND
GROUP, a Massachusetts business trust ("Trust"), and CONSECO CAPITAL MANAGEMENT,
INC. ("Adviser"), a Massachusetts corporation registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
is authorized to offer for public sale distinct series of shares of beneficial
interest; and
WHEREAS the Trust desires to retain the Adviser and may desire to have
one or more investment advisers (each a "Subadviser") provide investment
advisory and portfolio management services with respect to the series of shares
of beneficial interest of the Trust listed on Schedule A hereto, as such
schedule may be amended from time to time (each a "Fund"); and
WHEREAS the Trust desires to retain the Adviser as investment manager
to furnish certain portfolio management services to the Trust with respect to
each Fund for which a Subadviser is employed, and the Adviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Adviser as investment
adviser of the Trust and each Fund for the period and on the terms set forth in
this Contract. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Employment; Duties of the Adviser.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and any written guidelines adopted by the Board, the Adviser
will provide a continuous investment program for all or a designated portion of
the assets ("Segment") of each Fund, including investment research and
discretionary management with respect to all securities and investments and cash
equivalents in each Fund or Segment. The Adviser will determine from time to
time what investments will be purchased, retained or sold by each Fund or
Segment. The Adviser will be responsible for placing purchase and sell orders
for investments and for other related transactions for each Fund or Segment. The
Adviser will be responsible for voting proxies of issuers of securities held by
each Fund or Segment. The Adviser understands that each Fund's assets need to be
managed so as to permit it to qualify or to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended
("Code"). The Adviser will provide services under this Contract in accordance
with each Fund's investment objective, policies and restrictions as stated in
the Trust's currently effective registration statement under the 1940 Act, and
any amendments or supplements thereto ("Registration Statement").
(b) The Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of each Fund, the Adviser may, in its discretion and in compliance with
Section 28(e) of the Securities and Exchange Act of 1934, use brokers that
provide the Adviser with research, analysis, advice and similar services to
execute portfolio transactions on behalf of each Fund or Segment, and the
Adviser may pay to those brokers in return for brokerage and research services a
higher commission than may be charged by other brokers, subject to the Adviser's
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Adviser to
each Fund and its other clients and that the total commissions paid by each Fund
or Segment will be reasonable in relation to the benefits to each Fund over the
long term. In no instance will portfolio securities be purchased from or sold to
the Adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. The Adviser
may aggregate sales and purchase orders with respect to the assets of each Fund
or Segment with similar orders being made simultaneously for other accounts
2
advised by the Adviser or its affiliates. Whenever the Adviser simultaneously
places orders to purchase or sell the same security on behalf of a Fund and one
or more other accounts advised by the Adviser, the orders will be allocated as
to price and amount among all such accounts in a manner believed to be equitable
over time to each account.
(c) The Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Adviser on behalf of each Fund or
Segment, and will furnish the Board with such periodic and special reports as
the Board reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records that it
maintains for a Fund are the property of the Trust, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records that it
maintains for the Trust and that are required to be maintained by Rule 31a-1
under the 1940 Act, and further agrees to surrender promptly to the Trust any
records that it maintains for a Fund upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board, the
Adviser will provide the Board with economic and investment analyses and reports
as well as quarterly reports setting forth the performance of a Fund or Segment
and make available to the Board any economic, statistical and investment
services that the Adviser normally makes available to its institutional or other
customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Adviser is responsible for assisting in the fair valuation of
all portfolio securities in each Fund or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of the Adviser for each portfolio security for which the custodian
does not obtain prices in the ordinary course of business from an automated
pricing service.
3. Retention of a Subadviser. The Adviser may retain one or more
Subadvisers, at the Adviser's own cost and expense. In the event that the
Adviser retains one or more Subadviser(s) for a Fund, the following provisions
apply:
(a) Subject to the oversight and direction of the Board of the Trust
("Trustees"), the Adviser will provide to the Trust investment management
evaluation services by performing initial reviews of prospective Subadviser(s)
for each Fund and supervising and monitoring performance of the Subadviser(s)
thereafter. The Adviser agrees to report to the Trust the results of its
evaluation, supervision and monitoring functions and to keep certain books and
records of the Trust in connection therewith. The Adviser further agrees to
communicate performance expectations and evaluations to the Subadviser(s), and
to recommend to the Trust whether agreements with Subadviser(s) should be
renewed, modified or terminated.
(b) The Adviser will be responsible for informing the Subadviser(s) of
the investment objective(s), policies and restrictions of the Fund for which
each Subadviser is responsible, for informing or ascertaining that it is aware
of other legal and regulatory responsibilities applicable to the Subadviser(s)
with respect to the Fund for which each Subadviser is responsible, and for
monitoring each Subadviser's discharge of its duties; but the Adviser is not
responsible for the specific actions (or inactions) of a Subadviser in the
performance of the duties assigned to it.
(c) With respect to each Subadviser for a Fund, the Adviser shall enter
into an agreement ("Subadvisory Agreement") with the Subadviser in substantially
the form previously approved by the Board.
(d) The Adviser shall be responsible for the fees payable to and shall
pay the Subadviser(s) of a Fund the fee as specified in the Subadvisory
Agreement relating thereto.
4. Further Duties. In all matters relating to the performance of this
Contract, the Adviser will act in conformity with the Declaration of Trust,
By-Laws and the currently effective registration statement of the Trust and any
amendments or supplements thereto ("Registration Statement") and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the Advisers Act, and the rules under each, and all other
applicable federal and state laws and regulations.
3
5. Services Not Exclusive. The services furnished by the Adviser
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of the Adviser, who may also be a
Trustee, officer or employee of the Trust, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature.
6. Expenses.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by the Adviser, incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following (or each Funds' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Fund by the Adviser under this Contract;
(iii) filing fees and expenses relating to the registrations and qualification
of the Fund's shares and the Trust under federal and/or state securities laws
and maintaining such registration and qualifications; (iv) fees and salaries
payable to the Trust's Trustees and officers who are not interested persons of
the Trust or the Adviser; (v) all expenses incurred in connection with the
Trustees' services, including travel expenses; (vi) taxes (including any income
or franchise taxes) and governmental fees; (vii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (viii)
any costs, expenses or losses arising out of a liability of or claim for damages
or other relief asserted against the Trust or the Fund for violation of any law;
(ix) legal, accounting and auditing expenses, including legal fees of special
counsel for those Trustees of the Trust who are not interested persons of the
Trust; (x) charges of custodians, transfer agents and other agents; (xi) costs
of preparing share certificates; (xii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders;
(xiii) costs of mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials to
existing shareholders; (xiv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, agents and
shareholders) incurred by the Trust or the Fund; (xv) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (xvi) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the Board and any committees thereof;
(xvii) the cost of investment company literature and other publications provided
by the Trust to its Trustees and officers; (xviii) costs of mailing, stationery
and communications equipment; (xix) expenses incident to any dividend,
withdrawal or redemption options; (xx) charges and expenses of any outside
pricing service used to value portfolio securities; (xxi) interest on borrowings
of the Trust; and (xxii) fees or expenses related to license agreements with
respect to securities indices.
(c) The Trust or a Fund may pay directly any expenses incurred by it in
its normal operations and, if any such payment is consented to by the Adviser
and acknowledged as otherwise payable by the Adviser pursuant to this Contract,
a Fund may reduce the fee payable to the Adviser pursuant to Paragraph 7 thereof
by such amount. To the extent that such deductions exceed the fee payable to the
Adviser on any monthly payment date, such excess shall be carried forward and
deducted in the same manner from the fee payable on succeeding monthly payment
dates.
(d) The Adviser will assume the cost of any compensation for services
provided to the Trust received by the officers of the Trust and by those
Trustees who are interested persons of the Trust.
(e) The payment or assumption by the Adviser of any expenses of the
Trust or a Fund that the Adviser is not required by this Contract to pay or
assume shall not obligate the Adviser to pay or assume the same or any similar
expense of the Trust or a Fund on any subsequent occasion.
4
7. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to a Fund, the Trust will pay to the Adviser a fee,
computed daily and paid monthly, at an annual rate as set forth on Schedule A
hereto (as such schedule may be amended from time to time), expressed as a
percentage of average daily net assets of the Fund.
(b) The fee shall be computed daily and paid monthly to the Adviser on
or before the first business day of the next succeeding calendar month.
(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
8. Limitation of Liability of the Adviser. The Adviser and its
officers, directors, employees and delegates, including any Subadviser to a
Fund, shall not be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust, a Fund or any of its shareholders, in connection
with the matters to which this Contract relates, except to the extent that such
a loss results from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of the Adviser, who may be or become an
officer, Trustee, employee or agent of the Trust shall be deemed, when rendering
services to a Fund or the Trust or acting with respect to any business of a Fund
or the Trust, to be rendering such service to or acting solely for a Fund or the
Trust and not as an officer, director, employee, or agent or one under the
control or direction of the Adviser even though paid by it.
9. Limitation of Liability of the Trustees and Shareholders of the
Trust. The Trustees of the Trust and the shareholders of any Fund shall not be
liable for any obligations of any Fund or the Trust under this Agreement and the
Adviser agrees that, in asserting any rights or claims under this Agreement, it
shall look only to the assets and property of the Trust in settlement of such
right or claim, and not to such Trustees or shareholders.
10. Duration and Termination.
(a) This Contract shall become effective for each Fund upon the day and
year first written above, provided that this Contract has been approved for the
Fund by a vote of a majority of those Trustees of the Trust who are not parties
to this Contract or interested persons of any such party ("Independent
Trustees") cast in person at a meeting called for the purpose of voting on such
approval.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
each Fund.
(c) Notwithstanding the foregoing, with respect to a Fund, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund upon delivery of sixty (60) days' written notice to the
Adviser and may be terminated by the Adviser at any time, without the payment of
any penalty, upon delivery of sixty (60) days' written notice to the Trust.
Termination of this Contract with respect to a Fund shall in no way affect the
continued validity of this Contract or the performance thereunder with respect
to any other Fund. This Contract shall terminate automatically in the event of
its assignment.
11. Additional Funds. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have the Adviser
render services under this Contract, it shall so notify the Adviser in writing.
If the Adviser agrees in writing to provide said services, such series of shares
shall become a Fund hereunder upon execution of a new Schedule A and compliance
with the requirements of the 1940 Act and the rules and regulations thereunder.
5
12. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to a
Fund shall be effective until approved by vote of the Independent Trustees or a
majority of the Fund's outstanding voting securities.
13. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Indiana, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act, provided, however, that
section 9 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of the
State of Indiana or the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "national
securities exchange," "net assets," "prospectus," "sale," "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the Securities and Exchange Commission by any
rule, regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
CONSECO FUND GROUP
Attest: ____________________ By ______________________
William P. Kovacs Name: Maxwell E. Bublitz
Secretary President
CONSECO CAPITAL MANAGEMENT, INC.
Attest: ____________________ By ____________________
William P. Kovacs Name: Gregory J. Hahn
Secretary Vice President
6
CONSECO FUND GROUP
INVESTMENT MANAGEMENT CONTRACT
SCHEDULE A
Series Annual Fee
Conseco Science & Technology Fund 1.00%
Conseco 20 Fund 0.70%
Conseco Large-Cap Fund 0.70%
Conseco Equity Fund 0.70%
Conseco Balanced Fund 0.70%
Conseco Convertible Securities Fund 0.85%
Conseco High Yield Fund 0.70%
Conseco Fixed Income Fund 0.45%
APPENDIX C
MORE INFORMATION ABOUT CCM
CCM serves as the Funds' investment adviser. CCM, an Delaware
corporation, is a wholly owned asset management subsidiary of Conseco, Inc., a
diversified organization, with operations in many areas of the financial
services industry. CCM is located at 11825 North Pennsylvania Street, Carmel,
Indiana 46032. The principal business offices of Conseco, Inc. are located at
11815 N. Pennsylvania Street, Carmel, Indiana 46032. As of December 31, 2000,
CCM was the adviser or subadviser of 4 investment companies with 17 separate
portfolios and aggregate assets of approximately $1.3 billion.
Since December 31, 2000, purchases and sales of the securities of any
parent or subsidiary of CCM, CEP or OAK by the Trustees of the Funds did not
exceed 1% of the outstanding securities of any class of securities of such
entities.
The following is a list of the directors and principal executive
officer of CCM:
PRINCIPAL
NAME POSITION(S) WITH CCM OCCUPATION
Maxwell E. Bublitz President and CEO President
Gregory J. Hahn Senior Vice President Chief Investment Officer
Nora Bammann Senior Vice President Human Resources
Bruce Johnston Senior Vice President National Sales Director
- -------------------
The business address of each person listed above is 11825 North Pennsylvania
Street, Carmel, Indiana 46032.
2
OTHER INVESTMENT COMPANY CLIENTS
CCM also serves as investment adviser to the following investment
companies, which have investment objectives similar to the Funds', at the fee
rates set forth below.
APPROXIMATE NET
ASSETS AS OF ANNUAL INVESTMENT
DECEMBER 31, 2000 ANNUAL INVESTMENT ADVISORY FEE WITH
FUND (IN MILLIONS) ADVISORY FEE APPLICABLE FEE WAIVER
Conseco Strategic Income Fund $87.3 million 0.90% of average daily net assets 0.90% of average daily net assets
Conseco Stock Car Stocks Index Fund $4.85 million 0.65% of average daily net assets 0.00% of average daily net assets
Conseco Focus 20 Portfolio $3.76 million 0.80% of average daily net assets 0.80% of average daily net assets
Conseco Equity Portfolio $252.69 million 0.75% of average daily net assets 0.72% of average daily net assets
Conseco Balanced Portfolio $65.70 million 0.75% of average daily net assets 0.70% of average daily net assets
Conseco High Yield Portfolio $4.02 million 0.80% of average daily net assets 0.80% of average daily net assets
Conseco Fixed Income Portfolio $37.58 million 0.60% of average daily net assets 0.60% of average daily net assets
Conseco Government Securities Portfolio $18.72 million 0.60% of average daily net assets 0.60% of average daily net assets
Conseco Money Market Portfolio $83.73 million 0.50% of average daily net assets 0.25% of average daily net assets
3
APPENDIX D
FORM OF SUBADVISORY CONTRACT
Agreement made as of __________, 2001 ("Contract") between CONSECO
CAPITAL MANAGEMENT, INC. ("CCM"), and Chicago Equity Partners, LLC, a division
of Bank of America, N.A., a Delaware limited liability company ("Subadviser").
RECITALS
(1) CCM has entered into an Interim Investment Management Agreement,
dated December 1, 2000 ("Management Agreement"), with Conseco Fund Group
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"), with respect to all the
series of the Trust;
(2) CCM wishes to retain the Subadviser to furnish certain investment
advisory and portfolio management services to CCM and the series of the Trust
listed on Schedule A hereto, as such schedule may be amended from time to time
(each a "Fund"); and
(3) The Subadviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, CCM and the Subadviser agree as follows:
1. Appointment. CCM hereby appoints the Subadviser as an investment
subadviser with respect to each Fund for the period and on the terms set forth
in this Contract. The Subadviser accepts that appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. Duties as Subadviser.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and review by CCM, and any written guidelines adopted by the
Board or CCM, the Subadviser will provide a continuous investment program for
all or a designated portion of the assets ("Segment") of each Fund, including
investment research and discretionary management with respect to all securities
and investments and cash equivalents in each Fund or Segment. The Subadviser
will determine from time to time what investments will be purchased, retained or
sold by each Fund or Segment. The Subadviser will be responsible for placing
purchase and sell orders for investments and for other related transactions for
each Fund or Segment. The Subadviser will be responsible for voting proxies of
issuers of securities held by each Fund or Segment. The Subadviser understands
that each Fund's assets need to be managed so as to permit it to qualify or to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, as amended ("Code"). The Subadviser will provide services
under this Contract in accordance with each Fund's investment objective,
policies and restrictions as stated in the Trust's currently effective
registration statement under the 1940 Act, and any amendments or supplements
thereto ("Registration Statement").
(b) The Subadviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of each Fund, the Subadviser may, in its discretion and in compliance
with Section 28(e) of the Securities and Exchange Act of 1934, use brokers that
provide the Subadviser with research, analysis, advice and similar services to
execute portfolio transactions on behalf of each Fund or Segment, and the
Subadviser may pay to those brokers in return for brokerage and research
services a higher commission than may be charged by other brokers, subject to
the Subadviser's determining in good faith that such commission is reasonable in
terms either of the particular transaction or of the overall responsibility of
the Subadviser to each Fund and its other clients and that the total commissions
paid by each Fund or Segment will be reasonable in relation to the benefits to
each Fund over the long term. In no instance will portfolio securities be
purchased from or sold to CCM or the Subadviser, or any affiliated person
thereof, except in accordance with the federal securities laws and the rules and
regulations thereunder. The Subadviser may aggregate sales and purchase orders
4
with respect to the assets of each Fund or Segment with similar orders being
made simultaneously for other accounts advised by the Subadviser or its
affiliates. Whenever the Subadviser simultaneously places orders to purchase or
sell the same security on behalf of a Fund and one or more other accounts
advised by the Subadviser, the orders will be allocated as to price and amount
among all such accounts in a manner believed to be equitable over time to each
account.
(c) The Subadviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Subadviser on behalf of each Fund
or Segment, and will furnish the Board and CCM with such periodic and special
reports as the Board or CCM reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Subadviser hereby agrees that
all records that it maintains for a Fund are the property of the Trust, agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
records that it maintains for the Trust and that are required to be maintained
by Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to
the Trust any records that it maintains for a Fund upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or CCM,
the Subadviser will provide the Board and CCM with economic and investment
analyses and reports as well as quarterly reports setting forth the performance
of a Fund or Segment and make available to the Board and CCM any economic,
statistical and investment services that the Subadviser normally makes available
to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Subadviser is responsible for assisting in the fair valuation
of all portfolio securities in each Fund or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of the Subadviser for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
3. Further Duties. In all matters relating to the performance of this
Contract, the Subadviser will seek to act in conformity with the Trust's
Declaration of Trust, By-Laws and Registration Statement and with the written
instructions and written directions of the Board and CCM; and will comply with
the requirements of the 1940 Act and, to the extent applicable, the Investment
Advisers Act of 1940, as amended ("Advisers Act") and the rules under each,
Subchapter M of the Internal Revenue Code ("Code"), as applicable to regulated
investment companies; and all other federal and state laws and regulations
applicable to the Trust and each Fund. CCM agrees to provide to the Subadviser
copies of the Trust's Declaration of Trust, By-Laws, Registration Statement,
written instructions and directions of the Board and CCM, and any amendments or
supplements to any of these materials as soon as practicable after such
materials become available; and further agrees to identify to the Subadviser in
writing any broker-dealers that are affiliated with CCM (other than CCM itself).
4. Expenses. During the term of this Contract, the Subadviser will bear
all expenses incurred by it in connection with its services under this Contract.
The Subadviser shall not be responsible for any expenses incurred by the Trust,
a Fund or CCM.
5. Compensation.
(a) For the services provided and the expenses assumed by the
Subadviser pursuant to this Contract, CCM, not each Fund, will pay to the
Subadviser a subadvisory fee, computed daily and paid monthly, at the annual
rate set forth on Schedule A hereto, as such schedule may be amended from time
to time. The subadvisory fee will be based on the average daily net assets of a
Fund or Segment (computed in the manner specified in the Management Agreement)
and CCM will provide the Subadviser with a schedule showing the manner in which
the fee was computed. If the Subadviser is managing a Segment, its fees will be
based on the value of assets of the Fund within the Subadviser's Segment.
(b) The fee shall be accrued daily and payable monthly to the
Subadviser on or before the last business day of the next succeeding calendar
month.
5
(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be pro-rated according to the proportion that such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation of Liability.
(a) The Subadviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund, the Trust, its shareholders
or by CCM in connection with the matters to which this Contract relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract.
(b) In no event will the Subadviser have any responsibilities for any
portion of a Fund's investments not managed by the Subadviser or for the acts or
omissions of any other subadviser to the Trust or the Fund.
In particular, in the event the Subadviser shall manage only a portion
of a Fund's investments, the Subadviser shall have no responsibility for the
Fund's being in violation of any applicable law or regulation or investment
policy or restriction applicable to the Fund as a whole or for the Fund's
failing to qualify as a regulated investment company under the Code, if the
securities and other holdings of the Segment managed by the Subadviser are such
that such Segment would not be in such violation or fail to so qualify if such
segment were deemed a separate series of the Trust or a separate "regulated
investment company" under the Code.
Nothing in this section shall be deemed a limitation or waiver of any
obligation or duty that may not by law be limited or waived.
7. Representations of Subadviser. The Subadviser represents, warrants
and agrees as follows:
(a) The Subadviser (i) is registered as an investment adviser under the
Advisers Act; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Contract; (iii) has met and will
seek to continue to meet for so long as this Contract remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency necessary to be met in
order to perform the services contemplated by this Contract; (iv) has the
authority to enter into and perform the services contemplated by this Contract;
and (v) will promptly notify CCM of the occurrence of any event that would
disqualify the Subadviser from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) The Subadviser has adopted a written code of ethics and appropriate
procedures complying with the requirements of Rule 17j-1 under the 1940 Act and
will provide CCM and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Contract is in effect, the president or a vice
president of the Subadviser shall certify to CCM that the Subadviser has
complied with the requirements of Rule 17j-1 during the previous year and that
there has been no material violation of the Subadviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of CCM, the Subadviser shall permit
CCM, its employees or its agents to examine the reports required to be made by
the Subadviser pursuant to Rule 17j-1 and all other records relevant to the
Subadviser's code of ethics.
(c) The Subadviser will notify CCM of any change of control of the
Subadviser, including any change of its general partners or 25% shareholders or
25% limited partners, as applicable, and any changes in the key personnel who
are either the portfolio manager(s) of a Fund or senior management of the
Subadviser, in each case prior to, or promptly after, such change.
(d) The Subadviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with a Fund,
the Trust, CCM or any of their respective affiliates in offering, marketing or
other promotional materials without the prior express written consent of CCM.
6
8. Services Not Exclusive. The services furnished by the Subadviser
hereunder are not to be deemed exclusive and the Subadviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
trustee, director, officer or employee of the Subadviser, who may also be on the
Board of the Trust ("Trustee"), or an officer or employee of the Trust, to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
9. Duration and Termination.
(a) This Contract shall become effective upon the date first above
written, provided that this Contract shall not take effect unless it has first
been approved by a vote of a majority of those Trustees of the Trust who are not
parties to this Contract or interested persons of any such party ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and by vote of a majority of each Fund's outstanding voting
securities, unless CCM has authority to enter into this Contract pursuant to
exemptive relief from the SEC without a vote of each Fund's outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
each Fund.
(c) Notwithstanding the foregoing, with respect to a Fund, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Subadviser. This
Contract may also be terminated, without the payment of any penalty, by CCM: (i)
upon 120 days' written notice to the Subadviser; (ii) upon material breach by
the Subadviser of any of the representations, warranties and agreements set
forth in Paragraph 7 of this Contract; or (iii) immediately if, in the
reasonable judgment of CCM, the Subadviser becomes unable to discharge its
duties and obligations under this Contract, including circumstances such as
financial insolvency of the Subadviser or other circumstances that could
adversely affect a Fund. The Subadviser may terminate this Contract at any time,
without the payment of any penalty, on 120 days' written notice to CCM. This
Contract will terminate automatically in the event of its assignment or upon
termination of the Management Contract, as it relates to each Fund.
10. Additional Funds. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have the Subadviser
render services under this Agreement, it shall so notify the Subadviser in
writing. If the Subadviser agrees in writing to provide said services, such
series of shares shall become a Fund hereunder upon execution of a new Schedule
A and compliance with the requirements of the 1940 Act and the rules and
regulations thereunder.
11. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to a Fund
shall be effective until approved by vote of the Independent Trustees or a
majority of the Fund's outstanding voting securities.
12. Governing Law. This Contract shall be construed in accordance with
the 1940 Act and the laws of the State of Indiana, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of Indiana conflict with the applicable provisions of the 1940 Act,
the latter shall control.
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
7
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
14. Notices. Any notice herein required is to be in writing and is
deemed to have been given to the Subadviser or CCM upon receipt of the same at
their respective addresses set forth below. All written notices required or
permitted to be given under this Contract will be delivered by personal service,
by postage mail - return receipt requested or by facsimile machine or a similar
means of same day delivery which provides evidence of receipt (with a confirming
copy by mail as set forth herein). All notices provided to CCM will be sent to
the attention of William P. Kovacs, Chief Compliance Officer. All notices
provided to the Subadviser will be sent to the attention of the Compliance
Officer.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
CONSECO CAPITAL MANAGEMENT, INC.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attest:
By: _______________________ By: _________________________
Name: William P. Kovacs Name: Maxwell E. Bublitz
Title: Secretary Title: President
CHICAGO EQUITY PARTNERS, LLC
180 N. LaSalle Street, Suite 3800
Chicago, IL 60601
Attest:
By: ________________________ By: ____________________
Name: William P. Kovacs Name: James D. Miller
Title: Secretary Title: Chairman
8
CONSECO FUND GROUP
SUBADVISORY CONTRACT
SCHEDULE A
Series Annual Fee
Conseco Large-Cap Fund 0.30%
Conseco Equity Fund 0.30%
The equity portion of Conseco Balanced Fund 0.30%
9
APPENDIX E
MORE INFORMATION ABOUT CEP
CEP has a history of money management dating from 1988. CEP was formed
in 1998 and purchased from Bank of America by its management team in April 2000.
The management team has worked together at Bank of America, NT & SA, for many
years prior to the formation of CEP. As of December 31, 2000, CEP had
approximately $7.5 billion of assets under management. CEP is located at 180 N
LaSalle Street, Suite 3800, Chicago, IL 60601. CEP is a wholly-owned subsidiary
of Bank of America, N.A.
The following is a list of the directors and principal executive officer of CEP:
PRINCIPAL
NAME POSITION(S) WITH CEP OCCUPATION
James D. Miller Chairman, President & CEO Portfolio Manager
Patrick C. Lynch Senior Vice President & Treasurer Portfolio Manager
Robert H. Kramer Senior Vice President & Secretary Portfolio Manager
David C. Coughenour Senior Vice President Portfolio Manager
David R. Johnsen Senior Vice President Portfolio Manager
<FN>
- -------------------
The business address of each person listed above is Chicago Equity Partners,
LLC, 180 N LaSalle Street, Suite 3800, Chicago, IL 60601.
</FN>
OTHER INVESTMENT COMPANY CLIENTS
CEP also serves as investment adviser or subadviser to the following
investment companies, which have investment objectives similar to the
Portfolios', at the fee rates set forth below.
APPROXIMATE NET ASSETS
AS OF ANNUAL INVESTMENT
PORTFOLIO OCTOBER 31, 2000 ADVISORY FEE
Nations Funds $1.3 billion 0.10% of average daily net assets*
Accessor Funds $340 million 0.10% of average daily net assets*
*These investment companies have a long standing relationship with CEP. The
Nations Funds were affiliated with Bank of America, NT & SA, the entity from
which CEP was purchased by its current management team.
10
APPENDIX F
FORM OF SUBADVISORY CONTRACT
Agreement made as of ___________, 2001 ("Contract") between CONSECO
CAPITAL MANAGEMENT, INC. ("CCM"), and Oak Associates, ltd., an Ohio limited
liability company ("Subadviser").
RECITALS
(1) CCM has entered into an Interim Investment Management Agreement,
dated December 1, 2000 ("Management Agreement"), with Conseco Fund Group
("Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"), with respect to all the
series of the Trust;
(2) CCM wishes to retain the Subadviser to furnish certain investment
advisory and portfolio management services to CCM and the series of the Trust
listed on Schedule A hereto, as such schedule may be amended from time to time
(each a "Fund"); and
(3) The Subadviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, CCM and the Subadviser agree as follows:
1. Appointment. CCM hereby appoints the Subadviser as an investment
subadviser with respect to each Fund for the period and on the terms set forth
in this Contract. The Subadviser accepts that appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. Duties as Subadviser.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and review by CCM, and any written guidelines adopted by the
Board or CCM, the Subadviser will provide a continuous investment program for
all or a designated portion of the assets ("Segment") of each Fund, including
investment research and discretionary management with respect to all securities
and investments and cash equivalents in each Fund or Segment. The Subadviser
will determine from time to time what investments will be purchased, retained or
sold by each Fund or Segment. The Subadviser will be responsible for placing
purchase and sell orders for investments and for other related transactions for
each Fund or Segment. The Subadviser will be responsible for voting proxies of
issuers of securities held by each Fund or Segment. The Subadviser understands
that each Fund's assets need to be managed so as to permit it to qualify or to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, as amended ("Code"). The Subadviser will provide services
under this Contract in accordance with each Fund's investment objective,
policies and restrictions as stated in the Trust's currently effective
registration statement under the 1940 Act, and any amendments or supplements
thereto ("Registration Statement").
(b) The Subadviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of each Fund, the Subadviser may, in its discretion and in compliance
with Section 28(e) of the Securities and Exchange Act of 1934, use brokers that
provide the Subadviser with research, analysis, advice and similar services to
execute portfolio transactions on behalf of each Fund or Segment, and the
Subadviser may pay to those brokers in return for brokerage and research
services a higher commission than may be charged by other brokers, subject to
the Subadviser's determining in good faith that such commission is reasonable in
terms either of the particular transaction or of the overall responsibility of
the Subadviser to each Fund and its other clients and that the total commissions
paid by each Fund or Segment will be reasonable in relation to the benefits to
each Fund over the long term. In no instance will portfolio securities be
purchased from or sold to CCM or the Subadviser, or any affiliated person
thereof, except in accordance with the federal securities laws and the rules and
regulations thereunder. The Subadviser may aggregate sales and purchase orders
with respect to the assets of each Fund or Segment with similar orders being
made simultaneously for other accounts advised by the Subadviser or its
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affiliates. Whenever the Subadviser simultaneously places orders to purchase or
sell the same security on behalf of a Fund and one or more other accounts
advised by the Subadviser, the orders will be allocated as to price and amount
among all such accounts in a manner believed to be equitable over time to each
account.
(c) The Subadviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Subadviser on behalf of each Fund
or Segment, and will furnish the Board and CCM with such periodic and special
reports as the Board or CCM reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Subadviser hereby agrees that
all records that it maintains for a Fund are the property of the Trust, agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
records that it maintains for the Trust and that are required to be maintained
by Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to
the Trust any records that it maintains for a Fund upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or CCM,
the Subadviser will provide the Board and CCM with economic and investment
analyses and reports as well as quarterly reports setting forth the performance
of a Fund or Segment and make available to the Board and CCM any economic,
statistical and investment services that the Subadviser normally makes available
to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Subadviser is responsible for assisting in the fair valuation
of all portfolio securities in each Fund or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of the Subadviser for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
3. Further Duties. In all matters relating to the performance of this
Contract, the Subadviser will seek to act in conformity with the Trust's
Declaration of Trust, By-Laws and Registration Statement and with the written
instructions and written directions of the Board and CCM; and will comply with
the requirements of the 1940 Act and, to the extent applicable, the Investment
Advisers Act of 1940, as amended ("Advisers Act") and the rules under each,
Subchapter M of the Internal Revenue Code ("Code"), as applicable to regulated
investment companies; and all other federal and state laws and regulations
applicable to the Trust and each Fund. CCM agrees to provide to the Subadviser
copies of the Trust's Declaration of Trust, By-Laws, Registration Statement,
written instructions and directions of the Board and CCM, and any amendments or
supplements to any of these materials as soon as practicable after such
materials become available; and further agrees to identify to the Subadviser in
writing any broker-dealers that are affiliated with CCM (other than CCM itself).
4. Expenses. During the term of this Contract, the Subadviser will bear
all expenses incurred by it in connection with its services under this Contract.
The Subadviser shall not be responsible for any expenses incurred by the Trust,
a Fund or CCM.
5. Compensation.
(a) For the services provided and the expenses assumed by the
Subadviser pursuant to this Contract, CCM, not each Fund, will pay to the
Subadviser a subadvisory fee, computed daily and paid monthly, at the annual
rate set forth on Schedule A hereto, as such schedule may be amended from time
to time. The subadvisory fee will be based on the average daily net assets of a
Fund or Segment (computed in the manner specified in the Management Agreement)
and CCM will provide the Subadviser with a schedule showing the manner in which
the fee was computed. If the Subadviser is managing a Segment, its fees will be
based on the value of assets of the Fund within the Subadviser's Segment.
(b) The fee shall be accrued daily and payable monthly to the
Subadviser on or before the last business day of the next succeeding calendar
month.
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(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be pro-rated according to the proportion that such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation of Liability.
(a) The Subadviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund, the Trust, its shareholders
or by CCM in connection with the matters to which this Contract relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract.
(b) In no event will the Subadviser have any responsibilities for any
portion of a Fund's investments not managed by the Subadviser or for the acts or
omissions of any other subadviser to the Trust or the Fund.
In particular, in the event the Subadviser shall manage only a portion
of a Fund's investments, the Subadviser shall have no responsibility for the
Fund's being in violation of any applicable law or regulation or investment
policy or restriction applicable to the Fund as a whole or for the Fund's
failing to qualify as a regulated investment company under the Code, if the
securities and other holdings of the Segment managed by the Subadviser are such
that such Segment would not be in such violation or fail to so qualify if such
segment were deemed a separate series of the Trust or a separate "regulated
investment company" under the Code.
Nothing in this section shall be deemed a limitation or waiver of any
obligation or duty that may not by law be limited or waived.
7. Representations of Subadviser. The Subadviser represents, warrants
and agrees as follows:
(a) The Subadviser (i) is registered as an investment adviser under the
Advisers Act; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Contract; (iii) has met and will
seek to continue to meet for so long as this Contract remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency necessary to be met in
order to perform the services contemplated by this Contract; (iv) has the
authority to enter into and perform the services contemplated by this Contract;
and (v) will promptly notify CCM of the occurrence of any event that would
disqualify the Subadviser from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) The Subadviser has adopted a written code of ethics and appropriate
procedures complying with the requirements of Rule 17j-1 under the 1940 Act and
will provide CCM and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Contract is in effect, the president or a vice
president of the Subadviser shall certify to CCM that the Subadviser has
complied with the requirements of Rule 17j-1 during the previous year and that
there has been no material violation of the Subadviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of CCM, the Subadviser shall permit
CCM, its employees or its agents to examine the reports required to be made by
the Subadviser pursuant to Rule 17j-1 and all other records relevant to the
Subadviser's code of ethics.
(c) The Subadviser will notify CCM of any change of control of the
Subadviser, including any change of its general partners or 25% shareholders or
25% limited partners, as applicable, and any changes in the key personnel who
are either the portfolio manager(s) of a Fund or senior management of the
Subadviser, in each case prior to, or promptly after, such change.
(d) The Subadviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with a Fund,
the Trust, CCM or any of their respective affiliates in offering, marketing or
other promotional materials without the prior express written consent of CCM.
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8. Services Not Exclusive. The services furnished by the Subadviser
hereunder are not to be deemed exclusive and the Subadviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
trustee, director, officer or employee of the Subadviser, who may also be on the
Board of Trustees of the Trust ("Trustee"), or an officer or employee of the
Trust, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.
9. Duration and Termination.
(a) This Contract shall become effective upon the date first above
written, provided that this Contract shall not take effect unless it has first
been approved by a vote of a majority of those Trustees of the Trust who are not
parties to this Contract or interested persons of any such party ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and by vote of a majority of each Fund's outstanding voting
securities, unless CCM has authority to enter into this Contract pursuant to
exemptive relief from the SEC without a vote of each Fund's outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
each Fund.
(c) Notwithstanding the foregoing, with respect to a Fund, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Subadviser. This
Contract may also be terminated, without the payment of any penalty, by CCM: (i)
upon 120 days' written notice to the Subadviser; (ii) upon material breach by
the Subadviser of any of the representations, warranties and agreements set
forth in Paragraph 7 of this Contract; or (iii) immediately if, in the
reasonable judgment of CCM, the Subadviser becomes unable to discharge its
duties and obligations under this Contract, including circumstances such as
financial insolvency of the Subadviser or other circumstances that could
adversely affect a Fund. The Subadviser may terminate this Contract at any time,
without the payment of any penalty, on 120 days' written notice to CCM. This
Contract will terminate automatically in the event of its assignment or upon
termination of the Management Contract, as it relates to each Fund.
10. Additional Funds. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have the Subadviser
render services under this Agreement, it shall so notify the Subadviser in
writing. If the Subadviser agrees in writing to provide said services, such
series of shares shall become a Fund hereunder upon execution of a new Schedule
A and compliance with the requirements of the 1940 Act and the rules and
regulations thereunder.
11. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to a Fund
shall be effective until approved by vote of the Independent Trustees or a
majority of the Fund's outstanding voting securities.
12. Governing Law. This Contract shall be construed in accordance with
the 1940 Act and the laws of the State of Indiana, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of Indiana conflict with the applicable provisions of the 1940 Act,
the latter shall control.
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
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rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
14. Notices. Any notice herein required is to be in writing and is
deemed to have been given to the Subadviser or CCM upon receipt of the same at
their respective addresses set forth below. All written notices required or
permitted to be given under this Contract will be delivered by personal service,
by postage mail - return receipt requested or by facsimile machine or a similar
means of same day delivery which provides evidence of receipt (with a confirming
copy by mail as set forth herein). All notices provided to CCM will be sent to
the attention of William P. Kovacs, Chief Compliance Officer. All notices
provided to the Subadviser will be sent to the attention of the Compliance
Officer.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
CONSECO CAPITAL MANAGEMENT, INC.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attest: ____________________ By ___________________________
William P. Kovacs Name: Maxwell E. Bublitz
Secretary Title: President
OAK ASSOCIATES, LTD.,
3875 Embassy Parkway, Suite 250,
Akron, OH 44333
Attest: ____________________ By:_____________________________
William P. Kovacs Name: James D. Oelschlager
Secretary Title: Chief Executive Officer
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CONSECO FUND GROUP
SUBADVISORY CONTRACT
SCHEDULE A
Series Annual Fee
Conseco Science & Technology Fund 0.30%
Conseco 20 Fund 0.30%
APPENDIX G
MORE INFORMATION ABOUT OAK
OAK and its predecessor organizations have a history of money
management dating from 1985. As of December 31, 1999, OAK had approximately
$21.2 billion of assets under management. OAK is located at 3875 Embassy
Parkway, Suite 250, Akron, OH 44333.
The following is a list of the directors and principal executive officer of OAK:
PRINCIPAL
NAME POSITION(S) WITH CEP OCCUPATION
James D. Oelschlager Chief Executive Officer and Managing Member Portfolio Manager
Douglas S. MacKay Assistant Portfolio Manager Research Analyst
Donna L. Barton Assistant Portfolio Manager Trader
Margaret Ballinger Assistant Portfolio Manager Client Service
Mgr.
The business address of each person listed above is Oak Associates, ltd., 3875
Embassy Parkway, Suite 250, Akron, OH 44333.
OTHER INVESTMENT COMPANY CLIENTS
OAK also serves as investment adviser or subadviser to the following
investment companies, which have investment objectives similar to the Funds', at
the fee rates set forth below.
APPROXIMATE NET ASSETS
AS OF ANNUAL INVESTMENT
FUND OCTOBER 31, 2000 ADVISORY FEE
Oak Associates Funds $9.65 billion 0.74% of average daily net assets
Prudential Target Funds $295 million 0.30% of average daily net assets
Mutual of America $120 million 0.30% of average daily net assets
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VOTE THIS PROXY CARD TODAY!
Return the proxy card in the enclosed envelope or mail to:
Proxy Tabulator
PO Box 9122
Hingham, MA 02043-9717
CONSECO FUND GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) William
P. Kovacs and Sarah L. Todd, or any one of them, attorneys, with full power of
substitution, to vote all shares of Conseco Fund Group (the "Trust") as
indicated above which the undersigned is (are) entitled to vote at the Special
Meeting of Shareholders (the "Meeting") of the Trust to be held at 11815 North
Pennsylvania Street, Carmel, Indiana 46032 on March 29, 2001 at 11:00 a.m.,
Eastern Standard Time, and at any adjournments of the Meeting. All powers may be
exercised by a majority of said proxy holders or substitutes voting or acting,
or, if only one votes and acts, then by that one. This Proxy shall be voted on
the proposals described in the Proxy Statement as specified on the reverse side.
Receipt of the Notice of Meeting and the accompanying Proxy Statement is hereby
acknowledged. If not revoked, this Proxy shall be voted.
Date: __________________, 2001
NOTE: Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Signature(s) __________________________
(Title(s), if applicable) __________________________
Please refer to the Proxy Statement for a discussion of the proposal. THIS PROXY
SHALL BE VOTED FOR EACH PROPOSAL IF NO SPECIFICATION IS MADE. As to any other
matter, said proxy or proxies shall vote in accordance with their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
Please vote by filling in the appropriate box below using blue or black ink or
dark pencil. Do not use red ink.
1. To approve or disapprove a new Investment Management Contract between
Conseco Capital Management, Inc. and the Trust.
FOR ______ AGAINST ______ ABSTAIN ______
2. To approve or disapprove Subadvisory Contracts between Conseco Capital
Management, Inc. and Chicago Equity Partners, LLC (for the Conseco
Large-Cap Fund, Conseco Equity Fund, and the Conseco Balanced Fund ONLY).
FOR ______ AGAINST ______ ABSTAIN ______
3. To approve or disapprove Subadvisory Contracts between Conseco Capital
Management, Inc. and Oak Associates, ltd. (for the Conseco Science &
Technology Fund and Conseco 20 Fund ONLY).
FOR ______ AGAINST ______ ABSTAIN ______
4. To approve or disapprove a policy to permit Conseco Capital Management,
Inc. and the Board of Trustees to appoint and replace subadvisers, enter
into subadvisory contracts, and approve amendments to subadvisory contracts
on behalf of the Trust without further shareholder approval.
FOR ______ AGAINST ______ ABSTAIN ______
5. To elect the Trustees of the Trust.
Nominees: (01) Maxwell E. Bublitz, (02) William P. Daves, Jr., (03)
Gregory J. Hahn, (04) Harold W. Hartley, (05) Dr. R. Jan Lecroy, (06) Dr.
Jess H. Parrish, (07) David N. Walthall
INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.
FOR WITHOLD
all nominees authority to
listed (except vote for all
as noted in nominees
space provided listed
_______ _______
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6. To ratify the appointment of PricewaterhouseCoopers LLP as the Trust's
independent accountants.
FOR ______ AGAINST ______ ABSTAIN ______
7. To change the Conseco High Yield Fund's fundamental policy regarding
diversification.
FOR ______ AGAINST ______ ABSTAIN ______
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.