As Filed With The Securities And Exchange Commission On July 30, 1997
File Nos. 333-13185
811-7839
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No. _____
Post-Effective Amendment No.__1__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__
Amendment No.__2__
CONSECO FUND GROUP
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(Exact Name of Registrant as Specified in Charter)
11825 North Pennsylvania Street
Carmel, Indiana 46032
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(317) 817-6300
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
WILLIAM P. LATIMER, Esq.
Conseco Capital Management, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service of Process)
Copies to:
DONALD W. SMITH, Esq.
ROBERT J. ZUTZ, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
[_ _] Immediately upon filing pursuant to Rule 485(b)
[_X_] On August 6, 1997 pursuant to Rule 485(b)
[___] 60 days after filing pursuant to Rule 485(a)(i)
[___] On _______________ pursuant to Rule 485(a)(i)
[___] 75 days after filing pursuant to Rule 485(a)(ii)
[___] On _________________ pursuant to Rule 485(a)(ii)
<PAGE>
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of shares under the Securities
Act of 1933 and filed the declaration pursuant to that rule on December 20,
1996.
<PAGE>
CONSECO FUND GROUP
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
. Cover Sheet
. Contents of Registration Statement
. Cross Reference Sheet
. Part A - Conseco Fund Group, Class A prospectus
Conseco Fund Group, Class Y prospectus
. Part B - Statement of Additional Information
. Part C - Other Information
. Signature Pages
. Exhibits
<PAGE>
CONSECO FUND GROUP
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A Location in
Item No. Registration Statement
-------- ----------------------
PART A: INFORMATION REQUIRED IN PROSPECTUS
------------------------------------------
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page
5. Management of the Fund Management
6. Capital Stock and Other Securities Investment Objectives and
Policies of the Funds
7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
8. Redemption or Repurchase Purchase and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
Part B: Information Required In
Statement Of Additional Information
-----------------------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History General Information
13. Investment Objectives and Policies Investment Restrictions
14. Management of the Registrant Management
15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
16. Investment Advisory and Other Services Management
17. Brokerage Allocation Portfolio Turnover and
Securities Transactions
18. Capital Stock and Other Securities General
<PAGE>
N-1A Location in
Item No. Registration Statement
-------- ----------------------
19. Purchase, Redemption and Pricing of Purchase and Redemption of
Securities Being Offered Shares
20. Tax Status Taxes
21. Underwriters Distribution Arrangements
22. Calculation of Performance Data Investment Performance
23. Financial Statements Financial Statements
PART C: OTHER INFORMATION
-------------------------
24. Financial Statements and Exhibits Financial Statements and
Exhibits
25. Persons Controlled by or Under Common Persons Controlled by or
Control Under Common Control
26. Number of Holders of Securities Number of Holders of
Securities
27. Indemnification Indemnification
28. Business and Other Connections Business and Other
of Investment Adviser Connections of Investment
Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and
Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
CONSECO FUND GROUP
ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET, CARMEL, INDIANA 46032
(317) 817-6300
The Conseco Fund Group (the "Trust") is an open-end diversified management
investment company registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act"). The Trust was
organized as a Massachusetts business trust on September 24, 1996. The Trust is
a "series" type of mutual fund which issues separate series of shares, each of
which represents a separate diversified portfolio of investments. This
Prospectus offers shares of three series ("Funds") of the Trust, each with its
own investment objective and investment policies. The Funds are divided into
Class A and Class Y shares. Class Y shares are offered to certain institutional
investors and qualifying individual investors by a separate prospectus. Each
class may have different expenses, which may affect performance.
The investment objectives of the Funds are as follows:
EQUITY FUND seeks to provide a high equity total return consistent with
preservation of capital and a prudent level of risk primarily by investing in
selected equity securities and other securities having the investment
characteristics of common stocks.
ASSET ALLOCATION FUND seeks a high total investment return consistent
with the preservation of capital and prudent investment risk. The Fund seeks to
achieve this objective by pursuing an active asset allocation strategy whereby
investments are allocated, based upon thorough investment research, valuation
and analysis of market trends and the anticipated relative total return
available, among various asset classes, including debt securities, equity
securities, and money market instruments.
FIXED INCOME FUND seeks the highest level of income as is consistent with
preservation of capital by investing primarily in investment grade debt
securities.
<PAGE>
Conseco Capital Management, Inc. (the "Adviser") serves as the Trust's
investment adviser. The Adviser supervises the Trust's management and investment
program, performs a variety of administrative services on behalf of the Trust,
and pays all compensation of officers and Trustees of the Trust who are
affiliated persons of the Adviser or the Trust. The Trust pays all other
expenses incurred in the operation of the Trust, including fees and expenses of
Trustees who are unaffiliated persons of the Adviser and the Trust.
There is no assurance that any of the Funds will achieve its investment
objective. The various Funds may be used independently or in combination. You
may also purchase shares of a money market fund currently managed by Federated
Investors, which seeks current income consistent with stability of capital and
liquidity, through a separate prospectus. That prospectus is available upon
request by calling 800-557-7043.
This Prospectus sets forth concisely the information about the Trust that
an investor should know before investing. A Statement of Additional Information
("SAI") dated August 6, 1997, containing additional information about the Trust
and the Funds, has been filed with the SEC and is incorporated by reference in
this Prospectus in its entirety. You may obtain a copy of the SAI without charge
by calling or writing the Trust at the address and telephone number above.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August 6, 1997.
TABLE OF CONTENTS
PAGE
Cover Page
Fee Table
Financial Highlights
Investment Objectives and Policies of the Funds
Investment Techniques and Other Investment Policies
Management
Purchase and Redemption of Shares
Dividends, Other Distributions and Taxes
The Adviser's Investment Performance
Other Information
Table of Contents of the Statement of Additional
Information
Appendix A Securities Ratings
FEE TABLE
2
<PAGE>
The following fee table is provided to assist investors in understanding
the various costs and expenses which may be borne directly or indirectly by an
investment in Class A shares of the Funds.
Asset Fixed
Shareholder Transaction Expenses Equity Allocation Income
-------------------------------- ------ ---------- ------
Maximum Sales Charge Imposed on 5% 5% 5%
Purchases (as a percentage of
offering price)
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price) None None None
Deferred Sales Charge None None None
Redemption Fees None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily
net assets)
Management Fees .70% .70% .40%(1)
Administrative Fees .20% .20% .20%
12b-1 Distribution and Service Fees .50% .50% .65%
(2)
Other Expenses (less voluntary fee .10% .10% 0%
waivers and/or reimbursements) (3)
Total Operating Expenses (less
voluntary fee waivers and/or 1.50% 1.50% 1.25%
reimbursements) (4)
(1) The Adviser has voluntarily undertaken to reduce its advisory fee with
respect to the Fixed Income Fund to .40% of the Fund's average daily net assets
until April 30, 1998. Absent such undertaking, the advisory fee would be .45% of
the Fund's average daily net assets.
3
<PAGE>
(2) As a result of 12b-1 fees, a long-term shareholder in a Fund may pay more
than the economic equivalent of the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD").
(3) Other Expenses are based on estimated amounts for the current fiscal year
and exclude taxes, interest, brokerage and other transaction expenses, and any
extraordinary expenses.
(4) The expense information set forth above reflects voluntary commitments of
the Adviser, Conseco Services, LLC and Conseco Equity Sales, Inc. to waive a
portion of their fees under each Fund's Investment Advisory Agreement,
Administration Agreement and Distribution and Service Plan, respectively, and/or
to reimburse a portion of the Fund's expenses through April 30, 1998. The
voluntary commitments provide that the Total Operating Expenses for the Funds,
on an annual basis, will not exceed the amounts set forth above. In the absence
of such waivers and reimbursements (including the reduction in Fixed Income
Fund's advisory fee discussed above), it is estimated that Other Expenses would
be .92%, 1.38% and 2.17% and Total Operating Expenses would be 2.32%, 2.78% and
3.47%, of the average daily net assets of the Equity, Asset Allocation and Fixed
Income Funds, respectively.
EXAMPLE
Assuming a hypothetical investment of $1,000, a 5% annual return and
redemption at the end of each time period, an investor in Class A of each of the
Funds would have paid transaction and operating expenses at the end of each year
as follows:
1 Year 3 Years
------ -------
Equity $65 $96
Asset Allocation $65 $96
Fixed Income $62 $88
The same level of expenses would be incurred if the investments were held
throughout the period indicated.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
4
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Period from inception (January 2, 1997)
through June 30, 1997
--------------------------------------
Asset Fixed
Equity Allocation Income
Class A Shares Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Net asset value per share, beginning of period........................... $10.00 $10.00 $10.00
Income from investment operations (a):
Net investment income (loss).......................................... (.03) .10 .27
Net realized gains and change in unrealized appreciation
on investments...................................................... .88 .65 .09
------ ------ ------
Total from investment operations.................................. .85 .75 .36
Distributions from net investment income and net realized short-term
capital gains (a)................................................... - (.20) (.30)
------- ------ ------
Net asset value per share, end of period.......................... $10.85 $10.55 $10.06
====== ====== ======
Total return (not annualized) (b).(c).................................... 8.50% 6.65% 3.41%
==== ==== ====
Ratios/supplemental data:
Net assets, end of period............................................. 1,537,971 433,074 43,817
Ratio of expenses to average net assets (b) (annualized).............. 1.50% 1.50% 1.25%
Ratio of net investment income (loss) to average net
assets (b) (annualized)............................................. (.66)% 2.06% 5.96%
Portfolio turnover rate............................................... 97.331% 241.150% 220.808%
Average commission rate paid (d)...................................... $.06 $.06 $ -
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding during the period from inception (January 2, 1997) through June
30, 1997.
(b) These ratios have been reduced due to an agreement with the Adviser that
the ratio of expenses to average net assets would not exceed on an annual
basis 1.50 percent for the Equity Fund, 1.50 percent for the Asset
Allocation Fund and 1.25 percent for the Fixed Income Fund. These voluntary
limits may be discontinued by the Adviser at any time after April 30, 1998.
If the aforementioned agreement had not been in effect during the period,
the annualized ratio of expenses to average net assets would have been 9.33
percent for the Equity Fund, 23.20 percent for the Asset Allocation Fund
and 102.86 percent for the Fixed Income Fund.
(c) Total return figures do not include sales charges; results would be lower
if sales charges were included.
(d) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission.
</FN>
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each of the Funds has a different investment objective as described
below. Each Fund is managed by the Adviser. There can be no assurance that any
of the Funds will achieve its investment objective. Each Fund is subject to the
risk of changing economic conditions, as well as the risk inherent in the
ability of the Adviser to make changes in a Fund's investments in anticipation
of changes in economic, business, and financial conditions.
The different types of securities and investment techniques common to one
or more Funds all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital appreciation
and there is a substantial risk of decline. With respect to debt securities,
there can be no assurance that the issuer of such securities will be able to
meet its obligations on interest or principal payments in a timely manner. In
addition, the value of debt instruments generally rises and falls inversely with
interest rates.
The investments and investment techniques common to one or more Funds and
their risks are described in greater detail in "Description of Securities and
Investment Techniques" in the SAI.
The Funds are subject to investment restrictions that are described under
"Investment Restrictions" in the SAI. Those investment restrictions that are
"fundamental policies" may not be changed without a majority vote of
shareholders of the affected Funds. Among other things, the "fundamental
policies" prohibit each Fund, with respect to 75 percent of its total assets,
from (i) investing more than 5 percent of its assets in the securities of any
one issuer (except obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities (these obligations are referred to in this
Prospectus as "U.S. government securities")); and (ii) investing more than 25
percent of its assets in the securities of issuers in the same industry (except
cash equivalent items and U.S. government securities). Except for the Trust's
fundamental policies, all investment policies and practices described in this
Prospectus and in the SAI are not fundamental, meaning that the Board of
Trustees may change them without shareholder approval. See "Description of
Securities and Investment Techniques" and "Investment Restrictions" in the SAI
for further information.
6
<PAGE>
EQUITY FUND
In seeking its objective of providing a high equity total return
consistent with preservation of capital and a prudent level of risk, the Equity
Fund will attempt to achieve a total return (i.e., price appreciation plus
potential dividend yield) primarily through investment in selected equities
(i.e., common stocks and other securities having the investment characteristics
of common stocks, such as convertible debentures and warrants). However, if
market conditions indicate their desirability, the Adviser may, for defensive
purposes, temporarily invest all or a part of the assets of the Equity Fund in
money market instruments. See "Debt Securities" below and in the SAI for further
information.
The Adviser expects that the Fund's equity investments will be widely
diversified by both industry and number of issuers. The Adviser's stock
selection methods will be based in part upon the analysis of variables which it
believes significantly relate to the future market performance of a stock, such
as recent changes in earnings per share and their deviations from analysts'
expectations, past growth trends, price movement of the stock itself, publicly
recorded trading transactions by corporate insiders, and relative price-earnings
ratios. The Adviser expects that investment opportunities will often be sought
among securities of larger, established companies, although securities of
smaller, less well-known companies may also be selected. Small company stocks
have higher risk and volatility, because most are not as broadly traded as
stocks of larger companies and their prices thus may fluctuate more widely and
abruptly.
By investing in securities that are subject to market risk, the Equity
Fund is subject to greater fluctuations in its market value and involves the
assumption of a higher degree of risk as compared to a fund seeking stability of
principal, such as a money market fund, or a fund investing primarily in U.S.
government securities. To maximize potential return, the Adviser may utilize a
variety of investment techniques and strategies including but not limited to:
writing listed "covered" call and "secured" put options, including options on
stock indices, and purchasing such options; purchasing and selling, for hedging
purposes, stock index, interest rate, and other futures contracts, and
purchasing options on such futures contracts; purchasing warrants and preferred
and convertible preferred stocks; borrowing from banks to purchase securities;
purchasing foreign securities in the form of American Depository Receipts
("ADRs"); purchasing securities of other investment companies; entering into
repurchase agreements; purchasing restricted securities; investing in
when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques" in
the SAI for further information. The Equity Fund may also invest in high yield,
high risk, lower-rated debt securities. See "Risks Associated With High Yield
Debt Securities" below and in the SAI for further information.
ASSET ALLOCATION FUND
The investment objective of the Asset Allocation Fund is to seek a high
total investment return consistent with the preservation of capital and prudent
investment risk. The Fund seeks to achieve this objective by pursuing an active
asset allocation strategy whereby investments are allocated, based upon thorough
7
<PAGE>
investment research, valuation and analysis of market trends and the anticipated
relative total return available, among various asset classes, including debt
securities, equity securities and money market instruments. Total investment
return consists of current income, including dividends, interest, and discount
accruals, and capital appreciation. Achieving this Fund's objective depends on
the Adviser's ability to assess the effect of economic and market trends on
different sectors of the market. In seeking to maximize total return, the Asset
Allocation Fund will follow an asset allocation strategy contemplating shifts
(which may be frequent) among a wide range of investments and market sectors.
The Fund's investments will be designed to maximize total return during all
economic and financial environments, consistent with prudent risk as determined
by the Adviser.
The Asset Allocation Fund will invest in U.S. government securities,
intermediate and long-term debt securities and equity securities of domestic and
foreign issuers, including common and preferred stocks, convertible debt
securities, and warrants. If the Adviser deems stock market conditions to be
favorable or debt market conditions to be uncertain or unfavorable, a
substantially higher percentage of the Fund's total assets may be invested in
equity securities. If, however, the Adviser believes that the equity environment
is uncertain or unfavorable, the Fund may decrease its investments in equity
securities and increase its investments in debt securities. Furthermore, if the
Adviser believes that inflationary or monetary conditions warrant a significant
investment in companies involved in precious metals, the Fund may invest up to
10% of its total assets in the equity securities of companies exploring, mining,
developing, producing, or distributing gold or other precious metals.
Additionally, the Asset Allocation Fund may make temporary defensive investments
(i.e., money market instruments) without limit if it is believed that market
conditions warrant a more conservative investment strategy.
The Asset Allocation Fund may use various investment strategies and
techniques when the Adviser determines that such use is appropriate in an effort
to meet the Fund's investment objective, including but not limited to: writing
listed "covered" call and "secured" put options, including options on stock
indices, and purchasing such options; purchasing and selling, for hedging
purposes, stock index, interest rate, gold, and other futures contracts, and
purchasing options on such futures contracts; purchasing warrants and preferred
and convertible preferred stocks; purchasing foreign securities; entering into
foreign currency transactions and options on foreign currencies; borrowing from
banks to purchase securities; purchasing securities of other investment
companies; entering into repurchase agreements; purchasing restricted
securities; investing in when-issued or delayed delivery securities; and selling
securities short "against the box." See "Description of Securities and
Investment Techniques" in the SAI for further information.
The maturities of the debt securities in the Asset Allocation Fund will
vary based in large part on the Adviser's expectations as to future changes in
interest rates. However, the Adviser anticipates that the debt component of the
Fund will generally be invested primarily in intermediate and/or long-term debt
securities. The Adviser anticipates that the equity portion of the Fund will be
widely diversified by both industry and number of issuers. The Adviser's stock
selection methods will be based in part upon variables which it believes
8
<PAGE>
significantly relate to the future market performance of a stock, such as recent
changes in earnings per share and their deviations from analysts' expectations,
past growth trends, price movement of the stock itself, publicly recorded
trading transactions by corporate insiders, and relative price-earnings ratios.
The Adviser anticipates that investment opportunities will often be sought among
securities of larger, established companies, although securities of smaller,
less well-known companies may also be selected. Small company stocks are subject
to the risks described with respect to the Equity Fund.
The Asset Allocation Fund may invest in high yield, high risk, lower-rated
debt securities which are not believed to involve undue risk to income or
principal. The Asset Allocation Fund does not intend to invest more than 25% of
its total assets (measured at the time of investment) in high yield, high risk
debt securities. Generally, higher yielding bonds carry ratings assigned by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P") that
are lower than those assigned to investment grade debt securities, or they are
unrated and the Adviser determines such securities are not of comparable quality
to investment grade debt securities. A debt security will be considered
"investment grade" if it is rated in one of the four highest rating categories
by at least one nationally recognized statistical rating organization ("NRSRO"),
or, in the case of an unrated security, if the Adviser determines such security
is of comparable quality to securities rated in one of the four highest rating
categories. See "Appendix A" to this Prospectus for further discussion regarding
securities ratings.
Lower-rated securities carry higher investment risk than investment grade
debt securities. The market values of lower-rated securities generally fluctuate
more widely than those of higher-rated securities. In addition, changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity for the issuers of such securities to make principal and interest
payments than is generally the case for higher grade debt securities. The lowest
rating categories in which the Fund will invest are CCC/Caa. Securities in those
categories are considered to be of poor standing and are predominantly
speculative. The Adviser seeks to enhance total return specifically through
purchasing securities which the Adviser believes are undervalued and selling,
when appropriate, those securities the Adviser believes are overvalued. In order
to determine value, the Adviser utilizes independent fundamental analysis of the
issuer as well as an analysis of the specific structure of the security. See
"Risks Associated With High Yield Debt Securities" below and "Description of
Securities and Investment Techniques" in the SAI.
9
<PAGE>
The Asset Allocation Fund may also invest in zero coupon securities and
payment-in-kind securities. A zero coupon security pays no interest to its
holders prior to maturity and a payment-in-kind security pays interest in the
form of additional securities. These securities will be subject to greater
fluctuation in market value in response to changing interest rates than
securities of comparable maturities that make periodic cash distributions of
interest.
The Asset Allocation Fund may also invest in equity and debt securities of
foreign issuers, including non-U.S. dollar-denominated securities, Eurodollar
securities and securities issued, assumed or guaranteed by foreign governments
or political subdivisions or instrumentalities thereof. As a non-fundamental
operating policy, the Asset Allocation Fund will not invest more than 50% of its
total assets (measured at the time of investment) in foreign securities. See
"Foreign Securities" below and "Description of Securities and Investment
Techniques" in the SAI for further information.
FIXED INCOME FUND
In seeking its investment objective of providing the highest level of
income as is consistent with the preservation of capital, the Fixed Income Fund
invests primarily in investment grade debt securities (as defined above). The
Adviser seeks to reduce risk, increase income, and preserve or enhance total
return by actively managing the Fund in light of market conditions and trends.
The Adviser seeks to enhance total return specifically through purchasing
securities which the Adviser believes are undervalued and selling, when
appropriate, those securities the Adviser believes are overvalued. In order to
determine value, the Adviser utilizes independent fundamental analysis of the
issuer as well as an analysis of the specific structure of the security. The
Fixed Income Fund may invest in debt securities issued by publicly and privately
held U.S. and foreign companies, the U.S. government and agencies and
instrumentalities thereof, states and their political subdivisions, agencies,
and instrumentalities ("municipal securities"), and foreign governments and
their agencies and instrumentalities. The interest on the municipal securities
in which the Fund invests typically is not exempt from federal income tax. The
Fixed Income Fund may also invest in mortgage-related debt securities,
asset-backed debt securities, and other forms of debt securities. See "Debt
Securities" and "Mortgage-Backed Securities" below and in the SAI. In addition,
up to 15% of the Fund's assets may be invested directly in equity securities,
including preferred and common stocks, convertible debt securities and debt
securities carrying warrants to purchase equity securities, and up to 10% of the
Fund's assets may be invested in debt securities rated below investment grade
(as defined above) and comparable unrated securities.
Debt securities purchased by the Fixed Income Fund may be of any maturity.
It is anticipated that the dollar weighted average life of the debt portfolio
will be between seven and 15 years, but may be shorter or longer depending on
market conditions. While the Fixed Income Fund intends to invest in fixed income
securities in order to achieve its investment objective of obtaining the highest
level of income consistent with preservation of capital, it may from time to
time invest in fixed income securities which offer higher capital appreciation
potential. Such investments would be in addition to that portion of the Fund
which may be invested in common stocks and other types of equity securities.
10
<PAGE>
Fixed income securities will be affected by changes in interest rates.
When interest rates decline, the market value of a fund invested at higher
yields can be expected to rise. Conversely, when interest rates rise, the market
value of a fund invested at lower yields can be expected to decline. Therefore,
the Fixed Income Fund may engage in portfolio trading to take advantage of
market developments and yield disparities; for example, shortening the average
maturity of the Fund in anticipation of a rise in interest rates so as to
minimize depreciation of principal, or lengthening the average maturity of the
Fund in anticipation of a decline in interest rates so as to maximize
appreciation of principal.
The Fixed Income Fund may use various investment strategies and techniques
when the Adviser determines that such use is appropriate in an effort to meet
the Fund's investment objective. Such strategies and techniques include, but are
not limited to, writing listed "covered" call and "secured" put options and
purchasing such options; purchasing and selling, for hedging purposes, interest
rate and other futures contracts, and purchasing options on such futures
contracts; borrowing from banks to purchase securities; investing in securities
of other investment companies; entering into repurchase agreements; investing in
when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques" in
the SAI for further information.
INVESTMENT TECHNIQUES AND OTHER INVESTMENT POLICIES
MORTGAGE-BACKED SECURITIES
Each Fund may invest in mortgage-backed securities. Mortgage-backed
securities are interests in "pools" of mortgage loans made to residential home
buyers, including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations (see "Mortgage Pass-Through Securities," below). The Funds
may also invest in debt securities which are secured with collateral consisting
of mortgage-backed securities (see "Collateralized Mortgage Obligations," below)
and in other types of mortgage-related securities.
MORTGAGE PASS-THROUGH SECURITIES. These are securities representing
interests in pools of mortgages in which periodic payments of both interest and
principal on the securities are made by "passing through" periodic payments made
by the individual borrowers on the residential mortgage loans underlying such
securities (net of fees paid to the issuer or guarantor of the securities and
possibly other costs). Early repayment of principal on mortgage pass-through
securities (arising from prepayments of principal due to sale of the underlying
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<PAGE>
property, refinancing, or foreclosure, net of fees and costs which may be
incurred) may expose a Fund to a lower rate of return upon reinvestment of
principal. Payment of principal and interest on some mortgage pass-through
securities may be guaranteed by the full faith and credit of the U.S. government
(in the case of securities guaranteed by the Government National Mortgage
Association, "GNMA"), or guaranteed by agencies or instrumentalities of the U.S.
government (in the case of securities guaranteed by Fannie Mae, "FNMA," or the
Federal Home Loan Mortgage Corporation, "FHLMC"). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers, and other secondary market issuers) may be uninsured or may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance, and letters of credit, which may be
issued by governmental entities, private insurers, or the mortgage poolers.
GNMA CERTIFICATES. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will have maturities of up to
30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages may be purchased at any time prior to
maturity, will be subject to normal principal amortization, and may be prepaid
prior to maturity. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the certificates.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. FNMA, a federally chartered
and privately owned corporation, issues pass-through securities representing
interests in a pool of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest, but this guarantee is not backed by the full
faith and credit of the U.S. government. FNMA also issues REMIC certificates,
which represent interests in a trust funded with FNMA certificates. REMIC
certificates are guaranteed by FNMA and not by the full faith and credit of the
U.S. government.
FHLMC, a corporate instrumentality of the U.S. government, issues
participation certificates which represent an interest in a pool of conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal and maintains reserves to protect holders against losses
due to default, but these securities are not backed by the full faith and credit
of the U.S. government.
As is the case with GNMA certificates, the actual maturity of and realized
yield on particular FNMA and FHLMC pass-through securities will vary based on
the prepayment experience of the underlying pool of mortgages.
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COLLATERALIZED MORTGAGE OBLIGATIONS AND MORTGAGE-BACKED BONDS. All Funds
may purchase mortgage-backed securities issued by financial institutions such as
commercial banks, savings and loan associations, mortgage banks, and securities
broker-dealers (or affiliates of such institutions established to issue these
securities) in the form of either collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds. CMOs are obligations fully collateralized directly or
indirectly by a pool of mortgages on which payments of principal and interest
are dedicated to payment of principal and interest on the CMOs. Payments are
passed through to the holders on the same schedule as they are received,
although not necessarily on a pro rata basis. Mortgage-backed bonds are general
obligations of the issuer fully collateralized directly or indirectly by a pool
of mortgages. The mortgages serve as collateral for the issuer's payment
obligations on the bonds but interest and principal payments on the mortgages
are not passed through either directly (as with GNMA certificates and FNMA and
FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages could
change the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity). Although the mortgage-related securities securing these
obligations may be subject to a government guarantee or third-party support, the
obligation itself is not so guaranteed. Therefore, if the collateral securing
the obligation is insufficient to make payment on the obligation, a Fund could
sustain a loss. If new types of mortgage-related securities are developed and
offered to investors, investments in such securities will be considered.
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage pass-through securities,
such as GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or
modified pass-through securities, such as CMOs issued by various financial
institutions, are subject to early repayment of principal arising from
prepayments of principal on the underlying mortgage loans (due to the sale of
the underlying property, the refinancing of the loan, or foreclosure).
Prepayment rates vary widely and may be affected by changes in market interest
rates and other economic trends and factors. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-backed security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-backed security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the securities. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-backed securities will vary based
upon the prepayment experience of the underlying pool of mortgages.
DEBT SECURITIES
All Funds may invest in U.S. dollar-denominated corporate debt securities
of domestic issuers, and the Asset Allocation Fund and the Fixed Income Fund may
invest in debt securities of foreign issuers that may or may not be U.S.
dollar-denominated.
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The investment return on a corporate debt security reflects interest
earnings and changes in the market value of the security. The market value of
corporate debt obligations may be expected to rise and fall inversely with
interest rates generally. There also exists the risk that the issuers of the
securities may not be able to meet their obligations on interest or principal
payments at the time called for by an instrument. Debt securities rated BBB or
Baa, which are considered medium-grade debt securities, do not provide the high
degree of security with respect to payment of principal and interest associated
with higher-rated debt securities, and generally have some speculative
characteristics. A debt security will be placed in this rating category when
interest payments and principal security appear adequate for the present, but
economic characteristics that provide longer term protection may be lacking. Any
debt security, and particularly those rated BBB or Baa (or below), may be
susceptible to changing conditions, particularly to economic downturns, which
could lead to a weakened capacity to pay interest and principal.
RISKS ASSOCIATED WITH HIGH YIELD DEBT SECURITIES. The Funds may invest in
high yield, high risk, lower-rated debt securities. High yield debt securities
are subject to all risks inherent in any investment in debt securities. As
discussed below, these risks are significantly greater in the case of high yield
debt securities.
Lower-rated debt securities generally offer a higher current yield than
that available from higher-rated issues. However, lower-rated securities involve
higher risks in that they are especially subject to (1) adverse changes in
general economic conditions and in the industries in which the issuers are
engaged, (2) adverse changes in the financial condition of the issuers and (3)
price fluctuation in response to changes in interest rates. Accordingly, the
yield on lower-rated debt securities will fluctuate over time. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of principal and interest, and increase the possibility of default. In
addition, the market for lower-rated securities has expanded rapidly in recent
years, and this expanded market has not been tested in a period of extended
economic downturn. This market may be thinner and less active than the market
for higher quality securities, which may limit the ability to sell such
securities at their fair value in response to changes in the economy or the
financial markets. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the values and liquidity of
lower-rated securities, especially in a thinly traded market.
Differing yields on fixed income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities rated below
investment grade (I.E., Ba1 or lower by Moody's or BB+ or lower by S&P). Debt
securities rated below investment grade are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
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FOREIGN SECURITIES
The Asset Allocation Fund may invest in equity securities of foreign
issuers, including ADRs, which are described below, and in debt securities of
foreign issuers. That Fund may invest up to 50 percent of its total assets in
such securities. The Equity Fund may invest in ADRs. The Fixed Income Fund may
invest in debt obligations of foreign issuers, including foreign governments and
their agencies and instrumentalities.
Investments in foreign securities may offer unique potential benefits such
as substantial growth in industries not yet developed in the particular country.
Such investments also permit a Fund to invest in foreign countries with economic
policies or business cycles different from those of the United States, or to
reduce fluctuations in portfolio value by taking advantage of foreign securities
markets that may not move in a manner parallel to U.S.
markets.
Investments in securities of foreign issuers involve certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability, or diplomatic developments that could adversely affect
investments in those countries. Since the Asset Allocation Fund and the Fixed
Income Fund may invest in securities denominated or quoted in currencies other
than the U.S. dollar, changes in foreign currency exchange rates will affect the
value of securities in those Funds and the unrealized appreciation or
depreciation of investments so far as U.S. investors are concerned.
There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those to which U.S. companies are subject.
Foreign securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets. Securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Transactional costs in non-U.S. securities markets
are generally higher than in U.S. securities markets. There is generally less
government supervision and regulation of exchanges, brokers, and issuers than
there is in the United States. A Fund might have greater difficulty taking
appropriate legal action with respect to foreign investments in non-U.S. courts
than with respect to domestic issuers in U.S. courts. In addition, transactions
in foreign securities may involve greater time from the trade date until
settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.
Dividend and interest income from foreign securities may generally be
subject to withholding taxes by the country in which the issuer is located and
may not be recoverable by a Fund or its investors in all cases.
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ADRs are certificates issued by a U.S. bank or trust company representing
an interest in securities of a foreign issuer deposited in a foreign subsidiary
or branch or a correspondent of that bank. Generally, ADRs are designed for use
in U.S. securities markets and may offer U.S. investors more liquidity than the
underlying securities. The Fund may invest in unsponsored ADRs. The issuers of
unsponsored ADRs are not obligated to disclose material information in the
United States, and, therefore, there may not be a correlation between such
information and the market value of such ADRs.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities such as private placements,
although a Fund may not invest in any restricted security that is illiquid if,
after acquisition thereof, more than 15 percent of the Fund's assets would be
invested in illiquid securities. Once acquired, restricted securities may be
sold by a Fund only in privately negotiated transactions or in a public offering
with respect to which a registration statement is in effect under the Securities
Act of 1933. If sold in a privately negotiated transaction, a Fund may have
difficulty finding a buyer and may be required to sell at a price that is less
than the Adviser had anticipated. Where registration is required, a Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to sell.
MANAGEMENT
The Trustees of the Trust decide upon matters of general policy for the
Trust. In addition, the Trustees review the actions of the Adviser, as set forth
below. The Trust's officers supervise the daily business operations of the
Trust. For information about the Board of Trustees and the Trust's officers, see
"Management" in the SAI.
The Adviser, 11825 N. Pennsylvania Street, Carmel, Indiana 46032, has been
retained under Investment Advisory Agreements with the Trust to provide
investment advice and in general to supervise the management and investment
program of the Trust and each Fund. The Adviser is a wholly-owned subsidiary of
Conseco, Inc., a publicly-owned financial services company, the principal
operations of which are in development, marketing, and administration of
specialized annuity, life and health insurance products. The Adviser generally
manages the affairs of the Trust, subject to the supervision of the Board of
Trustees.
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Under the Investment Advisory Agreements, the Adviser has contracted to
receive an investment advisory fee equal to an annual rate of .45% of the
average daily net asset value of the Fixed Income Fund, .70% of the average
daily net asset value of the Equity Fund, and .70% of the average daily net
asset value of the Asset Allocation Fund. The Adviser also manages another
registered investment company and all of the invested assets of its parent
company, Conseco, Inc., which owns or manages several life insurance
subsidiaries, and provides investment and servicing functions to the Conseco
companies and affiliates. The Adviser, together with Conseco Services, LLC (the
"Administrator") and Conseco Equity Sales, Inc. (the "Distributor"), have
voluntarily agreed to waive their fees and/or reimburse expenses to the extent
that the ratio of expenses to net assets on an annual basis for Class A shares
of the Equity Fund exceeds 1.50%, the Asset Allocation Fund exceeds 1.50%, and
the Fixed Income Fund exceeds 1.25%. These voluntary limits may be discontinued
at any time after April 30, 1998.
The investment professionals primarily responsible for the management of
each Fund, with the respective responsibilities and business experience for the
past five years, are as follows:
EQUITY FUND: Thomas J. Pence, Vice President for the Adviser. He is
responsible for the management of the Adviser's equity portfolios and
oversight of the equity investment process. Mr. Pence joined the Adviser in
1992. Previously, Mr. Pence worked for five years as a securities analyst in
the field of real estate acquisition and development in which he specialized
in residential development and construction finance and was responsible for
overseeing a project portfolio of $750 million in real estate assets.
FIXED INCOME FUND: Gregory J. Hahn, Senior Vice President, Portfolio
Analytics, for the Adviser. He is responsible for the portfolio analysis and
management of the institutional client accounts and analytical support for
taxable portfolios. In addition, he has responsibility for SEC registered
investment products as well as investments in the insurance industry. Mr.
Hahn joined the Adviser in 1989.
ASSET ALLOCATION FUND: Gregory J. Hahn, Portfolio Manager of the fixed
income portion of the Fund. See Mr. Hahn's business experience above.
Thomas J. Pence, Portfolio Manager of the equity portion of the Fund. See
Mr. Pence's business experience above.
ADMINISTRATIVE FEES
Pursuant to an administration agreement ("Administration Agreement"), the
Administrator supervises the overall administration of the Funds. These
administrative services include supervising the preparation and filing of all
documents required for compliance by the Funds with applicable laws and
regulations, supervising the maintenance of books and records, and other general
and administrative responsibilities. For providing these services, the
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Administrator receives a fee from each Fund of .20% per annum of its average
daily Class A net assets. Pursuant to the Administration Agreement, the
Administrator reserves the right to employ one or more sub-administrators to
perform administrative services for the Funds. The Bank of New York performs
certain administrative services for the Funds pursuant to agreements with the
Administrator.
DISTRIBUTION AND SERVICE PLANS FOR CLASS A SHARES
The Funds have adopted Distribution and Service Plans for Class A shares
to compensate the Distributor for distributing Class A shares and servicing the
accounts of Class A shareholders. The Equity Fund's Plan and the Asset
Allocation Fund's Plan authorize payments to the Distributor up to 0.50%, and
the Fixed Income Fund's Plan up to 0.65%, annually of each Fund's average daily
net assets attributable to its Class A shares. The Plans further provide for
periodic payments by the Distributor to brokers, dealers, and other financial
intermediaries for providing shareholder services to accounts that hold Class A
shares and for promotional and other sales related costs. The portion of such
payments for shareholder servicing may not exceed an annual rate of .25% of the
average daily net asset value of Class A shares owned by clients of such broker,
dealer or financial intermediary.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares from any broker, dealer, or other financial
intermediary that has a selling agreement with the Distributor. These firms may
charge for their services in connection with your purchase order. In addition,
as discussed below, an account may be opened for the purchase of shares of a
Fund by mailing to the Conseco Fund Group, PO Box 8017, Boston, Massachusetts
02266-8017, a completed account application and a check payable to the
appropriate Fund. Or you may telephone (800) 986-3384 to obtain the number of an
account to which you can wire or electronically transfer funds and then send in
a completed application.
Purchase orders for all Funds are accepted only on a business day as
defined below. Orders for shares received by the Funds' Transfer Agent on any
business day prior to the close of regular trading on the New York Stock
Exchange (the "NYSE") (normally 4:00 p.m. Eastern Time) will receive that day's
offering price, which is net asset value plus any applicable sales charge.
Orders received by the Transfer Agent after such time but prior to the close of
business on the next business day will receive the next business day's offering
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price. If you purchase shares through a broker, dealer or other financial
intermediary, that firm is responsible for forwarding payment promptly to the
Transfer Agent. A "business day" is any day on which the NYSE is open for
business. It is anticipated that the NYSE will be closed Saturdays and Sundays
and on days on which the NYSE observes New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The minimum initial investment by a shareholder is $500, and the minimum
subsequent investment is $50. These requirements may be changed or waived at any
time at the discretion of a Fund's officers. Each Fund and the Distributor or
Transfer Agent reserves the right to reject any order for the purchase of shares
in whole or in part. The Trust reserves the right to cancel any purchase order
for which payment has not been received by the third business day following
placement of the order. The offering price of Class A is the net asset value
plus a varying sales charge, depending on the amount invested. The sales charge
applicable to shares of Class A is determined as follows:
SALES CHARGE
As % of Public As % of Net Dealer Reallowance
Offering Price Amount Invested As % Of Offering Price
-------------- --------------- ----------------------
On purchases of:
$500 - 50,000 5.0% 5.56% 4.5%
$50,000 - 100,000 4.5% 4.71% 4.0%
$100,000 - 500,000 3.5% 3.63% 3.0%
Over $500,000 None None 1.0%
The sales charge assessed upon the purchase of shares of Class A is not an
expense of Class A and has no effect on the net asset value of shares of Class
A. The Distributor may allow the selling broker, dealer or financial
intermediary to retain 100% of the sales charge. This may result in the selling
firm being considered an underwriter under the Securities Act of 1933, as
amended.
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The Distributor may provide promotional incentives including cash
compensation in excess of the applicable sales charge to certain brokers,
dealers or financial intermediaries whose representatives have sold or are
expected to sell significant amounts of shares of one or more of the Funds.
Other programs may provide, subject to certain conditions, additional
compensation to brokers, dealers, or financial intermediaries based on a
combination of aggregate shares sold and increases of assets under management.
All of the above payments will be made by the Distributor or its affiliates out
of their own assets. These programs will not change the price an investor will
pay for shares or the amount that a Fund will receive from such sale.
You will receive a confirmation of each new transaction in your account,
which will also show you the number of Fund shares you own and the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued.
PURCHASES BY WIRE
Purchases by wire transfer should be directed to the Transfer Agent. To
receive an account number call (800) 986-3384 between the hours of 8:00 a.m. and
4:00 p.m. (Eastern Time) on a business day (as defined above) on which your bank
is open for business. The following information will be requested: your name,
address, tax identification number, dividend distribution election, amount being
wired and the wiring bank. Instructions should then be given by you to your bank
to transfer funds by wire to: ABA # 011000028, State Street Bank, Boston, MA,
Account # 9905-244-1. If you arrange for receipt by the Transfer Agent of
Federal funds prior to the close of regular trading (normally 4:00 p.m. Eastern
Time) of the NYSE on a business day as defined above, you will receive that
day's offering price. Your bank may charge for these services.
PURCHASES THROUGH BROKERS, DEALERS AND OTHER FINANCIAL INTERMEDIARIES
Orders for purchase of shares placed through brokers, dealers and other
financial intermediaries will receive the offering price next computed following
receipt of the order provided the broker, dealer or other financial intermediary
receives the order prior to the close of the NYSE and transmits it to the
Transfer Agent prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). Such firms are required to provide payment within three business
days after placing an order. BROKERS, DEALERS AND OTHER FINANCIAL INTERMEDIARIES
MAKING PAYMENT FOR CONFIRMED PURCHASES VIA FEDERAL FUNDS WIRE MUST REFERENCE THE
CONFIRMATION NUMBER TO ENSURE TIMELY CREDIT.
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PURCHASES BY CHECK
An initial investment made by check must be accompanied by an application,
completed in its entirety. Additional shares of the Funds may also be purchased
by sending a check payable to the applicable Fund, along with information
regarding your account, including the account number, to the Transfer Agent. All
checks should be drawn only on U.S. banks in U.S. funds in order to avoid fees
and delays. A charge may be imposed if any check submitted for investment does
not clear. Third party checks will not be accepted. When purchases are made by
check or periodic automatic investment, redemptions will not be allowed until
the investment being redeemed has been in the account for 15 business days.
PRE-AUTHORIZED INVESTMENT PLAN
For your convenience, a pre-authorized investment plan may be established
where your personal bank account is automatically debited and your Fund account
is automatically credited with additional full and fractional shares ($50
minimum monthly investment). For further information on pre-authorized
investment plans, please contact the Transfer Agent at (800) 986-3384. The
minimum investment requirements may be waived by the Fund for purchases made
pursuant to certain programs such as payroll deduction plans and retirement
plans.
REDUCED SALES CHARGES FOR CLASS A SHARE PURCHASE
You may be eligible to buy Class A shares at reduced sales charge rates in
one or more of the following ways:
COMBINED PURCHASES
You may aggregate your purchases of shares of the Funds with the purchases
of the other persons listed below to achieve discounts in the applicable sales
charges. The sales charge applicable to a current purchase of Class A shares of
a Fund by a person listed below is determined by adding the value of Class A
shares to be purchased to the aggregate value (at current net asset value) of
all shares of any of the Funds in the Trust and shares of the money market fund
currently managed by Federated Investors previously purchased and then owned. In
addition, if you own a Great American Reserve Insurance Company variable annuity
contract, the current cash value of such contract will be aggregated with your
shares to determine your sales charge. The Transfer Agent must be notified by
you or your broker, dealer or financial intermediary each time a qualifying
purchase is made.
Qualifying investments include those by you, your spouse and your children
under the age of 21, if all parties are purchasing Class A shares for their own
account(s), which may include tax qualified plans, such as an Individual
Retirement Account ("IRA"), or by a company solely controlled (as defined in the
1940 Act) by such individuals. Reduced sales charges also apply to purchases by
a trustee or other fiduciary if the investment is for a single trust, estate or
fiduciary account, including pension, profit-sharing or other employee benefit
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trust created pursuant to a plan qualified under the Internal Revenue Code of
1986 (the "Code"). Reduced sales charges apply to combined purchases by
qualified employee benefit plans of a single corporation or of corporations
affiliated with each other in accordance with the 1940 Act. Purchases made for
nominee or street name accounts (securities held in the name of a broker or
another nominee such as a bank trust department instead of the customer) may not
be aggregated with those made for other accounts and may not be aggregated with
other nominee or street name accounts unless otherwise qualified as described
above.
LETTER OF INTENT
You may reduce your sales charge on all investments by meeting the terms
of a letter of intent, a non-binding commitment to invest a certain amount
within a 13-month period. Your existing holdings in the Trust may also be
combined with the investment commitment set forth in the letter of intent to
further reduce your sales charge. Up to 5% of the letter amount will be held in
escrow to cover additional sales charges which may be due if your total
investments over the letter period are not sufficient to qualify for a sales
charge reduction. See the SAI and the application for further details.
RIGHTS OF ACCUMULATION
The sales charge for new purchases of Class A shares of a Fund will be
determined by aggregating the net asset value of all shares of the Funds and
shares of the money market fund currently managed by Federated Investors owned
by the shareholder at the time of the new purchase. You must identify on the
application all accounts to be linked for Rights of Accumulation.
WAIVER OF CLASS A INITIAL SALES CHARGE
No sales charge is imposed on sales of Class A shares to certain
investors. However, in order for the following sales charge waivers to be
effective, the Transfer Agent must be notified of the waiver when the purchase
order is placed. The Transfer Agent may require evidence of your qualification
for the waiver. No sales charge is imposed on the following investors: (1)
current or retired officers, directors and employees (and their parents,
grandparents, spouses, and minor children) of the Trust, Conseco and its
affiliates and the Transfer Agent, (2) any participant in a tax qualified
retirement plan provided that the initial amount invested by the plan totals
$500,000 or more, the plan has 50 or more employees eligible to participate at
the time of purchase, or the plan certifies that it will have projected annual
contributions of $200,000 or more; (3) brokers, dealers, and other financial
intermediaries that have a selling agreement with the Distributor, if they
purchase shares for their own accounts or for retirement plans for their
employees; (4) employees and registered representatives (and their parents,
grandparents, spouses and minor children) of brokers, dealers, and other
financial intermediaries described above; the purchaser must certify to the
Distributor at the time of the purchase that the purchase is for the purchaser's
own account (or for the benefit of such employee's parents, grandparents, spouse
or minor children); (5) any charitable organization, state, county, city, or any
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instrumentality, department, authority or agency thereof which has determined
that Class A is a legally permissible investment and which is prohibited by
applicable investment law from paying a sales charge or commission in connection
with the purchase of shares of any registered management investment company; (6)
one or more members of a group of at least 100 persons (and persons who are
retirees from such group) engaged in a common business, profession, civic or
charitable endeavor or other activity, and the spouses and minor children of
such persons, pursuant to a marketing program between the Distributor and such
group; (7)(i) through an investment adviser who makes such purchases through a
broker, dealer, or other financial intermediary (each of which may impose
transaction fees on the purchase), (ii) by an investment adviser for its own
account or for a bona fide advisory account over which the investment adviser
has investment discretion or (iii) through a financial planner who charges a fee
and makes such purchases through a financial intermediary which maintains a net
asset value purchase program that enables the Distributor to realize certain
economies of scale; (8) through bank trust departments or trust companies on
behalf of bona fide trust or fiduciary accounts by notifying the Distributor in
advance of purchase; a bona fide advisory, trust or fiduciary account is one
which is charged an asset-based fee and whose purpose is other than purchase of
Fund shares at net asset value; (9) by purchasers in connection with investments
related to a bona fide medical savings account; or (10) by an account
established under a wrap fee or asset allocation program where the accountholder
pays the sponsor an asset-based fee.
Additionally, no sales charge is imposed on shares that are (a) issued in
plans of reorganization, such as mergers, asset acquisitions and exchange
offers, to which a Fund is a party, (b) purchased by the reinvestment of loan
repayments by participants in retirement plans, (c) purchased by the
reinvestment of dividends or other distributions from a Fund, or (d) purchased
and paid for with the proceeds of shares redeemed in the prior 60 days from a
mutual fund on which an initial sales charge or contingent deferred sales charge
was paid (other than a fund managed by the Adviser or any of its affiliates that
is subject to the exchange privilege described below); the purchaser must
certify to the Distributor at the time of purchase that the purchaser is a prior
load investor.
HOW TO REDEEM SHARES OF THE FUNDS
Shares of Class A are redeemed at net asset value next determined after
receipt of a redemption request in good form on any business day, reduced by the
amount of any federal income tax required to be withheld.
REDEMPTIONS BY MAIL
A written request for redemption must be received by the Transfer Agent to
constitute a valid tender for redemption. It will also be necessary for
corporate investors and other associations to have an appropriate certification
authorizing redemptions by a corporation or an association on file before a
redemption request will be considered in proper form. A suggested form of such
certification is provided on the application accompanying this Prospectus. A
signature guarantee is required for redemptions of $50,000 or more. A signature
guarantee may be obtained from most banks, brokers and dealers, credit unions,
savings associations and financial institutions, but not from a notary public.
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REDEMPTIONS BY WIRE OR TELEPHONE
Brokers, dealers, or other financial intermediaries may communicate
redemption orders by wire or telephone. These firms may charge for their
services in connection with your redemption request but neither the Funds nor
the Distributor imposes any such charges.
The Funds and the Transfer Agent will not be responsible for the
authenticity of telephone instructions or losses, if any, resulting from
unauthorized shareholder transactions if the Funds or the Transfer Agent
reasonably believe that such instructions are genuine. The Funds and the
Transfer Agent have established procedures that the Funds believe are reasonably
appropriate to confirm that instructions communicated by telephone are genuine.
These procedures include: (i) recording telephone instructions for exchanges and
expedited redemptions; (ii) requiring the caller to give certain specific
identifying information; and (iii) providing written confirmations to
shareholders of record not later than five days following any such telephone
transactions. If the Funds and the Transfer Agent do not employ these
procedures, they may be liable for any losses due to unauthorized or fraudulent
telephone instructions.
EXPEDITED REDEMPTIONS
You may have the payment of redemption requests (of $250 or more) wired or
mailed directly to a domestic commercial bank account that you have previously
designated. Normally, such payments will be transmitted on the second business
day following receipt of the request (provided redemptions may be made). You may
request a wire redemption by telephone or written request sent to the Transfer
Agent. For telephone redemptions, call the Transfer Agent at (800) 986-3384. You
must complete the "Expedited Redemptions" section of the application for this
privilege to be applicable.
SYSTEMATIC WITHDRAWAL PLAN
You may elect to have regular monthly or quarterly payments in any fixed
amount in excess of $50 made to you, or to anyone else properly designated, as
long as the account has a value of at least $5,000 at the time of election. You
must determine the fixed payment amount for the systematic withdrawal plan.
There are no separate charges under this plan. A number of full and
fractional shares equal in value to the amount of the requested payment will be
redeemed. Such redemptions are normally processed on or about the 25th day of
each month or quarter. Checks are then mailed on or about the first of the
following month. If you elect to have a Systematic Withdrawal Plan, you must
have all dividends and capital gains reinvested. To establish systematic cash
withdrawals, please complete the systematic cash withdrawal section on the
application.
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<PAGE>
You may change the amount, frequency, and payee, or terminate this plan,
by giving written notice to the Transfer Agent. As shares of a Fund are redeemed
under the plan, you may realize a capital gain or loss to be reported for income
tax purposes. A Systematic Withdrawal Plan may be terminated or modified at any
time upon written notice by you or a Fund.
GENERAL
Payment to shareholders for shares redeemed or repurchased will be made
within seven days after receipt by the Transfer Agent. A Fund may delay the
payment of redemption proceeds until the check used to purchase the shares being
redeemed has cleared, which may take up to 15 days or longer. To reduce such
delay, the Funds recommend that all purchases be made by bank wire Federal
funds. A Fund may suspend the right of redemption under certain extraordinary
circumstances in accordance with the rules of the SEC. Due to the relatively
high cost of handling small investments, the Funds reserve the right upon
30-days' written notice to redeem, at net asset value, the shares of any
shareholder whose account has a value of less than $500 other than as a result
of a decline in the net asset value per share.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program enables a shareholder to
transfer assets from the money market fund currently managed by Federated
Investors to another investment option on a predetermined and systematic basis.
The DCA program is generally suitable for shareholders making a substantial
investment in the Funds and who desire to control the risk of investing at the
top of a market cycle. The DCA program allows such investments to be made in
equal installments over time in an effort to reduce such risk.
If you have at least $5,000 invested in the money market fund currently
managed by Federated Investors, you may choose to have a specified dollar amount
transferred from this fund to other Fund(s) on a monthly basis. The main
objective of DCA is to shield your investment from short-term price
fluctuations. Since the same dollar amount is transferred to other Funds each
month, more shares are purchased in a Fund if the value per share is low and
fewer shares are purchased if the value per share is high. Therefore, a lower
average cost per share may be achieved over the long term. This plan of
investing allows investors to take advantage of market fluctuations but does not
assure a profit or protect against a loss in declining markets.
DCA may be elected on the application form or at a later date. The minimum
amount that may be transferred each month into any Fund is $250. The maximum
amount which may be transferred is equal to the amount invested in the money
market fund currently managed by Federated Investors when elected, divided by
12.
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The transfer date will be the same calendar day each month. The dollar
amount will be allocated to the Funds in the proportions you specify on the
appropriate form, or, if none are specified, in accordance with your original
investment allocation. If, on any transfer date, the amount invested is equal to
or less than the amount you have elected to have transferred, the entire amount
will be transferred and the option will end. You may change the transfer amount
once each year or cancel this option by sending the appropriate form to the
Trust's Administrative Office, which must be received at least seven days before
the next transfer date.
EXCHANGE PRIVILEGE
Class A shares of one Fund described in this Prospectus may be exchanged
for Class A shares of the other Funds or for shares of the money market fund
currently managed by Federated Investors at the relative net asset values per
share at the time of the exchange. Shares of the money market fund currently
managed by Federated Investors may be exchanged for Class A shares at relative
net asset values per share at the time of the exchange to the extent that the
money market fund shares are attributable to Class A shares on which an initial
sales charge was previously payable and dividend reinvestments on such Class A
shares. An initial sales charge will be imposed on other exchanges of shares of
the money market fund currently managed by Federated Investors for Class A
shares of the Funds. The total value of shares in a Fund after the exchange must
at least equal the minimum investment requirement of the Fund. You should
consider the differences in investment objectives and expenses of the Funds
before making an exchange. Shares are normally redeemed from one Fund and
purchased from the other Fund in the exchange transaction on the same business
day on which the Transfer Agent receives an exchange request that is in proper
form by the close of the NYSE that day.
ELECTRONIC TRANSFERS THROUGH AUTOMATED CLEARING HOUSE
Electronic transfers through Automated Clearing House ("ACH") allow you to
initiate a purchase or redemption for as little as $50 or as much as $50,000
between your bank account and Fund account using the ACH network. Sales charges
and initial purchase minimums apply. You must complete the "ACH" section of the
application for this privilege to be applicable.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined for each class of shares for
each Fund as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time) on each business day (as previously defined) by dividing the value
of the Fund's net assets attributable to a class (the class' pro rata share of
the value of the Fund's assets minus the class' pro rata share of the value of
the Fund's liabilities) by the number of shares of that class outstanding. The
assets of each Fund are valued primarily on the basis of market quotations. If
quotations are not readily available, assets are valued by a method that the
Trustees of the Trust believe accurately reflects fair value. Foreign securities
are valued on the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. With respect to all Funds, short-term investments that
will mature in 60 days or less are valued at amortized cost, which approximates
market value.
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<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund is treated as a separate corporation and intends to qualify as a
"regulated investment company" ("RIC") under the Code. As such, and by complying
with the applicable provisions of the Code regarding the amount and timing of
its distributions, each Fund will be allowed a deduction for amounts distributed
to its shareholders from its taxable income and net capital gain and will not be
subject to federal income tax on such amounts. To qualify for treatment as a
RIC, each Fund must, among other things, satisfy certain source of income and
diversification requirements described in the SAI.
Each Fund intends to distribute all its investment company taxable
income (generally consisting of net investment income, net short-term capital
gains, and any net gains from certain foreign currency transactions) and net
capital gain so as to avoid federal income and excise taxes. Dividends from each
Fund's investment company taxable income (whether paid in cash or reinvested in
additional shares) generally will be taxable to you as ordinary income. The
portion of those dividends that does not exceed the aggregate dividends received
by the Fund from U.S. corporations will be eligible for the dividends-received
deduction allowed to corporations; however, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax. Distributions of each Fund's
net capital gain (whether paid in cash or reinvested in additional shares), when
designated as such, will be taxable to you as a long-term capital gain,
regardless of how long you have held your Fund shares. Shareholders who are not
subject to tax on their income generally will not be required to pay tax on
distributions.
Dividends and other distributions declared in December, but received by
you in January, generally are taxable to you in the year in which declared. Each
Fund will inform you after the end of each calendar year as to the amount and
nature of dividends and other distributions paid (or deemed paid) to you for
that year.
When you redeem (sell) shares, it may result in a taxable gain or loss
to you, depending on whether you receive more or less than your adjusted basis
for the shares (which normally takes into account any initial sales charge paid
on Class A shares). An exchange of any Fund's shares for shares of another Fund
generally will have similar tax consequences. Special rules apply when you
dispose of Class A shares of a Fund through a redemption or exchange within 60
days after your purchase thereof and subsequently reacquire Class A shares of
the same Fund or acquire Class A shares of another Fund without paying a sales
charge. In these cases, any gain on the disposition of the original Class A
shares will be increased, or any loss decreased, by the amount of the sales
charge paid when you acquired those shares, and that amount will increase the
basis of the shares subsequently acquired. In addition, if you purchase shares
of a Fund within thirty days before or after redeeming other shares of that Fund
(regardless of class) at a loss, all or part of that loss will not be deductible
and will increase the basis of the newly purchased shares.
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<PAGE>
Each Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other non-corporate shareholders who do not furnish the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to those shareholders who
otherwise are subject to backup withholding.
The Asset Allocation Fund is required to include in its gross income each
year a portion of the original issue discount on zero coupon securities it
holds, even though the Fund receives no interest payment on the securities
during the year. Similarly, the Fund must include in its gross income each year
any interest on payment-in-kind securities distributed in the form of additional
securities. Accordingly, to qualify for treatment as a RIC under the Code, the
Fund may be required to distribute as a dividend an amount that is greater than
the total amount of cash the Fund actually receives. Those distributions will be
made from the Fund's cash assets or the proceeds from sales of Fund securities,
if necessary.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the SAI. You should
consult with your tax adviser about the effect of an investment in a Fund on
your particular tax situation.
Dividends from the Fixed Income Fund's net investment income will be
declared and distributed monthly. Dividends from the Equity Fund's and the Asset
Allocation Fund's net investment income will be declared and distributed
quarterly. However, the Trustees may decide to declare dividends at other
intervals. For dividend purposes, the net investment income of each Fund will
consist of all dividends and interest received and any net short-term gains or
losses from the sale of its investments (and, in the case of the Asset
Allocation Fund, net realized gains from foreign currency transactions) less its
estimated expenses (including fees payable to the Adviser).
Distributions of net capital gain (the excess of net long-term capital
gain over net short-term capital loss) of each Fund, if any, are declared and
distributed annually after the close of the Fund's fiscal year to its
shareholders.
Dividends and other distributions paid on each class of shares of each
Fund are calculated at the same time and in the same manner. Dividends on Class
A shares of a Fund are expected to be lower than those on its Class Y shares
because Class A shares have higher expenses resulting from their distribution
and service fees. Dividends on each class also might be affected differently by
the allocation of other class-specific expenses.
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<PAGE>
DISTRIBUTION OPTIONS. When you open your account, specify on your
application how you want to receive your distributions. For Conseco Fund Group
retirement accounts, all distributions are reinvested. For other accounts, you
have the following options:
REINVEST ALL DISTRIBUTIONS. You can elect to reinvest all dividends
and capital gain distributions from a Fund in additional Class A shares of
the Fund.
REINVEST INCOME DIVIDENDS ONLY. You can elect to reinvest dividends from a
Fund in Class A shares of the Fund while receiving capital gain distributions by
check or sent to your bank account.
REINVEST CAPITAL GAIN DISTRIBUTIONS ONLY. You can elect to reinvest
capital gain distributions from a Fund in Class A shares of the Fund while
receiving dividends by check or sent to your bank account.
RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for
all dividends and capital gain distributions or have them sent to your bank
account.
THE ADVISER'S INVESTMENT PERFORMANCE
The Funds commenced operations on January 2, 1997. The average annualized
total returns for Class A of the Funds for the period from January 2, 1997 to
June 30, 1997 assuming the maximum initial sales charge were 3.04%, 1.28% and
- -1.80% for Equity Fund, Asset Allocation Fund, and Fixed Income Fund,
respectively. The total returns for Class A of the Funds for that period with no
initial sales charge were 8.50%, 6.65%, and 3.41% for Equity Fund, Asset
Allocation Fund, and Fixed Income Fund, respectively.
The Equity Fund, Asset Allocation Fund and Fixed Income Fund are modeled
after previously existing funds of the Conseco Series Trust (the "CST Funds")
that are managed by the Adviser and have investment objectives and policies
substantially similar to the corresponding Funds. The CST Funds are used as
investment vehicles for the assets of variable annuity and variable life
insurance contracts issued by Conseco affiliates.
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<PAGE>
Below you will find information about the performance of the CST Funds.
Although the Funds offered by this Prospectus have substantially similar
investment objectives and policies, the same investment adviser and the same
portfolio managers as the corresponding CST Funds, you should not assume that
the Funds will have the same future performance as the CST Funds. For example,
any Fund's future performance may be greater or less than the performance of the
corresponding CST Fund due to, among other things, differences in expenses and
cash flows between a Fund and the corresponding CST Fund. Moreover, past
performance information is based on historical earnings and is not intended to
indicate future performance.
The investment characteristics of each Fund will closely resemble the
investment characteristics of the corresponding CST Fund. Depending on the Fund
involved, similarity of investment characteristics may involve factors such as
industry diversification, portfolio beta, portfolio quality, average maturity of
fixed-income assets, equity/non-equity mixes, and individual holdings.
The Funds do have differences from the CST Funds, although the Adviser
does not believe these practices would cause a significant change in investment
results. Investors should note the following differences from the CST Funds: (1)
the Funds may invest in swaps, caps, floors and collars; (2) the Funds may lend
portfolio securities; and (3) the Funds may sell securities short. See the SAI
for further details about these practices.
The table below sets forth each Fund, its corresponding CST Fund, the date
the Adviser began managing the CST Fund (referred to as the "inception date")
and asset size as of June 30, 1997.
Corresponding Cst Fund
Fund (Inception Date And Asset Size)
---- -------------------------------
Equity Fund Common Stock Portfolio (Jan. 31, 1992)
$182,608,444
Asset Allocation Fund Asset Allocation Portfolio (Dec. 1, 1991)
$20,749,844
Fixed Income Fund Corporate Bond Portfolio (July 31, 1990)
$19,007,412
The following two tables show the average annualized total returns for the
CST Funds for the one, three and five year periods ended June 30, 1997 and for
the periods from inception of the CST Funds to June 30, 1997. These figures are
based on the gross investment performance of the CST Funds. Note that the actual
investment performance experienced by investors in variable annuity and variable
life insurance contracts issued by Conseco affiliates would be lower than the
gross investment performance of the CST Funds due to expenses at the separate
account level; these expenses typically are higher than those borne by investors
in the Funds. From the gross investment performance figures, the Total Operating
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<PAGE>
Expenses reflected in the fee table herein are deducted to arrive at the net
return. The first table reflects a deduction for the maximum applicable sales
charges, while the second table reflects no deduction for sales charges.
Performance figures will be lower when sales charges are taken into account. CST
Fund performance does not represent the historical performance of the Funds and
should not be interpreted as indicative of the future performance of the Funds.
ASSUMING CLASS A SHARE TOTAL OPERATING EXPENSES AND THE MAXIMUM INITIAL SALES
CHARGE APPLICABLE TO CLASS A SHARES.
CST Fund
(Inception Date)
1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
------ ------- ------- ---------------
Common Stock 20.18% 28.49% 19.73% 18.03%
Portfolio (Jan. 31,
1992)
Asset Allocation 14.89% 20.71% 12.25% 14.57%
Portfolio (Dec. 31,
1991)
Corporate Bond 3.86% 6.97% 6.64% 8.67%
Portfolio (July 31,
1990)
ASSUMING CLASS A SHARE TOTAL OPERATING EXPENSES WITH NO INITIAL SALES
CHARGE.1/
CST Fund
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
- ---------------- ------ ------- ------- ---------------
Common Stock 26.97% 30.64% 20.90% 19.14%
Portfolio (Jan. 31,
1992)
Asset Allocation 21.19% 22.75% 15.74% 15.56%
Portfolio (Dec. 31,
1991)
Corporate Bond 9.30% 8.78% 7.71% 9.46%
Portfolio (July 31,
1990)
- ---------------------------
1/ Certain persons may purchase Class A shares that are not subject to the Class
A initial sales charge (see "Waiver of Class A Initial Sales Charge" in this
Prospectus) and certain other persons may purchase Class A shares subject to
less than the maximum initial sales charge.
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<PAGE>
Each of the Funds may from time to time advertise certain investment
performance information. Performance information may consist of yield and
average annual total return quotations reflecting the deduction of all
applicable charges over a period of time. A Fund also may use aggregate total
return figures for various periods, representing the cumulative change in value
of an investment in a Fund for the specific period. Performance information may
be shown in schedules, charts or graphs. These figures are based on historical
earnings and are not intended to indicate future performance.
The "yield" of a Fund refers to the annualized net income generated by an
investment in that Fund over a specified 30-day period, calculated by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period.
The "average annual total return" of a Fund refers to the total rate of
return of an investment in the Fund. The figure is computed by calculating
average annual compounded rates of return over the 1, 5 and 10 year periods that
would equate to the initial amount invested to the ending redeemable value,
assuming reinvestment of all income dividends and capital gain distributions.
"Total return" quotations reflect the performance of the Fund and include the
effect of capital changes.
Further information about the performance of the Funds is contained in the
SAI and in the Funds' semi-annual and annual reports to shareholders, which you
may obtain without charge by writing the Funds' address or calling the telephone
number set forth on the cover page of this Prospectus.
OTHER INFORMATION
BROKERAGE COMMISSIONS
Although the Conduct Rules of the NASD prohibit its members from seeking
orders for the execution of investment company portfolio transactions on the
basis of their sales of investment company shares, under such rules, sales of
investment company shares may be considered in selecting brokers to effect
portfolio transactions. Accordingly, some portfolio transactions are, subject to
such rules and to obtaining best prices and executions, effected through brokers
who sell shares of the Funds. The Adviser may also select an affiliated broker
to execute transactions for the Funds, provided that the commissions, fees or
other remuneration paid to such affiliated broker are reasonable and fair as
compared to that paid to non-affiliated brokers for comparable transactions.
RETIREMENT PLANS AND MEDICAL SAVINGS ACCOUNTS
Class A shares are available for purchase by qualified retirement plans
for both corporations and self-employed individuals. The Trust has available
prototype IRA plans (for both individuals and employers), Simplified Employee
Pension ("SEP") plans, and savings incentive match plans for employees ("SIMPLE"
plans) as well as Section 403(b)(7) Tax-Sheltered Retirement Plans which are
designed for employees of public educational institutions and certain
non-profit, tax-exempt organizations. The Trust also has information concerning
prototype Medical Savings Accounts. For information, call or write the
Distributor.
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SHARES OF BENEFICIAL INTEREST
All shares of beneficial interest of the Trust are entitled to one vote,
and votes are generally on an aggregate basis. However, on matters where the
interests of the Funds (or the classes of a Fund) differ (such as approval of an
investment advisory agreement or a change in fundamental investment policies),
the voting is on a Fund-by-Fund (or class-by-class) basis. The Trust does not
hold routine annual shareholders' meetings. The shares of each Fund issued are
fully paid and non-assessable, have no preference, conversion, exchange or
similar rights, and are freely transferable. In addition, each issued and
outstanding Class A share in a Fund is entitled to participate equally in
dividends and distributions declared by that class.
REPORTS TO SHAREHOLDERS
Investors in the Funds will be informed of their progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
CLASS Y SHARES
In order to buy Class Y shares you must be an institutional investor or a
qualifying individual investor. Institutional investors may include, but are not
limited to, the following: (i) tax qualified retirement plans which have (a) at
least $10 million in plan assets, or (b) 250 or more employees eligible to
participate at the time of purchase, (ii) banks and insurance companies
purchasing shares for their own account, (iii) investment companies not
affiliated with the Adviser, (iv) tax-qualified retirement plans of the Adviser
or brokers, dealers, and other financial intermediaries that have a selling
agreement with the Distributor and their affiliates, (v) endowments, foundations
and other charitable organizations or (vi) accounts established under wrap fee
or asset allocation programs where the accountholder pays the sponsor an
asset-based fee. A qualifying individual investor is an investor who is a client
of the Adviser and is making a purchase of over $500,000 or whose purchase
together with his current holdings of Class Y shares exceeds $500,000 or any
other individual who meets the minimum investment requirement.
Class Y shares are available to eligible institutional investors and
qualifying individual investors at net asset value without the imposition of an
initial or deferred sales charge and are not subject to ongoing distribution
fees imposed under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. The
minimum initial investment in Class Y shares is $500,000, but this requirement
may be waived at the discretion of the Trust's officers.
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<PAGE>
The Systematic Withdrawal Plan and Pre-Authorized Investment Plan are not
available for Class Y shares.
If you are considering a purchase of Class Y shares of a Fund, please call
the Transfer Agent at (800) 986-3384 to obtain information about eligibility and
a prospectus.
DISTRIBUTOR
Conseco Equity Sales, Inc., 11815 N. Pennsylvania Street, Carmel, Indiana
46032, serves as distributor of shares of the Trust.
TRANSFER AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, serves as the Trust's transfer agent.
CUSTODIAN
The Bank of New York, 90 Washington Street, 22nd Floor, New York, New York
10826, serves as custodian of each Fund's assets. The Bank of New York also
performs certain administrative services for the Funds pursuant to agreements
with Conseco Services, LLC.
INDEPENDENT PUBLIC ACCOUNTANTS
The Trust's independent public accountants are Coopers & Lybrand L.L.P.,
2900 One American Square, Box 82002, Indianapolis, Indiana 46282-0002.
LEGAL COUNSEL
Certain legal matters for the Funds are passed upon by Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN
ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO SALESMAN, DEALER
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE SAI.
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<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Page
General Information.........................................
Investment Restrictions.....................................
Description of Securities and Investment Techniques.........
Investment Performance .....................................
Portfolio Turnover and Securities Transactions..............
Control Persons and Principal Holders of Securities.........
Management..................................................
Net Asset Values of the Shares of the Funds ................
Fund Expenses ..............................................
Distribution Arrangements ..................................
Purchase and Redemption of Shares...........................
General ....................................................
Taxes.......................................................
Other Information...........................................
Financial Statements........................................
If you would like a free copy of the Statement of Additional Information
for this Prospectus, please complete this form, detach, and mail to:
Conseco Fund Group
Administrative Offices
11815 N. Pennsylvania Street, Carmel, Indiana 46032
Gentlemen:
Please send me a free copy of the Statement of Additional Information for
the Conseco Fund Group at the following address:
Name:.
Mailing Address:
Sincerely,
(Signature)
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APPENDIX A SECURITIES RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa by Moody's Investors Service, Inc. ("Moody's")
are judged to be the best quality and carry the smallest degree of investment
risk. Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
A-1
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STANDARD & POOR'S CORPORATE BOND RATINGS:
AAA - This is the highest rating assigned by Standard & Poor's ("S&P") to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB/B/CCC/CC - Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from AA to B may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
PREFERRED STOCK RATINGS:
Both Moody's and S&P use the same designations for corporate bonds as they do
for preferred stock, except that in the case of Moody's preferred stock ratings,
the initial letter rating is not capitalized. While the descriptions are
tailored for preferred stocks and relative quality, distinctions are comparable
to those described above for corporate bonds.
A-2
<PAGE>
CONSECO FUND GROUP
ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET, CARMEL, INDIANA 46032
(317) 817-6300
The Conseco Fund Group (the "Trust") is an open-end diversified management
investment company registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act"). The Trust was
organized as a Massachusetts business trust on September 24, 1996. The Trust is
a "series" type of mutual fund which issues separate series of shares, each of
which represents a separate diversified portfolio of investments. This
Prospectus offers shares of three series ("Funds") of the Trust, each with its
own investment objective and investment policies. The Funds are divided into
Class A and Class Y shares. Class A shares are offered to individual investors
by a separate prospectus. Each class may have different expenses which may
affect performance.
The investment objectives of the Funds are as follows:
EQUITY FUND seeks to provide a high equity total return consistent with
preservation of capital and a prudent level of risk primarily by investing in
selected equity securities and other securities having the investment
characteristics of common stocks.
ASSET ALLOCATION FUND seeks a High total investment return consistent
with the preservation of capital and prudent investment risk. The Fund seeks to
achieve this objective by pursuing an active asset allocation strategy whereby
investments are allocated, based upon thorough investment research, valuation
and analysis of market trends and the anticipated relative total return
available, among various asset classes, including debt securities, equity
securities, and money market instruments.
FIXED INCOME FUND seeks the highest level of income as is consistent with
preservation of capital by investing primarily in investment grade debt
securities.
Conseco Capital Management, Inc. (the "Adviser") serves as the Trust's
investment adviser. The Adviser supervises the Trust's management and investment
program, performs a variety of administrative services on behalf of the Trust,
and pays all compensation of officers and Trustees of the Trust who are
affiliated persons of the Adviser or the Trust. The Trust pays all other
expenses incurred in the operation of the Trust, including fees and expenses of
Trustees who are unaffiliated persons of the Adviser and the Trust.
There is no assurance that any of the Funds will achieve its investment
objective. The various Funds may be used independently or in combination. You
may also purchase shares of a money market fund currently managed by Federated
Investors, which seeks current income consistent with stability of capital and
liquidity, through a separate prospectus. That prospectus is available upon
request by calling 800-557-7043.
<PAGE>
This Prospectus sets forth concisely the information about the Trust that
an investor should know before investing. A Statement of Additional Information
("SAI") dated August 6, 1997, containing additional information about the Trust
and the Funds, has been filed with the SEC and is incorporated by reference in
this Prospectus in its entirety. You may obtain a copy of the SAI without charge
by calling or writing the Trust at the address and telephone number above.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 6, 1997.
TABLE OF CONTENTS
Page
Cover Page....................................................1
Fee Table.....................................................2
Financial Highlights..........................................
Investment Objectives and Policies of the Funds...............3
Investment Techniques and Other Investment Policies...........6
Management....................................................8
Purchase and Redemption of Shares.............................9
Dividends, Other Distributions and Taxes.....................12
The Adviser's Investment Performance.........................13
Other Information............................................
Appendix A - Securities Ratings.............................A-1
2
<PAGE>
FEE TABLE
The following fee table is provided to assist investors in understanding
the various costs and expenses which may be borne directly or indirectly by an
investment in Class Y shares of the Funds.
ASSET
SHAREHOLDER TRANSACTION EXPENSES EQUITY ALLOCATION FIXED INCOME
- -------------------------------- ------ ---------- ------------
Maximum Sales Charge Imposed on None None None
Purchases
(as a percentage of offering price)
Maximum Sales Charge Imposed on None None None
Reinvested Dividends (as a percentage of
offering price)
Deferred Sales Charge None None None
Redemption Fees None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net
assets)
Management Fees .70% .70% .40%(1)
Administrative Fees .20% .20% .20%
12b-1 Distribution and Service Fees None None None
Other Expenses (less voluntary fee .10% .10% 0%
waivers and/or
reimbursements) (2)
Total Operating Expenses (less 1.00% 1.00% .60%
voluntary fee waivers and/or
reimbursements) (3)
(1) The Adviser has voluntarily undertaken to reduce its advisory fee with
respect to the Fixed Income Fund to .40% of the Fund's average daily net assets
until April 30, 1998. Absent such undertaking, the advisory fee would have been
.45% of the Fund's average daily net assets.
3
<PAGE>
(2) Other Expenses are based on estimated amounts for the current fiscal year
and exclude taxes, interest, brokerage and other transaction expenses, and any
extraordinary expenses.
(3) The expense information set forth above reflects voluntary commitments of
the Adviser and Conseco Services, LLC to waive a portion of their fees under
each Fund's Investment Advisory Agreement and Administration Agreement,
respectively, and/or to reimburse a portion of the Fund's expenses through April
30, 1998. The voluntary commitments provide that the Total Operating Expenses
for the Funds, on an annual basis, will not exceed the amounts set forth above.
In the absence of such waivers and reimbursements (including the reduction in
Fixed Income Fund's advisory fee discussed above), it is estimated that Other
Expenses would be .31%, .94%, and .69%, and Total Operating Expenses would be
1.21%, 1.84% and 1.34% of the average daily net assets of the Equity, Asset
Allocation and Fixed Income Funds, respectively.
EXAMPLE
Assuming a hypothetical investment of $1,000, a 5% annual return and
redemption at the end of each time period, an investor in Class Y of each of the
Funds would have paid transaction and operating expenses at the end of each year
as follows:
1 YEAR 3 YEARS
------ -------
Equity $10 $32
Asset Allocation $10 $32
Fixed Income $ 6 $19
The same level of expenses would be incurred if the investments were held
throughout the period indicated.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
4
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Period from inception (January 2, 1997)
through June 30, 1997
-------------------------------------
Asset Fixed
Equity Allocation Income
Class Y Shares Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Net asset value per share, beginning of period........................... $10.00 $10.00 $10.00
Income from investment operations (a):
Net investment income (loss).......................................... (.01) .06 .35
Net realized gains and change in unrealized appreciation
on investments...................................................... .89 .56 .06
------ ------ ------
Total from investment operations.................................. .88 .62 .41
Distributions from net investment income and net realized short-term
capital gains (a)................................................... - (.05) (.33)
------ ------ ------
Net asset value per share, end of period.......................... $10.88 $10.57 $10.08
====== ====== ======
Total return (not annualized) (b)........................................ 8.80% 6.90% 3.71%
==== ==== ====
Ratios/supplemental data:
Net assets, end of period............................................. 48,690,983 10,706,693 19,480,853
Ratio of expenses to average net assets (b) (annualized).............. 1.00% 1.00% .60%
Ratio of net investment income (loss) to average net
assets (b) (annualized)............................................. (.24)% 2.85% 6.95%
Portfolio turnover rate............................................... 97.331% 241.150% 220.808%
Average commission rate paid (c)...................................... $.06 $.06 $ -
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding during the period from inception (January 2, 1997) through June
30, 1997.
(b) These ratios have been reduced due to an agreement with the Adviser that
the ratio of expenses to average net assets would not exceed on an annual
basis 1.00 percent for the Equity Fund, 1.00 percent for the Asset
Allocation Fund and .60 percent for the Fixed Income Fund. These voluntary
limits may be discontinued by the Adviser at any time after April 30, 1998.
If the aforementioned agreement had not been in effect during the period,
the annualized ratio of expenses to average net assets would have been 1.40
percent for the Equity Fund, 1.99 percent for the Asset Allocation Fund and
1.53 percent for the Fixed Income Fund.
(c) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission.
</FN>
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each of the Funds has a different investment objective as described below.
Each Fund is managed by the Adviser. There can be no assurance that any of the
Funds will achieve its investment objective. Each Fund is subject to the risk of
changing economic conditions, as well as the risk inherent in the ability of the
Adviser to make changes in a Fund's investments in anticipation of changes in
economic, business, and financial conditions.
The different types of securities and investment techniques common to one
or more Funds all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital appreciation
and there is a substantial risk of decline. With respect to debt securities,
there can be no assurance that the issuer of such securities will be able to
meet its obligations on interest or principal payments in a timely manner. In
addition, the value of debt instruments generally rises and falls inversely with
interest rates.
The investments and investment techniques common to one or more Funds and
their risks are described in greater detail in "Description of Securities and
Investment Techniques" in the SAI.
The Funds are subject to investment restrictions that are described under
"Investment Restrictions" in the SAI. Those investment restrictions that are
"fundamental policies" may not be changed without a majority vote of
shareholders of the affected Funds. Among other things, the "fundamental
policies" prohibit each Fund, with respect to 75 percent of its total assets,
from (i) investing more than 5 percent of its assets in the securities of any
one issuer (except obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities (these obligations are referred to in this
prospectus as "U.S. Government Securities")), and (ii) investing more than 25
percent of its assets in the securities of issuers in the same industry (except
cash equivalent items and U.S. government securities). Except for the Trust's
fundamental policies, all investment policies and practices described in this
Prospectus and in the SAI are not fundamental, meaning that the Board of
Trustees may change them without shareholder approval. See "Description of
Securities and Investment Techniques" and "Investment Restrictions" in the SAI
for further information.
EQUITY FUND
In seeking its objective of providing a high equity total return
consistent with the preservation of capital and a prudent level of risk, the
Equity Fund will attempt to achieve a total return (i.e., price appreciation
plus potential dividend yield) primarily through investment in selected equities
(i.e., common stocks and other securities having the investment characteristics
of common stocks, such as convertible debentures and warrants). However, if
market conditions indicate their desirability, the Adviser may, for defensive
purposes, temporarily invest all or a part of the assets of the Equity Fund in
money market instruments. See "Debt Securities" below and in the SAI for further
information.
6
<PAGE>
The Adviser expects that the Fund's equity investments will be widely
diversified by both industry and number of issuers. The Adviser's stock
selection methods will be based in part upon the analysis of variables which it
believes significantly relate to the future market performance of a stock, such
as recent changes in earnings per share and their deviations from analysts'
expectations, past growth trends, price movement of the stock itself, publicly
recorded trading transactions by corporate insiders, and relative price-earnings
ratios. The Adviser expects that investment opportunities will often be sought
among securities of larger, established companies, although securities of
smaller, less well- known companies may also be selected. Small company stocks
have higher risk and volatility, because most are not as broadly traded as
stocks of larger companies, and thus their prices may fluctuate more widely and
abruptly.
By investing in securities that are subject to market risk, the Equity
Fund is subject to greater fluctuations in its market value and involves the
assumption of a higher degree of risk as compared to a fund seeking stability of
principal, such as a money market fund, or a fund investing primarily in U.S.
government securities. To maximize potential return, the Adviser may utilize a
variety of investment techniques and strategies including but not limited to:
writing listed "covered" call and "secured" put options, including options on
stock indices, and purchasing such options; purchasing and selling, for hedging
purposes, stock index, interest rate, and other futures contracts, and
purchasing options on such futures contracts; purchasing warrants and preferred
and convertible preferred stocks; borrowing from banks to purchase securities;
purchasing foreign securities in the form of American Depository Receipts
("ADRs"); purchasing securities of other investment companies; entering into
repurchase agreements; purchasing restricted securities; investing in
when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques" in
the SAI for further information. The Equity Fund may also invest in high yield,
high risk, lower-rated debt securities. See "Risks Associated With High Yield
Debt Securities" below and in the SAI for further information.
ASSET ALLOCATION FUND
The investment objective of the Asset Allocation Fund is to seek a high
total investment return consistent with the preservation of capital and prudent
investment risk. The Fund seeks to achieve this objective by pursuing an active
asset allocation strategy whereby investments are allocated based upon thorough
investment research, valuation and analysis of market trends and the anticipated
relative total return available among various asset classes, including debt
securities, equity securities and money market instruments. Total investment
return consists of current income, including dividends, interest, and discount
accruals, and capital appreciation. Achieving this Fund's objective depends on
the Adviser's ability to assess the effect of economic and market trends on
different sectors of the market. In seeking to maximize total return, the Asset
Allocation Fund will follow an asset allocation strategy contemplating shifts
(which may be frequent) among a wide range of investments and market sectors.
The Fund's investments will be designed to maximize total return during all
economic and financial environments, consistent with prudent risk as determined
by the Adviser.
The Asset Allocation Fund will invest in U.S. government securities,
intermediate and long- term debt securities and equity securities of domestic
and foreign issuers, including common and preferred stocks, convertible debt
securities, and warrants. If the Adviser deems stock market conditions to be
favorable or debt market conditions to be uncertain or unfavorable, a
substantially higher percentage of the Fund's total assets may be invested in
equity securities. If, however, the Adviser believes that the equity environment
is uncertain or unfavorable, the Fund may decrease its investments in equity
7
<PAGE>
securities and increase its investments in debt securities. Furthermore, if the
Adviser believes that inflationary or monetary conditions warrant a significant
investment in companies involved in precious metals, the Fund may invest up to
10% of its total assets in the equity securities of companies exploring, mining,
developing, producing, or distributing gold or other precious metals.
Additionally, the Asset Allocation Fund may make temporary defensive investments
(i.e., money market instruments) without limit if it is believed that market
conditions warrant a more conservative investment strategy.
The Asset Allocation Fund may use various investment strategies and
techniques when the Adviser determines that such use is appropriate in an effort
to meet the Fund's investment objective, including but not limited to: writing
listed "covered" call and "secured" put options, including options on stock
indices, and purchasing such options; purchasing and selling, for hedging
purposes, stock index, interest rate, gold, and other futures contracts, and
purchasing options on such futures contracts; purchasing warrants and preferred
and convertible preferred stocks; purchasing foreign securities; entering into
foreign currency transactions and options on foreign currencies; borrowing from
banks to purchase securities; purchasing securities of other investment
companies; entering into repurchase agreements; purchasing restricted
securities; investing in when-issued or delayed delivery securities; and selling
securities short "against the box." See "Description of Securities and
Investment Techniques" in the SAI for further information.
The maturities of the debt securities in the Asset Allocation Fund will
vary based in large part on the Adviser's expectations as to future changes in
interest rates. However, the Adviser anticipates that the debt component of the
Fund will generally be invested primarily in intermediate and/or long-term debt
securities. The Adviser anticipates that the equity portion of the Fund will be
widely diversified by both industry and number of issuers. The Adviser's stock
selection methods will be based in part upon variables which it believes
significantly relate to the future market performance of a stock, such as recent
changes in earnings per share and their deviations from analysts' expectations,
past growth trends, price movement of the stock itself, publicly recorded
trading transactions by corporate insiders, and relative price-earnings ratios.
The Adviser anticipates that investment opportunities will often be sought among
securities of larger, established companies, although securities of smaller,
less well-known companies may also be selected. Small company stocks are subject
to the risks described with respect to the Equity Fund.
The Asset Allocation Fund may invest in high yield, high risk, lower-rated
debt securities, which are not believed to involve undue risk to income or
principal. The Asset Allocation Fund does not intend to invest more than 25% of
its total assets (measured at the time of investment) in high yield, high risk
debt securities. Generally, higher yielding bonds carry ratings assigned by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P") that
are lower than those assigned to investment grade debt securities, or they are
8
<PAGE>
unrated and the Adviser determines such securities are not of comparable quality
to investment grade debt securities. A debt security will be considered
"investment grade" if it is rated in one of the four highest rating categories
by at least one nationally recognized statistical rating organization ("NRSRO"),
or, in the case of an unrated security, if the Adviser determines such security
is of comparable quality to securities rated in one of the four highest rating
categories. See "Appendix A" to this Prospectus for further discussion regarding
securities ratings.
Lower-rated securities carry higher investment risk than investment grade
debt securities. The market values of lower-rated securities generally fluctuate
more widely than those of higher-rated securities. In addition, changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity for the issuers of such securities to make principal and interest
payments than is generally the case for higher grade debt securities. The lowest
rating categories in which the Fund will invest are CCC/Caa. Securities in those
categories are considered to be of poor standing and are predominantly
speculative. The Adviser seeks to enhance total return specifically through
purchasing securities which the Adviser believes are undervalued and selling,
when appropriate, those securities the Adviser believes are overvalued. In order
to determine value, the Adviser utilizes independent fundamental analysis of the
issuer as well as an analysis of the specific structure of the security. See
"Risks Associated With High Yield Debt Securities" below and "Description of
Securities and Investment Techniques" in the SAI.
The Asset Allocation Fund may also invest in zero coupon securities and
payment-in-kind securities. A zero coupon security pays no interest to its
holders prior to maturity and a payment-in-kind security pays interest in the
form of additional securities. These securities will be subject to greater
fluctuation in market value in response to changing interest rates than
securities of comparable maturities that make periodic cash distributions of
interest.
The Asset Allocation Fund may also invest in equity and debt securities of
foreign issuers, including non-U.S. dollar- denominated securities, Eurodollar
securities and securities issued, assumed or guaranteed by foreign governments
or political subdivisions or instrumentalities thereof. As a non-fundamental
operating policy, the Asset Allocation Fund will not invest more than 50% of its
total assets (measured at the time of investment) in foreign securities. See
"Foreign Securities" below and "Description of Securities and Investment
Techniques" in the SAI for further information.
FIXED INCOME FUND
In seeking its investment objective of providing the highest level of
income as is consistent with the preservation of capital, the Fixed Income Fund
invests primarily in investment grade debt securities (as defined above). The
Adviser seeks to reduce risk, increase income, and preserve or enhance total
return by actively managing the Fund in light of market conditions and trends.
The Adviser seeks to enhance total return specifically through purchasing
securities which the Adviser believes are undervalued and selling, when
appropriate, those securities the Adviser believes are overvalued. In order to
determine value, the Adviser utilizes independent fundamental analysis of the
issuer as well as an analysis of the specific structure of the security. The
Fixed Income Fund may invest in debt securities issued by publicly and privately
held U.S. and foreign companies, the U.S. government and agencies and
instrumentalities thereof, states and their political subdivisions, agencies and
9
<PAGE>
instrumentalities ("municipal securities"), and foreign governments and their
agencies and instrumentalities. The interest on the municipal securities in
which the Fund invests typically is not exempt from federal income tax. The
Fixed Income Fund may also invest in mortgage-related debt securities,
asset-backed debt securities, and other forms of debt securities. See "Debt
Securities" and "Mortgage-Backed Securities" below and in the SAI. In addition,
up to 15% of the Fund's assets may be invested directly in equity securities,
including preferred and common stocks, convertible debt securities and debt
securities carrying warrants to purchase equity securities, and up to 10% of the
Fund's assets may be invested in debt securities rated below investment grade
(as defined above) and comparable unrated securities.
Debt securities purchased by the Fixed Income Fund may be of any maturity.
It is anticipated that the dollar weighted average life of the debt portfolio
will be between seven and 15 years, but may be shorter or longer depending on
market conditions. While the Fixed Income Fund intends to invest in fixed income
securities in order to achieve its investment objective of obtaining the highest
level of income consistent with preservation of capital, it may from time to
time invest in fixed income securities which offer higher capital appreciation
potential. Such investments would be in addition to that portion of the Fund
which may be invested in common stocks and other types of equity securities.
Fixed income securities will be affected by changes in interest rates.
When interest rates decline, the market value of a fund invested at higher
yields can be expected to rise. Conversely, when interest rates rise, the market
value of a fund invested at lower yields can be expected to decline. Therefore,
the Fixed Income Fund may engage in portfolio trading to take advantage of
market developments and yield disparities; for example, shortening the average
maturity of the Fund in anticipation of a rise in interest rates so as to
minimize depreciation of principal, or lengthening the average maturity of the
Fund in anticipation of a decline in interest rates so as to maximize
appreciation of principal.
The Fixed Income Fund may use various investment strategies and techniques
when the Adviser determines that such use is appropriate in an effort to meet
the Fund's investment objective. Such strategies and techniques include, but are
not limited to, writing listed "covered" call and "secured" put options and
purchasing such options; purchasing and selling, for hedging purposes, interest
rate and other futures contracts, and purchasing options on such futures
contracts; borrowing from banks to purchase securities; investing in securities
of other investment companies; entering into repurchase agreements; investing in
when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques" in
the SAI for further information.
10
<PAGE>
INVESTMENT TECHNIQUES AND OTHER INVESTMENT POLICIES
MORTGAGE-BACKED SECURITIES
Each Fund may invest in mortgage-backed securities. Mortgage-backed
securities are interests in "pools" of mortgage loans made to residential home
buyers, including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations (see "Mortgage Pass-Through Securities," below). The Funds
may also invest in debt securities which are secured with collateral consisting
of mortgage-backed securities (see "Collateralized Mortgage Obligations,"
below), and in other types of mortgage-related securities.
MORTGAGE PASS-THROUGH SECURITIES. These are securities representing
interests in pools of mortgages in which periodic payments of both interest and
principal on the securities are made by "passing through" periodic payments made
by the individual borrowers on the residential mortgage loans underlying such
securities (net of fees paid to the issuer or guarantor of the securities and
possibly other costs). Early repayment of principal on mortgage pass-through
securities (arising from prepayments of principal due to sale of the underlying
property, refinancing, or foreclosure, net of fees and costs which may be
incurred) may expose a Fund to a lower rate of return upon reinvestment of
principal. Payment of principal and interest on some mortgage pass-through
securities may be guaranteed by the full faith and credit of the U.S. government
(in the case of securities guaranteed by the Government National Mortgage
Association, "GNMA"), or guaranteed by agencies or instrumentalities of the U.S.
government (in the case of securities guaranteed by Fannie Mae, "FNMA," or the
Federal Home Loan Mortgage Corporation, "FHLMC"). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers, and other secondary market issuers) may be uninsured or may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance, and letters of credit, which may be
issued by governmental entities, private insurers, or the mortgage poolers.
GNMA CERTIFICATES. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will have maturities of up to
30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages may be purchased at any time prior to
maturity, will be subject to normal principal amortization, and may be prepaid
prior to maturity. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the certificates.
11
<PAGE>
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. FNMA, a federally chartered
and privately owned corporation, issues pass-through securities representing
interests in a pool of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest, but this guarantee is not backed by the full
faith and credit of the U.S. government. FNMA also issues REMIC certificates,
which represent interests in a trust funded with FNMA certificates. REMIC
certificates are guaranteed by FNMA and not by the full faith and credit of the
U.S. government.
FHLMC, a corporate instrumentality of the U.S. government, issues
participation certificates which represent an interest in a pool of conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal, and maintains reserves to protect holders against
losses due to default, but these securities are not backed by the full faith and
credit of the U.S. government. As is the case with GNMA certificates, the actual
maturity of and realized yield on particular FNMA and FHLMC pass-through
securities will vary based on the prepayment experience of the underlying pool
of mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MORTGAGE-BACKED BONDS. All Funds
may purchase mortgage-backed securities issued by financial institutions such as
commercial banks, savings and loan associations, mortgage banks, and securities
broker-dealers (or affiliates of such institutions established to issue these
securities) in the form of either collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds. CMOs are obligations fully collateralized directly or
indirectly by a pool of mortgages on which payments of principal and interest
are dedicated to payment of principal and interest on the CMOs. Payments are
passed through to the holders on the same schedule as they are received,
although not necessarily on a pro rata basis. Mortgage-backed bonds are general
obligations of the issuer fully collateralized directly or indirectly by a pool
of mortgages. The mortgages serve as collateral for the issuer's payment
obligations on the bonds but interest and principal payments on the mortgages
are not passed through either directly (as with GNMA certificates and FNMA and
FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages could
change the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity). Although the mortgage-related securities securing these
obligations may be subject to a government guarantee or third-party support, the
obligation itself is not so guaranteed. Therefore, if the collateral securing
the obligation is insufficient to make payment on the obligation, a Fund could
sustain a loss. If new types of mortgage-related securities are developed and
offered to investors, investments in such securities will be considered.
12
<PAGE>
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage pass-through securities,
such as GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or
modified pass-through securities, such as CMOs issued by various financial
institutions, are subject to early repayment of principal arising from
prepayments of principal on the underlying mortgage loans (due to the sale of
the underlying property, the refinancing of the loan, or foreclosure).
Prepayment rates vary widely and may be affected by changes in market interest
rates and other economic trends and factors. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-backed security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-backed security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the securities. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-backed securities will vary based
upon the prepayment experience of the underlying pool of mortgages.
DEBT SECURITIES
All Funds may invest in U.S. dollar-denominated corporate debt securities
of domestic issuers, and the Asset Allocation Fund and the Fixed Income Fund may
invest in debt securities of foreign issuers that may or may not be U.S.
dollar-denominated.
The investment return on a corporate debt security reflects interest
earnings and changes in the market value of the security. The market value of
corporate debt obligations may be expected to rise and fall inversely with
interest rates generally. There also exists the risk that the issuers of the
securities may not be able to meet their obligations on interest or principal
payments at the time called for by an instrument. Debt securities rated BBB or
Baa, which are considered medium-grade debt securities, do not provide the high
degree of security with respect to payment of principal and interest associated
with higher-rated debt securities, and generally have some speculative
characteristics. A debt security will be placed in this rating category when
interest payments and principal security appear adequate for the present, but
economic characteristics that provide longer term protection may be lacking. Any
debt security, and particularly those rated BBB or Baa (or below), may be
susceptible to changing conditions, particularly to economic downturns, which
could lead to a weakened capacity to pay interest and principal.
RISKS ASSOCIATED WITH HIGH YIELD DEBT SECURITIES. The Funds may invest in
high yield, high risk, lower-rated debt securities. High yield debt securities
are subject to all risks inherent in any investment in debt securities. As
discussed below, these risks are significantly greater in the case of high yield
debt securities.
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Lower-rated debt securities generally offer a higher current yield than
that available from higher-rated issues. However, lower-rated securities involve
higher risks in that they are especially subject to (1) adverse changes in
general economic conditions and in the industries in which the issuers are
engaged, (2) adverse changes in the financial condition of the issuers and (3)
price fluctuation in response to changes in interest rates. Accordingly, the
yield on lower-rated debt securities will fluctuate over time. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of principal and interest, and increase the possibility of default. In
addition, the market for lower-rated securities has expanded rapidly in recent
years, and this expanded market has not been tested in a period of extended
economic downturn. This market may be thinner and less active than the market
for higher quality securities, which may limit the ability to sell such
securities at their fair value in response to changes in the economy or the
financial markets. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the values and liquidity of
lower-rated securities, especially in a thinly traded market.
Differing yields on fixed income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities rated below
investment grade (i.e., Ba1 or lower by Moody's or BB+ or lower by S&P). Debt
securities rated below investment grade are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
FOREIGN SECURITIES
The Asset Allocation Fund may invest in equity securities of foreign
issuers including ADRs, which are described below, and in debt securities of
foreign issuers. That Fund may invest up to 50 percent of its total assets in
such securities. The Equity Fund may invest in ADRs. The Fixed Income Fund may
invest in debt obligations of foreign issuers, including foreign governments and
their agencies and instrumentalities.
Investments in foreign securities may offer unique potential benefits such
as substantial growth in industries not yet developed in the particular country.
Such investments also permit a Fund to invest in foreign countries with economic
policies or business cycles different from those of the United States, or to
reduce fluctuations in portfolio value by taking advantage of foreign securities
markets that may not move in a manner parallel to U.S. markets. Investments in
securities of foreign issuers involve certain risks not ordinarily associated
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with investments in securities of domestic issuers. Such risks include
fluctuations in foreign exchange rates, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain countries, there is the possibility of expropriation of
assets, confiscatory taxation, political or social instability, or diplomatic
developments that could adversely affect investments in those countries. Since
the Asset Allocation Fund and the Fixed Income Fund may invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates will affect the value of securities in those
Funds and the unrealized appreciation or depreciation of investments so far as
U.S. investors are concerned.
There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those to which U.S. companies are subject.
Foreign securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets. Securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Transactional costs in non-U.S. securities markets
are generally higher than in U.S. securities markets. There is generally less
government supervision and regulation of exchanges, brokers, and issuers than
there is in the United States. A Fund might have greater difficulty taking
appropriate legal action with respect to foreign investments in non-U.S. courts
than with respect to domestic issuers in U.S. courts. In addition, transactions
in foreign securities may involve greater time from the trade date until
settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.
Dividend and interest income from foreign securities may generally be
subject to withholding taxes by the country in which the issuer is located and
may not be recoverable by a Fund or its investors in all cases.
ADRs are certificates issued by a U.S. bank or trust company representing
an interest in securities of a foreign issuer deposited in a foreign subsidiary
or branch or a correspondent of that bank. Generally, ADRs are designed for use
in U.S. securities markets and may offer U.S. investors more liquidity than the
underlying securities. The Fund may invest in unsponsored ADRs. The issuers of
unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of such ADRs.
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RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities such as private placements,
although a Fund may not invest in any restricted security that is illiquid if,
after acquisition thereof, more than 15 percent of the Fund's assets would be
invested in illiquid securities. Once acquired, restricted securities may be
sold by a Fund only in privately negotiated transactions or in a public offering
with respect to which a registration statement is in effect under the Securities
Act of 1933. If sold in a privately negotiated transaction, a Fund may have
difficulty finding a buyer and may be required to sell at a price that is less
than the Adviser had anticipated. Where registration is required, a Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to sell.
MANAGEMENT
The Trustees of the Trust decide upon matters of general policy for the
Trust. In addition, the Trustees review the actions of the Adviser, as set forth
below. The Trust's officers supervise the daily business operations of the
Trust. For information about the Board of Trustees and the Trust's officers, see
"Management" in the SAI.
The Adviser, 11825 N. Pennsylvania Street, Carmel, Indiana 46032, has been
retained under Investment Advisory Agreements with the Trust to provide
investment advice, and in general to supervise the management and investment
program of the Trust and each Fund. The Adviser is a wholly-owned subsidiary of
Conseco, Inc., a publicly-owned financial services company, the principal
operations of which are in development, marketing, and administration of
specialized annuity, life and health insurance products. The Adviser generally
manages the affairs of the Trust, subject to the supervision of the Board of
Trustees.
Under the Investment Advisory Agreements, the Adviser has contracted to
receive an investment advisory fee equal to an annual rate of .45% of the
average daily net asset value of the Fixed Income Fund, .70% of the average
daily net asset value of the Equity Fund, and .70% of the average daily net
asset value of the Asset Allocation Fund. The Adviser also manages another
registered investment company and all of the invested assets of its parent
company, Conseco, Inc., which owns or manages several life insurance
subsidiaries, and provides investment and servicing functions to the Conseco
companies and affiliates. The Adviser, together with Conseco Services, LLC (the
"Administrator") and Conseco Equity Sales Inc., (the "Distributor"), have
voluntarily agreed to waive its investment advisory fee and/or reimburse
expenses to the extent that the ratio of expenses to net assets on an annual
basis for Class Y shares of the Equity Fund exceeds 1.00%, the Asset Allocation
Fund exceeds 1.00%, and the Fixed Income Fund exceeds .60%. These voluntary
limits may be discontinued at any time after April 30, 1998.
The investment professionals primarily responsible for the management of
each Fund, with the respective responsibilities and business experience for the
past five years are as follows:
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EQUITY FUND: Thomas J. Pence, Vice President for the Adviser. He is
responsible for the management of the Adviser's equity portfolios and oversight
of the equity investment process. Mr. Pence joined the Adviser in 1992.
Previously, Mr. Pence worked for five years as a securities analyst in the field
of real estate acquisition and development in which he specialized in
residential development and construction finance and was responsible for
overseeing a project portfolio of $750 million in real estate assets.
FIXED INCOME FUND: Gregory J. Hahn, Senior Vice President, Portfolio
Analytics, for the Adviser. He is responsible for the portfolio analysis and
management of the institutional client accounts and analytical support for
taxable portfolios. In addition, he has responsibility for SEC registered
investment products as well as investments in the insurance industry. Mr. Hahn
joined the Adviser in 1989.
ASSET ALLOCATION FUND: Gregory J. Hahn, Portfolio Manager of the fixed
income portion of the Fund. See Mr. Hahn's business experience above.
Thomas J. Pence, Portfolio Manager of the equity portion of the Fund. See
Mr. Pence's business experience above.
ADMINISTRATIVE FEES
Pursuant to an administration agreement ("Administration Agreement"), the
Administrator supervises the overall administration of the Funds. These
administrative services include supervising the preparation and filing of all
documents required for compliance by the Funds with applicable laws and
regulations, supervising the maintenance of books and records, and other general
and administrative responsibilities. For providing these services, the
Administrator receives a fee from each Fund of .20% per annum of its average
daily Class Y net assets. Pursuant to the Administration Agreement, the
Administrator reserves the right to employ one or more sub-administrators to
perform administrative services for the Funds. The Bank of New York performs
certain administrative services for the Funds pursuant to agreements with the
Administrator.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares from any broker, dealer, or other financial
intermediary that has a selling agreement with the Distributor. These firms may
charge for their services in connection with your purchase order. In addition,
as discussed below, an account may be opened for the purchase of shares of a
Fund by mailing to the Conseco Fund Group, P.O. Box 8017, Boston, Massachusetts
02266-8017, a completed account application and a check payable to the
appropriate Fund. Or you may telephone (800) 986-3384 to obtain the number of an
account to which you can wire or electronically transfer funds and then send in
a completed application.
In order to buy Class Y shares you must be an institutional investor or a
qualifying individual investor. Institutional investors may include, but are not
limited to, the following: (i) tax qualified retirement plans which have (a) at
least $10 million in plan assets, or (b) 250 or more employees eligible to
participate at the time of purchase, (ii) banks and insurance companies
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purchasing shares for their own account, (iii) investment companies not
affiliated with the Adviser, (iv) tax-qualified retirement plans of the Adviser
or brokers, dealers, and other financial intermediaries that have a selling
agreement with the Distributor and their affiliates, (v) endowments, foundations
and other charitable organizations or (vi) accounts established under wrap fee
or asset allocation programs where the accountholder pays the sponsor an
asset-based fee. A qualifying individual investor is an investor who is a client
of the Adviser and is making a purchase of over $500,000 or whose purchase
together with his current holdings of Class Y shares exceeds $500,000 or any
other individual who meets the minimum investment requirement.
Purchase orders for all Funds are accepted only on a business day as
defined below. Orders for shares received by the Funds' Transfer Agent on any
business day prior to the close of regular trading on the New York Stock
Exchange (the "NYSE") (normally 4:00 p.m. Eastern Time) will receive that day's
offering price, which is net asset value. Orders received by the Transfer Agent
after such time but prior to the close of business on the next business day will
receive the next business day's offering price. If you purchase shares through a
broker, dealer, or other financial intermediary, that firm is responsible for
forwarding payment promptly to the Transfer Agent. A "business day" is any day
on which the NYSE is open for business. It is anticipated that the NYSE will be
closed Saturdays and Sundays and on days on which the NYSE observes New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Your initial purchase amount must be at least $500,000. However, the
minimum may be waived at the discretion of a Fund's officers. Each Fund and the
Distributor or Transfer Agent reserves the right to reject any order for the
purchase of shares in whole or in part. The Trust reserves the right to cancel
any purchase order for which payment has not been received by the third business
day following placement of the order.
The Distributor may provide promotional incentives including cash
compensation to certain brokers, dealers, or financial intermediaries whose
representatives have sold or are expected to sell significant amounts of shares
of one or more of the Funds. Other programs may provide, subject to certain
conditions, additional compensation to brokers, dealers, or financial
intermediaries based on a combination of aggregate shares sold and increases of
assets under management. All of the above payments will be made by the
Distributor or its affiliates out of their own assets. These programs will not
change the price an investor will pay for shares or the amount that a Fund will
receive from such sale.
You will receive a confirmation of each new transaction in your account,
which will also show you the number of Fund shares you own and the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Funds will not be issued.
PURCHASES BY WIRE
Purchases by wire transfer should be directed to the Transfer Agent. To
receive an account number call (800) 986-3384 between the hours of 8:00 a.m. and
4:00 p.m. (Eastern Time) on a business day (as defined above) on which your bank
is open for business. The following information will be requested: your name,
address, tax identification number, dividend distribution election, amount being
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wired and the wiring bank. Instructions should then be given by you to your bank
to transfer funds by wire to: ABA # 011000028, State Street Bank, Boston, MA,
Account # 9905-244-1. If you arrange for receipt by the Transfer Agent of
Federal funds prior to the close of regular trading (normally 4:00 p.m. Eastern
Time) of the NYSE on a business day as defined above, you will receive that
day's offering price. Your bank may charge for these services.
PURCHASES THROUGH BROKERS, DEALERS AND OTHER FINANCIAL INTERMEDIARIES
Orders for purchase of shares placed through brokers, dealers and other
financial intermediaries will receive the offering price next computed following
receipt of the order provided the broker, dealer or other financial intermediary
receives the order prior to the close of the NYSE and transmits it to the
Transfer Agent prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). Such firms are required to provide payment within three business
days after placing an order. BROKERS, DEALERS AND OTHER FINANCIAL INTERMEDIARIES
MAKING PAYMENT FOR CONFIRMED PURCHASES VIA FEDERAL FUNDS WIRE MUST REFERENCE THE
CONFIRMATION NUMBER TO ENSURE TIMELY CREDIT.
PURCHASES BY CHECK
An initial investment made by check must be accompanied by an application,
completed in its entirety. Additional shares of the Funds may also be purchased
by sending a check payable to the applicable Fund, along with information
regarding your account, including the account number, to the Transfer Agent. All
checks should be drawn only on U.S. banks in U.S. funds, in order to avoid fees
and delays. A charge may be imposed if any check submitted for investment does
not clear. Third party checks will not be accepted. When purchases are made by
check, redemptions will not be allowed until the investment being redeemed has
been in the account for 15 business days.
HOW TO REDEEM SHARES OF THE FUNDS
Shares of Class Y are redeemed at net asset value next determined after
receipt of a redemption request in good form on any business day, reduced by the
amount of any federal income tax required to be withheld.
REDEMPTIONS BY MAIL
A written request for redemption must be received by the Transfer Agent to
constitute a valid tender for redemption. It will also be necessary for
corporate investors and other associations to have an appropriate certification
authorizing redemptions by a corporation or an association on file before a
redemption request will be considered in proper form. A suggested form of such
certification is provided on the application accompanying this Prospectus. A
signature guarantee is required for redemptions of $50,000 or more. A signature
guarantee may be obtained from most banks, brokers and dealers, credit unions,
savings associations and financial institutions, but not from a notary public.
REDEMPTIONS BY WIRE OR TELEPHONE
Brokers, dealers, or other financial intermediaries may communicate
redemption orders by wire or telephone. These firms may charge for their
services in connection with your redemption request but neither the Funds nor
the Distributor imposes any such charges.
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The Funds and the Transfer Agent will not be responsible for the
authenticity of telephone instructions or losses, if any, resulting from
unauthorized shareholder transactions if the Funds or the Transfer Agent
reasonably believe that such instructions are genuine. The Funds and the
Transfer Agent have established procedures that the Funds believe are reasonably
appropriate to confirm that instructions communicated by telephone are genuine.
These procedures include: (i) recording telephone instructions for exchanges and
expedited redemptions; (ii) requiring the caller to give certain specific
identifying information; and (iii) providing written confirmations to
shareholders of record not later than five days following any such telephone
transactions. If the Funds and the Transfer Agent do not employ these
procedures, they may be liable for any losses due to unauthorized or fraudulent
telephone instructions.
EXPEDITED REDEMPTIONS
You may have the payment of redemption requests (of $250 or more) wired or
mailed directly to a domestic commercial bank account that you have previously
designated. Normally, such payments will be transmitted on the second business
day following receipt of the request (provided redemptions may be made). You may
request a wire redemption by telephone or written request sent to the Transfer
Agent. For telephone redemptions, call the Transfer Agent at (800) 986-3384. You
must complete the "Expedited Redemptions" section of the application for this
privilege to be applicable.
GENERAL
Payment to shareholders for shares redeemed or repurchased will be made
within seven days after receipt by the Transfer Agent. A Fund may delay the
payment of redemption proceeds until the check used to purchase the shares being
redeemed has cleared, which may take up to 15 days or longer. To reduce such
delay, the Funds recommend that all purchases be made by bank wire Federal
funds. A Fund may suspend the right of redemption under certain extraordinary
circumstances in accordance with the rules of the SEC.
EXCHANGE PRIVILEGE
Class Y shares of one Fund described in this Prospectus may be exchanged
for Class Y shares of the other Funds or for shares of the money market fund
currently managed by Federated Investors at the relative net asset values per
share at the time of the exchange. Shares of the money market fund currently
managed by Federated Investors may be exchanged for Class Y shares at relative
net asset values per share at the time of the exchange. The total value of
shares in a Fund after the exchange must at least equal the minimum investment
requirement of the Fund. You should consider the differences in investment
objectives and expenses of the Funds before making an exchange. Shares are
normally redeemed from one Fund and purchased from the other Fund in the
exchange transaction on the same business day on which the Transfer Agent
receives an exchange request that is in proper form by the close of the NYSE
that day.
ELECTRONIC TRANSFERS THROUGH AUTOMATED CLEARING HOUSE
Electronic transfers through Automated Clearing House ("ACH") allow you to
initiate a purchase or redemption for as little as $50 or as much as $50,000
between your bank account and Fund account using the ACH network. Initial
purchase minimums apply. You must complete the "ACH" section of the application
for this privilege to be applicable.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined for each class of shares for
each Fund as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time) on each business day (as previously defined) by dividing the value
of the Fund's net assets attributable to a class (the class' pro rata share of
the value of the Fund's assets minus the class' pro rata share of the value of
the Fund's liabilities) by the number of shares of that class outstanding. The
assets of each Fund are valued primarily on the basis of market quotations. If
quotations are not readily available, assets are valued by a method that the
Trustees of the Trust believe accurately reflects fair value. Foreign securities
are valued on the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. With respect to all Funds, short-term investments that
will mature in 60 days or less are valued at amortized cost, which approximates
market value.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund is treated as a separate corporation and intends to qualify as a
"regulated investment company" ("RIC") under the Code. As such, and by complying
with the applicable provisions of the Code regarding the amount and timing of
its distributions, each Fund will be allowed a deduction for amounts distributed
to its shareholders from its taxable income and net capital gain and will not be
subject to federal income tax on such amounts. To qualify for treatment as a
RIC, each Fund must, among other things, satisfy certain source of income and
diversification requirements described in the SAI.
Each Fund intends to distribute all its investment company taxable income
(generally consisting of net investment income, net short-term capital gains,
and any net gains from certain foreign currency transactions) and net capital
gain so as to avoid federal income and excise taxes. Dividends from each Fund's
investment company taxable income (whether paid in cash or reinvested in
additional shares) generally will be taxable to you as ordinary income. The
portion of those dividends that does not exceed the aggregate dividends received
by the Fund from U.S. corporations will be eligible for the dividends-received
deduction allowed to corporations; however, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax. Distributions of each Fund's
net capital gain (whether paid in cash or reinvested additional shares), when
designated as such, will be taxable to you as a long-term capital gain,
regardless of how long you have held your Fund shares. Shareholders who are not
subject to tax on their income generally will not be required to pay tax on
distributions.
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Dividends and other distributions declared in December, but received by
you in January, generally are taxable to you in the year in which declared. Each
Fund will inform you after the end of each calendar year as to the amount and
nature of dividends and other distributions paid (or deemed paid) to you for
that year.
When you redeem (sell) shares, it may result in a taxable gain or loss to
you, depending on whether you receive more or less than your adjusted basis for
the shares. An exchange of any Fund's shares for shares of another Fund
generally will have similar tax consequences. If you purchase shares of a Fund
(whether pursuant to the reinstatement privilege or otherwise) within thirty
days before or after redeeming other shares of that Fund (regardless of class)
at a loss, all or part of that loss will not be deductible and will increase the
basis of the newly purchased shares.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other non-corporate shareholders who do not furnish the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to those shareholders who
otherwise are subject to backup withholding.
The Asset Allocation Fund is required to include in its gross income each
year a portion of the original issue discount on zero coupon securities it
holds, even though the Fund receives no interest payment on the securities
during the year. Similarly, the Fund must include in its gross income each year
any interest on payment-in-kind securities distributed in the form of additional
securities. Accordingly, to qualify for treatment as a RIC under the Code, the
Fund may be required to distribute as a dividend an amount that is greater than
the total amount of cash the Fund actually receives. Those distributions will be
made from the Fund's cash assets or the proceeds from sales of Fund securities,
if necessary.
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This information is only a summary of certain federal tax information
about your investment. More information is contained in the SAI. You should
consult with your tax adviser about the effect of an investment in a Fund on
your particular tax situation.
Dividends from the Fixed Income Fund's net investment income will be
declared and distributed monthly. Dividends from the Equity Fund's and the Asset
Allocation Fund's net investment income will be declared and distributed
quarterly. However, the Trustees may decide to declare dividends at other
intervals. For dividend purposes, the net investment income of each Fund will
consist of all dividends and interest received and any net short-term gains or
losses from the sale of its investments (and, in the case of the Asset
Allocation Fund, net realized gains from foreign currency transactions) less its
estimated expenses (including fees payable to the Adviser).
Distributions of net capital gain (the excess of net long-term capital
gain over net short-term capital loss) of each Fund, if any, are declared and
distributed annually after the close of the Fund's fiscal year to its
shareholders.
Dividends and other distributions paid on each class of shares of each
Fund are calculated at the same time and in the same manner. Dividends on Class
A shares of a Fund are expected to be lower than those on its Class Y shares
because Class A shares have higher expenses resulting from their distribution
and service fees. [Dividends on each class also might be affected differently by
the allocation of other class-specific expenses.
DISTRIBUTION OPTIONS. When you open your account, specify on your
application how you want to receive your distributions. For Conseco Fund Group
retirement accounts, all distributions are reinvested. For other accounts, you
have the following options:
REINVEST ALL DISTRIBUTIONS. You can elect to reinvest all dividends and
capital gain distributions from a Fund in additional Class A shares of the Fund.
REINVEST INCOME DIVIDENDS ONLY. You can elect to reinvest dividends from a
Fund in Class A shares of the Fund while receiving capital gain distributions by
check or sent to your bank account.
REINVEST CAPITAL GAIN DISTRIBUTIONS ONLY. You can elect to reinvest
capital gain distributions from a Fund in Class A shares of the Fund while
receiving dividends by check or sent to your bank account.
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RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for
all dividends and capital gain distributions or have them sent to your bank
account.
THE ADVISER'S INVESTMENT PERFORMANCE
The Funds commenced operations on January 2, 1997. The average annualized
total returns for Class Y of the Funds for the period from January 2, 1997 to
June 30, 1997 were 8.80%, 6.90% and 3.71% for Equity Fund, Asset Allocation
Fund, and Fixed Income Fund, respectively.
The Equity Fund, Asset Allocation Fund and Fixed Income Fund are modeled
after previously existing funds of the Conseco Series Trust (the "CST Funds")
that are managed by the Adviser and have investment objectives and policies
substantially similar to the corresponding Funds. The CST Funds are used as
investment vehicles for the assets of variable annuity and variable life
insurance contracts issued by Conseco affiliates.
Below you will find information about the performance of the CST Funds.
Although the Funds offered by this Prospectus have substantially similar
investment objectives and policies, the same investment adviser and the same
portfolio managers as the corresponding CST Funds, you should not assume that
the Funds will have the same future performance as the CST Funds. For example,
any Fund's future performance may be greater or less than the performance of the
corresponding CST Fund due to, among other things, differences in expenses and
cash flows between a Fund and the corresponding CST Fund. Moreover, past
performance information is based on historical earnings and is not intended to
indicate future performance.
The investment characteristics of each Fund will closely resemble the
investment characteristics of the corresponding CST Fund. Depending on the Fund
involved, similarity of investment characteristics may involve factors such as
industry diversification, portfolio beta, portfolio quality, average maturity of
fixed-income assets, equity/non-equity mixes, and individual holdings.
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The Funds do have differences from the CST Funds, although the Adviser
does not believe these practices would cause a significant change in investment
results. Investors should note the following differences from the CST Funds: (1)
the Funds may invest in swaps, caps, floors and collars; (2) the Funds may lend
portfolio securities; and (3) the Funds may sell securities short. See the SAI
for further details about these practices.
The table below sets forth each Fund, its corresponding CST Fund, the date
the Adviser began managing the CST Fund (referred to as the "inception date")
and asset size as of June 30, 1997.
CORRESPONDING CST FUND
FUND (INCEPTION DATE AND ASSET SIZE)
---- -------------------------------
Equity Fund Common Stock Portfolio (Jan. 31, 1992)
$182,608,444
Asset Allocation Fund Asset Allocation Portfolio (Dec. 1, 1991)
$ 20,749,844
Fixed Income Fund Corporate Bond Portfolio (July 31, 1990)
$ 19,007,412
The following table shows the average annualized total returns for the CST
Funds for the one, three and five year periods ended June 30, 1997 and for the
periods from inception of the CST Funds to June 30, 1997. These figures are
based on the gross investment performance of the CST Funds. Note that the actual
investment performance experienced by investors in variable annuity and variable
life insurance contracts issued by Conseco affiliates would be lower than the
gross investment performance of the CST Funds due to expenses at the separate
account level; these expenses typically are higher than those borne by investors
in the Funds. From the gross investment performance figures, the Total Operating
Expenses reflected in the fee table herein are deducted to arrive at the net
return. Performance figures will be lower when sales charges are taken into
account. CST Fund performance does not represent the historical performance of
the Funds and should not be interpreted as indicative of the future performance
of the Funds.
25
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CLASS Y SHARE TOTAL OPERATING EXPENSES.
CST FUND
(INCEPTION DATE) 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
- ---------------- ------ ------- ------- ---------------
Common Stock 27.60% 31.29% 21.50% 19.73%
Portfolio (Jan. 31,
1992)
Asset Allocation 21.79% 23.35% 16.32% 16.14%
Portfolio (Dec. 31,
1991)
Corporate Bond 10.01% 9.48% 8.41% 10.17%
Portfolio (July 31,
1990)
Each of the Funds may from time to time advertise certain investment
performance information. Performance information may consist of yield and
average annual total return quotations reflecting the deduction of all
applicable charges over a period of time. A Fund also may use aggregate total
return figures for various periods, representing the cumulative change in value
of an investment in a Fund for the specific period. Performance information may
be shown in schedules, charts or graphs. These figures are based on historical
earnings and are not intended to indicate future performance.
The "yield" of a Fund refers to the annualized net income generated by an
investment in that Fund over a specified 30-day period, calculated by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period.
The "average annual total return" of a Fund refers to the total rate of
return of an investment in the Fund. The figure is computed by calculating
average annual compounded rates of return over the 1, 5 and 10 year periods that
would equate to the initial amount invested to the ending redeemable value,
assuming reinvestment of all income dividends and capital gain distributions.
"Total return" quotations reflect the performance of the Fund and include the
effect of capital changes.
Further information about the performance of the Funds is contained in the
SAI and in the Funds' semi-annual and annual reports to shareholders, which you
may obtain without charge by writing the Funds' address or calling the telephone
number set forth on the cover page of this Prospectus.
26
<PAGE>
OTHER INFORMATION
BROKERAGE COMMISSIONS
Although the Conduct Rules of the NASD prohibit its members from seeking
orders for the execution of investment company portfolio transactions on the
basis of their sales of investment company shares, under such rules, sales of
investment company shares may be considered in selecting brokers to effect
portfolio transactions. Accordingly, some portfolio transactions are, subject to
such rules and to obtaining best prices and executions, effected through brokers
who sell shares of the Funds. The Adviser may also select an affiliated broker
to execute transactions for the Funds, provided that the commissions, fees or
other remuneration paid to such affiliated broker are reasonable and fair as
compared to that paid to non-affiliated brokers for comparable transactions.
SHARES OF BENEFICIAL INTEREST
All shares of beneficial interest of the Trust are entitled to one vote,
and votes are generally on an aggregate basis. However, on matters where the
interests of the Funds (or classes of a Fund) differ (such as approval of an
investment advisory agreement or a change in fundamental investment policies),
the voting is on a Fund-by-Fund (or class by class) basis. The Trust does not
hold routine annual shareholders' meetings. The shares of each Fund issued are
fully paid and non-assessable, have no preference, conversion, exchange or
similar rights, and are freely transferable. In addition, each issued and
outstanding share in a Fund is entitled to participate equally in dividends and
distributions declared by that class.
REPORTS TO SHAREHOLDERS
Investors in the Funds will be informed of their progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
RETIREMENT PLANS AND MEDICAL SAVINGS ACCOUNTS
Class Y shares are available for purchase by qualified retirement plans
for both corporations and self-employed individuals. The Trust has available
prototype Individual Retirement Account ("IRA") plans (for both individuals and
employers), Simplified Employee Pension ("SEP") plans, and savings incentive
match plans for employees ("SIMPLE" plans) as well as Section 403(b)(7)
Tax-Sheltered Retirement Plans which are designed for employees of public
educational institutions and certain non-profit, tax-exempt organizations. The
Trust also has information concerning prototype Medical Savings Accounts. For
information, see the SAI and call or write the Distributor.
CLASS A SHARES
In addition to Class Y Shares, the Trust also offers Class A shares. Class
A shares are available to individual investors. Class A shares generally have
operating expenses similar to Class Y shares, except for certain sales charges
and distribution and transfer agent fees. Please call the Transfer Agent at
(800) 986-3384 for additional information on the purchase of Class A shares.
27
<PAGE>
DISTRIBUTOR
Conseco Equity Sales, Inc., 11815 N. Pennsylvania Street, Carmel, Indiana
46032, serves as distributor of shares of the Trust.
TRANSFER AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, serves as the Trust's transfer agent.
CUSTODIAN
The Bank of New York, 90 Washington Street, 22nd Floor, New York, New York
10826, serves as custodian of each Fund's assets. The Bank of New York also
performs certain administrative services for the Funds pursuant to agreements
with the Administrator.
INDEPENDENT PUBLIC ACCOUNTANTS
The Trust's independent public accountants are Coopers & Lybrand, L.L.P.,
2900 One American Square, Box 82002, Indianapolis, Indiana 46282-0002.
LEGAL COUNSEL
Certain legal matters for the Funds are passed upon by Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN
ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO SALESMAN, DEALER
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE SAI.
28
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Page
General Information........................................2
Investment Restrictions...................................__
Description of Securities and Investment Techniques........4
Investment Performance ...................................18
Portfolio Turnover and Securities Transactions............20
Management................................................22
Net Asset Values of the Shares of the Funds ..............24
Fund Expenses ............................................24
Distribution Arrangements ................................24
Purchase and Redemption of Shares.........................26
General ..................................................27
Taxes.....................................................29
Other Information.........................................
Financial Statements......................................33
If you would like a free copy of the Statement of Additional Information for
this Prospectus, please complete this form, detach, and mail to:
Conseco Fund Group
Attn: Administrative Offices
11815 N. Pennsylvania Street, Carmel, Indiana 46032
Gentlemen:
Please send me a free copy of the Statement of Additional Information for
the Conseco Fund Group at the following address:
Name:.
Mailing Address:
Sincerely,
(Signature)
29
<PAGE>
APPENDIX A SECURITIES RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa by Moody's Investors Service, Inc. ("Moody's")
are judged to be the best quality and carry the smallest degree of investment
risk. Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
Caa -Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
STANDARD & POOR'S CORPORATE BOND RATINGS:
AAA - This is the highest rating assigned by Standard & Poor's ("S&P") to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB/B/CCC/CC - Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation.+ BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from AA to B may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
PREFERRED STOCK RATINGS:
Both Moody's and S&P use the same designations for corporate bonds as they do
for preferred stock, except that in the case of Moody's preferred stock ratings,
the initial letter rating is not capitalized. While the descriptions are
tailored for preferred stocks and relative quality, distinctions are comparable
to those described above for corporate bonds.
A-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CONSECO FUND GROUP
EQUITY FUND
ASSET ALLOCATION FUND
FIXED INCOME FUND
CLASS A AND CLASS Y SHARES
August 6, 1997
This Statement of Additional Information ("SAI") is not a prospectus. It
contains additional information about the Conseco Fund Group (the "Trust") and
the three series of the Trust: Equity Fund, Asset Allocation Fund and Fixed
Income Fund (collectively, the "Funds"). It should be read in conjunction with
the Funds' Class A and Class Y Prospectuses dated August 6, 1997. You may
obtain a copy by contacting the Trust's Administrative Office, 11815 N.
Pennsylvania Street, Carmel, Indiana 46032.
TABLE OF CONTENTS
PAGE
General Information........................................................
Investment Restrictions....................................................
Description of Securities and
Investment Techniques................................................
Investment Performance.....................................................
Portfolio Turnover and Securities
Transactions.........................................................
Management.................................................................
Control Persons and Principal Holders
of Securities........................................................
Net Asset Values of the Shares of
the Funds............................................................
Fund Expenses .............................................................
Distribution Arrangements..................................................
Purchase and Redemption of Shares..........................................
General....................................................................
Taxes ....................................................................
Other Information..........................................................
Financial Statements.......................................................
<PAGE>
GENERAL INFORMATION
The Trust was organized as a Massachusetts business trust on September 24, 1996.
The Trust is an open-end management investment company registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940 (the "1940 Act"). The Trust is a "series" type of mutual fund which issues
separate series of shares, each of which represents a separate diversified
portfolio of investments. The Funds are divided into Class A and Class Y shares.
Each class may have different expenses, which may affect performance.
INVESTMENT RESTRICTIONS
The Trust has adopted the following policies relating to the investment of
assets of the Funds and their activities. These are fundamental policies and may
not be changed without the approval of the holders of a "majority" of the
outstanding shares of each Fund affected. Under the 1940 Act, the vote of such a
"majority" means the vote of the holders of the lesser of (i) 67 percent of the
shares represented at a meeting at which more than 50 percent of the outstanding
shares are represented or (ii) more than 50 percent of the outstanding shares. A
change in policy affecting only one Fund may be effected with the approval of
the holders of a "majority" of the outstanding shares of such Fund. The Trust
may not, and each Fund may not (except as noted):
1. Purchase securities on margin, except that Funds engaged in transactions
in options, futures, and options on futures may make margin deposits in
connection with those transactions, and except that effecting short sales
against the box will not be deemed to constitute a purchase of securities
on margin;
2. Purchase or sell commodities or commodity contracts (which, for the
purpose of this restriction, shall not include foreign currency futures or
forward currency contracts), except: (a) any Fund may engage in interest
rate futures contracts, stock index futures, futures contracts based on
other financial instruments, and options on such futures contracts; and
(b) the Asset Allocation Fund may engage in futures contracts on gold;
3. Borrow money or pledge, mortgage, or assign assets, except that a Fund
may: (a) borrow from banks, but only if immediately after each
borrowing and continuing thereafter it will have an asset coverage of
at least 300 percent; (b) enter into reverse repurchase agreements,
2
<PAGE>
options, futures, options on futures contracts, foreign currency futures
contracts and forward currency contracts as described in the Prospectuses
and in this SAI. (The deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on
a when-issued or delayed delivery basis and collateral arrangements with
respect to initial or variation margin deposits for future contracts, and
options on futures contracts and foreign currency futures and forward
currency contracts will not be deemed to be pledges of a Fund's assets);
4. Underwrite securities of other issuers;
5. With respect to 75% of a Fund's total assets, invest more than 5% of the
value of its assets in the securities of any one issuer if thereafter the
Fund in question would have more than 5% of its assets in the securities
of any issuer or would own more than 10% of the outstanding voting
securities of such issuer; this restriction does not apply to U.S.
government securities;
6. Invest in securities of a company for the purpose of exercising control
or management;
7. Write, purchase or sell puts, calls or any combination thereof, except
that the Funds may write listed covered or secured calls and puts and
enter into closing purchase transactions with respect to such calls and
puts if, after writing any such call or put, not more than 25% of the
assets of the Fund are subject to covered or secured calls and puts, and
except that the Funds may purchase calls and puts with a value of up to 5%
of each such Fund's net assets;
8. Participate on a joint or a joint and several basis in any trading
account in securities;
9. Invest in the securities of issuers in any one industry if thereafter more
than 25% of the assets of the Fund in question would be invested in
securities of issuers in that industry; investing in cash items, U.S.
government securities, or repurchase agreements as to these securities,
shall not be considered investments in an industry;
10. Purchase or sell real estate, except that it may purchase marketable
securities which are issued by companies which invest in real estate or
interests therein;
3
<PAGE>
11. Make loans of its assets, except the Funds may enter into repurchase
agreements and lend portfolio securities in an amount not to exceed 15% of
the value of a Fund's total assets. Any loans of portfolio securities will
be made according to guidelines established by the SEC and the Board of
Trustees; or
12. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except as permitted herein and in Investment Restriction
Nos. 1, 2 and 3. Obligations under interest rate swaps will not be
treated as senior securities for purposes of this restriction so long
as they are covered in accordance with applicable regulatory
requirements. Other good faith hedging transactions and similar
investment strategies will also not be treated as senior securities for
purposes of this restriction so long as they are covered in accordance
with applicable regulatory requirements and are structured consistent
with current SEC interpretations.
NONFUNDAMENTAL INVESTMENT RESTRICTIONS
The following restrictions are designated as nonfundamental and may be changed
by the Board of Trustees without shareholder approval.
The Trust may not, and each Fund may not (except as noted):
1. With respect to in excess of 15% of a Fund's assets, sell securities
short, except that each Fund may, without limit, make short sales against
the box.
2. Purchase any high yield, high risk security if as a result more than 35%
of the Fund's assets would be invested in high yield, high risk
securities.
In order to limit the risks associated with entry into repurchase agreements,
the Trustees have adopted certain criteria (which are not fundamental policies)
to be followed by the Funds. These criteria provide for entering into repurchase
agreement transactions (a) only with banks or broker-dealers meeting certain
guidelines for creditworthiness, (b) that are fully collateralized, (c) on an
approved standard form of agreement and (d) that meet limits on investments in
the repurchase agreements of any one bank, broker or dealer. In accordance with
regulatory requirements, a Fund will segregate assets whenever it enters into
reverse repurchase agreements or mortgage dollar rolls.
4
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The following discussion describes in greater detail different types of
securities and investment techniques used by the individual Funds, as described
in "Investment Objectives and Policies of the Funds" in each Prospectus, as well
as the risks associated with such securities and techniques.
U.S. GOVERNMENT SECURITIES
All of the Funds may invest in U.S. government securities as described in the
Prospectuses.
All Funds may also purchase obligations of the World Bank, the Inter-American
Development Bank, the Asian Development Bank and the International Bank for
Reconstruction and Development, which, while technically not U.S. government
agencies or instrumentalities, have the right to borrow from the participating
countries, including the United States.
ASSET-BACKED SECURITIES
Each Fund may invest in asset-backed securities which represent fractional
interests in pools of leases, retail installment loans and revolving credit
receivables, both secured and unsecured. These assets are generally held by a
trust. Payments of principal and interest or interest only are passed through to
certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Underlying automobile sales contracts or credit card receivables are subject to
prepayment, which may reduce the overall return to certificate holders.
Nevertheless, principal repayment rates tend not to vary much with interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the prepayment level. Certificate
holders may experience delays in payment on the certificates if the full amounts
due on underlying sales contracts or receivables are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If consistent with
its investment objective and policies, each Fund may invest in other
asset-backed securities that may be developed in the future.
5
<PAGE>
DEBT SECURITIES
New issues of certain debt securities are often offered on a when-issued or
delayed delivery basis; that is, the payment obligation and the interest rate
are fixed at the time the buyer enters into the commitment, but delivery and
payment for the securities normally take place after the customary settlement
time. The value of when-issued or delayed delivery securities may vary prior to
and after delivery depending on market conditions and changes in interest rate
levels. However, a Fund will not accrue any income on these securities prior to
delivery. A Fund will maintain in a segregated account with the Trust's
custodian an amount of cash or liquid securities, including equity securities
and debt securities of any grade, equal (on a daily mark-to-market basis) to the
amount of its commitment to purchase the when-issued or delayed delivery
securities.
As discussed more fully in the Prospectuses, the Fixed Income Fund will invest
primarily in debt securities that are "investment grade," except that the Fixed
Income Fund may invest up to 10 percent of the Fund's assets in non-investment
grade debt securities. The Equity and Asset Allocation Funds may also invest in
high yield, high risk lower-rated fixed income securities. The Asset Allocation
Fund does not intend to invest more than 25% of its total assets (measured at
the time of investment) in high yield, high risk debt securities. The Equity and
Asset Allocation Funds will not invest in rated debt securities which are rated
below CCC/Caa. All Funds may invest in unrated securities as long as Conseco
Capital Management, Inc. (the "Adviser") determines that such securities have
investment characteristics comparable to securities that would be eligible for
investment by a Fund by virtue of a rating. Many securities of foreign issuers
are not rated by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's ("S&P"); therefore, the selection of such issuers depends, to a large
extent, on the credit analysis performed or used by the Adviser.
HIGH YIELD DEBT SECURITIES
Although the Adviser considers security ratings when making investment
decisions, it performs its own investment analysis and does not rely principally
on the ratings assigned by the rating services. Rather, the Adviser performs
research and independently assesses the value of particular securities relative
to the market. The Adviser's analysis may include consideration of the issuer's
experience and managerial strength, changing financial condition, borrowing
requirements or debt maturity schedules, and the issuer's responsiveness to
changes in business conditions and interest rates. It also considers relative
values based on anticipated cash flow, interest or dividend coverage, asset
coverage and earnings prospects.
6
<PAGE>
The Adviser buys and sells debt securities principally in response to its
evaluation of an issuer's continuing ability to meet its obligations, the
availability of better investment opportunities, and its assessment of changes
in business conditions and interest rates. From time to time, consistent with a
Fund's investment objective, the Adviser may also trade high yield debt
securities for the purpose of seeking short-term profits. These securities may
be sold in anticipation of a market decline or bought in anticipation of a
market rise. They may also be traded for securities of comparable quality and
maturity to take advantage of perceived short-term disparities in market values
or yields.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery basis.
When-issued and delayed delivery transactions arise when securities are bought
with payment and delivery taking place in the future. The settlement dates of
these transactions, which may be a month or more after entering into the
transaction, are determined by mutual agreement of the parties. A Fund bears the
risk that, on the settlement date, the market value of the securities may be
lower than the purchase price. At the time a Fund makes a commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction and reflect the value each day of such securities in determining the
Fund's net asset value. There are no fees or other expenses associated with
these types of transactions other than normal transaction costs. To the extent a
Fund engages in when-issued and delayed delivery transactions, it will do so for
the purpose of acquiring instruments consistent with the investment objective
and policies of the respective Fund and not for the purpose of investment
leverage or to speculate on interest rate changes. When effecting when-issued
and delayed delivery transactions, cash or liquid securities of a Fund in an
amount sufficient to make payment for the obligations to be purchased will be
segregated at the trade date and maintained until the transaction has been
settled. The Adviser will ensure that such assets are segregated at all times
and are sufficient to satisfy these obligations. A Fund may dispose of these
securities before the issuance thereof. However, absent extraordinary
circumstances not presently foreseen, it is each Fund's policy not to divest
itself of its right to acquire these securities prior to the settlement date
thereof.
7
<PAGE>
VARIABLE AND FLOATING RATE SECURITIES
Each Fund may invest in variable and floating rate securities. Variable rate
securities provide for automatic establishment of a new interest rate at fixed
intervals (i.e., daily, monthly, semi-annually, etc.). Floating rate securities
provide for automatic adjustment of the interest rate whenever some specified
interest rate index changes. The interest rate on variable or floating rate
securities is ordinarily determined by reference to, or is a percentage of, a
bank's prime rate, the 90-day U.S. Treasury bill rate, the rate of return on
commercial paper or bank certificates of deposit, an index of short-term
interest rates, or some other objective measure.
Variable or floating rate securities frequently include a demand feature
entitling the holder to sell the securities to the issuer at par value. In many
cases, the demand feature can be exercised at any time on seven days' notice; in
other cases, the demand feature is exercisable at any time on 30 days' notice or
on similar notice at intervals of not more than one year.
BANKING INDUSTRY AND SAVINGS INDUSTRY OBLIGATIONS
Each Fund may invest in certificates of deposit, time deposits, bankers'
acceptances, and other short-term debt obligations issued by commercial banks
and in certificates of deposit, time deposits, and other short-term obligations
issued by savings and loan associations ("S&Ls"). Certificates of deposit are
receipts from a bank or an S&L for funds deposited for a specified period of
time at a specified rate of return. Time deposits in banks or S&Ls are generally
similar to certificates of deposit, but are uncertificated. Bankers' acceptances
are time drafts drawn on commercial banks by borrowers, usually in connection
with international commercial transactions. The Equity Fund and Fixed Income
Fund may each invest in obligations of foreign branches of domestic commercial
banks and foreign banks so long as the securities are U.S. dollar-denominated.
The Asset Allocation Fund may also invest in these types of instruments but such
instruments will not necessarily be U.S. dollar-denominated. See "Foreign
Securities" in the Prospectuses for information regarding risks associated with
investments in foreign securities.
The Funds will not invest in obligations issued by a commercial bank or S&L
unless:
1. The bank or S&L has total assets of at least $1 billion, or the equivalent
in other currencies, and the institution has outstanding securities rated
A or better by Moody's or S&P, or, if the institution has no outstanding
securities rated by Moody's or S&P, it has, in the determination of the
Adviser, similar creditworthiness to institutions having outstanding
securities so rated;
8
<PAGE>
2. In the case of a U.S. bank or S&L, its deposits are federally insured;
and
3. In the case of a foreign bank, the security is, in the determination of
the Adviser, of an investment quality comparable with other debt
securities which may be purchased by the Fund. These limitations do
not prohibit investments in securities issued by foreign branches of
U.S. banks, provided such U.S. banks meet the foregoing requirements.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements and reverse repurchase
agreements. Repurchase agreements permit a Fund to maintain liquidity and earn
income over periods of time as short as overnight. Repurchase agreements may be
characterized as loans collateralized by the underlying securities. In these
transactions, a Fund purchases securities (the "underlying securities") from a
broker or bank, which agrees to repurchase the underlying securities on a
certain date or on demand and at a fixed price calculated to produce a
previously agreed upon return to the Fund. If the broker or bank were to default
on its repurchase obligation and the underlying securities were sold for a
lesser amount, the Fund would realize a loss. A repurchase transaction will be
subject to guidelines approved by the Board of Trustees of the Trust, which
include monitoring the creditworthiness of the parties with which the Fund
engages in repurchase transactions, obtaining collateral at least equal in value
to the repurchase obligation, and marking the collateral to market on a daily
basis.
Although not one of the Trust's fundamental policies, it is the Trust's present
policy not to enter into a repurchase transaction which will cause more than 15
percent of the assets of the Fixed Income Fund to be subject to repurchase
agreements having a maturity of more than seven days. This 15 percent limit also
includes the aggregate of (i) fixed time deposits subject to withdrawal
penalties, other than overnight deposits; and (ii) any restricted securities
(i.e., securities which cannot freely be sold for legal reasons) that are
illiquid and any other securities for which market quotations are not readily
available; however, this 15 percent limit does not include any obligations
payable at principal amount plus accrued interest, on demand or within seven
days after demand, and thus does not include repurchase agreements having a
maturity of seven days or less.
9
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A reverse repurchase agreement involves the temporary sale of a security by a
Fund and its agreement to repurchase the instrument at a specified time and
price. Such agreements are short-term in nature and involve minimal credit
risks.
WARRANTS
The Equity and Asset Allocation Funds may invest in warrants. Each of these
Funds may invest up to 5 percent of its net assets in warrants (excluding those
that have been acquired in units or attached to other securities), measured at
the time of acquisition, and each such Fund may acquire warrants not listed on
the New York or American Stock Exchanges if, after such acquisition, no more
than 2 percent of the Fund's net assets would be invested in such warrants.
The holder of a warrant has the right to purchase a given number of shares of a
security of a particular issuer at a specified price until expiration of the
warrant. Such investments provide greater potential for profit than a direct
purchase of the same amount of the securities. Prices of warrants do not
necessarily move in tandem with the prices of the underlying securities, and
warrants are considered speculative investments. They pay no dividends and
confer no rights other than a purchase option. If a warrant is not exercised by
the date of its expiration, a Fund would lose its entire investment in such
warrant.
INTEREST RATE TRANSACTIONS
Each Fund may seek to protect the value of its investments from interest rate
fluctuations by entering into various hedging transactions, such as interest
rate swaps and the purchase or sale of interest rate caps, floors and collars. A
Fund expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio. A Fund may also
enter into these transactions to protect against an increase in the price of
securities a Fund anticipates purchasing at a later date. Each Fund intends to
use these transactions as a hedge and not as speculative investments.
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Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments. The purchase of an interest cap entitles
the purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments on a notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor. An interest rate collar
combines elements of buying a cap and selling a floor.
A Fund may enter into interest rate swaps, caps, floors, and collars on either
an asset-based or liability-based basis depending on whether it is hedging its
assets or its liabilities, and will only enter into such transactions on a net
basis, i.e., the two payment streams are netted out, with a Fund receiving or
paying, as the case may be, only the net amount of the two payments. The amount
of the excess, if any, of a Fund's obligations over its entitlements with
respect to each interest rate swap, cap, floor, or collar will be accrued on a
daily basis and an amount of cash or liquid securities having an aggregate value
at least equal to the accrued excess will be maintained in a segregated account
by the custodian.
A Fund will not enter into any interest rate transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
the highest rating category of at least one nationally recognized statistical
rating organization ("NRSRO") at the time of entering into such transaction. If
there is a default by the other party to such transaction, a Fund will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and agents. As a result,
the swap market has become well established and provides a degree of liquidity.
Caps, floors and collars are more recent innovations which tend to be less
liquid than swaps.
LENDING SECURITIES
Each Fund may lend its securities so long as such loans do not represent in
excess of 15% of the Fund's total assets. This is a fundamental policy. When a
Fund lends securities, the borrower gives the Fund collateral consisting of cash
or cash-equivalents. The Fund may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower which has delivered
cash-equivalent collateral. It is anticipated that securities will be loaned
only under the following conditions: (1) the borrower must furnish collateral
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equal at all times to the market value of the securities loaned and the borrower
must agree to increase the collateral on a daily basis if the securities
increase in value; (2) the borrower, after notice, must redeliver the securities
within three business days; (3) any cash collateral invested by a Fund will be
in short-term investments which give maximum liquidity so that the collateral
may be paid back to the borrower when the securities are returned; (4) the Fund
may pay reasonable service, placement, custodian or other fees in connection
with loans of securities and share a portion of the interest from investments of
cash collateral with the borrower of the securities; and (5) the Fund will limit
the amount of lending of securities so that the aggregate amount of interest
received attributed to securities loans, if considered "other income" for the
Federal tax purposes, will not cause the Fund to lose its status as a regulated
investment company.
FUTURES CONTRACTS
The Funds may purchase and sell stock index futures contracts, interest rate
futures contracts, and futures contracts based upon other financial instruments
and components. The Asset Allocation Fund may also engage in gold futures
contracts.
Such investments may be made by the Funds solely for the purpose of hedging
against the effect that changes in general market conditions, interest rates,
and conditions affecting particular industries may have on the values of
securities held in a Fund or which a Fund intends to purchase, and not for
purposes of speculation.
GENERAL DESCRIPTION OF FUTURES CONTRACTS. A futures contract provides for the
future sale by one party and purchase by another party of a specified amount of
a particular financial instrument (debt security) or commodity for a specified
price at a designated date, time, and place. Although futures contracts by their
terms require actual future delivery of and payment for the underlying financial
instruments, such contracts are usually closed out before the delivery date.
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Closing out an open futures contract position is effected by entering into an
offsetting sale or purchase, respectively, for the same aggregate amount of the
same financial instrument on the same delivery date. Where a Fund has sold a
futures contract, if the offsetting price is more than the original futures
contract purchase price, the Fund realizes a gain; if it is less, the Fund
realizes a loss.
At the time a Fund enters into a futures contract, an amount of cash or liquid
securities, equal to the fair market value less initial and variation margin of
the futures contract, will be deposited in a segregated account with the Trust's
custodian to collateralize the position and thereby ensure that such futures
contract is covered. A Fund may be required to deposit additional assets in the
segregated account in order to continue covering the contract as market
conditions change. In addition, each Fund will comply with certain regulations
of the Commodity Futures Trading Commission to qualify for an exclusion from
being a "commodity pool operator."
INTEREST RATE FUTURES CONTRACTS. The Funds may purchase and sell interest rate
futures contracts. An interest rate futures contract is an obligation traded on
an exchange or board of trade that requires the purchaser to accept delivery,
and the seller to make delivery, of a specified quantity of the underlying
financial instrument, such as U.S. Treasury bills and bonds, in a stated
delivery month, at a price fixed in the contract.
These Funds may purchase and sell interest rate futures as a hedge against
changes in interest rates that would adversely impact the value of debt
instruments and other interest rate sensitive securities being held or to be
purchased by a Fund. A Fund might employ a hedging strategy whereby it would
purchase an interest rate futures contract when it is not fully invested in
long-term debt securities but wishes to defer their purchase until it can
orderly invest in such securities or because short-term yields are higher than
long-term yields. Such a purchase would enable the Fund to earn the income on a
short-term security while at the same time minimizing the effect of all or part
of an increase in the market price of the long-term debt security which the Fund
intends to purchase in the future. A rise in the price of the long-term debt
security prior to its purchase either would be offset by an increase in the
value of the futures contract purchased by the Fund or avoided by taking
delivery of the debt securities under the futures contract.
A Fund would sell an interest rate futures contract to continue to receive the
income from a long-term debt security, while endeavoring to avoid part or all of
the decline in market value of that security which would accompany an increase
in interest rates. If interest rates rise, a decline in the value of the debt
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security held by the Fund would be substantially offset by the ability of the
Fund to repurchase at a lower price the interest rate futures contract
previously sold. While the Fund could sell the long-term debt security and
invest in a short-term security, this would ordinarily cause the Fund to give up
income on its investment since long-term rates normally exceed short-term rates.
OPTIONS ON FUTURES CONTRACTS. The Funds may purchase options on interest rate
futures contracts, although these Funds will not write options on any such
contracts. A futures option gives a Fund the right, in return for the premium
paid, to assume a long position (in the case of a call) or short position (in
the case of a put) in a futures contract at a specified exercise price prior to
the expiration of the option. Upon exercise of a call option, the purchaser
acquires a long position in the futures contract and the writer of the option is
assigned the opposite short position. In the case of a put option, the converse
is true. In most cases, however, a Fund would close out its position before
expiration by an offsetting purchase or sale.
The Funds would enter into options on futures contracts only in connection with
hedging strategies. Generally, these strategies would be employed under the same
market conditions in which a Fund would use put and call options on debt
securities, as described in "Options on Securities" below.
STOCK INDEX FUTURES CONTRACTS. The Equity and Asset Allocation Funds may
purchase and sell stock index futures contracts. A stock index (for example, the
Standard & Poor's 500 Composite Stock Price Index or the New York Stock Exchange
Composite Index) assigns relative values to the common stocks included in the
index and fluctuates with changes in the market values of such stocks. A stock
index futures contract is a bilateral agreement to accept or make payment,
depending on whether a contract is purchased or sold, of an amount of cash equal
to a specified dollar amount multiplied by the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract was originally purchased or sold.
To the extent that changes in the value of the Equity Fund or Asset Allocation
Fund correspond to changes in a given stock index, the sale of futures contracts
on that index ("short hedge") would substantially reduce the risk to the Fund of
a market decline and, by so doing, provide an alternative to a liquidation of
securities positions, which may be difficult to accomplish in a rapid and
orderly fashion. Stock index futures contracts might also be sold:
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1. When a sale of Fund securities at that time would appear to be
disadvantageous in the long-term because such liquidation would:
a. Forego possible appreciation,
b. Create a situation in which the securities would be difficult to
repurchase, or
c. Create substantial brokerage commission;
2. When a liquidation of part of the investment portfolio has commenced or
is contemplated, but there is, in the Adviser's determination, a
substantial risk of a major price decline before liquidation can be
completed; or
3. To close out stock index futures purchase transactions.
Where the Adviser anticipates a significant market or market sector advance, the
purchase of a stock index futures contract ("long hedge") affords a hedge
against the possibility of not participating in such advance at a time when a
Fund is not fully invested. Such purchases would serve as a temporary substitute
for the purchase of individual stocks, which may then be purchased in an orderly
fashion. As purchases of stock are made, an amount of index futures contracts
which is comparable to the amount of stock purchased would be terminated by
offsetting closing sales transactions. Stock index futures might also be
purchased:
1. If the Fund is attempting to purchase equity positions in issues which it
may have or is having difficulty purchasing at prices considered by the
Adviser to be fair value based upon the price of the stock at the time it
qualified for inclusion in the investment portfolio, or
2. To close out stock index futures sales transactions.
GOLD FUTURES CONTRACTS. The Asset Allocation Fund may enter into futures
contracts on gold. A gold futures contract is a standardized contract which is
traded on a regulated commodity futures exchange and which provides for the
future delivery of a specified amount of gold at a specified date, time, and
price. When the Fund purchases a gold futures contract, it becomes obligated to
take delivery and pay for the gold from the seller in accordance with the terms
of the contract.
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When the Fund sells a gold futures contract, it becomes obligated to make
delivery of the gold to the purchaser in accordance with the terms of the
contract. The Fund will enter into gold futures contracts only for the purpose
of hedging its holdings or intended holdings of gold stocks. The Fund will not
engage in these contracts for speculation or for achieving leverage. The hedging
activities may include purchases of futures contracts as an offset against the
effect of anticipated increases in the price of gold or sales of futures
contracts as an offset against the effect of anticipated declines in the price
of gold.
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several risks
associated with the use of futures and futures options for hedging purposes.
While hedging transactions may protect a Fund against adverse movements in the
general level of interest rates and economic conditions, such transactions could
also preclude the Fund from the opportunity to benefit from favorable movements
in the underlying securities. There can be no guarantee that the anticipated
correlation between price movements in the hedging vehicle and in the portfolio
securities being hedged will occur. An incorrect correlation could result in a
loss on both the hedged securities and the hedging vehicle so that the Fund's
return might have been better if hedging had not been attempted. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures and futures options, including technical
influences in futures and futures options trading, and differences between the
financial instruments being hedged and the instruments underlying the standard
contracts available for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. A decision as to whether, when, and
how to hedge involves the exercise of skill and judgment and even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day. Once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
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limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. In addition, certain of these instruments are relatively new
and without a significant trading history. Lack of a liquid market for any
reason may prevent a Fund from liquidating an unfavorable position and the Fund
would remain obligated to meet margin requirements and continue to incur losses
until the position is closed.
A Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. exchange or board of trade, or, in the case of
futures options, for which an established over-the-counter market exists. A Fund
will not enter into a futures contract or purchase a futures option if
immediately thereafter the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open futures options
positions, excluding futures contracts and futures options entered into for bona
fide hedging purposes and net of the amount by which any futures options
positions are "in-the-money" (i.e., the amount by which the value of the
contract exceeds the exercise price), would exceed 5 percent of the Fund's net
assets.
OPTIONS ON SECURITIES
The Funds may purchase put and call options on securities, and the Equity and
Asset Allocation Funds may purchase put and call options on stock indices, at
such times as the Adviser deems appropriate and consistent with a Fund's
investment objective. Such Funds may also write listed "covered" call and
"secured" put options. A Fund may write covered and secured options with respect
to not more than 25 percent of its net assets. A Fund may purchase call and put
options (listed on an exchange or traded in the over-the-counter ("OTC") market)
with a value of up to 5 percent of its net assets. Each of these Funds may enter
into closing transactions in order to terminate its obligations either as a
writer or a purchaser of an option prior to the expiration of the option.
PURCHASING OPTIONS ON SECURITIES. An option on a security is a contract that
gives the purchaser of the option, in return for the premium paid, the right to
buy a specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the seller ("writer") of the
option at a designated price during the term of the option. A Fund may purchase
put options on securities to protect holdings in an underlying or related
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security against a substantial decline in market value. Securities are
considered related if their price movements generally correlate to one another.
For example, the purchase of put options on debt securities held by a Fund would
enable a Fund to protect, at least partially, an unrealized gain in an
appreciated security without actually selling the security. In addition, the
Fund would continue to receive interest income on such security.
A Fund may purchase call options on securities to protect against substantial
increases in prices of securities which the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund may sell put
or call options it has previously purchased, which could result in a net gain or
loss depending on whether the amount realized on the sale is more or less than
the premium and transactional costs paid on the option which is sold.
WRITING COVERED CALL AND SECURED PUT OPTIONS. In order to earn additional income
on its portfolio securities or to protect partially against declines in the
value of such securities, the Funds may each write "covered" call options. The
exercise price of a call option may be below, equal to, or above the current
market value of the underlying security at the time the option is written.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. Closing purchase transactions will ordinarily be effected to
realize a profit on an outstanding call option, to prevent an underlying
security from being called, to permit the sale of the underlying security, or to
enable the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both.
In order to earn additional income or to protect partially against increases in
the value of securities to be purchased, the Funds may write "secured" put
options. During the option period, the writer of a put option may be assigned an
exercise notice by the broker-dealer through whom the option was sold requiring
the writer to purchase the underlying security at the exercise price.
A Fund may write a call or put option only if the call option is "covered" or
the put option is "secured" by the Fund. Under a covered call option, the Fund
is obligated, as the writer of the option, to own the underlying securities
subject to the option or hold a call at an equal or lower exercise price, for
the same exercise period, and on the same securities as the written call. Under
a secured put option, a Fund must maintain, in a segregated account with the
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Trust's custodian, cash or liquid securities with a value sufficient to meet its
obligation as writer of the option. A put may also be secured if the Fund holds
a put on the same underlying security at an equal or greater exercise price.
Prior to exercise or expiration, an option may be closed out by an offsetting
purchase or sale of an option by the same Fund.
OPTIONS ON SECURITIES INDICES. The Equity and Asset Allocation Funds may
purchase call and put options on securities indices. Call and put options on
securities indices would be purchased or sold by a Fund for the same purposes as
the purchase or sale of options on securities. Options on securities indices are
similar to options on securities, except that the exercise of securities index
options requires cash payment and does not involve the actual purchase or sale
of securities. In addition, securities index options are designed to reflect
price fluctuations in a group of securities or segment of the securities market
rather than price fluctuations in a single security. The Equity and Asset
Allocation Funds may write put and call options on securities indices. When such
options are written, the Fund is required to maintain a segregated account
consisting of cash or liquid securities, or the Fund must purchase a like option
of greater value that will expire no earlier than the option written. The
purchase of such options may not enable a Fund to hedge effectively against
stock market risk if they are not highly correlated with the value of a Fund's
securities. Moreover, the ability to hedge effectively depends upon the ability
to predict movements in the stock market, which cannot be done accurately in all
cases.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options involves
certain risks. During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit from a price
increase in the underlying securities above the exercise price, and, as long as
its obligation as a writer continues, has retained the risk of loss should the
price of the underlying security decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation under
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the option and must deliver or purchase the underlying securities at the
exercise price. If a put or call option purchased by a Fund is not sold when it
has remaining value, and if the market price of the underlying security, in the
case of a put, remains equal to or greater than the exercise price or, in the
case of a call, remains less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. If a Fund cannot effect a closing transaction, it
will not be able to sell the underlying security or securities in a segregated
account while the previously written option remains outstanding, even though it
might otherwise be advantageous to do so. Possible reasons for the absence of a
liquid secondary market on a national securities exchange could include:
insufficient trading interest, restrictions imposed by national securities
exchanges, trading halts or suspensions with respect to options or their
underlying securities, inadequacy of the facilities of national securities
exchanges or The Options Clearing Corporation due to a high trading volume or
other events, and a decision by one or more national securities exchanges to
discontinue the trading of options or to impose restrictions on certain types of
orders.
There also can be no assurance that a Fund would be able to liquidate an OTC
option at any time prior to expiration. In contrast to exchange-traded options
where the clearing organization affiliated with the particular exchange on which
the option is listed in effect guarantees completion of every exchange-traded
option, OTC options are contracts between a Fund and a counter-party, with no
clearing organization guarantee. Thus, when a Fund purchases an OTC option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing transaction with the dealer from whom the Fund
originally purchased the option.
Since option premiums paid or received by a Fund are small in relation to the
market value of underlying investments, buying and selling put and call options
offer large amounts of leverage. Thus, trading in options could result in a
Fund's net asset value being more sensitive to changes in the value of the
underlying securities.
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FOREIGN CURRENCY TRANSACTIONS
The Asset Allocation Fund may enter into foreign currency futures contracts and
forward currency contracts. A foreign currency futures contract is a
standardized contract for the future delivery of a specified amount of a foreign
currency, at a future date at a price set at the time of the contract. A forward
currency contract is an obligation to purchase or sell a currency against
another currency at a future date at a price agreed upon by the parties. The
Fund may either accept or make delivery of the currency at the maturity of the
contract or, prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. The Fund will engage in foreign
currency futures contracts and forward currency transactions in anticipation of
or to protect itself against fluctuations in currency exchange rates. The Fund
will not commit more than 15 percent of its total assets computed at market
value at the time of commitment to a foreign currency futures or forward
currency contracts. The Fund will purchase and sell such contracts for hedging
purposes and not as an investment. The Fund will not enter into a foreign
currency contract with a term of greater than one year.
Forward currency contracts are not traded on regulated commodities exchanges.
When the Fund enters into a forward currency contract, it incurs the risk of
default by the counter- party to the transaction.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out a foreign currency futures or forward currency position, in which case
the Fund might not be able to effect a closing purchase transaction at any
particular time. While these contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
Although the Asset Allocation Fund values assets daily in U.S. dollars, it does
not intend to physically convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund will do so from time to time and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
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OPTIONS ON FOREIGN CURRENCIES
The Asset Allocation Fund may invest up to 5 percent of its total assets, taken
at market value at the time of investment, in call and put options on domestic
and foreign securities and foreign currencies. The Fund may purchase call and
put options on foreign currencies as a hedge against changes in the value of the
U.S. dollar (or another currency) in relation to a foreign currency in which
portfolio securities of the Fund may be denominated. A call option on a foreign
currency gives the purchaser the right to buy, and a put option the right to
sell, a certain amount of foreign currency at a specified price during a fixed
period of time. The Fund may enter into closing sale transactions with respect
to such options, exercise them, or permit them to expire.
The Asset Allocation Fund may employ hedging strategies with options on
currencies before the Fund purchases a foreign security denominated in the
hedged currency, during the period the Fund holds the foreign security, or
between the day the foreign security is purchased or sold and the date on which
payment therefor is made or received. Hedging against a change in the value of a
foreign currency in the foregoing manner does not eliminate fluctuations in the
prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions reduce or preclude
the opportunity for gain if the value of the hedged currency should increase
relative to the U.S. dollar. The Fund will purchase options on foreign
currencies only for hedging purposes and will not speculate in options on
foreign currencies. The Fund may invest in options on foreign currency which are
either listed on a domestic securities exchange or traded on a recognized
foreign exchange.
An option position on a foreign currency may be closed out only on an exchange
which provides a secondary market for an option of the same series. Although the
Asset Allocation Fund will purchase only exchange-traded options, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. In the event no liquid secondary
market exists, it might not be possible to effect closing transactions in
particular options. If the Fund cannot close out an exchange-traded option which
it holds, it would have to exercise its option in order to realize any profit
and would incur transactional costs on the purchase or sale of the underlying
assets.
BORROWING
For temporary purposes, such as to facilitate redemptions, a Fund may borrow
money from a bank, but only if immediately after each such borrowing and
continuing thereafter the Fund would have asset coverage of 300 percent.
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Leveraging by means of borrowing will exaggerate the effect of any increase or
decrease in the value of portfolio securities on a Fund's net asset value; money
borrowed will be subject to interest and other costs which may or may not exceed
the income received from the securities purchased with borrowed funds. The use
of borrowing tends to result in a faster than average movement, up or down, in
the net asset value of a Fund's shares. A Fund also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
INVESTMENT IN SECURITIES OF OTHER INVESTMENT COMPANIES
Each Fund may purchase securities of other investment companies. Such securities
have the potential to appreciate as do any other securities, but tend to present
less risk because their value is based on a diversified portfolio of
investments. The 1940 Act expressly permits mutual funds such as the Trust to
invest in other investment companies within prescribed limitations. An
investment company may invest in other investment companies if at the time of
such investment (1) it does not own more than 3 percent of the voting securities
of any one investment company, (2) it does not invest more than 5 percent of its
assets in any single investment company, and (3) its investment in all
investment companies does not exceed 10 percent of assets. Each Fund will comply
with all of these limitations with respect to the purchase of securities issued
by other investment companies.
Investment companies in which the Funds may invest charge advisory and
administrative fees and may also assess a sales load and/or distribution fees.
Therefore, investors in a Fund that invested in other investment companies would
indirectly bear costs associated with those investments as well as the costs
associated with investing in the Fund. The percentage limitations described
above significantly limit the costs a Fund may incur in connection with such
investments.
INVESTMENT PERFORMANCE
STANDARDIZED YIELD QUOTATIONS. Each class of the Fixed Income Fund, Equity Fund,
and Asset Allocation Fund may advertise investment performance figures,
including yield. Each class' yield will be based upon a stated 30-day period and
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will be computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2 [(A-B/CD)+1)[SUPERCRIPTS]6-1]
Where:
A = the dividends and interest earned during the period.
B = the expenses accrued for the period (net of reimbursements, if any).
C = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
D = the maximum offering price (which is the net asset value plus, for
Class A shares only, the maximum initial sales charge) per share on the
last day of the period.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Each class of the Funds may
advertise its total return and its cumulative total return. The total return
will be based upon a stated period and will be computed by finding the average
annual compounded rate of return over the stated period that would equate an
initial amount invested to the ending redeemable value of the investment
(assuming reinvestment of all distributions), according to the following
formula:
P (1+T)[SUPERSCRIPT]n=ERV
Where:
P = a hypothetical initial payment of $1,000.
T = the average annual total return.
n = the number of years.
ERV = the ending redeemable value at the end of the stated period
of a hypothetical $1,000 payment made at the beginning of the
stated period.
The cumulative total return will be based upon a stated period and will be
computed by dividing the ending redeemable value of a hypothetical investment by
the value of the initial investment (assuming reinvestment of all
distributions).
Each investment performance figure will be carried to the nearest hundredth of
one percent.
NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely represent
a Fund's performance or more accurately compare such performance to other
measures of investment return, a Fund also may include in advertisements, sales
literature and shareholder reports other total return performance data
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<PAGE>
("Non-Standardized Return"). Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is required to be
quoted; it may consist of an aggregate or average annual percentage rate of
return, actual year-by-year rates or any combination thereof. Non-Standardized
Return for Class A may or may not take sales charges into account; performance
data calculated without taking the effect of sales charges into account will be
higher than data including the effect of such charges. All non-standardized
performance will be advertised only if the standard performance data for the
same period, as well as for the required periods, is also presented.
GENERAL INFORMATION. From time to time, the Funds may advertise their
performance compared to similar funds or types of investments using certain
unmanaged indices, reporting services and publications. Descriptions of some of
the indices which may be used are listed below.
The Standard & Poor's 500 Composite Stock Price Index is a well diversified list
of 500 companies representing the U.S. stock market.
The Nasdaq Composite OTC Price Index is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of approximately 3,500
stocks listed on the Nasdaq Stock Market.
The Lehman Government Bond Index is a measure of the market value of all public
obligations of the U.S. Treasury; all publicly issued debt of all agencies of
the U.S. government and all quasi-federal corporations; and all corporate debt
guaranteed by the U.S. government. Mortgage-backed securities, bonds and foreign
targeted issues are not included in the Lehman Government Index.
The Lehman Government/Corporate Bond Index is a measure of the market value of
approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the Lehman Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "BBB/Baa" or higher ("investment grade") by an NRSRO.
The Lehman Brothers Aggregate Bond Index is an index consisting of the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index, and the Lehman Brothers Asset-Backed Securities Index. The
Government/Corporate Bond Index is described above. The Mortgage-Backed
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<PAGE>
Securities Index consists of 15 and 30-year fixed rate securities backed by
mortgage pools of GNMA, FHLMC and FNMA (excluding buydowns, manufactured homes
and graduated equity mortgages). The Asset-Backed Securities Index consists of
credit card, auto and home equity loans (excluding subordinated tranches) with
an average life of one year.
Each Index includes income and distributions but does not reflect fees,
brokerage commissions or other expenses of investing.
In addition, from time to time in reports and promotions a Fund's performance
may be compared to: (1) other groups of mutual funds tracked by: (a) Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets; (b)
Morningstar, Inc., another widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets; or (c)
other financial or business publications, such as Business Week, Money Magazine,
Forbes and Barron's which provide similar information; (2) the Consumer Price
Index (measure for inflation) may be used to assess the real rate of return from
an investment in a Fund; (3) other statistics such as GNP and net import and
export figures derived from governmental publications, e.g., The Survey of
Current Business or statistics derived by other independent parties, e.g., the
Investment Company Institute, may be used to illustrate investment attributes of
a Fund or the general economic, business, investment, or financial environment
in which a Fund operates; (4) various financial, economic and market statistics
developed by brokers, dealers and other persons may be used to illustrate
aspects of a Fund's performance; and (5) the sectors or industries in which the
Fund invests may be compared to relevant indices or surveys (e.g., S&P Industry
Surveys) in order to evaluate the Fund's historical performance or current or
potential value with respect to the particular industry or sector.
PORTFOLIO TURNOVER AND SECURITIES TRANSACTIONS
A portfolio turnover rate is, in general, the percentage computed by taking the
lesser of purchases or sales of portfolio securities (excluding certain
short-term securities) for a year and dividing it by the monthly average of the
market value of such securities during the year. The Funds do not have a
predetermined rate of portfolio turnover since such turnover will be incidental
to transactions taken with a view to achieving their respective objectives. It
is anticipated that the annual turnover rate of the Funds normally will not
exceed 300%.
High turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. If a Fund derives more than 30 percent of its
gross income from the sale of securities or certain other investments held for
less than three months, it will fail to qualify under the tax laws as a
regulated investment company and thereupon would lose beneficial tax treatment
of its income (see "Taxes" below).
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<PAGE>
The Adviser is responsible for decisions to buy and sell securities for each
Fund, broker-dealer selection, and negotiation of brokerage commission rates.
The Adviser's primary consideration in effecting a securities transaction will
be execution at the most favorable price. A substantial majority of a Fund's
portfolio transactions in fixed income securities will be transacted with
primary market makers acting as principal on a net basis, with no brokerage
commissions being paid by a Fund. In certain instances, the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker-dealer to execute each particular transaction, the Adviser
will take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
the order and the difficulty of execution; and the size of contribution of the
broker-dealer to the investment performance of a Fund on a continuing basis.
Broker-dealers may be selected who provide brokerage and/or research services to
a Fund and/or other accounts over which the Adviser exercises investment
discretion. Such services may include advice concerning the value of securities
(including providing quotations as to securities); the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto, such as clearance and settlement.
The Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by a Fund's Investment Advisory Agreement or otherwise solely by
reason of its having caused the Fund to pay a broker-dealer that provides
brokerage and research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The Adviser
allocates orders placed by it on behalf of a Fund in such amounts and
proportions as the Adviser shall determine and the Adviser will report on said
allocations regularly to a Fund indicating the broker-dealers to whom such
allocations have been made and the basis therefor.
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<PAGE>
The receipt of research from broker-dealers may be useful to the Adviser in
rendering investment management services to the Funds and/or the Adviser's other
clients; conversely, information provided by broker-dealers who have executed
transaction orders on behalf of other clients may be useful to the Adviser in
carrying out its obligations to the Funds. The receipt of such research will not
be substituted for the independent research of the Adviser. It does enable the
Adviser to reduce costs to less than those which would have been required to
develop comparable information through its own staff. The use of broker-dealers
who supply research may result in the payment of higher commissions than those
available from other broker-dealers who provide only the execution of portfolio
transactions.
Orders on behalf of the Funds may be bunched with orders on behalf of other
clients of the Adviser. It is the Adviser's policy that, to the extent
practicable, all clients with similar investment objectives and guidelines be
treated fairly and equitably in the allocation of securities trades.
The Board of Trustees periodically reviews the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Trust.
MANAGEMENT
THE ADVISER
The Adviser provides investment advice and, in general, supervises the Trust's
management and investment program, furnishes office space, prepares reports for
the Funds, monitors compliance by the Funds in their investment activities and
pays all compensation of officers and Trustees of the Trust who are affiliated
persons of the Adviser. Each Fund pays all other expenses incurred in the
operation of the Fund, including fees and expenses of unaffiliated Trustees of
the Trust.
The Adviser is a wholly-owned subsidiary of Conseco, Inc. ("Conseco"), a
publicly-owned financial services company, the principal operations of which are
in development, marketing and administration of specialized annuity, life and
health insurance products. Conseco's offices are located at 11825 N.
Pennsylvania Street, Carmel, Indiana 46032.
The Investment Advisory Agreements, dated March 28, 1997, provide that the
Adviser shall not be liable for any error in judgment or mistake of law or for
any loss suffered by a Fund in connection with any investment policy or the
purchase, sale or redemption of any securities on the recommendations of the
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<PAGE>
Adviser. The Agreements provide that the Adviser is not protected against any
liability to a Fund or its security holders for which the Adviser shall
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by the
Agreements or the violation of any applicable law.
Under the Investment Advisory Agreements, the Adviser is entitled to receive an
investment advisory fee equal to an annual rate of 0.70% of the daily net asset
value of the Equity Fund, 0.70% of the daily net asset value of the Asset
Allocation Fund and 0.45% of the daily net asset value of the Fixed Income Fund.
The Adviser has voluntarily agreed to waive its investment advisory fees and/or
reimburse the Funds through April 30, 1998, to the extent that the ratio of
expenses (exclusive of taxes, interest, brokerage and other transaction expenses
and any other extraordinary expenses) to net assets on an annual basis exceeds
the following percentage of average annual net assets of Class A shares of each
Fund: 1.50% for Equity, 1.50% for Asset Allocation, and 1.25% for Fixed Income;
and of Class Y Shares of each fund: 1.00% for Equity, 1.00% for Asset
Allocation, and .60% for Fixed Income.
Each Fund receives credits from the Trust's custodian based on cash held by the
Fund at the custodian. These credits are used to reduce the custody fees payable
by the Fund. The Adviser's (and, as discussed below, other affiliates')
voluntary agreement to waive fees or reimburse expenses in order to maintain the
above expense ratios will be applied only after the Fund's custody fees have
been reduced or eliminated by the use of such credits.
THE ADMINISTRATOR
Conseco Services, LLC (the "Administrator") is a wholly-owned subsidiary of
Conseco, and receives compensation from the Trust pursuant to an Administration
Agreement dated January 2, 1997. Under that agreement, the Administrator
supervises the preparation and filing of all documents required for compliance
by the Funds with applicable laws and regulations, supervises the maintenance of
books and records of the Funds and provides other general and administrative
services. For providing these services, the Administrator receives compensation
at the annual rate of 0.20% of the average daily net assets attributable to
Class A and Y shares of each Fund. The Administrator has voluntarily agreed to
waive its fees and/or reimburse the Funds through April 30, 1998 to the extent
that annual total operating expenses exceed the following percentage of average
annual net assets: 1.50% for Class A shares of the Equity and Asset Allocation
Funds and 1.25% for the Class A shares of the Fixed Income Fund and 1.00% for
Class Y shares of the Equity and Asset Allocation Funds and 0.60% for Class Y
shares of the Fixed Income Fund. This voluntary commitment of the Administrator
was undertaken in conjunction with similar commitments made by the Adviser and
the Funds' distributor.
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<PAGE>
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their affiliations, if any, with the
Adviser and their principal occupations are set forth below.
Position Principal Occupation(s)
Name, Address Held During
and Age With Trust Past 5 Years
------------- ----------- ----------------------
William P. Daves, Jr. (71) Chairman of Consultant to insurance and
5723 Trail Meadow the Board, healthcare industries.
Dallas, TX 75230 Trustee Director, President and Chief
Executive Officer, FFG
Insurance Co. Chairman of the
Board and Trustee of one
other mutual fund managed by
the Adviser.
Maxwell E. Bublitz* (42) President and Chartered Financial Analyst.
11825 N. Pennsylvania St. Trustee President and Director,
Carmel, IN 46032 Adviser. Previously,
Sr. Vice President, Adviser.
President and Trustee of one
other mutual fund managed by
the Adviser.
Gregory J. Hahn* (36) Vice President Chartered Financial Analyst.
11825 N. Pennsylvania St. for Senior Vice President,
Carmel, IN 46032 Investments Adviser. Portfolio Manager of
and Trustee the fixed income portion of
Asset Allocation and Fixed
Income Funds.
Harold W. Hartley (73) Trustee Retired. Chartered Financial
317 Peppard Drive, S.W. Analyst. Previously,
Ft. Myers Beach, Fl 33913 Executive Vice President,
Tenneco Financial Services,
Inc. Trustee of one other
mutual fund managed by the
Adviser.
Dr. R. Jan LeCroy (65) Trustee President, Dallas Citizens
Dallas Citizens Council Council. Trustee of one
1201 Main Street, other mutual fund managed by
Suite 2444 the Adviser.
Dallas, TX 75202
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<PAGE>
Position Principal Occupation(s)
Name, Address Held During
and Age With Trust Past 5 Years
------------- ----------- ----------------------
Dr. Jesse H. Parrish (69) Trustee Former President, Midland
2805 Sentinel College. Higher Education
Midland, TX 79701 Consultant. Trustee of one
other mutual fund managed by
the Adviser.
William P. Latimer (62) Vice President Vice President, Senior
11825 N. Pennsylvania St. and Secretary Counsel, Secretary, Chief
Carmel, IN 46032 Compliance Officer and
Director of Adviser. Vice
President, Senior Counsel,
Secretary and Director,
Conseco Equity Sales, Inc.
Vice President and Secretary
of one other mutual fund
managed by the Adviser.
Previously, Consultant to
securities industry.
Previously, Senior Vice
President--Compliance, USF&G
Investment Services, Inc. and
Vice President, Axe-Houghton
Management Inc.
James S. Adams (37) Treasurer Sr. Vice President, Bankers
11815 N. Pennsylvania St. National, Great American
Carmel, IN 46032 Reserve. Senior Vice
President, Treasurer, and
Director, Conseco Equity
Sales, Inc. Senior Vice
President and Treasurer,
Conseco Services, LLC.
Treasurer of one other mutual
fund managed by the Adviser.
William T. Devanney, Jr. (42) Vice Sr. Vice President, Corporate
11815 N. Pennsylvania St. President, Taxes, Bankers National and
Carmel, IN 46032 Corporate Taxes Great American Reserve.
Senior Vice President,
Corporate Taxes, Conseco
Equity Sales, Inc. and
Conseco Services LLC. Vice
President of one other mutual
fund managed by the Adviser.
* The Trustee so indicated is an "interested person," as defined in the 1940
Act, of the Trust due to the positions indicated with the Adviser and its
affiliates.
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<PAGE>
The following table shows the estimated compensation of each disinterested
Trustee for the fiscal year ending December 31, 1997.
COMPENSATION TABLE
Total Compensation from
Aggregate Investment Companies in
Compensation the Trust Complex Paid
Name Of Person, Position From The Trust To Trustees
- ------------------------ -------------- -----------------------
William P. Daves, Jr. $9,000 $18,000
(1 other investment company)
Harold W. Hartley $9,000 $18,000
(1 other investment company)
Dr. R. Jan LeCroy $9,000 $18,000
(1 other investment company)
Dr. Jesse H. Parrish $9,000 $18,000
(1 other investment company)
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, the following shareholders owned of record, or were known
by a Fund to own beneficially, five percent or more of the outstanding shares of
each class of each Fund.
CONSECO EQUITY FUND CLASS A
David W. Tauber TR . . . . . . . . . . . . . . . . . . 5.62%
Jennifer Lynn Bell
Irrevocable Trust
U/A 01-C4-85
PO Box 4645
Houston, TX 77210-4645
State Street Bank & Trust . . . . . . . . . . . . . . 6.52%
Custodian for the IRA of
William A. Clemmer
11815 North Pennsylvania Street
Carmel, IN 46032-4555
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<PAGE>
State Street Bank & Trust Co. . . . . . . . . . . . . 9.74%
Custodian for the IRA of
Steven L. Priddy
2861 Jeremy Court
Carmel, IN 46033-8757
Sara M. Ralph . . . . . . . . . . . . . . . . . . . . 6.30%
13078 Sterling Commons
Fishers, IN 46038-9241
CONSECO ASSET ALLOCATION FUND CLASS A
State Street Bank & Trust . . . . . . . . . . . . . . 11.60%
Custodian for the IRA of
Amilcar E. Longarini
405 Village Road
Orwigsburg, PA 17961-9659
Sara M. Ralph . . . . . . . . . . . . . . . . . . . . 21.32%
13078 Sterling Commons
Fishers, IN 46038-9241
CONSECO FIXED INCOME FUND CLASS A
CCM . . . . . . . . . . . . . . . . . . . . . . . . . 38.21%
Attn: Shelly Clasen
11825 North Pennsylvania Street
Carmel, IN 46032-4555
Jeffrey S. La Pietra . . . . . . . . . . . . . . . . . 5.08%
694 Waukegan Road
Lake Forest, IL 60045
James S. Hawke . . . . . . . . . . . . . . . . . . . . 22.82%
Gay N. Hawke JT TEN
5124 Oriole Drive
Carmel, IN 46033-8349
State Street Bank & Trust . . . . . . . . . . . . . . 18.62%
Custodian for the IRA of
Ok H. Higgins
520 Cornwall Court
Carmel, IN 46032-9481
CONSECO EQUITY FUND CLASS Y
Conseco Save 401K Plan / BNL . . . . . . . . . . . . . 77.67%
11825 North Pennsylvania Street
Carmel, IN 46032-4555
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<PAGE>
CONSECO ASSET ALLOCATION FUND CLASS Y
American Traveller Life . . . . . . . . . . . . . . . 14.89%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Bankers Life and Casualty . . . . . . . . . . . . . .. 14.89%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Beneficial Standard Life . . . . . . . . . . . . . . . 9.92%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Great American Reserve . . . . . . . . . . . . . . . . 9.92%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Massachusetts General . . . . . . . . . . . . . . . . 9.92%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
National Fidelity Life . . . . . . . . . . . . . . . . 9.92%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Philidelphia Life . . . . . . . . . . . . . . . . . . 14.89%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Transport Life . . . . . . . . . . . . . . . . . . . . 14.89%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
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<PAGE>
CONSECO FIXED INCOME FUND CLASS Y
American Traveller Life . . . . . . . . . . . . . . . 7.93%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Bankers Life and Casualty . . . . . . . . . . . . . .. 5.30%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Beneficial Standard Life . . . . . . . . . . . . . . . 5.30%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Great American Reserve . . . . . . . . . . . . . . . . 5.30%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Massachusetts General . . . . . . . . . . . . . . . . 5.30%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
National Fidelity Life . . . . . . . . . . . . . . . . 7.95%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Philidelphia Life . . . . . . . . . . . . . . . . . . 7.95%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Transport Life . . . . . . . . . . . . . . . . . . . . 7.95%
Attn: Shelly Clasen (B2C)
11815 North Pennsylvania Street
Carmel, IN 46032-4555
Conseco Save 401K Plan / BNL . . . . . . . . . . . . . 35.85%
11825 North Pennsylvania Street
Carmel, IN 46032-4555
D. Michael Hockett . . . . . . . . . . . . . . . . . . 11.11%
Judith A. Hockett JT TEN
2130 Shan Crest Hill
Indianapolis, IN 46239-9423
The Trustees and officers of the Trust, as a group, own less than 1% of each
Fund's outstanding shares.
35
<PAGE>
NET ASSET VALUES OF THE SHARES OF THE FUNDS
Securities held by the Funds will be valued as follows. Fund securities which
are traded on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued or, lacking any sales, at
the mean between the closing bid and asked prices. Securities traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or yield equivalent as obtained from one or more dealers that make markets in
the securities. Fund securities which are traded both in the over-the-counter
market and on a stock exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities this
ordinarily will be the over-the-counter market. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust. In valuing lower-rated debt securities, it should be recognized that
judgment plays a greater role than is the case with respect to securities for
which a broader range of dealer quotations and last sale information is
available. Debt securities with maturities of sixty (60) days or less are valued
at amortized cost.
FUND EXPENSES
Each Fund pays its own expenses including, without limitation (i) expenses of
maintaining the Fund and continuing its existence, (ii) registration of the Fund
under the 1940 Act, (iii) auditing, accounting and legal expenses, (iv) taxes
and interest, (v) governmental fees, (vi) expenses of issue, sale, repurchase
and redemption of Fund shares, (vii) expenses of registering and qualifying the
Fund and its shares under federal and state securities laws and of preparing and
printing prospectuses for such purposes and for distributing the same to
shareholders, (viii) expenses of reports and notices to shareholders and of
meetings of shareholders and proxy solicitations thereof, (ix) expenses of
reports to governmental officers and commissions, (x) insurance expenses, (xi)
association membership dues, (xii) fees, expenses and disbursements of
custodians for all services to the Fund, (xiii) fees, expenses and disbursements
of transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xiv) expenses for servicing
shareholder accounts, (xv) any direct charges to Fund shareholders approved by
the Trustees of the Trust, (xvi) compensation and expenses of Trustees of the
Trust who are not "interested persons" of the Trust, and (xvii) such
nonrecurring items as may arise, including expenses incurred in connection with
litigation, proceedings and claims and the obligation of the Fund to indemnify
its Trustees and officers with respect thereto.
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<PAGE>
DISTRIBUTION ARRANGEMENTS
Conseco Equity Sales, Inc. (the "Distributor") serves as the principal
underwriter for each Fund pursuant to an Underwriting Agreement, dated January
2, 1997. The Distributor is a registered broker-dealer and member of the
National Association of Securities Dealers, Inc. ("NASD"). Shares of each Fund
will be continuously offered and will be sold by brokers, dealers or other
financial intermediaries who have executed selling agreements with the
Distributor. Subject to the compensation arrangement discussed below, the
Distributor bears all the expenses of providing services pursuant to the
Underwriting Agreement including the payment of the expenses relating to the
distribution of Prospectuses for sales purposes as well as any advertising or
sales literature. The Underwriting Agreement continues in effect for two years
from initial approval and for successive one-year periods thereafter, provided
that each such continuance is specifically approved (i) by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" of the Trust (as that term is defined in the 1940
Act); or (ii) by the vote of a majority of the outstanding voting securities of
a Fund. The Distributor is not obligated to sell any specific amount of shares
of any Fund.
The Distributor's principal address is 11815 N. Pennsylvania Street, Carmel,
Indiana 46032.
DISTRIBUTION AND SERVICE PLAN
The Trust has adopted a distribution and service plan (a "Plan"), dated March
28, 1997, for Class A shares of each Fund in accordance with the requirements of
Rule 12b-1 under the 1940 Act and the requirements of the applicable rules of
the NASD regarding asset-based sales charges.
Pursuant to the Class A Plans, each Fund may compensate the Distributor for its
expenditures in financing any activity primarily intended to result in the sale
of Class A shares of the Fund and for maintenance and personal service provided
to existing Class A shareholders. The Equity Fund's Plan and the Asset
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<PAGE>
Allocation Fund's Plan authorize payments to the Distributor up to 0.50%, and
the Fixed Income Fund's Plan up to 0.65%, annually of each Fund's average daily
net assets attributable to its Class A shares. The Plans further provide for
periodic payments by the Distributor to brokers, dealers and other financial
intermediaries for providing shareholder services to accounts that hold Class A
shares and for promotional and other sales related costs. The portion of such
payments for shareholder servicing may not exceed an annual rate of .25% of the
average daily net asset value of Class A shares owned by clients of such broker,
dealer or financial intermediary.
In accordance with the terms of the Plans, the Distributor provides to each
Fund, for review by the Trustees, a quarterly written report of the amounts
expended under the Plans and the purpose for which such expenditures were made.
In the Trustees' quarterly review of the Plans, they will review the level of
compensation the Plans provide in considering the continued appropriateness of
the Plans.
The Plans were adopted by a majority vote of the Trustees of the Trust,
including at least a majority of Trustees who are not, and were not at the time
they voted, interested persons of the Trust and do not and did not have any
direct or indirect financial interest in the operation of the Plans, cast in
person at a meeting called for the purpose of voting on the Plans. The Trustees
believe that there is a reasonable likelihood that the Plans will benefit each
Fund and its current and future shareholders. Among the anticipated benefits are
higher levels of sales and lower levels of redemptions of Class A shares of each
Fund, economies of scale, reduced expense ratios and greater portfolio
diversification.
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<PAGE>
Under their terms, the Plans remain in effect from year to year provided such
continuance is approved annually by vote of the Trustees in the manner described
above. The Plans may not be amended to increase materially the amount to be
spent under the Plans without approval of the shareholders of the affected Fund,
and material amendments to the Plans must also be approved by the Trustees in a
manner described above. The Plans may be terminated at any time, without payment
of any penalty, by vote of the majority of the Trustees who are not interested
persons of the Trust and have no direct or indirect financial interest in the
operations of the Plans, or by a vote of a majority of the outstanding voting
securities of the Fund affected thereby. The Plans will automatically terminate
in the event of their assignment.
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase or redemption of Fund shares, see
"Purchase and Redemption of Shares" in each Prospectus.
RIGHTS OF ACCUMULATION. Each Fund offers to all qualifying investors Rights of
Accumulation under which investors are permitted to purchase Class A shares of
any Fund of the Trust at the price applicable to the total of (a) the dollar
amount then being purchased plus (b) an amount equal to the then current net
asset value of the purchaser's holdings of shares of any Funds of the Trust or
shares of the money market fund currently managed by Federated Investors and the
current cash value of the variable annuity or variable life contracts issued by
affiliates of Conseco. Acceptance of the purchase order is subject to
confirmation of qualification. The rights of accumulation may be amended or
terminated at any time as to subsequent purchases.
LETTER OF INTENT. Any person may qualify for a reduced sales charge on purchases
of Class A shares made within a 13-month period pursuant to a Letter of Intent
(LOI). Class A shares acquired through the reinvestment of distributions do not
constitute purchases for purposes of the LOI. A Class A shareholder may include,
as an accumulation credit towards the completion of such LOI, the value of all
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shares of all Funds of the Trust owned by the shareholder. Such value is
determined based on the net asset value on the date of the LOI. During the term
of an LOI, Boston Financial Data Services ("BFDS"), the Trust's transfer agent,
will hold shares in escrow to secure payment of the higher sales charge
applicable for shares actually purchased if the indicated amount on the LOI is
not purchased. Dividends and capital gains will be paid on all escrowed shares
and these shares will be released when the amount indicated on the LOI has been
purchased. A LOI does not obligate the investor to buy or the Fund to sell the
indicated amount of the LOI. If a Class A shareholder exceeds the specified
amount of the LOI and reaches an amount which would qualify for a further
quantity discount, a retroactive price adjustment will be made at the time of
the expiration of the LOI. The resulting difference in offering price will
purchase additional Class A shares for the shareholder's account at the
applicable offering price. If the specified amount of the LOI is not purchased,
the shareholder shall remit to BFDS an amount equal to the difference between
the sales charge paid and the sales charge that would have been paid had the
aggregate purchases been made at a single time. If the Class A shareholder does
not within 20 days after a written request by BFDS pay such difference in sales
charge, BFDS will redeem an appropriate number of escrowed shares in order to
realize such difference. Additional information about the terms of the LOI are
available from your broker, dealer or other financial intermediary or from BFDS
at (800) 986-3384.
SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan ("SWP") is designed
to provide a convenient method of receiving fixed payments at regular intervals
from Class A shares of a Fund deposited by the applicant under this SWP. The
applicant must deposit or purchase for deposit shares of the Fund having a total
value of not less than $5,000. Periodic checks of $50 or more will be sent to
the applicant, or any person designated by him, monthly or quarterly.
Any income dividends or capital gain distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited in
a SWP account. Redemptions are taxable transactions to shareholders. To the
extent that such redemptions for periodic withdrawals exceed dividend income
reinvested in the SWP account, such redemptions will reduce and may ultimately
exhaust the number of shares deposited in the SWP account. In addition, the
amounts received by a shareholder cannot be considered as an actual yield or
income on his or her investment because part of such payments may be a return of
his or her capital.
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The SWP may be terminated at any time (1) by written notice to the Fund or from
the Fund to the shareholder; (2) upon receipt by the Fund of appropriate
evidence of the shareholder's death; or (3) when all shares under the SWP have
been redeemed. The fees of the Fund for maintaining SWPs are paid by the Fund.
SUSPENSION OF REDEMPTIONS
A Fund may not suspend a shareholder's right of redemption, or postpone payment
for a redemption for more than seven days, unless the New York Stock Exchange
("NYSE") is closed for other than customary weekends or holidays, trading on the
NYSE is restricted, or for any period during which an emergency exists as a
result of which (1) disposal by a Fund of securities owned by it is not
reasonably practicable, or (2) it is not reasonably practicable for a Fund to
fairly determine the value of its assets, or for such other periods as the SEC
may permit for the protection of investors.
GENERAL
The Trustees themselves have the power to alter the number and terms of office
of the Trustees, and they may at any time lengthen their own terms or make their
terms of unlimited duration (subject to certain removal procedures) and appoint
their own successors, provided that always at least a majority of the Trustees
have been elected by the shareholders of the Trust. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
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shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees. The Trust
is not required to hold Annual Meetings of Shareholders for action by
shareholders' vote except as may be required by the 1940 Act or the Declaration
of Trust. The Declaration of Trust provides that shareholders can remove
Trustees by a vote of two-thirds of the vote of the outstanding shares. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the holders of 10 percent of the Trust's shares. In
addition, 10 or more shareholders meeting certain conditions and holding the
lesser of $25,000 worth or 1 percent of the Trust's shares may advise the
Trustees in writing that they wish to communicate with other shareholders for
the purpose of requesting a meeting to remove a Trustee. The Trustees will then
either give those shareholders access to the shareholder list or, if requested
by those shareholders, mail at the shareholders' expense the shareholders'
communication to all other shareholders.
Each issued and outstanding share of each class of a Fund is entitled to
participate equally in dividends and distributions of the respective class of
the Fund and, upon liquidation or dissolution, in the net assets of such class
remaining after satisfaction of outstanding liabilities. The shares of each Fund
have no preference, preemptive, conversion, exchange or similar rights, and are
freely transferable.
Under Rule 18f-2 under the 1940 Act, as to any investment company which has two
or more series (such as the Funds) outstanding and as to any matter required to
be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in that rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series. Under
Rule 18f-3 under the 1940 Act, the Class A and Class Y shares of a Fund shall
have exclusive voting rights on any matters submitted to shareholders that
relate solely to a particular class' arrangement, and shall have separate voting
rights on any matters submitted to shareholders in which the interests of one
class differ from the interests of any other class.
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Under Massachusetts law, shareholders of a trust such as the Trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the Trust. The Declaration of Trust, however, contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or its Trustees. The Declaration of Trust
provides for indemnification and reimbursement of expenses out of Trust property
for any shareholder held personally liable for its obligations. The Declaration
of Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a trust such as the Trust to be held personally liable as a
partner under certain circumstances, the risk of a shareholder incurring
financial loss on account of shareholder liability is highly unlikely and is
limited to the relatively remote circumstances in which the Trust would be
unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Trust and the Adviser have Codes of Ethics governing the personal securities
transactions of officers and employees. These codes require prior approval for
certain transactions and prohibit transactions which may be deemed to conflict
with the securities trading of the Adviser's clients.
TAXES
GENERAL
To qualify for treatment as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended ("Code"), each Fund -- which is
treated as a separate corporation for these purposes -- must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short-term
capital gain, and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements. For
each Fund, these requirements include the following: (1) the Fund must derive at
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least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from options, futures, or forward contracts) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
(2) the Fund must derive less than 30% of its gross income each taxable year
from the sale or other disposition of securities, or any of the following, that
were held for less than three months -- options or futures (other than those on
foreign currencies), or foreign currencies (or options, futures, or forward
contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect to
securities) ("Short-Short Limitation"); and (3) at the close of each quarter of
the Fund's taxable year, (i) at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with those other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. government
securities or the securities of other RICs) of any one issuer.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares.
Distributions, if any, in excess of a Fund's current or accumulated earnings and
profits, as computed for federal income tax purposes, will constitute a return
of capital, which will first reduce a shareholder's tax basis in the Fund's
shares and thereafter (after such basis is reduced to zero) generally will give
rise to capital gains. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for federal income tax purposes
in each share so received equal to the amount of cash they would have received
had they elected to receive the distributions in cash, divided by the number of
shares received.
At the time of an investor's purchase of shares of a Fund, a portion of the
purchase price is often attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions from that appreciation (when realized) or income may be
taxable to the investor even if the net asset value of the investor's shares is,
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as a result of the distributions, reduced below the investor's cost for the
shares and the distributions in reality represent a return of a portion of the
purchase price.
Each Fund will be subject to a non-deductible 4% federal excise tax ("Excise
Tax") on certain amounts not distributed (and not treated as having been
distributed) on a timely basis in accordance with annual minimum distribution
requirements. Each Fund intends under normal circumstances to avoid liability
for such tax by satisfying such distribution requirements.
INCOME FROM FOREIGN SECURITIES
Dividends and interest received by the Asset Allocation Fund may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders. If a Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital loss) --
which likely would have to be distributed by the Fund to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax -- even if those
earnings and gain were not distributed to the Fund by the QEF. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs. "Marking to
market," in this context, means recognizing as gain for each taxable year the
excess, as of the end of that year, of the fair market value of such a PFIC's
stock over the adjusted basis in that stock (including mark-to-market gain for
each prior year for which an election was in effect).
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Foreign exchange gains and losses realized by the Asset Allocation Fund in
connection with certain transactions involving foreign currency-denominated debt
securities, certain foreign currency futures and options, foreign currency
positions, and payables or receivables (e.g., dividends or interest receivable)
denominated in a foreign currency are subject to section 988 of the Code, which
generally causes those gains and losses to be treated as ordinary income and
losses and may affect the amount, timing and character of distributions to
shareholders. Any such transactions that are not directly related to the Fund's
investment in stock or securities, including speculative currency positions or
currency derivatives not used for hedging purposes, may increase the amount of
gain subject to the Short-Short Limitation, and gains from the disposition of
foreign currencies could, under future Treasury regulations, produce income that
is not "qualifying income" under the Income Requirement.
INVESTMENTS IN DEBT SECURITIES
Each Fund that invests in zero coupon securities, payment-in-kind securities
and/or certain deferred interest securities (and, in general, any other
securities with original issue discount or with market discount if the Fund
elects to include market discount in income currently) must accrue income on
those investments prior to the receipt of cash payments or interest thereon.
However, each Fund must distribute, at least annually, all or substantially all
of its investment company taxable income, including such accrued and other
non-cash income, to shareholders to satisfy the Distribution Requirement and
avoid the Excise Tax. Therefore, a Fund may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or may have to
leverage itself by borrowing the cash, to make the necessary distributions.
Investment in debt obligations that are at risk of or in default presents
special tax issues for any Fund that may hold such obligations. Tax rules are
not entirely clear about issues such as when a Fund may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by any Fund that may hold such
obligations in order to seek to reduce the risk of distributing insufficient
income to qualify for treatment as a RIC and of becoming subject to federal
income tax or the Excise Tax.
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HEDGING STRATEGIES
The use of hedging strategies, such as writing (selling) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the character and timing of
recognition of the gains and losses a Fund realizes in connection therewith.
Income from transactions in options, futures, and forward contracts derived by
the Fund with respect to its business of investing in securities or foreign
currencies (and, as noted above, gains realized by the Asset Allocation Fund
from the disposition of foreign currencies, except certain gains that may be
excluded by future regulations) will qualify as permissible income under the
Income Requirement. However, income from the disposition of options and futures
contracts (other than those on foreign currencies) will be subject to the
Short-Short Limitation if they are held for less than three months. As noted
above, the Asset Allocation Fund's income from the disposition of foreign
currencies, and options, futures, and forward contracts thereon, that are not
directly related to its principal business of investing in securities (or
options and futures with respect to securities) also will be subject to the
Short-Short Limitation if they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not so qualify, it may be forced
to defer the closing out of certain options and futures -- and, in the case of
the Asset Allocation Fund, certain forward contracts and foreign currency
positions -- beyond the time when it otherwise would be advantageous to do so,
in order for the Fund to qualify as a RIC.
Certain options and futures in which the Funds may invest will be "section 1256
contracts." Section 1256 contracts held by a Fund at the end of each taxable
year, other than section 1256 contracts that are part of a "mixed straddle" with
respect to which a Fund has made an election not to have the following rules
apply, must be "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that unrealized
gains or losses will be treated as though they were realized. Sixty percent of
any net gain or loss recognized on these deemed sales, and 60% of any net
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realized gain or loss from any actual sales of section 1256 contracts, will be
treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. Section 1256 contracts also may be
marked-to-market for purposes of the Excise Tax.
Code section 1092 (dealing with straddles) may also affect the taxation of
options and futures contracts in which the Funds may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Section
1092 generally provides that any loss from the disposition of a position in a
straddle may be deducted only to the extent the loss exceeds the unrealized gain
on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Fund makes certain
elections, the amount, character, and timing of the recognition of gains and
losses from the affected straddle positions would be determined under rules that
vary according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Funds of straddle transactions are not entirely clear.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of the shares of a Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
OTHER INFORMATION
CUSTODIAN
Portfolio securities of each Fund are held pursuant to a Custodian Agreement
between the Trust and The Bank of New York, 90 Washington Street, 22nd Floor,
New York, New York 10826. The Bank of New York also performs certain
administrative services for the Funds pursuant to agreements with Conseco
Services, LLC.
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TRANSFER AGENCY SERVICES
State Street Bank and Trust Company is the transfer agent for each Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., 2900 One American Square, Box 82002, Indianapolis,
Indiana 46282-0002 serves as the Trust's independent public accountant.
FINANCIAL STATEMENTS
An audited statement of assets and liabilities of the Trust, dated December 18,
1996, together with the report of Coopers & Lybrand L.L.P., is included in this
SAI. Unaudited financial statements of the Trust and the notes thereto for the
period ended June 30, 1997 are included in this SAI.
49
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees
Conseco Fund Group
We have audited the accompanying statement of assets and liabilities of the
Conseco Fund Group (comprising, respectively, the Equity, Asset Allocation and
Fixed Income Funds) (collectively, the "Trust" (a Massachusetts business trust))
as of December 18, 1996. This financial statement is t h e responsibility of the
Trust s management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of each of the
respective Funds constituting the Conseco Fund Group as of December 18, 1996, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
December 18, 1996
<PAGE>
CONSECO FUND GROUP
STATEMENT OF ASSETS AND LIABILITIES
December 18, 1996
<TABLE>
<CAPTION>
Accounts
Asset Fixed
Equity Allocation Income
Fund Fund Fund
<S> <C> <C> <C>
Assets:
Cash . . . . . . . . . . . . . . . . $33,350 $33,350 $33,350
Organizational costs . . . . . . . . 93,000 93,000 93,000
Total assets . . . . . . . . . . . . 126,350 126,350 126,350
Payable to Conseco, Inc. . . . . . . . 93,000 93,000 93,000
Net assets . . . . . . . . . . . . . $33,350 $33,350 $33,350
Net assets consist of:
Capital . . . . . . . . . . . . . . . $33,350 $33,350 $33,350
Outstanding shares - Class A . . . . . 1,668 1,668 1,668
Outstanding shares - Class Y . . . . . 1,667 1,667 1,667
Net asset value per share - Class A . . $10.00 $10.00 $10.00
Net asset value per share - Class Y . . $10.00 $10.00 $10.00
</TABLE>
The accompanying notes are an integral part of the statement of assets and
liabilities.
<PAGE>
CONSECO FUND GROUP
Notes to Statement of Assets and Liabilities
December 18, 1996
____________________
1. ORGANIZATION
Conseco Fund Group (the "Trust") is an open-end diversified management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940. The Trust was organized as a Massachusetts
business trust on September 24, 1996. The Trust is a "series" type of mutual
fund which issues separate classes of shares of beneficial interest, each of
which currently represents a diversified portfolio of investments. The Trust
consists of three series ("Funds"), each with its own investment objective or
objectives and investment policies. The Funds include the Equity Fund, the Asset
Allocation Fund and the Fixed Income Fund. Since the date of organization, the
Trust s activities have been limited to organizational matters with no operating
activities: the Funds are expected to become effective and available for sale on
or about January 2, 1997.
Each Fund has distinct investment objectives. The Equity F u n d invests in
selected equity securities and other securities having the investment
characteristics of common stocks. The Asset Allocation Fund invests in several
asset classes including debt securities, equity securities, and money market
instruments. The Fixed Income Fund invests primarily in investment grade debt
securities.
The Funds offer two classes of shares: Class A and Class Y. Sales of Class A
shares may be subject to a front-end sales charge. Class Y shares are available
with no sales charge to institutional investors. As of the date of this
financial statement, an affiliate, Conseco, Inc. ("Conseco"), holds all of the
outstanding shares of each class of the Funds.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Organizational Costs
Costs incurred by the Funds in connection with their organization and
public offering of shares, estimated at $279,000, have been deferred and
will be amortized over a period of approximately 5 years beginning with the
initial date of sale of shares to the public. The costs were advanced by
Conseco, and will be
<PAGE>
CONSECO FUND GROUP
Notes to Statement of Assets and Liabilities
December 18, 1996
____________________
reimbursed by the Funds over a period of approximately 5 years. The
proceeds of any redemption of the initial shares by any holder thereof will
be reduced by any unamortized organizational costs in the same proportion
as the number of initial shares being redeemed to the number of initial
shares outstanding at the time of such redemption.
(b) Federal Income Taxes
For federal income tax purposes, the Funds intend to comply in their
initial fiscal year and thereafter under Subchapter M of the Internal
Revenue Code by distributing substantially all of their taxable income to
their shareholders or otherwise complying with the requirements for
regulated investment companies.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statement.
3. INVESTMENT ADVISORY AGREEMENTS
Conseco Capital Management, Inc. (the "Adviser"), a wholly owned subsidiary of
Conseco, serves as investment adviser to the Funds pursuant to investment
advisory agreements. The Adviser supervises the Trust s management and
investment program, performs a variety of services in connection with m a n a
gement and operation of the Funds and pays all compensation of officers and
Trustees of the Trust who are affiliated persons of the Adviser or the Trust.
Under the investment advisory agreements, the Adviser receives an investment
advisory fee equal to an annual rate of .45% of the daily net asset value of the
Fixed Income Fund, .70% of the daily net asset value of the Equity Fund, and
.70% of the daily net asset value of the Asset Allocation Fund. T h e Adviser
also manages another registered investment company, all of the invested assets
<PAGE>
CONSECO FUND GROUP
Notes to Statement of Assets and Liabilities
December 18, 1996
____________________
of its parent company, Conseco, which owns or manages several life insurance
subsidiaries, and provides investment and servicing functions to Conseco and
affiliates. Pursuant to investment advisory agreements between the Adviser and
the Funds, the Adviser will reduce its aggregate fees for any fiscal year, or
reimburse the Funds, to the extent required, so that the Funds expenses do not
exceed the expense limitations applicable to the Trust under the securities laws
or regulations of those states or jurisdictions in which the Funds shares are
registered or qualified for sale. Expenses for purposes of these expense
limitations include the management fee, but exclude brokerage commissions and
fees, taxes, interest and extraordinary expenses such as litigation, paid or
incurred by the Funds. In addition, the state with the most restrictive expense
limitation allows the Trust to exclude distribution expenses. The Adviser has
voluntarily agreed to waive its investment advisory fee to the extent that the
ratio of expenses to net assets on an annual basis for Class A Shares exceeds:
1.50% for the Equity Fund, 1.50% for the Asset Allocation Fund, and 1.25% for
the Fixed Income Fund; and for Class Y Shares exceeds: .95% for the Equity Fund,
.95% for the Asset Allocation Fund, and .50% for the Fixed Income Fund. These
voluntary limits may be discontinued by the Adviser at any time after April 30,
1998.
<PAGE>
CONSECO FUND GROUP
Financial Statements
June 30, 1997
(unaudited)
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997
(unaudited)
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Assets:
Investments in securities at value (cost: $43,347,022;
$9,901,112; $18,294,048, respectively).............................. $48,854,864 $10,656,716 $18,429,263
Accrued interest and dividends........................................ 47,374 90,404 267,461
Receivable for securities sold........................................ 2,462,653 895,089 1,045,440
Receivable for shares sold............................................ 18,954 101 63
Receivable from Conseco, Inc. and subsidiaries........................ - 29,818 41,308
Cash.................................................................. 999,163 598,967 1,965,445
Organizational costs.................................................. 83,882 83,882 83,882
----------- ----------- -----------
Total assets...................................................... 52,466,890 12,354,977 21,832,862
----------- ----------- -----------
Liabilities and net assets:
Payable to Conseco, Inc. and subsidiaries............................. 120,540 93,000 93,000
Accrued expenses...................................................... 28,102 30,483 32,155
Distributions payable................................................. 9 68,286 87,162
Payable for securities purchased...................................... 2,089,285 1,023,441 2,095,875
----------- ----------- -----------
Total liabilities................................................. 2,237,936 1,215,210 2,308,192
----------- ----------- -----------
Net assets........................................................ $50,228,954 $11,139,767 $19,524,670
=========== =========== ===========
Net assets consist of:
Paid in capital....................................................... $44,170,268 $10,543,011 $19,322,654
Accumulated undistributed net investment income (loss)................ (24,646) 6,118 16,750
Accumulated undistributed net realized gain (loss) on investments..... 575,490 (164,966) 50,052
Net unrealized appreciation on investments............................ 5,507,842 755,604 135,214
----------- ----------- -----------
Net assets........................................................ $50,228,954 $11,139,767 $19,524,670
=========== =========== ===========
Net asset value, redemption price and offering price per share:
Class A Shares:
Shares outstanding.................................................. 141,684 41,038 4,357
Net assets.......................................................... $1,537,971 $433,074 $43,817
Net asset value and redemption price per share...................... $10.85 $10.55 $10.06
Maximum sales charge per share (5 percent of offering price)........ .57 .56 .53
Maximum offering price per share.................................... 11.42 11.11 10.59
Class Y Shares:
Shares outstanding.................................................. 4,474,639 1,012,757 1,933,502
Net assets.......................................................... $8,690,983 $10,706,693 $19,480,853
Net asset value, redemption price and offering price per share...... $10.88 $10.57 $10.08
</TABLE>
The accompanying notes are an integral part of these
financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
STATEMENTS OF OPERATIONS
For the period from inception (January 2,1997) through June 30, 1997
(unaudited)
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Investment income:
Interest.............................................................. $ - $161,938 $430,617
Dividends............................................................. 88,500 13,965 -
---------- -------- --------
Total investment income........................................... 88,500 175,903 430,617
---------- -------- --------
Expenses:
Investment advisory fees.............................................. 61,439 18,156 15,619
Transfer agent fee - Class A shares................................... 19,870 15,513 14,543
Transfer agent fee - Class Y shares................................... 17,862 17,984 17,974
Reports - printing.................................................... 12,874 12,874 12,874
Administration fee.................................................... 22,363 10,078 12,655
Audit fees............................................................ 9,807 9,807 9,807
Director fees and expenses............................................ 5,626 5,626 5,626
Legal fees............................................................ 3,972 3,972 3,972
Amortization of organizational costs.................................. 9,118 9,118 9,118
Insurance............................................................. 4,905 4,905 4,905
Custody fees.......................................................... 7,344 7,305 3,972
Distribution and service fees related to Class A shares............... 1,082 310 63
Other................................................................. 490 490 491
---------- -------- --------
Total expenses.................................................... 176,752 116,138 111,619
---------- -------- --------
Less expense reductions:
Custody fee credits (note 1).......................................... 7,344 7,305 3,972
Fees waived and/or charged to subsidiaries of Conseco, Inc. (note 3).. 56,262 58,051 69,583
---------- -------- --------
Total expense reductions.......................................... 63,606 65,356 73,555
---------- -------- --------
Net expenses...................................................... 113,146 50,782 38,064
---------- -------- --------
Net investment income (loss)...................................... (24,646) 125,121 392,553
Net realized gains (losses) on sales of investments...................... 575,490 (164,966) 50,052
Net change in unrealized appreciation of investments..................... 5,507,842 755,604 135,214
---------- -------- ---------
Net realized and unrealized gains on investments......................... 6,083,332 590,638 185,266
---------- -------- ---------
Net increase in net assets from operations........................ $6,058,686 $715,759 $577,819
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
For the period from inception (January 2, 1997) through June 30, 1997
(unaudited)
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss).......................................... $ (24,646) $ 125,121 $ 392,553
Net realized gains (losses) on sales of investments................... 575,490 (164,966) 50,052
Net change in unrealized appreciation of investments.................. 5,507,842 755,604 135,214
----------- ----------- -----------
Net increase in net assets from operations........................ 6,058,686 715,759 577,819
----------- ----------- -----------
Dividends to shareholders from net investment income:
Class A shares........................................................ - (3,091) (894)
Class Y shares........................................................ - (115,912) (374,909)
------------ ----------- ----------
Total dividends to shareholders from net investment income........ - (119,003) (375,803)
------------ ----------- ----------
Capital share transactions:
Net proceeds from sales of shares..................................... 45,975,615 10,460,177 19,309,559
Net asset value of shares issued from reinvestment of dividends
and distributions................................................... - 50,691 277,853
Cost of shares redeemed............................................... (1,838,697) (1,207) (298,108)
----------- ----------- -----------
Net increase in net assets from capital share transactions........ 44,136,918 10,509,661 19,289,304
----------- ----------- -----------
Total net increase in net assets.................................. 50,195,604 11,106,417 19,491,320
Net assets, beginning of period.......................................... 33,350 33,350 33,350
----------- ------------ -----------
Net assets, end of period (including accumulated undistributed investment
income (loss) of $(24,646), $6,118 and $16,750, respectively)......... $50,228,954 $11,139,767 $19,524,670
=========== =========== ===========
Share data:
Class A shares:
Sold................................................................ 140,742 39,387 2,615
Issued in reinvestment of dividends................................. - 63 75
Redeemed............................................................ (726) (80) -
------- ------- ------
Net increase...................................................... 140,016 39,370 2,690
======= ====== =====
Class Y shares:
Sold................................................................ 4,652,917 1,005,930 1,933,837
Issued in reinvestment of dividends................................. - 5,195 27,780
Redeemed............................................................ (179,945) (35) (29,783)
----------- ----------- -----------
Net increase...................................................... 4,472,972 1,011,090 1,931,834
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Equity Fund
Statement of Investments in Securities
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
COMMON STOCKS (97.62% of total investments)
Air Transportation (3.88%)
27,500 Atlas Air Inc. (a).................................................. $ 948,750
34,250 Comair Holdings, Inc................................................ 948,297
----------
1,897,047
----------
Amusement and Recreation Services (2.54%)
28,400 Cedar Fair - LP..................................................... 1,242,500
----------
Apparel and Accessory Stores (1.57%)
43,850 Claire's Stores, Inc................................................ 767,375
----------
Business Services (14.52%)
36,250 Affiliated Computer Svcs - A (a).................................... 1,015,000
28,700 Autodesk, Inc....................................................... 1,099,569
17,200 CDI Corporation (a)................................................. 717,025
38,250 Comdisco Incorporated............................................... 994,500
35,400 IKOS Systems Inc. (a)............................................... 756,675
36,500 Renters Choice, Inc. (a)............................................ 725,437
47,975 Software Artistry Inc. (a).......................................... 761,603
60,700 Sotheby's Holdings - Class A........................................ 1,024,313
----------
7,094,122
----------
Chemicals and Allied Products (5.22%)
16,700 Goodrich (B.F.) Company............................................. 723,319
17,600 Great Lakes Chemical Corp........................................... 921,800
39,400 Serologicals Corporation (a)........................................ 906,200
----------
2,551,319
----------
Communications by Phone, Television, Radio, Cable (5.15%)
24,300 Emmis Broadcasting Corp. (a)........................................ 1,060,087
95,300 Tel-Save Holdings, Incorporated (a)................................. 1,453,325
----------
2,513,412
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Equity Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Construction - Specialized Trades (1.37%)
18,700 Dynatech Corporation (a)............................................ 668,525
----------
Depository Institutions (4.83%)
13,150 First Banking System Incorporated................................... 1,122,681
21,950 Norwest Corp........................................................ 1,234,688
----------
2,357,369
----------
Durable Goods - Wholesale (2.66%)
15,100 Applied Industrial Tech Inc......................................... 543,600
26,600 Hasbro, Inc......................................................... 754,775
----------
1,298,375
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (.74%)
7,550 Kinder Morgan Energy Partners L.P................................... 362,400
----------
Electrical Equipment, Except Computers (5.06%)
18,000 Andrew Corp. (a).................................................... 506,250
103,865 Inter City Products Corp. (a)....................................... 564,766
25,450 SBS Technologies (a)................................................ 588,531
22,250 Semtech Corporation (a)............................................. 812,125
----------
2,471,672
----------
Engineering Services, Accounting, Management (1.33%)
53,100 Physician Support Systems (a)....................................... 650,475
----------
Food Stores (2.01%)
45,500 Casey's General Stores Inc.......................................... 979,672
----------
Furniture and Fixtures (1.93%)
48,700 Furniture Brands International Inc. (a)............................. 943,563
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Equity Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------- -------- -----
<S> <C> <C> <C>
General Merchandise Stores (3.17%)
67,200 Ames Department Stores (a).......................................... 651,000
33,000 Family Dollar Stores................................................ 899,250
-----------
1,550,250
-----------
Health Services (2.13%)
29,100 Quorum Health Group, Inc. (a)....................................... 1,040,325
-----------
Industrial, Commercial Machinery, Computers (1.93%)
24,200 EMC Corporation..................................................... 943,800
-----------
Measuring Instruments, Photo Goods, Watches (5.41%)
33,200 Analogic Corporation................................................ 1,128,800
13,500 DENTSPLY International, Inc......................................... 749,700
12,000 Sci Systems Incorporated (a)........................................ 765,000
-----------
2,643,500
-----------
Miscellaneous Furniture and Fixtures (.92%)
9,450 Hillenbrand Industries.............................................. 448,875
-----------
Miscellaneous Retail (2.03%)
25,650 Brylane Inc. (a).................................................... 989,128
-----------
Motion Pictures, Films (1.85%)
203,870 Video Update, Inc. Class A (a)...................................... 904,673
-----------
Motor Freight Transportation, Warehouses (1.54%)
48,250 American Freightways, Incorporated (a).............................. 753,906
-----------
Oil and Gas Extraction (3.18%)
13,200 B.J. Services Company (a)........................................... 707,850
39,900 Oryx Energy Co. (a)................................................. 842,888
-----------
1,550,738
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Equity Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Optical Instruments and Lenses (.43%)
4,250 KLA - Tencor Corp................................................... 207,188
-----------
Paper and Allied Products (3.04%)
22,950 Schweitzer-Manduit Intl Inc......................................... 860,625
7,450 St. Joe Corporation................................................. 623,937
-----------
1,484,562
-----------
Personal Services (1.52%)
28,800 CUC International Inc. (a).......................................... 743,400
-----------
Printing, Publishing and Allied (2.07%)
38,500 New England Business Service........................................ 1,013,031
-----------
Real Estate Operators, Agents, Managers (3.15%)
23,700 Fairfield Communities Inc. (a)...................................... 796,913
25,100 Rouse Company....................................................... 740,450
----------
1,537,363
----------
Retail - Catalog and Mail-Order Houses (.80%)
13,000 Insight Enterprises, Inc............................................ 390,812
----------
Retail - Shoe Stores (1.41%)
12,600 Payless Shoesource Inc.............................................. 689,063
----------
Rubber and Miscellaneous Plastic Products (1.64%)
17,100 Reebok International Ltd............................................ 802,631
----------
Security and Commodity Brokers (4.47%)
18,700 Franklin Resources Inc.............................................. 1,356,919
31,950 New England Investment Companies L.P................................ 826,706
----------
2,183,625
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Equity Fund
Statement of Investments in Securities
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
----- -------- -----
<S> <C> <C> <C>
Transportation Equipment (3.11%)
47,800 Coltec Industries (a)............................................... 932,100
37,350 Kellstrom Industries Inc. (a)....................................... 588,262
-----------
1,520,362
-----------
Wholesale - Groceries and Related Products (1.01%)
19,700 International Multifoods Corporation................................ 494,962
-----------
Total common stocks (cost - $42,176,727).......................... 47,690,020
-----------
PREFERRED STOCK - CONVERTIBLE (2.38% of total investments)
Hotels, Other Lodging Places (2.38%)
53,250 La Quinta Inns Inc.................................................. 1,164,844
-----------
Total preferred stock - convertible (cost - $1,170,295)........... 1,164,844
-----------
Total stocks...................................................... 48,854,864
-----------
Total investments in securities (cost - $43,347,022).............. $48,854,864
===========
<FN>
(a) Non-dividend paying common stock.
</FN>
</TABLE>
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
COMMON STOCKS (58.03% of total investments)
Air Transportation (2.30%)
3,100 Atlas Air Inc. (a).................................................. $106,950
5,000 Comair Holdings, Inc................................................ 138,437
--------
245,387
--------
Amusement and Recreation Services (1.60%)
3,900 Cedar Fair - LP..................................................... 170,625
--------
Apparel and Accessory Stores (.97%)
5,900 Claire's Stores, Inc................................................ 103,250
--------
Business Services (9.18%)
4,850 Affiliated Computer Svcs - A (a).................................... 135,800
4,400 Autodesk, Inc....................................................... 168,575
1,600 CDI Corporation (a)................................................. 66,700
5,100 Comdisco Incorporated............................................... 132,600
5,400 IKOS Systems Inc. (a)............................................... 115,425
4,900 Renters Choice, Inc. (a)............................................ 97,387
7,600 Software Artistry Inc. (a).......................................... 120,650
8,350 Sotheby's Holdings - Class A........................................ 140,906
--------
978,043
--------
Chemicals and Allied Products (3.31%)
2,300 Goodrich (B.F.) Company............................................. 99,619
2,600 Great Lakes Chemical Corp........................................... 136,175
5,100 Serologicals Corporation (a)........................................ 117,300
--------
353,094
--------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Communications by Phone, Television, Radio, Cable (3.20%)
3,550 Emmis Broadcasting Corp. (a)........................................ 154,869
12,200 Tel-Save Holdings, Incorporated (a)................................. 186,050
--------
340,919
--------
Construction - Specialized Trades (.84%)
2,500 Dynatech Corporation (a)............................................ 89,375
--------
Depository Institutions (1.56%)
2,950 Norwest Corp........................................................ 165,937
--------
Durable Goods - Wholesale (1.24%)
950 Applied Industrial Tech Inc......................................... 34,200
3,450 Hasbro, Inc......................................................... 97,894
--------
132,094
--------
Electric, Gas, Water, Cogeneration, Sanitary Services (.45%)
1,000 Kinder Morgan Energy Partners L.P................................... 48,000
--------
Electrical Equipment, Except Computers (3.02%)
3,600 Andrew Corp. (a).................................................... 101,250
6,500 Inter City Products Corp. (a)....................................... 35,344
3,450 SBS Technologies (a)................................................ 79,781
2,900 Semtech Corporation (a)............................................. 105,850
--------
322,225
--------
Engineering Services, Accounting, Management (.84%)
7,300 Physician Support Systems (a)....................................... 89,425
--------
Food Stores (1.23%)
6,100 Casey's General Stores Inc.......................................... 131,341
--------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Furniture and Fixtures (1.17%)
6,450 Furniture Brands International Inc. (a)............................. 124,969
--------
General Merchandise Stores (2.02%)
9,450 Ames Department Stores (a).......................................... 91,547
4,550 Family Dollar Stores................................................ 123,988
--------
215,535
--------
Health Services (1.36%)
4,050 Quorum Health Group, Inc. (a)....................................... 144,788
--------
Industrial, Commercial Machinery, Computers (1.17%)
3,200 EMC Corporation..................................................... 124,800
--------
Measuring Instruments, Photo Goods, Watches (3.37%)
4,600 Analogic Corporation................................................ 156,400
2,050 DENTSPLY International, Inc......................................... 100,450
1,600 Sci Systems Incorporated (a)........................................ 102,000
--------
358,850
--------
Miscellaneous Furniture and Fixtures (.27%)
600 Hillenbrand Industries.............................................. 28,500
--------
Miscellaneous Retail (1.23%)
3,400 Brylane Inc. (a).................................................... 131,112
--------
Motion Pictures, Films (1.16%)
27,780 Video Update, Inc. Class A (a)...................................... 123,274
--------
Motor Freight Transportation, Warehouses (.93%)
6,350 American Freightways, Incorporated (a).............................. 99,219
--------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Oil and Gas Extraction (1.96%)
1,750 B.J. Services Company (a)........................................... 93,844
5,450 Oryx Energy Co. (a)................................................. 115,131
--------
208,975
--------
Optical Instruments and Lenses (1.14%)
2,500 KLA - Tencor Corp................................................... 121,875
--------
Paper and Allied Products (1.94%)
3,050 Schweitzer-Manduit Intl Inc......................................... 114,375
1,100 St. Joe Corporation................................................. 92,125
--------
206,500
--------
Personal Services (.95%)
3,900 CUC International Inc. (a).......................................... 100,669
--------
Printing, Publishing and Allied (1.28%)
5,200 New England Business Service........................................ 136,825
--------
Real Estate Operators, Agents, Managers (1.91%)
3,100 Fairfield Communities Inc. (a)...................................... 104,237
3,350 Rouse Company....................................................... 98,825
--------
203,062
--------
Rubber and Miscellaneous Plastic Products (1.19%)
2,700 Reebok International Ltd............................................ 126,731
--------
Security and Commodity Brokers (2.76%)
2,500 Franklin Resources Inc.............................................. 181,406
4,350 New England Investment Companies L.P................................ 112,556
--------
293,962
--------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Transportation Equipment (1.87%)
6,500 Coltec Industries (a)............................................... 126,750
4,600 Kellstrom Industries Inc. (a)....................................... 72,450
----------
199,200
----------
Wholesale - Groceries and Related Products (.61%)
2,600 International Multifoods Corporation................................ 65,325
----------
Total common stocks (cost - $5,454,530)........................... 6,183,886
----------
PREFERRED STOCK - CONVERTIBLE (1.48% of total investments)
Hotels, Other Lodging Places (1.48%)
7,200 La Quinta Inns Inc.................................................. 157,500
----------
Total preferred stock - convertible (cost - $160,683)............... 157,500
----------
CORPORATE BONDS (40.49% of total investments)
Auto Repair and Parking (3.77%)
400,000 Amerco Inc., 7.47%, due 1/15/27..................................... 401,975
----------
Depository Institutions (6.83%)
200,000 Centura Bank Capital Trust I, 8.845%, due 6/1/27, Series 144A....... 205,212
500,000 Dime Capital Trust, 9.33%, due 5/6/27............................... 522,251
----------
727,463
----------
Durable Goods - Wholesale (1.00%)
100,000 Pioneer Standard Electronics, 8.5%, due 8/1/06...................... 106,275
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (2.82%)
300,000 MCN Financing VI, 6.85%, due 10/28/99............................... 300,660
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Asset Allocation Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Food and Kindred Products (1.86%)
200,000 RJR Nabisco Inc. 8.25%, due 7/1/04.................................. 198,850
-----------
Home Furniture and Equipment Stores (4.72%)
500,000 Macsaver Financial, 7.875%, due 8/1/03.............................. 502,752
-----------
Lumber and Wood Products, Except Furniture (4.74%)
500,000 West Fraser Mill, 7.25%, due 9/15/02................................ 505,079
-----------
Non-Depository Credit Institutions (4.83%)
500,000 First USA Bank, 7.65%, due 8/1/03................................... 514,690
-----------
Real Estate Investment Trusts (2.81%)
300,000 Carramerica Realty Corp., 7.20%, due 7/1/04......................... 299,205
-----------
Security and Commodity Brokers (2.79%)
300,000 Paine Webber Grp, 7.625%, due 2/15/14............................... 297,799
-----------
Stone, Clay, Glass, Concrete (1.99%)
200,000 USG Corp., 9.25%, due 9/15/01....................................... 211,832
-----------
Transit and Passenger Transportation (2.33%)
250,000 Coach USA Inc., 9.375%, due 7/1/07.................................. 248,750
-----------
Total corporate bonds (cost - $4,285,899)......................... 4,315,330
-----------
Total investments in securities (cost - $9,901,112)............... $10,656,716
===========
<FN>
(a) Non-dividend paying common stock.
</FN>
</TABLE>
The accompanying notes are an integral part of these
financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Fixed Income Fund
Statement of Investments in Securities
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
ASSET BACKED (5.51% of total investments)
229,607 Copelco Capital Funding Corp., 6.34%, due 7/20/04................... $ 230,817
174,012 Lehman FHA Title I Loan Trust, 6.78%, due 3/25/08................... 174,766
153,999 Midland Realty Acceptance Corporation, 7.315%, due 8/25/28.......... 156,464
100,000 National Car Rental Financing LTD, 6.80%, due 4/20/00............... 99,812
342,002 New York City Tax Lien, 6.91%, due 5/25/05.......................... 353,513
----------
Total asset backed (cost - $1,003,422)............................ 1,015,372
----------
CORPORATE BONDS (61.10% of total investments)
Auto Repair and Parking (4.78%)
575,000 Amerco Inc., 7.47%, due 1/15/27..................................... 577,839
200,000 Amerco Inc., 7.44%, due 10/2/06..................................... 203,032
100,000 AMERCO, 6.71%, due 10/15/08 ........................................ 100,491
----------
881,362
----------
Depository Institutions (7.79%)
450,000 Dao Heng Bank LTD, 7.75%, due 1/24/07............................... 450,867
650,000 Morgan Stanley Fin PLC, 8.03%, due 2/25/17.......................... 647,347
350,000 Republic NY Cap II-Stops, 7.53%, due 12/4/26........................ 336,792
----------
1,435,006
----------
Durable Goods - Wholesale (.58%)
100,000 Pioneer Standard Electronics, 8.5%, due 8/1/06...................... 106,274
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (2.43%)
450,000 NRG Energy Inc., 7.5%, due 6/15/07.................................. 447,800
----------
Fire, Marine and Casualty Insurance (3.85%)
200,000 Horace Mann Educators, 6.625%, due 1/15/06.......................... 192,718
100,000 Integon Corp, 9.50%, due 10/15/01................................... 108,500
150,000 Leucadia, 8.25%, due 6/15/05........................................ 155,170
250,000 Leucadia National Corp., 7.785%, due 10/15/06....................... 253,085
----------
709,473
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Fixed Income Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Food and Kindred Products (2.71%)
100,000 Panamerican Beverage Inc., 8.125%, due 4/1/03....................... 102,575
400,000 RJR Nabisco Inc. 8.25%, due 7/1/04.................................. 397,700
----------
500,275
----------
Home Furniture and Equipment Stores (2.73%)
500,000 Macsaver Financial, 7.875%, due 8/1/03.............................. 502,752
----------
Life Insurance (2.70%)
300,000 Delphi Financial, 8%, due 10/1/03................................... 290,818
200,000 Delphi Funding LLC, 9.31%, due 3/25/27.............................. 206,124
----------
496,942
----------
Lumber and Wood Products, Except Furniture (3.84%)
700,000 West Fraser Mill, 7.25%, due 9/15/02................................ 707,111
----------
Mining - Metals and Ores (.54%)
100,000 Freeport McMoran C&G, 7.50%, due 11/15/06........................... 99,771
----------
Natural Gas Transmission and Distribution (1.51%)
250,000 Southwest Gas Company, 9.75%, due 6/15/02........................... 278,390
----------
Non-Depository Credit Institutions (7.38%)
250,000 First USA Bank, 7.65%, due 8/1/03................................... 257,345
700,000 MCN Financing VI, 6.85%, due 10/28/99............................... 701,540
150,000 Nationsbank Corp, 7.80%, due 9/15/16................................ 154,200
250,000 St. Paul Bankcorp, 7.125%, due 2/15/04.............................. 246,772
----------
1,359,857
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Fixed Income Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
Oil and Gas Extraction (5.57%)
200,000 Petrozuata Finance, 8.22%, due 4/1/17............................... 199,454
150,000 Ras Laffan Liq Nat Gas, 8.29%, due 3/15/14.......................... 157,255
500,000 Transocean Offshore Inc., 8.0%, due 4/15/27......................... 520,942
150,000 Western Atlas Inc., 5.65%, due 7/13/97.............................. 149,952
----------
1,027,603
----------
Paper and Allied Products (.58%)
100,000 Westavaco, 10.3%, due 1/15/19 ...................................... 106,770
----------
Petroleum Refining (4.58%)
278,000 Pennzoil Company, 9.625%, due 11/15/99.............................. 295,699
400,000 Pennzoil Company, 10.625%, due 6/1/01............................... 429,144
100,000 USX Corporation, 9.375%, due 2/15/12................................ 119,326
----------
844,169
----------
Real Estate Investment Trusts (2.70%)
500,000 Carramerica Realty Corp, 7.20%, due 7/1/04.......................... 498,675
----------
Security and Commodity Brokers (4.94%)
400,000 Paine Webber Grp, 7.625%, due 2/15/14............................... 397,065
200,000 Paine Webber Grp, 9.25%, due 12/15/01............................... 217,283
100,000 Salomon Inc., 6.50%, due 8/15/03.................................... 97,034
200,000 Salomon Inc., 6.70%, due 7/5/00..................................... 199,555
----------
910,937
----------
Miscellaneous Repair Services (1.89%)
300,000 Greenwich Air, 10.50%, due 6/6/06................................... 348,000
----------
Total corporate bonds (cost - $11,177,941)........................ 11,261,167
----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
CONSECO FUND GROUP
Fixed Income Fund
Statement of Investments in Securities, (continued)
June 30, 1997
(unaudited)
Shares or
Principal
Amount Security Value
------ -------- -----
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (10.85% of total investments)
500,000 CMO Iroquois Trust, 7.0%, due 12/15/06.............................. 494,150
230,878 JP Morgan Commercial Mortgage, 6.47%, due 11/25/27.................. 224,697
527,544 JP Morgan Comm Mortg Finc, 6.939%, due 12/26/28..................... 530,672
500,000 Paine Webber Mtg Accept Corp CMO, 6.90%, due 1/2/12................. 500,895
194,619 Rural Housing Trust 1987-1, 7.33%, due 4/1/26....................... 195,945
54,384 Structured Asset Securities Corp., 5.751%, due 2/25/28.............. 54,085
-----------
Total collateralized mortgage obligations (cost - $2,002,958)..... 2,000,444
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (10.69% of total investments)
1,159,227 FHLMC G00479, 9.0%, due 4/1/25...................................... 1,234,901
296,716 FHLMC Structured Pass Through, 7.63%, due 8/25/22................... 308,425
100,000 FNMA 7.0% Series 1994-63 Class PK, due 4/25/24...................... 97,991
230,796 FNMA 7.5% Pool 250307, due 7/1/25................................... 232,091
97,661 FNMA 7.0%, due 11/1/26.............................................. 95,901
-----------
Total U.S. Government and agency obligations
(cost - $1,942,681).......................................... 1,969,309
-----------
MUNICIPAL BONDS (11.85% of total investments)
Public Finance, Taxation (11.85%)
135,000 Augusta GA HSG Rehab Agy., 7.90%, due 3/1/99........................ 138,097
100,000 Doylestown Pa Hosp Auth Hosp Rev, 8.375%, due 7/1/08................ 102,274
300,000 Fort Worth Tex Higher Ed Fin Rev, 7.50%, due 10/1/06................ 301,370
600,000 Mississippi Hosp Equip Facs Auth, 9.10%, due 4/1/06 ................ 609,223
400,000 Philadelphia PA Auth Indl Dev, 6.488%, due 6/15/04.................. 400,000
350,000 Sisters of Providence Wa, 7.47%, due 10/1/07........................ 360,033
270,000 Tulane Univ La, 7.30%, due 12/15/12................................. 271,974
-----------
Total municipal bonds (cost - $2,167,046)......................... 2,182,971
-----------
Total investments in securities (cost - $18,294,048).............. $18,429,263
===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
19
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
1. ORGANIZATION
Conseco Fund Group (the "Trust") is an open-end diversified management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as
a Massachusetts business trust on September 24, 1996. The Trust is a "series"
type of mutual fund which issues separate series of shares of beneficial
interest, each of which represents a separate diversified portfolio of
investments. The Trust consists of three series ("Funds"), each with its own
investment objective and investment policies. The Funds are the Equity Fund, the
Asset Allocation Fund and the Fixed Income Fund. The Trust's activities were
limited to organizational matters with no operating activities through January
1, 1997. The Funds became operational and available for sale on January 2, 1997.
Each Fund has distinct investment objectives. The Equity Fund invests in
selected equity securities and other securities having the investment
characteristics of common stocks. The Asset Allocation Fund invests in several
asset classes including debt securities, equity securities, and money market
instruments. The Fixed Income Fund invests primarily in investment grade debt
securities.
The Funds offer two classes of shares: Class A and Class Y. Sales of Class
A shares may be subject to a front-end sales charge. Class Y shares are
available with no sales charge to certain institutional investors and qualifying
individual investors. Prior to January 2, 1997, an affiliate, Conseco, Inc.
("Conseco"), held all of the outstanding shares of each class of the Funds. The
Funds are authorized to issue an unlimited number of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation, Transactions, and Related Investment Income
The investments in each portfolio are valued at the end of each New York
Stock Exchange business day. Investment transactions are accounted for on the
trade date (the date the order to buy or sell is executed). Dividend income is
recorded on the ex-dividend date and interest income is accrued daily. The cost
of investments sold is determined on the specific identification basis. The
Trust does not hold any investments which are restricted as to resale, except
for the Centura Bank Capital Trust I bond held by the Asset Allocation Fund,
which is eligible for resale under Rule 144A of the Securities Act of 1933. This
security may be resold in transactions exempt from registration, normally to
qualified institutional buyers.
In each Fund of the Trust, Fund securities which are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued, or lacking any sales, at the mean between
the closing bid and asked prices. Securities traded in the over-the-counter
market are valued at the mid-day mean between the bid and asked prices or yield
equivalent as obtained from one or more dealers that make markets in the
securities. Fund securities which are traded both in the over-the-counter market
and on a stock exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities this
ordinarily will be the over-the-counter market. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined under policies approved by the Board of Trustees of the Trust. Debt
securities with maturities of sixty (60) days or less are valued at amortized
cost.
Dividends to Shareholders
Dividends from the Fixed Income Fund will be declared and distributed
monthly. Dividends from the Equity Fund and the Asset Allocation Fund will be
declared and distributed quarterly. However, the Trustees may decide to declare
dividends at other intervals.
20
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
Dividends to shareholders from net investment income are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Permanent book and tax differences relating to dividends
to shareholders may result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized and
unrealized gain (loss). Any taxable income or gain of the Trust remaining at
fiscal year end will be declared and distributed in the following year to the
shareholders of the Fund or Funds to which such gains are attributable.
Organizational Costs
Costs incurred by the Funds in connection with their organization and
public offering of shares, estimated at $279,000 have been deferred and will be
amortized over a period of approximately 5 years beginning with the initial date
of sale of shares to the public. The costs were advanced by Conseco, and will be
reimbursed by the Funds over a period of approximately 5 years. The proceeds of
any redemption of the initial shares by any holder thereof will be reduced by
any unamortized organizational costs in the same proportion as the number of
initial shares being redeemed to the number of initial shares outstanding at the
time of such redemption.
Federal Income Taxes
For federal income tax purposes, the Funds intend to comply in their
initial fiscal year and thereafter with Subchapter M of the Internal Revenue
Code by distributing substantially all of their taxable income and net capital
gain to their shareholders or otherwise complying with the requirements for
regulated investment companies, and therefore, no provision has been made for
federal income taxes.
Custody Fees
The Funds receive credits from their custodian based on cash held by each
Fund at the custodian. These credits are used to reduce the custody fees payable
by each Fund. For the period from inception (January 2, 1997) through June 30,
1997, such credits totaled $7,344, $7,305 and $3,972 for the Equity Fund, Asset
Allocation Fund and Fixed Income Fund, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results may differ from these estimates.
3. AGREEMENTS WITH SUBSIDIARIES OF CONSECO
Investment Advisory Agreement
Conseco Capital Management, Inc. (the "Adviser"), a wholly owned subsidiary
of Conseco, serves as investment adviser to the Funds pursuant to investment
advisory agreements. The Adviser supervises the Trust's management and
investment program, performs a variety of services in connection with management
and operation of the Funds and pays all compensation of officers and Trustees of
the Trust who are affiliated persons of the Adviser or the Trust. The total fees
paid to the Adviser for the period from inception (January 2, 1997) through June
30, 1997, were $61,439, $18,156 and $15,619 for the Equity Fund, Asset
Allocation Fund and Fixed Income Fund, respectively.
Under the investment advisory agreements, the Adviser receives an
investment advisory fee equal to an annual rate of .45% of the average daily net
asset value of the Fixed Income Fund, .70% of the average daily net asset value
of the Equity Fund, and .70% of the average daily net asset value of the Asset
Allocation Fund. The Adviser has voluntarily agreed to reduce its advisory fee
with respect to the Fixed Income Fund to .40% of such Fund's average daily net
assets until April 30, 1998. The Adviser also manages another registered
investment company and all of the invested assets of its parent company,
Conseco, which owns or manages several
21
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
life insurance subsidiaries, and provides investment and servicing functions to
Conseco and affiliates. The Adviser has voluntarily agreed to waive its
investment advisory fee and/or reimburse the Funds to the extent that the ratio
of expenses to net assets on an annual basis for Class A Shares exceeds: 1.50%
for the Equity Fund, 1.50% for the Asset Allocation Fund, and 1.25% for the
Fixed Income Fund; and for Class Y Shares exceeds: 1.00% for the Equity Fund,
1.00% for the Asset Allocation Fund, and .60% for the Fixed Income Fund. These
voluntary limits may be discontinued by the Adviser at any time after April 30,
1998.
Administration Agreement
Conseco Services, LLC (the "Administrator"), a wholly owned subsidiary of
Conseco, supervises the preparation and filing of all documents required for
compliance by the Funds with applicable laws and regulations, supervises the
maintenance of books and records of the Funds and provides other general and
administrative services. For providing these services, the Administrator
receives compensation at the annual rate of 0.20% of the average daily net
assets attributable to Class A and Class Y shares of each Fund. The
Administrator has voluntarily agreed to waive its fees and/or reimburse the
Funds to the extent that annual total operating expenses exceed 1.50% for Class
A shares of the Equity and Asset Allocation Funds and 1.25% for the Class A
shares of the Fixed Income Fund and 1.00% for Class Y shares of the Equity and
Asset Allocation Funds and 0.60% for Class Y shares of the Fixed Income Fund.
The total fees paid to the Administrator for the period from inception (January
2, 1997) through June 30, 1997, were $22,363, $10,078 and $12,655 for the Equity
Fund, Asset Allocation Fund and Fixed Income Fund, respectively.
Distribution Arrangements
Conseco Equity Sales, Inc. (the "Distributor"), a wholly owned subsidiary
of Conseco, serves as the principal underwriter for each Fund pursuant to an
Underwriting Agreement, dated January 2, 1997, initially approved by the Board
of Trustees. The Distributor is a registered broker-dealer and member of the
National Association of Securities Dealers, Inc. ("NASD"). Shares of each Fund
will be continuously offered and will be sold by selected brokers, dealers and
other financial intermediaries who have executed selling agreements with the
Distributor. The Distributor bears all the expenses of providing services
pursuant to the Underwriting Agreement including the payment of the expenses
relating to the distribution of Prospectuses for sales purposes as well as any
advertising or sales literature.
The Trust has adopted distribution and service plans (the "Plans"), dated
March 28, 1997, for Class A shares of each Fund in accordance with the
requirements of Rule 12b-1 under the 1940 Act and the requirements of the
applicable rules of the NASD regarding asset based sales charges.
Pursuant to the Plans, a Fund may compensate the Distributor for
its expenditures in financing any activity primarily intended to result in the
sale of Class A shares of the Fund and for maintenance and personal service
provided to existing Class A shareholders. The Equity Fund's Plan and the Asset
Allocation Fund's Plan authorize payments to the Distributor up to 0.50%, and
the Fixed Income Fund's Plan up to 0.65%, annually of each Fund's average daily
net assets attributable to its Class A shares. The Plans provide for periodic
payments by the Distributor to brokers, dealers and financial intermediaries for
providing shareholder services to accounts that hold Class A shares and for
promotional and other sales related costs. The Distributor has voluntarily
agreed to waive its fees and/or reimburse the Funds to the extent that annual
total operating expenses exceed 1.50% for Class A shares of the Equity and Asset
Allocation Funds and 1.25% for the Class A shares of the Fixed Income Fund. The
total fees paid to the Distributor for Class A shares for the period from
inception (January 2, 1997) through June 30, 1997, were $1,082, $310 and $63 for
the Equity Fund, Asset Allocation Fund and Fixed Income Fund, respectively.
22
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Period from inception (January 2, 1997)
through June 30, 1997
--------------------------------------
Asset Fixed
Equity Allocation Income
Class A Shares Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Net asset value per share, beginning of period........................... $10.00 $10.00 $10.00
Income from investment operations (a):
Net investment income (loss).......................................... (.03) .10 .27
Net realized gains and change in unrealized appreciation
on investments...................................................... .88 .65 .09
------ ------ ------
Total from investment operations.................................. .85 .75 .36
Distributions from net investment income and net realized short-term
capital gains (a)................................................... - (.20) (.30)
------- ------ ------
Net asset value per share, end of period.......................... $10.85 $10.55 $10.06
====== ====== ======
Total return (not annualized) (b).(c).................................... 8.50% 6.65% 3.41%
==== ==== ====
Ratios/supplemental data:
Net assets, end of period............................................. 1,537,971 433,074 43,817
Ratio of expenses to average net assets (b) (annualized).............. 1.50% 1.50% 1.25%
Ratio of net investment income (loss) to average net
assets (b) (annualized)............................................. (.66)% 2.06% 5.96%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding during the period from inception (January 2, 1997) through June
30, 1997.
(b) These ratios have been reduced due to an agreement with the Adviser that
the ratio of expenses to average net assets would not exceed on an annual
basis 1.50 percent for the Equity Fund, 1.50 percent for the Asset
Allocation Fund and 1.25 percent for the Fixed Income Fund. These voluntary
limits may be discontinued by the Adviser at any time after April 30, 1998.
If the aforementioned agreement had not been in effect during the period,
the annualized ratio of expenses to average net assets would have been 9.33
percent for the Equity Fund, 23.20 percent for the Asset Allocation Fund
and 102.86 percent for the Fixed Income Fund.
(c) Total return figures do not include sales charges; results would be lower
if sales charges were included.
</FN>
</TABLE>
23
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
4. FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Period from inception (January 2, 1997)
through June 30, 1997
-------------------------------------
Asset Fixed
Equity Allocation Income
Class Y Shares Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Net asset value per share, beginning of period........................... $10.00 $10.00 $10.00
Income from investment operations (a):
Net investment income (loss).......................................... (.01) .06 .35
Net realized gains and change in unrealized appreciation
on investments...................................................... .89 .56 .06
------ ------ ------
Total from investment operations.................................. .88 .62 .41
Distributions from net investment income and net realized short-term
capital gains (a)................................................... - (.05) (.33)
------ ------ ------
Net asset value per share, end of period.......................... $10.88 $10.57 $10.08
====== ====== ======
Total return (not annualized) (b)........................................ 8.80% 6.90% 3.71%
==== ==== ====
Ratios/supplemental data:
Net assets, end of period............................................. 48,690,983 10,706,693 19,480,853
Ratio of expenses to average net assets (b) (annualized).............. 1.00% 1.00% .60%
Ratio of net investment income (loss) to average net
assets (b) (annualized)............................................. (.24)% 2.85% 6.95%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding during the period from inception (January 2, 1997) through June
30, 1997.
(b) These ratios have been reduced due to an agreement with the Adviser that
the ratio of expenses to average net assets would not exceed on an annual
basis 1.00 percent for the Equity Fund, 1.00 percent for the Asset
Allocation Fund and .60 percent for the Fixed Income Fund. These voluntary
limits may be discontinued by the Adviser at any time after April 30, 1998.
If the aforementioned agreement had not been in effect during the period,
the annualized ratio of expenses to average net assets would have been 1.40
percent for the Equity Fund, 1.99 percent for the Asset Allocation Fund and
1.53 percent for the Fixed Income Fund.
</FN>
</TABLE>
24
<PAGE>
CONSECO FUND GROUP
Notes to Financial Statements
June 30, 1997
(unaudited)
4. FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Supplemental data for all classes:
Net assets, end of period...........................................$50,228,954 $11,139,767 $19,524,670
Portfolio turnover rate............................................. 97.331% 241.150% 220.808%
Average commission rate paid (a).................................... $.06 $.06 $ -
<FN>
(a) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission.
</FN>
</TABLE>
5. INVESTMENT TRANSACTIONS
Gross unrealized appreciation and depreciation of investments at June 30,
1997 are shown below:
<TABLE>
<CAPTION>
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Gross unrealized appreciation............................................ $5,832,738 $836,268 $178,343
Gross unrealized depreciation............................................ (324,896) (80,664) (43,128)
---------- -------- --------
Net unrealized appreciation........................................... $5,507,842 $755,604 $135,215
========== ======== ========
</TABLE>
The aggregate cost of purchases and the aggregate proceeds from sales of
investments for the period from inception (January 2, 1997) through June 30,
1997, are shown below:
<TABLE>
<CAPTION>
Asset Fixed
Equity Allocation Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Purchases:
Investments, excluding U.S. government securities and
short-term investments.............................................. $63,852,457 $29,966,309 $33,403,290
U.S. government securities............................................ - 3,389,012 11,469,004
Sales:
Investments, excluding U.S. government securities and
short-term investments.............................................. $21,080,925 $19,903,176 $15,153,116
U.S. government securities............................................ - 3,386,813 11,477,982
</TABLE>
25
<PAGE>
CONSECO FUND GROUP:
Equity Fund
Asset Allocation Fund
Fixed Income Fund
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements included in Part B of this Registration
Statement:
(1) Audited Statement of Assets and Liabilities of the Registrant
as of December 18, 1996.
(2) Unaudited Financial Statements of the Registrant and Notes
thereto for the period ended June 30, 1997.
(b) Exhibits:
(1) Agreement and Declaration of Trust1/
(2) By-laws1/
(3) Voting trust agreement - None
(4)(a) Agreement and Declaration of Trust of Conseco Fund
Group, Articles V, VI, VII, VIII, and X1/
(b) By-laws of Conseco Fund Group, Articles II, V, and VII1/
(5)(a) Investment Advisory Agreement between Conseco Fund Group
and Conseco Capital Management, Inc. with respect to the
Equity Fund (filed herewith)
(b) Investment Advisory Agreement between Conseco Fund Group
and Conseco Capital Management, Inc. with respect to the
Asset Allocation Fund (filed herewith)
(c) Investment Advisory Agreement between Conseco Fund Group
and Conseco Capital Management, Inc. with respect to the
Fixed Income Fund (filed herewith)
- ---------------------------------
1/ Incorporated by reference from the Registrant's registration statement,
SEC File No. 333-13185, filed on October 1, 1996.
<PAGE>
(6) Principal Underwriting Agreement between Conseco Fund
Group and Conseco Equity Sales, Inc. (filed herewith)
(7) Bonus, profit sharing or pension plans - None
(8) Custody Agreement between Conseco Fund Group and The
Bank of New York (filed herewith)
(9)(a) Administration Agreement between Conseco Fund Group and
Conseco Services, LLC (filed herewith)
(b) Sub-Administration Agreement between Conseco Services,
LLC and The Bank of New York (filed herewith)
(c) Fund Accounting Agreement between Conseco Services, LLC
and The Bank of New York (filed herewith)
(d) Transfer Agency Agreement between Conseco Fund Group and
State Street Bank and Trust Company (filed herewith)
(10) Opinion and Consent of Counsel as to the Legality of the
Securities being Registered2/
(11) Consent of Coopers & Lybrand L.L.P., Independent
Accountants (filed herewith)
(12) Financial statements omitted from prospectus - None
(13) Letter of investment intent - None
(14) Prototype retirement plan - None
(15)(a) Class A Plan of Distribution and Service pursuant to Rule
12b-1 with respect to the Equity Fund (filed herewith)
(b) Class A Plan of Distribution and Service pursuant to Rule
12b-1 with respect to the Asset Allocation Fund (filed
herewith)
(c) Class A Plan of Distribution and Service pursuant to Rule
12b-1 with respect to the Fixed Income Fund (filed
herewith)
(d) Selling Group Agreement2/
(16) Performance Computation Schedule - None
- ---------------------------------
2/ Incorporated by reference from Pre-Effective Amendment No. 1, to
Registrant's registration statement SEC File No. 333-13185, filed on December
20, 1996.
C-2
<PAGE>
(17) Financial Data Schedules (filed herewith)
(18) Plan pursuant to Rule 18f-32/
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
NUMBER OF RECORD HOLDERS
------------------------
TITLE OF CLASS JUNE 30, 1997
-------------- ---------------
Equity Fund
Class A shares 249
Class Y shares 15
Asset Allocation Fund
Class A shares 93
Class Y shares 15
Fixed Income Fund
Class A shares 25
Class Y shares 16
ITEM 27. INDEMNIFICATION.
Reference is made to Articles II and V of the Agreement and Declaration of
Trust incorporated by reference from the Registrant's registration statement,
SEC File No. 333-13185, filed previously on October 1, 1996.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Conseco Capital Management, Inc. (the "Adviser") is an Indiana corporation
which offers investment advisory services. The Adviser is a wholly-owned
subsidiary of Conseco, Inc., also an Indiana corporation, a publicly owned
financial services company. Both the Adviser's and Conseco, Inc.'s offices are
located at 11825 N. Pennsylvania Street, Carmel, Indiana 46032.
Information as to the officers and directors of the Adviser is included in
its current Form ADV filed with the SEC and is incorporated by reference herein.
ITEM 29. PRINCIPAL UNDERWRITERS.
Conseco Equity Sales, Inc. serves as the Registrant's principal
underwriter. Conseco Equity Sales, Inc. also serves as distributor of one
other investment company, Conseco Series Trust.
C-3
<PAGE>
The following information is furnished with respect to the officers and
directors of Conseco Equity Sales, Inc. The principal business address of each
person listed is 11815 N. Pennsylvania Street, Carmel, Indiana 46032.
Name and Principal Positions and Offices Positions and Offices
Business Address With Principal Underwriter With Registrant
------------------ -------------------------- ----------------------
L. Gregory Gloeckner President None
William P. Latimer Vice President, Senior Vice President and
Counsel, Secretary, and Secretary
Director
James S. Adams Senior Vice President, Treasurer, Principal
Treasurer, and Director Financial and Accounting
Officer
William T. Devanney, Jr. Senior Vice President, Vice President,
Corporate Taxes Corporate Taxes
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the Adviser or the
registrant's custodian, The Bank of New York, 90 Washington Street, 22nd Floor,
New York, New York 10826.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
1. Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
2. Registrant hereby undertakes to hold a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10 percent of the outstanding
shares, and in connection with such meeting to assist in communications with
other shareholders as required by section 16(c) of the 1940 Act.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this amendment to its
Registration Statement pursuant to the Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 1 to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Carmel and State of Indiana on the 28th day of
July, 1997.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
-------------------------------
Maxwell E. Bublitz
President (Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 1 to the Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Maxwell E. Bublitz President (Principal July 28, 1997
- --------------------------- Executive Officer) and
Maxwell E. Bublitz Trustee
/s/ James S. Adams Treasurer (Principal July 28, 1997
- --------------------------- Financial and Accounting
James S. Adams Officer)
/s/ William P. Daves, Jr.* Chairman of the Board and July 28, 1997
- ---------------------------
William P. Daves, Jr. Trustee
/s/ Gregory J. Hahn * Trustee July 28, 1997
- ------------------------------
Gregory J. Hahn
/s/ Harold W. Hartley * Trustee July 28, 1997
- ------------------------
Harold W. Hartley
/s/ R. Jan Lecroy * Trustee July 28, 1997
- ------------------------------
Dr. R. Jan LeCroy
/s/ Jesse H. Parrish * Trustee July 28, 1997
- ------------------------------
Dr. Jesse H. Parrish
/s/ William P. Latimer July 28, 1997
- ------------------------------
*By: William P. Latimer
Attorney-In-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit
NUMBER DESCRIPTION PAGE
(1) Agreement and Declaration of Trust(1)
(2) By-laws(1)
(3) Voting trust agreement - None
(4)(a) Agreement and Declaration of Trust of Conseco Fund Group,
Articles V, VI, VII, VIII, and X(1)
(b) By-laws of Conseco Fund Group, Articles II, V, and VII(1)
(5)(a) Investment Advisory Agreement between Conseco Fund Group and
Conseco Capital Management, Inc. with respect to the Equity
Fund (filed herewith)
(b) Investment Advisory Agreement between Conseco Fund Group and
Conseco Capital Management, Inc. with respect to the Asset
Allocation Fund (filed herewith)
(c) Investment Advisory Agreement between Conseco Fund Group and
Conseco Capital Management, Inc. with respect to the Fixed Income
Fund (filed herewith)
(6) Principal Underwriting Agreement between Conseco Fund Group and
Conseco Equity Sales, Inc. (filed herewith)
(7) Bonus, profit sharing or pension plans - None
(8) Custody Agreement between Conseco Fund Group and The Bank of New
York (filed herewith)
(9)(a) Administrative Agreement between Conseco Fund Group and Conseco
Services, LLC (filed herewith)
(b) Sub-Administration Agreement between Conseco Services, LLC and
The Bank of New York (filed herewith)
(c) Fund Accounting Agreement between Conseco Services, LLC and The
Bank of New York (filed herewith)
(d) Transfer Agency Agreement between Conseco Fund Group and State
Street Bank and Trust Company (filed herewith)
<PAGE>
(10) Opinion and Consent of Counsel as to the Legality of the
Securities being Registered(2)
(11) Consent of Coopers & Lybrand L.L.P., Independent Accountants
(filed herewith)
(12) Financial statements omitted from prospectus - None
(13) Letter of investment intent - None
(14) Prototype retirement plan - None
(15)(a) Class A Plan of Distribution and Service pursuant to Rule 12b-1
with Respect to the Equity Fund (filed herewith)
(b) Class A Plan of Distribution and Service pursuant to Rule 12b-1
with Respect to the Asset Allocation Fund (filed herewith)
(c) Class A Plan of Distribution and Service pursuant to Rule 12b-1
with Respect to the Fixed Income Fund (filed herewith)
(d) Selling Group Agreement(2)
(16) Performance Computation Schedule - None
(17) Financial Data Schedules (filed herewith)
(18) Plan pursuant to Rule 18f-3(2)
- ------------------------------
1/ Incorporated by reference from the Registrant's registration
statement, SEC File No. 333-13185, filed on October 1, 1996.
2/ Incorporated by reference from Pre-Effective Amendment No. 1, to
Registrant's registration statement SEC File No. 333-13185, filed on
December 20, 1996.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP EQUITY FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,668
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,668
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP EQUITY FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,667
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,667
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP ASSET ALLOCATION FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,668
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,668
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP ASSET ALLOCATION FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,667
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,667
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP FIXED INCOME FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,668
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,668
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER INFORMATION IS
COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/18/96 AUDITED BALANCE SHEET OF THE CONSECO FUND GROUP AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP FIXED INCOME FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-18-1996
<PERIOD-START> DEC-18-1996
<PERIOD-END> DEC-18-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,000
<TOTAL-LIABILITIES> 93,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,350
<SHARES-COMMON-STOCK> 1,667
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,667
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP EQUITY FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 43,347,022
<INVESTMENTS-AT-VALUE> 48,854,864
<RECEIVABLES> 2,528,981
<ASSETS-OTHER> 1,083,045
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,466,890
<PAYABLE-FOR-SECURITIES> 2,089,285
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 148,642
<TOTAL-LIABILITIES> 2,237,936
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,170,268
<SHARES-COMMON-STOCK> 140,016
<SHARES-COMMON-PRIOR> 1,668
<ACCUMULATED-NII-CURRENT> (24,646)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 575,490
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,507,842
<NET-ASSETS> 50,228,954
<DIVIDEND-INCOME> 88,500
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (113,146)
<NET-INVESTMENT-INCOME> (24,646)
<REALIZED-GAINS-CURRENT> 575,490
<APPREC-INCREASE-CURRENT> 5,507,842
<NET-CHANGE-FROM-OPS> 6,058,686
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 140,742
<NUMBER-OF-SHARES-REDEEMED> (726)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,195,604
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176,752
<AVERAGE-NET-ASSETS> 537,193
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> .88
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.85
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP EQUITY FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 43,347,022
<INVESTMENTS-AT-VALUE> 48,854,864
<RECEIVABLES> 2,528,981
<ASSETS-OTHER> 1,083,045
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,466,890
<PAYABLE-FOR-SECURITIES> 2,089,285
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 148,642
<TOTAL-LIABILITIES> 2,237,936
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,170,268
<SHARES-COMMON-STOCK> 4,474,639
<SHARES-COMMON-PRIOR> 1,667
<ACCUMULATED-NII-CURRENT> (24,646)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 575,490
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,507,842
<NET-ASSETS> 50,228,954
<DIVIDEND-INCOME> 88,500
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (113,146)
<NET-INVESTMENT-INCOME> (24,646)
<REALIZED-GAINS-CURRENT> 575,490
<APPREC-INCREASE-CURRENT> 5,507,842
<NET-CHANGE-FROM-OPS> 6,058,686
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,652,917
<NUMBER-OF-SHARES-REDEEMED> (179,945)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 50,195,604
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176,752
<AVERAGE-NET-ASSETS> 19,218,020
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .89
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.88
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP ASSET ALLOCATION FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 9,901,112
<INVESTMENTS-AT-VALUE> 10,656,716
<RECEIVABLES> 1,015,412
<ASSETS-OTHER> 682,849
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,354,977
<PAYABLE-FOR-SECURITIES> 1,023,441
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 191,769
<TOTAL-LIABILITIES> 1,215,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,543,011
<SHARES-COMMON-STOCK> 41,038
<SHARES-COMMON-PRIOR> 1,668
<ACCUMULATED-NII-CURRENT> 6,118
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (164,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755,604
<NET-ASSETS> 11,139,767
<DIVIDEND-INCOME> 13,965
<INTEREST-INCOME> 161,938
<OTHER-INCOME> 0
<EXPENSES-NET> (50,782)
<NET-INVESTMENT-INCOME> 125,121
<REALIZED-GAINS-CURRENT> (164,966)
<APPREC-INCREASE-CURRENT> 755,604
<NET-CHANGE-FROM-OPS> 715,759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (119,003)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39,387
<NUMBER-OF-SHARES-REDEEMED> (80)
<SHARES-REINVESTED> 63
<NET-CHANGE-IN-ASSETS> 11,106,417
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,138
<AVERAGE-NET-ASSETS> 153,546
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .65
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.20)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.55
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP ASSET ALLOCATION FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 9,901,112
<INVESTMENTS-AT-VALUE> 10,656,716
<RECEIVABLES> 1,015,412
<ASSETS-OTHER> 682,849
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,354,977
<PAYABLE-FOR-SECURITIES> 1,023,441
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 191,769
<TOTAL-LIABILITIES> 1,215,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,543,011
<SHARES-COMMON-STOCK> 1,012,757
<SHARES-COMMON-PRIOR> 1,667
<ACCUMULATED-NII-CURRENT> 6,118
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (164,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755,604
<NET-ASSETS> 11,139,767
<DIVIDEND-INCOME> 13,965
<INTEREST-INCOME> 161,938
<OTHER-INCOME> 0
<EXPENSES-NET> (50,782)
<NET-INVESTMENT-INCOME> 125,121
<REALIZED-GAINS-CURRENT> (164,966)
<APPREC-INCREASE-CURRENT> 755,604
<NET-CHANGE-FROM-OPS> 715,759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (119,003)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,005,930
<NUMBER-OF-SHARES-REDEEMED> (35)
<SHARES-REINVESTED> 5,195
<NET-CHANGE-IN-ASSETS> 11,106,417
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,138
<AVERAGE-NET-ASSETS> 8,669,389
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .56
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> CONSECO FUND GROUP FIXED INCOME FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 18,294,048
<INVESTMENTS-AT-VALUE> 18,429,263
<RECEIVABLES> 1,354,272
<ASSETS-OTHER> 2,049,327
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,832,862
<PAYABLE-FOR-SECURITIES> 2,095,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 212,317
<TOTAL-LIABILITIES> 2,308,192
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,322,654
<SHARES-COMMON-STOCK> 4,357
<SHARES-COMMON-PRIOR> 1,667
<ACCUMULATED-NII-CURRENT> 16,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 135,214
<NET-ASSETS> 19,524,670
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 430,617
<OTHER-INCOME> 0
<EXPENSES-NET> (38,064)
<NET-INVESTMENT-INCOME> 392,553
<REALIZED-GAINS-CURRENT> 50,052
<APPREC-INCREASE-CURRENT> 135,214
<NET-CHANGE-FROM-OPS> 577,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,615
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 75
<NET-CHANGE-IN-ASSETS> 19,491,320
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111,619
<AVERAGE-NET-ASSETS> 27,088
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .09
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.30)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.06
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED 6/30/97 FINANCIAL STATEMENTS
OF THE CONSECO FUND GROUP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> CONSECO FUND GROUP FIXED INCOME FUND - CLASS Y
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 18,294,048
<INVESTMENTS-AT-VALUE> 18,429,263
<RECEIVABLES> 1,354,272
<ASSETS-OTHER> 2,049,327
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,832,862
<PAYABLE-FOR-SECURITIES> 2,095,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 212,317
<TOTAL-LIABILITIES> 2,308,192
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,322,654
<SHARES-COMMON-STOCK> 1,933,502
<SHARES-COMMON-PRIOR> 1,668
<ACCUMULATED-NII-CURRENT> 16,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 135,214
<NET-ASSETS> 19,524,670
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 430,617
<OTHER-INCOME> 0
<EXPENSES-NET> (38,064)
<NET-INVESTMENT-INCOME> 392,553
<REALIZED-GAINS-CURRENT> 50,052
<APPREC-INCREASE-CURRENT> 135,214
<NET-CHANGE-FROM-OPS> 577,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,933,837
<NUMBER-OF-SHARES-REDEEMED> (29,783)
<SHARES-REINVESTED> 27,780
<NET-CHANGE-IN-ASSETS> 19,491,320
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111,619
<AVERAGE-NET-ASSETS> 11,277,291
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INVESTMENT ADVISORY AGREEMENT
BETWEEN CONSECO FUND GROUP
ON BEHALF OF EQUITY FUND
AND
CONSECO CAPITAL MANAGEMENT, INC.
THIS INVESTMENT ADVISORY AGREEMENT is entered into as of this 28th day of
March, 1997, by and between Conseco Fund Group (the "Trust"), a Massachusetts
business trust, on behalf of its series Equity Fund (the "Fund"), and Conseco
Capital Management, Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such pursuant to the provisions of the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, the Fund is a diversified series of the Trust operating as an
open-end management investment company under the 1940 Act, and is currently
divided into Class A and Class Y shares to be offered to individual and
institutional investors, respectively;
WHEREAS, the Adviser is an investment adviser, registered as such pursuant
to the provisions of the Investment Advisers Act of 1940, and is engaged in the
business of rendering investment advice and investment management services as an
independent contractor;
WHEREAS, the Fund desires and has agreed to retain the Adviser to render
advice and services to the Fund in connection with management and operation of
the Fund pursuant to terms and conditions set forth herein; and
WHEREAS, the Adviser desires and has agreed to render such advice and
furnish such services pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, conditions and agreements contained herein, and for such
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties, each intending to be legally bound hereby,
mutually agree as follows:
1. Employment. The Fund hereby employs the Adviser and the Adviser hereby
accepts such employment, to render investment advice and investment management
services with respect to the Fund, subject to the supervision and direction of
the Board of Trustees of the Trust (the "Trustees"). The Adviser shall, except
as otherwise provided herein, render or make available all services needed for
<PAGE>
the management and operation of the Fund, and shall, as part of its duties
hereunder, (i) furnish the Fund with advice and recommendations with respect to
the investment of the assets of the Fund and the purchase and sale of the
portfolio securities of the Fund, including the taking of such other steps as
may be necessary to implement such advice and recommendations, (ii) furnish the
Fund with reports, statements and other data on securities, economic conditions
and other pertinent subjects which the Trustees may request, (iii) furnish such
office space and personnel as is needed by the Fund, and (iv) in general,
superintend and manage the investments of the Fund, subject to the ultimate
supervision and direction of the Trustees.
2. Best Efforts. The Adviser hereby agrees to use its best judgment and
efforts in rendering the advice and services with respect to the Fund as
contemplated by this Agreement. The Adviser further agrees to use its best
efforts in the furnishing of such advice and recommendations with respect to the
Fund, in the preparation of reports and information, and in the management of
the respective assets of the Fund pursuant to this Agreement. For this purpose
the Adviser shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary to the performance of its obligations under this
Agreement. Without limiting the generality of the foregoing, the staff and
personnel of the Adviser shall be deemed to include persons employed or retained
by the Adviser to furnish statistical, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Adviser may desire and request.
3. Independent Contractor Status. The Adviser shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent of the Trust or
the Fund. It is expressly understood and agreed that the services to be rendered
by the Adviser to the Fund pursuant to the provisions of this Agreement are not
to be deemed exclusive with respect to the Adviser's rendering of services, and
the Adviser shall therefore be free to render similar or different services to
others, PROVIDED THAT, its ability to render the services described herein shall
not be impaired thereby.
4. Furnishing of Information. The Fund shall from time to time furnish to
the Adviser detailed statements of the investments and assets of the Fund and
information pertaining to the investment objectives and needs of the Fund. and
shall make available to the Adviser such financial reports, proxy statements,
legal and other information in the possession of or available to the Fund
relating to its investments, as the same may be relevant to the performance by
the Adviser of its obligations hereunder. The Fund shall furnish such other
information as the Adviser may reasonably request.
5. Fund Records. The Adviser agrees that all records which it maintains
for the Fund shall be the property of the Fund and that it will surrender
promptly to the designated officers of the Fund any of such records upon
request. The Adviser further agrees to preserve for the period prescribed by the
rules and regulations of the Securities and Exchange Commission all such records
as are required to be maintained pursuant to said rules. The Adviser agrees that
it will maintain all records and accounts regarding the investment activities of
the Fund in a confidential manner. All such accounts or records shall be made
available within five (5) business days of request to the accountants or
2
<PAGE>
auditors of the Fund during regular business hours at the Adviser's offices upon
reasonable prior written notice. In addition, the Adviser will provide any
materials reasonably related to the investment advisory services provided
hereunder as may be reasonably requested in writing by the designated officers
of the Fund or as may be required by any governmental agency having
jurisdiction.
6. Tender Offers. The Adviser hereby agrees that whenever the Adviser has
determined that the Fund should tender securities pursuant to a "tender offer
solicitation," the Adviser shall designate an affiliate as the "tendering
dealer," so long as such affiliate is legally permitted to act in such capacity
under the federal securities laws, the rules promulgated thereunder and the
rules of any securities exchange or association of which such affiliate may be a
member. Such affiliated dealer shall not be obligated to make any additional
commitments of capital, expense or personnel beyond that committed as of the
date of this Agreement (other than normal periodic fees or payments necessary to
maintain its corporate existence and its membership in the National Association
of Securities Dealers, Inc.). This Agreement shall not obligate the Adviser or
such affiliate to (i) act pursuant to the foregoing requirement under any
circumstance in which either might reasonably believe that liability might be
imposed upon it as a result of so acting, or (ii) institute legal or other
proceedings to collect fees which may be considered to be due to it from others
as a result of such a tender, unless the Fund shall enter into an agreement with
the Adviser or such affiliate to reimburse it for all expenses connected with
attempting to collect such fees (including legal fees and expenses and that
portion of the compensation due to their respective employees, which amount is
directly attributable to the time involved in attempting to collect such fees).
7. Allocation of Costs and Expenses. The Adviser shall bear and pay the
costs of rendering its services pursuant to the terms of this Agreement,
including the fees paid to any sub-adviser which the Adviser may retain and any
value added taxes due in connection therewith. The Fund shall bear and pay for
all other expenses of its operation, including but not limited to,
organizational and offering expenses of the Fund and expenses incurred in
connection with the issuance and registration of shares of the Fund; fees of the
Fund's custodian, transfer and shareholder servicing agent; costs and expenses
of pricing and calculating the daily net asset value of the shares of the Fund
and of maintaining the books of account required by the 1940 Act; expenditures
in connection with meetings of shareholders and Trustees, other than those
called solely to accommodate the Adviser; salaries of officers and fees and
expenses of Trustees or members of any advisory board or committee who are not
affiliated with or interested persons of the Fund or the Adviser; salaries of
personnel involved in placing orders for the execution of the portfolio
transactions of the Fund or in maintaining registration of shares of the Fund
under state securities laws; insurance premiums on property or personnel of the
Fund which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Trust or other communications for
distribution to its shareholders; legal, auditing, and accounting fees; trade
association dues; fees and expenses or registering and maintaining registration
of shares of the Fund for sale under applicable federal and state securities
laws; and all other charges and costs associated with the Fund's operations,
plus any extraordinary and non-recurring expenses, except as otherwise
prescribed herein. To the extent the Adviser incurs any costs or performs any
services which are an obligation of the Fund as set forth herein and to the
extent such costs or services have been reasonably rendered, (a) the Fund shall
3
<PAGE>
promptly reimburse the Adviser for such costs and expenses, and (b) the Adviser
shall be entitled to recover from the Fund the actual costs incurred by the
Adviser in rendering such services.
8. Management Fees. (a) In exchange for the rendering of advice and
services pursuant hereto, the Fund shall pay to the Adviser, and the Adviser
shall accept as full compensation for all investment management services
furnished or provided to the Fund and as full reimbursement for all expenses
assumed by the Adviser, a management fee computed at the annual rate of .70% of
the average daily net assets of the Fund.
(b) The management fee shall be accrued daily by the Fund and paid
to the Adviser at the end of each calendar month.
(c) In the case of termination of this Agreement during any month,
the management fee for that month shall be calculated on the basis of the number
of business days during which it is in effect for that month.
(d) To the extent that the gross operating costs and expenses of the
Fund (excluding any interest, taxes, brokerage commissions, distribution
expenses and, to the extent permitted, any extraordinary expenses, such as
litigation and non-recurring expenses) exceed the allowable expense limitations
of the state in which shares of the Fund are registered for sale having the most
stringent expenses reimbursement provisions, the Adviser shall reimburse the
Fund for the amount of such excess.
(e) The management fee payable by the Fund hereunder shall be
reduced to the extent that an affiliate of the Adviser has actually received
cash payments of tender offer solicitation fees (less certain costs and expenses
incurred in connection therewith) as referred to in Paragraph 6 hereof.
9. Prohibition on Purchase of Shares. The Adviser agrees that neither it
nor any of its officers or employees shall take any short position in the shares
of beneficial interest of the Fund. This prohibition shall not prevent the
purchase of such shares by any of the officers and directors or bona fide
employees of the Adviser or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the 1940 Act.
10. Compliance with Applicable Law. Nothing contained herein shall be
deemed to require the Fund to take any action contrary to (a) the Agreement and
Declaration of Trust of the Trust, (b) the By-laws of the Trust, or (c) any
applicable statute or regulation. Nothing contained herein shall be deemed to
relieve or deprive the Trustees of their responsibility for and control of the
conduct of the affairs of the Fund.
11. Liability. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of or in
4
<PAGE>
connection with rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Fund.
(b) Notwithstanding the foregoing, the Adviser agrees to reimburse
the Fund for any and all costs, expenses, and counsel and Trustees' fees
reasonably incurred by the Fund in connection with (i) preparation, printing and
distribution of proxy statements, (ii) amendments to its Registration Statement,
(iii) the holding of meetings of shareholders or Trustees, (iv) the conduct of
factual investigations, (v) any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and Exchange
Commission)) which the Fund incurs as a result of action or inaction on the part
of the Adviser or any of its shareholders where the action or inaction
necessitating such expenditures is (A) directly or indirectly related to any
transactions or proposed transaction in the shares or control of the Adviser or
its affiliates (or litigation related to any transactions or proposed
transaction involving such shares or control) which shall have been undertaken
without the prior express approval of the Trustees, or (B) within the sole
control of the Adviser or any of its affiliates or any of their respective
officers, directors, employees or shareholders. The Adviser shall not be
obligated pursuant to the provisions of this Subparagraph 10(b) to reimburse the
Fund for any expenditures related to the institution of an administrative
proceeding or related to civil litigation by the Fund or by a shareholder of the
Trust seeking to recover all or a portion of the proceeds derived by any
shareholder of the Adviser or any of its affiliates from the sale of shares of
the Adviser or similar matters. So long as this Agreement remains in effect, the
Adviser shall pay to the Fund the amount due for expenses subject to this
Subparagraph 10(b) within thirty (30) days after a bill or statement has been
received by the Fund therefor. This provision shall not be deemed to be a waiver
of any claim which the Fund may have or may assert against the Adviser or others
for costs, expenses, or damages heretofore incurred by the Trust or for costs,
expenses, or damages the fund may hereafter incur which are not reimbursable to
it hereunder.
(c) No provision of this Agreement shall be construed to protect any
Trustee of the Trust or officer of the Fund, or any director or officer of the
Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.
(d) The Adviser understands that the obligations of this Agreement
are not personally binding upon any shareholder of the Fund, but bind only the
Trust's property. The Adviser represents that it has notice of the provisions of
the Declaration of Trust of the Trust disclaiming shareholder liability for acts
or obligations of the Trust.
12. Term of Agreement. This Agreement shall become effective on the date
hereof and shall continue in effect for two years from such date unless sooner
terminated as hereinafter provided, and shall continue in effect from year to
year thereafter so long as such continuation is approved at least annually by
(i) the Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Fund, and (ii) the vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, with such vote being cast in person at a meeting called for the
purpose of voting on such approval.
13. Termination. This Agreement may be terminated at any time without
payment of any penalty (a) by the Trustees of the Trust or by vote of a majority
5
<PAGE>
of the outstanding voting securities of the Fund, upon delivery of sixty (60)
days' written notice to the Adviser, or (b) by the Adviser upon sixty (60) days'
written notice to the Fund. This Agreement shall terminate automatically in the
event of any transfer or assignment hereof, as defined in the 1940 Act.
14. 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.
15. Severability. The provisions of this Agreement shall be considered
severable and if for any reason any provision of this Agreement which is not
essential to the effectuation of the basic purpose 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.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
17. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior understandings or agreements between the parties
pertaining to the subject matter hereof, whether oral or written. This Agreement
may only be modified or amended by mutual written agreement of the parties
hereto and, as required, upon approval of a majority of the outstanding voting
securities of the Fund.
18. Definitions. For purposes of application and operation of
the provisions of this Agreement, the term "majority of the outstanding
voting securities" shall have the meaning as set forth in the 1940 Act.
19. Use of Name. In consideration of the execution of this
Agreement, the Adviser hereby grants to the Trust the right to use the name
"Conseco" as part of its name and the names of series thereof. The Trust
agrees that in the event this Agreement is terminated, it shall immediately
take such steps as are necessary to amend its name to remove the reference to
"Conseco."
20. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers on the day and year
first above written.
ATTEST: CONSECO FUND GROUP,
on behalf of Equity Fund
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
ATTEST: CONSECO CAPITAL MANAGEMENT, INC.
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
7
INVESTMENT ADVISORY AGREEMENT
BETWEEN CONSECO FUND GROUP
ON BEHALF OF ASSET ALLOCATION FUND
AND
CONSECO CAPITAL MANAGEMENT, INC.
THIS INVESTMENT ADVISORY AGREEMENT is entered into as of this 28th day of
March, 1997, by and between Conseco Fund Group (the "Trust"), a Massachusetts
business trust, on behalf of its series Asset Allocation Fund (the "Fund"), and
Conseco Capital Management, Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such pursuant to the provisions of the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, the Fund is a diversified series of the Trust operating as an
open-end management investment company under the 1940 Act, and is currently
divided into Class A and Class Y shares to be offered to individual and
institutional investors, respectively;
WHEREAS, the Adviser is an investment adviser, registered as such pursuant
to the provisions of the Investment Advisers Act of 1940, and is engaged in the
business of rendering investment advice and investment management services as an
independent contractor;
WHEREAS, the Fund desires and has agreed to retain the Adviser to render
advice and services to the Fund in connection with management and operation of
the Fund pursuant to terms and conditions set forth herein; and
WHEREAS, the Adviser desires and has agreed to render such advice and
furnish such services pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, conditions and agreements contained herein, and for such
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties, each intending to be legally bound hereby,
mutually agree as follows:
1. EMPLOYMENT. The Fund hereby employs the Adviser and the Adviser hereby
accepts such employment, to render investment advice and investment management
services with respect to the Fund, subject to the supervision and direction of
the Board of Trustees of the Trust (the "Trustees"). The Adviser shall, except
as otherwise provided herein, render or make available all services needed for
the management and operation of the Fund, and shall, as part of its duties
<PAGE>
hereunder, (i) furnish the Fund with advice and recommendations with respect to
the investment of the assets of the Fund and the purchase and sale of the
portfolio securities of the Fund, including the taking of such other steps as
may be necessary to implement such advice and recommendations, (ii) furnish the
Fund with reports, statements and other data on securities, economic conditions
and other pertinent subjects which the Trustees may request, (iii) furnish such
office space and personnel as is needed by the Fund, and (iv) in general,
superintend and manage the investments of the Fund, subject to the ultimate
supervision and direction of the Trustees.
2. BEST EFFORTS. The Adviser hereby agrees to use its best judgment and
efforts in rendering the advice and services with respect to the Fund as
contemplated by this Agreement. The Adviser further agrees to use its best
efforts in the furnishing of such advice and recommendations with respect to the
Fund, in the preparation of reports and information, and in the management of
the respective assets of the Fund pursuant to this Agreement. For this purpose
the Adviser shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary to the performance of its obligations under this
Agreement. Without limiting the generality of the foregoing, the staff and
personnel of the Adviser shall be deemed to include persons employed or retained
by the Adviser to furnish statistical, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Adviser may desire and request.
3. INDEPENDENT CONTRACTOR STATUS. The Adviser shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent of the Trust or
the Fund. It is expressly understood and agreed that the services to be rendered
by the Adviser to the Fund pursuant to the provisions of this Agreement are not
to be deemed exclusive with respect to the Adviser's rendering of services, and
the Adviser shall therefore be free to render similar or different services to
others, PROVIDED THAT, its ability to render the services described herein shall
not be impaired thereby.
4. FURNISHING OF INFORMATION. The Fund shall from time to time furnish to
the Adviser detailed statements of the investments and assets of the Fund and
information pertaining to the investment objectives and needs of the Fund, and
shall make available to the Adviser such financial reports, proxy statements,
legal and other information in the possession of or available to the Fund
relating to its investments, as the same may be relevant to the performance by
the Adviser of its obligations hereunder. The Fund shall furnish such other
information as the Adviser may reasonably request.
5. FUND RECORDS. The Adviser agrees that all records which it maintains
for the Fund shall be the property of the Fund and that it will surrender
promptly to the designated officers of the Fund any of such records upon
request. The Adviser further agrees to preserve for the period prescribed by the
rules and regulations of the Securities and Exchange Commission all such records
as are required to be maintained pursuant to said rules. The Adviser agrees that
2
<PAGE>
it will maintain all records and accounts regarding the investment activities of
the Fund in a confidential manner. All such accounts or records shall be made
available within five (5) business days of request to the accountants or
auditors of the Fund during regular business hours at the Adviser's offices upon
reasonable prior written notice. In addition, the Adviser will provide any
materials reasonably related to the investment advisory services provided
hereunder as may be reasonably requested in writing by the designated officers
of the Fund or as may be required by any governmental agency having
jurisdiction.
6. TENDER OFFERS. The Adviser hereby agrees that whenever the Adviser has
determined that the Fund should tender securities pursuant to a "tender offer
solicitation," the Adviser shall designate an affiliate as the "tendering
dealer," so long as such affiliate is legally permitted to act in such capacity
under the federal securities laws, the rules promulgated thereunder and the
rules of any securities exchange or association of which such affiliate may be a
member. Such affiliated dealer shall not be obligated to make any additional
commitments of capital, expense or personnel beyond that committed as of the
date of this Agreement (other than normal periodic fees or payments necessary to
maintain its corporate existence and its membership in the National Association
of Securities Dealers, Inc.). This Agreement shall not obligate the Adviser or
such affiliate to (i) act pursuant to the foregoing requirement under any
circumstance in which either might reasonably believe that liability might be
imposed upon it as a result of so acting, or (ii) institute legal or other
proceedings to collect fees which may be considered to be due to it from others
as a result of such a tender, unless the Fund shall enter into an agreement with
the Adviser or such affiliate to reimburse it for all expenses connected with
attempting to collect such fees (including legal fees and expenses and that
portion of the compensation due to their respective employees, which amount is
directly attributable to the time involved in attempting to collect such fees).
7. ALLOCATION OF COSTS AND EXPENSES. The Adviser shall bear and pay the
costs of rendering its services pursuant to the terms of this Agreement,
including the fees paid to any sub-adviser which the Adviser may retain and any
value added taxes due in connection therewith. The Fund shall bear and pay for
all other expenses of its operation, including but not limited to,
organizational and offering expenses of the Fund and expenses incurred in
connection with the issuance and registration of shares of the Fund; fees of the
Fund's custodian, transfer and shareholder servicing agent; costs and expenses
of pricing and calculating the daily net asset value of the shares of the Fund
and of maintaining the books of account required by the 1940 Act; expenditures
in connection with meetings of shareholders and Trustees, other than those
called solely to accommodate the Adviser; salaries of officers and fees and
expenses of Trustees or members of any advisory board or committee who are not
affiliated with or interested persons of the Fund or the Adviser; salaries of
personnel involved in placing orders for the execution of the portfolio
transactions of the Fund or in maintaining registration of shares of the Fund
under state securities laws; insurance premiums on property or personnel of the
Fund which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Trust or other communications for
distribution to its shareholders; legal, auditing, and accounting fees; trade
association dues; fees and expenses or registering and maintaining registration
of shares of the Fund for sale under applicable federal and state securities
laws; and all other charges and costs associated with the Fund's operations,
plus any extraordinary and non-recurring expenses, except as otherwise
prescribed herein. To the extent the Adviser incurs any costs or performs any
services which are an obligation of the Fund as set forth herein and to the
3
<PAGE>
extent such costs or services have been reasonably rendered, (a) the Fund shall
promptly reimburse the Adviser for such costs and expenses, and (b) the Adviser
shall be entitled to recover from the Fund the actual costs incurred by the
Adviser in rendering such services.
8. MANAGEMENT FEES. (a) In exchange for the rendering of advice and
services pursuant hereto, the Fund shall pay to the Adviser, and the Adviser
shall accept as full compensation for all investment management services
furnished or provided to the Fund and as full reimbursement for all expenses
assumed by the Adviser, a management fee computed at the annual rate of .70% of
the average daily net assets of the Fund.
(b) The management fee shall be accrued daily by the Fund and paid
to the Adviser at the end of each calendar month.
(c) In the case of termination of this Agreement during any month,
the management fee for that month shall be calculated on the basis of the number
of business days during which it is in effect for that month.
(d) To the extent that the gross operating costs and expenses of the
Fund (excluding any interest, taxes, brokerage commissions, distribution
expenses and, to the extent permitted, any extraordinary expenses, such as
litigation and non-recurring expenses) exceed the allowable expense limitations
of the state in which shares of the Fund are registered for sale having the most
stringent expenses reimbursement provisions, the Adviser shall reimburse the
Fund for the amount of such excess.
(e) The management fee payable by the Fund hereunder shall be
reduced to the extent that an affiliate of the Adviser has actually received
cash payments of tender offer solicitation fees (less certain costs and expenses
incurred in connection therewith) as referred to in Paragraph 6 hereof.
9. PROHIBITION ON PURCHASE OF SHARES. The Adviser agrees that neither it
nor any of its officers or employees shall take any short position in the shares
of beneficial interest of the Fund. This prohibition shall not prevent the
purchase of such shares by any of the officers and directors or bona fide
employees of the Adviser or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the 1940 Act.
10. COMPLIANCE WITH APPLICABLE LAW. Nothing contained herein shall be
deemed to require the Fund to take any action contrary to (a) the Agreement and
Declaration of Trust of the Trust, (b) the By-laws of the Trust, or (c) any
applicable statute or regulation. Nothing contained herein shall be deemed to
relieve or deprive the Trustees of their responsibility for and control of the
conduct of the affairs of the Fund.
11. LIABILITY. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Fund or to
4
<PAGE>
any shareholder of the Fund for any act or omission in the course of or in
connection with rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Fund.
(b) Notwithstanding the foregoing, the Adviser agrees to reimburse
the Fund for any and all costs, expenses, and counsel and Trustees' fees
reasonably incurred by the Fund in connection with (i) preparation, printing and
distribution of proxy statements, (ii) amendments to its Registration Statement,
(iii) the holding of meetings of shareholders or Trustees, (iv) the conduct of
factual investigations, (v) any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and Exchange
Commission) which the Fund incurs as a result of action or inaction on the part
of the Adviser or any of its shareholders where the action or inaction
necessitating such expenditures is (A) directly or indirectly related to any
transactions or proposed transaction in the shares or control of the Adviser or
its affiliates (or litigation related to any transactions or proposed
transaction involving such shares or control) which shall have been undertaken
without the prior express approval of the Trustees, or (B) within the sole
control of the Adviser or any of its affiliates or any of their respective
officers, directors, employees or shareholders. The Adviser shall not be
obligated pursuant to the provisions of this Subparagraph 10(b) to reimburse the
Fund for any expenditures related to the institution of an administrative
proceeding or related to civil litigation by the Fund or by a shareholder of the
Trust seeking to recover all or a portion of the proceeds derived by any
shareholder of the Adviser or any of its affiliates from the sale of shares of
the Adviser or similar matters. So long as this Agreement remains in effect, the
Adviser shall pay to the Fund the amount due for expenses subject to this
Subparagraph 10(b) within thirty (30) days after a bill or statement has been
received by the Fund therefor. This provision shall not be deemed to be a waiver
of any claim which the Fund may have or may assert against the Adviser or others
for costs, expenses, or damages heretofore incurred by the Trust or for costs,
expenses, or damages the fund may hereafter incur which are not reimbursable to
it hereunder.
(c) No provision of this Agreement shall be construed to protect any
Trustee of the Trust or officer of the Fund, or any director or officer of the
Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.
(d) The Adviser understands that the obligations of this Agreement
are not personally binding upon any shareholder of the Fund, but bind only the
Trust's property. The Adviser represents that it has notice of the provisions of
the Declaration of Trust of the Trust disclaiming shareholder liability for acts
or obligations of the Trust.
12. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect for two years from such date unless sooner
terminated as hereinafter provided, and shall continue in effect from year to
year thereafter so long as such continuation is approved at least annually by
(i) the Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Fund, and (ii) the vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, with such vote being cast in person at a meeting called for the
purpose of voting on such approval.
5
<PAGE>
13. TERMINATION. This Agreement may be terminated at any time without
payment of any penalty (a) by the Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Fund, upon delivery of sixty (60)
days' written notice to the Adviser, or (b) by the Adviser upon sixty (60) days'
written notice to the Fund. This Agreement shall terminate automatically in the
event of any transfer or assignment hereof, as defined in the 1940 Act.
14. 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.
15. SEVERABILITY. The provisions of this Agreement shall be considered
severable and if for any reason any provision of this Agreement which is not
essential to the effectuation of the basic purpose 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.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
17. ENTIRE AGREEMENT. This Agreement represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior understandings or agreements between the parties
pertaining to the subject matter hereof, whether oral or written. This Agreement
may only be modified or amended by mutual written agreement of the parties
hereto and, as required, upon approval of a majority of the outstanding voting
securities of the Fund.
18. DEFINITIONS. For purposes of application and operation of the
provisions of this Agreement, the term "majority of the outstanding voting
securities" shall have the meaning as set forth in the 1940 Act.
19. USE OF NAME. In consideration of the execution of this Agreement, the
Adviser hereby grants to the Trust the right to use the name "Conseco" as part
of its name and the names of series thereof. The Trust agrees that in the event
this Agreement is terminated, it shall immediately take such steps as are
necessary to amend its name to remove the reference to "Conseco."
20. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers on the day and year
first above written.
ATTEST: CONSECO FUND GROUP,
on behalf of Asset Allocation Fund
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
ATTEST: CONSECO CAPITAL MANAGEMENT, INC.
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
INVESTMENT ADVISORY AGREEMENT
BETWEEN CONSECO FUND GROUP
ON BEHALF OF FIXED INCOME FUND
AND
CONSECO CAPITAL MANAGEMENT, INC.
THIS INVESTMENT ADVISORY AGREEMENT is entered into as of this 28th day of
March, 1997, by and between Conseco Fund Group (the "Trust"), a Massachusetts
business trust, on behalf of its series Fixed Income Fund (the "Fund"), and
Conseco Capital Management, Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such pursuant to the provisions of the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, the Fund is a diversified series of the Trust operating as an
open-end management investment company under the 1940 Act, and is currently
divided into Class A and Class Y shares to be offered to individual and
institutional investors, respectively;
WHEREAS, the Adviser is an investment adviser, registered as such pursuant
to the provisions of the Investment Advisers Act of 1940, and is engaged in the
business of rendering investment advice and investment management services as an
independent contractor;
WHEREAS, the Fund desires and has agreed to retain the Adviser to render
advice and services to the Fund in connection with management and operation of
the Fund pursuant to terms and conditions set forth herein; and
WHEREAS, the Adviser desires and has agreed to render such advice and
furnish such services pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, conditions and agreements contained herein, and for such
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties, each intending to be legally bound hereby,
mutually agree as follows:
1. EMPLOYMENT. The Fund hereby employs the Adviser and the Adviser hereby
accepts such employment, to render investment advice and investment management
services with respect to the Fund, subject to the supervision and direction of
the Board of Trustees of the Trust (the "Trustees"). The Adviser shall, except
<PAGE>
as otherwise provided herein, render or make available all services needed for
the management and operation of the Fund, and shall, as part of its duties
hereunder, (i) furnish the Fund with advice and recommendations with respect to
the investment of the assets of the Fund and the purchase and sale of the
portfolio securities of the Fund, including the taking of such other steps as
may be necessary to implement such advice and recommendations, (ii) furnish the
Fund with reports, statements and other data on securities, economic conditions
and other pertinent subjects which the Trustees may request, (iii) furnish such
office space and personnel as is needed by the Fund, and (iv) in general,
superintend and manage the investments of the Fund, subject to the ultimate
supervision and direction of the Trustees.
2. BEST EFFORTS. The Adviser hereby agrees to use its best judgment and
efforts in rendering the advice and services with respect to the Fund as
contemplated by this Agreement. The Adviser further agrees to use its best
efforts in the furnishing of such advice and recommendations with respect to the
Fund, in the preparation of reports and information, and in the management of
the respective assets of the Fund pursuant to this Agreement. For this purpose
the Adviser shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary to the performance of its obligations under this
Agreement. Without limiting the generality of the foregoing, the staff and
personnel of the Adviser shall be deemed to include persons employed or retained
by the Adviser to furnish statistical, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Adviser may desire and request.
3. INDEPENDENT CONTRACTOR STATUS. The Adviser shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent of the Trust or
the Fund. It is expressly understood and agreed that the services to be rendered
by the Adviser to the Fund pursuant to the provisions of this Agreement are not
to be deemed exclusive with respect to the Adviser's rendering of services, and
the Adviser shall therefore be free to render similar or different services to
others, PROVIDED THAT, its ability to render the services described herein shall
not be impaired thereby.
4. FURNISHING OF INFORMATION. The Fund shall from time to time furnish to
the Adviser detailed statements of the investments and assets of the Fund and
information pertaining to the investment objectives and needs of the Fund, and
shall make available to the Adviser such financial reports, proxy statements,
legal and other information in the possession of or available to the Fund
relating to its investments, as the same may be relevant to the performance by
the Adviser of its obligations hereunder. The Fund shall furnish such other
information as the Adviser may reasonably request.
5. FUND RECORDS. The Adviser agrees that all records which it maintains
for the Fund shall be the property of the Fund and that it will surrender
promptly to the designated officers of the Fund any of such records upon
request. The Adviser further agrees to preserve for the period prescribed by the
rules and regulations of the Securities and Exchange Commission all such records
as are required to be maintained pursuant to said rules. The Adviser agrees that
2
<PAGE>
it will maintain all records and accounts regarding the investment activities of
the Fund in a confidential manner. All such accounts or records shall be made
available within five (5) business days of request to the accountants or
auditors of the Fund during regular business hours at the Adviser's offices upon
reasonable prior written notice. In addition, the Adviser will provide any
materials reasonably related to the investment advisory services provided
hereunder as may be reasonably requested in writing by the designated officers
of the Fund or as may be required by any governmental agency having
jurisdiction.
6. TENDER OFFERS. The Adviser hereby agrees that whenever the Adviser has
determined that the Fund should tender securities pursuant to a "tender offer
solicitation," the Adviser shall designate an affiliate as the "tendering
dealer," so long as such affiliate is legally permitted to act in such capacity
under the federal securities laws, the rules promulgated thereunder and the
rules of any securities exchange or association of which such affiliate may be a
member. Such affiliated dealer shall not be obligated to make any additional
commitments of capital, expense or personnel beyond that committed as of the
date of this Agreement (other than normal periodic fees or payments necessary to
maintain its corporate existence and its membership in the National Association
of Securities Dealers, Inc.). This Agreement shall not obligate the Adviser or
such affiliate to (i) act pursuant to the foregoing requirement under any
circumstance in which either might reasonably believe that liability might be
imposed upon it as a result of so acting, or (ii) institute legal or other
proceedings to collect fees which may be considered to be due to it from others
as a result of such a tender, unless the Fund shall enter into an agreement with
the Adviser or such affiliate to reimburse it for all expenses connected with
attempting to collect such fees (including legal fees and expenses and that
portion of the compensation due to their respective employees, which amount is
directly attributable to the time involved in attempting to collect such fees).
7. ALLOCATION OF COSTS AND EXPENSES. The Adviser shall bear and pay the
costs of rendering its services pursuant to the terms of this Agreement,
including the fees paid to any sub-adviser which the Adviser may retain and any
value added taxes due in connection therewith. The Fund shall bear and pay for
all other expenses of its operation, including but not limited to,
organizational and offering expenses of the Fund and expenses incurred in
connection with the issuance and registration of shares of the Fund; fees of the
Fund's custodian, transfer and shareholder servicing agent; costs and expenses
of pricing and calculating the daily net asset value of the shares of the Fund
and of maintaining the books of account required by the 1940 Act; expenditures
in connection with meetings of shareholders and Trustees, other than those
called solely to accommodate the Adviser; salaries of officers and fees and
expenses of Trustees or members of any advisory board or committee who are not
affiliated with or interested persons of the Fund or the Adviser; salaries of
personnel involved in placing orders for the execution of the portfolio
transactions of the Fund or in maintaining registration of shares of the Fund
under state securities laws; insurance premiums on property or personnel of the
Fund which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Trust or other communications for
distribution to its shareholders; legal, auditing, and accounting fees; trade
association dues; fees and expenses or registering and maintaining registration
of shares of the Fund for sale under applicable federal and state securities
laws; and all other charges and costs associated with the Fund's operations,
plus any extraordinary and non-recurring expenses, except as otherwise
prescribed herein. To the extent the Adviser incurs any costs or performs any
3
<PAGE>
services which are an obligation of the Fund as set forth herein and to the
extent such costs or services have been reasonably rendered, (a) the Fund shall
promptly reimburse the Adviser for such costs and expenses, and (b) the Adviser
shall be entitled to recover from the Fund the actual costs incurred by the
Adviser in rendering such services.
8. MANAGEMENT FEES. (a) In exchange for the rendering of advice and
services pursuant hereto, the Fund shall pay to the Adviser, and the Adviser
shall accept as full compensation for all investment management services
furnished or provided to the Fund and as full reimbursement for all expenses
assumed by the Adviser, a management fee computed at the annual rate of .45% of
the average daily net assets of the Fund.
(b) The management fee shall be accrued daily by the Fund and paid
to the Adviser at the end of each calendar month.
(c) In the case of termination of this Agreement during any month,
the management fee for that month shall be calculated on the basis of the number
of business days during which it is in effect for that month.
(d) To the extent that the gross operating costs and expenses of the
Fund (excluding any interest, taxes, brokerage commissions, distribution
expenses and, to the extent permitted, any extraordinary expenses, such as
litigation and non-recurring expenses) exceed the allowable expense limitations
of the state in which shares of the Fund are registered for sale having the most
stringent expenses reimbursement provisions, the Adviser shall reimburse the
Fund for the amount of such excess.
(e) The management fee payable by the Fund hereunder shall be
reduced to the extent that an affiliate of the Adviser has actually received
cash payments of tender offer solicitation fees (less certain costs and expenses
incurred in connection therewith) as referred to in Paragraph 6 hereof.
9. PROHIBITION ON PURCHASE OF SHARES. The Adviser agrees that neither it
nor any of its officers or employees shall take any short position in the shares
of beneficial interest of the Fund. This prohibition shall not prevent the
purchase of such shares by any of the officers and directors or bona fide
employees of the Adviser or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the 1940 Act.
10. COMPLIANCE WITH APPLICABLE LAW. Nothing contained herein shall be
deemed to require the Fund to take any action contrary to (a) the Agreement and
Declaration of Trust of the Trust, (b) the By-laws of the Trust, or (c) any
applicable statute or regulation. Nothing contained herein shall be deemed to
relieve or deprive the Trustees of their responsibility for and control of the
conduct of the affairs of the Fund.
11. LIABILITY. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of or in
4
<PAGE>
connection with rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Fund.
(b) Notwithstanding the foregoing, the Adviser agrees to reimburse
the Fund for any and all costs, expenses, and counsel and Trustees' fees
reasonably incurred by the Fund in connection with (i) preparation, printing and
distribution of proxy statements, (ii) amendments to its Registration Statement,
(iii) the holding of meetings of shareholders or Trustees, (iv) the conduct of
factual investigations, (v) any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and Exchange
Commission) which the Fund incurs as a result of action or inaction on the part
of the Adviser or any of its shareholders where the action or inaction
necessitating such expenditures is (A) directly or indirectly related to any
transactions or proposed transaction in the shares or control of the Adviser or
its affiliates (or litigation related to any transactions or proposed
transaction involving such shares or control) which shall have been undertaken
without the prior express approval of the Trustees, or (B) within the sole
control of the Adviser or any of its affiliates or any of their respective
officers, directors, employees or shareholders. The Adviser shall not be
obligated pursuant to the provisions of this Subparagraph 10(b) to reimburse the
Fund for any expenditures related to the institution of an administrative
proceeding or related to civil litigation by the Fund or by a shareholder of the
Trust seeking to recover all or a portion of the proceeds derived by any
shareholder of the Adviser or any of its affiliates from the sale of shares of
the Adviser or similar matters. So long as this Agreement remains in effect, the
Adviser shall pay to the Fund the amount due for expenses subject to this
Subparagraph 10(b) within thirty (30) days after a bill or statement has been
received by the Fund therefor. This provision shall not be deemed to be a waiver
of any claim which the Fund may have or may assert against the Adviser or others
for costs, expenses, or damages heretofore incurred by the Trust or for costs,
expenses, or damages the fund may hereafter incur which are not reimbursable to
it hereunder.
(c) No provision of this Agreement shall be construed to protect any
Trustee of the Trust or officer of the Fund, or any director or officer of the
Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.
(d) The Adviser understands that the obligations of this Agreement
are not personally binding upon any shareholder of the Fund, but bind only the
Trust's property. The Adviser represents that it has notice of the provisions of
the Declaration of Trust of the Trust disclaiming shareholder liability for acts
or obligations of the Trust.
12. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect for two years from such date unless sooner
terminated as hereinafter provided, and shall continue in effect from year to
year thereafter so long as such continuation is approved at least annually by
(i) the Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Fund, and (ii) the vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, with such vote being cast in person at a meeting called for the
purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated at any time without
payment of any penalty (a) by the Trustees of the Trust or by vote of a majority
5
<PAGE>
of the outstanding voting securities of the Fund, upon delivery of sixty (60)
days' written notice to the Adviser, or (b) by the Adviser upon sixty (60) days'
written notice to the Fund. This Agreement shall terminate automatically in the
event of any transfer or assignment hereof, as defined in the 1940 Act.
14. 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.
15. SEVERABILITY. The provisions of this Agreement shall be considered
severable and if for any reason any provision of this Agreement which is not
essential to the effectuation of the basic purpose 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.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
17. ENTIRE AGREEMENT. This Agreement represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior understandings or agreements between the parties
pertaining to the subject matter hereof, whether oral or written. This Agreement
may only be modified or amended by mutual written agreement of the parties
hereto and, as required, upon approval of a majority of the outstanding voting
securities of the Fund.
18. DEFINITIONS. For purposes of application and operation of the
provisions of this Agreement, the term "majority of the outstanding voting
securities" shall have the meaning as set forth in the 1940 Act.
19. USE OF NAME. In consideration of the execution of this Agreement, the
Adviser hereby grants to the Trust the right to use the name "Conseco" as part
of its name and the names of series thereof. The Trust agrees that in the event
this Agreement is terminated, it shall immediately take such steps as are
necessary to amend its name to remove the reference to "Conseco."
20. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers on the day and year
first above written.
ATTEST: CONSECO FUND GROUP,
on behalf of Fixed Income Fund
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
ATTEST: CONSECO CAPITAL MANAGEMENT, INC.
/s/ William P. Latimer By: /s/ Maxwell E. Bublitz
- ---------------------- ----------------------
William P. Latimer, Esq. Maxwell E. Bublitz
President
7
PRINCIPAL UNDERWRITING AGREEMENT
--------------------------------
BETWEEN CONSECO FUND GROUP
AND
CONSECO EQUITY SALES, INC.
THIS PRINCIPAL UNDERWRITING AGREEMENT is entered into as of this 2nd day
of January, 1997, by and between Conseco Fund Group (the "Trust"), a
Massachusetts business trust, and Conseco (formerly GARCO) Equity Sales, Inc., a
Texas corporation (the "Underwriter").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such pursuant to the provisions of the Investment Company Act of
1940 (the "1940 Act"), and its shares are registered pursuant to the Securities
Act of 1933 (the "1933 Act");
WHEREAS, the Trust consists of the Equity, Asset Allocation and Fixed
Income Funds (the "Funds," each a "Fund"), which are diversified series of the
Trust operating as open-end management investment companies under the 1940 Act,
and are currently divided into Class A and Class Y shares to be offered to
individual and institutional investors, respectively;
WHEREAS, the Underwriter is registered as a broker-dealer pursuant to
the provisions of the Securities Exchange Act of 1934 (the "1934 Act"), and
is a member in good standing of the National Association of Securities
Dealer, Inc. ("NASD");
WHEREAS, the Trust desires to have its Funds' shares sold and distributed
through the Underwriter pursuant to the terms and conditions set forth herein;
and
WHEREAS, the Underwriter desires and has agreed to sell and distribute
those shares pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, conditions and agreements contained herein, and for such
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties, each intending to be legally bound hereby,
mutually agree as follows:
l. EMPLOYMENT. The Trust hereby employs the Underwriter and the
Underwriter hereby accepts employment as the exclusive sales agent for
distribution of the shares, other than sales made directly by the Trust without
sales charge. The Underwriter agrees to use its best efforts to promote the sale
of the shares, but is not obligated to sell any specific number of shares. The
Trust agrees to deliver to the Underwriter such shares as it may sell.
<PAGE>
2. INDEPENDENT CONTRACTOR. The Underwriter shall, for all purposes herein,
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to bind or obligate the Trust in any
way, except that the Underwriter is authorized to accept orders for the purchase
or repurchase of shares as sales agent of the Trust. The Underwriter may appoint
sub-agents or distribute shares through dealers or otherwise, as determined
necessary or desirable. It is expressly understood and agreed that the services
to be rendered by the Underwriter to the Trust pursuant to the provisions of
this Agreement are not to be deemed exclusive with respect to the Underwriter's
rendering of services, and the Underwriter shall therefore be free to render
similar or different services to others; provided that, its ability to render
the services described herein shall not be impaired thereby.
3. FURNISHING OF INFORMATION. The Trust shall furnish to the Underwriter
such information with respect to the Trust, the Funds and the shares as the
Underwriter may reasonably request. The Trust shall also furnish such
information and take such action as the Underwriter may reasonably request in
order to qualify the shares for sale to the public under Blue Sky Laws in
jurisdictions in which the Underwriter may wish to offer them. The Trust shall
furnish the Underwriter at least annually with audited financial statements of
its books and accounts certified by independent public accountants and with such
additional financial information as the Underwriter may reasonably request from
time to time.
4. OFFERING PRICE. The shares shall be offered at a price equivalent to
their net asset value plus, as appropriate, a variable percentage of the public
offering price as a sales load, as set forth in each Fund's Prospectus. On each
business day on which the New York Stock Exchange ("NYSE") is open for business,
the Trust shall furnish the Underwriter with the net asset value of the shares,
which shall be determined and become effective as of the close of business of
the NYSE on that day. The net asset value so determined shall apply to all
orders for the purchase of shares received by dealers prior to such
determination and the Underwriter is authorized in its capacity as agent to
accept orders and confirm sales at such net asset value; provided that, such
dealers notify the Underwriter of the time when they received the particular
order and that the order is placed with the Underwriter prior to its close of
business on the day on which the applicable net asset value is determined. To
the extent that the Trust's Transfer Agent (the "Agent") and the Custodian(s)
for any pension, profit-sharing, employer or self-employed plan receive payments
on behalf of the investors, such Agent and Custodian(s) shall be required to
record the time of such receipt with respect to each payment, and the applicable
net asset value shall be that which is next determined and effective after the
time of receipt. In all events, the Underwriter shall forthwith notify all of
the dealers comprising its selling group and the Agent and Custodian(s) of the
effective net asset value as received from the Trust. Should the Trust at any
time calculate the net asset value more frequently than once each business day,
procedures comparable to those set forth above shall be followed with respect to
such additional price.
2
<PAGE>
5. PAYMENT OF SHARES. All premiums and any other monies payable upon the
sale, distribution, renewal or other transaction involving the shares shall be
paid or remitted directly to the Trust which shall retain all such premiums and
monies for its own account. The Underwriter acknowledges that all premiums
collected by the Underwriter are held in a fiduciary capacity on behalf of the
Trust and are to be paid over to the Trust as soon as possible immediately
following receipt and collection.
6. SALES COMMISSION. (a) The Underwriter shall be entitled to
receive a sales commission on the sale of shares in the amounts and according
to the procedures set forth in each Fund's prospectuses then in effect under
the 1933 Act.
(b) In addition to the payment of the sales commission provided for
in (a) above, the Underwriter may also receive reimbursement for expenses or a
maintenance or service fee as may be required by and described in a distribution
plan adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act.
(c) The Underwriter may allow appointed sub-agents or dealers such
commissions or discounts as deemed advisable, so long as any such commissions or
discounts are set forth in the Funds' then current prospectuses to the extent
required by the applicable federal and state securities laws.
(d) It is the sole prerogative of the Trust to establish commission
rates to be paid to the Underwriter and the Trust at all times retains an
ultimate veto as to commission rates to be paid.
7. PURCHASES FOR UNDERWRITER'S OWN ACCOUNT. The Underwriter shall not
purchase shares for its own account for the purpose of resale to the public, but
the Underwriter may purchase shares for its own investment account upon written
assurance that the purchase is for investment purposes only and that the shares
shall not be resold except through redemption by the Trust.
8. SALE OF SHARES TO AFFILIATES. The Underwriter may sell the shares at
net asset value (plus a varying sales charge as appropriate) pursuant to a
uniform offer described in the Funds' current prospectuses to (i) the Trustees,
officers and investment adviser of the Trust and to the Underwriter and
affiliated companies thereof, (ii) the bona fide, full-time employees or sales
representatives of any of the foregoing who have acted as such for at least
ninety (90) days, (iii) any trust, pension, profit-sharing or other benefit plan
for such persons, or (iv) any other person set forth in the Funds' current
prospectuses; provided that, such sales are made in accordance with the rules
and regulations of the 1940 Act and upon the written assurance of the purchaser
that the purchases are made for investment purposes only, not for the purpose of
resale to the public, and that the shares will not be resold except through
redemption by the Trust.
9. ALLOCATION OF EXPENSES. (a) The Trust will pay the following
expenses in connection with the sale and distribution of shares of the Funds:
3
<PAGE>
(i) expenses pertaining to the preparation of audited and certified
financial statements to be included in any amendments to the Registration
Statements under the 1933 Act and 1940 Act, including any Prospectuses and
the Statements of Additional Information included therein;
(ii) expenses pertaining to the preparation (including legal fees)
and printing of all amendments or supplements filed with the Securities
and Exchange Commission, including the copies of the Prospectuses and
Statements of Additional Information included in the amendments, other
than those necessitated by or related to the Underwriter's activities
where such amendments or supplements result in expenses which the Trust
would not otherwise have incurred;
(iii) expenses pertaining to the preparation, printing and
distribution of any reports or communications, including Prospectuses and
Statements of Additional Information, which are sent to existing
shareholders;
(iv) filing and other fees to federal and state securities
regulatory authorities necessary to register and maintain registration of
the shares; and
(v) expenses of the Agent, including all costs and expenses in
connection with the issuance, transfer and registration of the shares,
including but not limited to any taxes and other government charges in
connection therewith.
(b) Except to the extent that the Underwriter is entitled to
reimbursement under the provisions of any 12b-1 distribution plans, the
Underwriter shall pay the following expenses:
(i) expense of printing additional copies of the Prospectuses and
Statements of Additional Information and any amendments or supplements
thereto which are necessary to continue to offer shares to the public;
(ii) expenses pertaining to the preparation (excluding legal fees)
and printing of all amendments and supplements to the Registration
Statements if the amendment or supplement arises from, is necessitated by
or related to the Underwriter's activities where those expenses would not
otherwise have been incurred;
(iii) expenses pertaining to the printing of additional copies, for
use by the Underwriter as sales literature, of reports or other
communications which have been prepared for distribution to existing
shareholders or expenses incurred by the Underwriter in advertising,
promoting and selling shares to the public.
10. CONDUCT OF BUSINESS. Other than currently effective Prospectuses and
Statements of Additional Information, the Underwriter shall not issue any sales
material or statements except literature or advertising which conforms to the
requirements of federal and state securities laws and regulations and have been
filed, where necessary, with the appropriate regulatory authorities. The
Underwriter shall furnish the Trust with copies of all such material prior to
its use and no such material shall be published if the Trust reasonably and
promptly objects.
4
<PAGE>
11. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If shares are tendered to
the Trust for redemption or are repurchased by the Trust within seven (7)
business days after the Underwriter's acceptance of the original purchase order
for the shares, the Underwriter shall immediately refund to the Trust the full
amount of any sales commission (net of allowances to dealers or brokers) allowed
to the Underwriter on the original sale, and shall promptly, upon receipt
thereof, pay to the Trust any refunds from dealers or brokers of the balance of
sales commissions realized by the Underwriter. The Trust shall notify the
Underwriter of such tender for redemption within ten (10) days of the day on
which notice of such tender for redemption is received by the Trust.
12. SUSPENSION OF SALES. The Trust shall have the ultimate right to cease
to offer and issue any shares available to the Underwriter hereunder. The Trust
reserves the right at all times to suspend or limit the public offering of the
shares upon written notice to the Underwriter and to reject any order in whole
or in part.
13. LIABILITY. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Underwriter, the Underwriter shall not be subject to liability to the
Trust or to any of its shareholders for any act or omission in the course of or
in connection with rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
14. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect for two years from such date unless sooner
terminated as hereinafter provided, and shall continue in effect from year to
year thereafter so long as such continuation is approved at least annually by
(i) the Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Fund(s) and (ii) the vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, with such vote being cast in person at a meeting called for the
purpose of voting on such approval.
15. TERMINATION. This Agreement may be terminated at any time without
payment of any penalty (a) by the Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Fund(s), upon delivery of sixty (60)
days' written notice to the Underwriter, or (b) by the Underwriter upon sixty
(60) days' written notice to the Trust. This Agreement shall terminate
automatically in the event of any transfer or assignment hereof.
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 considered
severable and if for any reason any provision of this Agreement which is not
essential to the effectuation of the basic purpose 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.
5
<PAGE>
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
19. ENTIRE AGREEMENT. This Agreement represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior understandings or agreements between the parties
pertaining to the subject matter hereof, whether oral or written. This Agreement
may only be modified or amended by mutual written agreement of the parties
hereto and, as required, upon approval of a majority of the outstanding voting
securities of the Fund(s).
20. DEFINITIONS. For purposes of application and operation of the
provisions of this Agreement, the terms "net asset value," "offering price,"
"investment company," "open-end investment company," "assignment," "principal
underwriter," "interested person" and "majority of the outstanding voting
securities" shall have the meanings set forth in the 1933 Act and 1940 Act, as
applicable, and the rules and regulations promulgated thereunder.
21. NOTICES. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed postage prepaid to the other party at the
address such other party may designate from time to time for the receipt of
such notices.
22. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana.
23. 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 instrument is executed on behalf of the Trustees of the Trust as Trustees,
and not individually, and that the obligations of this instrument are not
binding upon any of the Trustees or Shareholders individually but are binding
only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers on the day and year
first above written.
CONSECO FUND GROUP
ATTEST: By: /s/ Maxwell E. Bublitz
Maxwell E. Bublitz
/s/ William P. Latimer President
-----------------------
[title]
CONSECO EQUITY SALES, INC.
ATTEST:
By: /s/ L. Gregory Gloeckner
/s/ William P. Latimer L. Gregory Gloeckner
President
-------------------------
[title]
6
<PAGE>
ALLOCATION AGREEMENT
THIS ALLOCATION AGREEMENT (the "Agreement"), is made as of this 2nd day of
January, 1997, by and among:
CONSECO SERIES TRUST (the "Series Trust"), a registered investment company
organized as a Massachusetts business trust on November 15, 1982, with its
principal place of business at 11815 North Pennsylvania Street, Carmel,
Indiana 46032, on behalf of the Series Trust, its five portfolios, the
COMMON STOCK PORTFOLIO, ASSET ALLOCATION PORTFOLIO, GOVERNMENT SECURITIES
PORTFOLIO, CORPORATE BOND PORTFOLIO, and MONEY MARKET PORTFOLIO
(collectively, the "Portfolios") and all future registered investment
companies which are named insureds under a joint fidelity bond as
described below and for which Conseco Capital Management, Inc. acts as
investment adviser; and
CONSECO FUND GROUP (the "Fund Group"), a registered investment company
established as a Massachusetts business trust on September 24, 1996, with
its principal place of business at 11825 North Pennsylvania Street,
Carmel, Indiana 46032, on behalf of Conseco Fund Group, its three Funds,
the EQUITY FUND, ASSET ALLOCATION FUND, and FIXED INCOME FUND
(collectively, the "Funds"), and all future registered investment
companies which are named insureds under a joint fidelity bond as
described below and for which Conseco Capital Management, Inc. acts as
investment adviser.
This Agreement is entered into by the aforementioned parties (collectively, the
"Joint Insureds") under the following circumstances:
W I T N E S S E T H
WHEREAS, Section 17(g) of the Investment Company Act of 1940, as amended
(the "1940 Act"), authorizes the Securities and Exchange Commission (the
"Commission") to require that officers and employees of registered investment
companies be bonded against larceny and embezzlement, and the Commission has
adopted Rule 17g-1 under the 1940 Act dealing with this subject;
WHEREAS, the Series Trust, the Portfolios, the Fund Group, and the Funds
are named or will be named as joint insureds under the terms of a certain bond
or policy of insurance which insures against larceny and embezzlement of
officers and employees (the "Fidelity Bond"), a copy of which Fidelity Bond is
attached hereto as Exhibit A;
<PAGE>
WHEREAS, the trustees of the Series Trust and the trustees of the Fund
Group (collectively, the "Trustees"), including a majority of the Trustees who
are not "interested persons" of the Series Trust or the Fund Group, as that term
is defined in Section 2(a)(19) of the 1940 Act, have considered all relevant
factors, including, but not limited to, the number of the parties named as
"joint insureds" under the joint Fidelity Bond, the nature of the business
activities of such Joint Insureds, the amount of the joint insured bond, the
amount of the premium for such bond, and the ratable allocation of the premium
among all parties named as insureds under the joint Fidelity Bond, and have
determined that the share of the premium allocated to the Series Trust and the
Fund Group is less than the premium each would have had to pay if each had
provided and maintained a single insured bond, as required pursuant to paragraph
(e) of Rule 17g-1, and also have determined that it would be in the best
interests of (1) the Series Trust and the Portfolios and (2) the Fund Group and
the Funds for (1) the Series Trust and the Portfolios and (2) the Fund Group and
the Funds, respectively, to be included as covered joint insureds under the
joint insured Fidelity Bond, pursuant to the requirements of Rule 17g-1 under
the 1940 Act;
WHEREAS, a majority of the Trustees who are not "interested persons," as
that term is defined in Section 2(a)(19) of the 1940 Act, have given due
consideration to all factors relevant to the form, amount, and apportionment of
premiums and recoveries on such joint insured Fidelity Bond and such Trustees
have approved the term and amount of the Fidelity Bond, the portions of the
premium payable by each of the Portfolios and Funds, and the manner in which
recovery of said Fidelity Bond, if any, shall be shared by and among the parties
hereto as set forth; and
WHEREAS, the Series Trust, the Portfolios, the Fund Group, and the Funds
now desire to enter into the agreement required by Rule 17g-1(f) under the 1940
Act to establish the manner in which recovery on said Fidelity Bond, if any,
shall be shared.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the parties as follows:
1. PAYMENT OF PREMIUMS
Each of the Portfolios and Funds shall pay that percentage of said amount
of the premium due under the Fidelity Bond which is derived by a fraction, (i)
the denominator of which is the total net assets of all the Portfolios and Funds
combined, and (ii) the numerator of which is the total net assets of each such
Portfolio or each such Fund individually.
Each of the Portfolios and each of the Funds agree that the
appropriateness of the allocation of said premium will be determined by Conseco
Capital Management, Inc. ("CCM") on a monthly basis, subject to approval by the
Trustees of both the Fidelity Bond and this Allocation Agreement no less often
than annually.
2. ALLOCATION OF RECOVERIES
(a) If more than one of the parties hereto is damaged in a single loss for
which recovery is received under the Fidelity Bond, each such party shall
receive that portion of the recovery which represents the loss sustained by that
party, unless the recovery is inadequate to indemnify fully such party
sustaining a loss.
2
<PAGE>
(b) If the recovery is inadequate to indemnify fully each such party
sustaining a loss, then the recovery shall be allocated among such parties as
follows:
(i) Each such party sustaining a loss shall be allocated an amount
equal to the lesser of that party's actual loss or the minimum amount of bond
which would be required to be maintained by such party under a single insured
bond (determined as of the time of the loss) in accordance with the provisions
of Rule 17g-1(d)(l) under the 1940 Act.
(ii) The remaining portion of the proceeds shall be allocated to
each such party sustaining a loss not fully covered by the allocation under
subparagraph 2(b)(i), above, in the proportion that each such party's last
payment of premium bears to the sum of the last such premium payments of all
such parties. If such allocation would result in any party which had sustained a
loss receiving a portion of the recovery in excess of the loss actually
sustained, such excess portion shall be allocated among the other parties whose
losses would not be fully indemnified. The allocation shall bear the same
proportion as each such party's last payment of premium bears to the sum of the
last premium payments of all parties entitled to receive a share of the excess.
Any allocation in excess of a loss actually sustained by any such party shall be
reallocated in the same manner.
3. OBLIGATION TO MAINTAIN MINIMUM COVERAGE
(a) Each of the Portfolios and each of the Funds represents and warrants
to each of the other parties hereto that the minimum amount of coverage required
of each such Portfolio and each such Fund, respectively, shall be determined as
of the date hereof pursuant to the schedule set forth in paragraph (d)(l) of
Rule 17g-1 under the 1940 Act. The parties hereto agree that CCM will determine,
no less frequently than at the end of each calendar quarter, the minimum amount
of coverage which would be required of each of the Portfolios and each of the
Funds by Rule 17g-1(d)(l) if a determination with respect to the adequacy of the
coverage were currently being made.
(b) In the event that the total amount of the minimum coverages thus
determined exceeds the amount of coverage of the then-effective Fidelity Bond,
the Trustees will be notified and will determine whether it is necessary or
appropriate to increase the total amount of coverage of the Fidelity Bond to an
amount not less than the total amount of such minimums, or to secure such excess
coverage for one or more of the parties hereto, which, when added to the total
coverage of the Fidelity Bond, will equal an amount of such minimums.
(c) Unless either or both the Series Trust and the Fund Group elects to
terminate this Agreement (pursuant to Paragraph 4, below) and the Series Trust's
and the Fund Group's respective participation in a joint-insured bond, each
Portfolio and each Fund agrees to pay the Portfolio's and the Fund's respective
fair portion of the new or additional premium (taking into account all of the
then-existing circumstances).
3
<PAGE>
4. PRIOR AGREEMENTS; TERMINATION
This Agreement shall supersede all prior agreements relating to an
allocation of premium on any joint insured bond and shall apply to the present
Fidelity Bond coverage and any renewal or replacement thereof. This Agreement
shall continue until terminated by any party hereto upon the giving of not less
than sixty (60) days notice to the other parties hereto in writing.
5. LAW GOVERNING
This Agreement is governed by the laws of the State of Indiana (without
reference to such state's conflict of law rules).
6. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
7. AMENDMENT, MODIFICATION, AND WAIVER
No term or provision of this Agreement may be amended, modified, or waived
without the affirmative vote or action by written consent of each of the parties
hereto.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed by their duly-authorized officers as of the date first above
written.
ATTEST: CONSECO SERIES TRUST
By: /s/ William P. Latimer By: /s/ Maxwell E. Bublitz
------------------------ --------------------------
Name: William P. Latimer [Name] Maxwell E. Bublitz
Title: Secretary [Position] President
ATTEST: CONSECO SERIES TRUST on behalf of
the PORTFOLIOS of CONSECO SERIES
TRUST
By: /s/ William P. Latimer By: /s/ Maxwell E. Bublitz
------------------------ --------------------------
Name: William P. Latimer [Name] Maxwell E. Bublitz
Title: Secretary [Position] President
ATTEST: CONSECO FUND GROUP
By: /s/ William P. Latimer By: /s/ Maxwell E. Bublitz
------------------------ --------------------------
Name: William P. Latimer [Name] Maxwell E. Bublitz
Title: Secretary [Position] President
ATTEST: CONSECO FUND GROUP on behalf of the
FUNDS of CONSECO FUND GROUP
By: /s/ William P. Latimer By: /s/ Maxwell E. Bublitz
------------------------ --------------------------
Name: William P. Latimer [Name] Maxwell E. Bublitz
Title: Secretary [Position] President
5
CUSTODY AGREEMENT
-----------------
Agreement made as of this 18th day of December, 1996, between CONSECO FUND
GROUP, a Massachusetts business trust organized and existing under the laws of
the Commonwealth of Massachusetts, having its principal office and place of
business at 11825 North Pennsylvania Street, Carmel, Indiana 46032 (hereinafter
called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized
to do a banking business, having its principal office and place of business at
48 Wall Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two Officers, and the term Certificate shall also include
Instructions.
4. "Clearing Member" shall mean a registered broker-dealer which is
a clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment
company, or any broker-dealer reasonably believed by the Custodian to be such
a clearing member.
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
<PAGE>
6. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Currency" shall mean money denominated in a lawful currency of
any country or the European Currency Unit.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to
buy or sell fixed income securities including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank
certificates of deposit, and Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "FX Transaction" shall mean any transaction for the purchase by
one party of an agreed amount in one Currency against the sale by it to the
other party of an agreed amount in another Currency.
14. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Officer or unsigned) and tested telex.
2
<PAGE>
15. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
16. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
17. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
18. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other
person or persons, whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
listed in the Certificate annexed hereto as Appendix A or such other Certificate
as may be received by the Custodian from time to time.
19. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably
believed by the Custodian to be an Officer.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
3
<PAGE>
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund
listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the
Fund, each of which is, in the case of a Fund having Series, allocated to a
particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund and allocated to a
Series during the period of this Agreement.
4
<PAGE>
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and moneys deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Trustees, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and ongoing
basis, until instructed to the contrary by a Certificate actually received by
the Custodian, to accept, utilize and act in accordance with such confirmations
as provided in this Agreement with respect to such Series.
5
<PAGE>
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
6
<PAGE>
(a) Collect all income, dividends and distributions due or
payable;
(b) Give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian without the prior notification
or consent of the Fund;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder.
(g) Deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
7
<PAGE>
(c) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin Account
and payments with respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
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ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the moneys held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
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<PAGE>
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member through whom
such Option was purchased; and (i) the name of the broker to whom payment is to
be made. The Custodian shall pay, upon receipt of a Clearing Member's statement
confirming the purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
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of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
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<PAGE>
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Account for such
Series; and (k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a Margin Account,
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<PAGE>
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
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ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures Contract(s); (g)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be paid
and the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
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4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b) the type of
Future Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
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3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
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<PAGE>
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Future Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such withdrawals from and/or in the case
of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
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sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
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The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
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termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and
to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
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5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions
or Certificate, as the case may be, the Custodian shall pay out of the moneys
held for the account of each Series the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the Fund with respect
to such Series.
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ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys held in
the separate account of the Series of the Shares being redeemed.
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ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien and security
interest in and to any property specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
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amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund agrees not to sell, reproduce, lease or otherwise provide,
directly or indirectly, the Software or any portion thereof to any third party
without the prior written consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Agreement.
3. The Fund acknowledges that the Software, all data bases made available
to the Fund by utilizing the Software (other than data bases relating solely to
the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
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Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties.
4. The Custodian reserves the right to modify the Software from time to
time upon reasonable prior notice and the Fund shall install new releases of the
Software as the Custodian may direct. The Fund agrees not to modify or attempt
to modify the Software without the Custodian's prior written consent. The Fund
acknowledges that any modifications to the Software, whether by the Fund or the
Custodian and whether with or without the Custodian's consent, shall become the
property of the Custodian.
5. The Custodian makes no warranties or representations of any kind with
regard to the Software or the method(s) by which the Fund may transmit
Instructions to the Custodian, express or implied, including but not limited to
any implied warranties or merchantability or fitness for a particular purpose.
6. Where the method for transmitting Instructions by the Fund involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
8. The Fund hereby presents, warrants and covenants to the Custodian that
this Agreement has been duly approved by a resolution of its Board of Trustees,
and that its transmission of Instructions pursuant hereto shall at all times
comply with the Investment Company Act of 1940, as amended.
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9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Foreign Securities (as such term is defined in paragraph (c)(1)
of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other
assets, the foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to
carry out their respective responsibilities in accordance with the terms of the
sub-custodian agreement between each such Foreign Sub-Custodian and the
Custodian, copies of which have been previously delivered to the Fund and
receipt of which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). Upon receipt of a Certificate, together with a
certified resolution substantially in the form attached as Exhibit E of the
Fund's Board of Trustees, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund, the Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series
of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Fund in connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information pertaining to (i)
the Foreign Custodians' financial strength, general reputation and standing in
the countries in which they are located and their ability to provide the
custodial services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of securities not
materially different form those prevailing in the United States. The Custodian
shall monitor the general operating performance of each Foreign Sub-Custodian.
The Custodian agrees that it will use reasonable care in monitoring compliance
by each Foreign Sub-Custodian with the terms of the relevant Foreign
Sub-Custodian Agreement and that if it learns of any breach of such Foreign
Sub-Custodian Agreement believed by the Custodian to have a material adverse
effect on the Fund or any Series it will promptly notify the Fund of such
breach. The Custodian also agrees to use reasonable and diligent efforts to
enforce its rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports
or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
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of the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign SubCustodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to be received by
the Fund has been received in full.
3. Any foreign exchange transaction effected by the Custodian in
connection with this Agreement may be entered with the Custodian, any office,
branch or subsidiary of The Bank of New York Company, Inc., or any Foreign
Sub-Custodian acting as principal or otherwise through customary banking
channels. The Fund may issue a standing Certificate with respect to foreign
exchange transactions but the Custodian may establish rules or limitations
concerning any foreign exchange facility made available to the Fund. The Fund
shall bear all risks of investing in Securities or holding Currency. Without
limiting the foregoing, the Fund shall bear the risks that rules or procedures
imposed by a Foreign Sub-Custodian or foreign depositories, exchange controls,
asset freezes or other laws, rules, regulations or orders shall prohibit or
28
<PAGE>
impose burdens or costs on the transfer to, by or for the account of the Fund of
Securities or any cash held outside the Fund's jurisdiction or denominated in
Currency other than its home jurisdiction or the conversion of cash from one
Currency into another currency. The Custodian shall not be obligated to
substitute another Currency for a Currency (including a Currency that is a
component of a Composite Currency Unit) whose transferability, convertibility or
availability has been affected by such law, regulation, rule or procedure.
Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the Fund
for any loss resulting from any of the foregoing events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither
the Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund, at the Fund's expense, or of its own counsel, which shall be at the
expense of the Fund only if the Fund has approved such expense, and otherwise
shall be at the Custodian's own expense, and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with such
advice or opinion. The Custodian shall be liable to the Fund for any loss or
damage resulting from the use of the Book-Entry System or any Depository arising
by reason of any negligence or willful misconduct on the part of the Custodian
or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend
by the Fund;
(d) The legality of any borrowing by the Fund using Securities
as collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
28
<PAGE>
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
30
<PAGE>
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian such out-of-pocket expenses and such compensation as are
specified on Exhibit F hereto, as such Exhibit may be amended from time to time
by the Custodian and the Fund. The Custodian may charge such compensation and
any expenses with respect to a Series incurred by the Custodian in the
performance of its duties pursuant to such agreement against any money
specifically allocated to such Series. Unless and until the Fund instructs the
Custodian by a Certificate to apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Series such Series pro
rata share (based on such Series net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimbursement hereunder
shall include, but are not limited to, the expenses of sub-custodians and
foreign branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a Certificate. The Custodian shall be entitled to rely
upon any Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
31
<PAGE>
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
32
<PAGE>
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, designating a successor custodian or custodians. In the absence
of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
33
<PAGE>
ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers. The Fund agrees to furnish to the Custodian
a new Certificate in similar form in the event that any such present Officer
ceases to be an Officer or in the event that other or additional Officers are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the present Officers as set
forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
8. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
34
<PAGE>
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
CONSECO FUND GROUP
[SEAL] By: /S/ MAXWELL E. BUBLITZ
President
Attest:
/S/ WILLIAM P. LATIMER
THE BANK OF NEW YORK
[SEAL]
By: /S/ S. GRUNSTON
Name: STEPHEN E. GRUNSTON
Title: Vice President
Attest:
/S/ MARJORIE MCLAUGHLIN
35
<PAGE>
APPENDIX A
I,
, President and I, _____________________________________ of CONSECO FUND GROUP,
a Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund
and each has been duly elected or appointed by the Board of Trustees of the Fund
to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
----------------- ----------------- --------------------
<PAGE>
APPENDIX B
SERIES
Equity Fund
Asset Allocation Fund
Fixed Income Fund
<PAGE>
APPENDIX C
I, Marjorie A. McLaughlin, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer Depository Trust Company Notices Financial Daily Card Service JJ
Kenney Municipal Bond Service London Financial Times New York Times Standard &
Poor's Called Bond Record Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting of CONSECO FUND GROUP, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on ,
1996, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1996, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to deposit in
the BookEntry System, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the same
are specifically allocated, and to utilize the Book-Entry System to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales
of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CONSECO
FUND GROUP, as of the day of , 1996.
----------------------------
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of CONSECO FUND GROUP, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1996, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1996, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with settlements
of purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CONSECO
FUND GROUP, as of the day of , 1996.
_________________________________
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the
duly elected and acting of CONSECO FUND GROUP, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1996, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of ,
1996, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CONSECO
FUND GROUP, as of the day of , 1996.
-------------------------------
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of CONSECO FUND GROUP, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1996, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transaction in Options, regardless of the
Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CONSECO
FUND GROUP, as of the day of , 1996.
---------------------------
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is the
duly elected and acting of CONSECO FUND GROUP, a Massachusetts
business trust (the "Fund"), further certifies that the following resolutions
were adopted by the Board of Trustees of the Fund at a meeting duly held on
,1996, at which a quorum was at all times present and that
such resolutions have not been modified or rescinded and are in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of ,
1996 (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Instructions (as defined
in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Officers of the Fund as defined in the Custody Agreement,
shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of user and access codes, passwords and
authentication keys, and shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of CONSECO
FUND GROUP, as of the day of , 1996.
[SEAL] _________________________
<PAGE>
EXHIBIT E
The undersigned, , hereby certifies
that he or she is the duly elected and acting of CONSECO FUND GROUP,
a Massachusetts business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1996, at which a quorum was at all times
present and that such resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country listed
in Schedule I hereto be, and hereby is, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the foreign sub-custodians and
depositories listed in Schedule I located in the countries specified therein be,
and hereby is, approved by the Board of Trustees as consistent with the best
interest of the Fund and its shareholders; and further
RESOLVED, that the Sub-custodian Agreements presented to this meeting
between the Bank and each of the foreign subcustodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby authorized
to place assets of the Fund with the aforementioned foreign branches and foreign
sub-custodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are
authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of CONSECO FUND
GROUP, as of the day of , 1996.
-----------------------
[SEAL]
<PAGE>
EXHIBIT F
Fee Schedule
<PAGE>
Exhihit F
DOMESTIC CUSTODY FEE SCHEDULE
FOR
CONSECO FUND GROUP
SAFEKEEPING/INCOME COLLECTION/ALL REPORTING/DTC-ID AFFIRMATIONS/TRANSMISSION
OF POSITIONS
- ----------------------------------------------------------------------------
1 basis point per annum on the first $100 million of the net assets
per fund.
3/4 basis point per annum on the excess.
MINIMUM FEE
- -----------
There will be a minimum fee of $250 per month, per Fund.
SECURITY TRANSACTION CHARGES
- ----------------------------
$ 8 Book-Entry Settlements/Paydowns - DTC/FRB/PTC
$15 Physical settlement transactions, options, and futures
$40 Euro C/D's
FEDERAL FUNDS WIRES/OFFICIAL CHECKS
- -----------------------------------
$ 6 for wires not related to securities transactions and checks
requested to pay your corporate expenses.
OUT-OF-POCKET EXPENSES
- ----------------------
None
BILLING CYCLE
- -------------
The above fees will be billed on a monthly basis.
<PAGE>
Exhibit F
DOMESTIC CUSTODY FEE SCHEDULE
FOR
CONSECO FUND GROUP
EARNINGS CREDITS ON BALANCES/INTEREST ON OVERDRAFTS
- ---------------------------------------------------
Earnings credits are provided to the Fund on 100% of the daily balance in the
domestic custodian account after reduction for Federal Reserve requirements,
computed at the 90-day T-bill rate on the day of the balance.
Overdrafts excluding bank errors, will cause a reduction of earnings credits,
computed at 1% above the Federal Funds rate on the day of the overdraft.
FDIC charges shall be assessed on the ledger balance as of the last business day
of the quarter computed at the rate assessed by the FDIC. The charges shall be
netted against the earnings credits or added to the overdraft charges.
Custody fees due the Bank are calculated monthly. If the earnings credits for
the Fund exceed the bank service charges, such excess can be carried forward to
the next succeeding month. However, no earnings credits will be carried forward
after year-end. If a negative amount is computed after considering earnings
credits (positive/negative) and the bank charges, such negative amounts would be
billed monthly.
CONSECO FUND GROUP THE BANK OF NEW YORK
- ------------------ --------------------
Accepted by: /s/ Maxwell E. Bublitz Accepted by: /s/ S. Grunston
----------------------- ---------------------
Title: President Title: Stephen E. Grunston
----------------------- -------------------
Vice President
Date: 12/18/96 Date: 12/13/96
----------------------- --------------------
ADMINISTRATION AGREEMENT
BETWEEN CONSECO FUND GROUP
AND
CONSECO SERVICES LLC
THIS ADMINISTRATION AGREEMENT is entered into as of this 2nd day of
January, 1997, by and between Conseco Fund Group (the "Trust"), a Massachusetts
business trust having its principal office and place of business at 11825 N.
Pennsylvania St., Carmel, Indiana, and Conseco Services LLC (the
"Administrator"), an Indiana limited liability company having its principal
office and place of business at 11815 N. Pennsylvania St., Carmel, Indiana.
WITNESSETH:
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series, with each series representing interests in a
separate portfolio of securities and other assets (the "Funds"); and
WHEREAS, the Trust, on behalf of the Funds, desires the Administrator to
provide administrative services, and the Administrator desires to provide said
services directly or through other entities;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, conditions and agreements contained herein, and for such
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties, each intending to be legally bound hereby,
mutually agree as follows:
1. TERMS OF APPOINTMENT: DUTIES OF THE ADMINISTRATOR
1.1 Subject to the terms and conditions set forth in this Agreement, the
Trust, on behalf of the Funds, hereby engages the Administrator to
provide, and the Administrator agrees to provide, administrative services
to the Trust, to its Funds and to the shareholders of each of the
respective Funds of the Trust ("Shareholders") as set out hereunder and in
the currently effective prospectus and statement of additional information
("Prospectus") of the Trust on behalf of the applicable Fund.
1.2 The Administrator agrees that it will perform the following services:
(a) The Administrator shall provide administrative services on behalf
of the Funds which may be agreed upon in writing between the
Trust and the Administrator and will include (i) furnishing the
Funds with such office space, equipment, and personnel as needed
in connection with their operation, (ii) administering the
<PAGE>
corporate affairs of the Funds, including supervising the
preparation and filing of all documents required for compliance
by the Funds with applicable laws and regulations, (iii)
monitoring and documenting compliance by the Funds with
applicable investment policies and restrictions, (iv) furnishing
clerical and bookkeeping services as needed by the Funds in
connection with their operation, including but not limited to
establishing appropriate expense accruals, maintaining expense
files and coordinating payment of invoices, (v) supervising the
maintenance of books and records, (vi) fund accounting, (vii)
assisting in the preparation of annual and other reports to
shareholders of the Funds, the Securities and Exchange Commission
and any appropriate governmental body, (viii) monitoring and
reporting on compliance with NASD rules, (ix) monitoring and
reporting on compliance with applicable Internal Revenue Code
provisions and regulations, (x) reviewing and filing any federal,
state and local income tax returns pertaining to the Funds as
requested by the Trust, (xi) providing Blue Sky services, (xii)
preparing for meetings of the Trust's Board of Trustees and
shareholders, (xiii) permitting its officers and employees to
serve without compensation as Trustees or officers of the Trust
if elected to such positions, (xiv) overseeing the determination
and publication of the Funds' net asset value in accordance with
the Funds' policies as adopted from time to time by the Trustees,
and (xv) in general, supervising the performance of the
administrative functions necessary to the Funds in connection
with their operation, subject to the ultimate supervision and
direction of the Trustees.
(b) The administrative services provided hereunder will exclude (i)
portfolio custodial services provided by the Trust's custodian
bank, (ii) transfer agency services provided by the Trust's
transfer agent, (iii) distribution services provided by the
distributor of the Trust's Shares, Conseco Equity Sales, Inc.,
and (iv) any administrative services provided by the Trust's
investment adviser pursuant to its investment advisory agreements
with the Trust.
2. FEES AND EXPENSES
2.1 For the performance by the Administrator pursuant to this Agreement, the
Trust agrees on behalf of the Funds to pay the Administrator annual fees
as set out below:
(a) From each Fund, a fee of .20% per annum of its Class A shares'
average daily net assets.
(b) From each Fund, a fee of .20% per annum of its Class Y shares'
average daily net assets.
The fees and the extraordinary expenses identified under Section 2.2
below may be changed from time to time subject to mutual written
agreement between the Trust and the Administrator.
2
<PAGE>
2.2 In addition to the fees paid under Section 2.1 above, the Trust agrees on
behalf of the Funds to reimburse the Administrator for any extraordinary
expenses incurred by the Administrator at the request of the Trust and
upon the prior consent of the Trustees.
2.3 The Trust agrees on behalf of the Funds to pay all fees and reimbursable
expenses promptly. The Administrator will bill the Trust monthly in
arrears.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR AND THE TRUST
3.1 The Administrator represents and warrants to the Trust that:
(a) It is a limited liability company duly organized and existing, in
good standing, under the laws of the State of Indiana.
(b) It is duly qualified to carry on its business in the State of
Indiana.
(c) It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
(d) All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
(e) It has and will continue to have access to the necessary facilities
equipment and personnel to perform its duties and obligations under
this Agreement.
3.2 The Trust represents and warrants to the Administrator that:
(a) It is a business trust duly organized and existing, in good
standing, under the laws of the Commonwealth of Massachusetts.
(b) It is empowered under applicable laws and by its Agreement and
Declaration of Trust and By-Laws to enter into and perform this
Agreement.
(c) All corporate proceedings required by said Agreement and Declaration
of Trust and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
(d) It is an open-end diversified investment management company
registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
(e) A registration statement under the Securities Act of 1933, as
amended, and the 1940 Act, on behalf of the Funds is currently
effective and will remain effective, and appropriate securities
filings have been made and will continue to be made with respect to
all Shares of the Funds being offered for sale.
3
<PAGE>
4. CONFIDENTIALITY
Subject to the duty of the Trust or the Administrator to comply with
applicable law, each party hereto shall treat as confidential all
information with respect to the other party received pursuant to this
Agreement.
5. INDEMNIFICATION
The Administrator and its shareholders, officers, directors or employees
shall not be responsible for, and the Trust shall on behalf of the
applicable Fund indemnify and hold the Administrator harmless from, any
and all losses, expenses and liability arising out of the Administrator's
activities hereunder, except for willful misconduct, bad faith or
negligence of the Administrator or that of its employees or the reckless
disregard by the Administrator of its obligations and duties hereunder.
Nothing herein shall in any way constitute a waiver or limitation of any
rights which may exist under any federal securities laws.
6. STANDARD OF CARE
The Administrator shall at all times act in good faith and use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement. The Administrator assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees or subcontractors.
7. COVENANTS OF THE ADMINISTRATOR
The Administrator shall keep records relating to the services to be
performed hereunder in the form and manner as it may deem advisable. To
the extent required by Section 31 of the 1940 Act and the Rules
thereunder, the Administrator agrees that all said records prepared or
maintained by the Administrator relating to the services to be performed
hereunder are the property of the Trust, and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Trust on and in accordance with its request.
8. ADDITIONAL FUNDS
In the event that the Trust establishes one or more series of Shares in
addition to the existing Funds with respect to which it desires to have
the Administrator render administrative services under the terms hereof,
it shall so notify the Administrator in writing. If the Administrator
agrees in writing to provide said services, such series of Shares shall
become a Fund hereunder.
9. AMENDMENT
This Agreement may be amended or modified by a written Agreement executed
by both parties and authorized or approved by a resolution of the Trustees
of the Trust.
4
<PAGE>
10. ASSIGNMENT
10.1 Except as provided in Section 10.3 below, neither this agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Administrator may, without further consent on the part of the Trust,
subcontract for the performance hereof with an affiliate or a
non-affiliate of the Administrator, provided, however, that the
Administrator shall be fully responsible to the Trust for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
The Administrator shall compensate any subcontractor retained pursuant to
this Agreement out of the fees it receives from the Funds pursuant to
Section 2.1 above.
11. TERM OF AGREEMENT
This Agreement shall become effective on the date hereof and shall
continue in effect for two years from such date unless sooner terminated
as hereinafter provided, and shall continue in effect from year to year
thereafter so long as such continuation is approved at least annually by
(i) the Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Fund(s) and (ii) the vote of a
majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party, with such vote being
cast in person at a meeting called for the purpose of voting on such
approval.
12. TERMINATION
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
l 3. APPLICABLE LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of Indiana.
14. FORCE MAJEURE
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure, or other causes reasonably beyond its control, such
party shall not be liable for damages to the other resulting from such
failure to perform or otherwise from such causes.
5
<PAGE>
15. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. 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 instrument is executed on behalf of the Trustees of
the Trust as Trustees, and not individually, and that the obligations of
this instrument are not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and property of the
Trust.
18. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers on the day and year
first above written.
CONSECO FUND GROUP
ATTEST: By: /s/ Maxwell E. Bublitz
----------------------
Maxwell E. Bublitz
/s/ William P. Latimer President
- ---------------------- ---------
William P. Latimer [Title]
CONSECO SERVICES LLC
ATTEST: By: /s/ T.J. Kilian
------------------
Thomas J. Kilian
/s/ Karl W. Kindig President
- ------------------ ---------
Karl W. Kindig [Title]
7
SUB-ADMINISTRATION AGREEMENT
----------------------------
AGREEMENT made as of January 2, 1997, by and between Conseco Services
L.L.C. (the "Administrator"), the Administrator of the Conseco Fund Group (the
"Trust") and each portfolio series of the Fund listed on Exhibit A hereto (each,
a "Fund"; collectively, the "Funds"), and The Bank of New York, a New York trust
company (the "Sub-Administrator").
W I T N E S S E T H:
--------------------
WHEREAS, the Administrator is an Indiana limited liability company acting
pursuant to an Administration Agreement dated as of January 2, 1997 between the
Administrator and the Trust;
WHEREAS, the Trust is an investment company registered under the
Investment Administrator Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator desires to retain the Sub-Administrator as its
agent to provide administration services for the Trust and each Fund and the
Sub-Administrator is willing to provide such services, all as more fully set
forth below;
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereby agree as follows:
1. Appointment.
-----------
The Administrator hereby appoints the Sub-Administrator as its agent for
the term of this Agreement to perform the services described herein for the
Trust and each Fund. The Sub-Administrator hereby accepts such appointment and
agrees to perform the duties hereinafter set forth.
2. Representations And Warranties.
------------------------------
The Administrator hereby represents and warrants to the Sub-Administrator,
which representations and warranties shall be deemed to be continuing, that:
(a) It is duly organized and existing under the laws of the jurisdiction
of its organization, with full power to carry on its business as now conducted,
to enter into this Agreement and to perform its obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered by the
Administrator in accordance with all requisite action and constitutes a valid
and legally binding obligation of the Administrator, enforceable in accordance
with its terms;
<PAGE>
(c) The Administrator has been duly authorized by the Trust to
appoint the Sub-Administrator to perform its responsibilities hereunder; and
(d) It is conducting its business in compliance with all applicable laws
and regulations, both state and federal, and has obtained all regulatory
licenses, approvals and consents necessary to carry on its business as now
conducted; there is no statute, regulation, rule, order or judgment binding on
it and no provision of its charter or by-laws, nor of any mortgage, indenture,
credit agreement or other contract binding on it or affecting its property which
would prohibit its execution or performance of this Agreement.
3. Delivery of Documents.
---------------------
(a) The Administrator will promptly deliver to the Sub-Administrator true
and correct copies of each of the following documents as currently in effect and
will promptly deliver to it all future amendments and supplements thereto, if
any:
(i) The Trust's Declaration of Trust and all amendments thereto (the
"Charter");
(ii) The Trust's bylaws (the "Bylaws");
(iii) Resolutions of the Trust's board of trustees (the "Board")
authorizing the execution, delivery and performance of this
Agreement by the Administrator;
(iv) The Trust's registration statement most recently filed with the
Securities and Exchange Commission (the "SEC") relating to the
shares of each Fund (the "Registration Statement");
(v) The Trust's Notification of Registration under the 1940 Act on
Form N-8A filed with the SEC; and
(vi) The Trust's Prospectus and Statement of Additional Information
pertaining to each Fund (collectively, the "Prospectus").
(b) Each copy of the Charter shall be certified by the Secretary of State
(or other appropriate official) of the state of organization, and if the Charter
is required by law also to be filed with a county or other officer or official
body, a certificate of such filing shall be filed with a certified copy
submitted to the Sub-Administrator. Each copy of the Bylaws, Registration
Statement and Prospectus, and all amendments thereto, and copies of Board
resolutions, shall be certified by the Secretary or an Assistant Secretary of
the Trust.
(c) It shall be the sole responsibility of the Administrator to deliver to
the Sub-Administrator the Trust's currently effective Prospectus and the
Sub-Administrator shall not be deemed to have notice of any information
contained in such Prospectus until it is actually received by the
Sub-Administrator.
2
<PAGE>
4. Duties And Obligations Of The Sub-administrator.
-----------------------------------------------
(a) Subject to the direction and control of the Board and the provisions
of this Agreement, the Sub-Administrator shall provide to the Administrator on
behalf of the Trust and each Fund the administrative services set forth on
Schedule I attached hereto.
(b) In performing hereunder, the Sub-Administrator shall provide, at its
expense, office space, facilities, equipment and personnel.
(c) The Sub-Administrator shall not provide any services relating to the
management, investment advisory or sub-advisory functions of the Trust or any
Fund, distribution of shares of any Fund, maintenance of the Trust's or any
Fund's financial records or other services normally performed by the Trust or
Funds' counsel or independent auditors.
(d) Upon receipt of the Administrator's prior written consent (which shall
not be unreasonably withheld), the Sub-Administrator may delegate any of its
duties and obligations hereunder to any delegee or agent whenever and on such
terms and conditions as it deems necessary or appropriate. Notwithstanding the
foregoing, no consent shall be required for any such delegation to any other
subsidiary of The Bank of New York Administrator, Inc. The Sub-Administrator
shall not be liable to the Administrator, the Trust or any Fund for any loss or
damage arising out of, or in connection with, the actions or omissions to act of
any delegee or agent utilized hereunder so long as the Sub-Administrator acts in
good faith and without negligence or willful misconduct in the selection of such
delegee or agent.
(e) The Administrator shall cause its and the Trust's officers, advisors,
sponsor, distributor, legal counsel, independent accountants, current
Sub-Administrator (if any) and transfer agent to cooperate with the
Sub-Administrator and to provide the Sub-Administrator, upon request, with such
information, documents and advice relating to the Trust or any Fund as is within
the possession or knowledge of such persons, in order to enable the
Sub-Administrator to perform its duties hereunder. In connection with its duties
hereunder, the Sub-Administrator shall be entitled to rely, and shall be held
harmless when acting in reliance upon the instructions, advice or any documents
relating to the Trust or any Fund provided to the Sub-Administrator by any of
the aforementioned persons. The Sub-Administrator shall not be liable for any
loss, damage or expense resulting from or arising out of the failure of the
Administrator or the Trust to cause any information, documents or advice to be
provided to the Sub-Administrator as provided herein. All fees or costs charged
by such persons shall be borne by the Administrator.
(f) Nothing in this Agreement shall limit or restrict the
Sub-Administrator, any affiliate of the Sub-Administrator or any officer or
employee thereof from acting as Sub-Administrator for or with any third parties.
(g) The Sub-Administrator may apply to an officer of the Administrator for
written instructions with respect to any matter arising in connection with the
Sub-Administrator's performance hereunder, and the Sub-Administrator shall not
be liable for any action taken or omitted to be taken by it in good faith in
3
<PAGE>
accordance with such instructions. Such application for instructions may, at the
option of the Sub-Administrator, set forth in writing any action proposed to be
taken or omitted to be taken by the Sub-Administrator with respect to its duties
or obligations under this Agreement and the date on and/or after which such
action shall be taken, and the Sub-Administrator shall not be liable for any
action taken or omitted to be taken in accordance with a proposal included in
any such application on or after the date specified therein unless, prior to
taking or omitting to take any such action, the Sub-Administrator has received
written instructions in response to such application specifying the action to be
taken or omitted. The Sub-Administrator may consult with counsel to the
Administrator or the Trust, at the Administrator's expense, or its own counsel
(at its own expense), and shall be fully protected with respect to anything done
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
(h) The Sub-Administrator shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement and Schedule I hereto, and no covenant or obligation shall be
implied against the Sub-Administrator in connection with this Agreement.
5. Allocation Of Expenses.
----------------------
Except as otherwise provided herein, all costs and expenses arising or
incurred in connection with the performance of this Agreement shall be paid by
the Administrator, including but not limited to, organizational costs and costs
of maintaining the Trust's or the Funds' existence, taxes, interest, brokerage
fees and commissions, insurance premiums, compensation and expenses of the
Trust's trustees, officers or employees, legal, accounting and audit expenses,
management, advisory, sub-advisory, administration and shareholder servicing
fees, charges of custodians, transfer and dividend disbursing agents, expenses
(including clerical expenses) incident to the issuance, redemption or repurchase
of Fund shares, fees and expenses incident to the registration or qualification
of the Trust or any Fund's shares under federal or state securities laws, costs
(including printing and mailing costs) of preparing and distributing
Prospectuses, reports, notices and proxy material to Fund shareholders, all
expenses incidental to holding meetings of the Board and Fund shareholders, and
extraordinary expenses as may arise, including litigation affecting the
Administrator, the Trust or any Fund and legal obligations relating thereto for
which the Administrator, the Trust or a Fund may have to indemnify its trustees
and officers.
6. Standard Of Care; Indemnification.
---------------------------------
(a) Except as otherwise provided herein, the Sub-Administrator shall not
be liable for any costs, expenses, damages, liabilities or claims (including
reasonable attorneys' and accountants' fees) incurred by the Administrator, the
Trust or a Fund, except those costs, expenses, damages, liabilities or claims
arising out of the Sub-Administrator's own bad faith, negligence or willful
misconduct. In no event shall the Sub-Administrator be liable to the
Administrator, the Trust or any Fund or any third party for special, indirect or
consequential damages, or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of the possibility
of such damages and regardless of the form of action.
4
<PAGE>
(b) The Administrator agrees to indemnify and hold harmless the
Sub-Administrator from and against any and all costs, expenses, damages,
liabilities and claims (including claims asserted by the Administrator or the
Trust), and reasonable attorneys' and accountants' fees relating thereto, which
are sustained or incurred or which may be asserted against the Sub-
Administrator, by reason of or as a result of any action taken or omitted to be
taken by the Sub- Administrator in good faith hereunder or in reliance upon (i)
any law, act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed, (ii) the
Registration Statement or Prospectus, (iii) any instructions of an officer of
the Administrator or the Trust, or (iv) any opinion of legal counsel for the
Administrator, the Trust or the Sub-Administrator, or arising out of
transactions or other activities of the Administrator, the Trust or a Fund which
occurred prior to the commencement of this Agreement; provided, that the
Sub-Administrator shall not be indemnified for costs, expenses, damages,
liabilities or claims arising out of the Sub-Administrator's own negligence, bad
faith or willful misconduct. This indemnity shall be a continuing obligation of
the Administrator, its successors and assigns, notwithstanding the termination
of this Agreement.
(c) Actions taken or omitted in reliance on oral or written instructions,
or upon any information, order, indenture, stock certificate, power of attorney,
assignment, affidavit or other instrument believed by the Sub-Administrator to
be genuine or bearing the signature of a person or persons believed to be
authorized to sign, countersign or execute the same, or upon the opinion of
legal counsel for the Administrator, the Trust or the Sub-Administrator's own
counsel, shall be conclusively presumed to have been taken or omitted in good
faith.
7. Compensation.
------------
For the services provided hereunder, the Administrator agrees to pay the
Sub-Administrator such compensation as is mutually agreed from time to time and
such out-of-pocket expenses (e.g., telecommunication charges, postage and
delivery charges, record retention costs, reproduction charges and
transportation and lodging costs) as are incurred by the Sub-Administrator in
performing its duties hereunder. Except as hereinafter set forth, compensation
shall be calculated and accrued daily and paid monthly. The Administrator
authorizes the Sub-Administrator to debit each Fund's custody account for all
amounts due and payable hereunder and allocable to such Fund. The
Sub-Administrator shall deliver to the Administrator invoices for services
rendered after debiting such each Fund's custody account with an indication that
payment has been made. Upon termination of this Agreement before the end of any
month, the compensation for such part of a month shall be prorated according to
the proportion which such period bears to the full monthly period and shall be
payable upon the effective date of termination of this Agreement. For the
purpose of determining compensation payable to the Sub-Administrator, each
Fund's net asset value shall be computed at the times and in the manner
specified in the Prospectus.
5
<PAGE>
8. Term Of Agreement.
-----------------
(a) This Agreement shall continue until terminated by either the
Sub-Administrator giving to the Administrator, or the Administrator giving to
the Sub-Administrator, a notice in writing specifying the date of such
termination, which date shall be not less than 90 days after the date of the
giving of such notice. Upon termination hereof, the Administrator shall pay to
the Sub-Administrator such compensation as may be due as of the date of such
termination, and shall reimburse the Sub-Administrator for any disbursements and
expenses made or incurred by the Sub-Administrator and payable or reimbursable
hereunder.
(b) Notwithstanding the foregoing, the Sub-Administrator may terminate
this Agreement upon 30 days prior written notice to the Administrator if the
Trust shall terminate its custody agreement or the Administrator shall terminate
its fund accounting agreement with The Bank of New York, or the Administrator or
the Trust fails to perform its obligations hereunder in a material respect.
9. Amendment.
---------
This Agreement may not be amended or modified in any manner except by a
written agreement executed by the Sub-Administrator and the Administrator, and
authorized or approved by the Board.
10. Assignment.
----------
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Administrator without the written
consent of the Sub-Administrator, or by the Sub-Administrator without the
written consent of the Administrator accompanied by the authorization or
approval of the Board.
11. Governing Law; Consent to Jurisdiction.
--------------------------------------
This Agreement shall be construed in accordance with the laws of the State
of New York, without regard to conflict of laws principles thereof. The
Administrator hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder. To the extent that in any jurisdiction the Administrator may now or
hereafter be entitled to claim immunity from suit, execution, attachment (before
or after judgment) or other legal process, it irrevocably agrees not to claim,
and hereby waives, such immunity.
6
<PAGE>
12. Severability.
-------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby, and if any provision is inapplicable to any
person or circumstances, it shall nevertheless remain applicable to all other
persons and circumstances.
13. No Waiver.
---------
Each and every right granted to the Sub-Administrator hereunder or under
any other document delivered hereunder or in connection herewith, or allowed it
by law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of the Sub-Administrator to exercise, and no delay in
exercising, any right will operate as a waiver thereof, nor will any single or
partial exercise by the Sub-Administrator of any right preclude any other or
future exercise thereof or the exercise of any other right.
14. Notices.
-------
All notices, requests, consents and other communications pursuant to this
Agreement in writing shall be sent as follows:
if to the Administrator, at
Conseco Services, L.L.C.
11825 North Pennsylvania Street
Carmel, Indiana 46032
ATTENTION: GREG HAHN
if to the Sub-Administrator, at
The Bank of New York
90 Washington Street
New York, New York 10286
ATTENTION: Timothy J. Overzat
Vice President
or at such other place as may from time to time be designated in writing.
Notices hereunder shall be effective upon receipt.
15. Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts together shall
constitute only one instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the day and year first above written.
CONSECO SERVICES L.L.C.
By: /s/ T.J. Kilian
-----------------------------
Thomas J. Kilian
Title: President
THE BANK OF NEW YORK
By: /s/ Jorge Louis
-----------------------------
Jorge Louis
Title: Vice President
8
<PAGE>
EXHIBIT A
Name of Fund
- ------------
Conseco Fund Group
Equity Fund
Asset Allocation Fund
Fixed Income Fund
<PAGE>
Exhibit F
FUND ADMINISTRATION FEE SCHEDULE
WITH BLUE SKY SERVICES
FOR
CONSECO FUND GROUP
Fund Administration Fee
- -----------------------
3 basis points per annum, on the net assets of each portfolio up to
$100 million.
2 basis points on the excess.
Minimum Fee
- -----------
The minimum fee will be waived for the first 3 months of operation.
The following minimums will apply thereafter:
4 - 12 months: $2,000 per month, per portfolio
After l year: $2,500 per month, per portfolio
Out-of-Pocket Expenses
- ----------------------
Services include but are not limited to the out-of-pocket expenses
for administration, courier, printing, filing fees, legal fees, and
shareholder reports.
Billing Cycle
- -------------
The above fees will be billed on a monthly basis.
Conseco Services, LLC The Bank of New York
- --------------------- --------------------
Accepted by: /s/ T.J. Kilian Accepted by: /s/ Marjorie McLaughlin
------------------ -----------------------
Thomas J. Kilian
Title: President Title: Vice President
--------------------- -----------------------
Date: January 2, 1997 Date: January 2, 1997
----------------- -----------------------
<PAGE>
Schedule I
Dated as of January 2, 1997
---------------
FUND ADMINISTRATION SERVICES
SUB-ADMINISTRATION AGREEMENT
----------------------------
. Monitor and document compliance by the Fund with its policies and
restrictions as delineated in its Prospectus and with the Rules and
Regulations of the Investment Company Act of 1940.
. Monitor and report on Sub-Chapter M qualifications, monitor compliance
with Section 4982 of the Internal Revenue Code, calculate and maintain
records pertaining to original issue discount and premium amortization as
required, perform ongoing wash sales review, etc.
. Establish appropriate expense accruals, maintain expense files and
coordinate the payment of invoices.
. Monitor and report on adherence to NASD rules governing investment company
sales charges.
FUND ACCOUNTING AGREEMENT
AGREEMENT made as of this 2nd day of January, 1997, by and between CONSECO
SERVICES, LLC, an Indiana Limited Liability Company having its principal place
of business at 11825 North Pennsylvania Street, Carmel, Indiana 46032
(hereinafter called the "Company") and The Bank of New York, a New York
corporation authorized to do a banking business, having its principal place of
business at 48 Wall Street, New York, New York 10286 (hereinafter called the
"Bank").
W I T N E S S E T H:
WHEREAS, the Company wishes the Bank to perform various services with
respect to the Conseco Fund Group, a Massachusetts business trust having its
principal place of business at 11825 North Pennsylvania Street, Carmel, Indiana
46032 (hereinafter called the "Fund"); and
WHEREAS, the Bank agrees to perform the services herein described on
the terms and conditions herein contained,
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Bank hereby agree as follows:
1. The Company hereby appoints the Bank to perform the duties
hereinafter set forth.
2. The Bank hereby accepts appointment and agrees to perform the
duties hereinafter set forth.
3. Subject to the provisions of paragraphs 5 and 6 below, the Bank shall
compute the net asset value per share of the Fund and shall value the securities
held by the Fund (the "Securities") at such times and dates and in the manner
specified in the then currently effective Prospectus of the Fund. In the event
Schedule 1 hereto, as amended from time to time upon the agreement of the
Company and the Bank, specifies series of a Fund and/or classes of shares of the
Fund or of a series, all computations described with respect to the Fund or
<PAGE>
shares of the Fund shall be made with respect to each series so specified and
the shares of each such series or such class.
4. Subject to the provisions of paragraphs 5 and 6 below, the Bank shall
also compute the net income of the Fund for dividend purposes and the net income
per share at such times and dates and in the manner specified in the then
currently effective Prospectus of the Fund.
5. To the extent valuation of Securities or computation of a net asset
value, net income for dividend purposes, or net income per share as specified in
the Company's then currently effective Prospectus is at any time inconsistent
with any applicable laws or regulations, the Fund shall immediately so notify
the Bank in writing and thereafter shall either furnish the Bank at all
appropriate times with the values of such Securities, net asset value, net
income for dividend purposes or net income per share, as the case may be, or
subject to the prior approval of the Bank, instruct the Bank in writing to value
Securities and compute net asset value, net income for dividend purposes, and
net income per share in a manner which the Company then represents in writing to
be consistent with all applicable laws and regulations. The Company may also
from time to time, subject to the prior approval of the Bank, instruct the Bank
in writing to compute the value of the Securities, the Fund's net asset value,
net income for dividend purposes, or net income per share in a manner other than
as specified in paragraphs 3 and 4 of this Agreement. The Company shall have
sole responsibility for determining the method of valuation of Securities and
the method of computing net asset value, net income for dividend purposes and
net income per share.
6. The Company shall furnish the Bank with any and all instructions,
explanations, information, specifications and documentation deemed necessary by
the Bank in the performance of its duties hereunder, including, without
limitation, the amounts or written formula for calculating the amounts and times
of accrual of Fund liabilities and expenses. The Company shall also furnish the
Bank with bid, offer, or market values of Securities if the Bank notifies the
Company that same are not available to the Bank from a security pricing or
similar service utilized, or subscribed to, by the Bank which the Bank in its
judgment deems reliable at the time such information is required for
calculations hereunder. At any time and from time to time, the Company also may
2
<PAGE>
furnish the Bank with bid, offer, or market values of Securities and instruct
the Bank to use such information in its calculations hereunder. The Bank shall
at no time be required or obligated to commence or maintain any utilization of,
or subscriptions to, any securities pricing or similar service.
7. The Bank shall advise the Company and the Fund's transfer agent of the
net asset value, net income for dividend purposes, and net income per share upon
completion of the computations required to be made by the Bank pursuant to this
Agreement.
8. The Bank shall, as agent for the Company, maintain and keep current the
books, accounts and other documents (the "Records") the Fund is required to
maintain and preserve by the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder (the "Rules") with respect to the computations
by the Bank under this Agreement. Such Records shall be preserved in accordance
with the Rules and shall be made available upon reasonable request for
inspection by officers, employees and auditors of the Company or Fund during the
Bank's normal business hours.
9. Records maintained and preserved by the Bank pursuant to this Agreement
shall be and remain the property of the Fund and shall be surrendered to the
Fund promptly upon request in the form in which such Records have been
maintained and preserved. Upon reasonable request of the Company or the Fund,
the Bank shall provide in hard copy or micro-film, whichever the Bank shall
elect, any Records included in any such delivery which are maintained by the
Bank on a computer disc, or are similarly maintained, and the Company shall
reimburse the Bank for its expenses of providing such hard copy or micro-film.
10. The Bank, in performing the services required of it under the terms of
this Agreement, shall be entitled to rely fully on the accuracy and validity of
any and all instructions, explanations, information, specifications and
documentation furnished to it by the Company and shall have no duty or
obligation to review the accuracy, validity or propriety of such instructions,
explanations, information, specifications or documentation, including, without
limitation, evaluations of Securities; the amounts or formula for calculating
3
<PAGE>
the amounts and times of accrual of liabilities and expenses; the amounts
receivable and the amounts payable on the sale or purchase of Securities; and
amounts receivable or amounts payable for the sale or redemption of Fund shares
effected by or on behalf of the Fund. In the event the Bank's computations
hereunder rely, in whole or in part, upon information, including, without
limitation, bid, offer or market values of Securities or other assets, or
accruals of interest or earnings thereon, from a pricing or similar service
utilized, or subscribed to, by the Bank which the Bank in its judgment deems
reliable, the Bank shall not be responsible for, under any duty to inquire into,
or deemed to make any assurances with respect to, the accuracy or completeness
of such information.
11. The Bank shall not be required to inquire into any valuation of
Securities or other assets by the Company or the Fund or any third party
described in preceding paragraph 10 hereof, even though the Bank in performing
services similar to the services provided pursuant to this Agreement for others
may receive different valuations of the same or different securities of the same
issuers.
12. The Bank, in performing the services required of it under the terms of
this Agreement, shall not be responsible for determining whether any interest
accruable to the Fund is or will be actually paid, but will accrue such interest
until otherwise instructed by the Company.
13. The Bank shall not be responsible for delays or errors which occur by
reason of circumstances beyond its control in the performance of its duties
under this Agreement, including, without limitation, labor difficulties within
or without the Bank, mechanical breakdowns, flood or catastrophe, acts of God,
failures of transportation, loss or malfunction of utilities, computer (hardware
or software) or communications services, or other similar circumstances. Nor
shall the Bank be responsible for delays or failures to supply the information
or services specified in this Agreement where such delays or failures are caused
by the failure of any person(s) other than the Bank to supply any instructions,
explanations, information, specifications or documentation deemed necessary by
the Bank in the performance of its duties under this Agreement.
14. No provision of this Agreement shall prevent the Bank from offering
services similar or identical to those covered by this Agreement to any other
corporations, associations or entities of any kind. Any and all operational
procedures, techniques and devices developed by the Bank in connection with the
4
<PAGE>
performance of its duties and obligations under this Agreement, including those
developed in conjunction with the Fund, shall be and remain the property of the
Bank, and the Bank shall be free to employ such procedures, techniques and
devices in connection with the performance of any other contract with any other
person whether or not such contract is similar or identical to this Agreement.
15. The Bank may, with respect to questions of law, apply to and obtain
the advice and opinion of counsel to the Company or the Fund or its own counsel
and shall be entitled to rely on the advice or opinion of such counsel. The
costs of any such advice or opinion shall be borne by the Company.
16. The Bank shall be entitled to rely upon any oral instructions received
by the Bank and reasonably believed by the Bank to be given by or on behalf of
the Fund, even if the Bank subsequently receives written instructions
contradicting such oral instructions. The books and records of the Bank with
respect to the content of any oral instruction shall be binding and conclusive.
17. The Bank shall not be liable for any loss, damage or expense,
including counsel fees and other costs and expenses of a defense against any
claim or liability, resulting from, arising out of, or in connection with its
performance hereunder, including its actions or omissions, the incompleteness or
inaccuracy of any specifications or other information furnished by the Company,
or for delays caused by circumstances beyond the Bank's control, unless such
loss, damage or expense arises out of the bad faith, negligence, or willful
misconduct of the Bank. In no event shall the Bank be liable to the Company or
any third party for special, indirect, or consequential damages, or for lost
profits or loss of business, arising under or in connection with this Agreement,
even if previously informed of the possibility of such damages and regardless of
the form of action.
18. Without limiting the generality of the foregoing, the Company shall
indemnify the Bank against and save the Bank harmless from any loss, damage or
expense, including counsel fees and other costs and expenses of a defense
against any claim or liability, arising from any one or more of the following:
5
<PAGE>
(a) Errors in records or instructions, explanations, information,
specifications or documentation of any kind, as the case may be, supplied to the
Bank by any third party described in preceding paragraph 10 hereof or by the
Company by or on behalf of the Fund;
(b) Action or inaction taken or omitted to be taken by the Bank
pursuant to written or oral instructions of the Company or otherwise without bad
faith, negligence or willful misconduct;
(c) Any action taken or omitted to be taken by the Bank in good
faith in accordance with the advice or opinion of counsel for the Company or its
own counsel;
(d) Any improper use by the Company or its agents, distributor or
investment advisor of any valuations or computations supplied by the Bank
pursuant to this Agreement;
(e) The method of valuation of the Securities and the method of
computing net asset value, net income for dividend purposes, and net income
per share; or
(f) Any bid, offer, market value or other valuations of Securities,
net asset value, net income for dividend purposes, or net income per share
provided by the Company.
19. In consideration for all of the services to be performed by the Bank
as set forth herein the Bank shall be entitled to receive such reimbursement for
out-of-pocket expenses and such compensation as are specified on Exhibit A
hereto, as such Exhibit may be amended from time to time by the Bank and the
Company.
20. Attached hereto as Appendix A is a list of persons duly authorized by
the Board of Directors of the Company to execute this Agreement and give any
written or oral instructions, or written or oral specifications, by or on behalf
of the Company. From time to time the Company may deliver a new Appendix A to
add or delete any person and the Bank shall be entitled to rely on the last
Appendix A actually received by the Bank.
21. The Company represents and warrants to the Bank that it has all
requisite power to execute and deliver this Agreement, to give any written or
oral instructions contemplated hereby, and to perform the actions or obligations
6
<PAGE>
contemplated to be performed by it hereunder, and has taken all necessary action
to authorize such execution, delivery, and performance. By giving any
instruction described in this Agreement to the Bank, the Company shall be deemed
to have represented that such instruction is consistent with all applicable laws
and regulations and the then currently effective Prospectus of the Fund.
22. This Agreement shall not be assignable by the Company without the
prior written consent of the Bank, or by the Bank without the prior written
consent of the Company.
23. Either of the parties hereto may terminate this Agreement by giving
the other party a notice in writing specifying the date of such termination,
which shall not be less than ninety (90) days after the date of giving of such
notice. Upon the date set forth in such notice, the Bank shall deliver to the
Company all Records then the property of the Fund and, upon such delivery, the
Bank shall be relieved of all duties and responsibilities under this Agreement.
24. This Agreement may not be amended or modified in any manner except by
written agreement executed on behalf of both parties hereto.
25. This Agreement is executed in the State of New York and all laws and
rules of construction of the State of New York (other than those relating to
choice of laws) shall govern the rights, duties and obligations of the parties
hereto.
26. The performance and provisions of this Agreement are intended to
benefit only the Bank and the Company, and no rights shall be granted to any
other person by virtue of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
CONSECO SERVICES, LLC
By: /s/ Thomas J. Kilian
--------------------
Thomas J. Kilian
Attest: President
/s/ Karl W. Kindig
-------------------
Karl W. Kindig
THE BANK OF NEW YORK
By: /s/ S. Grunston
---------------
STEPHEN E. GRUNSTON
Vice President
Attest:
/s/ Marjorie McLaughlin
- -----------------------
8
<PAGE>
SCHEDULE 1
Series and Classes
SERIES CLASSES
------ -------
Equity Fund Class A
Class Y
Asset Allocation Fund Class A
Class Y
Fixed Income Fund Class A
Class Y
<PAGE>
APPENDIX A
I, Thomas J. Kilian, of CONSECO SERVICES, LLC, (the "Company"), do
hereby certify that:
The following individuals serve in the following positions with Conseco
Capital Management, Inc. ("CCM"), the investment adviser to Conseco Fund Group,
and each has been duly elected or appointed by the Board of Directors of CCM to
each such position and qualified therefor in conformity with CCM's Charter and
By-Laws, and the signatures set forth opposite their respective names are their
true and correct signatures. Each such person is authorized to give written or
oral instructions or written or oral specifications by or on behalf of the
Company to the Bank.
Name Position Signature
- ---- -------- ---------
Gregory J. Hahn Senior Vice President /s/ Gregory J. Hahn
Andrew E. Sommers Vice President /s/ Andrew E. Sommers
Rodney A. Schmucker Assistant Vice President /s/ Rodney A. Schmucker
Kristine Kate Southward Sr. Investment Analyst /s/ Kristine Southward
<PAGE>
EXHIBIT A
FUND ACCOUNTING FEE PROPOSAL
FOR
CONSECO FUND GROUP
Domestic Accounting Fee
4 basis points per annum, per fund, on the nest assets up to $100
million.
3 basis points on the next $100 million.
2 basis points on the excess over $200 million.
Minimum Fee
The minimum fee will be waived for the first three (3) months of operations. The
following minimums will apply thereafter:
4-12 months: $2,000 per month, per fund.
After one year: $3,500 per month, per fund.
Multiple Class Charges
$150.00 per month for each additional class added above two (2)
Out-of-Pocket Expenses
The cost of obtaining prices for daily security evaluations will be in addition
to the stated fees.
Billing Cycle
The above fees will be billed on a monthly basis.
Conseco Services, LLC The Bank of New York
Accepted by: /s/ Thomas J. Kilian Accepted by: /s/ S. Grunston
-------------------- ---------------
Thomas J. Kilian
Title: President Title: Stephen E. Grunston
------------------- -------------------
Vice President
Date: January 2, 1997 Date: 12/13/96
-------------------- -------------------
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CONSECO FUND GROUP
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Terms of Appointment; Duties of the Bank..................................1
2. Fees and Expenses.........................................................3
3. Representations and Warranties of the Bank................................4
4. Representations and Warranties of the Fund................................4
5. Data Access and Proprietary Information...................................5
6. Indemnification...........................................................6
7. Standard of Care..........................................................8
8. Covenants of the Fund and the Bank........................................8
9. Termination of Agreement..................................................9
10. Additional Funds.........................................................9
11. Assignment...............................................................9
12. Amendment................................................................9
13. Massachusetts Law to Apply..............................................10
14. Force Majeure...........................................................10
15. Consequential Damages...................................................10
16. Merger of Agreement.....................................................10
17. Limitations of Liability of the Trustees and Shareholders...............10
18. Counterparts............................................................10
3
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 2nd day of January, 1997, by and between Conseco Fund
Group, a Massachusetts business trust, having its principal office and place of
business at 11815 N. Pennsylvania Street, Carmel, Indiana 46032 (the "Fund"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having
its principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in three series, the Equity
Fund, Balanced Fund and Fixed Income Fund (each such series, together with all
other series subsequently established by the Fund and made subject to this
Agreement in accordance with Article 10, being herein referred to as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock, $ par value, ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and agent
in connection with any accumulation, open-account or similar plans
provided to the shareholders of each of the respective Portfolios of the
Fund ("Shareholders") and set out in the currently effective prospectus
and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian
<PAGE>
of the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(viii)Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the
Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to
monitor the issuance of such shares or to take cognizance
of any laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of the
Fund.
2
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic
investment plan or periodic withdrawal program), including but
not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and
(ii) provide a system which will enable the Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue
sky reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by
the Fund and the reporting of such transactions to the Fund as
provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and the Bank.
3
<PAGE>
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the
Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4
<PAGE>
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
5
<PAGE>
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to
time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar.
6
<PAGE>
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
(f) The negotiation and processing by the Bank of checks not made
payable to the order of the Bank, the Fund, the Fund's management
company, transfer agent or distributor or the retirement account
custodian or trustee for a plan account investing in Shares,
which checks are tendered to the Bank for the purchase of Shares
(i.e., checks made payable to prospective or existing
Shareholders, such checks are commonly known as "third party
checks").
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund. The
Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers
of the Fund, and the proper countersignature of any former transfer agent
or former registrar, or of a co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
7
<PAGE>
7. STANDARD OF CARE
----------------
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
8. COVENANTS OF THE FUND AND THE BANK
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and
all amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
8
<PAGE>
9. TERMINATION OF AGREEMENT
------------------------
9.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination and/or a charge equivalent to the average
of three (3) months' fees.
10. ADDITIONAL FUNDS
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Equity Fund, Balanced Fund and Fixed Income Fund with
respect to which it desires to have the Bank render services as transfer
agent under the terms hereof, it shall so notify the Bank in writing, and
if the Bank agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
11. ASSIGNMENT
----------
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
12. AMENDMENT
---------
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
9
<PAGE>
13. MASSACHUSETTS LAW TO APPLY
--------------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of
Massachusetts.
14. FORCE MAJEURE
-------------
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
15. CONSEQUENTIAL DAMAGES
---------------------
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. MERGER OF AGREEMENT
-------------------
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
---------------------------------------------------------
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
18. COUNTERPARTS
------------
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
-------------------------------
President
ATTEST:
/s/ William P. Latimer
- ---------------------------------
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Ronald E. Logue
-----------------------------
Executive Vice President
ATTEST:
/s/ Francine Hayes
- ----------------------
11
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
RESPONSIBILITY
--------------
SERVICE PERFORMED BANK FUND
- ----------------- ---- ----
1. Receives orders for the purchase of Shares. *
2. Issue Shares and hold Shares in *
Shareholders accounts.
3. Receive redemption requests. *
4. Effect transactions 1-3 above directly *
with broker-dealers.
5. Pay over monies to redeeming Shareholders. *
6. Effect transfers of Shares. *
7. Prepare and transmit dividends and *
distributions.
8. Issue Replacement Certificates. *
9. Reporting of abandoned property. *
10. Maintain records of account. *
11. Maintain and keep a current and accurate *
control book for each issue of securities.
12. Mail proxies. *
13. Mail Shareholder reports. *
14. Mail prospectuses to current Shareholders. *
15. Withhold taxes on U.S. resident and *
non-resident alien accounts.
16. Prepare and file U.S. Treasury Department * *
forms.
17. Prepare and mail account and confirmation *
statements for Shareholders.
18. Provide Shareholder account information. *
19. Blue sky reporting. *
* Such services are more fully described in Section 1.2(a), (b) and (c) of
the Agreement.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
---------------------------
President
ATTEST:
/s/ William P. Latimer
- ----------------------------------
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Ronald E. Logue
-----------------------------
Executive Vice President
ATTEST:
/s/ Francine Hayes
- ----------------------
<PAGE>
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
CONSECO FUND GROUP
ANNUAL ACCOUNT SERVICE FEES
Daily Dividend Fund $ 14.00
Non-Daily Dividend Fund $ 12.00
Closed Account Fee $ 1.50
Minimum Fee (per Fund with 2 Classes) $60,000
Each class is considered a fund and will be billed accordingly.
Fees are billable on a monthly basis at the rate of 1/12 of the annual fee. A
charge is made for an account in the month that an account opens or closes.
Account service fees are the higher of: open account charges plus closed account
charges or the fund minimum.
This fee schedule assumes 4 funds with 2 classes. Additional funds or classes
will be subject to renegotiation.
ACTIVITY BASED FEES
New Account Set-up $ 5.00/each
Manual Transactions $ 1.50/each
Telephone Calls $ 2.50/each
Correspondence $ 1.50/each
Research Requests $ 1.50/each
BANKING SERVICES
Checkwriting Setup $ 5.00
Checkwriting (per draft) $ 1.00
ACH $ .35
OTHER FEES
Investor Processing $ 1.80/Investor
12b-1 Commissions $ 1.20/account
THIRD PARTY INTERFACE $10,000/Annually/per
interface
IRA CUSTODIAL FEES
Acceptance & Setup $ 5.00/account
Annual Maintenance $ 10.00/account
OUT-OF-POCKET EXPENSES Billed as incurred
- ----------------------
Out-of-Pocket expenses include but are not limited to: confirmation statements,
investor statements, postage, forms, audio response, telephone, records
retention, federal wire, transcripts, microfilm, microfiche, and expenses
incurred at the specific direction of the fund.
CONSECO FUND GROUP STATE STREET BANK AND TRUST CO.
By /s/ Maxwell E. Bublitz By [Officer]
----------------------------- -----------------------------------
Title President Title Vice Pres.
---------------------------- --------------------------------
Date 12/18/96 Date 10/24/96
---------------------------- --------------------------------
Revised 9/24/96
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our report dated December 18, 1996 on
our audit of the Statement of Assets and Liabilities of the Conseco Fund Group
(comprising, respectively, the Equity, Asset Allocation and Fixed Income Funds)
with respect to this Post-Effective Amendment No. 1 to the Registration
Statement (File Nos. 333-13185 and 811-7839) filed under the Securities Act of
1933 on Form N-1A of the Conseco Fund Group. We also consent to the reference to
our Firm under the caption "Independent Public Accountants" in the Prospectus
and under the caption "Financial Statements" in the Statement of Additional
Information.
/s/ COOPERS & LYBRAND L.L.P
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
July 28, 1997
CLASS A
PLAN OF DISTRIBUTION AND SERVICE
PURSUANT TO RULE 12B-1
CONSECO FUND GROUP
EQUITY FUND
March 28, 1997
WHEREAS, Conseco Fund Group, a Massachusetts business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such with the Securities and Exchange Commission;
WHEREAS, the Trust has engaged Conseco Equity Sales, Inc. (the
"Distributor") as distributor of the shares of the Trust pursuant to an
Underwriting Agreement dated as of January 2, 1997;
WHEREAS, the Trust is authorized to issue shares in separate series (the
"Series"); the Trustees, to date, have created three Series of shares one of
which series is the Equity Fund (the "Fund"); and the Trustees may create
additional Series in the future as the Trustees deem necessary and appropriate;
WHEREAS, the Trust is authorized to issue shares of each Series in one
or more classes, and to date, the Trustees have created two classes: "Class A
Shares" and "Class Y Shares";
WHEREAS, the Trust desires to adopt a Plan of Distribution and Service
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") on
behalf of the Fund and the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Plan will benefit the Fund and its
shareholders; and
WHEREAS, expenditures under the Plan of Distribution and Service are
primarily intended to result in the sale of Class A Shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 under the Act.
NOW, THEREFORE, the Trust hereby adopts, on behalf of the Fund, and the
Distributor hereby agrees to the terms of, this Plan of Distribution and Service
(the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
1. (a) The Trust is authorized to compensate the Distributor for services
performed and expenses incurred by the Distributor in connection
with the distribution of Class A Shares of the Fund and the
servicing of accounts holding such Shares of the Fund.
<PAGE>
(b) The Fund shall pay to the Distributor, at the end of each month. an
amount equal to the average daily net assets of the Fund multiplied
by that portion of 0.50% which the number of days in the month bears
to 365. Such payment represents reimbursement for (i) expenses
incurred by the Distributor for the promotion and distribution of
Class A Shares of the Fund ("Distribution Fee") and (ii) fees paid
to Authorized Dealers (defined below).
(c) Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(d) The Distributor shall:
(i) (1) retain that portion of the Distribution Fee necessary to
compensate it for costs associated with the distribution of
Class A Shares of the Fund; and (2) disburse that portion of
the Distribution Fee to Authorized Dealers necessary to
reimburse expenses of Authorized Dealers incurred in the
promotion and distribution of Class A Shares of the Fund; and
(ii) pay any Service Fee it receives under the Plan for which a
particular underwriter, dealer, broker, bank or selling entity
having a Selling Group Agreement in effect (the "Authorized
Dealers") is the dealer of record (which may include the
Distributor) to such Authorized Dealers to compensate such
Authorized Dealers for providing personal services to
shareholders relating to their investment and/or maintaining
shareholder accounts.
(e) Expenses for which the Distributor, or an Authorized Dealer, may
receive Distribution Fee payments include, but are not limited to,
the printing of prospectuses, statements of additional information
and reports used for sales purposes, expenses of preparation of
sales literature and related expenses, advertisements, other
distribution-related expenses (including personnel of the
Distributor), certain overhead expenses attributable to the
distribution of Class A Shares of the Fund such as communications,
salaries, training, supplies, photocopying and similar types of
expenses and fees paid to Authorized Dealers.
(f) Services for which Authorized Dealers may receive Service Fee
payments include, but are not limited to, any or all of the
following: maintaining account records for shareholders who
beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Trust and the
performance of their investment; providing assistance and handling
transmission of funds in connection with purchase, redemption and
exchange orders for Shares; providing assistance in connection with
changing account setups and enrolling in various optional Trust
services; producing and disseminating shareholder communications or
servicing materials; the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses,
relating to any activity for which payment is authorized by the
Board of Trustees; and the financing of any other activity for which
payment is authorized by the Board of Trustees.
2
<PAGE>
(g) In no event shall the sum of the Distribution Fee and Service Fee
exceed the Distributor's actual expenses incurred during the period
for which such Fees will be paid. Notwithstanding the foregoing, the
sum of the Distribution Fee and Service Fee may exceed actual
expenses incurred by the Distributor, provided, that such excess
represents payment to the Distributor for unreimbursed expenses
incurred under this Plan not more than three years prior to the date
upon which the Fund will make payment of Distribution Fees and
Service Fees to the Distributor. Reimbursement of expenses shall be
calculated on a "first-in, first-out" basis.
2. This Plan shall not take effect until the Plan, together with any related
agreement(s), has been approved by votes of a majority of both (a) the
Board of Trustees of the Trust, and (b) those Trustees of the Trust who
are not "interested persons" of the Trust (as defined in the Act) and who
have no direct or indirect financial interest in the operation of the Plan
or any agreements related to the Plan (the "Rule 12b-1 Trustees") cast in
person at a meeting called for the purpose of voting on the Plan and such
related agreement(s).
3. This Plan shall remain in effect until March 28, 1998, and shall continue
in effect thereafter so long as such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of
distribution and service related activities, Distribution Fees, Service
Fees, and the purposes for which such activities were performed and
expenses incurred.
5. This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Trustees or by vote of a majority (as defined in the Act) of the
Class A outstanding voting securities of the Fund.
6. This Plan may not be amended to increase materially the amount of
compensation payable by the Trust with respect to Class A Shares of the
Fund under paragraph 1 hereof unless such amendment is approved by a vote
of at least a majority (as defined in the Act) of the Class A outstanding
voting securities of the Fund. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the Trustees
who are not interested persons (as defined in the Act) of the Trust shall
be committed to the discretion of the Trustees who are not such interested
persons.
8. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 4 hereof, for a period of not
less than six years from the date of the Plan, any such agreement, or any
such report, as the case may be, the first two years in an easily
accessible place.
3
<PAGE>
9. Any agreement related to this Plan shall be in writing and shall provide
that (a) the agreement may be terminated at any time upon sixty (60) days'
written notice, without the payment of any penalty, by vote of a majority
of the Rule 12b-1 Trustees, or by vote of a majority of the Class A
outstanding voting securities of the Fund, (b) the agreement shall
automatically terminate in the event of its assignment (as defined in the
Act), and (c) the agreement shall continue in effect for a period of more
than one year from the date of its execution or adoption only so long as
such continuance is specifically approved at least annually by a majority
of Trustees of the Trust and a majority of the Rule 12b-1 Trustees by
votes cast in person at a meeting called for the purpose of voting on such
agreement.
IN WITNESS WHEREOF, the Trust and Distributor have executed this Plan of
Distribution and Service as of the day and year first above written.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
---------------------------
Maxwell E. Bublitz
CONSECO EQUITY SALES, INC.
By: /s/ L. Gregory Gloeckner
---------------------------
L. Gregory Gloeckner
4
CLASS A
PLAN OF DISTRIBUTION AND SERVICE
PURSUANT TO RULE 12B-1
CONSECO FUND GROUP
ASSET ALLOCATION FUND
March 28, 1997
WHEREAS, Conseco Fund Group, a Massachusetts business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such with the Securities and Exchange Commission;
WHEREAS, the Trust has engaged Conseco Equity Sales, Inc. (the
"Distributor") as distributor of the shares of the Trust pursuant to an
Underwriting Agreement dated as of January 2, 1997;
WHEREAS, the Trust is authorized to issue shares in separate series (the
"Series"); the Trustees, to date, have created three Series of shares one of
which series is the Asset Allocation Fund (the "Fund"); and the Trustees may
create additional Series in the future as the Trustees deem necessary and
appropriate;
WHEREAS, the Trust is authorized to issue shares of each Series in one or
more classes, and to date, the Trustees have created two classes: "Class A
Shares" and "Class Y Shares";
WHEREAS, the Trust desires to adopt a Plan of Distribution and Service
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") on
behalf of the Fund and the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Plan will benefit the Fund and its
shareholders; and
WHEREAS, expenditures under the Plan of Distribution and Service are
primarily intended to result in the sale of Class A Shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 under the Act.
NOW, THEREFORE, the Trust hereby adopts, on behalf of the Fund, and the
Distributor hereby agrees to the terms of, this Plan of Distribution and Service
(the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
(a) The Trust is authorized to compensate the Distributor for services
performed and expenses incurred by the Distributor in connection
with the distribution of Class A Shares of the Fund and the
servicing of accounts holding such Shares of the Fund.
<PAGE>
(b) The Fund shall pay to the Distributor, at the end of each month, an
amount equal to the average daily net assets of the Fund multiplied
by that portion of 0.50% which the number of days in the month bears
to 365. Such payment represents reimbursement for (i) expenses
incurred by the Distributor for the promotion and distribution of
Class A Shares of the Fund ("Distribution Fee") and (ii) fees paid
to Authorized Dealers (defined below).
(c) Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(d) The Distributor shall:
(i) (1) retain that portion of the Distribution Fee necessary to
compensate it for costs associated with the distribution of
Class A Shares of the Fund; and (2) disburse that portion of
the Distribution Fee to Authorized Dealers necessary to
reimburse expenses of Authorized Dealers incurred in the
promotion and distribution of Class A Shares of the Fund; and
(ii) pay any Service Fee it receives under the Plan for which a
particular underwriter, dealer, broker, bank or selling
entity having a Selling Group Agreement in effect (the
"Authorized Dealers") is the dealer of record (which may
include the Distributor) to such Authorized Dealers to
compensate such Authorized Dealers for providing personal
services to shareholders relating to their investment
and/or maintaining shareholder accounts.
(e) Expenses for which the Distributor, or an Authorized Dealer, may
receive Distribution Fee payments include, but are not limited
to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, expenses of
preparation of sales literature and related expenses,
advertisements, other distribution-related expenses (including
personnel of the Distributor), certain overhead expenses
attributable to the distribution of Class A Shares of the Fund
such as communications, salaries, training, supplies,
photocopying and similar types of expenses and fees paid to
Authorized Dealers.
(f) Services for which Authorized Dealers may receive Service Fee
payments include, but are not limited to, any or all of the
following: maintaining account records for shareholders who
beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Trust and the
performance of their investment; providing assistance and
handling transmission of funds in connection with purchase,
redemption and exchange orders for Shares; providing assistance
in connection with changing account setups and enrolling in
various optional Trust services; producing and disseminating
shareholder communications or servicing materials; the ordinary
or capital expenses, such as equipment, rent, fixtures, salaries,
bonuses, reporting and recordkeeping and third party consultancy
or similar expenses, relating to any activity for which payment
is authorized by the Board of Trustees; and the financing of any
other activity for which payment is authorized by the Board of
Trustees.
2
<PAGE>
(g) In no event shall the sum of the Distribution Fee and Service Fee
exceed the Distributor's actual expenses incurred during the
period for which such Fees will be paid. Notwithstanding the
foregoing, the sum of the Distribution Fee and Service Fee may
exceed actual expenses incurred by the Distributor, provided,
that such excess represents payment to the Distributor for
unreimbursed expenses incurred under this Plan not more than
three years prior to the date upon which the Fund will make
payment of Distribution Fees and Service Fees to the Distributor.
Reimbursement of expenses shall be calculated on a "first-in,
first-out" basis.
2. This Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved by votes of a majority of both
(a) the Board of Trustees of the Trust, and (b) those Trustees of the
Trust who are not "interested persons" of the Trust (as defined in the
Act) and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to the Plan (the "Rule
12b-1 Trustees") cast in person at a meeting called for the purpose of
voting on the Plan and such related agreement(s).
3. This Plan shall remain in effect until March 28, 1998, and shall continue
in effect thereafter so long as such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of
distribution and service related activities, Distribution Fees, Service
Fees, and the purposes for which such activities were performed and
expenses incurred.
5. This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Trustees or by vote of a majority (as defined in the Act) of the
Class A outstanding voting securities of the Fund.
6. This Plan may not be amended to increase materially the amount of
compensation payable by the Trust with respect to Class A Shares of the
Fund under paragraph 1 hereof unless such amendment is approved by a vote
of at least a majority (as defined in the Act) of the Class A outstanding
voting securities of the Fund. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the Trustees
who are not interested persons (as defined in the Act) of the Trust shall
be committed to the discretion of the Trustees who are not such interested
persons.
8. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 4 hereof, for a period of not
less than six years from the date of the Plan, any such agreement, or any
such report, as the case may be, the first two years in an easily
accessible place.
3
<PAGE>
9. Any agreement related to this Plan shall be in writing and shall
provide that (a) the agreement may be terminated at any time upon sixty
(60) days' written notice, without the payment of any penalty, by vote
of a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the Class A outstanding voting securities of the Fund, (b) the
agreement shall automatically terminate in the event of its assignment
(as defined in the Act), and (c) the agreement shall continue in effect
for a period of more than one year from the date of its execution or
adoption only so long as such continuance is specifically approved at
least annually by a majority of Trustees of the Trust and a majority of
the Rule 12b-1 Trustees by votes cast in person at a meeting called for
the purpose of voting on such agreement.
IN WITNESS WHEREOF, the Trust and Distributor have executed this Plan of
Distribution and Service as of the day and year first above written.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
-------------------------
Maxwell E. Bublitz
CONSECO EQUITY SALES, INC.
By: /s/ L. Gregory Gloeckner
--------------------------
L. Gregory Gloeckner
4
CLASS A
PLAN OF DISTRIBUTION AND SERVICE
PURSUANT TO RULE 12B-1
CONSECO FUND GROUP
FIXED INCOME FUND
March 28, 1997
WHEREAS, Conseco Fund Group, a Massachusetts business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such with the Securities and Exchange Commission;
WHEREAS, the Trust has engaged Conseco Equity Sales, Inc. (the
"Distributor") as distributor of the shares of the Trust pursuant to an
Underwriting Agreement dated as of January 2, l997;
WHEREAS, the Trust is authorized to issue shares in separate series (the
"Series"); the Trustees, to date, have created three Series of shares one of
which series is the Fixed Income Fund (the "Fund"); and the Trustees may create
additional Series in the future as the Trustees deem necessary and appropriate;
WHEREAS, the Trust is authorized to issue shares of each Series in one or
more classes, and to date, the Trustees have created two classes: "Class A
Shares" and "Class Y Shares";
WHEREAS, the Trust desires to adopt a Plan of Distribution and Service
pursuant to Rule l2b-l under the Investment Company Act of 1940 (the "Act") on
behalf of the Fund and the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Plan will benefit the Fund and its
shareholders; and
WHEREAS, expenditures under the Plan of Distribution and Service are
primarily intended to result in the sale of Class A Shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 under the Act.
NOW, THEREFORE, the Trust hereby adopts, on behalf of the Fund, and the
Distributor hereby agrees to the terms of, this Plan of Distribution and Service
(the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
1. (a) The Trust is authorized to compensate the Distributor for
services performed and expenses incurred by the Distributor in
connection with the distribution of Class A Shares of the Fund and
the servicing of accounts holding such Shares of the Fund.
<PAGE>
(b) The Fund shall pay to the Distributor, at the end of each month, an
amount equal to the average daily net assets of the Fund multiplied
by that portion of 0.65% which the number of days in the month bears
to 365. Such payment represents reimbursement for (i) expenses
incurred by the Distributor for the promotion and distribution of
Class A Shares of the Fund ("Distribution Fee") and (ii) fees paid
to Authorized Dealers (defined below).
(c) Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(d) The Distributor shall:
(i) (1) retain that portion of the Distribution Fee necessary to
compensate it for costs associated with the distribution of
Class A Shares of the Fund; and (2) disburse that portion of
the Distribution Fee to Authorized Dealers necessary to
reimburse expenses of Authorized Dealers incurred in the
promotion and distribution of Class A Shares of the Fund; and
(ii) pay any Service Fee it receives under the Plan for which a
particular underwriter, dealer, broker, bank or selling
entity having a Selling Group Agreement in effect (the
"Authorized Dealers") is the dealer of record (which may
include the Distributor) to such Authorized Dealers to
compensate such Authorized Dealers for providing personal
services to shareholders relating to their investment
and/or maintaining shareholder accounts.
(e) Expenses for which the Distributor, or an Authorized Dealer, may
receive Distribution Fee payments include, but are not limited
to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, expenses of
preparation of sales literature and related expenses,
advertisements, other distribution-related expenses (including
personnel of the Distributor), certain overhead expenses
attributable to the distribution of Class A Shares of the Fund
such as communications, salaries, training, supplies,
photocopying and similar types of expenses and fees paid to
Authorized Dealers.
(f) Services for which Authorized Dealers may receive Service Fee
payments include, but are not limited to, any or all of the
following: maintaining account records for shareholders who
beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Trust and the
performance of their investment; providing assistance and
handling transmission of funds in connection with purchase,
redemption and exchange orders for Shares; providing assistance
in connection with changing account setups and enrolling in
various optional Trust services; producing and disseminating
shareholder communications or servicing materials; the ordinary
or capital expenses, such as equipment, rent, fixtures, salaries,
bonuses, reporting and recordkeeping and third party consultancy
or similar expenses, relating to any activity for which payment
is authorized by the Board of Trustees; and the financing of any
other activity for which payment is authorized by the Board of
Trustees.
2
<PAGE>
(g) In no event shall the sum of the Distribution Fee and Service Fee
exceed the Distributor's actual expenses incurred during the
period for which such Fees will be paid. Notwithstanding the
foregoing, the sum of the Distribution Fee and Service Fee may
exceed actual expenses incurred by the Distributor, provided,
that such excess represents payment to the Distributor for
unreimbursed expenses incurred under this Plan not more than
three years prior to the date upon which the Fund will make
payment of Distribution Fees and Service Fees to the Distributor.
Reimbursement of expenses shall be calculated on a "first-in,
first-out" basis.
2. This Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved by votes of a majority of both
(a) the Board of Trustees of the Trust, and (b) those Trustees of the
Trust who are not "interested persons" of the Trust (as defined in the
Act) and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to the Plan (the "Rule
12b-1 Trustees") cast in person at a meeting called for the purpose of
voting on the Plan and such related agreement(s).
3. This Plan shall remain in effect until March 28, 1998, and shall continue
in effect thereafter so long as such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of
distribution and service related activities, Distribution Fees, Service
Fees, and the purposes for which such activities were performed and
expenses incurred.
5. This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Trustees or by vote of a majority (as defined in the Act) of the
Class A outstanding voting securities of the Fund.
6. This Plan may not be amended to increase materially the amount of
compensation payable by the Trust with respect to Class A Shares of the
Fund under paragraph 1 hereof unless such amendment is approved by a vote
of at least a majority (as defined in the Act) of the Class A outstanding
voting securities of the Fund. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the Trustees
who are not interested persons (as defined in the Act) of the Trust shall
be committed to the discretion of the Trustees who are not such interested
persons.
8. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 4 hereof, for a period of not
less than six years from the date of the Plan, any such agreement, or any
such report, as the case may be, the first two years in an easily
accessible place.
3
<PAGE>
9. Any agreement related to this Plan shall be in writing and shall
provide that (a) the agreement may be terminated at any time upon sixty
(60) days' written notice, without the payment of any penalty, by vote
of a majority of the Rule 12b-1 Trustees, or by vote of a majority of
the Class A outstanding voting securities of the Fund, (b) the
agreement shall automatically terminate in the event of its assignment
(as defined in the Act), and (c) the agreement shall continue in effect
for a period of more than one year from the date of its execution or
adoption only so long as such continuance is specifically approved at
least annually by a majority of Trustees of the Trust and a majority of
the Rule 12b-l Trustees by votes cast in person at a meeting called for
the purpose of voting on such agreement.
IN WITNESS WHEREOF, the Trust and Distributor have executed this Plan of
Distribution and Service as of the day and year first above written.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
----------------------------
Maxwell E. Bublitz
CONSECO EQUITY SALES, INC.
By: /s/ L. Gregory Gloeckner
----------------------------
L. Gregory Gloeckner
4