[Federal Register Volume 67, Number 10 (Tuesday, January 15, 2002)]
[Notices]
[Pages 2000-2002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-941]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25359; 812-12468]


Conseco Fund Group, et al.; Notice of Application

January 9, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an exemption under section 6(c) of 
the Investment Company Act of 1940 (``Act'') from section 15(a) of the 
Act and rule 18f-2 under the Act.

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    Summary of the Application: The order would permit applicants to 
enter into and materially amend subadvisory agreements without 
shareholder approval.
    Applicants: Conseco Fund Group (``CFG''), Conseco Series Trust 
(``CST'' together with CFG, the ``Trusts''), and Conseco Capital 
Management, Inc. (the ``Adviser'').

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    Filing Dates: The application was filed on March 6, 2001, and 
amended on December 26, 2001.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the SEC orders a hearing. Interested 
persons may request a hearing by writing to the SEC's Secretary and 
serving applicants with a copy of the request, personally or by mail. 
Hearing requests should be received by the SEC by 5:30 p.m. on February 
4, 2002, and should be accompanied by proof of service on applicants, 
in the form of an affidavit, or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
0609. Applicants, 11825 North Pennsylvania Street, Carmel, IN 46032.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Trusts, each a Massachusetts business trust, are registered 
under the Act as open-end management investment companies. Each Trust 
is organized as a series investment company and offers shares of 
multiple series (each series, a ``Fund,'' and together, the ``Funds''), 
each with its own investment objectives, policies, and restrictions.\1\ 
The Adviser serves as the investment adviser to the Funds and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act'').
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    \1\ The applicants also request that any relief granted pursuant 
to the application also apply to future series of the Trusts and any 
other registered open-end management investment companies and their 
series that: (a) Are advised by the Adviser or any person 
controlling, controlled by, or under common control with the 
Adviser; (b) use the multi-manager structure described in the 
application; and (c) comply with the terms and conditions in the 
application (``Future Funds,'' included in the term ``Funds''). The 
Trusts are the only existing investment companies that currently 
intend to rely on the requested order. No Fund will contain in its 
name the name of a Subadviser (as defined below).
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    2. The Adviser serves as investment adviser to the Funds pursuant 
to an investment advisory agreement between each Trust and the Adviser 
that was approved by the respective Trust's board of trustees 
(``Board''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), and each Fund's shareholders (``Advisory 
Agreement''). The Advisory Agreement permits the Adviser to enter into 
separate investment advisory agreements (``Subadvisory Agreements'') 
with subadvisers (``Subadvisers'') to whom the Adviser may delegate 
responsibility for providing investment advice and making investment 
decisions for a Fund. Each Subadviser is an investment adviser 
registered under the Advisers Act. The Adviser monitors and evaluates 
the Subadvisers and recommends to the Board their hiring, termination, 
and replacement. The Adviser compensates the Subadvisers out of the 
fees paid to the Adviser by the Fund.
    3. Applicants request relief to permit the Adviser to enter into 
and materially amend Subadvisory Agreements without obtaining 
shareholder approval. The requested relief will not extend to any 
Subadviser that is an affiliated person, as defined in section 2(a)(3) 
of the Act, of the Trust or the Adviser, other than by reason of 
serving as a Subadviser to one or more of the Funds (``Affiliated 
Subadviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except under a written contract that has been 
approved by a majority of the investment company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve the 
matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act authorizes the SEC to exempt persons or 
transactions from the provisions of the Act to the extent that the 
exemption is necessary or appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policies and provisions of the Act. Applicants state 
that the requested relief meets this standard for the reasons discussed 
below.
    3. Applicants assert that the Funds' shareholders rely on the 
Adviser to select the Subadvisers best suited to achieve a Fund's 
investment objectives. Applicants assert that, from the perspective of 
the investor, the role of the Subadvisers is comparable to that of 
individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of each 
Subadvisory Agreement would impose costs and unnecessary delays on the 
Funds, and may preclude the Adviser from acting promptly in a manner 
considered advisable by the Board. Applicants also note that the 
Advisory Agreement will remain subject to section 15(a) of the Act and 
rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund in the manner described in the application will be approved by 
the vote of a majority of its outstanding voting securities, as defined 
in the Act, or, in the case of a Fund whose public shareholders 
purchased shares on the basis of a prospectus containing the disclosure 
contemplated by condition number 2 below, by the initial shareholder(s) 
before offering shares of that Fund to the public.
    2. Each Fund will disclose in its prospectus the existence, 
substance, and effect of any order granted pursuant to the application. 
In addition, each Fund relying on the requested order will hold itself 
out to the public as employing the management structure described in 
the application. The prospectus will prominently disclose that the 
Adviser has ultimate responsibility (subject to oversight of the Board) 
to oversee Subadvisers and recommend their hiring, termination, and 
replacement.
    3. At all times, a majority of each Trust's Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be at the discretion of the then existing 
Independent Trustees.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. When a change of Subadviser is proposed for a Fund with an 
Affiliated Subadviser, the Board of the corresponding Trust, including 
a majority of the Independent Trustees,

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will make a separate finding, reflected in the Board's minutes, that 
the change is in the best interests of the Fund and its shareholders 
and does not involve a conflict of interest from which the Adviser or 
the Affiliated Subadviser derives an inappropriate advantage.
    6. Within 90 days of the hiring of any new Subadviser, shareholders 
will be furnished all information about the new Subadviser that would 
be contained in a proxy statement, including any change in such 
disclosure caused by the addition of a new Subadviser. Each Fund will 
meet this condition by providing shareholders, within 90 days of the 
hiring of a Subadviser, an information statement meeting the 
requirements of Regulation 14C, Schedule 14C, and Item 22 of Schedule 
14A under the Securities Exchange Act of 1934.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets, and, subject to review 
and approval by the Board, will (a) set the Fund's overall investment 
strategies; (b) evaluate, select, and recommend Subadviser(s) to manage 
all or a part of the Fund's assets; (c) monitor and evaluate the 
performance of Subadviser(s); (d) ensure that Subadvisers comply with 
each Subadvised Fund's investment objectives, restrictions, and 
policies by, among other things, implementing procedures reasonably 
designed to ensure compliance; and (e) allocate and, when appropriate, 
reallocate a Fund's assets among its Subadvisers when a Fund has more 
than one Subadviser.
    8. No trustee or officer of the Trust or director or officer of the 
Adviser will own, directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by any such trustee, director 
or officer) any interest in a Subadviser except for: (a) Ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or is under common control with the Adviser, or (b) ownership of less 
than 1% of the outstanding securities of any class of equity or debt 
securities of any publicly-traded company that is either a Subadviser 
or an entity that controls, is controlled by, or is under common 
control with a Subadviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-941 Filed 1-14-02; 8:45 am]
BILLING CODE 8010-01-P