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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 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 (or series) of stock, each of which currently
represents a separate diversified portfolio of investments.
This Prospectus offers shares of three series ( Funds ) of the
Trust, each with its own investment objective or objectives
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.
The various Funds may be used independently or in
combination. You may also purchase shares of the money market
fund managed by Federated Investors, which seeks current
income consistent with stability of capital and liquidity, the
prospectus for which immediately follows this prospectus.
The investment policies of the respective Funds are
fundamental and cannot be changed without a vote of their
respective shareholders. There is no assurance that any of
the Funds will achieve their investment objectives.
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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 or the Trust.
This Prospectus sets forth concisely the information
about the Trust that an investor should know before investing.
A Statement of Additional Information ( SAI ) dated January
2, 1997, containing additional information about the Trust and
the Funds, has been filed with the Securities and Exchange
Commission 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 January 2, 1997.
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TABLE OF CONTENTS
Page
Cover Page 1
Fee Table 3
Investment Objectives and Policies of the Funds 4
Investment Techniques and Other Investment Policies 8
Management 12
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 17
The Adviser's Investment Performance 18
Table of Contents of the Statement of Additional
Information 22
Appendix A Securities Ratings A1
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.
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<TABLE>
<CAPTION>
Shareholder Transaction
Expenses Equity Allocation Income
<S> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchase (as a percentage
of offering price) None None None
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 net assets)
Management Fees .70% .70% .45%
Administrative Fees .20% .20% .20%
12b-1 Distribution and
Service Fees None None None
Other Expenses (less
voluntary fee waivers and
reimbursements) .10% .10% (.05%)
Total Operating Expenses
(after reimbursement)(1) 1.00% 1.00% .60%
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fees
and/or reimburse all expenses (exclusive of taxes, interest,
brokerage and other transaction expenses and any other
extraordinary expenses) through April 30, 1998, including
management fees, to the extent that the Class Y expenses of
the Equity, Asset Allocation and Fixed Income Funds exceed
1.00%, 1.00% and .60%, respectively, of the Fund s average
daily net assets. If the Adviser had not undertaken to limit
Fund expenses as described above, it is estimated that the
Total Operating Expenses would be 1.15%, 1.15% and .85% of the
average daily net assets of the Equity, Asset Allocation and
Fixed Income Funds, respectively.
Example
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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:
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
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.
</TABLE>
These examples illustrate the effect of expenses, but are
not meant to suggest actual or expected costs or returns, all
of which may vary.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each of the Funds has a different investment objective or
objectives as described below. Each Fund is managed by the
Adviser. There can be no assurance that any of the Funds will
achieve their investment objective or objectives. 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 are described in greater detail, including the
risks of each, in the Description of Securities and
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Investment Techniques in the SAI.
The Funds are subject to investment restrictions that are
described under Investment Restrictions in the SAI. The
investment restrictions are fundamental policies, which
means that they may not be changed without a majority vote of
shareholders of the affected Funds. The Trust has certain
fundamental policies, which 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 U.S. government securities defined below); 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
fundamental policies imposed by the Trust s investment
restrictions, 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, 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 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 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 action 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.
By investing in securities that are subject to market
risk, the Equity Fund is also subject to greater fluctuations
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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 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 ). To maximize potential return, the
Adviser may utilize a variety of investment techniques and
strategies including but not limited to: writing covered and
secured listed put and call 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; 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
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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
covered and secured listed put and call 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 below and 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,
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price movement of the stock itself, publicly recorded trading
transactions by corporate insiders, and 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.
The Asset Allocation Fund may also invest in high
yield, high risk, lower-rated fixed income 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 Investor Service, Inc. ( Moody s ) or Standard &
Poor s Corporation ( S&P ) that are lower than those assigned
to investment grade debt securities, or are unrated and the
Adviser does not determine such security is of comparable
quality to securities rated in one of the four highest rating
categories. Such 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 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 these 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. 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
and Risks Associated With High Yield Debt Securities below
and under 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
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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 debt 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 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. 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. A debt security will
be considered investment grade if it is rated in one of the
four highest rating categories by at least one 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. 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, and foreign governments and their
agencies and instrumentalities. The Fixed Income Fund may
also invest in mortgage-related debt securities, other types
of 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 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 may be invested
in debt securities rated below investment grade.
Debt securities purchased by the Fixed Income Fund
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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.
With respect to the Fund s investment in fixed
income securities, such 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 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 covered and secured listed
put and call 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
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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, at page 9 ), 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 the
Federal National Mortgage Association, 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 GNMA
guarantees timely payment even if homeowners delay or default,
tracking the pass-through payments may, at times, be
difficult. Expected payments may be delayed due to the delays
in registering the newly traded paper securities. The
custodian s policies for crediting missed payments while
errant receipts are tracked down may vary. Other mortgage-
backed securities, such as those of FHLMC and FNMA, trade in
book-entry form and are not subject to this risk of delays in
timely payment of income. Although the mortgage loans in the
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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.
Collateralized Mortgage Obligations. 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. 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
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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 holder could sustain a loss. It
is expected that governmental, government-related, or private
entities may create mortgage loan pools and other mortgage-
backed securities offering mortgage pass-through and mortgage-
backed securities. If such securities are developed and
offered to other types of investors, investments in such new
types of mortgage-related securities will be considered.
Risks of Mortgage-Backed Securities. In the case of 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, 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 may expose a Fund to a lower rate of
return upon reinvestment of the principal. 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
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interest or principal payments at the time called for by an
instrument. Debt securities rated BBB or Baa, which are
considered medium-grade category debt securities, do not have
economic characteristics that 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 where 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) 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 categories of recognized rating agencies: Ba1 or lower
by Moody s or BB+ or lower by Standard & Poor s. Debt
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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. That Fund may invest up to 50 percent of
its net assets in such securities. The Asset Allocation Fund
and Equity Fund may invest in American Depository Receipts
( ADRs ), which are described below. 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 stock 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,
future political and economic developments, 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 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
that Fund 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
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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 the right to receive securities of a
foreign issuer deposited in a foreign subsidiary or branch or
a correspondent of that bank. Generally, ADRs, in registered
form, 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 U.S. 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
illiquid restricted security 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 Trust s investment manager, as set forth below.
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The Trust s officers supervise the daily business operations
of the Trust.
Conseco Capital Management, Inc. (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. For information about the Board of Trustees and the
Trust s officers, see Management in the SAI.
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.
The Adviser also manages another registered investment
company, 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. 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 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. Prior to joining the Adviser in 1992, 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 ), Conseco Services, LLC 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, Conseco
Services receives a fee from each Fund of .20% per annum of
its average daily Class Y net assets. Pursuant to the
Administration Agreement, Conseco Services, LLC reserves the
right to employ one or more sub-administrators to perform
administrative services for the Funds.
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
You may purchase shares from any broker-dealer that has a
selling agreement with Conseco Equity Sales, Inc. (the
Distributor ). In addition, as discussed below, an account
may be opened for the purchase of shares of a Fund by mailing
to Conseco Fund Group, P.O. Box 8017, Boston, Massachusettes,
02266-8017, a completed account application and a check
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<PAGE>
payable to the appropriate Fund. Or you may telephone 1-800-
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 qualify as one of
the following types of institutional investors: (i) tax
qualified retirement plans which have (a) at least $10 million
in plan assets, (b) have 750 or more employees eligible to
participate at the time of purchase, or (c) certify that they
will have projected annual contributions of $2.5 million or
more, (ii) banks and insurance companies which are not
affiliated with the Adviser purchasing shares for their own
account, (iii) investment companies not affiliated with the
Adviser, or (iv) tax-qualified retirement plans of the Adviser
or broker-dealer wholesalers and their affiliates.
Purchase orders for all Funds are accepted only on a
regular business day as defined below. Orders for shares
received by the Transfer Agent on any business day prior to
the close of trading on the New York Stock Exchange (the
NYSE ) (normally 4:00 p.m. Eastern Time) will receive that
day s offering price. Orders received by the Transfer Agency
after such time but prior to the close of business on the next
business day will receive the next business day s offering
price which is net asset value. If you purchase shares
through a broker-dealer, your broker 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 fifth business day following placement of the
order.
The Distributor may provide promotional incentives
including cash compensation in excess of the applicable sales
charge to certain broker-dealers 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 broker-
dealers based on a combination of aggregate shares sold and
increases of assets under management. All of the above
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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
Purchase by wire transfer should be directed to the
Transfer Agent to receive an account number at (800) 986-3384
between the hours of 8:00 a.m. and 4:00 p.m. (Eastern Time) on
a regular 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, Massachusetts, Account # 9905-244-1. If
you arrange for receipt by the Transfer Agent of federal funds
prior to the close of trading (currently 4:00 p.m. Eastern
Time) of the NYSE on a regular business day as defined above,
you will receive that day s offering price. Your bank may
charge for these services.
Purchase Through Dealer
Orders for purchase of shares placed through dealers will
receive the net asset value next computed following receipt of
the order provided the dealer receives the order prior to the
close of the NYSE and transmits it to the Distributor prior to
its close of business that same day (normally 4:00 p.m.
Eastern Time). Dealers are required to provide payment within
three business days after placing an order. Dealers 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
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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.
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 day the NYSE is open for business, 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 by an eligible guarantor may be required as
stipulated in Rule 17Ad-15(a)(2) under the Securities Exchange
Act of 1934. A signature guarantee is required for
redemptions of $50,000 or more.
Redemptions by Wire or Telephone
Brokers, dealers, or other sales agents 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 impose any
such charges.
The Funds and the Transfer Agent will not be responsible
for the authenticity of phone 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,
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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 mailing of a
redemption check 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, managed by Federated
Investors, at the relative net asset values per share at the
time of the exchange. Shares of the Money Market Fund,
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 into which they are being exchanged.
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 regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of the NYSE that
day. Exchanges are taxable transactions and may be subject to
special tax rules about which you should consult your own tax
adviser.
Electronic Transfers through Automated Clearing House
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Electronic Transfers through Automated Clearing House
( ACH ) allows you to initiate a purchase or redemption for as
little as $100 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 the NYSE
(normally 4:00 p.m. Eastern Time) on each regular business day
(as previously defined) by dividing the value of the Fund s
net assets attributable to a class 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, DISTRIBUTIONS AND TAXES
Each Fund is treated as a separate taxable entity and
qualifies as a regulated investment company under applicable
provisions of the Internal Revenue Code of 1986 (the Code ).
As such and by complying with the applicable provisions of the
Code regarding the sources of its income, the timing of its
distributions, and the diversification of its assets, each
Fund will be allowed a deduction for amounts distributed to
its shareholders from its ordinary income and net realized
capital gains and will not be subject to federal income tax on
such amounts. To qualify for treatment as a regulated
investment company, each Fund must, among other things,
derive in each taxable year at least 90% of its gross income
from dividends, interest and gains from the sale or other
disposition of securities, and derive less than 30% of its
gross income in each taxable year from the gains (without
deduction for losses) from the sale or other disposition of
securities held for less than three months.
Each Fund intends to distribute sufficient net investment
income to avoid the application of federal income tax on the
Trust. Each Fund also intends to distribute sufficient income
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to avoid the application of any federal excise tax. For
dividend purposes, the net investment income of each Fund will
consist of all payments of dividends or interest received and
any net short-term gains or losses from the sale of its
investments less its estimated expenses (including fees
payable to the Adviser). The Asset Allocation Fund is also
required to include in its gross income each year a portion of
the original issue discount at which it acquires zero coupon
securities, even though the Fund receives no interest payment
on the security during the year. Similarly, the Fund must
include in its gross income each year any interest distributed
in the form of additional securities by payment-in-kind
securities. Accordingly, to continue to qualify for treatment
as a regulated investment company 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
received. 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 the Fund on your
particular tax situation.
Dividends from the Fixed Income Fund will be declared and
distributed monthly in additional full and fractional shares
of those respective Funds. 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.
All net realized long-term capital gains of the Trust, if
any, are declared and distributed annually after the close of
the Trust s fiscal year to the shareholders of the Fund or
Funds to which such gains are attributable.
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 in the Fund. You can elect to
reinvest all dividends and long term capital gains
distributions in additional shares of the Fund.
Reinvest Income Dividends Only. You can elect to
reinvest investment income dividends in a Fund while receiving
capital gains distributions by check or sent to your bank
account.
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Reinvest Capital Gains Only. You can elect to reinvest
capital gains in 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 long-term capital gain
distributions or have them sent to your bank.
THE ADVISER'S INVESTMENT PERFORMANCE
Because the Funds are being offered to the public for the
first time, as of the date of this Prospectus they do not have
any prior operating history or performance. However, the
Equity Fund, Asset Allocation Fund and Fixed Income Fund are
modeled after 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 three comparable Funds discussed
above have substantially similar investment objectives and
policies, the same investment adviser and the same portfolio
managers as the CST Funds, you should not assume that the
Funds offered by this Prospectus 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 listed below
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.
Certain Funds do have differences from their
corresponding CST Fund none of which the Adviser believes
would cause a significant change in investment results.
Investors should note the following differences: (1) the Funds
may invest in swaps, caps and floors; (2) the Funds may lend
portfolio securities; and (3) the Funds may sell securities
short. See the SAI the for further details.
The table below sets forth each Fund, and its
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corresponding CST Fund, the date the Adviser began managing
the CST Fund (referred to as the inception date ) and asset
size as of October 31, 1996.
<TABLE>
<CAPTION>
Corresponding CST Fund
Fund (Inception Date and Asset Size)
<S> <C>
Equity Fund
Common Stock Portfolio
(Jan. 31, 1992) $154,615,806
Asset Allocation Fund
Asset Allocation Portfolio
(Dec. 1, 1991) $14,792,025
Fixed Income Fund
Corporate Bond Portfolio
(July 31, 1990) $17,031,312
</TABLE>
The following table shows the average annualized total
returns for the CST Funds for the one, three, five and ten
year (or life of CST Fund, if shorter) periods ended October
31, 1996. These figures are based on the actual gross
investment performance of the CST Funds. From the gross
investment performance figures, the maximum Total Fund
Operating Expenses reflected in the fee table on page 3 are
deducted to arrive at the net return. 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.
<TABLE>
<CAPTION>
CST Fund 10 Years or
(Inception Date) 1 Year 3 Years 5 Years Since
Inception
<S> <C> <C> <C> <C>
Common Stock Portfolio 39.115% 22.764% N/A 19.354%
(Jan. 31, 1992)
Asset Allocation Portfolio 26.125% 16.555% N/A 15.779%
(Dec. 31, 1991)
Corporate Bond Portfolio 6.497% 6.151% 9.024% 10.427%
(July 30, 1990)
</TABLE>
Each of the Funds may from time to time advertise certain
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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 the 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 will be contained in the Funds
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.
Brokerage Commissions
Although the Conduct Rules of the National Association of
Securities Dealers, Inc. 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 dealers who sell shares of the
Funds. The Adviser may also select an affiliated broker-
dealer 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
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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
differ (such as approval of an investment advisory agreement
or a change in fundamental investment policies), the voting is
on a Fund-by-Fund 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 such Fund.
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 has available prototype qualified retirement
plans for both corporations and self-employed individuals.
The Trust also has available prototype Individual Retirement
Account ( IRA ) plans (for both individuals and employers) and
Simplified Employee Pension ( SEP ) 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.
Distributor
Conseco Equity Sales, 11815 N. Pennsylvania Street,
Carmel, Indiana 46032 serves as distributor to the Trust.
Transfer Agent
State Street Bank and Trust Company, 225 Franklin Street,
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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 accountant is Coopers &
Lybrand, L.L.P., Indianapolis, Indiana.
Legal Counsel
Certain legal matters for the Funds are passed upon by
Jorden Burt Berenson & Johnson LLP, 1025 Thomas Jefferson
Street, N.W., Suite 400 East, Washington, D.C. 20007.
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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TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Page
General Information 2
Investment Objectives 2
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
Financial Statements 33
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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 Group Fund Group at the following
address:
Name:
Mailing Address:
Sincerely,
(Signature)
APPENDIX A SECURITIES RATINGS
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DESCRIPTION OF CORPORATE BOND RATINGS
Moody s Investor Service, Inc. s Corporate Bond Ratings:
Aaa - Bonds which are rated Aaa by Moody s Investor 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
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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 Corporation s Corporate Bond Ratings:
AAA - This is the highest rating assigned by Standard & Poor s
Corporation ( 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
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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.
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