UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
CONSECO SERIES TRUST
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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calculated and state how it was determined):
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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.
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CONSECO SERIES TRUST
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
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 Series Trust Portfolios (the "Portfolios") listed
above, series of Conseco Series Trust, a Massachusetts business trust (the
"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 (the "Board") has called this meeting
to request shareholder approval of several proposals relating to the management
and operations of the Portfolios. With respect to the Portfolios' 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
Equity Portfolio and the equity portion of the Balanced Portfolio; and (c) a
subadvisory contract under which Oak Associates, ltd. ("OAK") would serve as
subadviser for the investment portfolio of the Conseco 20 Focus Portfolio. Your
Board has approved these new investment management arrangements, including the
appointments of CEP and OAK as subadvisers for the respective Portfolios. 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
that is 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 (1) to re-elect the
current Trustees, and to elect one new nominee, to the Board; (2) to ratify the
appointment of PricewaterhouseCoopers LLP as the Trust's independent
accountants; and (3) and to approve a Distribution and Service Plan for the
Portfolios pursuant to Rule 12b-1 under the Investment Company Act of 1940.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF 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. 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.
If you have any questions, please call 1-800-824-2726. Our representatives
will be glad to assist you. Thank you for your attention to this matter and for
your continuing investment in the Portfolios.
Very truly yours,
Maxwell E. Bublitz
President
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
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 (the "Meeting")
of each of the above-listed Conseco Series Trust Portfolios (each a "Portfolio",
collectively, the "Portfolios"). The Portfolios are a series of the Conseco
Series Trust, a Massachusetts business trust (the "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 Portfolio, to approve or disapprove a new Investment
Management Contract with Conseco Capital Management, Inc. ("CCM");
2. For the Equity Portfolio and the Balanced Portfolio, to approve or
disapprove a Subadvisory Contract between CCM and Chicago Equity
Partners, LLC;
3. For the Conseco 20 Focus Portfolio, to approve or disapprove a
Subadvisory Contract between CCM and Oak Associates, ltd.;
4. For each Portfolio, to approve or disapprove a policy to permit CCM
and the Portfolios' Board of Trustees to appoint and replace
subadvisers, enter into subadvisory contracts, and approve amendments
to subadvisory contracts on behalf of the Portfolios without further
shareholder approval;
5. For each Portfolio, to elect the Trustees of the Trust, including one
new nominee; and
6. For each Portfolio, to ratify the appointment of
PricewaterhouseCoopers LLP as the Trust's independent accountants.
7. For each Portfolio, to approve or disapprove a Plan of Distribution
and Service for the Portfolios pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
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 in the enclosed envelope the
accompanying proxy card, which is being solicited by the Trust's Board of
Trustees. 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 Portfolios at any time before the proxy is
exercised, or by voting in person at the Meeting.
If you own shares of more than one Portfolio, you must submit a separate
proxy card for each Portfolio in which you own shares. Unless the proxy cards
submitted by corporations and partnerships are signed by the appropriate persons
as indicated in the instructions on the cards, they will not be voted.
By Order of the Board of Trustees,
William P. Kovacs,
Secretary
February 12, 2001
11825 North Pennsylvania Street
Carmel, Indiana 46032
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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, AND THE APPOINTMENT OF THE
INDEPENDENT ACCOUNTANTS, THE PLAN OF DISTRIBUTION AND SERVICE 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.
If you have any questions regarding the Meeting, or the execution of your
proxy, please call toll-free 1-800-824-2726.
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.
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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 Portfolios 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
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
1-800-824-2726
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
MARCH 29, 2001
This Proxy Statement is being furnished to the shareholders of each of the
above-listed series of Conseco Series Trust (each a "Portfolio", collectively,
the "Portfolios") 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 is to be held on 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 on:
1. For each Portfolio, to approve or disapprove a new Investment
Management Contract with Conseco Capital Management, Inc. ("CCM");
2. For the Equity Portfolio and the Balanced Portfolio, to approve or
disapprove a Subadvisory Contract between CCM and Chicago Equity
Partners, LLC;
3. For the Conseco 20 Focus Portfolio, to approve or disapprove a
Subadvisory Contract between CCM and Oak Associates, ltd.;
4. For each Portfolio, to approve or disapprove a policy to permit CCM
and the Portfolios' Board of Trustees to appoint and replace
subadvisers, enter into subadvisory contracts, and approve amendments
to subadvisory contracts on behalf of the Portfolios without further
shareholder approval;
5. For each Portfolio, to elect the Trustees of the Trust, including one
new nominee; and
6. For each Portfolio, to ratify the appointment of
PricewaterhouseCoopers LLP as the Portfolios' independent accountants.
7. For each Portfolio, to approve or disapprove a Plan of Distribution
and Service for the Portfolios pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
This table shows which proposals apply to your Portfolio.
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Portfolio Proposal(s)
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Conseco 20 Focus Portfolio 1, 3, 4, 5, 6, 7
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Equity Portfolio 1, 2, 4, 5, 6, 7
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Balanced Portfolio 1, 2, 4, 5, 6, 7
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High Yield Portfolio 1, 4, 5, 6, 7
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Fixed Income Portfolio 1, 4, 5, 6, 7
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Government Securities Portfolio 1, 4, 5, 6, 7
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Money Market Portfolio 1, 4, 5, 6, 7
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For each Portfolio, the presence, in person or by proxy, of a majority of
the shares of the Portfolio 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.
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 Contract, "FOR" the Subadvisory
Contracts, "FOR" the Subadvisory Policy, "FOR" the election of the Trustees,
"FOR" the appointment of PricewaterhouseCoopers LLP, "FOR" the Plan of
Distribution and Service and "FOR" or "AGAINST" any other business which may
properly arise at the Meeting, in the proxies' discretion. If a Variable
Contract owner does not
submit a voting instruction card on time, the owner's Insurance Company will
vote the owner's interests in the same proportion as interests for which it has
received timely instructions. Abstentions will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum and will have a negative effect on the Proposals. Each Life Company will
vote shares of the Portfolios held by each of its separate accounts in
accordance with instructions received from the Variable Contract owners. Each
Insurance Company will also vote shares of the Portfolios held in each separate
account for which it has not received timely instructions, as well as any shares
held in its general account, in the same proportion as it votes shares held by
that separate account for which it has received instructions. Shareholders of
the Portfolios and Variable Contract owners permitted to give instructions, and
the number of shares for which such instructions may be given for purposes of
voting at the Meeting and any adjournment thereof, will be determined as of the
record date. The Trustees of the qualified pension and retirement plans may vote
the shares of the Portfolios held by the plans.
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 Variable Contract 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 Portfolio as of the Record Date is set
forth below:
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Portfolio Total Number
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Conseco 20 Focus Portfolio 496,970.961
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Equity Portfolio 15,569,812.941
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Balanced Portfolio 5,736,065.632
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High Yield Portfolio 431,356.227
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Fixed Income Portfolio 3,869,026.791
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Government Securities Portfolio 1,510,897.255
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Money Market Portfolio 78,264,273.290
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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 Portfolios, does not know of any
person who owns beneficially or of record 5% or more of any class of
shares of the Portfolios. As of that same date, the Trustees and officers of the
Portfolios, as a group, owned less than 1% of any class of the Portfolios'
outstanding shares.
The solicitation of proxies, the cost of which will be borne by CCM, will
be made by mail and telephone. The Portfolios' officers and employees of CCM who
assist in the proxy solicitation will not receive any additional or special
compensation for any such efforts. The Portfolios have engaged the services of
Shareholder Communications (the "Solicitor") to assist them in the solicitation
of proxies for the Meeting. Shareholder Communications will be paid
approximately $16,000.00 for proxy solicitation services.
COPIES OF THE PORTFOLIOS' MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE PORTFOLIOS' ANNUAL AND SEMI-ANNUAL
REPORTS BY WRITING THE PORTFOLIOS AT 11825 NORTH PENNSYLVANIA STREET, CARMEL,
INDIANA 46032, OR BY CALLING 1-800-824-2726.
INTRODUCTION
On October 19, 2000, CCM filed a prospectus supplement announcing the
departure from the firm of portfolio managers Mr. Thomas J. Pence, Mr. Eric J.
Voss, and Mr. James M. Leach. These individuals managed, or co-managed, the
Conseco 20 Focus Portfolio, the Equity Portfolio, and the equity portion of the
Balanced Portfolio.
CCM appointed Mr. Maxwell E. Bublitz, President of CCM, 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 Portfolios' assets are managed. To implement new investment management
arrangements for the Portfolios, the Board, effective December 1, 2000,
terminated the existing investment advisory contracts between the Portfolios and
CCM and approved a new interim investment management contract with CCM ("Interim
Management Contract") and interim subadvisory contracts ("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 Portfolios and provides portfolio
management oversight for those Portfolios managed by subadvisers, instead of
directly managing those Portfolios. The Portfolios pay CCM the same annual fee
under the Interim Management Contract that it paid under the preceding
investment advisory contracts. The annual fees paid to CCM by each Portfolio are
shown in the table below.
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% of a Portfolio's daily net
Portfolio assets paid to average CCM
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Conseco 20 Focus Portfolio 0.70%
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Equity Portfolio 0.65%
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Balanced Portfolio 0.65%
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High Yield Portfolio 0.70%
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Fixed Income Portfolio 0.50%
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Government Securities Portfolio 0.50%
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Money Market Portfolio 0.25%*
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*CCM, since May 1, 1993, has waived a portion of its management fee. Absent
this fee waiver, the management fees for the Money Market Portfolio would be
0.60%
Under the Interim Subadvisory Contract, CEP and OAK provide the Portfolios
listed below ("Subadvised Portfolios") with a continuous investment program for
which CCM, NOT THE SUBADVISED PORTFOLIOS, pays CEP and OAK the annual fees shown
below.
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% of a Portfolio's average
Portfolio daily net assets paid to
subadviser
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Conseco 20 Focus Portfolio 0.30%
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Equity Portfolio 0.30%
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Equity portion of 0.30%
the Balanced Portfolio
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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 Portfolios' 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 Portfolio's assets as their investment
subadvisers and CCM would continue to oversee their activities as subadvisers
and evaluate their performance. The Board is also asking the Subadvised
Portfolios' 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
Portfolios' 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 Portfolios' current Interim Management
Contract and the Portfolios' 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 Portfolios.
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 Portfolios, including investment research and
management with respect to all securities, investments and cash equivalents in
the Portfolios, and to determine what securities and other investments would be
purchased, retained or sold by the Portfolios. Under the New Contracts, CCM may
oversee the management of the Portfolios by one or more investment subadvisers,
rather than managing the Portfolios 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.
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 a subadviser. 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 Portfolio's assets
among the subadvisers. In addition, the New Contracts have been amended to
acknowledge 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, which would permit CCM to implement Proposal 4, if approved
by Shareholders. As described in Proposal 4, CCM and the Portfolios have applied
for an order 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 Portfolios. See Proposal 4 for more information.
Under the New Contracts, for both the services provided and the expenses
assumed with respect to the Portfolios, the Portfolios will pay to CCM a fee,
computed daily and paid monthly, at an annual rate of a certain percentage of
the average daily net assets of each Portfolio. (For the exact percentages paid
by each Portfolio, refer to each table above.) This 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 Portfolio 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 Portfolios,
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 Trustees of the Trust and Portfolio
shareholders will not be liable for any obligations of the Portfolios 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 Portfolio'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 Portfolio.
If approved by a Portfolio'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
Portfolio'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 Portfolio or CCM ("Independent Trustees"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
The table below provides the effective date of the Old Advisory Contract
for each of the Portfolios. The effective date of each Old Advisory 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 Portfolios.
EFFECTIVE DATE OF INVESTMENT ADVISORY FEES
FUND OLD ADVISORY CONTRACT PAID TO CCM ($):
Conseco 20 Focus Portfolio May 1, 2000 $9,666
Equity Portfolio October 9, 1986 $2,105,260
Balanced Portfolio May 1, 1987 $389,301
High Yield Portfolio May 1, 2000 $7,801
Fixed Income Portfolio January 1, 1993 $160,480
Government Securities Portfolio October 9, 1986 $70,222
Money Market Portfolio October 9, 1986 $193,002
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 Portfolios, 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 Portfolios' investment performance; (3) the nature and scope of the services
to be provided to the Portfolios 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 Balanced Portfolio, the High Yield Portfolio, the Fixed
Income Portfolio, the Government Securities Portfolio, and the Money Market
Portfolio. The Board also determined that CCM should continue to supervise the
equity series, including the Conseco 20 Focus Portfolio, the Equity Portfolio,
and the equity portion of the Balanced Portfolio. The Board's review also
approved the level of services performed by CCM with regard to all the
Portfolios, including portfolio management, accounting, and administrative
oversight. Additionally, the Portfolios have performed well with regard to each
Portfolio's respective benchmark.
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
portfolios. The fixed income Portfolios 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 Portfolios.
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 Portfolios'
shareholders for their approval at the Meeting.
REQUIRED VOTE
Approval of Proposal 1 with respect to any Portfolio requires the
affirmative vote of the lesser of (1) 67% or more of the shares of a Portfolio
present at the Meeting, if more than 50% of the outstanding shares of each such
Portfolio are represented at the Meeting in person or by proxy, or (2) more than
50% of the outstanding shares of each Portfolio 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 EQUITY PORTFOLIO AND THE BALANCED PORTFOLIO
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 Equity Portfolio
and Balanced Portfolio. The Proposed Subadvisory Contract is substantially
similar to the Interim Subadvisory Contract adopted by the Board on November 28,
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 Equity Portfolio and Balanced
Portfolio, including placing purchase and sell orders for investments and for
other related transactions. CEP agrees to provide a continuous investment
program for each Portfolio's assets, including investment research and
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
Portfolio, 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 Portfolio'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 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 Portfolio,
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 Portfolio's assets that it does not manage or for
the acts or omissions of any other subadviser for a Portfolio or the Trust. In
particular, if at any time CEP only manages a portion of a Portfolio's assets,
CEP will have no responsibility for the Portfolio being in violation of any law
or regulation or Portfolio policy or restriction, or for the Portfolio's failure
to qualify as a "regulated investment company" for federal tax purposes, if the
portion of the Portfolio'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 Portfolio, 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 Portfolio, 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 Portfolio. 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
PORTFOLIOS), computed daily and paid monthly, at an annual rate of a certain
percentage of the portion of a Portfolio's average daily net assets under CEP's
management. The fees paid by each Portfolio are shown in the table below.
- --------------------------------------------------------------------------------
Portfolio % of a Portfolio's daily
net assets paid to CEP
- --------------------------------------------------------------------------------
Equity Portfolio 0.30%
- --------------------------------------------------------------------------------
Equity portion of 0.30%
the Balanced Portfolio
- --------------------------------------------------------------------------------
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT OF
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO CCM OR CCM'S DUTIES AND
RESPONSIBILITIES TOWARD THE PORTFOLIOS UNDER THE PROPOSED MANAGEMENT CONTRACT.
If approved by each Portfolio'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
Portfolio'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 Portfolio, 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 a 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 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 Portfolios. 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 Portfolios, including its personnel, operations
and financial condition, and other factors that would affect the provision of
those 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 they 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 Equity Portfolio and the Balanced
Portfolio, respectively, present at the Meeting, if more than 50% of the
outstanding shares of each such Portfolio are represented at the Meeting in
person or by proxy, or (2) more than 50% of the outstanding shares of each such
Portfolio 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.
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 November 28, 2000. A form of the 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 Conseco 20 Focus Portfolio,
including placing purchase and sell orders for investments and for other related
transactions. OAK agrees to provide a continuous investment program for the
Portfolio'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 OAK regulations promulgated thereunder with respect to transactions
the subadviser effects on behalf of the Portfolio, 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 the
Portfolio'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 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 the
Portfolio, 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 the Portfolio's assets that it does not
manage or for the acts or omissions of any other subadviser for the Portfolio or
Trust. In particular, if at any time OAK only manages a portion of the
Portfolio's assets, OAK will have no responsibility for the Portfolio being in
violation of any law or regulation or Portfolio policy or restriction, or for
the Portfolio's failure to qualify as a "regulated investment company" for
federal tax purposes, if the portion of the Portfolio's assets 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 the Portfolio, 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 the Portfolio, 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 the Portfolio. 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
Portfolio), computed daily and paid monthly, at an annual rate of 0.30% of the
portion of the Portfolio's average daily net assets under OAK's management.
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT OF
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO CCM OR CCM'S DUTIES AND
RESPONSIBILITIES TOWARD THE PORTFOLIOS UNDER THE PROPOSED MANAGEMENT CONTRACT.
If approved by the Portfolio'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 the
Portfolio'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 Portfolio, 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 for 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 Portfolio. 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 Portfolio, including its personnel, operations and
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 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 the Conseco Focus 20 Portfolio present at the
Meeting, if more than 50% of the outstanding shares of the Portfolio are
represented at the Meeting in person or by proxy, or (2) more than 50% of the
outstanding shares of the Portfolio 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 PORTFOLIOS WITHOUT
FURTHER SHAREHOLDER APPROVAL.
At its meeting on January 17, 2001, the Board approved, and recommended
that the shareholders of the Portfolios 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 Portfolios 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 Portfolios without having to incur the expense of another
shareholder meeting. If approved by the Portfolios' 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 Portfolios without shareholder approval.
THE ANTICIPATED EXEMPTIVE ORDER
On February 12, 2001, the Portfolios and CCM anticipate filing an
application for exemptive relief from the SEC that would permit CCM and the
Portfolios' 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 Portfolios' 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 Portfolios'
shareholders approve all new subadvisory contracts as well as material
amendments to any existing subadvisory contract. If shareholders approve this
proposal, CCM will be authorized to evaluate, select and retain unaffiliated
subadvisers for the Portfolios, 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 Portfolios' shareholders whenever CCM
and the Board believe these actions would benefit the Portfolios and their
shareholders. As explained below, shareholders would receive detailed
information regarding any new subadviser.
CURRENT SUBADVISER APPROVAL PROCESS
Currently, the holders of a majority of a Portfolio's outstanding shares
must approve any subadvisory contract between CCM and another investment adviser
pursuant to which the other adviser provides a Portfolio 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 Portfolio 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 Portfolio's management by adding another subadviser; or (5) there is
a change in investment style of a Portfolio. 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 Portfolios, CCM,
any subadviser, or any subadvisory contract, other than the requirement to call
and hold a meeting of the Portfolio'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 Portfolios and CCM will be subject to several conditions imposed
by the SEC to ensure that the interests of the Portfolios' shareholders are
adequately protected whenever CCM acts under the Subadviser Approval Policy.
Finally, within 90 days of the appointment of a new subadviser, a Portfolio
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 Portfolio's shareholders
would receive in a proxy statement.
If a Portfolio'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.
SHAREHOLDER APPROVAL OF THIS PROPOSAL WILL NOT CHANGE THE TOTAL AMOUNT OF
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO CCM OR CCM'S DUTIES AND
RESPONSIBILITIES TOWARD THE PORTFOLIOS UNDER THE PROPOSED MANAGEMENT CONTRACT.
BENEFITS OF THE SUBADVISORY APPROVAL POLICY
The Board believes that it is in the best interests of the Portfolios'
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 Portfolios' Interim Management
Contract and Interim Subadvisory Contracts were adopted), a Portfolio's current
advisory contract must be terminated before the Rule can apply and a Portfolio'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 Portfolio
must still call and hold a meeting of the Portfolio'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 Portfolio (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 Portfolios 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 Portfolios
and their shareholders.
REQUIRED VOTE
Approval of Proposal 4 with regard to any Portfolio requires the
affirmative vote of the lesser of (1) 67% or more of the shares of a Portfolio
present at the Meeting, if more than 50% of the outstanding shares of such
Portfolio 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 BOARDS RECOMMEND THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 4.
----------------------------
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. Mr. Bublitz was elected to the
Board by the other Board members on August 17, 1994, while Messrs. Daves,
Hartley, LeCroy and Parrish were elected to the Board by the Trust's
shareholders on June 30, 1993. The other Board members elected Mr. Walthall to
the Board on October 12, 1998. Mr. Hahn is not currently a member of the Board,
but was nominated by the current Board on January 17, 2001.
The following information regarding each person nominated for election as a
Trustee includes such person's age, positions with CCM (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,
Adviser; 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.
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
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.
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.
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.
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NEW NOMINEE:
GREGORY J. HAHN* 40 Chartered Financial Analyst; Senior Vice
President, CCM; Vice President of the Trust;
Trustee and officer of three other investment
companies managed by CCM. Address: 11825 North
Pennsylvania Street, Carmel, Indiana 46032.
* The Trustees so indicated are considered "interested persons," of the Trust
as defined in the 1940 Act, due to their employment with CCM.
The following information pertaining to each executive officer of the Trust
not listed above includes such person's age, positions with CCM (if any),
principal occupation and business experience for the last five years:
PRINCIPAL OCCUPATION AND BUSINESS
NAME AND POSITION WITH FUND AGE EXPERIENCE FOR PAST FIVE YEARS
WILLIAM P. KOVACS, ESQ. 55 Vice President, General Counsel,
Vice President and Secretary Secretary, Chief Compliance Officer and
Director of Adviser. 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.
JAMES S. ADAMS 41 Senior Vice President, Chief Accounting
Treasurer Officer and Treasurer of Conseco, Inc. and
various subsidiaries. Treasurer of three
other investment companies managed by CCM.
WILLIAM T. DEVANNEY 45 Senior Vice President, Corporate Taxes, of
Vice President Conseco Services, LLC and various
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 $500.00
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.
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 Total Compensation from
from the Trust* the Trust and Fund Complex**
- --------------------------------------------------------------------------------
William P. Daves, Jr. $13,666.66 $38,521.50 (17)
- --------------------------------------------------------------------------------
Harold W. Hartley $12,916.66 $36,834.00 (17)
- --------------------------------------------------------------------------------
Dr. R. Jan LeCroy $12,916.66 $36,834.00 (17)
- --------------------------------------------------------------------------------
Dr. Jess H. Parrish $12,916.66 $36,834.00 (17)
- --------------------------------------------------------------------------------
David N. Walthall $12,916.66 $36,834.00 (17)
- --------------------------------------------------------------------------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $4,958.78 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.
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.
-------------------------
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
Portfolio 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 1993. 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 Portfolio.
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 A PLAN OF DISTRIBUTION AND SERVICE PURSUANT TO RULE
12B-1 UNDER THE 1940 ACT FOR THE PORTFOLIOS.
INTRODUCTION
At a meeting of the Board of Trustees of the Trust (the "Board") held on
January 17, 2001, the Board, including the Trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) (the "Independent Trustees")
voting separately, unanimously voted to approve a Plan of Distribution and
Service (the "Plan") pursuant to Rule 12b-1 of the 1940 Act. The Independent
Trustees have no direct or indirect financial interest in the operation of the
Plan. Rule 12b-1 under the 1940 Act provides, among other things, that a mutual
fund may finance
activities primarily intended to result in the sale of its shares only pursuant
to a plan adopted in accordance with this rule. Implementing a new Plan of
Distribution and Service also requires shareholder approval.
The Plan of Distribution and Service will be governed by Rule 12b-1 under
the 1940 Act, which requires that (1) the Rule 12b-1 plan must be approved with
respect to a Portfolio by a vote of at least a majority of the outstanding
voting securities of that Portfolio; (2) the Plan and any related agreements
must be approved by a vote of the Trust's Board of Trustees, and by a majority
of the Independent Trustees; (3) both the Plan and the related agreements must
provide in substance (i) that they will be subject to annual approval by the
Trustees and Independent Trustees, (ii) that any person authorized to make
payments under the Plan or a related agreement must provide the Trustees with a
quarterly written report of payments made and the purpose of the payments, (iii)
that the Plan may be terminated at any time by a majority of the Independent
Trustees, (iv) that any related agreement may be terminated without penalty at
any time by a vote of the outstanding securities of a Portfolio on not more than
60 days written notice, and (v) that any related agreement terminates if it is
assigned; (4) a plan may not be amended to increase materially the amount to be
spent for distribution without shareholder approval, and all material Plan
amendments must be approved by a vote of the Independent Trustees; and (5) in
implementing or continuing the Plan, the Trustees must conclude that there is a
reasonable likelihood that the Plan will benefit the Trust and its shareholders.
The Plan is intended to assist and promote the sale of the Trust's shares
by providing the Distributor with additional resources. The Board recommends the
shareholders of each Portfolio approve the Plan. A copy of the Plan may be found
in Appendix H.
TERMS OF THE PLAN OF DISTRIBUTION
The Board has approved a Distribution Agreement between the Portfolios and
Conseco Equity Sales, Inc. ("CES", or the "Distributor") that will take effect
if shareholders approve the Plan. CES is an affiliate of Conseco Variable
Insurance Corporation ("CVIC") and Conseco Series Trust. Under the Distribution
Agreement, CES, will act as distributor for the Portfolios. Each Portfolio would
pay a distribution fee equal to 0.25% of the Portfolio's average daily net
assets per annum to CES. As Distributor, CES will provide, among other things,
the following services:
o Developing, preparing, printing, and mailing of advertisements, sales
literature and other promotional material describing and/or relating to the
Trust or the Variable Annuity and Flexible Variable Annuity Life Insurance
Policies (the "Variable Contracts").
o Printing and mailing of Trust prospectuses, statements of additional
information, any supplements thereto and shareholder reports for prospective
Variable Contract owners.
o Holding or participating in seminars and sales meetings designed to promote
the distribution of shares of the Trust, including materials intended either
for broker-dealer only use or for retail use.
o Providing information about the Trust or the Variable Contracts, or mutual
funds or variable contracts in general, to registered representatives of
broker-dealers.
o Providing assistance to broker-dealers that are conducting due diligence on
the Trust or the Variable Contracts.
o Payment of marketing fees or allowances requested by broker-dealers who sell
Variable Contracts.
o Obtaining information and providing explanations to Variable Contract owners
regarding Series investment options and policies and other information about
the Trust or the Variable Contracts.
o Training sales personnel regarding sales of Variable Contracts.
o Personal service and/or maintenance of the Variable Contract owner accounts.
o Financing any other activity that is intended to result in the sale of Trust
shares or the Variable Contracts.
CES will provide these services either directly or through affiliated or
unaffiliated third parties. If CES provides these services through third
parties, it will compensate the third parties out of the fees paid to it under
the Plan or its other resources.
The Plan does not require the Distributor or other recipient of payments
under the Plan to maintain any specific level of expenditures, nor is the
Distributor or other recipient precluded from earning a profit on the fees
received. Nothing in the Plan, however, limits the ability of the Distributor,
the Portfolios' investment adviser, or others to spend additional money in
connection with the promotion of sales of Portfolio shares.
REASONS FOR THE PROPOSAL
CVIC has recommended this proposal to the Board because of competitive
pressures and increased expenses associated with providing distribution services
and shareholder servicing to the Portfolios. CVIC believes that the distribution
and service fee proposed for the Portfolios is appropriate to defray a portion
of the costs associated with shareholder servicing activities and to support the
marketing of the Portfolios. CVIC believes that the compensation practices that
prevail among the entities that market the Portfolios to investors justify
adopting the Plan.
If the Plan were adopted, the fees paid would be available for
distribution-related expenses as well as shareholder servicing. Many of the
Trust's competitors have distribution and service plans, which they use to
compensate third-party service providers for making fund shares available to
their clients and/or for providing services to investors. CVIC believes it will
be difficult to maintain a relationship with these third-party service providers
unless they are provided with additional compensation to offset the increased
costs of making the funds available to their clients and maintaining the
clients' assets in the funds. Certain third-party
service providers that are registered broker-dealers may use money provided
under the Plan to pay individual sales representatives. CVIC believes that the
fees under the Plan will help the Portfolios maintain and improve distribution
activities that are necessary for the Portfolios to maintain a sufficient size
to spread their fixed costs over a substantial asset base.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases NONE*
Maximum Deferred Sales Charge (Load) NONE*
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE*
Redemption Fees NONE*
Exchange Fee NONE*
* Shares of the Portfolios may be purchased through variable insurance products,
which involve their own charges and expenses. This table does not reflect any
such charges.
CURRENT ANNUAL PORTFOLIO OPERATING EXPENSES (expenses that are deducted from
Portfolio assets, in %):
- --------------------------------------------------------------------------------
PORTFOLIO: MANAGEMENT OTHER TOTAL FEE WAIVERS NET ANNUAL
FEES EXPENSES ANNUAL AND EXPENSE PORTFOLIO
PORTFOLIO REIMBURSEMENT OPERATING
OPERATING EXPENSES
EXPENSES
- --------------------------------------------------------------------------------
Conseco 20 Focus 0.80% 0.08% 0.88% 0.00% 0.88%
Portfolio
- --------------------------------------------------------------------------------
Equity Portfolio 0.73% 0.08% 0.81% 0.00% 0.81%
- --------------------------------------------------------------------------------
Balanced Portfolio 0.75% 0.08% 0.83% 0.00% 0.83%
- --------------------------------------------------------------------------------
High Yield 0.80% 0.08% 0.88% 0.00% 0.88%
Portfolio
- --------------------------------------------------------------------------------
Fixed Income 0.60% 0.08% 0.68% 0.00% 0.68%
Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Government 0.60% 0.08% 0.68% 0.00% 0.68%
Securities
Portfolio
- --------------------------------------------------------------------------------
Money Market 0.60% 0.08% 0.68% 0.25% 0.43%
Portfolio
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL PORTFOLIO OPERATING EXPENSES (expenses that are deducted from
Portfolio assets, in %):
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
PORTFOLIO: MANAGEMENT ESTIMATED OTHER TOTAL FEE WAIVERS NET ANNUAL
FEES DISTRIBUTION EXPENSES ANNUAL AND EXPENSE PORTFOLIO
(12b-1) FEES PORTFOLIO REIMBURSEMENTS OPERATING
OPERATING EXPENSES
EXPENSES
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Conseco 20 Focus 0.80% 0.25% 0.08% 1.13% 0.00% 1.13%
Portfolio
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Equity Portfolio 0.73% 0.25% 0.08% 1.08% 0.00% 1.08%
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Balanced Portfolio 0.75% 0.25% 0.08% 1.08% 0.00% 1.08%
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
High Yield Portfolio 0.80% 0.25% 0.08% 1.13% 0.00% 1.13%
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Fixed Income 0.60% 0.25% 0.08% 0.93% 0.00% 0.93%
Portfolio
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Government 0.60% 0.25% 0.08% 0.93% 0.00% 0.93%
Securities Portfolio
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
Money Market 0.60% 0.25% 0.08%
Portfolio 0.93% 0.25% 0.68%
- --------------------- ------------------- ------------------ -------------- ---------------- ------------------------ --------------
EXPENSE EXAMPLES
These examples assume that you invest $10,000 in a Portfolio for the time
periods indicated, that your investment has a 5% return each year, and that any
expense waivers and reimbursements remain in effect only for the periods during
which they are binding. The first table assumes that the Portfolios' total
operating expenses remain at current levels. The second table reflects the
effect of the imputed distribution fees as discussed above. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
CURRENT EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO: CURRENT AFTER:
- --------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- --------------------------------------------------------------------------------
Conseco 90 281 488 1084
20 Focus
Portfolio
- --------------------------------------------------------------------------------
Equity 83 259 450 1002
Portfolio
- --------------------------------------------------------------------------------
Balanced 85 265 460 1025
Portfolio
- --------------------------------------------------------------------------------
High Yield 90 281 488 1084
Portfolio
- --------------------------------------------------------------------------------
Fixed Income 69 218 379 847
Portfolio
- --------------------------------------------------------------------------------
Government 69 218 379 847
Securities
Portfolio
- --------------------------------------------------------------------------------
Money Market 44 192 354 823
Portfolio
- --------------------------------------------------------------------------------
WITH DISTRIBUTION AND SERVICE FEES
- --------------------------------------------------------------------------------
PORTFOLIO: CURRENT AFTER
- --------------------------------------------------------------------------------
1 YR. 3 YR. 5 YRS. 10 YRS.
- --------------------------------------------------------------------------------
Conseco Focus 115 359 622 1375
Portfolio
- --------------------------------------------------------------------------------
Equity 110 343 595 1317
Portfolio
- --------------------------------------------------------------------------------
Balanced 110 343 595 1317
Portfolio
- --------------------------------------------------------------------------------
High Yield 115 359 622 1375
Portfolio
- --------------------------------------------------------------------------------
Fixed Income 95 296 515 1143
Portfolio
- --------------------------------------------------------------------------------
Government 95 296 515 1143
Securities
Portfolio
- --------------------------------------------------------------------------------
Money Market 69 271 490 1120
Portfolio
- --------------------------------------------------------------------------------
Approval of the Plan will, to the extent the increase is not offset by
economies of scale, increase the total expenses borne by the Portfolios, and
indirectly, by shareholders.
EVALUATION BY THE BOARD OF DIRECTORS
Until now the Portfolios have not utilized a principal underwriter or
distributor in connection with distribution of their shares. The current
agreement between the Portfolios and CVIC requires the latter to bear all
advertising and promotional expenses in connection with the
distribution of the Portfolios' shares. In view of recent trends in the
industry, CVIC recommended to the Board that another company within the Conseco
family of companies, Conseco Equity Sales, Inc., should become the distributor
for the Portfolios. CES already acts as distributor for nine mutual funds
advised by Conseco Capital Management that are offered directly to the public,
rather than through the Variable Contracts.
In determining whether to approve the proposed Plan, the Board considered
the following material factors:
o The potential costs and benefits of an increase in Portfolio expenses.
o The channels through which variable annuity and variable life contracts and
their underlying portfolios are marketed to the public have evolved
substantially in recent years, as have the means by which and entities
through which distribution- and shareholder servicing-related activities are
carried out. The Board believed that the retention of a distributor by the
Portfolios and the payment of a distribution and service fees to the
distributor would provide the resources and flexibility needed in order for
the Portfolios to respond to these industry changes.
o The possibility that the Portfolios may wish to offer their shares through
separate accounts of insurance companies not affiliated with CVIC. The Board
believed that the proposed Plan could facilitate such offerings if they are
undertaken.
o The likelihood that the proposed Plan will increase sales of Portfolio
shares. The Board determined that the distribution fees available under the
Plan would be attractive to fund "supermarkets" and others that make the
Portfolios' shares available. The Board believed that the possible benefits
to the Portfolios and their shareholders from increased sales include
economies of scale resulting in potentially lower expense ratios, more
investment flexibility, and increased liquidity.
o The benefits of the Plan to the Distributor, as the payment of distribution
expenses could reduce the need for the Distributor (or an affiliate) to pay
such expenses out of its own resources. The Board also considered the amount
of unreimbursed expensed borne by CVIC from prior years.
o The benefit to CCM from increased sales, since its advisory fees are based on
the respective Portfolios' net asset levels.
o Whether reasonable alternatives to the proposed Plan existed.
Based on the foregoing considerations, the Board concluded that there is a
reasonable likelihood that the proposed Plan will benefit the Portfolios and
their shareholders. The Board therefore approved the proposed Plan and
recommended its approval by Portfolio shareholders.
VOTE REQUIRED
Approval of this proposal with respect to each Portfolio requires the
affirmative vote of a "majority of the outstanding voting securities" of that
Portfolio, which for this purpose means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Portfolio or (2) 67% or more
of the shares of the Portfolio present at the Meeting if more than 50% of the
outstanding shares of the Portfolio are represented at the Meeting in person or
by proxy.
The Distribution and Service Plan will become effective with respect to a
Portfolio whose shareholders approve it as described above, even if shareholders
of the other Portfolios do not approve the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF EACH PORTFOLIO VOTE TO APPROVE THE
PROPOSED PLAN OF DISTRIBUTION AND SERVICE.
----------------------------
OTHER INFORMATION
SHAREHOLDER PROPOSALS. As a general matter, the Portfolios do not hold
regular annual or other regular meetings of shareholders. Any shareholder that
wishes to submit proposals to be considered at a special meeting of the
Portfolios' shareholders should send such proposals to a Portfolio at 11825
North Pennsylvania Street, Carmel, Indiana 46032. Proposals must be received
within 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 Portfolios' 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 Portfolios'
shareholders arise, the proxies will vote thereon according to their best
judgment in the interests of the Portfolios.
By Order of the Board of Trustees,
-----------------------------
William P. Kovacs,
Secretary
February 12, 2001
APPENDIX A
As of January 24, 2001, the following shareholders are shown on the
Portfolio's records as owning more than 5% of a class of its shares*
- -----------------------------------------------------------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
FUND NAME AND ADDRESS BENEFICIALLY OWNED AS OF JANUARY 24, 2001
- -----------------------------------------------------------------------------------------------------
CONSECO Conseco Variable Insurance Company** 99.99% 496,960.943
FOCUS PORTFOLIO & Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
EQUITY PORTFOLIO Conseco Variable Insurance Company** 96.27% 14,988,906.089
& Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
BALANCED Conseco Variable Insurance Company** 99.96% 5,733,999.900
PORTFOLIO & Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
HIGH YIELD Conseco Variable Insurance Company** 99.99% 431,345.983
PORTFOLIO & Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
FIXED INCOME Conseco Variable Insurance Company** 99.99% 3,868,779.788
PORTFOLIO & Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
GOVERNMENT Conseco Variable Insurance Company** 99.99% 1,510,800.482
SECURITIES & Bankers National Life Insurance Co.
PORTFOLIO 11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
MONEY MARKET Conseco Variable Insurance Company** 99.99% 78,264,273.290
PORTFOLIO & Bankers National Life Insurance Co.
11815 N. Pennsylvania Street
Carmel, IN 46032
- -----------------------------------------------------------------------------------------------------
*The two listed record holders of beneficial interest are affiliates and their
interests are merged.
**Formerly known as Great American Reserve Company.
Each shareholder listed may be contacted c/o Conseco Capital Management, Inc.,
11825 North Pennsylvania Street, Carmel, Indiana 46032. 1-317-817-4560
o Conseco Services, LLC is the administrator ("Administrator") for each of the
Portfolios. The Administrator is located at 11815 N. Pennsylvania Street,
Carmel, Indiana 46032. For providing administrative services, the
Administrator will receive an annual fee from each Portfolio as follows:
0.10% for the first $100 million; 0.08% for the second $100 million; and
0.06% for assets exceeding $200 million for each Portfolio.
o The Administrator will continue services if the Proposals discussed herein
are passed.
APPENDIX B
FORM OF INVESTMENT MANAGEMENT CONTRACT
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 CCM 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 "Portfolio"); and
WHEREAS the Trust desires to retain CCM as investment manager to furnish
certain portfolio management services to the Trust with respect to each
Portfolio for which a Subadviser is employed, and CCM 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 CCM as investment adviser of
the Trust and each Portfolio for the period and on the terms set forth in this
Contract. CCM accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. Employment; Duties of CCM.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and any written guidelines adopted by the Board, CCM will
provide a continuous investment program for all or a designated portion of the
assets ("Segment") of each Portfolio, including investment research and
discretionary management with respect to all securities and investments and cash
equivalents in each Portfolio or Segment. CCM will determine from time to time
what investments will be purchased, retained or sold by each Portfolio or
Segment. CCM will be responsible for placing purchase and sell orders for
investments and for other related transactions for each Portfolio or Segment.
CCM will be responsible for voting proxies of issuers of securities held by each
Portfolio or Segment. CCM understands that each Portfolio'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"). CCM will provide services under this Contract in accordance with each
Portfolio'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) CCM 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 Portfolio, CCM may, in its discretion and in compliance with Section 28(e)
of the Securities and Exchange Act of 1934, use brokers that provide CCM with
research, analysis, advice and similar services to execute portfolio
transactions on behalf of each Portfolio or Segment, and CCM may pay to those
brokers in return for brokerage and research services a higher commission than
may be charged by other brokers, subject to CCM's determining in good faith that
such commission is reasonable in terms either of the particular transaction or
of the overall responsibility of CCM to each Portfolio and its other clients and
that the total commissions paid by each Portfolio or Segment will be reasonable
in relation to the benefits to each Portfolio over the long term. In no instance
will portfolio securities be purchased from or sold to CCM, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder. CCM may aggregate sales and purchase orders
with respect to the assets of each Portfolio or Segment with similar orders
being made simultaneously for other accounts advised by CCM or its affiliates.
Whenever CCM simultaneously places orders to purchase or sell the same security
on behalf of a
2
Portfolio and one or more other accounts advised by CCM, 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) CCM 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 CCM on behalf of each Portfolio 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, CCM hereby agrees that all records that it maintains for a
Portfolio 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 Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board, CCM will
provide the Board with economic and investment analyses and reports as well as
quarterly reports setting forth the performance of a Portfolio or Segment and
make available to the Board any economic, statistical and investment services
that CCM normally makes available to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, CCM is responsible for assisting in the fair valuation of all
portfolio securities in each Portfolio or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of CCM 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. CCM may retain one or more Subadvisers, at
CCM's own cost and expense. In the event that CCM retains one or more
Subadviser(s) for a Portfolio, the following provisions apply:
(a) Subject to the oversight and direction of the Board of Trustees of the
Trust ("Trustees"), CCM will provide to the Trust investment management
evaluation services by performing initial reviews of prospective Subadviser(s)
for each Portfolio and supervising and monitoring performance of the
Subadviser(s) thereafter. CCM 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. CCM 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) CCM will be responsible for informing the Subadviser(s) of the
investment objective(s), policies and restrictions of the Portfolio 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 Portfolio for which each Subadviser is responsible, and for
monitoring each Subadviser's discharge of its duties; but CCM 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 Portfolio, CCM shall enter into
an agreement ("Subadvisory Agreement") with the Subadviser in substantially the
form previously approved by the Board.
(d) CCM shall be responsible for the fees payable to and shall pay the
Subadviser(s) of a Portfolio the fee as specified in the Subadvisory Agreement
relating thereto.
4. Further Duties. In all matters relating to the performance of this
Contract, CCM 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 Advisors Act, and the rules under each, and all other applicable federal and
state laws and regulations.
5. Services Not Exclusive. The services furnished by CCM hereunder are
not to be deemed exclusive and CCM 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 CCM, who may also be a Trustee, officer or employee of
the Trust, to engage in any other business or to devote his
3
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 Portfolio will bear all
expenses, not specifically assumed by CCM, incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Portfolio will include but not be limited to
the following (or each Portfolios' proportionate share of the following): (i)
the cost (including brokerage commissions) of securities purchased or sold by
the Portfolio and any losses incurred in connection therewith; (ii) fees payable
to and expenses incurred on behalf of the Portfolio by CCM under this Contract;
(iii) filing fees and expenses relating to the registrations and qualification
of the Portfolio'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 CCM; (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 Portfolio 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 Portfolio; (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 Portfolio may pay directly any expenses incurred by it
in its normal operations and, if any such payment is consented to by CCM and
acknowledged as otherwise payable by CCM pursuant to this Contract, a Portfolio
may reduce the fee payable to CCM pursuant to Paragraph 7 thereof by such
amount. To the extent that such deductions exceed the fee payable to CCM 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) CCM 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 CCM of any expenses of the Trust or a
Portfolio that CCM is not required by this Contract to pay or assume shall not
obligate CCM to pay or assume the same or any similar expense of the Trust or a
Portfolio on any subsequent occasion.
7. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to a Portfolio, the Trust will pay to CCM 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 Portfolio.
4
(b) The fee shall be computed daily and paid monthly to CCM 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 CCM. CCM and its officers, directors,
employees and delegates, including any Subadviser to a Portfolio, shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust, a Portfolio 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 CCM, who may be or become an officer,
Trustee, employee or agent of the Trust shall be deemed, when rendering services
to a Portfolio or the Trust or acting with respect to any business of a
Portfolio or the Trust, to be rendering such service to or acting solely for a
Portfolio or the Trust and not as an officer, director, employee, or agent or
one under the control or direction of CCM 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 Portfolio shall not be
liable for any obligations of any Portfolio or the Trust under this Agreement
and CCM 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 Portfolio upon the day
and year first written above, provided that this Contract has been approved for
the Portfolio 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 Portfolio.
(c) Notwithstanding the foregoing, with respect to a Portfolio, 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 Portfolio upon delivery of sixty (60) days' written notice to
CCM and may be terminated by CCM 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 Portfolio shall in no way affect
the continued validity of this Contract or the performance thereunder with
respect to any other Portfolio. This Contract shall terminate automatically in
the event of its assignment.
11. Additional Portfolios. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have CCM render
services under this Contract, it shall so notify CCM in writing. If CCM agrees
in writing to provide said services, such series of shares shall become a
Portfolio hereunder upon execution of a new Schedule A and compliance with the
requirements of the 1940 Act and the rules and regulations thereunder.
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
Portfolio shall be effective until approved by vote of the Independent Trustees
or a majority of the Portfolio's outstanding voting securities.
5
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 SERIES TRUST
Attest: By
-------------------- ----------------------
William P. Kovacs Name: Maxwell E. Bublitz
Secretary Title: President
CONSECO CAPITAL MANAGEMENT, INC.
Attest: By
-------------------- ----------------------
William P. Kovacs Name: Gregory J. Hahn
Secretary Title: Senior Vice President
6
CONSECO SERIES TRUST
INVESTMENT MANAGEMENT CONTRACT
SCHEDULE A
Series Annual Fee
Conseco 20 Focus Portfolio 0.70%
Equity Portfolio 0.65%
Balanced Portfolio 0.65%
High Yield Portfolio 0.70%
Fixed Income Portfolio 0.50%
Government Securities Portfolio 0.50%
Money Market Portfolio 0.25%
APPENDIX C
MORE INFORMATION ABOUT CCM
CCM serves as the Portfolios' investment adviser. CCM, a 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
11825 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 Portfolios 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:
POSITION(S) WITH CONSECO PRINCIPAL
NAME CAPITAL MANAGEMENT, INC. OCCUPATION
Maxwell E. Bublitz President & CEO President
Gregory J. Hahn Senior Vice President Chief Investment
Officer
Nora A. 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.
8
OTHER INVESTMENT COMPANY CLIENTS
CCM also serves as investment adviser to the following investment
companies, which have investment objectives similar to the Portfolios', at the
fee rates set forth below.
- ----------------------------------------------------------------------------------------------------
FUND APPROXIMATE ANNUAL INVESTMENT ANNUAL INVESTMENT
NET ASSETS ADVISORY FEE ADVISORY FEE
AS OF WITH APPLICABLE
DECEMBER 31, 2000 WAIVER
- ----------------------------------------------------------------------------------------------------
Conseco Strategic $87.3 million 0.90% of average 0.90% of average daily net assets
Income Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco Stock Car $4.85 million 0.65% of average 0.00% of average daily net assets
Stocks Index Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco Science & $31.62 million 1.00% of average 0.58% of average daily net assets
Technology Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco 20 Fund $222.16 million 0.70% of average 0.70% of average daily net assets
daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco $30.31 million 0.70% of average 0.14% of average daily net assets
Large-Cap Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco $156.04 million 0.70% of average 0.70% of average daily net assets
Equity Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco $61.93 million 0.70% of average 0.46% of average daily net assets
Balanced Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco Convertible $67.75 million 0.85% of average 0.70% of average daily net assets
Securities Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco High $87.12 million 0.70% of average 0.52% of average daily net assets
Yield Fund daily net assets
- ----------------------------------------------------------------------------------------------------
Conseco Fixed $73.91 million 0.45% of average 0.26% of average daily net assets
Income Fund daily net assets
- ----------------------------------------------------------------------------------------------------
9
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 Series Trust ("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 "Portfolio"); 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 Portfolio 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 Portfolio,
including investment research and discretionary management with respect to all
securities and investments and cash equivalents in each Portfolio or Segment.
The Subadviser will determine from time to time what investments will be
purchased, retained or sold by each Portfolio or Segment. The Subadviser will be
responsible for placing purchase and sell orders for investments and for other
related transactions for each Portfolio or Segment. The Subadviser will be
responsible for voting proxies of issuers of securities held by each Portfolio
or Segment. The Subadviser understands that each Portfolio'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 Portfolio'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 Portfolio, 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 Portfolio 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 Portfolio and its other clients and
that the total commissions paid by each Portfolio or Segment will be reasonable
in relation to the benefits to each Portfolio over the long term. In no instance
will portfolio securities be purchased from or sold to CCM or the
10
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
Portfolio 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 Portfolio 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
Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio. 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 Portfolio or CCM.
5. Compensation.
(a) For the services provided and the expenses assumed by the Subadviser
pursuant to this Contract, CCM, not each Portfolio, 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 Portfolio 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 Portfolio 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.
11
(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 Portfolio, 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 Portfolio's investments not managed by the Subadviser or for the
acts or omissions of any other subadviser to the Trust or the Portfolio.
In particular, in the event the Subadviser shall manage only a portion
of a Portfolio's investments, the Subadviser shall have no responsibility for
the Portfolio's being in violation of any applicable law or regulation or
investment policy or restriction applicable to the Portfolio as a whole or for
the Portfolio'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 Portfolio or senior management of the
Subadviser, in each case prior to, or promptly after, such change.
12
(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 Portfolio,
the Trust, CCM or any of their respective affiliates in offering, marketing or
other promotional materials without the prior express written consent of CCM.
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 Portfolio'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 Portfolio'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 Portfolio.
(c) Notwithstanding the foregoing, with respect to a Portfolio, 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 Portfolio 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 Portfolio. 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 Portfolio.
10. Additional Portfolios. 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 Portfolio 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
Portfolio shall be effective until approved by vote of the Independent Trustees
or a majority of the Portfolio'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 law 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
13
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 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
CHICAGO EQUITY PARTNERS, LLC,
180 N LaSalle Street, Suite 3800,
Chicago, IL 60601
Attest: By
-------------------- ----------------------
William P. Kovacs Name: James D. Miller
Secretary Title: Chairman
14
CONSECO SERIES TRUST
SUBADVISORY CONTRACT
SCHEDULE A
Series Annual Fee
Equity Portfolio 0.30%
The equity portion of Balanced Portfolio 0.30%
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 had 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
- ----------
The business address of each person listed above is Chicago Equity Partners,
LLC, 180 N LaSalle Street, Suite 3800, Chicago, IL 60601.
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.
16
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 Series Trust ("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 "Portfolio"); 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 Portfolio 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 Portfolio,
including investment research and discretionary management with respect to all
securities and investments and cash equivalents in each Portfolio or Segment.
The Subadviser will determine from time to time what investments will be
purchased, retained or sold by each Portfolio or Segment. The Subadviser will be
responsible for placing purchase and sell orders for investments and for other
related transactions for each Portfolio or Segment. The Subadviser will be
responsible for voting proxies of issuers of securities held by each Portfolio
or Segment. The Subadviser understands that each Portfolio'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 Portfolio'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 Portfolio, 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 Portfolio 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 Portfolio and its other clients and
that the total commissions paid by each Portfolio or Segment will be reasonable
in relation to the benefits to each Portfolio over the long term. In no instance
will portfolio securities be purchased from or sold to CCM or the
17
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
Portfolio 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 Portfolio 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
Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio. 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 Portfolio or CCM.
5. Compensation.
(a) For the services provided and the expenses assumed by the Subadviser
pursuant to this Contract, CCM, not each Portfolio, 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 Portfolio 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 Portfolio 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.
18
(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 Portfolio, 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 Portfolio's investments not managed by the Subadviser or for the
acts or omissions of any other subadviser to the Trust or the Portfolio.
In particular, in the event the Subadviser shall manage only a portion of a
Portfolio's investments, the Subadviser shall have no responsibility for the
Portfolio's being in violation of any applicable law or regulation or investment
policy or restriction applicable to the Portfolio as a whole or for the
Portfolio'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 Portfolio 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 Portfolio,
the Trust, CCM or any of their respective affiliates in offering, marketing or
other promotional materials without the prior express written consent of CCM.
19
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 Portfolio'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 Portfolio'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 Portfolio.
(c) Notwithstanding the foregoing, with respect to a Portfolio, 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 Portfolio 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 Portfolio. 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 Portfolio.
10. Additional Portfolios. 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 Portfolio 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
Portfolio shall be effective until approved by vote of the Independent Trustees
or a majority of the Portfolio'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 law 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"
20
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 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
21
CONSECO SERIES TRUST
SUBADVISORY CONTRACT
SCHEDULE A
Series Annual Fee
Conseco 20 Focus Portfolio 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 Portfolio Manager
and Managing Member
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
2
APPENDIX H
PLAN OF DISTRIBUTION AND SERVICE PURSUANT TO RULE 12B-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
PREAMBLE TO THE PLAN OF DISTRIBUTION & SERVICE
The Conseco Series Trust ("Trust") is an open-end management investment
company organized as a Massachusetts business trust, which offers the shares of
its Portfolios (the "Portfolio" or "Portfolios") to certain life insurance
companies ("Insurance Companies") for allocation to their separate accounts
which have been established for the purpose of funding variable annuity
contracts and variable life insurance policies (collectively, "Variable
Contracts"). The following Plan of Distribution and Service (the "Plan") has
been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act") by the Trust for the shares of its Portfolios listed above
("Shares"). The Plan shall take effect on _______, 2001, provided that it is
first approved by the shareholders of each Portfolio of the Trust (the
"Effective Date of the Plan"). The Plan has been approved by a majority of the
Board of Trustees of the Trust (the "Board"), including a majority of the Board
who are not interested persons of the Trust and who have no direct financial
interest in the operation of the Plan (the "non-interested Board members"), cast
in person at a meeting called for the purpose of voting on such Plan. The
Board's approval included a determination that in the exercise of its reasonable
business judgment and in light of its fiduciary duties, there is a reasonable
likelihood that the Plan will benefit each Portfolio of the Trust and its
shareholders.
PLAN OF DISTRIBUTION & SERVICE
1. The Trust shall pay Conseco Equity Sales, Inc. ("Distributor"), permitted
Insurance Companies or others, for distribution-related activities primarily
intended to sell Shares or Variable Contracts offering Shares.
Distribution-related payments made under the Plan may be used for, among other
things, the printing of prospectuses and reports used for sales purposes,
preparing and distributing sales literature and related expenses,
advertisements, education of Variable Contract owners or dealers and their
representatives, trail commissions, and other distribution-related expenses,
including a prorated portion of the overhead expenses of the Distributor or the
Insurance Companies which are attributable to the distribution of these Variable
Contracts. Distributor may undertake such activities directly or may compensate
others for undertaking such activities. Payments made under the Plan may also be
used to pay Insurance Companies, dealers or others for non-distribution
services, including, among other things, responding to inquiries from owners of
Variable Contracts regarding the Trust, printing and mailing Trust prospectuses
and other shareholder communications to existing Variable Contract owners,
direct communications with Variable Contract owners regarding Trust operations
and Portfolio composition and performance, furnishing personal services or such
other enhanced services as the Trust or a Variable Contract may require, or
maintaining customer accounts and records. Agreements for the payment of fees to
the Distributor, Insurance Companies or others shall be in a form that has been
approved from time to time by the Board, including the non-interested Board
members.
2. The amount paid by the Trust shall be .25% per annum of the average daily net
assets of the Trust's Shares in each Portfolio covered by this Plan of
Distribution and Service. These payments shall be made quarterly by the Trust to
Distributor, the Insurance Companies or others.
3
3. Distributor, Insurance Companies or others shall furnish to the Board, for
its review, on a quarterly basis, a written report of the monies paid to it, to
the Insurance Companies or others under the Plan. The Distributor, Insurance
Companies or others shall furnish the Board with such other information as the
Board may reasonably request in connection with the payments made under the Plan
including those distributions or payments made to others by the recipient.
4. The Plan shall continue in effect for a period of more than one year with
respect to the Trust only so long as such continuance is specifically approved
at least annually by a vote of the Board, including the non-interested Board
members, cast in person at a meeting called for the purpose of voting on the
Plan and its continuance.
5. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated with respect to the Shares of the Trust (or any Portfolio thereof) at
any time without penalty, by vote of a majority of the outstanding Shares of the
Trust (or such Portfolio) or by vote of a majority of the non-interested Board
members, on not more than sixty (60) days written notice, or by the Distributor
on not more than sixty (60) days written notice, and shall terminate
automatically in the event of any act that constitutes an assignment of the
Management agreement between the Trust and the Trust's Adviser.
6. The Plan, and any agreements entered into pursuant to this Plan, may not be
amended to increase materially the amount to be spent by the Trust pursuant to
Paragraph 2 hereof without approval by a majority of the outstanding Shares of
each Portfolio affected thereby.
7. All material amendments to the Plan, or any agreements entered into pursuant
to this Plan, shall be approved by a vote of the non-interested Board members
case in person at a meeting called for the purpose of voting on any such
amendment.
8. So long as the Plan is in effect, the selection and nomination of the Trust's
non-interested Board members shall be committed to the discretion of such
non-interested Board members.
9. This Plan is a compensation type plan of distribution. It does not require
the Distributor or other recipient of payments to maintain any specific level of
expenditures, nor is the Distributor or other recipient precluded from earning a
profit. Nothing in this Plan limits the ability of the Distributor, the
Portfolios' investment adviser, or others to utilize their own funds in
connection with the promotion of sales of Portfolio shares.
4
APPENDIX I
PRINCIPAL UNDERWRITING AGREEMENT
BETWEEN CONSECO SERIES TRUST
AND
CONSECO EQUITY SALES, INC.
THIS PRINCIPAL UNDERWRITING AGREEMENT, is entered into as of this ___ day
of ___________, 2001, by and between Conseco Series Trust ("Trust"), a
Massachusetts Business Trust, and Conseco Equity Sales, Inc., a Texas
corporation (the "Underwriter").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end diversified management investment
company, and its shares are registered pursuant to the Securities Act of 1933
(the "1933 Act");
WHEREAS, the Trust has established several separate series of shares, each
of which represents a separate diversified portfolio of investments, and may
establish additional series of shares (each series now or hereafter listed on
Schedule A hereto, as such schedule is amended from time to time, shall be
referred to herein as a "Portfolio");
WHEREAS, the Trust has issued shares of each Portfolio in one or more
classes (each a "Class"), and has adopted a Distribution and Service Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to certain of
those Classes (each a "12b-1 Class");
WHEREAS, the Underwriter is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing with the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, the Trust desires to retain the Underwriter to act as the Trust's
principal underwriter in connection with the offering and sale of shares of each
Portfolio and to furnish certain other services; and
WHEREAS, the Underwriter is willing to act as principal underwriter and to
furnish such services pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties mutually agree as follows:
1. UNDERWRITING SERVICES
The Trust hereby engages the Underwriter, and the Underwriter hereby agrees
to act, as principal underwriter for the Trust in the sale and distribution of
the shares of the Trust. The Underwriter agrees to offer such shares for sale at
all times when such shares are available for sale and may lawfully be offered
for sale and sold.
2. SALE OF TRUST SHARES
Such shares are to be sold only on the following terms: (a) All
subscriptions, offers, or sales shall be subject to acceptance or rejection by
the Trust. Any offer or sale shall be conclusively presumed to have been
accepted by the Trust if the Trust shall fail to notify the Underwriter of the
rejection of such offer or sales prior to the computation of the net asset value
of the Trust's shares next following receipt by the Trust of notice of such
offer or sale. (b) No share
5
of the Trust shall be sold by the Underwriter for any consideration other than
cash. (c) Shares of the Trust are not available to the public. The Trust is
available for sale only to separate accounts of Conseco Variable Insurance
Company and to certain of its life insurance affiliates for the purpose of
funding variable life insurance policies and variable annuity contracts
("Variable Contracts").
3. REGISTRATION OF SHARES
The Trust agrees to make prompt and reasonable efforts to effect and keep
in effect, at its expense, the registration or qualification of its shares for
sale in such jurisdictions as the Trust may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER
The Trust agrees that it will furnish the Underwriter with such information
with respect to the affairs and accounts of the Trust as the Underwriter may
from time to time reasonably require, and further agrees that the Underwriter,
at all reasonable times, shall be permitted to inspect the books and records of
the Trust.
5. ALLOCATION OF EXPENSES
During the period of this contract, the Trust shall pay or cause to be paid
all expenses, costs, and fees incurred by the Trust which are not assumed by the
Underwriter or Conseco Capital Management, Inc., the Trust's investment adviser.
The Underwriter shall pay costs associated with the distribution of shares of
the Trust. Distribution-related payments may include, among other things, the
printing of prospectuses and reports used for sales purposes, preparing and
distributing sales literature and related expenses, advertisements, education of
Variable Contract owners or dealers and their representatives, trail
commissions, and other distribution-related expenses, including a prorated
portion of the overhead expenses of the Underwriter or the Insurance Companies
which are attributable to the distribution of the Variable Contracts.
Underwriter may undertake such activities directly or may compensate others for
undertaking such activities. Payments made under the Plan may also be used to
pay Insurance Companies, dealers or others for non-distribution services,
including, among other things, responding to inquiries from owners of Variable
Contracts regarding the Trust, printing and mailing Trust prospectuses and other
shareholder communications to existing Variable Contract owners, direct
communications with Variable Contract owners regarding Trust operations and
portfolio composition and performance, furnishing personal services or such
other enhanced services as the Trust or a Variable Contract may require, or
maintaining customer accounts and records. Agreements for the payment of fees to
the Underwriter, Insurance Companies or others shall be in a form approved from
time to time by the Board, including the non-interested Board members.
6. COMPENSATION TO THE UNDERWRITER
Pursuant to the Trust's Distribution and Service Plan adopted by the
shareholders of the Trust in accordance with Rule 12b-1 under the 1940 Act (the
"Plan"), the Trust shall pay the Underwriter a total fee each month equal to
.25% per annum of the average daily net assets represented by shares of the
Trust to cover the costs of "distribution-related activities" and other
"non-distribution services" as described in the Plan ("Distribution Expenses").
Average daily net assets shall be computed in accordance with the Trust's
currently effective Prospectus. Amounts payable to the Underwriter under the
Plan may exceed or be less than the Underwriter's actual Distribution Expenses.
In the event such Distribution Expenses exceed amounts payable to the
Underwriter under the Plans, the Underwriter shall not be entitled to
reimbursement by the Trust. In each year during which this Agreement remains in
effect, the Underwriter will prepare and furnish to the Board of Trustees of the
Trust, and the Board will review, on a quarterly basis, written reports
complying with the requirements of Rule 12b-1 under the 1940 Act that set forth
the amounts expended under this Agreement and the Plan and the purposes for
which those expenditures were made.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY
The Underwriter shall be deemed to be an independent contractor and, except
as specifically provided or authorized herein, shall have no authority to act
for or represent the Trust.
6
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS
The subscription for the shares of the Trust shall be solely from separate
accounts pursuant to the terms of the variable life insurance policies and
variable annuity contracts.
9. INDEMNIFICATION OF THE TRUST
The Underwriter agrees to indemnify the Trust against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost, or penalty imposed as a result of such litigation or
proceedings in any way arising out of or in connection with the sale or
distribution of the shares of the Trust by the Underwriter. In the event of the
threat or institution of any such litigation or legal proceedings against the
Trust, the Underwriter shall defend such action on behalf of the Trust at its
own expense, and shall pay any such liability, judgment, cost, or penalty
resulting therefrom, whether imposed by legal authority or agreed upon by way of
compromise and settlement; provided, however, the Underwriter shall not be
required to pay or reimburse the Trust for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of the
omission to supply information by, the Trust to the Underwriter, or to the
Underwriter by a director, officer, or employee of the Trust who is not an
interested person of the Underwriter, unless the information so supplied or
omitted was available to the Underwriter or Management without recourse to the
Trust or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
The effective date of this Agreement is set forth in the first paragraph of
this Agreement. Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect only so long as such continuance is specifically
approved at least annually (a) by the Board of Trustees of the Trust, or by the
vote of the holders of a majority of the outstanding voting securities of the
Trust (or such Portfolio), and (b) by a majority of the Trustees who are not 3
interested persons of the Underwriter or of the Trust cast in person at a
meeting called for the purpose of voting on such approval. This Agreement may be
terminated with respect to the Trust (or any Portfolio thereof) at any time
without penalty, by vote of a majority of the outstanding Shares of the Trust
(or such Portfolio) or by vote of a majority of the non-interested Board
members, on not more than sixty (60) days' written notice, or by the Underwriter
on not more than sixty (60) days' written notice, and shall terminate
automatically in the event of any act that constitutes an assignment, (as
defined by the provisions of the Investment Company Act of 1940, as amended) of
this Agreement.
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until approved
by the Underwriter and by vote of majority of the Board of Trustees of the Trust
who are not interested persons of the Underwriter, and such amendment is in
writing and signed by both parties.
13. NOTICES
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
14. LIABILITY
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Underwriter or reckless disregard by the Underwriter of its
obligations and duties hereunder, the Underwriter shall not be subject to
7
liability to the Trust or any Portfolio or its shareholders for any act or
omission in the course of or in connection with rendering services hereunder.
15. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Indiana, except insofar as the 1940 Act may be controlling.
16. NO WAIVER
The waiver by any party of any breach of or default under any provision or
portion of this Agreement shall not operate as or be construed to be a waiver of
any subsequent breach or default.
17. SEVERABILITY
The provisions of this Agreement shall be construed severable and if any
provision of this Agreement is deemed to be invalid or contrary to any existing
or future law, such invalidity shall not impair the operation of or affect any
other provision of this Agreement which is valid.
18. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that this Agreement is executed on behalf of the Trustees as Trustees, not
individually. The Underwriter acknowledges and agrees that the obligations of a
Portfolio hereunder are not binding upon any of the Trustees or shareholders of
a Portfolio personally but are binding only upon the assets and property of that
Portfolio and no other.
IN WITNESS WHEREOF, The Trust and the Underwriter have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
CONSECO SERIES TRUST
By:
------------------------
ATTEST: Gregory J. Hahn
Vice President
- -----------------------
CONSECO EQUITY SALES, INC.
By:
------------------------
L. Gregory Gloeckner
ATTEST: President
- -----------------------
8
CONSECO SERIES TRUST
PRINCIPAL UNDERWRITING AGREEMENT
SCHEDULE A
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
9
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 SERIES TRUST
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 Series Trust (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 Equity Portfolio
and the Balanced Portfolio ONLY).
FOR ______ AGAINST ______ ABSTAIN ______
3. To approve or disapprove Subadvisory Contracts between Conseco Capital
Management, Inc. and Oak Associates, ltd. (for the Conseco 20 Focus
Portfolio 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 (all nominees except as provided) ______
WITHHOLD authority to vote for all nominees listed ______
6. To ratify the appointment of PricewaterhouseCoopers LLP as the Trust's
independent accountants.
FOR ______ AGAINST ______ ABSTAIN ______
7. To approve or disapprove a Plan of Distribution and Service for the
Portfolios pursuant to Rule 12b-1 under the Investment Company Act of 1940.
FOR ______ AGAINST ______ ABSTAIN ______
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.